<PAGE> 1
Fiscal 2001 First Quarter
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
COMMISSION FILE NO. 0-18706
BLACK BOX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-3086563
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1000 Park Drive
Lawrence, Pennsylvania 15055
(Address of principal executive offices)
724-746-5500
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
The number of shares outstanding of the Registrant's common stock, $.001 par
value, as of July 31, 2000 was 18,693,465 shares.
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BLACK BOX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
(Unaudited)
June 30, March 31,
ASSETS 2000 2000
----------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,019 $ 8,643
Accounts receivable, net of allowance for doubtful
accounts of $7,649 and $6,304, respectively 132,487 115,958
Inventories, net 47,837 44,582
Costs and estimated earnings in excess of billings
on uncompleted contracts 20,622 7,953
Other current assets 18,158 17,398
-------- --------
Total current assets 226,123 194,534
Property, plant and equipment, net of accumulated depreciation
of $27,184 and $25,671, respectively 43,490 40,445
Intangibles, net of accumulated amortization of $38,277 and
$35,629, respectively 271,078 215,366
Other assets 4,293 1,944
-------- --------
Total assets $544,984 $452,289
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current debt $ 746 $ 969
Accounts payable 48,021 38,374
Billings in excess of costs and estimated earnings
on uncompleted contracts 8,252 3,655
Other accrued expenses 26,739 27,087
Accrued income taxes 8,381 8,468
-------- --------
Total current liabilities 92,139 78,553
Long-term debt 128,916 105,374
Deferred taxes 9,455 9,581
Other liabilities 1,694 454
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 20,474,518 and 19,940,217, respectively 20 20
Additional paid-in capital 185,949 144,828
Retained earnings 200,184 186,056
Treasury stock, at cost, 1,500,000 shares (67,253) (67,253)
Cumulative foreign currency translation adjustments (6,120) (5,324)
Total stockholders' equity 312,780 258,327
-------- --------
Total liabilities and stockholders' equity $544,984 $452,289
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE> 3
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three month period ended
June 30,
2000 1999
-------- -------
<S> <C> <C>
Revenues $169,036 $97,520
Cost of sales 99,173 52,053
-------- -------
Gross profit 69,863 45,467
Selling, general and administrative expenses 42,438 26,493
Intangibles amortization 2,648 1,289
-------- -------
Operating income 24,777 17,685
Interest expense, net 2,213 50
Other (income)/expenses, net (597) 48
-------- -------
Income before income taxes 23,161 17,587
Provision for income taxes 9,033 6,947
-------- -------
Net income $ 14,128 $10,640
======== =======
Basic earnings per common share $ 0.76 $ 0.60
======== =======
Diluted earnings per common share $ 0.72 $ 0.57
======== =======
Weighted average common shares 18,625 17,767
======== =======
Weighted average common and
common equivalent shares 19,758 18,821
======== =======
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 4
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Cumulative
Common Stock Additional Foreign
---------------------- Treasury Paid-in Retained Currency
Shares Amount Stock Capital Earnings Translation Total
---------- ------ -------- ---------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1999 18,147,358 $18 -- $ 59,272 $137,204 $(3,842) $192,652
Net income -- -- -- -- 48,852 - 48,852
Purchase of treasury stock -- -- (67,253) -- -- - $(67,253)
Issuance of common stock 1,148,570 1 -- 64,676 -- - 64,677
Exercise of options 644,289 1 -- 12,987 -- - 12,988
Tax benefit from exercised options -- -- -- 7,893 -- - 7,893
Foreign currency translation
adjustment -- -- -- -- -- (1,482) (1,482)
---------- --- -------- --------- -------- ------- --------
Balance at March 31, 2000 19,940,217 20 (67,253) 144,828 186,056 (5,324) 258,327
Net income -- -- -- -- 14,128 - 14,128
Issuance of common stock 488,019 -- -- 39,839 -- - 39,839
Exercise of options 46,282 -- -- 833 -- - 833
Tax benefit from exercised options -- -- -- 449 -- - 449
Foreign currency translation
adjustment -- -- -- -- -- (796) (796)
---------- --- -------- --------- -------- ------- --------
Balance at June 30, 2000 20,474,518 $20 $(67,253) $ 185,949 $200,184 $(6,120) $312,780
========== === ======== ========= ======== ======= ========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 5
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three month period ended
June 30,
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 14,128 $ 10,640
Adjustments to reconcile net income to cash provided
by operating activities:
Intangibles amortization 2,648 1,289
Depreciation 1,861 1,013
Other 68 32
Changes in working capital items:
Account receivable, net (5,630) 3,254
Inventories, net (1,957) (2,922)
Other current assets (9,993) (3,553)
Accounts payable and accrued liabilities 3,477 (2,452)
-------- --------
Cash provided by operating activities 4,602 7,301
-------- --------
Cash flows from investing activities:
Capital expenditures (3,385) (2,600)
Mergers, net of cash acquired (26,202) 45
-------- --------
Cash (used in) investing activities (29,587) (2,555)
-------- --------
Cash flows from financing activities:
Repayment of borrowings (2,912) (685)
Proceeds from borrowings 26,134 33,729
Proceeds from exercise of options 1,282 4,338
Purchase of treasury stock -- (41,981)
-------- --------
Cash provided by/(used in) financing activities 24,504 (4,599)
-------- --------
Foreign currency translation adjustment (1,143) (1,249)
-------- --------
(Decrease) in cash and cash equivalents (1,624) (1,102)
Cash and cash equivalents at beginning of period 8,643 5,946
-------- --------
Cash and cash equivalents at end of period $ 7,019 $ 4,844
======== ========
Interest paid $ 2,011 $ 180
-------- --------
Income taxes paid $ 3,470 $ 1,872
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE> 6
BLACK BOX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except per-share amounts)
NOTE 1 - BASIS OF PRESENTATION
The Financial Statements presented herein and these notes are
unaudited. Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission ("SEC"). Although Black Box
Corporation (the "Company") believes that all adjustments necessary for a fair
presentation have been made, interim periods are not necessarily indicative of
the results of operations for a full year. As such, these financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's most recent Form 10-K which was filed with the SEC for
the fiscal year ended March 31, 2000. Certain prior year amounts have been
reclassified to conform to the current year financial statement presentation.
NOTE 2 - INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out
method) or market. The net inventory balances are as follows:
June 30, March 31,
2000 2000
-------- ---------
Raw materials $ 2,854 $ 2,485
Work-in-process 60 23
Finished goods 48,778 45,858
Inventory reserve (3,855) (3,784)
------- --------
Inventory, net $47,837 $44,582
======= =======
NOTE 3 - FINANCIAL DERIVATIVES
The Company has entered and will continue in the future, on a selective
basis, to enter into forward exchange contracts to reduce the foreign currency
exposure related to certain intercompany transactions. On a monthly basis, the
open contracts are revalued to the current exchange rates, and the resulting
gains and losses are recorded in other income. These gains and losses offset the
revaluation of the related foreign currency denominated receivables.
At June 30, 2000, the open foreign exchange contracts were in Yen,
Euro, Sterling pound, Canadian dollars, Swiss francs and Australian dollars.
These open contracts, valued at approximately $13,112, will expire over the next
nine months and have contract rates of 102.73 to 103.93 Yen, 0.8958 to 0.9600
Euro, 1.5071 to 1.5885 Sterling pound, 1.4744 to 1.4762 Canadian dollar, 1.6280
to 1.6438 Swiss franc and 0.6002 to 0.6058 Australian dollar, all per U.S.
dollar. The effect of these contracts on net income for the three month period
ended June 30, 2000 was not material.
6
<PAGE> 7
BLACK BOX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except per-share amounts)
NOTE 4 - COMPREHENSIVE INCOME
In the first quarter of Fiscal 1999, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," which established standards for reporting and displaying comprehensive
income and its components in financial statements. Comprehensive income is
defined as net income and all nonowner changes in stockholders' equity.
Accumulated other comprehensive income consists entirely of foreign currency
translation adjustments. Total comprehensive income for the three month periods
ended June 30, 2000 and 1999 were $13,332 and $9,688, respectively.
NOTE 5 - 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. The following table details this
calculation:
Three month period
ended June 30,
2000 1999
------- -------
Net income to be used for earnings per share
computation $14,128 $10,640
Basic earnings per common share:
Weighted average common shares 18,625 17,767
------- -------
Basic earnings per common share $ 0.76 $ 0.60
======= =======
Diluted earnings per common share:
Weighted average common shares 18,625 17,767
Shares issuable from assumed conversion
of common stock equivalents 1,133 1,054
------- -------
Weighted average common and common
equivalent shares 19,758 18,821
------- -------
Diluted earnings per common share $ 0.72 $ 0.57
======= =======
7
<PAGE> 8
BLACK BOX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except per-share amounts)
NOTE 6 - ADOPTION OF NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
amended by SFAS No. 137, which establishes accounting and reporting standards
for derivative instruments and requires that an entity recognize all derivatives
as either assets or liabilities and measure those instruments at fair value. The
Company is currently evaluating the effects of SFAS No. 133 and does not expect
its adoption to have a material effect on the Company's financial statements or
results of operations. The Company will adopt the new standard in the first
quarter of Fiscal 2002.
In June 2000, the SEC staff issued SAB 101B, which further establishes
accounting and reporting standards for revenue recognition. The Company is
currently evaluating the effects of SAB 101B and does not expect its adoption to
have a material effect on the Company's financial statements or results of
operations. The Company will adopt the new literature in the fourth quarter of
Fiscal 2001.
NOTE 7 - CHANGES IN BUSINESS
During the three months ended June 30, 2000, the Company successfully
completed seven business combinations which have been accounted for using the
purchase method of accounting: April 2000 - Cabling Concepts, Inc. and Teldata
Corporation, June 2000 - ST Communications & Cabling, Inc., GMCI Netcomm, Inc.,
Allcom Electric, Inc., Vista Information Technologies, Inc. and Schoeller
Connectivity Gmbh. In connection with the above seven business combinations, the
Company issued an aggregate of 488 thousand shares of its common stock in
exchange for all of the outstanding shares of the above seven companies. In
addition, an aggregate of approximately $26,000 in cash was used to acquire the
above seven companies. The aggregate purchase price was approximately $65,800
and resulted in goodwill after assumed liabilities of approximately $57,600,
which is being amortized over twenty-five years.
As of June 30, 2000, certain merger agreements provide for contingent
payments, depending on future performance, of up to $19,025, of which $812 have
been satisfied and paid. Upon meeting the future performance goals, the goodwill
will be adjusted for the amount of the contingent payments.
The Company has consolidated the results of operations for each of the
acquired companies as of the respective merger date. The following table reports
pro forma information as if the acquired entities had been purchased at the
beginning of the stated periods:
8
<PAGE> 9
Three month period
ended June 30,
--------------------------------------
2000 1999
(unaudited) (unaudited)
--------------------------------------------------------------------------------
Revenue As reported $169,036 $ 97,520
Pro forma 183,119 169,336
--------------------------------------------------------------------------------
Net income As reported $ 14,128 $ 10,640
Pro forma 15,602 15,258
--------------------------------------------------------------------------------
Earnings per share As reported $ 0.72 $ 0.57
Pro forma $ 0.78 $ 0.75
--------------------------------------------------------------------------------
NOTE 8 - TREASURY STOCK
On March 31, 1999, the Company announced its intention to repurchase up
to 1 million shares of its Common Stock. As of June 1999, the Company had
repurchased all 1 million shares at prevailing market prices for an aggregate
purchase price of $41,981. On July 15, 1999, the Company announced its intention
to repurchase an additional 500 thousand shares of its Common Stock. As of
November 1999, the Company had repurchased all 500 thousand shares under this
plan at prevailing market prices for an aggregate purchase price of $25,272.
Funding for these stock repurchases came from existing cash flow and borrowings
under credit facilities maintained with Mellon Bank, N.A.
NOTE 9 - INDEBTEDNESS
On April 4, 2000, the Company simultaneously entered into a $120,000
Revolving Credit Agreement ("Long Term Revolver") and a $60,000 Short Term
Credit Agreement ("Short Term Revolver") (together the "Syndicated Debt") with
Mellon Bank, N.A. and a group of lenders. The terms of the Syndicated Debt are
substantially similar to the terms of the previous Mellon Facility. The Long
Term Revolver is scheduled to expire on April 4, 2003 and the Short Term
Revolver is scheduled to expire on April 4, 2001. Upon its expiration, the
Company has the option to convert the Short Term Revolver into a two-year note
with substantially similar terms. The interest on the borrowings is variable
based on the Company's option of selecting the banks prime rate plus an
applicable margin as defined in the agreement or the Euro-dollar rate plus an
applicable margin as defined in the agreement.
The Company's total debt at June 30, 2000 was comprised of $112,400
under the Mellon Long Term Revolver, $11,000 under the Mellon Short Term
Revolver, and $6,262 of various other loans. The weighted average interest rate
on all indebtedness of the Company as of June 30, 2000 was approximately 7.7%
compared to 5.9% as of June 30, 1999.
9
<PAGE> 10
BLACK BOX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except per-share amounts)
NOTE 10 - SEGMENT REPORTING
The Company manages the business primarily on a product and service
line basis. Its reportable segments are comprised of On-Site Services and Phone
Services. The Other operating segment includes expenses related primarily to
tradename and trademark protection and costs directly related to its mergers and
acquisitions program. The Company reports its segments separately because of
differences in the ways the product and service lines are managed and operated.
Consistent with SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," the Company aggregates similar operating segments into
reportable segments.
The Company evaluates the performance of each segment based on
"Worldwide EBITA." A segment's Worldwide EBITA is its earnings before interest,
taxes and amortization. Revenues and the related profits on intercompany
transactions are reported by the segment providing the third-party revenues.
Intersegment sales are not reviewed by management and are not presented below.
Certain costs incurred in Phone Services are directly related to the Company's
business development through mergers and acquisitions and therefore are
reclassified to the Other operating segment in the information presented below.
Interest income, interest expense and expenditures for segment assets are not
presented to or reviewed by management, and therefore are not presented in the
information below.
Summary information by reportable segment is as follows:
Three month period
ended June 30,
---------------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------------
On-Site Services
Revenues $80,041 $17,803
Worldwide EBITA 10,574 2,206
Phone Services
Revenues $88,995 $79,717
Worldwide EBITA 17,563 17,379
Other
Revenues $ 0 $ 0
Worldwide EBITA (712) (611)
---------------------------------------------------------------------------
10
<PAGE> 11
BLACK BOX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except per-share amounts)
The following is a reconciliation between the reportable segment data and the
corresponding consolidated amount for EBITA:
EBITA
Three month period
ended June 30,
------------------------------------------------------------------------------
2000 1999
------------------------------------------------------------------------------
Total Worldwide EBITA for reportable segments $28,137 $19,585
Other EBITA (712) (611)
Total consolidated EBITA 27,425 18,974
------------------------------------------------------------------------------
Prior period amounts have been restated to reflect the reclassification of the
costs related to the Company's mergers and acquisitions program. Such
reclassifications will be shown in future periods on a comparable basis.
The following is summary information of assets by reportable segment and a
reconciliation to the consolidated assets:
ASSETS
-----------------------------------------------------------------------------
June 30, March 31,
2000 2000
-----------------------------------------------------------------------------
On-Site Services $ 308,098 $ 221,377
Phone Services 334,719 312,496
--------- ---------
Total assets for reportable segments 642,817 533,873
Other assets 410,437 340,532
Corporate eliminations (508,270) (422,116)
--------- ---------
Total consolidated assets $ 544,984 $ 452,289
-----------------------------------------------------------------------------
Information about geographic areas is as follows:
REVENUES
Three month period
ended June 30,
--------------------------------------------------------------------------------
2000 1999
--------------------------------------------------------------------------------
North America $123,486 $62,066
Europe 30,452 22,612
Pacific Rim 10,177 8,928
Latin America 4,921 3,914
--------- ---------
Total revenues $169,036 $97,520
--------------------------------------------------------------------------------
11
<PAGE> 12
BLACK BOX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except per-share amounts)
ASSETS
--------------------------------------------------------------------------------
June 30, March 31,
2000 2000
--------------------------------------------------------------------------------
North America $454,077 $364,303
Europe 62,521 60,311
Pacific Rim 16,228 16,200
Latin America 12,158 11,475
--------- ---------
Total consolidated assets $544,984 $452,289
--------------------------------------------------------------------------------
NOTE 11 - SUBSEQUENT EVENTS
In July 2000, the Company effected a merger with Ascor bvba ("Ascor").
Established in 1985 in Mechelen, Belgium, Ascor provides technical design,
installation and maintenance services for premise cabling and related products
to customers throughout Belgium. The results of operations and financial
position of Ascor are not material to the Company's consolidated results of
operations or financial position.
In July 2000, the Company effected a merger with Carey Systems Company
("Carey"). Established in 1993 near Dayton, Ohio, Carey provides technical
design, installation and maintenance services for premise cabling and related
network products to customers in the greater Dayton region. The results of
operations and financial position of Carey are not material to the Company's
consolidated results of operations or financial position.
In July 2000, the Company effected a merger with Datel Communications,
Inc. ("Datel"). Established in 1991 in Phoenix, Arizona, Datel provides
technical design, installation and maintenance services for premise cabling and
related products to customers primarily in Arizona and through a branch office
in Las Vegas, Nevada. The results of operations and financial position of Datel
are not material to the Company's consolidated results of operations or
financial position.
In July 2000, the Company effected a merger with Data Specialities
Europe, Ltd., which trades as Anglo Communications Ltd. ("Anglo"). Established
in 1993 in Bury St. Edmunds, England, Anglo provides technical design,
installation and maintenance for premise cabling and related products to
customers throughout the United Kingdom. The results of operations and financial
position of Anglo are not material to the Company's consolidated results of
operations or financial position.
In July 2000, the Company effected a merger with Midwest Electronics
and Communications, Inc. ("Midwest"). Established in 1987 in Denver, Colorado,
Midwest provides technical design, installation and maintenance services for
premise cabling and related products to customers in the greater Denver area.
The results of operations and financial position of Midwest are not material to
the Company's consolidated results of operations or financial position.
12
<PAGE> 13
BLACK BOX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Capital Dollars in thousands, except per-share amounts)
On July 13, 2000, the Company announced its intention to repurchase up
to 500 thousand shares of its Common Stock. On July 21, 2000, the Company
announced that it increased its share repurchase program from 500 thousand to 1
million shares of the Company's Common Stock. The shares will be purchased in
the open market from time to time at prevailing market prices or in privately
negotiated transactions. As of July 31, 2000, the Company had repurchased 450
thousand shares under this plan at prevailing market prices for an aggregate
purchase price of $25,180.
13
<PAGE> 14
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (dollars in thousands)
GENERAL
FORWARD-LOOKING STATEMENTS
When included in this Quarterly Report on Form 10-Q or in documents
incorporated herein by reference, the words "expects," "intends," "anticipates,"
"believes," "estimates," and analogous expressions are intended to identify
forward-looking statements. Such statements are inherently subject to a variety
of risks and uncertainties that could cause actual results to differ materially
from those projected. Such risks and uncertainties include, among others,
general economic and business conditions, competition, changes in foreign,
political and economic conditions, fluctuating foreign currencies compared to
the U.S. dollar, rapid changes in technologies, customer preferences and various
other matters, many of which are beyond the Company's control. These
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995 and speak only as of the
date of this Quarterly Report on Form 10-Q. The Company expressly disclaims any
obligation or undertaking to release publicly any updates or any changes in the
Company's expectations with regard thereto or any change in events, conditions,
or circumstances on which any statement is based.
RESULTS OF OPERATIONS
The table below should be read in conjunction with the following
discussion (percentages are based on total revenues).
Three month period ended
June 30,
---------------------------
2000 1999
-------- -------
Revenues $169,036 $97,520
======== =======
Revenues:
On-Site Services 47.4% 18.3%
Phone Services:
North America 27.4 45.6
International 25.2 36.1
-------- -------
Total Phone Services 52.6 81.7
-------- -------
Total revenues 100.0 100.0
14
<PAGE> 15
Revenues for the three months ended June 30, 2000 (First Quarter 2001)
were $169,036, an increase of $71,516, or 73%, over the same period in the prior
year (First Quarter 2000). Revenues from on-site services for First Quarter 2001
were $80,041, an increase of $62,238, or 350%, over revenues for First Quarter
2000. On-site services revenue growth was primarily due to the Company's
continued geographic expansion of its technical services capabilities through
merger as well as strong demand for on-site services from existing on-site
customers.
Reported revenues from the Company's phone services business for First
Quarter 2001 were $88,995, an increase of $9,278, or 12%, over revenues for
First Quarter 2000. If exchange rates had remained constant from First Quarter
2000, phone services revenues for the three month ended June 30, 2000 would have
increased 14%. Phone services revenue growth was driven primarily by strong
sales in Europe and Latin America. Phone services revenues from North America
for First Quarter 2001 were $46,371, an increase of $1,872, or 4%, over revenues
for First Quarter 2000. While the North America phone support revenue growth was
modest, the demand continues to be strong for infrastructure products and switch
products, including ServSwitch(TM), from customers of all sizes. International
phone services revenues for First Quarter 2001 were $42,624, an increase of
$7,406, or 21%, over revenues for First Quarter 2000. International phone
services revenue growth was driven by strong demand across most product lines,
success in attracting new customers and deeper penetration of existing
customers. If exchange rates had remained constant from First Quarter 2000,
International phone services revenues for the three months ended June 30, 2000
would have increased 26%.
Reported revenue dollar and percentage changes by geographic region
were as follows: Europe revenues increased $7,840, or 35%; Pacific Rim revenue
increased $1,249, or 14%; and Latin American revenue increased $1,007, or 26%.
If the exchange rate relative to the U.S. dollar had remained unchanged from
First Quarter 2000, revenue growth for Europe, Pacific Rim and Latin America
would have been 46%, 5% and 27%, respectively.
Gross profit in First Quarter 2001 increased to $69,863, or 41.3% of
revenues, from $45,467, or 46.6% of revenues, in First Quarter 2000. The decline
in gross profit margin was due primarily to the increase in percentage of
revenues from the Company's on-site services which provides 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 41.7% for First Quarter
2001 compared to 46.9% for First Quarter 2000.
Selling, general and administrative ("SG&A") expenses in First Quarter
2001 were $42,438, or 25.1% of revenues, an increase of $15,945 over SG&A
expenses of $26,493, or 27.2% of revenues, in First Quarter 2000. SG&A expense
as a percentage of revenues decreased from last year primarily due to the
increase in percentage of revenue from the Company's on-site services which
incurs lower operating expenses relative to revenues. The dollar increase over
the prior year related primarily to additional marketing and personnel costs
worldwide and additional costs from on-site service operations which are
included in First Quarter 2001 but not in First Quarter 2000.
Operating income before amortization in First Quarter 2001 was $27,425,
or 16.2% of revenues, compared to $18,974, or 19.4% of revenues, in First
Quarter 2000. The decline in margin was due primarily to the increase in
percentage of revenues from the Company's on-site services which operate at
lower margins. Intangible amortization for First Quarter 2001 was $2,648,
15
<PAGE> 16
compared to $1,289 for the First Quarter 2000. The increase in amortization is
due to additional goodwill related to the Company's continued expansion of its
technical services by merger.
Net interest expense in First Quarter 2001 increased to $2,213 from $50
in First Quarter 2000 due to an increase in borrowings for the repurchase of the
Company's Common Stock and several mergers which were completed with cash.
The tax provision in First Quarter 2001 was $9,033, or an effective tax
rate of 39.0%, which is comparable to $6,947, or an effective tax rate of 39.5%,
in First Quarter 2000.
Net income for First Quarter 2001 was $14,128 compared to $10,640 in
First Quarter 2000, an increase of 33%. This growth was primarily due to strong
revenue growth and the successful expansion of the Company's on-site services by
merger.
LIQUIDITY AND CAPITAL RESOURCES
In the First Quarter 2001, the Company's net proceeds from borrowings
increased by $23,222 as a result of borrowings used to finance the repurchase of
its Common Stock and to continue expansion of its on-site services by merger. As
of June 30, 2000, the Company had cash and cash equivalents of $7,019, working
capital of $133,984, and total debt of $129,662.
On April 4, 2000, Black Box PA simultaneously entered into a $120,000
Revolving Credit Agreement ("Long Term Revolver") and a $60,000 Short Term
Credit Agreement ("Short Term Revolver") (together the "Syndicated Debt") with
Mellon Bank, N.A. and a group of lenders. The terms of the Syndicated Debt are
substantially similar to the terms of the previous Mellon Facility. The Long
Term Revolver is scheduled to expire on April 4, 2003 and the Short Term
Revolver is scheduled to expire on April 4, 2001. Upon its expiration, the
Company has the option to convert the Short Term Revolver into a two-year note
with substantially similar terms. The interest on the borrowings is variable
based on the Company's option of selecting the banks prime rate plus an
applicable margin as defined in the agreement or the Euro-dollar rate plus an
applicable margin as defined in the agreement.
The Company's total debt at June 30, 2000 was comprised of $112,400
under the Mellon Long Term Revolver, $11,000 under the Mellon Short Term
Revolver, and $6,262 of various other loans. The weighted average interest rate
on all indebtedness of the Company as of June 30, 2000 was approximately 7.7%
compared to 5.9% as of June 30, 1999. In addition, at June 30, 2000, the Company
had $1,039 of letters of credit outstanding and $55,561 of additional funds
available under the Syndicated Debt.
On March 31, 1999, the Company announced its intention to repurchase up
to 1 million shares of its Common Stock. As of June 1999, the Company had
repurchased all 1 million shares at prevailing market prices for an aggregate
purchase price of $41,981. On July 15, 1999, the Company announced its intention
to repurchase an additional 500 thousand shares of its Common Stock. As of
November 1999, the Company had repurchased all 500 thousand shares under this
plan at prevailing market rates for an aggregate purchase price of $25,273. On
July 13, 2000, the Company announced its
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intention to repurchase up to 500 thousand shares of its Common Stock. On July
21, 2000, the Company announced that it increased its share repurchase program
from 500 thousand to 1 million shares of the Company's stock. The shares will be
purchased in the open market from time to time at prevailing market prices or in
privately negotiated transactions. As of July 31, 2000, the Company had
repurchased 450 thousand shares under this plan at prevailing market prices for
an aggregate purchase price of $25,180. Funding for these stock repurchases came
from existing cash flow and borrowings under credit facilities maintained with
Mellon Bank, N.A.
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, Chile 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 and will continue in the future, on a selective
basis, to enter into forward exchange contracts to reduce the foreign currency
exposure related to certain intercompany transactions. On a monthly basis, the
open contracts are revalued to the current exchange rates and the resulting
gains and losses are recorded in other income. These gains and losses offset the
revaluation of the related foreign currency denominated receivables. At June 30,
2000, the open foreign exchange contracts were in Yen, Euro, Sterling pound,
Canadian dollars, Swiss francs and Australian dollars. These open contracts,
valued at approximately $13,112, will expire over the next nine months and have
contract rates of 102.73 to 103.93 Yen, 0.8958 to 0.9600 Euro, 1.5071 to 1.5885
Sterling pound, 1.4744 to 1.4762 Canadian dollar, 1.6280 to 1.6438 Swiss franc
and 0.6002 to 0.6058 Australian dollar, all per U.S. dollar. The effect of these
contracts on net income for the three month period ended June 30, 2000 was
approximately $600, which is offset by the revaluation of the related foreign
currency denominated receivables.
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.
CONVERSION TO THE EURO CURRENCY
On January 1, 1999, certain members of the European Union established
fixed conversion rates between their existing currencies and the European
Union's common currency, the Euro. The Company conducts business in member
countries. The transition period for the introduction of the Euro will be
between January 1, 1999 and June 30, 2002. The Company is assessing the issues
involved with the introduction of the Euro, and it does not expect Euro
conversion to have a material impact on its operations or financial results.
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ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks in the ordinary course of
business that include foreign currency exchange rates. In an effort to mitigate
the risk, the Company, on a selective basis, will enter into forward exchange
contracts. At June 30, 2000, the Company had open contracts valued at
approximately $13,112 and with a fair value of approximately $12,999.
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PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule - June 30, 2000
(b) Reports on Form 8-K.
None.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLACK BOX CORPORATION
August 14, 2000 By: /s/ Anna M. Baird
-------------------------
Anna M. Baird, Vice President,
Chief Financial Officer, Treasurer,
and Principal Accounting Officer
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EXHIBIT INDEX
Exhibit No.
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21.1 Subsidiaries of the Company
27.1 Financial Data Schedule - June 30, 2000
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