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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/ / Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1998
/ / Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from ________ to ________.
Commission File Number: 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
incorporation or organization) Identification No.)
1000 Park Drive
Lawrence, Pennsylvania 15055
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 724-746-5500
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE.
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 _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / X /
Indicate by check mark whether the registrant has filed all documents required
to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.
Yes __x__ No _____
Aggregate market value of outstanding Common Stock, $.001 par value, (the
"Common Stock") held by non-affiliates of the Registrant at June 19, 1998, was
$556,698,110 based on the closing sale price reported on the NASDAQ National
Market for June 19, 1998. For purposes of this calculation only, directors and
executive officers of the Registrant and their affiliates are deemed to be
affiliates of the Registrant.
Number of outstanding shares of Common Stock at June 19, 1998, was 16,774,331.
Document Incorporated by Reference
----------------------------------
Proxy Statement for 1998 Annual Meeting of Stockholders -- Part III
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PART I
ITEM 1 -- BUSINESS
GENERAL. Until June 3, 1994, Black Box Corporation (the "Company" or "Black
Box"), operated through two independent subsidiaries, Black Box Corporation of
Pennsylvania ("Black Box-PA") and MICOM Communications Corp. ("MICOM").
On July 22, 1993, the Board of Directors of the Company approved in
principle a plan to distribute all of the outstanding shares of MICOM Common
Stock (the "Distribution") to all holders of the Company's outstanding Common
Stock (the "MICOM Spin-off"). On May 10, 1994, the Company's Board of Directors
formally approved the Distribution and declared a dividend payable to each
holder of record at the close of business on May 20, 1994 (the "Record Date") of
two shares of MICOM Common Stock for each three shares of the Company's Common
Stock held by such holder on the Record Date. On June 3, 1994, the Distribution
was effected. Accordingly the operating results of MICOM have been classified as
discontinued operations for all periods presented.
The Company was incorporated in Delaware in 1987.
OVERVIEW. Black Box is a leading worldwide direct marketer and technical service
provider of computer communications and networking equipment and services. In
Fiscal 1998, the Company mailed 10.5 million catalogs and direct marketing
pieces in 11 languages to targeted customers including MIS and business
professionals, purchasing agents and resellers. Black Box catalogs offer
businesses in 77 countries access to more than 7,000 computer communications and
networking products, the majority of which carry the BLACK BOX(R) private label.
The Company sells to businesses of all sizes around the world, including a
majority of the Fortune 1000 companies in the U.S.
Black Box differentiates itself from other direct marketers and
distributors through its private label brand, BLACK BOX(R), and through
unparalleled levels of technical support. The Black Box brand has earned a
reputation for high quality and reliability since the Company was founded in
1976. Black Box complements its catalog mailings with over 130 technical support
professionals, available seven days per week, 24 hours per day by phone, who are
trained to understand complex computer communications problems and to recommend
products which best meet customers' needs. Black Box's MIS and inventory
management systems enable it to ship 95% of orders for stock products on the day
the orders are received. The successful combination of cost-effective direct
marketing and high value technical support has resulted in the Company's
consistent growth in revenues and operating income and its high level of
customer satisfaction.
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To take advantage of the increased utilization of computer systems and
networks around the world, Black Box has consistently expanded its international
presence every year. In Fiscal 1998, 48% of total revenues were generated
outside of the U.S. and Canada. The Company operates subsidiaries in 14
countries including the United Kingdom, France, Japan and Brazil. In addition,
the Company has distributor arrangements in 63 other countries. The Company
continually assesses worldwide market and business conditions for continued
growth in the worldwide marketplace.
Since its inception, the Company has experienced consistent growth in
revenues and profitability due to continual (1) delivery of high quality
technical services on demand, (ii) enhancement of its global direct marketing
activities, (iii) expansion of its product offerings and (iv) expansion of its
operations worldwide.
INDUSTRY BACKGROUND. The rapidly growing need to interconnect new and existing
computer resources over local and geographically dispersed areas continues to
create an increased demand for computer communications and networking products.
The continual development of new and often incompatible technologies has also
made the task of creating and maintaining such systems increasingly complex.
Manufacturers often do not provide sufficient technical advice or devices to
connect or integrate their products with products of different manufacturers.
Even sophisticated MIS staffs often require third party technical advice and a
wide range of specialized computer communications and networking products to
install and maintain computer systems. Black Box addresses these needs by
providing its customers with a convenient and technically proficient means to
purchase computer communications and networking solutions.
BUSINESS STRATEGY. Black Box's business strategy is to be a "one-stop shop" for
organizations with simple to complex computer communications and networking
needs who benefit from high levels of technical support and customer service.
The Company believes that its combination of cost-effective direct marketing,
technical support and customer service is the best method to sell into its
markets. The Company's 21 years of experience in the industry have enabled it to
compile an extensive database of loyal active accounts and establish the BLACK
BOX(R) private label brand as the premier line of computer communications and
networking solutions. The success of this strategy is evidenced by the Company's
record of consistent growth in revenues and operating income and its high rate
of repeat customers. Keys to the Company's success include the following:
Unparalleled Technical Support. Black Box believes that its ability to
provide in-depth technical support and prompt and efficient customer service is
critical to its success. Black Box maintains a dedicated technical support
staff, located in 14 different countries, that is available seven days per week,
24 hours a day to assist customers on product selection, service requirements,
technical specifications and product compatibility both before and after
purchase. The Company also has a dial-up
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automated fax-back service and web-based technical data for customers who need
written comprehensive application and technical product details.
Cost-Effective Direct Marketing. Because of the broad range of products
sold, average order size of $645 in Fiscal 1998 and a geographically dispersed
customer base, Black Box believes that its direct mail strategy is the most
cost-effective and efficient way to sell products to both existing and
prospective customers. The high quality, 700 page BLACK BOX(R) Catalog provides
customers around the world access to a comprehensive range of computer
communications and networking products, including complete technical
specifications and recommended uses, and allows them to make technical decisions
and purchases without leaving their offices. The Company believes that, in
conjunction with the BLACK BOX(R) Catalog, its trained technical and customer
support staffs can be a more effective sales tool than a more expensive
traditional direct sales force.
Proprietary Customer List. Over the past 21 years, the Company has
built a proprietary mailing list containing approximately 1.7 million names
representing nearly 700,000 customers. This database includes information on the
past purchases of its customers. The Company routinely analyzes this data in an
effort to enhance customer response and purchasing rates, increase average order
size and ensure that targeted mailings reach specific customer groups. The
Company believes that its proprietary list is a valuable asset that represents a
significant competitive advantage and does not rent the list to other parties.
Broad and Responsive Product Mix. The Black Box Catalogs offer over
7,000 products in 12 categories, the vast majority of which are BLACK BOX(R)
private labeled. Black Box continuously refines its product mix based on
information compiled from customers through the thousands of calls received
daily to place orders, request technical assistance or develop custom products.
Black Box also actively monitors communications industry technology and product
developments to identify new product areas to respond to evolving customer
needs. The Company also offers custom capabilities and sources products outside
of its standard product set to meet a customer's exact specifications and
requirements. Revenue from custom products has grown rapidly during the past
several years.
Quality Products and Brand Name. BLACK BOX(R) is a widely recognized
brand name associated with high quality products and knowledgeable customer
support services. The Company believes that the Black Box(R) tradename is
important to its business. As a result, manufacturers of computer communications
and networking products have sought to distribute their products under the BLACK
BOX(R) private label to take advantage of this broad and cost-effective
distribution channel. In 1994, Black Box received ISO9000 certification,
becoming the first U.S. technical direct marketer to be so certified. In
addition, the Australia, Brazil, France, Japan, Mexico and United Kingdom
subsidiaries have also received the ISO certification. Rigorous quality control
processes must be documented and practiced to earn and maintain
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ISO9000 certification, which is increasingly required of vendors (like Black
Box) by the purchasing departments of many businesses around the world. Black
Box guarantees all of its products by permitting customers to return or exchange
them within the first 45 days. In addition, the Company provides warranties of
at least one year and lifetime warranties with many products. In Fiscal 1998,
Black Box became the first in the industry to introduce a warranty program
offering full protection regardless of cause of failure, including accidental,
surge or water damage.
In-Stock Availability and Rapid Order Fulfillment. The Company has
developed an efficient inventory management and order fulfillment systems that
allow more than 95% of orders for standard product received before midnight ET
to be shipped that same day.
GROWTH STRATEGY. The principal components of Black Box's growth strategy include
(i) expanded technical support services, (ii) enhanced global direct marketing
activities, (iii) expanded product offerings and (iv) continued expansion
worldwide.
Expanded Technical Support Services. With the merger with ATIMCO
Network Services, Inc. in Fiscal 1998, Black Box expanded its technical support
services to include on-site design, installation and maintenance of connectivity
solutions. The Company believes there is a large growing and lucrative market
for these services worldwide, and expects to be able to provide such services in
other major U.S. markets in the future.
On June 22, 1998, the Company acquired through merger Associated
Network Solutions, Inc. ("ANSI"). ANSI is a privately-held company that provides
network design and installation services, premise cabeling and related products
in the geographic markets of Northern and Central Florida.
Enhanced Global Direct Marketing Activities. Black Box continues to
make changes in its catalog design, improving product presentations, expanding
technical information, and better use of eye-catching icons. In addition to the
BLACK BOX(R) catalog, the Company also mails an interim New Product Supplement
and, on a monthly basis, mini-catalogs featuring "hot new products" or specific
products and applications. These regular mailings enable the Company to
introduce new products more quickly than its twice per year BLACK BOX(R) Catalog
distributions, and serve as a more cost-effective method to prospect for new
customers and maintain contact with existing customers.
In addition to producing state-of-the-art color catalogs, the Company
publishes a family of technical guides on topics such as local and remote
communications, power and data protection, and internetworking, as well as a
monthly subscription technical newsletter, Connectivity NEWS(sm) that includes
technical tips and application notes and discusses technology trends.
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Expanded Product Offerings. The Company serves markets which are
growing rapidly and new products are continuously developed as a result of
technological advances. In response to this dynamic environment, Black Box
continues to broaden its existing product lines by offering line extensions and
new technologies. In Fiscal 1998, the Company introduced 1,650 new products.
Expansion Worldwide. In Fiscal 1998, Black Box's revenues outside the
U.S. and Canada were $134.6 million, or 48% of total revenues. New technologies
have typically been introduced and widely accepted in the United States before
reaching many foreign countries. Consequently, Black Box believes that the
international market for its products will continue to grow more rapidly than
the U.S. market. Black Box currently distributes products in 77 countries
through 13 subsidiaries, one joint venture and a network of third-party
distributors.
CUSTOMERS. Black Box customers range from small organizations to many of the
world's largest corporations and include educational institutions and federal,
state and local governments. While Black Box's customers include the majority of
the Fortune 1,000 companies, Black Box estimates that the majority of its active
customers were non-Fortune 1,000 businesses. Many small and mid-sized companies
lack the in-house expertise to evaluate and maintain increasingly complex
computer systems and thus rely on Black Box's technical expertise, both before
and after making purchases. Larger customers find the BLACK BOX(R) Catalog to be
a convenient and comprehensive source for all their computer communications and
networking needs and also utilize the Company's extensive base of technical
knowledge. Additionally, the Company's overall average order size has increased
consistently and was $645 in Fiscal 1998 compared to $620 in the prior year. The
Company believes the increased average order size reflects the ability to sell
products in volume, the successful introduction of more sophisticated, higher
priced products and effective cross-selling and up-selling at the time of
customer order.
Black Box also provides products, service and support to over 10,000
domestic resellers who integrate and sell products directly to end users. In
Fiscal 1998, the reseller program accounted for 26% of the revenues in North
America and 17% of total revenues. The reseller program enables resellers to
provide quality Black Box products to their end user customers who prefer to be
serviced in person. This program provides the reseller with access to over 7,000
products, 24-hour technical support and rapid fulfillment that would be costly
to replicate, manage and implement in their own operations. The customers of
this program range from large distributors to small single proprietors who offer
very specialized local solutions.
CATALOGS. Black Box was the first company to engage exclusively in the sale of a
broad range of computer communications and networking products through direct
marketing techniques. Black Box employs a distribution method based on the
targeted mailing of comprehensive, fully-illustrated color catalogs and other
promotional material directly to its customers who make systems design
decisions.
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Black Box's catalogs present a wide choice of items using a combination of
product features and benefits, photographs, product descriptions, product
specifications, compatibility charts, potential applications and other helpful
technical information. The catalogs have a distinctive look and are recognized
by Black Box's customers.
TECHNICAL SUPPORT. Black Box believes that its technical support is a critical
component of its success. The Company's technical support personnel typically
have technical or engineering backgrounds through education or relevant work
experience. Technical support is available 24 hours per day, seven days per
week, in 11 languages, and the Company's staff handles over 3,800 customer calls
each day worldwide. Black Box also differentiates its technical support by
providing very short customer wait times. Frequent contact between the Company's
technical staff and customers enables it to modify existing products and/or
introduce new products to meet changing applications and to identify emerging
product trends.
CUSTOMER SERVICE. Black Box strives to make purchasing its products as
convenient as possible. The Company's customer service group daily handles over
4,000 calls worldwide, and is available 24 hours from Monday through Friday and
on Saturdays. Order entry and fulfillment occurs at the Company's Pittsburgh and
subsidiary locations. Calls are received by well-trained inbound customer
service representatives who utilize on-line terminals to enter customer orders
into computerized order processing systems. Using proprietary applications, each
member of the customer service group has immediate access to customer files,
including usage and billing information and real-time inventory levels. Using
this data, inbound customer service personnel are also prompted by their
computer screen to cross-sell selected products and to update customer list
information. The Company regularly reviews performance to monitor productivity.
Black Box also employs an outbound customer sales and service force to
increase the frequency and order size of customer purchases. Black Box's
telesales force is focused on expanding its customer list and improving the
accuracy of its customer database. In addition, telesales personnel are utilized
to obtain specifications for potential orders and to follow-up on such quotes.
Black Box provides major account pricing to large corporate buyers and provides
an assigned telesales representative who works with the corporate buyers to
ensure that their requirements are satisfied.
When an order is entered into the system, a credit check is performed
and, when approved, the order is transmitted to the distribution center and a
packing slip is printed for order fulfillment. All packages are inspected prior
to shipment to ensure the accurate fulfillment of customers' orders. Orders
generally are shipped by Federal Express and United Parcel Service in the United
States and by similar small package delivery services internationally.
WORLDWIDE OPERATIONS. The Company's headquarters and domestic operating
facilities are located in Lawrence, Pennsylvania (a suburb of Pittsburgh). This
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200,000 square foot facility is on an 84 acre site that houses administrative,
sales and marketing, manufacturing and service operations. In Fiscal 1998, Black
Box began construction of a new 132,000 square foot distribution center
expansion. The facility will assure adequate distribution capacity for the
foreseeable future.
PRODUCTS. Black Box believes that the ability to offer a broad, innovative
product line with plenty of new products, has been an important factor in
consistently maintaining high growth rates and operating margins. Black Box
currently offers private label, well known branded products and custom products
aggregating more than 7,000. A majority of the 7,000 products carry the BLACK
BOX(R) brand name.
MANUFACTURERS AND SUPPLIERS. Black Box utilizes a network of over 200
manufacturers and suppliers throughout the world. Each supplier is monitored for
quality, delivery performance and cost through a well established certification
program. Manufacturers of computer communications and networking products
distribute their products under the BLACK BOX(R) brand name because Black Box
offers qualified technical support and provides a significant channel of
distribution to end users. This network has manufacturing and engineering
capabilities to customize products for specialized applications. Black Box
believes that the loss of any single source of supply would not adversely affect
its business.
Black Box also operates its own manufacturing and assembly operation at
its Lawrence, Pennsylvania location which currently supplies custom cable
assemblies, switches and specialized active devices. The Company has chosen to
manufacture certain products in-house when third-party sourcing is uneconomical
or lead times cannot be met by third-parties. Sourcing decisions of in-house
versus out-of-house are based upon a balance of quality, delivery, performance
and cost. In Fiscal 1998, Black Box manufactured products represented
approximately 16% of total revenues.
MANAGEMENT INFORMATION SYSTEMS. The Company has committed significant resources
to the development of sophisticated information systems which are used to manage
all aspects of its business. The Company's systems support and integrate
technical support and customer service, inventory management, purchasing,
distribution activities and accounting. These systems provide the Company with
real time, continuously updated information which allows the Company to monitor
sales trends, make informed purchasing decisions, perform statistical analyses
of its customer database and provide product availability and order status
information. The Company's international operations utilize a remote customer
access system to communicate with Pittsburgh-based information systems to check
stock availability, order status and pricing and to place orders.
The Company's changing product mix, multiple language requirements and
design enhancements require efficient modification of product presentations for
its various catalogs. Black Box has implemented a computerized publishing system
that provides flexibility and speed for both text and graphic layout. Black Box
believes
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that this system enables it to efficiently update product lines in subsequent
catalog issues and introduce new products on a timely basis.
BACKLOG. Due to rapid order fulfillment, Black Box's backlog of orders is not
significant to its operations. At March 31, 1998, the worldwide backlog of
unfilled orders believed to be firm for Black Box products was approximately
$3.3 million.
EMPLOYEES. As of March 31, 1998, the Company had approximately 892 employees
worldwide. The Company's ATIMCO subsidiary holds a collective bargaining
agreement with 25 employees. The agreement expires April 21, 2001. The Company
believes that its relationship with its employees is good.
FINANCIAL INFORMATION. Financial information regarding the Company, including
geographic sales data, is set forth in Item 8 of this Form 10-K.
COMPETITION. The Company competes with a variety of manufacturers, direct
marketers, computer resellers and manufacturers' sales organizations. The
Company also competes with the manufacturers of products that the Company sells
under its private labels. The Company believes the principal competitive factors
in its markets are product quality and selection, technical support, customer
base and customer service. The Company believes it competes favorably with
respect to these factors. The Company believes there are no dominate competitors
in the industry. There are several direct marketing catalog competitors such as
Micro Warehouse, Inc. CDW Computer Centers, Inc., and Viking Office Products who
market like products in a similar manner.
ITEM 2 -- PROPERTIES
The Company's headquarters and domestic operating facilities are
located in Lawrence, Pennsylvania (a suburb of Pittsburgh). This 200,000 square
foot facility on a sixteen-acre site houses administrative, sales and marketing,
manufacturing and service operations. In Fiscal 1998, Black Box began
construction of a new 132,000 square foot addition to its product distribution
center. This building will stand on 6 acres of previously undeveloped land
adjacent to the existing facility. The Company expects the new facility to be
operational near the end of 1998. Black Box also owns 62 undeveloped acres
adjacent to such site.
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The Company also owns or leases the following facilities:
Location Own/Lease Square Footage
-------- --------- --------------
Melbourne, Australia Lease 13,750
Zaventum, Belgium Lease 7,300
Sao Paulo, Brazil Lease 14,000
Ontario, Canada Lease 7,500
Rungis, France Lease 20,800
Hallbergmoos, Germany Lease 6,700
Vimodrone, Italy Lease 3,100
Tokyo, Japan Lease 15,100
Mexico City, Mexico Lease 6,500
Utrecht, Netherlands Lease 5,400
Altendorf, Switzerland Lease 9,800
Reading, England Own 19,400
The Company believes that its manufacturing facilities, located at its
headquarters site, are adequate for its present level of production. The
Company's other facilities, including the new distribution center, used
primarily for sales and distribution, are also adequate given its present level
of operations.
ITEM 3 -- LEGAL PROCEEDINGS
The Company is involved in, or has pending, various legal proceedings,
claims, suits and complaints arising out of the normal course of business. Based
on the facts currently available to the Company, management believes all such
matters are adequately provided for, covered by insurance, without merit, or of
such amounts which upon resolution will not have a material adverse effect on
the consolidated financial position or the results of operations of the Company.
In Fiscal 1996, the Company paid approximately $2.7 million in taxes
and interest relating to California unitary tax issues arising prior to the
spin-off of MICOM. The Company believes that subsequent to the date of the
spin-off, June 3, 1994, the Company and MICOM are not part of a unitary group
and, therefore, the Company will have no further liability for unitary taxes
beyond that date.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security-holders, through the solicitation
of proxies or otherwise.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company and their respective ages and
positions are as follows:
<TABLE>
<CAPTION>
Name Age Position with the Company
- ---- --- -------------------------
<S> <C> <C>
Frederick C. Young 42 Chairman of the Board, Chief Executive Officer,
President, and Secretary
Anna M. Baird 41 Vice President, Chief Financial Officer, Treasurer
Kathleen Bullions 43 Vice President of Operations
</TABLE>
- ------------
The following is a biographical summary of the experience of the executive
officers of the Company:
FREDERICK C. YOUNG, 42, was elected Chairman of the Board and
Chief Executive Officer of the Company on June 24, 1998. He is currently
President and Secretary of the Company and was elected a director of the Company
on December 18, 1995. He served as Vice President and Chief Financial Officer,
Treasurer and Secretary of Black Box Corporation since joining the Company in
1991 and was promoted to Senior Vice President and Chief Operating Officer in
May 1996 and President in May 1997.
ANNA M. BAIRD, 41, was promoted to Vice President, Chief
Financial Officer, and Treasurer on May 9, 1997. She was Director of Finance
since prior to March 1992.
KATHLEEN BULLIONS, 43, was promoted to Vice President of
Operations on May 9, 1997. She was Director of Operations since prior to March
1992.
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PART II
ITEM 5 -- MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock is traded on the Nasdaq National Market (trading
symbol "BBOX"). On June 19, 1998, the last reported sale price of the Common
Stock was $33-3/16 per share. The following table sets forth the quarterly high
and low sale prices of the Common Stock as reported by the Nasdaq Stock Market
during each of the Company's fiscal quarters following the MICOM spin-off on
June 3, 1994. Such over the counter market quotations reflect inter-dealer
prices, without retail mark-up, mark-down, or commission, and may not
necessarily represent actual transactions.
High Low
---- ---
Fiscal 1996
1st Quarter 17-1/8 14-1/4
2nd Quarter 19-3/4 14-1/2
3rd Quarter 18-3/4 15-3/4
4th Quarter 18-1/2 13-1/4
Fiscal 1997
1st Quarter 24-3/4 17
2nd Quarter 33-1/2 19
3rd Quarter 41-1/2 32
4th Quarter 43-1/4 24-3/4
Fiscal 1998
1st Quarter 39-1/2 20-3/4
2nd Quarter 41-1/2 33-3/4
3rd Quarter 46 25
4th Quarter 40-1/4 29-1/2
At March 31, 1998, there were 137 holders of record.
No cash dividends have been paid on the Common Stock. The Mellon Credit
Agreement, dated May 6, 1994, between Black Box - PA and Mellon Bank, N.A., as
amended (the "Mellon Credit Agreement"), and the associated Guarantee and
Suretyship Agreement between the Company and Mellon Bank, N.A. (the "Mellon
Guarantee") and the 8.81% Senior Notes and associated Guarantee Agreement limits
the amount of dividends the Company can pay to its stockholders.
On January 30, 1998, in connection with the acquisition of ATIMCO
Network Services, Inc. ("ATIMCO"), the Company issued 68,115 shares of its
Common Stock to
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the two (2) previous owners of ATIMCO. As a result of the transaction, ATIMCO
became a wholly-owned subsidiary of the Company. The issuance of these shares
was exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Act"), by virtue of Section 4(2) of the Act and Regulation D
promulgated thereunder. These exemptions were available because of the number
and nature of the purchasers of the stock, the information provided to them, the
lack of general solicitation and or advertisement in connection with the offer
and sale of the stock, and the restrictions on transfer of the stock.
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ITEM 6 -- SELECTED FINANCIAL DATA
The following table sets forth certain selected historical consolidated
financial data for the Company for the periods indicated. Information should be
read in conjunction with the Company's Consolidated Financial Statements and
Notes thereto included elsewhere in this report. The historical data presented
below for Fiscal Years 1994 through 1998 were derived from the Consolidated
Financial Statements of the Company.
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
-------------------------------------------------------------
Income Statement Data: 1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues (1) $142,004 $164,766 $193,427 $232,158 $279,821
Cost of sales 65,456 73,191 87,455 108,512 138,993
------ ------ ------ ------- -------
Gross profit 76,548 91,575 105,972 123,646 140,828
Selling, general &
administrative expenses 44,830 54,564 64,267 74,094 82,678
------ ------ ------ ------ ------
Operating income before
amortization 31,718 37,011 41,705 49,552 58,150
Intangibles amortization 4,338 4,206 3,620 3,854 3,801
----- ----- ----- ----- -----
Operating income 27,380 32,805 38,085 45,698 54,349
Interest expense, net 7,137 6,400 5,757 3,649 2,652
Income from continuing operations
before extraordinary item 11,446 14,465 18,278 24,295 30,915
Income from discontinued
operations 5,791 50 -- -- --
Extraordinary item (3,867)(2) -- -- -- --
------ ------ ------ ------ ------
Net income $13,370 $14,515 $18,278 $24,295 $30,915
======= ======= ======= ======= =======
Basic earnings per share:
Income from continuing operations $0.73 $0.91 $1.13 $1.48 $1.85
before extraordinary item
Income (loss) from discontinued 0.37 -- -- -- --
operations
Extraordinary item (0.25) -- -- -- --
------ ------ ------ ------ ------
Net income $0.85 $0.91 $1.13 $1.48 $1.85
====== ====== ====== ====== ======
Diluted earnings per share:
Income from continuing operations $0.71 $0.89 $1.10 $1.40 $1.75
before extraordinary item
Income (loss) from discontinued 0.36 -- -- -- --
operations
Extraordinary item (0.24) -- -- -- --
------ ------ ------ ------ ------
Net income $0.83 $0.89 $1.10 $1.40 $1.75
====== ====== ====== ====== ======
Balance Sheet Data (at end of period):
Working capital $34,208 $23,093 $30,049 $38,232 $61,504
Total assets 186,261 152,132(3) 155,544 173,279 185,191
Total long-term debt 80,474 56,775 41,142 21,175 8,043
Stockholders' equity 65,347 47,115(3) 67,141 94,264 127,765
</TABLE>
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ADJUSTED BALANCE SHEET DATA:(4)
<TABLE>
<CAPTION>
As of March 31,
------------------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Working capital $23,683 $23,093 $30,049 $38,232 $61,504
Total assets 150,722 152,132 155,544 173,279 185,191
Total long-term debt 80,474 56,775 41,142 21,175 8,043
Stockholders' equity 29,808 47,115 67,141 94,264 127,765
</TABLE>
(1) Revenues are net of sales returns and allowances.
(2) Represents the write-off of the original issue discount remaining on
the then outstanding notes in connection with the May 1994
refinancing.
(3) The decrease in total assets and stockholders' equity from March 31,
1994 reflects the impact of the MICOM Spin-off.
(4) Adjusted to exclude the net assets of MICOM as of March 31, 1994.
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
GENERAL: The table below should be read in conjunction with the following
discussion (percentages are based on total revenues.)
FISCAL YEAR ENDED MARCH 31,
- -------------------------------------------------------------------------------
1996 1997 1998
===============================================================================
Revenues $193,427 $232,158 $279,821
North America 56.9% 52.6% 51.9%
International 43.1 47.4 48.1
Total 100.0 100.0 100.0
===============================================================================
FISCAL 1998 COMPARED TO FISCAL 1997: Revenues for Fiscal 1998 were $279,821, an
increase of 20.5% over Fiscal 1997 revenues of $232,158, reflecting strong
growth worldwide. North American revenues increased to $145,177 from $122,133,
or 18.9% over the prior year. The growth was driven by both the success of new
product sales and an increase in the number of medium and large orders.
Reported revenues from International operations increased to $134,644 from
$110,025, or 22.4% over the prior year. If exchange rates had remained constant
from the prior year, International revenues would have increased 29.4% from
Fiscal 1997.
Reported revenue dollar and percentage growth for the Company's largest
subsidiaries were as follows: Japan increased $4,245, or 16.0%; United Kingdom
increased $6,882, or 32.7%; France increased $907, or 5.0%; and Brazil increased
$4,834, or 58.6%. Reported revenue growth in France was reduced due to a
stronger U.S. dollar in Fiscal
15
<PAGE> 16
1998, and without the currency effect, operating revenues increased 19.2% from
the prior year. Excluding Japan, United Kingdom, France, and Brazil, the
remaining International business units grew $7,771, or 21.6%, from Fiscal 1997.
The overall growth in International revenues was due to an increase in the
number of orders as well as the success of new product sales.
Gross profit in Fiscal 1998 increased to $140,828, or 50.3% of revenues, from
$123,646, or 53.3% of revenues, in Fiscal 1997. The decrease in gross profit
margin was due to the combined effects of an increase in medium and large
orders, which receive larger discounts and carry slightly lower profit margins
than small orders, and 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 50.6% in Fiscal 1998 compared to 53.5%
in Fiscal 1997.
Selling, general and administrative ("SG&A") expenses for Fiscal 1998 were
$82,678, or 29.5% of revenues, an increase of $8,584 over SG&A expenses of
$74,094, or 31.9% of revenues in Fiscal 1997. SG&A expense as a percentage of
revenues decreased from last year as the Company was able to leverage its
existing cost structure. The dollar increase over the prior year related to
additional marketing and personnel costs, primarily at the International
locations.
Operating income before amortization in Fiscal 1998 was $58,150, or 20.8% of
revenues, compared to $49,552, or 21.3% of revenues, in Fiscal 1997. Intangibles
amortization for the year was $3,801, comparable to the prior year amount of
$3,854.
Net interest expense for Fiscal 1998 declined to $2,652 from $3,649 in Fiscal
1997 due to lower average borrowings.
The annual effective tax rate of 40.7% for Fiscal 1998 was higher than the U.S.
statutory rate of 35.0% primarily due to state income taxes, foreign income
taxes higher than the U.S. rate, and the unfavorable impact of non-deductible
intangibles amortization.
Net income for Fiscal 1998 was $30,915 compared to $24,295 in Fiscal 1997, an
increase of 27.2%. This growth was primarily due to strong revenue growth in
North America and Europe and the Company's ability to leverage its existing cost
structure.
FISCAL 1997 COMPARED TO FISCAL 1996: Revenues for Fiscal 1997 were $232,158, an
increase of $38,731, or 20.0%, over Fiscal 1996 revenues of $193,427. North
American revenues increased to $122,133 from $109,980, or 11.1% over the prior
year. The growth was the result of improved marketing programs and introductions
of new products.
16
<PAGE> 17
Reported revenues from International operations increased to $110,026 from
$83,452, or 31.8% over the prior year. The growth was primarily as a result of
strong marketing programs, new product introductions and the acquisition of the
joint venture partner's interest in Black Box Australia.
In total, revenues at the Company's largest subsidiaries, Japan, United Kingdom
and France, increased 25.0% from Fiscal 1996. The acquisition of the joint
venture interest in Black Box Australia increased international revenues by
approximately $4,300 in Fiscal 1997. The stronger U.S. dollar, particularly
against the Japanese yen and French franc, reduced total Fiscal 1997 revenues by
approximately $6,600 compared to Fiscal 1996.
Gross profit in Fiscal 1997 increased to $123,646, or 53.3% of revenues, from
$105,972, or 54.8% of revenues, in Fiscal 1996. The decrease in gross profit
margin was due primarily to the impact of a stronger US dollar in Fiscal 1997
compared to Fiscal 1996, resulting in an unfavorable impact from the revaluation
of foreign denominated intercompany receivables. Excluding the impact of
revaluing the intercompany receivables, the gross profit margin remained
relatively constant at 53.6% in Fiscal 1997 compared to 53.9% in Fiscal 1996.
SG&A expenses for Fiscal 1997 were $74,094, or 31.9% of revenues, an increase of
$9,827 over SG&A expenses of $64,267, or 33.2% of revenues, in Fiscal 1996. SG&A
expense decreased as a percentage of revenues due to the leveraging of the
Company's existing cost structure and the improvement in the Brazil operations
compared to Fiscal 1996. The majority of the dollar increase was due to
increased worldwide marketing expenditures and personnel costs primarily at the
International locations. SG&A expenses included approximately $1,600 relating to
expenses in Australia, which were more than offset by approximately $2,100 of
favorable translation currency impact on expenses.
Operating income before amortization in Fiscal 1997 was $49,552, or 21.3% of
revenues, compared to $41,705, or 21.6% of revenues, in Fiscal 1996. Intangibles
amortization in Fiscal 1997 increased slightly to $3,854 from $3,620 in Fiscal
1996.
Net interest expense for Fiscal 1997 declined to $3,649 from $5,757 in Fiscal
1996 due primarily to lower average borrowings.
The annual effective tax rate of 42.0% for Fiscal 1997 was higher than the U.S.
statutory rate of 35.0% primarily because of foreign subsidiary income tax rates
higher than the U.S. statutory rate, state income taxes and the unfavorable
impact of non-deductible intangibles amortization.
Net income for Fiscal 1997 was $24,295 compared to $18,278 in Fiscal 1996, an
increase of 32.9%. This growth was primarily due to strong revenue growth in
North America, Europe, and the Pacific Rim and the Company's ability to leverage
its existing cost structure.
17
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES: The Company continues to meet all of its cash
requirements through cash flow from operations. During Fiscal 1998, cash flow
before debt reduction was $22,030 and the Company reduced debt by $12,823. The
Company also made capital expenditures of $2,332 during Fiscal 1998. As of March
31, 1998, the Company had cash and cash equivalents of $10,560, working capital
of $61,504 and long-term debt of $8,043. The Company's total debt at March 31,
1998 of $16,480 was comprised of $16,000 aggregate principal amount of 8.81%
Senior Notes, and $480 of various other loans. The weighted average interest
rate on all indebtedness of the Company as of March 31, 1998 was approximately
8.8% compared to 8.5% as of March 31, 1997. In addition, at March 31, 1998, the
Company had $39,010 of additional funds available under the Mellon Credit
Agreement.
The Mellon Credit Agreement provides for a maximum borrowing of $40,000 through
March 31, 1999. Interest on borrowings is variable based on the Company's option
of selecting the bank's prime rate (8-1/2 percent at March 31, 1998), the
Euro-dollar rate plus an applicable margin, as defined in the agreement or
Mellon's ABS rate plus an applicable margin, as defined in the agreement. The
applicable margin added to the Euro-dollar rate and Mellon's ABS rate is
adjusted each quarter based on the cash flow ratio, as defined in the agreement
and can vary from 2 percent to 3/4 percent (3/4 percent at March 31, 1998).
The Company has operations, customers and suppliers worldwide, thereby exposing
the Company's financial results to foreign currency fluctuations. In an effort
to reduce this risk, the Company generally sells and purchases inventory based
on prices denominated in U.S. dollars. Intercompany sales to subsidiaries are
generally denominated in the subsidiaries' local currency, although intercompany
sales to the Company's subsidiaries in Brazil and Mexico are denominated in U.S.
dollars. The gains and losses resulting from the revaluation of the intercompany
balances denominated in foreign currencies are recorded to gross profit to the
extent the intercompany transaction resulted from an intercompany sale of
inventory.
The Company has entered into and will continue in the future, on a selective
basis, to enter into forward exchange contracts to reduce the foreign currency
exposure related to these 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 March
31, 1998, the Company did not have any open forward contracts. During Fiscal
1998, the net impact from revaluing forward contracts 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.
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
18
<PAGE> 19
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.
ACCOUNTING STANDARDS: In June 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("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 SFAS No. 130, the Company expects to adopt the new standard in the
first quarter 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.
In June 1997, the 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.
INFLATION: The overall effects of inflation on the Company have been nominal.
Although long-term inflation rates are difficult to predict, the Company
continues to strive to minimize the effect of inflation through improved
productivity and cost reduction programs as well as price increases within the
constraints of market competition.
FORWARD-LOOKING STATEMENTS: When included in this Annual Report on Form 10-K 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 Annual Report on Form 10-K. 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.
19
<PAGE> 20
ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BLACK BOX CORPORATION AND SUBSIDIARIES
Report of Independent Public Accountants
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Changes in Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
20
<PAGE> 21
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Black Box Corporation:
We have audited the accompanying consolidated balance sheets of Black Box
Corporation (a Delaware corporation and the "Company") and subsidiaries as of
March 31, 1998 and 1997, and the related consolidated statements of income,
changes in stockholders' equity and cash flows for each of the three years in
the period ended March 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Black Box
Corporation and subsidiaries as of March 31, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended March 31, 1998, in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
-----------------------
Arthur Andersen LLP
Pittsburgh, Pennsylvania
May 1, 1998
<PAGE> 22
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------------
1996 1997 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $193,427 $232,158 $279,821
Cost of sales 87,455 108,512 138,993
- ---------------------------------------------------------------------------------------------
Gross profit 105,972 123,646 140,828
SG&A expense 64,267 74,094 82,678
Intangibles amortization 3,620 3,854 3,801
- ---------------------------------------------------------------------------------------------
Operating income 38,085 45,698 54,349
Interest expense, net 5,757 3,649 2,652
Other expense (income), net (295) 160 (417)
- ---------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 32,623 41,889 52,114
Provision for income taxes 14,345 17,594 21,199
- ---------------------------------------------------------------------------------------------
Net income $18,278 $24,295 $30,915
=============================================================================================
Basic earnings per common share $1.13 $1.48 $1.85
Diluted earnings per common share $1.10 $1.40 $1.75
- ---------------------------------------------------------------------------------------------
Weighted average common shares 16,135 16,415 16,700
Weighted average common and common
equivalent shares 16,584 17,292 17,616
=============================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22
<PAGE> 23
BLACK BOX CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------
1997 1998
==============================================================================================
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,353 $ 10,560
Accounts receivable, net of allowance for doubtful
accounts of $2,499 and $2,655, respectively 43,900 47,197
Inventories, net 30,435 31,922
Prepaid catalog expenses 5,332 5,845
Other current assets 2,895 4,303
- ----------------------------------------------------------------------------------------------
Total current assets 83,915 99,827
Property, plant and equipment 12,923 12,782
Intangibles, net 75,955 72,164
Other assets 486 418
- ----------------------------------------------------------------------------------------------
Total assets $ 173,279 $ 185,191
==============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current debt $ 8,128 $ 8,437
Accounts payable 19,924 14,098
Accrued compensation and benefits 5,688 5,940
Other accrued expenses 6,127 6,582
Accrued income taxes 5,816 3,266
- ----------------------------------------------------------------------------------------------
Total current liabilities 45,683 38,323
Long-term debt 21,175 8,043
Other liabilities, primarily deferred taxes 12,157 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 16,518,682 and
16,765,110, respectively 17 17
Additional paid-in capital 29,897 33,805
Retaining earnings 66,504 97,998
Cumulative foreign currency translation (2,154) (3,619)
Dividend declared to former ATIMCO shareholders
prior to merger -- (436)
- ----------------------------------------------------------------------------------------------
Total stockholders' equity 94,264 127,765
- ----------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 173,279 $ 185,191
==============================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23
<PAGE> 24
BLACK BOX CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------- PAID-IN RETAINED TRANSLATION DIVIDEND
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT DECLARED TOTAL
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1995 16,061,557 $16 $23,169 $23,931 $(1) $47,115
Net income 18,278 18,278
Exercise of options 240,697 2,057 2,057
Tax benefit from exercised
options 678 678
Foreign currency translation
adjustment (987) (987)
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1996 16,302,254 16 25,904 42,209 (988) 67,141
Net income 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
adjustment (1,166) (1,166)
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1997 16,518,682 17 29,897 66,504 (2,154) 94,264
Net income 30,915 30,915
Contribution from merger 62 579 641
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)
Dividends 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
=================================================================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
24
<PAGE> 25
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------------
1996 1997 1998
===============================================================================================================
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 18,278 $ 24,295 $ 30,915
Adjustments to reconcile net income to cash
provided by operating activities
Depreciation and amortization 6,057 6,199 6,325
All other (109) 99 (48)
Changes in working capital items
Accounts receivable, net (6,235) (8,529) (2,795)
Inventories, net (1,404) (11,050) (1,446)
Other assets (1,609) (660) (1,860)
Accounts payable 4,179 7,214 (5,887)
Accrued compensation and benefits 1,031 1,237 252
Accrued expenses (1,135) 236 419
Accrued income taxes (1,070) 2,873 (3,618)
- ---------------------------------------------------------------------------------------------------------------
Cash provided by operating activities 17,983 21,914 22,257
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (2,476) (2,758) (2,332)
ATIMCO merger -- -- 160
Acquisition of joint venture -- (934) --
- ---------------------------------------------------------------------------------------------------------------
Cash used in investing activities (2,476) (3,692) (2,172)
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings (50,894) (68,407) (94,028)
Proceeds from borrowings 33,663 48,384 81,205
Proceeds from the exercise of options 2,057 2,474 3,846
Dividends paid to former ATIMCO
shareholders prior to merger -- -- (436)
- ---------------------------------------------------------------------------------------------------------------
Cash used in financing activities (15,174) (17,549) (9,413)
- ---------------------------------------------------------------------------------------------------------------
Foreign currency exchange impact on cash (955) (1,244) (1,465)
- ---------------------------------------------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents (622) (571) 9,207
Cash and cash equivalents at beginning of year 2,546 1,924 1,353
- ---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 1,924 $ 1,353 $ 10,560
===============================================================================================================
Interest paid $ 6,445 $ 3,663 $ 2,749
===============================================================================================================
Income taxes paid $ 14,495 $ 13,282 $ 16,107
===============================================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
25
<PAGE> 26
BLACK BOX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS: Black Box Corporation is a leading worldwide direct
marketer and technical service provider of computer communications and
networking equipment and services to businesses of all sizes, operating in 77
countries throughout the world.
FISCAL YEARS AND INTERIM PERIODS: Prior to the fiscal year ended March 31, 1998,
the Company followed a 52 or 53 week fiscal year that ended on the Sunday
nearest March 31. Each fiscal quarter consisted of 13 weeks, and the last
quarter was adjusted for those years having 53 weeks. For fiscal years ended
March 31, 1998 and after, the Company changed the fiscal year end to March 31.
The first three quarters consisted of 13 weeks, and the fourth quarter was
adjusted to end on March 31. The ending dates for the years ended March 31,
1998, 1997 and 1996 were actually March 31, 1998, March 30, 1997 and March 31,
1996, respectively. For simplicity, March 31 is used for all year end
references.
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements
include the accounts of Black Box Corporation and its wholly-owned and
majority-owned subsidiaries. All intercompany accounts and transactions have
been eliminated in consolidation.
CASH EQUIVALENTS: The Company considers all highly liquid investments purchased
with a maturity of three months or less to be cash equivalents. The carrying
amount approximates fair value because of the short maturity of those
instruments.
INVENTORIES: Inventories are stated at the lower of cost (first-in, first-out
method) or market. The net inventory balances at March 31 are as follows:
1997 1998
============================================================================
Raw materials $ 2,152 $1,654
Work-in-process 28 41
Finished goods 29,865 33,081
Inventory reserve (1,610) (2,854)
- ----------------------------------------------------------------------------
Inventory, net $ 30,435 $ 31,922
============================================================================
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at cost.
Depreciation is computed using the straight-line method based on the estimated
useful lives of the assets. The useful life for buildings and improvements is 30
years and for machinery and equipment is three to seven years. Maintenance and
minor repair costs are charged to expense as incurred. Major replacements or
betterment's
26
<PAGE> 27
are capitalized. When items are sold, retired or otherwise disposed of, the cost
and related accumulated depreciation are removed from the accounts and, if
applicable, a gain or loss is recorded.
Property, plant and equipment balances, net of accumulated depreciation, at
March 31 are as follows:
1997 1998
=============================================================================
Land $ 1,962 $ 1,962
Building and improvements 9,750 10,087
Machinery and equipment 12,983 14,964
- -----------------------------------------------------------------------------
24,695 27,013
Accumulated depreciation (11,772) (14,231)
- -----------------------------------------------------------------------------
Property, plant and equipment, net $ 12,923 $ 12,782
=============================================================================
INTANGIBLES: Intangibles include the reorganization value in excess of amounts
allocable to identifiable assets (the portion of the reorganization value which
could not be attributed to specific, tangible or identifiable intangible
assets), goodwill (the excess of the purchase cost over the fair value of the
assets acquired) and tradename and trademarks. These intangibles are amortized
over 20, 30 to 40, and 40 years, respectively. The intangible assets and
associated accumulated amortization at March 31 are as follows:
1997 1998
================================================================================
Reorganization value in excess of amounts
allocable to identifiable assets, less
accumulated amortization of $16,096 and
$18,880, respectively $ 40,978 $ 38,194
- --------------------------------------------------------------------------------
Goodwill, less accumulated amortization of $422
and $527, respectively 3,682 3,577
- --------------------------------------------------------------------------------
Tradename and trademarks, less accumulated
amortization of $4,647 and $5,549, respectively 31,295 30,393
- --------------------------------------------------------------------------------
Intangibles, net $ 75,955 $ 72,164
================================================================================
The Company evaluates the recoverability of intangible assets, including
goodwill, at each balance sheet date based on forecasted future operations,
undiscounted cash flows and other significant criteria. Based upon the available
data, management believes that the carrying amount of these intangible assets
will be realized over their respective remaining amortization periods.
INCOME TAXES: Deferred income taxes are recognized for all temporary differences
between the tax and financial bases of the Company's assets and liabilities,
using the enacted tax laws and statutory tax rates applicable to the periods in
which the differences are expected to affect taxable income.
FOREIGN CURRENCY TRANSLATION: The financial statements of the Company's foreign
subsidiaries, except for the subsidiaries located in Brazil and Mexico, are
recorded in the local currency which is the functional currency. Accordingly,
assets and liabilities
27
<PAGE> 28
of these subsidiaries are translated using prevailing exchange rates at the
appropriate balance sheet date and revenues and expenses are translated using an
average monthly exchange rate. Translation adjustments resulting from this
process are recorded as a separate component of "Stockholders' Equity" and will
be included in income upon sale or liquidation of the foreign investment. Gains
and losses from transactions denominated in a currency other than the functional
currency are included in net earnings. For the subsidiaries located in Brazil
and Mexico, the U.S. dollar is the functional currency, hence a combination of
current and historical rates is used in translating assets and liabilities and
the related exchange adjustments are included in net earnings.
RISK MANAGEMENT AND FINANCIAL DERIVATIVES: The Company has operations, customers
and suppliers worldwide, thereby exposing the Company's financial results to
foreign currency fluctuations. In an effort to reduce this risk, the Company
generally sells and purchases inventory based on prices denominated in U.S.
dollars. Intercompany sales to all subsidiaries except Brazil and Mexico are
denominated in the subsidiaries local currency. Intercompany sales to the
subsidiaries in Brazil and Mexico are denominated in U.S. dollars. The gains and
losses resulting from the revaluation of the intercompany balances denominated
in foreign currencies is recorded to gross profit to the extent the intercompany
transaction resulted from an intercompany sale of inventory.
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 these intercompany transactions. These contracts have a term of 12
months or less and are with a major commercial bank. Accordingly, the Company
expects the counterparty to the contracts to meet its obligations. 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 March 31, 1998, the Company did not have any open forward exchange contracts.
During Fiscal 1998, the net impact from revaluing forward contracts was not
material.
The Company does not hold or issue any other financial derivative instruments
nor does it engage in speculative trading of financial derivatives.
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.
28
<PAGE> 29
USE OF ESTIMATES: The preparation of financial statements in accordance with
generally accepted accounting standards requires management to make estimates
and assumptions. These estimates and assumptions affect the amounts reported in
the accompanying financial statements. Actual results could differ from those
amounts.
NOTE 2: CHANGES IN BUSINESS
ACQUISITIONS AND NEW SUBSIDIARIES: In January 1998, the Company acquired through
merger 100% of ATIMCO, a privately-held company that provides network design and
installation services, premise cabling and related products. The acquisition was
accounted for as a pooling of interests. The Company issued 68,115 shares of
common stock in the transaction, which was accounted for by a pooling of
interests. ATIMCO's revenues in Fiscal 1998 were $3,200. ATIMCO's results of
operations are not considered material to the Company, and, as such, prior
periods have not been restated.
In March 1997, the Company purchased the remaining 50 percent of its joint
venture operation in Australia, Black Box Catalog Australia Pty. Ltd. ("Black
Box Australia"). The purchase price was $1,100 of which the majority, $766, was
allocated to goodwill. The Company has consolidated the results of operations
for Black Box Australia as of the beginning of Fiscal 1997. The operations and
financial position of Black Box Australia are not material to either the
consolidated financial position or results of operations of the Company and
therefore, no pro forma information has been provided.
In May 1995, the Company established a new wholly-owned subsidiary in Mexico
City, Mexico, Black Box de Mexico, S.A. de C.V. ("Black Box Mexico").
In December 1994, the Company established a new majority-owned subsidiary in Sao
Paulo, Brazil, Black Box do Brazil Industria e Comercia Ltda. ("Black Box
Brazil"). The ownership agreement provides the Company with the option beginning
in October 1997 and ending in September 1999 to purchase the minority
shareholders' shares based on a defined price calculation. If the Company does
not exercise its option prior to September 1999, the Company is required to
purchase the minority shareholders' shares in October 1999 based on a defined
price calculation. The minority shareholders are restricted from competing with
Black Box Brazil for a period of two years after having any affiliation with
Black Box Brazil. One of the minority shareholders is Michael E. Barker, a
member of the Board of Directors of the Company. In November 1997, the Company
exercised its option to repurchase the minority interest under the agreement.
Mr. Barker has objected to the valuation of his interest and the matter is
currently in arbitration.
DISCONTINUED OPERATIONS AND DISPOSALS: On June 3, 1994, the Company distributed
all of the outstanding shares of MICOM Communications Corp. ("MICOM") common
stock to all holders of the Company's outstanding common stock who held shares
on May 20, 1994, the record date of distribution.
29
<PAGE> 30
NOTE 3: INDEBTEDNESS
Long-term debt at March 31 is as follows:
1997 1998
=====================================================================
Revolving credit $ 5,100 $ --
Notes 24,000 16,000
Other debt 203 480
- ---------------------------------------------------------------------
29,303 16,480
Less current portion (8,128) (8,437)
- ---------------------------------------------------------------------
Long-term debt $ 21,175 $ 8,043
=====================================================================
In May 1994, Black Box Corporation of Pennsylvania, a domestic operating
subsidiary of the Company entered into a Revolving Credit Agreement with Mellon
Bank, N.A. ("Mellon") for the purpose of refinancing the then existing revolving
credit agreement and to provide additional working capital. On April 1, 1996,
this agreement was amended to extend the term and modify the interest rate
options. The current agreement, as amended, provides for a maximum borrowing of
$40,000 through March 31, 1999. Interest on borrowings is variable based on the
Company's option of selecting the bank's prime rate (8-1/2 percent at March 31,
1998), the Euro-dollar rate plus an applicable margin, as defined in the
agreement or Mellon's Automated Borrowing Services ("ABS") rate plus an
applicable margin, as defined in the agreement. The applicable margin added to
the Euro-dollar rate and Mellon's ABS rate is adjusted each quarter based on the
cash flow ratio, as defined in the agreement and can vary from 2 percent to 3/4
percent (3/4 percent at March 31, 1998). The agreement requires the Company to
pay an annual commitment fee of 3/8 percent on the daily unborrowed portion of
the total commitment. The agreement is unsecured; however, all borrowings are
guaranteed by the Company, as parent. The agreement contains restrictive
covenants which relate to levels of dividend payments and capital expenditures
and various financial ratios. The Company is in compliance with these covenants.
In May 1994, the domestic subsidiary of the Company entered into a $40,000, five
year Senior Note Agreement with certain financial institution parties for the
purpose of refinancing a portion of the existing notes outstanding. The Senior
Notes are payable in five equal installments of $8,000 per year starting in May
1995 and ending in May 1999. Interest on the notes is fixed at 8.81 percent and
prepayments are permitted subject to the payment of a yield-maintenance amount,
as defined in the agreement. The agreement is unsecured; however, all borrowings
are guaranteed by the Company, as parent. The agreement contains restrictive
covenants which relate to levels of dividend payments and capital expenditures
and various financial ratios. The Company is in compliance with these covenants.
30
<PAGE> 31
Other debt is composed of various bank, industrial revenue and third party loans
secured by specific pieces of equipment and real property. Interest on these
loans are fixed and range from 3 to 5 percent. The due dates occur at various
times through May 2000.
At March 31, 1998, the Company had $990 of letters of credit outstanding.
The aggregated amount of the minimum principal payments for each of the five
fiscal years subsequent to March 31, 1998 for all long-term indebtedness is as
follows: 1999-$8,437; 2000-$8,040; 2001-$3; 2002-$0; 2003-$0.
The fair value of the Company's debt at March 31, 1998 approximates the carrying
value. The fair value is based on management's estimate of current rates
available to the Company for similar debt with the same remaining maturity.
NOTE 4: INCOME TAXES
The domestic and foreign components of pretax income from continuing operations
for the years ended March 31 are as follows:
1996 1997 1998
=======================================================================
Domestic $ 24,641 $ 30,950 $ 38,872
Foreign 7,982 10,939 13,242
- -----------------------------------------------------------------------
Consolidated $ 32,623 $ 41,889 $ 52,114
=======================================================================
The provision for income tax charged to continuing operations for the years
ended March 31 consists of the following:
1996 1997 1998
=======================================================================
Current:
Federal $ 6,692 $ 9,507 $ 9,666
State 1,025 1,158 856
Foreign 4,713 7,045 7,579
- -----------------------------------------------------------------------
Total current 12,430 17,710 18,101
Deferred 1,915 (116) 3,098
- -----------------------------------------------------------------------
Provision for income taxes $14,345 $17,594 $21,199
=======================================================================
Reconciliations between income taxes from continuing operations computed using
the federal statutory income tax rate and the Company's effective tax rate for
the years ended March 31 are as follows:
1996 1997 1998
================================================================================
Federal statutory tax rate 35.0% 35.0% 35.0%
Foreign taxes, net of foreign tax credits 5.9 0.6 2.8
Amortization of intangibles 2.9 2.3 1.9
State income taxes, net of federal benefit 2.3 2.0 1.6
Other, net (2.1) 2.1 (0.6)
- --------------------------------------------------------------------------------
Effective tax rate 44.0% 42.0% 40.7%
================================================================================
31
<PAGE> 32
The components of deferred tax (liabilities) assets included in "Other
Liabilities" at March 31 are as follows:
<TABLE>
<CAPTION>
1997 1998
========================================================================================
<S> <C> <C>
Tradename and trademarks $ (10,941) $ (10,627)
State taxes (3,450) (1,283)
Unremitted earnings of Japanese subsidiary (2,917) (3,551)
Basis of fixed assets (916) (961)
Other (3,245) (4,790)
- ----------------------------------------------------------------------------------------
Gross deferred tax liabilities (21,649) (21,212)
Net operating losses and foreign tax credit carryforwards 6,821 7,430
Other 2,996 3,014
- ----------------------------------------------------------------------------------------
Gross deferred tax assets 9,817 10,444
- ----------------------------------------------------------------------------------------
Net deferred tax liabilities $ (11,832) $ (10,768)
========================================================================================
</TABLE>
At March 31, 1998, the Company had $45,090 of net operating loss carryforwards
and $39,993 of alternative minimum tax loss carryforwards. As a result of the
Company's reorganization in 1992 and concurrent ownership change, Section 382 of
the Internal Revenue Code limits the amount of net operating losses available to
the Company to approximately $600 per year. The carryforwards expire in the
fiscal years 2004 through 2007; however, due to the limitation stated above, the
Company expects to utilize only the unrestricted portion of the operating loss
carryforwards, prior to expiration.
In general, except for certain earnings in Japan, it is management's intention
to reinvest undistributed earnings of foreign subsidiaries, which aggregate
approximately $13,000 based on exchange rates at March 31, 1998. However, from
time to time, the foreign subsidiaries declare dividends to the U.S. parent, at
which time the appropriate amount of tax is determined. Also, additional taxes
could be necessary if foreign earnings were lent to the parent or if the Company
should sell its stock in the subsidiaries. It is not practicable to estimate the
amount of additional tax that might be payable on undistributed foreign
earnings.
NOTE 5: COMMITMENTS AND CONTINGENCIES
The Company leases certain equipment under noncancelable operating lease
agreements, which contain provisions for certain rental adjustments as well as
renewal options. Rent expense under these operating leases for the years ended
March 31, 1998, 1997 and 1996 was $812, $809, and $868, respectively. At March
31, 1998, the minimum lease commitments for the next five years are as follows:
1999-$815; 2000-$742; 2001-$6; 2002-$0; 2003-$0.
The Company is involved in, or has pending, various legal proceedings, claims,
suits and complaints arising out of the normal course of business. Based on the
facts currently available to the Company, management believes all such matters
are adequately provided for, covered by insurance, are without merit, or are of
such
32
<PAGE> 33
amounts which upon resolution will not have a material adverse effect on the
consolidated financial position or the results of operations of the Company.
NOTE 6: RELATED PARTY TRANSACTIONS
For a portion of Fiscal 1996, the Company had a services agreement with Odyssey
Investors, Inc. ("Odyssey Investors"), a related party to the Company's former
majority stockholder, which provided for an annual service fee. One-half of this
service fee was paid to Odyssey Investors and one-half to Michael E. Barker, a
member of the Board of Directors of the Company. For the year ended March 31,
1996, the Company expensed $113 under the agreement. In addition, Odyssey
Investors was entitled to reimbursement of certain expenses incurred on behalf
of the Company. For the year ended March 31, 1996, the Company paid, in the
normal course of business, fees and expenses of $152. This agreement expired on
December 22, 1995. No fees or expenses were paid to these parties in Fiscal 1997
and 1998. See Note 2 for other related party information.
NOTE 7: INCENTIVE COMPENSATION PLANS
PERFORMANCE BONUS: The Company has a variable compensation plan covering
substantially all employees. This plan provides for the payment of a bonus based
on certain annual performance targets. All payments are subject to approval by
the Board of Directors upon the completion of the annual audit. In addition, the
Company had an incentive compensation plan which covered certain key employees.
Amounts paid under this plan were based on the attainment of certain operating
targets over a three year period ending March 31, 1998. The amounts expensed
under the variable and incentive compensation plans for the years ended March
31, 1996, 1997 and 1998 were $2,134, $2,954, and $2,084, respectively.
PROFIT SHARING AND SAVINGS PLAN: The Company has a Profit Sharing and Savings
Plan ("Plan") which qualifies as a deferred salary arrangement under Section
401(k) of the Internal Revenue Code covering only U.S. employees. Under the
Plan, participants are permitted to make contributions of up to 12 percent of
their compensation, as defined. The Company matches 25 percent of the
participant's contributions and increases its matching contribution percentage
if the Company achieves specific revenue and profit targets established at the
beginning of each fiscal year. The total Company contribution for the years
ended March 31, 1996, 1997 and 1998 was $437, $505, and $523, respectively.
STOCK OPTION PLANS: The Company has two stock option plans, the 1992 Stock
Option Plan, as amended (the "Employee Plan"), and the 1992 Directors Stock
Option Plan, as amended (the "Directors Plan"). The Employee Plan authorizes the
issuance of options and stock appreciation rights ("SARs") up to 3,200 shares of
Common Stock. Options are issued by the Board of Directors or Board Committee to
key employees of the Company and generally become exercisable in equal amounts
over a three year
33
<PAGE> 34
period. A portion of these options are held by MICOM employees as the options
were granted prior to the spin-off of MICOM. Option prices are equal to the fair
market value of the stock on the date of the grant and have been adjusted to
reflect the effect of the MICOM distribution on June 3, 1994. No SARs have been
issued.
The Directors Plan authorizes the issuance of options and SARs up to 75 shares
of Common Stock. Options are issued by the Board of Directors or Board Committee
and become exercisable in equal amounts over a three year period. Option prices
are equal to the fair market value of the stock on the date of the grant and
have been adjusted to reflect the effect of the MICOM distribution on June 3,
1994. No SARs have been issued.
The following is a summary of the Company's stock option plans for years ended
March 31:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
==========================================================================
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning
of the year 1,305 $ 9.34 1,754 $11.96 1,750 $14.11
Granted 807 15.29 400 23.38 1,047 28.73
Exercised (239) 8.42 (214) 11.47 (178) 11.43
Forfeited (119) 12.96 (190) 16.70 (96) 19.43
- ------------------------------------------------------------------------------------------------------------
Outstanding, end of
the year 1,754 $11.96 1,750 $14.11 2,523 $20.17
Exercisable, end of year 511 $ 9.04 822 $10.54 1,119 $12.32
Weighted average fair
value of options granted
during the year $7.77 $11.89 $14.92
============================================================================================================
</TABLE>
34
<PAGE> 35
The following table summarizes information about the stock options outstanding
at March 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------- -------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
============================================================================================================
<S> <C> <C> <C> <C> <C>
$7.77 73 4.7 years $ 7.77 73 $ 7.77
$8.92 - $9.35 90 5.5 years 9.35 90 9.35
$9.78 - $13.06 555 6.3 years 10.07 555 10.07
$13.65 - $15.75 482 7.2 years 15.03 314 15.01
$20.50 - $24.75 474 8.6 years 22.80 87 23.85
$30.25 - $35.19 849 9.7 years 30.43 -- --
============================================================================================================
$7.77 - $35.19 2,523 8.0 years $ 20.17 1,119 $ 12.32
============================================================================================================
</TABLE>
The Company continues to apply APB Opinion No. 25 in accounting for stock-based
compensation. To-date, all stock options have been issued at market value;
accordingly, no compensation cost has been recognized. Had the Company elected
to recognize compensation cost based on the fair value basis under SFAS No. 123,
the Company's net income and earnings per share would have been reduced to the
pro forma amounts for the years ended March 31:
1997 1998
==============================================================================
Net income As reported $24,295 $30,915
Pro forma 23,024 28,570
Earnings per share As reported $ 1.40 $ 1.75
Pro forma 1.32 1.62
==============================================================================
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes options pricing model with the following assumptions for the years
ending March 31:
1997 1998
==============================================================================
Expected life (in years) 7.0 7.3
Risk free interest rate 6.6% 5.7%
Volatility 35% 50%
Dividend yield -- --
==============================================================================
35
<PAGE> 36
NOTE 8: 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:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------
1996 1997 1998
==========================================================================================================
<S> <C> <C> <C>
Net income for earnings per share computation $ 18,278 $ 24,295 $ 30,915
Basic earnings per common share:
Weighted average common shares 16,135 16,415 16,700
Basic earnings per common share $1.13 $1.48 $1.85
- ------------------------------------------------------------------------ --------------- -- --------------
Diluted earnings per common share:
Weighted average common shares $16,135 16,415 16,700
Shares issuable from assumed conversion of common
stock equivalents 556 998 1,049
Shares buyable with tax savings from compensation
expense of exercised options (107) (121) (133)
- ------------------------------------------------------------------------ --------------- -- --------------
Weighted average common and common equivalent
shares 16,584 17,292 17,616
Diluted earnings per common share $1.10 $1.40 $1.75
==========================================================================================================
</TABLE>
NOTE 9: SEGMENT INFORMATION
The Company operates in one industry segment as a direct marketer and technical
service provider of computer communications and networking equipment and
services to businesses of all sizes. Geographic segment information for the
years ended March 31 is as follows:
<TABLE>
<CAPTION>
CORPORATE AND
UNITED INTERCOMPANY
STATES EUROPE OTHER ELIMINATIONS CONSOLIDATED
=====================================================================================================================
<S> <C> <C> <C> <C> <C>
1996
Revenues $ 141,638 $ 48,761 $28,495 $ (25,467) $ 193,427
Operating income (1) 31,982 5,174 2,715 (1,786) 38,085
Identifiable assets 128,729 30,132 16,257 (19,574) 155,544
- ---------------------------------------------------------------------------------------------------------------------
1997
Revenue $ 165,730 $ 58,488 $45,297 $ (37,357) $ 232,158
Operating income (1) 36,027 5,781 6,212 (2,322) 45,698
Identifiable assets 152,043 28,146 24,585 (31,495) 173,279
- ---------------------------------------------------------------------------------------------------------------------
1998
Revenues $ 200,428 $ 69,576 $56,919 $ (47,102) $ 279,821
Operating income (1) 42,479 6,153 7,410 (1,693) 54,349
Identifiable assets 165,649 33,089 25,500 (38,997) 185,191
=====================================================================================================================
</TABLE>
(1) The amount presented represents local operating income which differs
from the internal measurement used by the Company. Internally,
intercompany profits generated in the US are allocated back to the
location which records the third-party sale.
36
<PAGE> 37
NOTE 10: QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
============================================================================================================
<S> <C> <C> <C> <C> <C>
FISCAL 1997
Revenues $ 53,788 $ 56,912 $ 58,589 $ 62,869 $ 232,158
Gross profit 28,978 30,595 31,136 32,937 123,646
Net income 5,205 5,825 6,110 7,155 24,295
Basic earnings per
common share 0.32 0.36 0.37 0.43 1.48
Diluted earnings per
common share 0.31 0.34 0.35 0.41 1.40(1)
- ------------------------------------------------------------------------------------------------------------
FISCAL 1998
Revenues $ 65,032 $ 69,665 $ 68,989 $ 76,135 $ 279,821
Gross Profit 33,342 35,015 35,009 37,462 140,828
Net income 6,962 7,459 7,863 8,631 30,915
Basic earnings per
common share 0.42 0.45 0.47 0.51 1.85
Diluted earnings per
common share 0.40 0.42 0.44 0.49 1.75
============================================================================================================
</TABLE>
(1) Earnings per share for the year is less than the sum of the quarterly
earnings per share due to the change in shares each quarter.
NOTE 11: SUBSEQUENT EVENT (UNAUDITED)
In June 1998, the Company acquired by merger 100% of Associated Network
Solutions, Inc. ("ANSI"). ANSI is a privately-held company that provides network
design and installation services, premise cabling and related products in the
geographic markets of northern and central Florida. The Company will account for
the acquisition as a pooling of interests. ANSI's results of operations are not
expected to be material to the Company as a whole.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
AUDITING AND FINANCIAL DISCLOSURE
Not applicable.
37
<PAGE> 38
PART III
ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated herein by
reference to the information set forth under the caption "Executive Officers of
the Registrant" included under Part I of this Form 10-K.
The other information required by this item is incorporated herein by
reference to the information set forth under the captions "Election of
Directors" and "Board of Directors and Certain Board Committees" in the
Company's definitive proxy statement for the 1998 Annual Meeting of Stockholders
to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934,
as amended (the "Proxy Statement").
ITEM 11 -- EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by
reference to the information set forth under the captions "Board of Directors
and Certain Board Committees", "Executive Compensation and Other Information",
and "Compensation Committee Interlocks and Insider Participation" in the Proxy
Statement; provided, however, that the compensation committee report and
performance graph in the Proxy Statement are not incorporated herein by
reference.
ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by
reference to the information set forth under the captions "Security Ownership of
Certain Beneficial Owners", "Compensation Committee Interlocks and Insider
Participation -- Change of Control Agreement", "Compensation Committee
Interlocks and Insider Participation -- Seperation Agreement", and "Security
Ownership of Management" in the Proxy Statement.
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by
reference to the information set forth under the captions "Election of
Directors" and "Compensation Committee Interlocks and Insider Participation" in
the Proxy Statement.
38
<PAGE> 39
PART IV
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Financial statements, financial statement schedules and exhibits not
listed here have been omitted where the required information is included in the
consolidated financial statements or notes thereto, or is not applicable or
required.
(a) Documents filed as part of this report
(1) Financial Statements - no financial statements have
been filed in this Form 10-K other than those in
Item 8.
(2) Financial Statement Schedules
Report of Independent Public Accountants on
Supplemental Schedules
Schedule II - Valuation and Qualifying Accounts
(3) Exhibits
Exhibit
Number Description
------ -----------
3(i) Second Restated Certificate of
Incorporation of the Company, as
amended (15)
3(ii) Restated Bylaws, as amended (2)
10.1 1992 Stock Option Plan, as amended (1)
10.2 1992 Director Stock Option Plan, as
amended (13)
10.3(i) Mortgage on property in the
Township of Cecil, in the Commonwealth
of Pennsylvania, dated September 27,
1988, from Black Box - PA to the Agent
(the "Mortgage") (5)
10.3 (ii) First Amendment to the Mortgage, dated
December 3, 1991 (3)
39
<PAGE> 40
10.4 $40,000,000 Senior Note Agreement, dated as of May 6,
1994, between Black Box - PA and various holders of
the Senior Notes (the "Holders") (7)
10.5(i) Form of Senior Note, dated as of May 6, 1994 (7)
10.5(ii) Modification of Note Purchase Agreements between
Black Box-PA and the Holders, dated November 21, 1996
(14)
10.5(iii) Second Modification of Note Purchase Agreements
between Black Box-PA and Holders, dated November 21,
1996. (14)
10.6(i) Guarantee Agreement, dated as of May 6, 1994, between
the Company and the Holders (7)
10.6(ii) Amendment to Guarantee Agreement between Black Box
Corporation and Holders, dated November 21, 1996 (14)
10.7(i) Credit Agreement, dated as of May 6, 1994, between
Mellon and Black Box - PA (7)
10.7(ii) First Amendment to Credit Agreement, dated March 30,
1995 (9)
10.7(iii) Second Amendment to the Credit Agreement between
Black Box - PA and Mellon, dated August 1, 1995 (10)
10.7(iv) Third Amendment to the Credit Agreement between Black
Box - PA and Mellon, dated April 1, 1996 (12)
10.7(v) Fourth Amendment to Credit Agreement between Black
Box-PA and Mellon, dated November 21, 1996 (14)
10.7(vi) Fifth Amendment to Credit Agreement between Black
Box-PA and Mellon, dated November 21, 1996 (14)
10.8(i) Form of $50,000,000 Revolving Credit Note, dated as
of May 6, 1994, between Black Box - PA and Mellon (7)
10.8(ii) First Amended and Restated Revolving Credit Note,
dated March 30, 1995 (9)
10.9(i) Guaranty and Suretyship Agreement, dated as of May 6,
1994, between the Company and Mellon (7)
40
<PAGE> 41
10.9(ii) First Amendment to Guaranty and Suretyship Agreement,
dated March 30, 1995 (9)
10.9(iii) Second Amendment to Guaranty and Suretyship between
Black Box Corporation and Mellon, dated November 21,
1996 (14)
10.10 Intercreditor Agreement, dated as of May 6, 1994,
between Mellon and the Holders (7)
10.11 Agreement and Plan of Distribution, dated as of May
10, 1994, among the Company, Black Box - PA and MICOM
(4)
10.12 Indemnification and Liability Assumption Agreement,
dated as of June 3, 1994, among the Company, Black
Box - PA and MICOM (4)
10.13(i) Tax Sharing Agreement, dated as of January 28, 1992,
among the Company (previously known as MB Holdings,
Inc.), Black Box and MICOM (4)
10.13(ii) Amendment to Tax Sharing Agreement, dated as of June
3, 1994 (4)
10.14 Separation Agreement, dated as of October 17, 1991,
between the Company (previously known as MB Holdings,
Inc.), and MICOM (4)
10.15 Black Box do Brasil Industria E. Comercio LTDA.
Quotaholder Agreement (6)
10.16 Private Instrument of Amendment to the Articles of
Association of Black Box do Brasil Industria E.
Comercio LTDA. (6)
10.17 Change of Control Agreement with Jeffery M.
Boetticher, dated as of December 20, 1994 (9)
10.18 Change of Control Agreement with Frederick C. Young,
dated as of December 20, 1994 (9)
10.19 Executive Incentive Program Summary (1996-1998) (12)
10.20 Subscription Agreement and Plan of Acquisition of
BBOX Holding Company by Black Box Corporation dated
November 21, 1996 (14)
10.21 Guaranty and Suretyship Agreement between BBOX
Holding Company and Mellon, dated November 21, 1996
(14)
41
<PAGE> 42
10.22 Holding Company Guarantee Agreement between BBOX
Holding Company and Holders, dated November 21, 1996
(14)
10.23 Executive Incentive Program Summary (1999-2001) (1)
10.24 Separation Agreement, dated as of June 23, 1998,
between the Company and Jeffrey M. Boetticher (1)
21 Subsidiaries of the Company (1)
23.1 Consent and Report of Arthur Andersen LLP,
independent public accountants (1)
27.1 Financial Data Schedule (1)
27.2 Restated Financial Data Schedule for Form 10-Q for
the Fiscal 1998 Third Quarter (1)
27.3 Restated Financial Data Schedule for Form 10-Q for
the Fiscal 1998 Second Quarter (1)
27.4 Restated Financial Data Schedule for Form 10-Q for
the Fiscal 1998 First Quarter (1)
27.5 Restated Financial Data Schedule for Form 10-K for
Fiscal 1997 (1)
27.6 Restated Financial Data Schedule for Form 10-Q for
Fiscal 1997 Third Quarter (1)
27.7 Restated Financial Data Schedule for Form 10-Q for
Fiscal 1997 Second Quarter (1)
27.8 Restated Financial Data Schedule for Form 10-Q for
Fiscal 1997 First Quarter (1)
27.9 Restated Financial Data Schedule for Form 10-K for
Fiscal 1996 (1)
(1) Filed herewith.
(2) Filed as an exhibit to the 1993 Annual Report on Form 10-K of the
Company, file number 0-18706, filed with the Commission on June 26,
1993, and incorporated herein by reference.
(3) Filed as an exhibit to the Registration Statement No. 33-50104 on
Form S-1 of the Company, filed with the Commission on July 28,
1992, as amended through April 13, 1993, and incorporated herein by
reference.
42
<PAGE> 43
(4) Filed as an exhibit to the Report on Form 8-K, file number 0-18706,
filed with the Commission on June 20, 1994, and incorporated herein
by reference.
(5) Filed as an exhibit to the Registration Statement No. 33-28207 on
Form S-1 of the Company, filed with the Commission on April 24,
1989, as amended through July 26, 1989, and incorporated herein by
reference.
(6) Filed as an exhibit to the Quarterly Report on Form 10-Q of the
Company, file number 0-18706, filed with the Commission on February
15, 1994, and incorporated herein by reference.
(7) Filed as an exhibit to the 1994 Annual Report on Form 10-K of the
Company, file number 0-18706, filed with the Commission on June 28,
1994, and incorporated herein by reference.
(8) Filed as an exhibit to the Quarterly Report on Form 10-Q of the
Company, file number 0-18706, filed with the Commission on August
17, 1994 and incorporated herein by reference.
(9) Filed as an exhibit to the 1995 Form 10-K of the Company, file
number 0-18706, filed with the Commission on June 19, 1995 and
incorporated herein by reference.
(10) Filed as an exhibit to the Quarterly Report on Form 10-Q of the
Company, filed number 0-18706, filed with the Commission on August
10, 1995, and incorporated herein by reference.
(11) Filed as an exhibit to the Quarterly Report on Form 10-Q of the
Company, file number 0-18706, filed with the Commission on November
15, 1995, and incorporated herein by reference.
(12) Filed as an exhibit to the 1996 Form 10-K of the Company, file
number 0-18706, filed with the Commission on June 25, 1996 and
incorporated herein by reference.
(13) Filed as an exhibit to the Quarterly Report on Form 10-Q of the
Company, file number 0-18706, filed with the Commission on November
13, 1996, and incorporated herein by reference.
(14) Filed as an exhibit to the Quarterly Report on Form 10-Q of the
Company, file number 0-18706, filed with the Commission on February
12, 1997, and incorporated herein by reference.
43
<PAGE> 44
(15) Filed as an exhibit to the Quarterly Report on Form 10-Q of the
Company, file number 0-18706, filed with the Commission on November
10, 1997, and incorporated herein by reference.
(b) Reports on Form 8-K.
None.
(c) The Company hereby files as exhibits to the Form 10-K
the exhibits set forth in Item 14(a)(3) hereof which
are not incorporated by reference.
(d) The Company hereby files as financial statement
schedules to this Form 10-K the financial statement
schedules which are set forth in Item 14(a)(2) hereof.
44
<PAGE> 45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1943, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BLACK BOX CORPORATION
Dated: June 19, 1998 /s/ ANNA M. BAIRD
----------------------------------------------
Anna M. Baird, Vice President, Chief Financial
Officer, Treasurer, and principal accounting officer
Pursuant to the requirements of the Securities Exchange Act of 1934 as
amended, this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Capacity Date
---------- -------- ----
<S> <C> <C>
/s/ WILLIAM F. ANDREWS Director June 19, 1998
- ----------------------------------------
William F. Andrews
Director June 19, 1998
- ----------------------------------------
Michael E. Barker
/s/ JEFFERY M. BOETTICHER Director, Chairman of the June 19, 1998
- ---------------------------------------- Board, and Chief Executive
Jeffery M. Boetticher Officer
/s/ WILLIAM R. NEWLIN Director June 19, 1998
- ----------------------------------------
William R. Newlin
/s/ WILLIAM NORRED Director June 19, 1998
- ----------------------------------------
William Norred
/s/ BRIAN D. YOUNG Director June 19, 1998
- ----------------------------------------
Brian D. Young
/s/ FRED C. YOUNG Director, June 19, 1998
- ---------------------------------------- President, Chief Operating
Fred C. Young Officer, and Secretary
/s/ ANNA M. BAIRD Vice President, Chief Financial June 19, 1998
- ---------------------------------------- Officer, Treasurer, and
Anna M. Baird principal accounting officer
</TABLE>
<PAGE> 46
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Black Box Corporation:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of Black Box Corporation and Subsidiaries
included in this Form 10-K, and have issued our report thereon dated May 1,
1998. Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the accompanying
index is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
-----------------------
Arthur Andersen LLP
Pittsburgh, Pennsylvania
May 1, 1998
<PAGE> 47
SCHEDULE II
BLACK BOX CORPORATION
VALUATIONS AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING CHARGED TO REDUCTIONS BALANCE AT
OF COSTS AND FROM END OF
DESCRIPTION PERIOD EXPENSES RESERVES PERIOD
----------- ------ -------- -------- ------
<S> <C> <C> <C> <C>
YEAR ENDED MARCH 31, 1996
Inventory reserves $1,273 $1,047 $ 672 $1,648
Allowance for unrealizable accounts/sales
returns $2,059 $1,163 $ 815 $2,407
YEAR ENDED MARCH 31, 1997
Inventory reserves $1,648 $1,398 $1,436 $1,610
Allowance for unrealizable accounts/sales
returns $2,407 $ 664 $ 572 $2,499
YEAR ENDED MARCH 31, 1998
Inventory reserves $1,610 $3,653 $2,409 $2,854
Allowance for unrealizable accounts/sales
returns $2,499 $1,333 $1,177 $2,655
</TABLE>
<PAGE> 1
Exhibit 10.1
BLACK BOX CORPORATION
1992 STOCK OPTION PLAN
(AS AMENDED THROUGH FEBRUARY 3, 1998)
I. PURPOSES
BLACK BOX CORPORATION (the "Company") desires to afford certain of its
key employees and the key employees of any subsidiary corporation or parent
corporation of the Company now existing or hereafter formed or acquired who are
responsible for the continued growth of the Company an opportunity to acquire a
proprietary interest in the Company, and thus to create in such key employees an
increased interest in and a greater concern for the welfare of the Company and
its subsidiaries.
The Company, by means of this 1992 Stock Option Plan as originally
approved on November 11, 1992, and as further amended on May 10,1994, August 9,
1994, August 7, 1995, August 12, 1996, August 13, 1997, and February 3, 1998
(the "Plan"), seeks to retain the services of persons now holding key positions
and to secure the services of persons capable of filling such positions.
The stock options ("Options") and stock appreciation rights ("Rights")
offered pursuant to the Plan are a matter of separate inducement and are not in
lieu of any salary or other compensation for the services of any key employee.
The Options granted under the Plan are intended to be either incentive
stock options ("Incentive Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or options that do not
meet the requirements for Incentive Options ("Non-Qualified Options"), but the
Company makes no warranty as to the qualification of any Option as an Incentive
Option.
II. AMOUNT OF STOCK SUBJECT TO THE PLAN
The total number of shares of common stock of the Company which may be
purchased or acquired pursuant to the exercise of Options or Rights granted
under the Plan shall not exceed, in the aggregate, 3,200,000 shares of the
authorized common stock, $.001 par value per share, of the Company (the
"Shares"), such number subject to adjustment as provided in Article XII hereof.
Shares that are the subject of Rights and related Options shall be counted only
once in determining whether the maximum number of Shares that may be purchased
or awarded under the Plan has been exceeded.
Shares acquired under the Plan may be either authorized but unissued
Shares or Shares of issued stock held in the Company's treasury, or both, at the
discretion of the Company. If and to the extent that Options or Rights granted
under the Plan expire or terminate without having been exercised, the Shares
covered by such expired or terminated Options or Rights shall again become
available for award under the Plan.
Except as provided in Articles XIX and XXII and subject to Article II,
the Company may, from time to time during the period beginning on the date on
which the Company consummates an underwritten initial public offering of Shares
(the "Effective Date") and ending on November 30, 2002 (the "Termination Date"),
grant to certain key employees of the Company, or of any subsidiary corporation
or parent corporation of the Company now existing or hereafter formed or
acquired, Incentive Options and/or Non-Qualified Options and/or Rights under the
terms hereinafter set forth.
Provisions of the Plan that pertain to Options or Rights granted to an
employee shall apply to Options, Rights or a combination thereof.
As used in the Plan, the term "subsidiary corporation" and "parent
corporation" shall mean, respectively, a corporation coming within the
definition of such terms contained in Sections 424(f) and 424(e) of the Code.
1
<PAGE> 2
III. ADMINISTRATION
The board of directors of the Company (the "Board of Directors") shall
designate from among its members an option committee, which may be the
Compensation Committee of the Board of Directors (the "Committee"), to
administer the Plan. The Committee shall consist of no fewer than two members of
the Board of Directors, each of whom shall be a "disinterested person" within
the meaning of Rule 16b-3 (or any successor rule or regulation) promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). A
majority of the members of the Committee shall constitute a quorum, and the act
of a majority of the members of the Committee shall be the act of the Committee.
Any member of the Committee may be removed at any time either with or without
cause by resolution adopted by the Board of Directors, and any vacancy on the
Committee at any time may be filled by resolution adopted by the Board of
Directors.
Subject to the express provisions of the Plan the Committee shall have
authority, in its discretion, to determine the employees to whom Options or
Rights shall be granted, the time when such Options or Rights shall be granted,
the number of Shares which shall be subject to each Option or Right, the
purchase price or exercise price of each Option or Right, the period(s) during
which such Options or Rights shall become exercisable (whether in whole or in
part) and the other terms and provisions thereof (which need not be identical).
Subject to the express provisions of the Plan, the Committee also shall
have authority to construe the Plan and the Options and Rights granted
thereunder, to amend the Plan and the Options and Rights granted thereunder, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the Options (which need not be identical)
and Rights (which need not be identical) granted thereunder and to make all
other determinations necessary or advisable for administering the Plan. The
Committee also shall have the authority to require, in its discretion, as a
condition of the granting of any such Option or Right, that the employee agree
(i) not to sell or otherwise dispose of Shares acquired pursuant to the exercise
of such Option or Right for a period of six (6) months following the date of the
acquisition of such Option or Right and (ii) that in the event of termination of
employment of such employee, other than as a result of dismissal without cause,
such employee will not, for a period to be fixed at the time of the grant of the
Option or Right, enter into any other employment or participate directly or
indirectly in any other business or enterprise which is competitive with the
business of the Company or any subsidiary corporation or parent corporation of
the Company, or enter into any employment in which such employee will be called
upon to utilize special knowledge obtained through employment with the Company
or any subsidiary corporation or parent corporation thereof. In no event will an
employee who is subject to the reporting requirements of Section 16(a) of the
Exchange Act be entitled to sell or otherwise dispose of any Shares acquired
pursuant to exercise of any such Options or Rights for a period of six (6)
months from the date of the acquisition of such Options or Rights.
The determination of the Committee on matters referred to in this
Article III shall be conclusive.
The Committee may employ such legal counsel, consultants and agents as
it may deem desirable for the administration of the Plan and may rely upon any
opinion or computation received from any such legal counsel, consultant or
agent. Expenses incurred by the Committee in the engagement of such counsel,
consultant or agent shall be paid by the Company. No member or former member of
the Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any award of Options or Rights granted hereunder.
IV. ELIGIBILITY
Options and Rights may be granted only to salaried key employees of the
Company or of any subsidiary corporation or parent corporation of the Company,
except as hereinafter provided, and shall not be granted to any officer or
director who is not also a salaried key employee or to any member of the
Committee. Any person who shall have retired from active employment by the
Company or a subsidiary corporation or parent corporation thereof, although such
person shall have entered into a consulting contract with the Company or a
subsidiary corporation or parent corporation thereof, shall not be eligible to
receive an Option or a Right.
The Plan does not create a right in any employee to participate in the
Plan, nor does it create a right in any employee to have any Options or Rights
granted to him or her.
2
<PAGE> 3
V. OPTION PRICE AND PAYMENT
The price for each Share purchasable under any Option granted hereunder
shall be such amount as the Committee shall, in its best judgment, determine to
be not less than one hundred percent (100%) of the fair market value per Share
at the date the Option is granted; provided, however, that in the case of an
Incentive Option granted to a person who, at the time such Option is granted,
owns shares of the Company or any subsidiary corporation or parent corporation
of the Company which possesses more than ten percent (10%) of the total combined
voting power of all classes of shares of the Company or of any subsidiary
corporation or parent corporation of the Company, the purchase price for each
Share shall be such amount as the Committee in its best judgment shall determine
to be not less than one hundred ten percent (110%) of the fair market value per
Share at the date the Option is granted. In determining stock ownership of an
employee for any purposes under the Plan, the rules of Section 424(d) of the
Code shall be applied, and the Committee may rely on representations of fact
made to it by the employee and believed by it to be true.
If the Shares are listed on a national securities exchange in the
United States (which, for purposes of this Article V, shall be deemed to include
any last sale reported over-the-counter market), on any date on which the fair
market value per Share is to be determined, the fair market value per Share
shall be deemed to be the average of the high and low quotations at which such
Shares are sold on such national securities exchange on the date such Option is
granted. If the Shares are listed on a national securities exchange in the
United States on such date, but the Shares are not traded on such date, or such
national securities exchange is not open for business on such date, the fair
market value per Share shall be determined as of the closest preceding date on
which such exchange shall have been open for business and the Shares shall have
been traded. If the Shares are listed on more than one national securities
exchange in the United States on the date on which the fair market value per
Share is to be determined, the Committee shall determine which national
securities exchange shall be used for the purpose of determining the fair market
value per Share.
If a public market exists for the Shares on any date on which the fair
market value per Share is to be determined but the Shares are not listed on a
national securities exchange in the United States, the fair market value per
Share shall be deemed to be the mean between the closing bid and asked
quotations in the over-the-counter market for the Shares on such date. If there
are no bid and asked quotations for the Shares on such date, the fair market
value per Share shall be deemed to be the mean between the closing bid and asked
quotations in the over-the-counter market for the Shares on the closest date
preceding such date for which such quotations are available.
If no public market exists for the Shares on any date on which the fair
market value per Share is to be determined, the Committee shall, in its sole
discretion and best judgment, determine the fair market value of a Share.
For purposes of this Plan, the determination by the Committee of the
fair market value of a Share shall be conclusive.
Upon the exercise of an Option granted hereunder, the Company shall
cause the purchased Shares to be issued only when it shall have received the
full purchase price for the Shares in cash or by certified check; provided,
however, that in lieu of cash, the holder of an Option may, if and to the extent
the terms of such Option so provide and to the extent permitted by applicable
law, exercise an Option (i) in whole or in part, by delivering to the Company
shares of common stock of the Company (in proper form for transfer and
accompanied by all requisite stock transfer tax stamps or cash in lieu thereof)
owned by such holder having a fair market value equal to the exercise price
applicable to that portion of the Option being exercised by the delivery of such
Shares or (ii) in part, by delivering to the Company an executed promissory note
on such terms and conditions as the Committee shall determine, at the time of
grant, in its sole discretion; provided, however, that the principal amount of
such note shall not exceed eighty percent (80%) (or such lesser percentage as
would be permitted by applicable margin regulations) of the aggregate purchase
price of the Shares then being purchased pursuant to the exercise of such
Option. The fair market value of the stock so delivered shall be determined as
of the date immediately preceding the date on which the Option is exercised, or
as may be required in order to comply with or to conform to the requirements of
any applicable laws or regulations.
3
<PAGE> 4
VI. USE OF PROCEEDS
The cash proceeds of the sale of Shares pursuant to the Plan are to be
added to the general funds of the Company and used for its general corporate
purposes as the Board of Directors shall determine.
VII. TERM OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE
Any Option shall be exercisable at such times, in such amounts and
during such period or periods as the Committee shall determine at the date of
the grant of such Option; provided, however, that an Incentive Option shall not
be exercisable after the expiration of ten (10) years from the date such Option
is granted; and provided further that, in the case of an Incentive Option
granted to a person who, at the time such Option is granted, owns stock of the
Company or any subsidiary corporation or parent corporation of the Company
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of any subsidiary corporation or parent
corporation of the Company, such Option shall not be exercisable after the
expiration of five (5) years from the date such Option is granted.
Except to the extent otherwise provided under the Code, to the extent
that the aggregate fair market value of stock for which Incentive Options are
exercisable for the first time by an employee during any calendar year (under
all stock option plans of the Company and of any parent corporation or
subsidiary corporation of the Company) exceeds one hundred thousand dollars
($100,000), such Options shall be treated as Non-Qualified Options. For purposes
of this limitation, (i) the fair market value of stock is determined as of the
time the Option is granted, and (ii) the limitation will be applied by taking
into account Options in the order in which they were granted.
Subject to the provisions of Article XVIII, the Committee shall have
the right to accelerate, in whole or in part, from time to time, conditionally
or unconditionally, rights to exercise any Option granted hereunder.
To the extent that an Option is not exercised within the period of
exercisability specified therein, it shall expire as to the then unexercised
part.
In no event shall an Option granted hereunder be exercised for a
fraction of a Share.
VIII. EXERCISE OF OPTIONS
Options granted under the Plan shall be exercised by the optionee as to
all or part of the Shares covered thereby by the giving of written notice of the
exercise thereof to the Corporate Secretary of the Company at the principal
business office of the Company, specifying the number of Shares to be purchased
and specifying a business day not more than fifteen (15) days from the date such
notice is given for the payment of the purchase price against delivery of the
Shares being purchased. Subject to the terms of Articles XIV, XVI, and XVII, the
Company shall cause certificates for the Shares so purchased to be delivered to
the optionee at the principal business office of the Company, against payment of
the full purchase price, on the date specified in the notice of exercise.
IX. STOCK APPRECIATION RIGHTS
In the discretion of the Committee, a Right may be granted (i) alone,
(ii) simultaneously with the grant of an Option (either Incentive or
Non-Qualified) and in conjunction therewith or in the alternative thereto or
(iii) subsequent to the grant of a Non-Qualified Option and in conjunction
therewith or in the alternative thereto.
The exercise price of a Right granted alone shall be determined by the
Committee but shall not be less than one hundred percent (100%) of the fair
market value of one Share on the date of grant of such Right. A Right granted
simultaneously with or subsequent to the grant of an Option and in conjunction
therewith or in the alternative thereto shall have the same exercise price as
the related Option, shall be transferable only upon the same terms and
conditions as the related Option, and shall be exercisable only to the same
extent as the related Option; provided, however, that a Right, by its terms,
shall be exercisable only when the fair market value of the Shares subject to
the Right and related Option exceeds the exercise price thereof.
Upon exercise of a Right granted simultaneously with or subsequent to
an Option and in the alternative thereto, the number of Shares for which the
related Option shall be exercisable shall be reduced by the number
4
<PAGE> 5
of Shares for which the Right shall have been exercised. The number of Shares
for which a Right shall be exercisable shall be reduced upon any exercise of a
related Option by the number of Shares for which such Option shall have been
exercised.
Any Right shall be exercisable upon such additional terms and
conditions as may from time to time be prescribed by the Committee.
A Right shall entitle the holder upon exercise thereof to receive from
the Company, upon a written request filed with the Secretary of the Company at
its principal offices (the "Request"), a number of Shares (with or without
restrictions as to substantial risk of forfeiture and transferability, as
determined by the Committee in its sole discretion), an amount of cash, or any
combination of Shares and cash, as specified in the Request (but subject to the
approval of the Committee in its sole discretion, at any time up to and
including the time of payment, as to the making of any cash payment), having an
aggregate fair market value equal to the product of (i) the excess of the fair
market value, on the day of such Request, of one Share over the exercise price
per share specified in such Right or its related Option, multiplied by (ii) the
number of Shares for which such Right shall be exercised.
Any election by a holder of a Right to receive cash in full or partial
settlement of such Right, and any exercise of such Right for cash, may be made
only by a Request filed with the Corporate Secretary of the Company during the
period beginning on the third business day following the date of release for
publication by the Company of quarterly or annual summary statements of sales
and earnings and ending on the twelfth business day following such date. Within
thirty (30) days of the receipt by the Company of a Request to receive cash in
full or partial settlement of a Right or to exercise such Right for cash, the
Committee shall, in its sole discretion, either consent to or disapprove, in
whole or in part, such Request. A Request to receive cash in full or partial
settlement of a Right or to exercise a Right for cash may provide that, in the
event the Committee shall disapprove such Request, such Request shall be deemed
to be an exercise of such Right for Shares.
If the Committee disapproves in whole or in part any election by a
holder to receive cash in full or partial settlement of a Right or to exercise
such Right for cash, such disapproval shall not affect such holder's right to
exercise such Right at a later date, to the extent that such Right shall be
otherwise exercisable, or to elect the form of payment at a later date, provided
that an election to receive cash upon such later exercise shall be subject to
the approval of the Committee. Additionally, such disapproval shall not affect
such holder's right to exercise any related Option or Options granted to such
holder under the Plan.
A holder of a Right shall not be entitled to request or receive cash in
full or partial payment of such Right unless such Right shall have been held for
six (6) months from the date of acquisition to the date of cash settlement
thereof; provided, however, that such prohibition shall not apply if the holder
of such Right is not subject to the reporting requirements of Section 16(a) of
the Exchange Act. In no event will a holder of a Right who is subject to the
reporting requirements of Section 16(a) of the Exchange Act be entitled to make
such a request or receive cash in full or partial payment of such Right until
the Company shall have satisfied the informational requirements of Rule
16b-3(e)(1) promulgated under the Exchange Act for the specified one year
period.
A Right shall be deemed exercised on the last day of its term, if not
otherwise exercised by the holder thereof, provided that the fair market value
of the Shares subject to the Right exceeds the exercise price thereof on such
date.
For all purposes of this Article IX, the fair market value of Shares
shall be determined in accordance with the principles set forth in the Article
V.
X. NON-TRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
Neither an Option nor a Right granted hereunder shall be transferable,
whether by operation of law or otherwise, other than by will or the laws of
descent and distribution, and any Option or Right granted hereunder shall be
exercisable during the lifetime of the holder only by such holder. Except to the
extent provided above, Options and Rights may not be assigned, transferred,
pledged, hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process.
5
<PAGE> 6
XI. TERMINATION OF EMPLOYMENT
Upon termination of employment of any employee with the Company and all
subsidiary corporations and parent corporations of the Company, an Option or
Right previously granted to the employee, unless otherwise specified by the
Committee in the Option or Right, shall, to the extent not theretofore
exercised, terminate and become null and void, provided that:
(a) if the employee shall die while in the employ of such
corporation or during either the three (3) month or one (1) year
period, whichever is applicable, specified in clause (b) below and at a
time when such employee was entitled to exercise an Option or Right as
herein provided, the legal representative of such employee, or such
person who acquired such Option or Right by bequest or inheritance or
by reason of the death of the employee, may, not later than one (1)
year from the date of death, exercise such Option or Right, to the
extent not theretofore exercised, in respect of any or all of such
number of Shares as specified by the Committee in such Option or Right;
and
(b) if the employment of an employee to whom such Option or
Right shall have been granted shall terminate by reason of the
employee's retirement (at such age or upon such conditions as shall be
specified by the Board of Directors), disability (as described in
Section 22(e)(3) of the Code) or dismissal by the employer other than
for cause (as defined below), and while such employee is entitled to
exercise such Option or Right as herein provided, such employee shall
have the right to exercise such Option or Right so granted, to the
extent not theretofore exercised, in respect of any or all of such
number of Shares as specified by the Committee in such Option or Right,
at any time up to and including (i) three (3) months after the date of
such termination of employment in the case of termination by reason of
retirement or dismissal other than for cause and (ii) one (1) year
after the date of termination of employment in the case of termination
by reason of disability.
If an employee voluntarily terminates his or her employment, or is
discharged for cause, any Option or Right granted hereunder shall, unless
otherwise specified by the Committee in the Option or Right, forthwith terminate
with respect to any unexercised portion thereof.
If an Option or Right granted hereunder shall be exercised by the legal
representative of a deceased or disabled employee or former employee, or by a
person who acquired an Option or Right granted hereunder by bequest or
inheritance or by reason of death of any employee or former employee, written
notice of such exercise shall be accompanied by a certified copy of letters
testamentary or equivalent proof of the right of such legal representative or
other person to exercise such Option or Right.
For the purposes of the Plan, the term "for cause" shall mean (i) with
respect to an employee who is party to a written agreement with, or,
alternatively, participates in a compensation or benefit plan of the Company or
a subsidiary corporation or parent corporation of the Company, which agreement
or plan contains a definition of "for cause" or "cause" (or words of like
import) for purposes of termination of employment thereunder by the Company or
such subsidiary corporation or parent corporation of the Company, "for cause" or
"cause" as defined in the most recent of such agreements or plans, or (ii) in
all other cases, (a) the willful commission by an employee of a criminal or
other act that causes substantial economic damage to the Company or a subsidiary
corporation or parent corporation of the Company or substantial injury to the
business reputation of the Company or a subsidiary corporation or parent
corporation of the Company; (b) the commission by an employee of an act of fraud
in the performance of such employee's duties on behalf of the Company or a
subsidiary corporation or parent corporation of the Company; or (c) the
continuing willful failure of an employee to perform the duties of such employee
to the Company or a subsidiary corporation or parent corporation of the Company
(other than such failure resulting from the employee's incapacity due to
physical or mental illness) after written notice thereof (specifying the
particulars thereof in reasonable detail) and a reasonable opportunity to be
heard and cure such failure are given to the employee by the Board of Directors
or the Committee. For purposes of the Plan, no act, or failure to act, on the
employee's part shall be considered "willful" unless done or omitted to be done
by the employee not in good faith and without reasonable belief that the
employee's action or omission was in the best interest of the Company or a
subsidiary corporation or parent corporation of the Company.
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time of the
determination, the individual was an "employee" of such corporation for purposes
of Section 422(a) of the Code. If an individual is on military, sick leave or
other bona
6
<PAGE> 7
fide leave of absence, such individual shall be considered an "employee" for
purposes of the exercise of an Option or Right and shall be entitled to exercise
such Option or Right during such leave if the period of such leave does not
exceed 90 days, or, if longer, so long as the individual's right to reemployment
with the corporation granting the option (or a related corporation) is
guaranteed either by statute or by contract. If the period of leave exceeds
ninety (90) days, the employment relationship shall be deemed to have terminated
on the ninety-first (91st) day of such leave, unless the individual's right to
reemployment is guaranteed by statute or contract.
A termination of employment shall not be deemed to occur by reason of
(i) the transfer of an employee from employment by the Company to employment by
a subsidiary corporation or a parent corporation of the Company or (ii) the
transfer of an employee from employment by a subsidiary corporation or a parent
corporation of the Company to employment by the Company or by another subsidiary
corporation or parent corporation of the Company. Furthermore, solely for
purposes of determining the rights and obligations under any outstanding Options
or Rights theretofore granted, in the event that the Company ceases to own,
directly or indirectly, stock possessing 50% or more of the total combined
voting power of all classes of stock of a subsidiary company by virtue of a
recapitalization, stock dividend, stock split, split-up, spin-off, combination
of shares or other like change in capital structure of the Company, the
Committee may determine that employment by such former subsidiary (or any parent
or subsidiary company of such subsidiary) shall continue to be deemed to be
employment by the Company for purposes of the Plan.
In the event of the complete liquidation or dissolution of a subsidiary
corporation, or in the event that the Company ceases to own, directly or
indirectly, stock possessing 50% or more of the total combined voting power of
all classes of stock of such corporation, any unexercised Options or Rights
theretofore granted to any person employed by such subsidiary corporation will
be deemed canceled unless such person is employed by the Company or by any
parent corporation or another subsidiary corporation after the occurrence of
such event. In the event an Option or Right is to be canceled pursuant to the
provisions of the previous sentence, notice of such cancellation will be given
to each employee holding unexercised Options or Rights and such holder will have
the right to exercise such Options or Rights in full (without regard to any
limitation set forth or imposed pursuant to Article VII) during the 30 day
period following notice of such cancellation.
Notwithstanding anything to the contrary contained in this Article XI,
in no event, however, shall any person be entitled to exercise any Option or
Right after the expiration of the period of exercisability of such Option or
Right as specified therein.
XII. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN TRANSACTIONS
In the event of any change in the outstanding Shares through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
split-up, split-off, spin-off, combination of shares, exchange of shares,
issuance of rights to subscribe for Shares, or other like change in capital
structure of the Company, the Committee shall make such adjustment to each
outstanding Option and Right that it, in its sole discretion, deems appropriate.
The term "Shares" after any such change shall refer to the securities, cash
and/or property then receivable upon exercise of an Option or Right. In
addition, in the event of any such change, the Committee shall make any further
adjustments as may be appropriate to the maximum number of Shares which may be
acquired under the Plan pursuant to the exercise of Options and Rights, the
maximum number of Shares which may be so acquired by one employee and the number
of Shares and prices per Share subject to outstanding Options and Rights as
shall be equitable to prevent dilution or enlargement of rights under such
Options or Rights, and the determination of the Committee as to these matters
shall be conclusive. Notwithstanding the foregoing, (i) each such adjustment
with respect to an Incentive Option and any related Right shall comply with the
rules of Section 424(a) of the Code and (ii) in no event shall any adjustment be
made which would render any Incentive Option granted hereunder to be other than
an "incentive stock option" for purposes of Section 422 of the Code.
In the event of a "change in control" of the Company, all then
outstanding Options and Rights shall immediately become exercisable. For
purposes of the Plan, a "change in control" of the Company occurs if: (a) any
"Person" (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act), other than Odyssey Partners, L.P. and its affiliates (which, for purposes
of this Article XII only, is deemed to include E.R. Yost) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly of securities of the Company representing (i) 50% or more of the
combined voting power of the Company's then-outstanding securities; or (ii) 25%
or more but less than 50% of the combined voting power of the Company's
7
<PAGE> 8
then-outstanding securities if such transaction(s) giving rise to such
beneficial ownership are not approved by the Company's Board of Directors; or
(b) at any time a majority of the members of the Board of Directors has been
elected or designated by any Person, other than Odyssey Partners, L.P. and its
affiliates (which, for purposes of this Article XII only, is deemed to include
E.R. Yost); or (c) the Board of Directors shall approve a sale of all or
substantially all of the assets of the Company or any merger, consolidation,
issuance of securities or purchase of assets, in all cases other than to or with
Odyssey Partners, L.P. or its affiliates (which, for purposes of this Article
XII only, is deemed to include E.R. Yost), the result of which would be the
occurrence of any event described in clause (a) or (b) above.
The Committee, in its discretion, may determine that, upon the
occurrence of a transaction described in the preceding paragraph, each Option or
Right outstanding hereunder shall terminate within a specified number of days
after notice to the holder, and such holder shall receive, with respect to each
Share subject to such Option or Right, cash in an amount equal to the excess of
the fair market value of such Shares immediately prior to the occurrence of such
transaction over the exercise price per share of such Option or Right. The
provisions contained in the preceding sentence shall be inapplicable to an
Option or Right granted within six (6) months before the occurrence of a
transaction described above if the holder of such Option or Right is subject to
the reporting requirements of Section 16(a) of the Exchange Act.
XIII. RIGHT TO TERMINATE EMPLOYMENT
The Plan shall not impose any obligation on the Company or on any
subsidiary corporation or parent corporation thereof to continue the employment
of any holder of Options or Rights and it shall not impose any obligation on the
part of any holder of Options or Rights to remain in the employ of the Company
or of any subsidiary corporation or parent corporation thereof.
XIV. PURCHASE FOR INVESTMENT
Except for hereinafter provided, the Committee may require an employee,
as a condition upon exercise of any Option or Right granted hereunder, to
execute and deliver to the Company (a) stock powers with respect to Shares
underlying a particular Option or Right and required to be held by a custodian,
and (b) a written statement, in form satisfactory to the Committee in which the
employee represents and warrants that Shares are being acquired for such
person's own account for investment only and not with a view to the resale or
distribution thereof. The employee shall, at the request of the Committee, be
required to represent and warrant in writing that any subsequent resale or
distribution of Shares by the Employee shall be made only pursuant to either (i)
a Registration Statement on an appropriate form under the Securities Act of
1933, as amended (the "Securities Act"), which Registration Statement has become
effective and is current with regard to the Shares being sold, or (ii) a
specific exemption from the registration requirements of the Securities Act, but
in claiming such exemption the employee shall, prior to any offer of sale or
sale of such Shares, obtain a prior favorable written opinion of counsel, in
form and substance satisfactory to counsel for the Company, as to the
application of such exemption thereto. The foregoing restriction shall not apply
to (i) issuances by the Company so long as the Shares being issued are
registered under the Securities Act and a prospectus in respect thereof is
current or (ii) re-offerings of Shares by affiliates of the Company (as defined
in Rule 405 or any successor rule or regulation promulgated under the Securities
Act) if the Shares being re-offered are registered under the Securities Act and
a prospectus in respect thereof is current.
XV. ISSUE OF CERTIFICATES, LEGENDS, PAYMENT OF EXPENSES
Upon any exercise of an Option or Right which may be granted hereunder
and, in the case of an Option, payment of the purchase price, a certificate or
certificates for the Shares shall be issued by the Company in the name of the
person exercising the Option or Right and shall be delivered to or upon the
order of such person.
The Company may endorse such legend or legends upon the certificates
for Shares issued pursuant to the Plan and may issue such "stop transfer"
instructions to its transfer agent in respect of such Shares as, in its
discretion, it determines to be necessary or appropriate to (i) prevent a
violation of, or to perfect an exemption from, the registration requirements of
the Securities Act, (ii) implement the provisions of the Plan and any agreement
between the Company and the optionee or grantee with respect to such Shares, or
(iii) permit the Company to determine the occurrence of a disqualifying
disposition, as described in Section 421(b) of the Code, of Shares transferred
upon exercise of an Incentive Option granted under the Plan.
8
<PAGE> 9
The Company shall pay all issue or transfer taxes with respect to the
issuance of transfer of Shares, as well as all fees and expenses necessarily
incurred by the Company in connection with such issuance or transfer, except
fees and expenses which may be necessitated by the filing or amending of a
Registration Statement under the Securities Act, which fees and expenses shall
be borne by the recipient of the Shares unless such Registration Statement has
been filed by the Company for its own corporate purposes (and the Company so
states) in which event the recipient of the Shares shall bear only fees and
expenses as are attributable solely to the inclusion of the Shares he or she
received in the Registration Statement.
All Shares issued as provided herein shall be fully paid and
non-assessable to the extent permitted by law.
XVI. WITHHOLDING TAXES
The Company may require an employee exercising a Right or Non-Qualified
Option granted hereunder, or disposing of Shares acquired pursuant to the
exercise of an Incentive Option in a disqualifying disposition (within the
meaning of Section 421(b) of the Code), to reimburse the corporation that
employs such employee for any taxes required by any government to be withheld or
otherwise deducted and paid by such corporation in respect of the issuance or
disposition of such Shares. In lieu thereof, the corporation that employs such
employee shall have the right to withhold the amount of such taxes from any
other sums due or to become due from such corporation to the employee upon such
terms and conditions as the Committee shall prescribe. The corporation that
employs such employee may, in its discretion, hold the stock certificate to
which such employee is entitled upon the exercise of an Option as security for
the payment of such withholding tax liability, until cash sufficient to pay that
liability has been accumulated. In addition, at any time that the Company
becomes subject to a withholding obligation under applicable law with respect to
the exercise of a Right or Non-Qualified Option (the "Tax Date"), except as set
forth below, a holder of a Right or Non-Qualified Option may elect to satisfy,
in whole or in part, the holder's related personal tax liabilities (an
"Election") by (i) directing the Company to withhold from Shares issuable in the
related exercise either a specified number of Shares or Shares having a
specified value (in each case not in excess of the related personal tax
liabilities), (ii) tendering Shares previously issued pursuant to the exercise
of an Option or Right or other Shares of the Company's common stock owned by the
holder or (iii) combining any or all of the foregoing options in any fashion. An
Election shall be irrevocable. The withheld Shares and other Shares tendered in
payment shall be valued at their fair market value (determined in accordance
with the principles set forth in Article V of the Plan) on the Tax Date. The
Committee may disapprove of any Election, suspend or terminate the right to make
Elections or provide that the right to make Elections shall not apply to
particular Shares or exercises. The Committee may prescribe additional rules, in
its discretion, to permit a holder of an Option or Right who is subject to the
reporting requirements of Section 16(a) of the Exchange Act to effect such tax
withholding in compliance with the Rules promulgated under Section 16 of the
Exchange Act and the positions of the staff of the Securities and Exchange
Commission expressed in no-action or interpretative letters exempting such tax
withholding transactions from liability under Section 16(b) of the Exchange Act.
The Committee may also impose any additional conditions or restrictions on the
right to make an Election as it shall deem appropriate.
XVII. LISTING OF SHARES AND RELATED MATTERS
The Committee may delay any award, issuance or delivery of Shares if it
determines that listing, registration or qualification of Shares or the consent
or approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the sale or purchase of Shares under the
Plan, until such listing, registration, qualification, consent or approval shall
have been effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Committee.
XVIII. AMENDMENT OF THE PLAN
The Board of Directors or the Committee, as the case may be, may, from
time to time, amend the Plan, provided that no amendment shall be made, without
the approval of the stockholders of the Company, that will (i) increase the
total number of Shares reserved for Options under the Plan (other than an
increase resulting from an adjustment provided for in Article XII), (ii) reduce
the exercise price of any Incentive Option granted hereunder below the price
required by Article V, (iii) modify the provisions of the Plan relating to
eligibility, or (iv) materially increase the benefits accruing to participants
under the Plan. The Board of Directors or the Committee, as the case may be,
shall be authorized to amend the Plan and the Options granted thereunder to
permit the Incentive Options granted thereunder to qualify as incentive stock
options within the meaning of
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<PAGE> 10
Section 422 of the Code. The rights and obligations under any Option or Right
granted before amendment of the Plan or any unexercised portion of such Option
or Right shall not be adversely affected by amendment of the Plan, Option or
Right without the consent of the holder of such Option or Right.
XIX. TERMINATION OR SUSPENSION OF THE PLAN
The Board of Directors may at any time suspend or terminate the Plan.
The Plan, unless sooner terminated by action of the Board of Directors, shall
terminate at the close of business on the Termination Date. Options and Rights
may not be granted while the Plan is suspended or after it is terminated. Rights
and obligations under any Option or Right granted while the Plan is in effect
shall not be altered or impaired by suspension or termination of the Plan,
except upon the consent of the person to whom the Option or Right was granted.
The power of the Committee to construe and administer any Options or Rights
granted prior to the termination or suspension of the Plan under Article III
nevertheless shall continue after such termination or during such suspension.
XX. GOVERNING LAW
The Plan, such Options and Rights as may be granted thereunder and all
related matters shall be governed by, and construed and enforced in accordance
with, the laws of the State of Delaware from time to time obtaining.
XXI. PARTIAL INVALIDITY
The invalidity or illegibility of any provision hereof shall not be
deemed to affect the validity of any other provision.
XXII. EFFECTIVE DATE
This Plan became effective at 5:30 P.M., New York City Time, on the
Effective Date.
10
<PAGE> 1
EXHIBIT 10.23
EXECUTIVE INCENTIVE PROGRAM SUMMARY
(1999 - 2001)
The purpose of this program is to provide incentive compensation to key
employees of Black Box Corporation (the "Company"), in order to motivate and
retain such key employees.
Payment of the incentive compensation is based on the Company meeting or
exceeding cumulative three year targets for both revenue and earnings per share.
The three year period covers fiscal 1999, 2000 and 2001. If the targets are
achieved, a fixed lump-sum cash payment will be made within the first 45 days of
fiscal 2002.
<PAGE> 1
Exhibit 10.24
[BLACK BOX LETTERHEAD]
June 22, 1998
VIA MESSENGER
- -------------
Mr. Jeffery M. Boetticher
110 Sherborne Drive
McMurray, PA 15317
Re: Separation Agreement
--------------------
Dear Mr. Boetticher:
This letter agreement ("Agreement") is intended to set forth the
understandings we recently reached regarding your retirement from active
employment by Black Box Corporation (the "Corporation") and certain related
matters, as follows:
Section 1. Cessation of Active Employment. Your last day of full-time
work at the Corporation will be June 30, 1998. You will be on paid vacation for
the period July 1, 1998 through December 8, 1998 (the "Retirement Date"),
during which period you will be treated for all purposes as a regular
Corporation employee who is on an approved vacation leave.
Section 2. Additional Payments. The Corporation shall make the
following payments to you: (i) $850,000 representing the remaining portion of
your award under the Corporation's Key Employee Incentive Compensation Plan,
with respect to fiscal years 1996-1998, which amount shall be paid to you on or
before the earlier to occur of (a) December 31, 1998 and (b) the date on which
such amount or portion thereof is accrued as a liability on the books and
records of the Corporation in accordance with generally accepted accounting
principles, and (ii) $36,000, representing accrued but unpaid vacation, which
amount shall be paid to you on December 8, 1998.
Section 3. Stock Options. Effective as of September 1, 1998, you will
be fully vested in all of the stock options which you have been awarded under
the Black Box Corporation 1992 Stock Option Plan ("Plan"). As of the Retirement
Date, you will be deemed to have terminated employment with the Corporation on
account of "retirement" for purposes of Article XI, subparagraph (b) of the
Plan and each related Non-Qualified Stock Option Agreement to which you are a
party. To the extent that the vesting provisions of any option agreements to
which you and the Corporation are parties are inconsistent with the foregoing,
such provisions shall be disregarded. Such options will remain exercisable
through March 8, 1999 (i.e., three (3) months from the Retirement Date). The
Corporation shall take such action as may be necessary to effectuate the
acceleration of vesting and exercisability of options described in this Section
3.
1000 Park Drive, Lawrence, PA 15055-1018 * (724)746-5500 * FAX (724)746-0746
<PAGE> 2
June 22, 1998
Page 2
Section 4. Consulting. For the nine-month period beginning December
9, 1998 and ending August 31, 1998 ("Consulting Period"), you will be available
to act as a consultant (and not as an employee) to the Corporation. The
Corporation will pay you a per diem consulting fee of $500 for each day of
consultation provided by you at the request of the Corporation, payable as of
the last business day of each calender month during the Consulting Period.
During the Consulting Period, you agree to be available to the Corporation to
assist in various projects as may be assigned to you by the Corporation from
time to time. The Corporation agrees to reimburse you for any travel and out of
pocket expenses you may incur in conjunction with such assignments.
Section 5. Participation in Employee Benefit Plans. Your
participation as an active employee in the Corporation's employee benefit
plans will cease as of the Retirement Date or at such later date as may be
provided pursuant to the terms of any such plans.
Section 6. Payments Upon Death or Disability. In the event of your
disability or death prior to receipt of the various payments and benefits
provided to you and your eligible dependents pursuant to the terms of this
Agreement, any remaining payments or benefits shall be provided to you in the
event of your disability or to your surviving spouse (if then living, otherwise
equally to your surviving children, or to such other beneficiaries as you may
designate in writing provided to the Corporation from time to time) in the
event of your death.
Section 7. Non-Compete/Non-Solicit. Your obligations pursuant to the
Non-Compete and Non-Solicit Agreement dated January 1998 shall remain in full
force and effect and those obligations shall be in addition to any other
obligations enforceable against you pursuant to this Agreement or Attachment A.
Section 8. Release and Remedies. Your right to receive the benefits
referred to in this Agreement is conditioned on your execution of the Release
and Separation Agreement that is attached hereto as Attachment A, the terms of
which are incorporated into this Agreement. Your sole and exclusive remedy in
the event of a breach of this Agreement by the Corporation shall be, and the
Corporation's liability shall be limited to, damages equal to the payments and
benefits required to be provided by the Corporation under this Agreement, plus
reasonable attorney fees and costs incurred by you if you are successful in
enforcing your rights under the Agreement.
Section 9. Arbitration. Except as otherwise provided in this
Agreement, the Corporation and you hereby consent to the resolution by
arbitration of all claims or controversies for which a court otherwise would be
authorized by law to grant relief, in any way arising out of, relating to or
associated with the terms and/or enforcement of this Agreement. This does not
apply to claims by the Corporation for injunctive and/or other equitable relief
for prohibited competition and/or solicitation and/or the use and/or
unauthorized disclosure of trade secrets or confidential information.
1000 Park Drive, Lawrence, PA 15055-1018 * (724)746-5500 * FAX (724)746-0746
<PAGE> 3
June 22, 1998
Page 3
Any claims subject to arbitration pursuant to this Agreement, upon
the request of you or the Corporation, shall be submitted to and settled by
arbitration before a single arbitrator in the Commonwealth of Pennsylvania
pursuant to the commercial arbitration rules then in effect of the American
Arbitration Association (or at any other place or under any other form of
arbitration mutually acceptable to you and the Corporation). Any award rendered
shall be final and conclusive upon you and the Corporation, and a judgement may
be entered in the highest court, state or federal, having jurisdiction.
Section 10. Successors.
(a) This Agreement shall be binding upon and inure to the benefit of
you and your heirs and estate and the Corporation and its successors and
assigns.
(b) The Corporation shall require any successor (direct or indirect,
by consolidation, liquidation, purchase, acquisition of assets, or otherwise)
to expressly assume and perform the Corporation's responsibilities and
liability hereunder to the same extent that the Corporation would have been
required to perform if no succession had taken place.
Section 11. Assignment.
(a) Any rights and interest that you, your beneficiaries and/or your
estate may have hereunder shall not be assignable (in law or equity) or subject
to any manner of alienation, sale, transfer, claims of creditors, pledge,
attachment, garnishment, levy, execution, or encumbrances of any kind, and any
attempt to do so shall be void.
(b) Any assignment of the Corporation's responsibilities and
liability hereunder shall not relieve the Corporation of its responsibilities
and liability hereunder.
Section 12. No Funding. Your rights and interest hereunder shall be
that of a general unsecured creditor of the Corporation, and you shall not have
any preferred claims on, or any beneficial interest in, the assets of the
Corporation.
Section 13. Withholding. All amounts payable hereunder shall be
subject to withholding for taxes (federal, state, and local) to the extent
required by applicable law.
Section 14. Severability and Waivers.
(a) Any provisions of this Agreement prohibited by law shall be
ineffective to the extent of such prohibition without invalidating the
remaining provisions.
(b) The failure by you or the Corporation to insist upon strict
compliance with any provisions of this Agreement shall not be deemed to be a
waiver of such provision. Any waiver of any provision of this Agreement shall
not be deemed to be a waiver of any other provision,
1000 Park Drive, Lawrence, PA 15055-1018 * (724)746-5500 * FAX (724)746-0746
<PAGE> 4
June 22, 1998
Page 4
and any waiver of default in any provision of this Agreement shall not be
deemed to be a waiver of any later default.
Section 15. Entire Understanding Amendment.
(a) This Agreement represents the entire understanding of you and
the Corporation with respect to the matters set forth herein.
(b) Any previous agreements to which you and the Corporation or its
predecessors or related entities are parties, including, without limitation,
the Agreement dated December 20, 1994 between you and the Corporation, shall be
null and void and of no effect whatsoever.
(c) Termination, revocation, or amendment of this Agreement shall be
made only in a writing executed by both you and the Corporation.
Section 16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
You should carefully consider the matters outlined in this Agreement.
If, after due deliberation and consultation with such professional advisors as
you deem appropriate, including a lawyer of your own choice, you agree with the
terms of this Agreement, please sign where indicated below and return this
letter to my office prior to July 14, 1998. The additional enclosed copy of
this letter is for your files.
Very truly yours,
BLACK BOX CORPORATION
By: /s/ FRED C. YOUNG
--------------------------------
Fred C. Young, President
Accepted and Agreed:
/s/ JEFFERY M. BOETTICHER
- -----------------------------
Jeffery M. Boetticher
Date: June 22, 1998
1000 Park Drive, Lawrence, PA 15055-1018 * (724)746-5500 * FAX (724)746-0746
<PAGE> 5
ATTACHMENT "A"
RELEASE AND SEPARATION AGREEMENT
THIS RELEASE AND SEPARATION AGREEMENT ("Separation Agreement"),
effective as of June 22, 1998, by and between Black Box Corporation
("Corporation") and Jeffery M. Boetticher ("Executive").
WITNESSETH:
WHEREAS, the Executive has been employed by the Corporation and is a party
to a letter agreement with the Corporation dated June 22, 1998 ("Letter
Agreement"), which requires the Executive to execute this Separation Agreement
in order to receive the benefits provided under the Letter Agreement; and
WHEREAS, the Executive desires to execute this Separation Agreement in
order to receive the benefits ("Termination Benefits") provided under the
Letter Agreement;
NOW THEREFORE, the parties, intending to be legally bound hereby, and in
consideration of the representations and covenants set forth herein, agree to
the following terms and conditions:
1. Recitals. The above recitals are true and correct and are
incorporated into the substantive provisions of the Separation Agreement.
2. Release and Waiver of Rights. In consideration of the Termination
Benefits provided to the Executive by the Corporation pursuant to the Letter
Agreement, the Executive, intending to be legally bound:
(a) hereby releases and forever discharges the Corporation as of the
date of this Separation Agreement and thereafter, its subsidiaries, successors,
assigns and affiliates, and all its and their present or former employees,
agents and directors and their respective heirs, executors, administrators,
successors and assigns, from all claims, charges, complaints or causes of
action except with respect to the Corporation's obligations to provide the
Termination Benefits, and which the undersigned now has or may or can hereafter
have, known or unknown, by reason of any cause whatsoever, on account of, or in
anywise arising out of any transactions or events which have occurred prior to
the signing of this Agreement, and specifically with regard to or relating to
the Executive's employment with the Corporation or the termination thereof,
under Title VII of the Civil Rights Act of 1964, as amended, the Pennsylvania
Human Relations Act, as amended, the Equal Pay Act, as amended, the Age
Discrimination in Employment Act of 1967, as amended, The Americans With
Disabilities Act, The Employee Retirement Income Security Act of 1974, the
Pittsburgh Ordinance on Human Relations, or any similar federal, state or local
statutes, ordinances or regulations.
(b) hereby agrees not to file or aid or participate in any lawsuit
filed against the Corporation as of the date of this Separation Agreement and
thereafter, its subsidiaries, successors, assigns and affiliates, and all its
and their present or former officers, employees,
1000 Park Drive, Lawrence, PA 15055-1018 * (724)746-5500 * FAX (724)746-0746
<PAGE> 6
agents and directors and their respective heirs, executors, administrators,
successors and assigns arising out of, or related to, any employment
relationship between the Corporation and the Executive or any other person or
persons. If Executive breaches this promise and files a lawsuit against any
person or entity released hereby, Executive agrees to pay any such person or
entity the legal fees and related expenses incurred as a result of his broken
promise.
(c) hereby agrees to abide by the terms of the Letter Agreement and
the Non-Compete and Non-Solicit Agreement referred to in Section 7 of that
Agreement.
3. Remedies for Breach. In further consideration of the benefits
provided to the Executive by the Corporation pursuant to the Letter Agreement,
the Executive, intending to be legally bound, hereby recognizes that damages in
the event of breach of this Separation Agreement by the Executive would be
impossible to ascertain, and therefore agrees that the Corporation, in addition
to and without limiting any other remedy or right it may have, shall have the
right to an injunction or other equitable relief in any court of competent
jurisdiction, enjoining any such breach, and the Executive hereby waives any
and all defenses he may have on the ground of lack of jurisdiction or
competence of the court to grant such an injunction or other equitable relief.
The existence of this right shall not preclude the Corporation from pursuing
all other rights and remedies at law or in equity that the Corporation may have.
4. Successors. The rights of the Corporation and any subsidiary
corporations hereunder shall run in favor of the Corporation and such subsidiary
corporations and their respective successors, assigns, nominees or other legal
representatives. Termination of the Executive's employment shall not operate to
relieve the Executive of any remaining obligations hereunder, and all such
obligations are binding upon his heirs, executors, administrators, or other
legal representatives. The obligations of the Corporation hereunder shall be
binding upon the Corporation and its respective successors, assigns, nominees or
other legal representatives.
5. Termination of Employment. The Executive hereby acknowledges that
his employment with the Corporation will terminate in accordance with the terms
of the Letter Agreement and that thereafter he will no longer have any rights as
an active employee. The Executive specifically understands and agrees that the
Executive's separation from employment is not in violation of any oral or
written promise or agreements of any nature whatsoever, whether express or
implied.
6. Consultation with Attorney and Right of Revocation. The
Executive is advised to consult with an attorney of his choice before signing
this Release and Separation Agreement. The Executive will be allowed a period of
twenty-one (21) days from June 22, 1998, in which to consult with an attorney
about the terms of this Separation Agreement. This Separation Agreement shall
not become effective until seven (7) calendar days following the date of the
Executive's signature. Prior to that time, the Executive may revoke this
Agreement by giving written notification to the Corporation, and repay the
Corporation all monies paid and costs incurred by the Corporation hereunder.
7. Return of Corporation Property. The Executive agrees that he or
she will return to the Corporation any of its property which Executive may have
in his or her possession including
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<PAGE> 7
but not limited to computers, telephones, beepers, other office equipment,
records and data (regardless of the medium in which it is stored). In the event
Executive fails to return any of the Corporation property, Executive hereby
authorizes the Corporation to deduct the fair market value of any such property
from any payments which are made to Executive by the Corporation.
8. Amendment. This Release and Separation Agreement shall be
amended only pursuant to written agreement signed by the parties.
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1000 Park Drive, Lawrence, PA 15055-1018 * (724)746-5500 * FAX (724)746-0746
<PAGE> 8
9. Construction of Agreement. This Release and Separation Agreement
shall be governed by and construed under the laws of the Commonwealth of
Pennsylvania without regard to its laws relating to choice of laws. In the
event that any one or more of the provisions of this Agreement shall be held to
be invalid, illegal or unenforceable, the validity, legality or enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
BY SIGNING THIS RELEASE AND SEPARATION AGREEMENT, YOU ARE WAIVING IMPORTANT
RIGHTS.
WITNESS: BLACK BOX CORPORATION
/s/ ANNA M. BAIRD By: /s/ FRED C. YOUNG
- -------------------------------- -------------------------------------
Name: Anna M. Baird Fred C. Young, President
Date: June 22, 1998 Date: June 22, 1998
-- --
WITNESS:
/s/ ANNA M. BAIRD /s/ JEFFERY M. BOETTICHER
- -------------------------------- ----------------------------------------
Jeffery M. Boetticher
Date: June 22, 1998 Date: June 22, 1998
------- -------
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1000 Park Drive, Lawrence, PA 15055-1018 * (724)746-5500 * FAX (724)746-0746
<PAGE> 9
I, Jeffery M. Boetticher, received the Release and Separation
Agreement from Black Box Corporation on June 22, 1998, and hereby acknowledge
the following:
1. Black Box Corporation has given me twenty-one (21) days from
June 22, 1998, in which to consult an attorney or otherwise
consider the terms of this Agreement; and
2. I have fully considered the matters contained in this Release
and Separation Agreement and have voluntarily elected to execute
this Agreement prior to the expiration of the Twenty-one (21) day
period. This election has been made by me after having a full
and fair opportunity to discuss this matter with an attorney or
any other advisors of my choice.
Date: June 23, 1998 /s/ JEFFERY M. BOETTICHER
------------------------------
Jeffery M. Boetticher
Date: June 23, 1998 /s/ ANNA M. BAIRD
------------------------------
Witness
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<PAGE> 1
EXHIBIT 21
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>
<PAGE> 1
Exhibit 23.1
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports, included or incorporated by reference in this Form 10-K, into the
Company's previously filed registration statements on Form S-8, Registration No.
33-75254; Form S-8, Registration No. 33-75252; Form S-8, Registration No.
33-92656; Form S-8, Registration No. 333-01978; Form S-8, Registration No.
333-34839; and Form S-8, Registration No. 333-34837, relating to the Company's
1992 Employee Stock Option Plan, 1992 Director Stock Option Plan, First
Amendment to the Employee Plan, Second Amendment to the Employee Plan, Third
Amendment to the Employee Plan and First Amendment to the Director Plan, and
Form S-3, Registration No. 333-48421, and Form S-4, Registration No. 333-52937.
It should be noted that we have not audited any financial statements of the
Company subsequent to March 31, 1998, or performed any audit procedures
subsequent to the date of our report.
/s/ ARTHUR ANDERSEN LLP
-----------------------
Arthur Andersen LLP
Pittsburgh, Pennsylvania
June 29, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 10,560
<SECURITIES> 0
<RECEIVABLES> 49,852
<ALLOWANCES> 2,655
<INVENTORY> 31,922
<CURRENT-ASSETS> 99,827
<PP&E> 27,013
<DEPRECIATION> 14,231
<TOTAL-ASSETS> 185,191
<CURRENT-LIABILITIES> 38,323
<BONDS> 8,043
0
0
<COMMON> 17
<OTHER-SE> 127,748
<TOTAL-LIABILITY-AND-EQUITY> 185,191
<SALES> 279,821
<TOTAL-REVENUES> 279,821
<CGS> 138,993
<TOTAL-COSTS> 138,993
<OTHER-EXPENSES> (417)
<LOSS-PROVISION> 825
<INTEREST-EXPENSE> 2,652
<INCOME-PRETAX> 52,114
<INCOME-TAX> 21,199
<INCOME-CONTINUING> 30,915
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,915
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 1.75
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,413
<SECURITIES> 0
<RECEIVABLES> 45,845
<ALLOWANCES> 2,666
<INVENTORY> 36,648
<CURRENT-ASSETS> 91,775
<PP&E> 26,815
<DEPRECIATION> 13,769
<TOTAL-ASSETS> 178,415
<CURRENT-LIABILITIES> 40,307
<BONDS> 8,051
0
0
<COMMON> 17
<OTHER-SE> 118,253
<TOTAL-LIABILITY-AND-EQUITY> 178,415
<SALES> 68,989
<TOTAL-REVENUES> 68,989
<CGS> 33,980
<TOTAL-COSTS> 33,980
<OTHER-EXPENSES> (184)
<LOSS-PROVISION> 162
<INTEREST-EXPENSE> 592
<INCOME-PRETAX> 12,945
<INCOME-TAX> 5,082
<INCOME-CONTINUING> 7,863
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,863
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.44
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,484
<SECURITIES> 0
<RECEIVABLES> 48,759
<ALLOWANCES> 2,408
<INVENTORY> 36,295
<CURRENT-ASSETS> 95,354
<PP&E> 26,408
<DEPRECIATION> 13,137
<TOTAL-ASSETS> 183,184
<CURRENT-LIABILITIES> 44,145
<BONDS> 17,359
0
0
<COMMON> 17
<OTHER-SE> 109,679
<TOTAL-LIABILITY-AND-EQUITY> 183,184
<SALES> 69,665
<TOTAL-REVENUES> 69,665
<CGS> 34,650
<TOTAL-COSTS> 34,650
<OTHER-EXPENSES> (262)
<LOSS-PROVISION> 251
<INTEREST-EXPENSE> 736
<INCOME-PRETAX> 12,711
<INCOME-TAX> 5,252
<INCOME-CONTINUING> 7,459
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,459
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.42
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,160
<SECURITIES> 0
<RECEIVABLES> 46,892
<ALLOWANCES> 2,365
<INVENTORY> 36,457
<CURRENT-ASSETS> 92,498
<PP&E> 25,439
<DEPRECIATION> 12,486
<TOTAL-ASSETS> 180,940
<CURRENT-LIABILITIES> 44,929
<BONDS> 21,167
0
0
<COMMON> 17
<OTHER-SE> 102,721
<TOTAL-LIABILITY-AND-EQUITY> 180,940
<SALES> 65,032
<TOTAL-REVENUES> 65,032
<CGS> 31,690
<TOTAL-COSTS> 31,690
<OTHER-EXPENSES> 96
<LOSS-PROVISION> 160
<INTEREST-EXPENSE> 807
<INCOME-PRETAX> 11,829
<INCOME-TAX> 4,867
<INCOME-CONTINUING> 6,962
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,962
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.40
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,353
<SECURITIES> 0
<RECEIVABLES> 46,399
<ALLOWANCES> 2,499
<INVENTORY> 30,435
<CURRENT-ASSETS> 83,915
<PP&E> 24,695
<DEPRECIATION> 11,772
<TOTAL-ASSETS> 173,279
<CURRENT-LIABILITIES> 45,683
<BONDS> 21,175
0
0
<COMMON> 17
<OTHER-SE> 94,247
<TOTAL-LIABILITY-AND-EQUITY> 173,279
<SALES> 232,158
<TOTAL-REVENUES> 232,158
<CGS> 108,512
<TOTAL-COSTS> 108,512
<OTHER-EXPENSES> 160
<LOSS-PROVISION> 664
<INTEREST-EXPENSE> 3,649
<INCOME-PRETAX> 41,889
<INCOME-TAX> 17,594
<INCOME-CONTINUING> 24,295
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,295
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.40
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,567
<SECURITIES> 0
<RECEIVABLES> 38,831
<ALLOWANCES> 2,552
<INVENTORY> 25,135
<CURRENT-ASSETS> 71,150
<PP&E> 23,376
<DEPRECIATION> 11,076
<TOTAL-ASSETS> 161,133
<CURRENT-LIABILITIES> 35,677
<BONDS> 24,734
0
0
<COMMON> 16
<OTHER-SE> 88,126
<TOTAL-LIABILITY-AND-EQUITY> 161,133
<SALES> 58,589
<TOTAL-REVENUES> 58,589
<CGS> 27,453
<TOTAL-COSTS> 27,453
<OTHER-EXPENSES> 63
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 839
<INCOME-PRETAX> 10,535
<INCOME-TAX> 4,425
<INCOME-CONTINUING> 6,110
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,110
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.35
</TABLE>
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,232
<SECURITIES> 0
<RECEIVABLES> 39,421
<ALLOWANCES> 2,608
<INVENTORY> 22,913
<CURRENT-ASSETS> 69,301
<PP&E> 22,638
<DEPRECIATION> 10,425
<TOTAL-ASSETS> 160,124
<CURRENT-LIABILITIES> 37,197
<BONDS> 30,540
0
0
<COMMON> 16
<OTHER-SE> 78,537
<TOTAL-LIABILITY-AND-EQUITY> 160,124
<SALES> 56,912
<TOTAL-REVENUES> 56,912
<CGS> 26,317
<TOTAL-COSTS> 26,317
<OTHER-EXPENSES> 82
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,040
<INCOME-PRETAX> 10,050
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<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.34
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,171
<SECURITIES> 0
<RECEIVABLES> 36,968
<ALLOWANCES> 2,460
<INVENTORY> 20,522
<CURRENT-ASSETS> 63,499
<PP&E> 22,222
<DEPRECIATION> 9,939
<TOTAL-ASSETS> 155,245
<CURRENT-LIABILITIES> 31,016
<BONDS> 37,541
0
0
<COMMON> 16
<OTHER-SE> 72,699
<TOTAL-LIABILITY-AND-EQUITY> 155,245
<SALES> 53,788
<TOTAL-REVENUES> 53,788
<CGS> 24,810
<TOTAL-COSTS> 24,810
<OTHER-EXPENSES> (26)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,126
<INCOME-PRETAX> 9,294
<INCOME-TAX> 4,089
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<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.31
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 1,924
<SECURITIES> 0
<RECEIVABLES> 37,211
<ALLOWANCES> 2,407
<INVENTORY> 18,781
<CURRENT-ASSETS> 62,842
<PP&E> 21,922
<DEPRECIATION> 9,623
<TOTAL-ASSETS> 155,544
<CURRENT-LIABILITIES> 32,793
<BONDS> 41,142
0
0
<COMMON> 16
<OTHER-SE> 67,125
<TOTAL-LIABILITY-AND-EQUITY> 155,544
<SALES> 193,427
<TOTAL-REVENUES> 193,427
<CGS> 87,455
<TOTAL-COSTS> 87,455
<OTHER-EXPENSES> (295)
<LOSS-PROVISION> 1,163
<INTEREST-EXPENSE> 5,757
<INCOME-PRETAX> 32,623
<INCOME-TAX> 14,345
<INCOME-CONTINUING> 18,278
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,278
<EPS-PRIMARY> 1.13
<EPS-DILUTED> 1.10
</TABLE>
