Black Box Corporation (BBOX)

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Black Box Corporation (BBOX)

F3Q 2009 (Qtr End 12/27/08) Earnings Call Transcript

January 27, 2009 5:00 pm ET


Gary Doyle – Director, IR

Terry Blakemore – President and CEO

Mike McAndrew – VP, CFO, Secretary and Treasurer


Joe Gagan – Atlantic Equity Research

Jeff Beach – Stifel Nicolaus

Nat Kellogg – Next Generation Equity Research



Ladies and gentlemen, thank you for standing by, and welcome to the Black Box Corporation Third Quarter Fiscal 2009 Earnings Call. At this time, all lines are in a listen-only mode; later there will be an opportunity for questions, and instructions will be given at that time. (Operator instructions) And as a reminder, this conference is being recorded.

I’ll now turn the conference over to Gary Doyle, Director of Investor Relations. Please go ahead, sir.

Gary Doyle

Thank you. Good evening, and welcome to Black Box Corporation’s third quarter fiscal 2009 earnings conference call.

My name is Gary Doyle and I am the Director of Investor Relations for Black Box. With us today are Terry Blakemore, President and CEO of Black Box Corporation, and Mike McAndrew, our Vice President and Chief Financial Officer.

Earlier today, we announced our third quarter fiscal 2009 results by issuing a press release and furnishing it to the Securities and Exchange Commission on Form 8-K. We also posted this press release to our website at We will start today’s call with an overview of our results from Terry Blakemore, followed by a more detailed discussion from Mike and Terry. Following this, we will field questions as time allows.

Before we begin, and as a reminder, matters discussed in this call may contain forward-looking statements that involve risks and uncertainties concerning Black Box’s expected financial performance. Actual results may differ materially from expected results and reported results should not be considered as an indication of future performance. Potential factors that could affect our business and financial results include changes in economic conditions in our end market and in the general market at large. Additional factors are included in our most recent Form 10-K and today’s press release, including the ongoing SEC investigation and shareholder derivative lawsuits.

On this call and as presented in today’s press release, we will discuss some financial information that includes non-GAAP financial measures, including operating net income, operating earnings per share, free cash flow, EBITDA, adjusted EBITDA, and organic or same-office revenue comparisons. We will limit any non-GAAP financial discussions today to the specific measures in our press release. As I said earlier, our press release was filed with the SEC and posted to our website prior to this call. Please refer to the schedule that accompanies the press release for a reconciliation of non-GAAP financial measurements to the most directly comparable GAAP financial measurement and other supplemental information.

On the IR calendar, I would like to let everyone know Mike McAndrew will be attending the Next Generation Equity Research Third Annual Industrial Conference on March 3 in Chicago. Please check our website as that date approaches for a press release with more specific information on the conference.

Now, I would like to turn the call over to Mr. Terry Blakemore.

Terry Blakemore

Thanks, Gary.

I am pleased to report that our results for the third quarter demonstrates that in a challenging economic environment, the Black Box was able to generate diversified revenues and deliver double-digit margins and positive cash flow. Revenues for our third quarter were $262 million, a 1% increase from last year’s $258 million, and a 3% increase over last quarter’s $254 million. Year-to-date revenues were $758 million, a 2% decrease from last year’s $771 million.

Our third quarter operating earnings per share were $.88, up $0.03 from last year’s $0.85, and down $0.06 from last quarter’s record $0.94. Year-to-date operating earnings per share were $2.55 versus $2.45 for the same period last year. Our third-quarter free cash flow was $11 million compared to $23 million last year. On a sequential basis, comparison basis, our second-quarter free cash flow was $26 million. The year-to-date free cash flow stands at $49 million versus $38 million for the same period last year.

I will turn it over to Mike now for a more detailed discussion on our financial results.

Mike McAndrew

Thanks Terry.

As Terry just mentioned, we posted quarterly revenues of $262 million versus $258 million for the same period last year. Excluding the $32 million of revenue contribution in the third quarter related acquisitions and the negative $6 million impact from foreign currency, same office revenues for the third quarter are down $19 million or 8% over the third quarter of the prior year. This $90 million revenue decrease is partly driven by $6 million decrease in revenues resulting from the loss of Avaya distribution agreement we announced in August of 2007.

In the past, we have also adjusted for the impact of customer attrition related to the NextiraOne acquisition. Last quarter, 2Q09 was the final adjustment for that item. In addition, at a more macro level, we believe the remainder of the decrease in same office revenues is attributable to continued signs of caution from certain of our clients related to capital investments. In particular, we continue to see reduced capital spending in the retail and banking verticals.

Looking more deeply at our third-quarter revenues by the two segments that we report, the highlights are as follows. Initially from the service type segment perspective, our third-quarter revenues were comprised of $158 million or 60% of voice services revenue, $52 million or 20% of hotline products, and $52 million or 20% of data services.

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