BBOX

Black Box Corporation (BBOX)

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Black Box Corporation (BBOX)

F2Q09 (Qtr End 9/27/08) Earnings Call

October 28, 2008 5:00 pm ET

Executives

Gary Doyle - Director of IR

Terry Blakemore - President and CEO

Mike McAndrew - Vice President and CFO

Analysts

Jeff Beach - Stifel Nicolaus

Josh Overhalt - Investment Counselors of Maryland

Presentation

Operator

Welcome to Black Box Corporation second quarter fiscal 2009 earnings call. At this time, all participants are in a listen-only mode and later we will conduct a question and answer session with instructions being given at that time. (Operator Instructions) As a reminder, today's conference is being recorded.

And I would now like to turn the conference over to your host, the Director of Investor Relations, Mr. Gary Doyle. Please go ahead, sir.

Gary Doyle

Thank you. Good evening, and welcome to Black Box Corporation’s second quarter fiscal 2009 Earnings 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 second quarter fiscal year 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 on our website at blackbox.com.

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 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 comparison. We will limit any non-GAAP financial discussions today to these specific measures. 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 schedules that accompany 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 that Terry and Mike will be presenting at the UBS Global Technology & Services conference on November 18th in New York City. 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 the results for the second quarter of fiscal 2009 demonstrate Black Box's ability to generate well diversified revenues, solid sustainable margins, and consistent positive cash flow.

Revenues for our second quarter were $254 million, a 3% decrease from last year's $261 million and a 5% increase over last quarter's $243 million. Year to date revenues were $496 million, a 3% decrease from last year's $513 million.

Our second quarter operating earnings per share were $0.94 cents, up $0.07 cents from last year's $0.87 cents and $0.20 cents from last quarter's $0.74 cents. This is a record quarterly operating earnings per share for Black Box and strong evidence of our ability to effectively manage our cost structure in a challenging economic environment. Year to date operating earnings per share were $1.67 versus $1.60 for the same period last year.

Second quarter free cash flow was $26 million compared to 8 million last year. On a sequential comparison basis, our first quarter '09 free cash flow was $12 million. Year to date free cash flow stands at $38 million versus $15 million for the same period of last year. Of our $26 million in free cash flow in second quarter of '09, $24 million was used primarily to fund acquisition activity and $1 million was used to pay dividends.

I'll turn it over to Mike now for a more detailed discussion of our financial results.

Mike McAndrew

Thanks, Terry. As Terry mentioned a moment ago, we posted quarterly revenues of $254 million versus $261 million for the same period last year. Excluding the contribution in the second quarter of '09 of $19 million related to acquisitions and a positive $2 million impact from foreign currency, same-office revenues were down 27 million, or 10% year to year.

This $27 million revenue decrease is primarily driven by the following: An $8 million decrease in revenue resulting from the loss of the Avaya distribution agreement, which we announced in August of 2007, and a $5 million decrease in revenues resulted from the expected post-transaction revenue attrition from the commercial operations of the NextiraOne acquisition. These two items make up approximately half of the total same-office revenue decrease.

In addition, at a more macro level, we believe the balance of the decrease in the same-office revenues is primarily related to the continued signs of caution from certain of our clients' capital investments. In particular, we continue to see reduced spending in the retail and banking verticals.

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