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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
[ ] 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 /
Aggregate market value of outstanding Common Stock, $.001 par value (the "Common
Stock"), held by non-affiliates of the Registrant at May 14, 2002, was
$1,057,918,812 based on the closing sale price reported on the Nasdaq National
Market for May 14, 2002. 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 May 14, 2002, was 20,257,129.
Document Incorporated by Reference
Proxy Statement for 2002 Annual Meeting of Stockholders -- Part III
PART I
ITEM 1 -- BUSINESS
OVERVIEW. Black Box Corporation ("Black Box" or "the Company") is the world's
largest technical services company dedicated to designing, building and
maintaining today's complicated network infrastructure systems. The Black Box
team of approximately 3,700 employees serves more than 150,000 clients in 132
countries throughout the world, providing technical services on the phone,
on-site, and on-line. Founded in 1976, Black Box operates subsidiaries on five
continents, and is headquartered near Pittsburgh in Lawrence, Pennsylvania.
Black Box differentiates itself from its competitors through high levels of
technical support, its capability to provide one source for network
infrastructure services to clients (especially those with multilocation needs),
and its private-labeled brand, BLACK BOX(R). Through its 2,700 on-site services
team members and 1,000 phone services team members, the Company offers technical
services on the phone free of charge, 24 hours a day, seven days a week, and
fee-based on-site technical services.
As the largest network infrastructure services company in the world, Black Box
is in a unique position to capitalize on its service advantages, leadership
position, diverse customer base and strong customer loyalty.
INDUSTRY BACKGROUND. Black Box participates in the worldwide network
infrastructure market to end users, which is estimated at $20 billion. The
structured cabling market is estimated at $8 billion and the telephony services
market is estimated at $12 billion.
Products and services are distributed to this market primarily through value
added resellers, manufacturers, direct marketers, and technical service
companies. Prior to the development of its on-site network services business,
Black Box had participated in only the direct marketing channel, which accounts
for just 7% of the total market. By integrating the Company's on-site services
capability with its traditional phone-based technical sales and service
business, Black Box is participating in a much larger portion of the market.
BUSINESS STRATEGY. Black Box's business strategy is to provide its clients with
one source for products and services to meet all of their networking
infrastructure needs - whether at a single location or multiple locations
worldwide. The Company believes that its combination of on-site technical
services - integrated with its telephonic technical support, high quality
products and a worldwide presence - provides it with a unique advantage against
its competitors in the network infrastructure market. The Company believes its
record of consistent operating profitability and its high rate of repeat clients
is evidence of the strength of its strategy. Keys to the Company's success
include the following:
On-the-Phone Technical Services. Black Box provides its clients with
around-the-clock, seven days per week technical support at no charge through a
hotline telephone consulting service, available to clients in 132 countries
worldwide. In Fiscal 2002, the Company's on-the-phone technical experts
responded to approximately two million client calls, and 99.6% of them were
answered in less than 20 seconds, nearly 30 times faster than the industry
average.
Each Black Box phone technician receives training that enables the technician to
provide clients with reliable and cost-effective solutions to conversion,
connectivity, communications and
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networking challenges and to guide the client from system design and product
selection through installation, post-installation and maintenance.
On-Site Technical Services. Black Box Corporation provides complete structured
cabling and telephony solutions - including design, installation and maintenance
- - with consistent quality and uniformity from site to site. The Company
maintains what it believes is the industry's largest staff of Registered
Communication Distribution Designers (RCDDs) who assure that all designs meet or
exceed ANSI, TIA/EIA, and National Electric Code(R) (NEC(R)) standards. On-site
technical services are provided in most major domestic markets and in selected
markets outside of the United States. The Company intends to continue its
geographic expansion of on-site capabilities throughout the world.
Quality Networking Solutions. Through the BLACK BOX(R) Catalog and BLACK BOX(R)
On-Line, the Company markets more than 90,000 infrastructure and networking
products in categories including PC communication products and accessories,
cables and connectors, cabinets and racks, testers and tools, power and surge
protection, video and mass storage, switches, ServSwitch(TM) products, printer
devices, converters, line drivers, modems and multiplexors, and local area
networking equipment. The Company modifies and updates its product offerings
based on technical advancements and market demand.
In Fiscal 1998, Black Box became the first in the industry to introduce a
product warranty program offering full protection regardless of cause of
failure, including accidental, surge or water damage. In Fiscal 2000, the
Company introduced Certification Plus, the industry's first comprehensive
guaranteed-for-life structured cabling system. In Fiscal 2002, Extended
Certification Plus was introduced, enabling clients' existing cabling systems to
be guaranteed for life after inspection and certification by a Black Box
designer.
Brand Name. BLACK BOX(R) is a widely recognized brand name associated with high
quality products and 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 ISO9001 certification in the U.S., becoming the
first U.S. technical direct marketer to be so certified. The Company's
subsidiaries in Australia, Brazil, France, Japan, Mexico and the United Kingdom
have also received the ISO certification. Rigorous quality control processes
must be documented and practiced to earn and maintain ISO9001 certification.
Proprietary Customer List. For more than 25 years, the Company has built a
proprietary mailing list of approximately 1.5 million names representing nearly
1 million clients. This database includes information on the past purchases of
its clients. The Company routinely analyzes this data in an effort to enhance
client purchasing and ensure that targeted mailings reach specific audiences.
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.
In-Stock Availability and Rapid Order Fulfillment. The Company has developed
efficient inventory management and order fulfillment systems that allow more
than 95% of orders for standard product received before midnight eastern time to
be shipped that same day.
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GROWTH STRATEGY. The principal components of Black Box's growth strategy include
(i) continued marketing of its one source provider capabilities and advantages
and (ii) continued geographic expansion of on-site technical services worldwide.
Marketing of One Source Provider Capabilities and Advantages. With on-site
operations firmly established in 40 states and 12 other countries as well as
phone services available in 132 countries, the Company is well positioned to
offer infrastructure services and products with single-company coordination from
coast to coast and continent to continent. The Company believes it is uniquely
positioned to succeed with multinational clients because of this advantage. At
the close of Fiscal 2002, the Company's multilocation clients were some of the
largest domestic retailers, including The Home Depot and Target.
Continued Geographic Expansion of On-Site Technical Services. In Fiscal 1998,
Black Box expanded its technical services to include on-site design,
installation and maintenance for infrastructure products. The Company believes
there is a large, growing and lucrative market for these services worldwide and
it expects the expansion to enable it to increase its addressable share of the
worldwide network infrastructure market significantly.
Through a series of mergers, Black Box has established on-site presence in most
major domestic markets and in selected markets outside of the United States.
Revenues from on-site services were $434 million for Fiscal 2002 and represented
58% of the worldwide business. The Company expects to continue expanding its
on-site capabilities in Fiscal 2003.
CLIENTS. Black Box clients range from small organizations to many of the world's
largest corporations covering a diversity of industries, from manufacturing,
retail and financial to educational and government. While the Company's clients
include most of the Fortune 1000 companies, Black Box estimates that 60% of its
revenues were from non-Fortune 1000 clients.
MARKETING. Black Box services and products are primarily marketed through the
direct marketing materials, its offices throughout the world, and online through
the Company's website. 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 targets its catalogs and
marketing materials directly to its clients who make systems design and
purchasing decisions. Black Box marketing materials 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.
TECHNICAL SERVICES. Black Box believes that its technical services are the
foundation of its success enabling the Company to provide services ranging from
phone consultation to site surveys, design and engineering, installation,
certification and maintenance.
CUSTOMER SERVICE. Black Box strives to make purchasing its products as
convenient as possible. The Company enters and fulfills orders at all of its
worldwide locations. Black Box's client service group is available 24 hours per
day from Monday through Saturday. Off-hours ordering requirements are handled by
technical services personnel. Using proprietary applications, service
representatives have immediate access to client information and real-time
inventory levels to assist clients. Client information is updated at the time of
the call and cross selling and up selling occurs.
Black Box employs an outbound sales and service force to increase the frequency
and order size of
4
client orders. This group is utilized to obtain specifications for potential
orders and to follow up on quotes. Black Box provides key account pricing to
large corporate buyers and provides an assigned telesales representative who
works with corporate buyers to ensure that their requirements are satisfied.
WORLDWIDE OPERATIONS. The Company's headquarters and domestic operating
facilities are located in Lawrence, Pennsylvania (a suburb of Pittsburgh). This
352,000 square foot facility is on a 22-acre site that houses administrative,
sales and marketing, manufacturing and service operations.
PRODUCTS. Black Box believes that its ability to offer a broad, innovative
product line, supported by readily available technical services, has been an
important factor in its consistent high gross margins. Black Box currently
offers more than 90,000 products through its catalogs and website and introduces
new products regularly. The majority of the Company's product revenues are from
products marketed under the BLACK BOX(R) brand name.
MANUFACTURERS AND SUPPLIERS. Black Box utilizes a network of 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 services 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 not
economical or when 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.
INFORMATION SYSTEMS. The Company has committed significant resources to the
development of sophisticated information systems that 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. In addition, the Company's exclusive project tracking
system, e-Status, enables clients to review up to date information on their
projects across the country or around the world.
The Company's changing product mix, multiple language requirements and design
enhancements require efficient modification of product presentations for its
various catalogs. Black Box's publishing system provides the flexibility and
speed for both text and graphic layout and enables the timely and efficient
creation of marketing materials.
BACKLOG. Due to rapid order fulfillment, Black Box's backlog of orders is not
significant to its phone services operation. At March 31, 2002, the worldwide
backlog of unfilled orders believed to be firm for phone services was
approximately $4.3 million. The worldwide backlog of unfilled orders believed to
be firm for on-site services was approximately $45 million.
5
EMPLOYEES. As of March 31, 2002, the Company had approximately 3,700 employees
worldwide of which approximately 700 are subject to collective bargaining
agreements. The Company believes that its relationship with its employees is
good.
FINANCIAL INFORMATION. Financial information regarding the Company, including
segment data, is set forth in Item 8 of this Form 10-K and is incorporated
herein by reference.
COMPETITION. The Company competes with other technical service companies and
believes the principal competitive factors in its markets are its full suite of
high quality technical services, product quality and selection, a broad client
base and superior customer service. The Company believes it competes favorably
with respect to these factors and believes there are no dominant competitors in
the industry.
6
ITEM 2 -- PROPERTIES
The Company's headquarters and domestic operating facilities are located in
Lawrence, Pennsylvania (a suburb of Pittsburgh). This 352,000 square foot
facility on a 22-acre site houses administrative, sales and marketing,
manufacturing and service operations. Black Box also owns 62 undeveloped acres
adjacent to its facilities.
The Company owns or leases approximately 123 additional offices or facilities
throughout the world, none of which are material in nature to Black Box.
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 its Lawrence, Pennsylvania distribution
center used primarily for sales and distribution, are also adequate for the
foreseeable future.
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, results of operations or cash flow of the
Company.
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.
7
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company and their respective ages and positions
are as follows:
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
Fred C. Young 46 Chairman of the Board and Chief
Executive Officer
Anna M. Baird 44 Vice President, Chief Financial
Officer, Treasurer, Secretary and
Principal Accounting Officer
Kathleen Bullions 47 Vice President of Operations
The following is a biographical summary of the experience of the executive
officers of the Company:
FRED C. YOUNG, 46, was elected Chairman of the Board and Chief Executive
Officer of the Company on June 24, 1998. He was first 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, 44, was promoted to Vice President, Chief Financial
Officer, and Treasurer on May 9, 1997 and became Secretary in May 2000.
She was Director of Finance prior to May 9, 1997.
KATHLEEN BULLIONS, 47, was promoted to Vice President of Operations on May
9, 1997. She was Director of Operations prior to May 9, 1997.
8
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 May 14, 2002, the last reported sale price of the Common Stock was
$52.61 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 indicated. Such over the counter market quotations
reflect inter-dealer prices, without retail mark-up, markdown, or commission,
and may not necessarily represent actual transactions.
High Low
---- ---
FISCAL 2000
1st Quarter 51.3125 30.8750
2nd Quarter 58.5000 44.5625
3rd Quarter 68.7500 48.4375
4th Quarter 78.6250 54.5000
FISCAL 2001
1st Quarter 91.0000 64.6250
2nd Quarter 92.2500 42.7500
3rd Quarter 67.0000 40.5000
4th Quarter 73.2500 39.3281
FISCAL 2002
1st Quarter 72.2500 40.2500
2nd Quarter 71.2344 39.8750
3rd Quarter 58.7656 39.5625
4th Quarter 55.8750 43.5469
At March 31, 2002, there were 2,356 holders of record.
No cash dividends have been paid on the Common Stock.
See "Equity Compensation Plan Information", Item 12 in Part IV, which is
incorporated by reference herein.
9
ITEM 6 -- SELECTED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
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 1998 through 2002 were derived from the Consolidated
Financial Statements of the Company.
FISCAL YEAR ENDED MARCH 31,
- ----------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
Income Statement Data:
Revenues (1) $305,549 $336,890 $508,340 $826,993 $743,681
Cost of sales 157,714 174,067 288,813 493,861 453,131
-------- -------- -------- -------- --------
Gross profit 147,835 162,823 219,527 333,132 290,550
Selling, general &
administrative expenses 88,137 95,055 129,874 203,377 181,867
Restructuring expenses -- -- -- -- 3,500
-------- -------- -------- -------- --------
Operating income before
amortization 59,698 67,768 89,653 129,755 105,183
Intangibles amortization 3,801 4,263 6,410 12,821 170
-------- -------- -------- -------- --------
Operating income 55,897 63,505 83,243 116,934 105,013
Interest expense, net 2,636 553 3,243 11,312 6,268
Net income $ 32,404 $ 38,145 $ 48,852 $ 64,190 $ 62,042
- ----------------------------------------------------------------------------------------------------------
Basic earnings per share $ 1.89 $ 2.19 $ 2.74 $ 3.40 $ 3.11
Diluted earnings per share $ 1.79 $ 2.09 $ 2.60 $ 3.22 $ 2.97
- ----------------------------------------------------------------------------------------------------------
Balance Sheet Data (at
end of period):
Working capital $ 63,345 $ 73,262 $115,981 $138,922 $143,464
Total assets 190,283 246,465 452,289 652,930 650,787
Total long-term debt 8,189 204 105,374 124,066 75,497
Stockholders' equity 130,248 192,652 258,327 388,951 490,098
- ----------------------------------------------------------------------------------------------------------
(1) Revenues are net of sales returns and allowances.
10
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS)
The table below should be read in conjunction with the following discussion.
FISCAL YEAR ENDED MARCH 31,
---------------------------
2000 2001 2002
- --------------------------------------------------------------------------------------
Total Revenues $ 508,340 $ 826,993 $ 743,681
Percentage of Total Revenues:
On-Site Services Revenues
North America 29.2% 49.6% 50.7%
International 0.7 3.3 7.6
-------------------------------------------------
Subtotal 29.9 52.9 58.3
-------------------------------------------------
Phone Services Revenues
North America 37.3 24.1 21.0
International 32.8 23.0 20.7
-------------------------------------------------
Subtotal 70.1 47.1 41.7
-------------------------------------------------
Total Revenues 100.0% 100.0% 100.0%
- --------------------------------------------------------------------------------------
FISCAL 2002 COMPARED TO FISCAL 2001:
TOTAL REVENUES
Total revenues for Fiscal 2002 were $743,681, a decrease of 10% compared to
Fiscal 2001 total revenues of $826,993. If exchange rates had remained
constant from the corresponding periods in the prior year, Fiscal 2002 total
revenues would have been $8,414 higher.
ON-SITE SERVICES REVENUES
Revenues from on-site services were $433,937 for Fiscal 2002 compared to
$437,296 for Fiscal 2001. Overall, the on-site services revenue decline was
due to general economic conditions that affected customer demand, offset in
part by the Company's continued geographic expansion by merger of its on-site
technical services capabilities. Fiscal 2002 revenues resulting from
acquisitions accounted for using the purchase method were $36,280.
North America on-site services revenues were $377,240 for Fiscal 2002, a
decrease of 8% compared to $409,850 for the prior year. The decrease in North
America on-site services revenues was due to the downturn in the economy
described above.
International on-site services revenues increased 107% to $56,697 for Fiscal
2002 from $27,446 for the prior year. The growth of International on-site
services revenues was driven by the Company's continued geographic expansion
of its technical services capabilities and deeper penetration in existing
markets.
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PHONE SERVICES REVENUES
Revenues from the Company's phone services business for Fiscal 2002 were
$309,744 compared to $389,697 for the prior year. Phone services revenues
from North America decreased to $156,170 for Fiscal 2002 from $199,005 for
the prior year while International phone services revenues decreased to
$153,574 for Fiscal 2002 from $190,692 for the prior year. The decline in
North America and International phone services revenues was driven by the
general economic downturn.
REVENUES BY GEOGRAPHY
Reported revenue dollar and percentage changes by geographic region were as
follows: North America revenues decreased $75,445, or 12%; Europe revenues
increased $8,418, or 6%; Pacific Rim revenues decreased $14,453, or 30%; and
Latin American revenues decreased $1,832, or 8%. If the exchange rate
relative to the U.S. dollar had remained unchanged from Fiscal 2001, Europe
revenue growth for Fiscal 2002 would have been 8% while the Pacific Rim and
Latin America revenues would have decreased 22% and 6%, respectively.
GROSS PROFIT
Gross profit for Fiscal 2002 decreased to $290,550, or 39.1% of revenues,
from $333,132, or 40.3% of revenues for Fiscal 2001. The decrease in gross
profit dollars over prior year was due primarily to the decline in revenues
while the decrease in gross profit percentage was due primarily to the
increase in percentage of revenues from the Company's on-site services that
provide lower gross margins.
SG&A EXPENSES
Selling, general and administrative ("SG&A") expenses for Fiscal 2002 were
$181,867, or 24.5% of revenues, a decrease of $21,510 over SG&A expenses of
$203,377, or 24.6% of revenues for Fiscal 2001. The dollar decrease over the
prior year related primarily to the Company's cost reduction efforts
worldwide, offset in part by a special expense in Fiscal 2002 and additional
costs of $7,850 from newly merged operations that are included in Fiscal 2002
but not in Fiscal 2001. The special expense of $5,027 in First Quarter 2002
was primarily attributable to the Company reserving for two accounts
receivable from customers who filed for Chapter 11 bankruptcy protection
during that quarter.
RESTRUCTURING EXPENSES
In the fourth quarter of Fiscal 2002, the Company recorded a restructuring
charge of $3,500 primarily related to adjusting staffing levels in its
European and Latin American operations and facility closures in the U.S. Of
this charge, $1,830 related to severance for 60 individuals in Europe, $230
related to severance for 19 individuals in Latin America, $108 related to
severance for 26 individuals in the U.S., and $1,332 related to lease costs
and other charges to consolidate two U.S. offices. The components of the
charge and the restructuring accrual at March 31, 2002 are as follows:
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ACCRUED TOTAL CASH ACCRUED
MARCH 31, 2001 CHARGE EXPENDITURES MARCH 31, 2002
- --------------------------------------------------------------------------------------------
Employee Severance $ -- $2,168 $ 725 $1,443
Facility Closures 705 1,332 598 1,439
- --------------------------------------------------------------------------------------------
Total $705 $3,500 $1,323 $2,882
============================================================================================
Of the $3,500 charge, $2,540 related to on-site services and $960 related to
phone services. The restructuring accrual at March 31, 2001 relates to
continuing costs of a previously closed facility done at the time of merger.
OPERATING TO NET INCOME
Operating income for Fiscal 2002 was $105,013, or 14.1% of revenues, compared
to $116,934, or 14.1% of revenues in Fiscal 2001.
Operating income before amortization for Fiscal 2002 was $105,183, or 14.1%
of revenues, compared to $129,755, or 15.7% of revenues in Fiscal 2001. If
the Company had not incurred the special expense or restructuring charge
described above, operating income before amortization for Fiscal 2002 would
have been $113,710, or 15.3% of revenues. The decline in operating income
percentage was due primarily to the increase in percentage of revenues from
the Company's on-site services that operate at slightly lower margins.
Intangibles amortization for the year was $170 compared to the prior year of
$12,821. The decrease in amortization is due to the Company's adoption of
SFAS No. 142 "Goodwill and Other Intangible Assets" in Fiscal 2002 where
goodwill and other intangible assets with indefinite lives are no longer
amortized. See Note 3 to the Consolidated Financial Statements.
Net interest expense for Fiscal 2002 decreased to $6,268 from $11,312 for
Fiscal 2001 due to reductions in both interest rates and the outstanding
debt.
The tax provision for Fiscal 2002 was $36,428, an effective tax rate of
37.0%, compared to Fiscal 2001 of $41,040, an effective tax rate of 39.0%.
The decrease in the effective tax rate for Fiscal 2002 is due to the
Company's adoption of SFAS No. 142 described above as the rate for Fiscal
2001 reflected the unfavorable impact of nondeductible intangibles
amortization expense. The annual effective tax rates for Fiscal 2002 and
Fiscal 2001 were higher than the U.S. statutory rate of 35.0% primarily due
to state income taxes, offset by foreign income tax credits.
Net income for Fiscal 2002 was $62,042 compared to $64,190 for Fiscal 2001, a
decrease of 3%. This percentage decrease was less than the revenue percentage
decrease primarily due to the Company's cost reduction efforts and the
adoption of SFAS No. 142. These benefits were offset in part by the special
expense of $5,027 and the restructuring charge of $3,500 in Fiscal 2002.
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FISCAL 2001 COMPARED TO FISCAL 2000:
TOTAL REVENUES
Total revenues for Fiscal 2001 were $826,993, an increase of 63% compared to
Fiscal 2000 total revenues of $508,340. If exchange rates had remained
constant from the corresponding periods in the prior year, Fiscal 2001 total
revenues would have been $17,125 higher.
ON-SITE SERVICES REVENUES
Revenues from on-site services increased to $437,296 for Fiscal 2001 from
$152,167, or 187% over the prior year. Overall, on-site services revenue
growth was due to the Company's continued geographic expansion by merger of
its on-site technical services capabilities as well as strong demand for
on-site services from existing clients. Total Fiscal 2001 revenues resulting
from acquisitions accounted for using the purchase method were $140,339.
North America on-site services revenues increased 176% to $409,850 for Fiscal
2001 from $148,490 for the prior year. International on-site services
revenues for Fiscal 2001 increased 646% to $27,446 from $3,677 for the prior
year. The growth of North America and International on-site services revenues
were both driven by the Company's continued geographic expansion of its
technical services capabilities, deeper penetration in existing markets, and
strong demand for on-site services from existing clients.
PHONE SERVICES REVENUES
Revenues from the Company's phone services business for Fiscal 2001 increased
9% to $389,697 from $356,173 for the prior year. If exchange rates had
remained constant from the corresponding periods in the prior year, phone
services revenues for Fiscal 2001 would have increased 13%. Overall, phone
services revenue growth was driven by strong sales in all geographic regions.
Phone services revenues from North America increased 5% to $199,005 for
Fiscal 2001 from $189,609. The growth of North America phone services
revenues is driven primarily by continued strong demand for infrastructure
products and ServSwitch(TM) products from clients of all sizes.
International phone services revenues increased 14% to $190,692 for Fiscal
2001 from $166,564 for the prior year. If exchange rates had remained
constant from the prior year, International phone services revenues would
have increased 23% from Fiscal 2000. International phone services revenue
growth was driven by strong demand for infrastructure products,
ServSwitch(TM) and printer devices, success in attaining new clients, and
deeper penetration of existing clients.
REVENUES BY GEOGRAPHY
Reported revenue dollar and percentage changes by geographic region were as
follows: North America revenues increased $270,756 or 80%; Europe revenues
increased $40,267, or 38%; Pacific Rim revenues increased $4,342, or 10%; and
Latin American revenues increased $3,288, or 17%. If the exchange rate
relative to the U.S. dollar had remained unchanged from Fiscal
14
2000, revenue growth for Fiscal 2001 in Europe, Pacific Rim and Latin America
would have been 52%, 12% and 18%, respectively.
GROSS PROFIT
Gross profit for Fiscal 2001 increased to $333,132, or 40.3% of revenues,
from $219,527, or 43.2% of revenues for Fiscal 2000. The decrease in gross
profit percentage was due primarily to the increase in percentage of revenues
from the Company's on-site services that provide lower gross margins.
SG&A EXPENSES
Selling, general and administrative ("SG&A") expenses for Fiscal 2001 were
$203,377, or 24.6% of revenues, an increase of $73,503 over SG&A expenses of
$129,874, or 25.5% of revenues for Fiscal 2000. The dollar increase over the
prior year related primarily to additional marketing and personnel costs
worldwide and additional costs from newly-merged operations that are included
in Fiscal 2001 but not in Fiscal 2000. SG&A expense as a percentage of
revenues decreased from the prior year primarily due to the increase in the
percentage of revenue from the Company's on-site services that incur lower
operating expenses relative to revenues.
OPERATING TO NET INCOME
Operating income for Fiscal 2001 was $116,934, or 14.1% of revenues, compared
to $83,243, or 16.4% of revenues in Fiscal 2000.
Operating income before amortization for Fiscal 2001 was $129,755, or 15.7%
of revenues, compared to $89,653, or 17.6% of revenues for Fiscal 2000. The
decline in operating income percentage was due primarily to the increase in
percentage of revenues from the Company's on-site services that operate at
slightly lower margins. Intangibles amortization for the year was $12,821
compared to the prior year of $6,410. The increase in amortization is due to
additional goodwill related to the Company's continued expansion by merger of
its technical services.
Net interest expense for Fiscal 2001 increased to $11,312 from $3,243 for
Fiscal 2000 due to an increase in interest rates and an increase in
borrowings for the repurchase of the Company's common stock and the continued
expansion by merger of its technical services.
The tax provision for Fiscal 2001 was $41,040, an effective tax rate of
39.0%, compared to Fiscal 2000 of $31,225, an effective tax rate of 39.0%.
The annual effective tax rate of 39.0% was higher than the U.S. statutory
rate of 35.0% primarily due to state income taxes and the unfavorable impact
of nondeductible intangibles amortization, offset by foreign income tax
credits.
Net income for Fiscal 2001 was $64,190 compared to $48,852 for Fiscal 2000,
an increase of 31%. This growth was primarily due to strong revenue growth
and the successful expansion of the Company's on-site services by merger.
15
LIQUIDITY AND CAPITAL RESOURCES:
During Fiscal 2002, free cash flow (cash flow from operating activities less
capital expenditures and foreign currency translation adjustments, plus
proceeds from stock option exercises) was $77,756 compared to $62,073 for
Fiscal 2001 and $38,183 for Fiscal 2000. Cash flow from operating activities
for Fiscal 2002, 2001 and 2000 was $67,898, $65,872 and $39,147,
respectively. Reflected as a source of cash flow from operating activities in
Fiscal 2002 are decreases in accounts receivable, inventories and other
current assets, offset in part by decreases in various liabilities, all
generally related to the decline in revenues. In Fiscal 2001 and 2000,
increases in accounts receivables, inventories and other assets were a use of
cash flow from operating activities, while increases in various liabilities
were a source of cash flow.
The Company's debt decreased by $50,751 during Fiscal 2002 as a result of
current year free cash flow being used to pay down debt. As of March 31,
2002, the Company had cash and cash equivalents of $13,423, working capital
of $143,464 and long-term debt of $75,497.
On April 4, 2000, Black Box Corporation of PA, a domestic subsidiary of the
Company, 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 Long Term Revolver was scheduled to expire on April 4, 2003 and
the Short Term Revolver was scheduled to expire on April 3, 2002. In April
2002, the Long Term Revolver was extended until April 4, 2005 and the Short
Term Revolver was extended until April 2, 2003.
The Company's total debt at March 31, 2002 of $78,686 was comprised of
$75,000 under the Long Term Revolver and $3,686 of various other loans. The
weighted average interest rate on all indebtedness of the Company for the
Fiscal 2002 and 2001 was approximately 4.4% and 6.8%, respectively. The
weighted average interest rate on all indebtedness of the Company as of March
31, 2002 was 2.9%. In addition, at March 31, 2002 the Company had $2,530 of
letters of credit outstanding and $102,470 available under the Syndicated
Debt.
Interest on the Syndicated Debt is variable based on the Company's option of
selecting the bank's Euro-dollar rate plus an applicable margin or the prime
rate plus an applicable margin. The majority of the Company's borrowings are
under the Euro-rate option. The applicable margin is adjusted each quarter
based on the consolidated leverage ratio as defined in the agreement. The
applicable margin varies from 0.75% to 1.75% (1.0% at March 31, 2002,
reducing to 0.75% during the first quarter of Fiscal 2003) on the Euro-dollar
rate option and from zero to 0.75% (zero at March 31, 2002) on the prime rate
option. The Syndicated Debt provides for the payment of quarterly commitment
fees on unborrowed funds, also based on the consolidated leverage ratio. The
commitment fee percentage ranges from 0.20% to 0.375% (0.25% as of March 31,
2002). The Syndicated Debt is unsecured; however, the Company, as the
ultimate parent, guarantees all borrowings and the debt contains various
restrictive covenants.
The net cash impact of mergers transactions during Fiscal 2002 was $19,372
while capital expenditures, net of disposals, were $992. Capital expenditures
for Fiscal 2003 are projected to be approximately $5,000 and will be focused
primarily on information systems and facility improvements.
16
The Company previously announced its intention to repurchase up to 2.5
million shares of its Common Stock from April 1, 1999 through March 31, 2002.
As of March 31, 2002, the Company had repurchased 2.1 million shares at
prevailing market prices for an aggregate purchase price of $100,355. The
Company's most recent announcement was on July 21, 2000 to repurchase an
additional 500 thousand shares of its Common Stock, of which 105 thousand
were repurchased during Fiscal 2001, and are included in the totals above.
There were no stock repurchases during Fiscal 2002. Funding for these stock
repurchases came from existing cash flow and borrowings under credit
facilities.
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,
Denmark, Mexico, Norway and Sweden 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 accumulated other
comprehensive income.
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 fair market value, and the
resulting gains and losses are recorded in accumulated other comprehensive
income. These gains and losses offset the revaluation of the related foreign
currency denominated receivables, which are also included in accumulated
other comprehensive income. At March 31, 2002, the open foreign exchange
contracts related to intercompany transactions were in Euro, Canadian
dollars, Swiss francs and Australian dollars. These open contracts are valued
at approximately $5,097 and will expire in April 2002. The open contracts
have contract rates of 1.15 Euro, 1.595 Canadian dollars, 1.677 Swiss francs
and 1.9 Australian dollars, all per U.S. dollar.
The Company believes that its cash flow from operations and its existing
credit facilities will be sufficient to satisfy its liquidity needs for the
foreseeable future.
As of March 31, 2002, the Company had contractual obligations as follows:
OBLIGATIONS DUE BY PERIOD
WITHIN 1 2-3 4-5 AFTER 5
TOTAL YEAR YEARS YEARS YEARS
--------------------------------------------------------------------
Short-term debt $ 3,189 $ 3,189 $ -- $ -- $ --
Long-term debt 75,497 -- 442 75,055 --
Operating leases 34,421 7,307 10,591 5,999 10,524
Letters of credit 2,530 2,530 -- -- --
--------------------------------------------------------------------
Total $115,637 $13,026 $11,033 $81,054 $10,524
====================================================================
17
CRITICAL ACCOUNTING POLICIES:
In preparing the Company's financial statements in conformity with accounting
principles generally accepted in the United States, judgments and estimates
are made about the amounts reflected in the financial statements. As part of
the financial reporting process, the Company's management collaborates to
determine the necessary information on which to base judgments and develop
estimates used to prepare the financial statements. Historical experience and
available information is used to make these judgments and estimates. However,
different amounts could be reported using different assumptions and in light
of different facts and circumstances. Therefore, actual amounts could differ
from the estimates reflected in the financial statements.
In addition to the significant accounting policies described in Note 1 of the
Consolidated Financial Statements, the Company believes that the following
discussion addresses its critical accounting policies.
REVENUE RECOGNITION
The Company recognizes revenue for phone services operations when title
transfers at the time of shipment and the price for the product has been
determined.
For its on-site services, the Company recognizes revenues on short-term
projects (generally projects with a duration of less than one month) as the
projects are completed and invoiced to the client. Revenues from long-term
projects are recognized according to the percentage of completion method.
Under the percentage of completion method, income is recognized based on a
ratio of estimated costs incurred to total estimated contract costs. Losses,
if any, on such contracts are provided in full when they become known.
Billing in excess of costs and estimated earnings on uncompleted contracts
are classified as current liabilities and any costs and estimated earnings in
excess of billings are classified as current assets.
ACCOUNTING FOR JUDGMENT AND ESTIMATES
The Company establishes reserves when it is probable that a liability or loss
has been incurred and the amount can be reasonably estimated. Reserves by
their nature relate to uncertainties that require exercise of judgment both
in accessing whether or not a liability or loss has been incurred and
estimating any amount of potential loss. The most important areas of judgment
and estimates affecting the Company's financial statements include accounts
receivable collectibility, inventory valuation, pending litigation and the
realization of deferred tax assets.
LONG-LIVED ASSETS
The Company evaluates the recoverability of property, plant and equipment and
intangible assets other than goodwill whenever events or changes in
circumstances indicate the carrying amount of any such assets may not be
fully recoverable. Changes in circumstances include technological advances,
changes in the Company's business model, capital strategy, economic
conditions or operating performance. The Company's evaluation is based upon,
among other things, assumptions about the estimated future undiscounted cash
flows these assets are expected to generate. When the sum of the undiscounted
cash flows is less than the carrying
18
value, the Company would recognize an impairment loss. The Company
continually applies its best judgment when performing these evaluations to
determine the timing of the testing, the undiscounted cash flows used to
assess recoverability and the fair value of the asset.
The Company evaluates the recoverability of the goodwill attributable to each
of its reporting units as required under SFAS No. 142, "Goodwill and Other
Intangible Assets," by comparing the fair value of each reporting unit with
its carrying value. The Company continually applies its best judgment when
performing these evaluations to determine the financial projections used to
assess the fair value of each reporting unit.
RESTRUCTURING
The Company accrues the cost of restructuring activities in accordance with
the appropriate accounting guidance depending upon the facts and
circumstances surrounding the situation. The Company exercises its judgment
in estimating the total costs of each of these activities. As these
activities are implemented, the actual costs may differ from the estimated
costs due to changes in the facts and circumstances that were not foreseen at
the time of the initial cost accrual.
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 was between January 1,
1999 and June 30, 2002. The Company has converted to the Euro, as required,
and believes the conversion did not materially impact its operations or
financial results.
NEW ACCOUNTING PRONOUNCEMENTS:
In August 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets".
SFAS No. 144 addresses financial accounting and reporting for the impairment
of long-lived assets and for long-lived assets to be disposed of and
supersedes FASB Statement No. 121. This statement retains the fundamental
provisions of SFAS No. 121 for recognition and measurement of the impairment
of long-lived assets to be held and used and measurement of long-lived assets
to be disposed of by sale. The provisions of this standard must be applied
for fiscal years beginning after December 15, 2001. The Company is currently
evaluating the effects of SFAS No. 144 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 2003.
In April 2002, SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and
64, Amendment of FASB Statement No. 13, and Technical Corrections", was
issued. The Statement updates, clarifies and simplifies existing accounting
pronouncements. While the technical corrections to existing pronouncements
are not substantive in nature, in some instances, they may change accounting
practice. The provisions of this standard related to SFAS No. 13 are
effective for transactions occurring after May 15, 2002. All other provisions
of this standard must be applied for financial statements issued on or after
May 15, 2002, with early application encouraged. The Company is currently
evaluating the effects of SFAS No. 145.
19
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 adjustments 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, the ability of the Company to identify, acquire and operate
additional on-site technical service companies, 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.
20
ITEM 7A - 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. A discussion of accounting policies for financial derivatives is
included in Note 1 to the Consolidated Financial Statements. At March 31,
2002, the Company had total open contracts valued at approximately $9,955
with a fair value of approximately $9,706.
In the ordinary course of business, the Company is also exposed to risks that
interest rate increases may adversely affect funding costs associated with
the $75,000 of variable rate debt. At March 31, 2002, an instantaneous 100
basis point increase in the interest rate would reduce the Company's future
earnings by $473, assuming the Company employed no intervention strategies.
21
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
22
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, 2002 and 2001, 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, 2002. 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 auditing standards generally
accepted in the United States. 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, 2002 and 2001, and the results
of their operations and their cash flows for each of the three years in the
period ended March 31, 2002, in conformity with accounting principles
generally accepted in the United States.
As explained in Note 3 to the consolidated financial statements, effective
April 1, 2001, the Company changed its method of accounting for goodwill and
other intangible assets.
/s/ ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
April 26, 2002
23
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED MARCH 31,
-------------------------------------------
2000 2001 2002
- ------------------------------------------------------------------------------------
Revenues $ 508,340 $826,993 $743,681
Cost of sales 288,813 493,861 453,131
- ------------------------------------------------------------------------------------
Gross profit 219,527 333,132 290,550
SG&A expense 129,874 203,377 181,867
Restructuring expense -- -- 3,500
Intangibles amortization 6,410 12,821 170
- ------------------------------------------------------------------------------------
Operating income 83,243 116,934 105,013
Interest expense, net 3,243 11,312 6,268
Other (income) expense, net (77) 392 275
- ------------------------------------------------------------------------------------
Income before income taxes 80,077 105,230 98,470
Provision for income taxes 31,225 41,040 36,428
- ------------------------------------------------------------------------------------
Net income $ 48,852 $ 64,190 $ 62,042
=====================================================================================
Basic earnings per common share $ 2.74 $ 3.40 $ 3.11
Diluted earnings per common share $ 2.60 $ 3.22 $ 2.97
- ------------------------------------------------------------------------------------
Weighted average common shares 17,835 18,904 19,936
Weighted average common and common
equivalent shares 18,785 19,929 20,860
=====================================================================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
24
BLACK BOX CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
MARCH 31,
---------------------------
2001 2002
- ---------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 6,209 $ 13,423
Accounts receivable, net of allowance for doubtful
accounts of $7,777 and $8,207, respectively 160,917 115,969
Inventories, net 51,086 46,081
Costs and estimated earnings in excess of
billings on uncompleted contracts 30,067 24,015
Other current assets 19,069 19,959
- ---------------------------------------------------------------------------------------------
Total current assets 267,348 219,447
Property, plant and equipment, net 44,661 41,063
Intangibles, net 337,180 387,286
Other assets 3,741 2,991
- ---------------------------------------------------------------------------------------------
Total assets $ 652,930 $ 650,787
=============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current debt $ 5,371 $ 3,189
Accounts payable 70,255 34,279
Accrued compensation and benefits 9,047 8,336
Billings in excess of costs and estimated
earnings on uncompleted contracts 6,013 4,235
Other accrued expenses 24,090 22,789
Accrued income taxes 13,650 3,155
- ---------------------------------------------------------------------------------------------
Total current liabilities 128,426 75,983
Long-term debt 124,066 75,497
Deferred taxes 11,105 7,383
Other liabilities 382 1,826
Stockholders' equity:
Preferred stock authorized 5,000,000; par value
$1.00; none issued and outstanding -- --
Common stock authorized 100,000,000; par value
$.001; issued 21,406,367 and 22,351,049, respectively 21 22
Additional paid-in capital 248,053 287,714
Retained earnings 250,246 312,288
Treasury stock, at cost, 2,105,000 shares (100,355) (100,355)
Accumulated other comprehensive loss (9,014) (9,571)
- ---------------------------------------------------------------------------------------------
Total stockholders' equity 388,951 490,098
- ---------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 652,930 $ 650,787
=============================================================================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
25
BLACK BOX CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
CUMULATIVE
COMMON STOCK ADDITIONAL FOREIGN
------------------- TREASURY PAID-IN RETAINED CURRENCY
SHARES AMOUNT STOCK CAPITAL EARNINGS TRANSLATION TOTAL
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1999 18,147,358 $18 $ -- $ 59,272 $137,204 $(3,842) $192,652
Comprehensive income
Net income 48,852 48,852
Foreign currency translation
adjustment (1,482) (1,482)
-------
Comprehensive income 47,370
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
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2000 19,940,217 20 (67,253) 144,828 186,056 (5,324) 258,327
Comprehensive income
Net income 64,190 64,190
Foreign currency translation
adjustment (3,690) (3,690)
-------
Comprehensive income 60,500
Purchase of treasury stock (33,102) (33,102)
Issuance of common stock 1,290,455 1 95,598 95,599
Exercise of options 175,695 4,916 4,916
Tax benefit from exercised
options 2,711 2,711
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2001 21,406,367 21 (100,355) 248,053 250,246 (9,014) 388,951
Comprehensive income
Net income 62,042 62,042
Foreign currency translation
adjustment (389) (389)
Unrealized losses on derivatives
designated and qualified as
cash flow hedges (323) (323)
Reclassification of unrealized
gains or losses on expired
derivatives 155 155
---
Comprehensive income 61,485
Issuance of common stock 654,562 1 28,070 28,071
Exercise of options 290,120 8,954 8,954
Tax benefit from exercised
options 2,637 2,637
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2002 22,351,049 $22 $(100,355) $287,714 $312,288 $(9,571) $490,098
=================================================================================================================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
26
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED MARCH 31,
---------------------------------------
2000 2001 2002
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 48,852 $ 64,190 $ 62,042
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 11,381 20,906 8,293
Other (24) -- --
Changes in working capital items:
Accounts receivable, net (22,504) (18,608) 51,864
Inventories, net (6,350) (3,151) 5,805
Other assets (3,008) (17,361) 5,867
Accounts payable 2,964 18,831 (40,827)
Accrued compensation and benefits (588) (868) (8,083)
Accrued expenses 7,707 179 (5,469)
Accrued income taxes 717 1,754 (11,594)
--------- --------- ---------
Cash provided by operating activities 39,147 65,872 67,898
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, net (12,566) (6,911) (992)
Mergers, net of $5,287, $4,432 and $8,460 cash
acquired, respectively (62,123) (53,435) (19,372)
--------- --------- ---------
Cash used in investing activities (74,689) (60,346) (20,364)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings (17,340) (230,150) (190,670)
Proceeds from borrowings 111,230 252,180 139,500
Proceeds from the exercise of options 12,988 7,627 11,591
Purchase of treasury stock (67,253) (33,102) --
--------- --------- ---------
Cash provided by/(used in) financing activities 39,625 (3,445) (39,579)
--------- --------- ---------
Foreign currency exchange impact on cash (1,386) (4,515) (741)
--------- --------- ---------
Increase/(decrease) in cash and cash equivalents 2,697 (2,434) 7,214
Cash and cash equivalents at beginning of year 5,946 8,643 6,209
--------- --------- ---------
Cash and cash equivalents at end of year $ 8,643 $ 6,209 $ 13,423
========= ========= =========
Cash paid for interest $ 3,171 $ 10,785 $ 7,174
========= ========= =========
Cash paid for income taxes $ 21,005 $ 39,286 $ 47,603
========= ========= =========
YEAR ENDED MARCH 31,
---------------------------------------
2000 2001 2002
--------- --------- ---------
MERGERS
Fair Value of:
Assets acquired $ 110,181 $ 86,648 $ 39,878
Liabilities assumed (42,771) (28,781) (12,046)
--------- --------- ---------
Cash paid 67,410 57,867 27,832
Less cash acquired (5,287) (4,432) (8,460)
--------- --------- ---------
Net cash paid for mergers $ 62,123 $ 53,435 $ 19,372
========= ========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
27
BLACK BOX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS: Black Box Corporation is the world's largest technical
services company dedicated to designing, building and maintaining today's
complicated network infrastructure systems, servicing clients in 132 countries
throughout the world.
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements
include the accounts of Black Box Corporation and its wholly owned subsidiaries.
All intercompany accounts and transactions have been eliminated in
consolidation.
REVENUE RECOGNITION: The Company recognizes revenues for phone services
operations when title transfers at the time of shipment and the price for the
product has been determined.
For its on-site services, the Company recognizes revenues on short-term projects
(generally projects with a duration of less than one month) as the projects are
completed and invoiced to the client. Revenues from long-term projects are
recognized according to the percentage of completion method. Under the
percentage of completion method, income is recognized based on a ratio of
estimated costs incurred to total estimated contract costs. Losses, if any, on
such contracts are provided in full when they become known. Billing in excess of
costs and estimated earnings on uncompleted contracts are classified as current
liabilities and any costs and estimated earnings in excess of billings are
classified as current assets.
SHIPPING AND HANDLING FEES AND COSTS: All fees billed to clients for shipping
and handling are classified as a component of net revenues. All costs associated
with shipping and handling are classified as a component of cost of sales.
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:
2001 2002
-------- --------
Raw materials $ 2,476 $ 2,417
Work-in-process 11 5
Finished goods 51,863 47,017
Inventory reserve (3,264) (3,358)
-------- --------
Inventory, net $ 51,086 $ 46,081
======== ========
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 five years. Maintenance and
minor repair costs are charged to expense as incurred. Major
28
replacements or betterments 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:
2001 2002
-------- --------
Land $ 2,405 $ 2,405
Building and improvements 25,595 26,169
Machinery 49,453 51,124
-------- --------
77,453 79,698
Accumulated depreciation (32,792) (38,635)
-------- --------
Property, plant and equipment, net $ 44,661 $ 41,063
======== ========
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 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.
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 subsidiaries are generally denominated in the
subsidiaries' local currency, although intercompany sales to the Company's
subsidiaries in Brazil, Chile, Denmark, Mexico, Norway and Sweden are
denominated in U.S. dollars.
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. The Company has adopted SFAS No.
133, and as amended by SFAS No. 138, "Accounting for Derivative Instruments and
Hedging Activities" effective April 1, 2001, resulting in current liabilities of
$323 and a decrease in other comprehensive loss of $323 being recorded. These
contracts, designated as cash flow hedges, hedge anticipated cash flows from
cross-border intercompany sales of product and services. On a monthly basis, the
open contracts are revalued to fair market value, and the resulting gains and
losses are recorded in accumulated other comprehensive income. These gains and
losses offset the revaluation of the related foreign currency denominated
receivables, which are also included in accumulated other comprehensive income.
Gains and losses realized on contracts at maturity and any gain or loss on the
satisfaction
29
of intercompany amounts are recorded as a component of operating income. The
Company recognized approximately $155 of income in Fiscal 2002 related to hedge
ineffectiveness.
At March 31, 2002, the open foreign exchange contracts were in the Euro,
Canadian dollars, Pounds Sterling, Swiss francs and Australian dollars. The
total open contracts, valued at approximately $9,955, have a fair value of
$9,706 and will expire in April 2002. The open contracts have contract rates of
1.15 Euro, 1.595 Canadian dollars, 0.7014 Pounds Sterling, 1.677 Swiss francs
and 1.9 Australian dollars, all per U.S. dollar.
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.
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.
NEW ACCOUNTING PRONOUNCEMENTS: In August 2001, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS No. 144 addresses financial accounting and
reporting for the impairment of long-lived assets and for long-lived assets to
be disposed of and supersedes FASB Statement No. 121. This statement retains the
fundamental provisions of SFAS No. 121 for recognition and measurement of the
impairment of long-lived assets to be held and used and measurement of
long-lived assets to be disposed of by sale. The provisions of this standard
must be applied for fiscal years beginning after December 15, 2001. The Company
is currently evaluating the effects of SFAS No. 144 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 2003.
In April 2002, SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections", was issued. The
Statement updates, clarifies and simplifies existing accounting pronouncements.
While the technical corrections to existing pronouncements are not substantive
in nature, in some instances, they may change accounting practice. The
provisions of this standard related to SFAS No. 13 are effective for
transactions occurring after May 15, 2002. All other provisions of this standard
must be applied for financial statements issued on or after May 15, 2002, with
early application encouraged. The Company is currently evaluating the effects of
SFAS No. 145.
RECLASSIFICATIONS: Certain prior year amounts have been reclassified to conform
to the current year financial statement presentation.
30
NOTE 2: CHANGES IN BUSINESS
During Fiscal 2002, the Company successfully completed 18 business combinations
that have been accounted for using the purchase method of accounting: April 2001
- - Haddad Electronic Supply, Inc., FBS Communications, L.P. and Integrated
Cabling Systems, Inc.; May 2001 - Computer Cables and Accessories Ltd; June 2001
- - Vivid Communications, Inc. and DESIGNet, Inc; July 2001 - J.C. Informatica
Integral S.A. de C.V., Consultoria en Redes S.A. de C.V. and SIC Comunicaciones
S.A. de C.V. (together "Grupo Gresco"); August 2001 - LJL Telephone and
Communication, Inc., AB Lofamatic and Optech Fibres Ltd.; September 2001 - GCS
Network Services Ltd. and Di.el. Distribuzioni Elettroniche S.r.l.; October 2001
- - Lanetwork Sales Ltd; January 2002 - Trend Communications, TW Netzwerkservice
GmbH, TeleFuture Communications Ltd., and Netzwerke Kabelsystem GmbH; and March
2002 - TeleAce Communication PTE Ltd. In connection with the above 18 business
combinations, the Company issued an aggregate of 510 thousand shares of its
common stock and used approximately $21,000 in cash to acquire all of the
outstanding shares of the above 18 companies.
The aggregate purchase price of the above 18 companies including deal costs was
approximately $50,500 and resulted in goodwill of $43,900 and other intangibles
of approximately $2,100 in accordance with SFAS No. 141, "Business
Combinations," which the Company adopted during the second quarter of Fiscal
2002. The other intangibles balance consisted of non-compete agreements and
backlog. As of March 31, 2002, the non-compete agreements had an estimated gross
value of $1,900 and accumulated amortization of $92. As of March 31, 2002, the
backlog intangibles had a gross value of $203 and accumulated amortization of
$78. See Note 3, "Intangible Assets".
During Fiscal 2001, the Company successfully completed 28 business combinations
that 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; July 2000 - Ascor bvba,
Carey Systems Company, Datel Communications, Inc., Data Specialties Europe Ltd.
and Midwest Electronics and Communications, Inc.; August 2000 - Duracom, Inc.
and Sterling Technology Systems, Inc.; September 2000 - Da/Com Limited; October
2000 - Clear Communications, Inc., Person-To-Person Communications, Inc. and
Smiles Communication Systems, Inc.; November 2000 - IntEC Electric Systems
Corporation, Orchard Network Solutions Ltd. and Societe Industrielle de
Telephonie, Alarme et Video; December 2000 - LANmark Communications, Inc. and
G&T Audio, Inc.; January 2001 - Bergman & Beving Electronics AS/Heathcomm,
NetCabling B.V., and Bernhard Merz AG; February 2001 - Universal Connections,
Incorporated; and March 2001 - Michael Electric, Inc. In connection with the
above 28 business combinations, the Company issued an aggregate of 1.269 million
shares of its common stock and used approximately $56,400 in cash to acquire all
of the outstanding shares of the above 28 companies.
The aggregate purchase price of the above 28 companies was approximately
$151,000 and resulted in goodwill of approximately $133,200 after the allocation
of purchase price to assets acquired and liabilities assumed.
During Fiscal 2000, the Company successfully completed 24 business combinations
that have been accounted for using the purchase method of accounting: May 1999 -
C-Tel Corporation; July 1999
31
- - American Cabling & Equipment Services, Inc. and Comm Line Inc.; September 1999
- - Florida Intranet Group, Inc., Business Communication Concepts, Inc. and
Comunicaciones SA Spain; October 1999 - Koncepts Communications of L.I., Corp.
and Communication Contractors, Inc.; November 1999 - DataCom-Link, Inc./T&U
Electric Service, Inc., American Communications Network Corporation and Datech
Holdings, Limited; December 1999 - U.S. Premise Networking Services, Inc. and
TennMark Telecommunications, Inc.; January 2000 - Parrish Communication Cabling,
Inc., Structured Network Solutions, Inc., R&D Services, Inc. and The Delaney
Companies; February 2000 - K&A Communications, Inc. and Jet Line Communications,
Inc.; and March 2000 - American Telephone Service, Inc., HL Service, Indacom
N.V./Blue Box B.V., Advanced Network Technologies, Inc. and Coast to Coast
Communications, Inc. In connection with the above 24 business combinations, the
Company issued an aggregate of 1.144 million shares of its common stock and used
approximately $66,400 in cash to acquire all of the outstanding shares of the
above 24 companies.
The aggregate purchase price of the above 24 companies was approximately
$133,300 and resulted in goodwill of approximately $117,400 after the allocation
of purchase price to assets acquired and liabilities assumed.
As of March 31, 2002, certain merger agreements provide for contingent payments
of up to $13,674. Upon meeting future operating performance goals, goodwill will
be adjusted for the amount of the contingent payments.
As of March 31, 2002, certain merger agreements for which amounts are included
in the previous paragraph provide a total of 11 thousand contingently issuable
shares of common stock. Issuance of these shares is contingent on the market
price of the Company's common stock over time. There will be no change in the
dollar amount of stockholders' equity if such shares are issued. These shares
are included as common equivalent shares when calculating diluted earnings per
common share.
For the year ended March 31, 2002, approximately $4,300 of the Company's
operating performance-based obligations were earned and paid.
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:
YEAR ENDED MARCH 31,
-----------------------------------
2001 2002
(UNAUDITED) (UNAUDITED)
------------ -----------
Revenue As reported $ 826,993 $ 743,681
Pro forma 987,000 765,098
------------ -----------
Net income As reported $ 64,190 $ 62,042
Pro forma 86,137 65,802
------------ -----------
Diluted earnings per share As reported $ 3.22 $ 2.97
Pro forma 4.30 3.13
------------ -----------
NOTE 3: INTANGIBLE ASSETS
On April 1, 2001, the Company adopted SFAS No. 142, "Goodwill and Other
Intangible Assets,"
32
under which goodwill and other intangible assets with indefinite lives are not
amortized. Such intangibles were evaluated for impairment as of April 1, 2001 by
comparing the fair value of each reporting unit to its carrying value, and no
impairment existed. In addition, during the third quarter, the Company evaluated
its intangibles for impairment and none existed. During the third quarter of
each future fiscal year, the Company will evaluate the intangible assets for
impairment with any resulting impairment reflected as an operating expense. The
Company's only intangibles as identified in SFAS No. 141 other than goodwill,
are its trademarks, non-compete agreements and acquired backlog.
As of March 31, 2002 and 2001, the Company's trademarks had a gross carrying
amount of $35,992 and accumulated amortization of $8,253 and the Company
believes this intangible has an indefinite life.
The Company had the following other intangibles as of March 31, 2002:
GROSS CARRYING ACCUMULATED
AMOUNT AMORTIZATION
------ ------------
Non-Compete Agreements $1,884 $ 92
Acquired Backlog 203 78
------ ------
Total $2,087 $ 170
====== ======
No amounts were assigned to non-compete agreements or acquired backlog as of
March 31, 2001. The non-compete agreements and acquired backlog are amortized
over their estimated useful lives of approximately 10 years and 1 year,
respectively. Amortization expense for the non-compete agreements and acquired
backlog intangibles during the year ended March 31, 2002 was $92 and $78,
respectively. The estimated amortization expense for each of the five fiscal
years subsequent to March 31, 2002 for the non-compete agreements and acquired
backlog intangibles is as follows: 2003 - $312; 2004 - $189; 2005 - $189; 2006 -
$189; and 2007 - $189.
The changes in the carrying amount of goodwill, by reporting segment, for the
year ended March 31, 2002, are as follows:
PHONE ON-SITE TOTAL
-------- -------- --------
Balance as of March 31, 2001 $ 58,474 $251,017 $309,491
Goodwill related to acquisitions and
earnout payments during the current
fiscal year 2,066 46,073 48,139
-------- -------- --------
Balance as of March 31, 2002 $ 60,540 $297,090 $357,630
======== ======== ========
The following table reports pro forma information as if SFAS No. 142 had been
adopted in all periods presented:
33
YEAR ENDED MARCH 31,
----------------------------------------
2000 2001 2002
---------- ---------- ----------
Reported net income $ 48,852 $ 64,190 $ 62,042
Goodwill amortization 4,722 9,466 --
Trademark amortization 716 716 --
---------- ---------- ----------
Adjusted net income $ 54,290 $ 74,372 $ 62,042
========== ========== ==========
Basic earnings per share $ 2.74 $ 3.40 $ 3.11
Goodwill amortization .24 .50 --
Trademark amortization .04 .04 --
---------- ---------- ----------
Adjusted basic earnings per share $ 3.02 $ 3.94 $ 3.11
========== ========== ==========
Diluted earnings per share $ 2.60 $ 3.22 $ 2.97
Goodwill amortization .25 .47 --
Trademark amortization .04 .04 --
---------- ---------- ----------
Adjusted diluted earnings per share $ 2.89 $ 3.73 $ 2.97
========== ========== ==========
NOTE 4: INDEBTEDNESS
Long-term debt at March 31 is as follows:
2001 2002
--------- ---------
Revolving credit agreement $ 121,200 $ 75,000
Other debt 8,237 3,686
--------- ---------
Total debt 129,437 78,686
Less: current portion (5,371) (3,189)
--------- ---------
Long-term debt $ 124,066 $ 75,497
========= =========
On April 4, 2000, Black Box Corporation of PA, a domestic subsidiary of the
Company, 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 Long Term Revolver was scheduled to expire on April 4, 2003 and the Short
Term Revolver was scheduled to expire on April 4, 2002. In April 2002, the Long
Term Revolver was extended to April 4, 2005 and the Short Term Revolver was
extended to April 2, 2003. During Fiscal 2002, the maximum amount and average
balance outstanding under the Syndicated Debt was $144,400 and $120,950,
respectively.
Interest on the Syndicated Debt is variable based on the Company's option of
selecting the bank's Euro-dollar rate plus an applicable margin or the prime
rate plus an applicable margin. The applicable margin is adjusted each quarter
based on the Company's consolidated leverage ratio as defined in the agreement.
The applicable margin varies from 0.75% to 1.75% on the Euro-dollar rate option
and from zero to 0.75% on the prime rate option. As of March 31, 2002, the
margin was 1.0% on the Euro-dollar rate option and zero on the prime rate
option. Due to the Company's reduction of its consolidated leverage ratio in
March 2002, the interest margin on the Euro-dollar rate option will be reduced
to 0.75% in the first quarter of Fiscal 2003. The Syndicated Debt provides for
the payment of quarterly commitment fees on unborrowed funds, also based on the
consolidated leverage ratio. The commitment fee percentage ranges from 0.20% to
0.375%. As of March 31, 2002, the commitment fee percentage was 0.25% on the
Long Term Revolver and
34
0.20% on the Short Term Revolver. The Syndicated Debt is unsecured; however, the
Company, as the ultimate parent, guarantees all borrowings and the debt contains
various restrictive covenants including without limitation requirements for
minimum net worth, fixed charge coverage, interest coverage and consolidated
leverage ratio. The weighted average interest rate on all indebtedness of the
Company for Fiscal 2002 and 2001 was approximately 4.4% and 6.8%, respectively.
The weighted average interest rate on all indebtedness of the Company as of
March 31, 2002 was 2.9%.
Other debt is composed of various bank and third party loans secured by specific
pieces of equipment and real property. Interest on these loans are fixed and
range from 1% to 5%.
At March 31, 2002, the Company had $2,530 of letters of credit outstanding.
The aggregate amount of the minimum principal payments for each of the five
fiscal years subsequent to March 31, 2002 for all long-term indebtedness
outstanding at the end of Fiscal 2002 is as follows: 2003 - $3,189; 2004 - $315;
2005 - $127; 2006 - $75,010 and 2007 - $45.
The fair value of the Company's debt at March 31, 2002 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 5: INCOME TAXES
The domestic and foreign components of pretax income from continuing operations
for the years ended March 31 are as follows:
2000 2001 2002
-------- -------- --------
Domestic $ 56,304 $ 80,863 $ 77,874
Foreign 23,773 24,367 20,596
-------- -------- --------
Consolidated $ 80,077 $105,230 $ 98,470
======== ======== ========
The provision for income tax charged to continuing operations for the years
ended March 31 consists of the following:
2000 2001 2002
------- ------- -------
Current:
Federal $11,474 $25,085 $21,796
State 1,020 3,836 2,669
Foreign 9,254 8,739 6,536
------- ------- -------
Total current 21,748 37,660 31,001
Deferred 9,477 3,380 5,427
------- ------- -------
Total provision for income taxes $31,225 $41,040 $36,428
======= ======= =======
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:
35
2000 2001 2002
---- ---- ----
Federal statutory tax rate 35.0% 35.0% 35.0%
Foreign taxes, net of foreign tax credits (0.4) (1.4) (0.9)
Amortization of nondeductible intangibles 2.2 3.1 --
State income taxes, net of federal benefit 1.7 2.6 2.1
Other, net 0.5 (0.3) 0.8
---- ---- ----
Effective tax rate 39.0% 39.0% 37.0%
==== ==== ====
The components of deferred tax (liabilities)/assets at March 31 are as follows:
2001 2002
-------- --------
DEFERRED TAX LIABILITIES:
Tradename and trademarks $(10,006) $(10,390)
State taxes (1,720) (2,577)
Unremitted earnings of Japanese subsidiary (3,294) (2,264)
Basis of fixed assets (771) (1,043)
-------- --------
Gross deferred tax liabilities (15,791) (16,274)
======== ========
DEFERRED TAX ASSETS:
Net operating losses 1,225 1,065
Foreign tax credit carryforwards 4,389 2,823
Allowance for doubtful accounts 1,485 1,613
Basis of finished goods inventory 920 691
Other 627 1,598
-------- --------
Gross deferred tax assets 8,646 7,790
-------- --------
Net deferred tax liabilities $ (7,145) $ (8,484)
======== ========
At March 31, 2002, the Company had $42,757 of net operating loss carryforwards
and $37,659 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 portion of the operating loss carryforwards
not limited by Section 382 of the Code, 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 $20,596 based on exchange rates at March 31, 2002. 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 loaned 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 6: COMMITMENTS AND CONTINGENCIES
The Company leases certain equipment and facilities 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, 2000, 2001 and 2002 was $4,831, $8,608 and
$10,085 respectively. At March 31, 2002, the minimum lease commitments
36
under all noncancelable operating leases for the next five years are as follows:
2003 - $7,307; 2004 - $6,011; 2005 - $4,580; 2006 - $3,243; 2007 - $2,756 and
thereafter - $10,524.
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 amounts which upon resolution will not have a material adverse effect on
the consolidated financial position, the results of operations or cash flows of
the Company.
NOTE 7: INCENTIVE COMPENSATION PLANS
PERFORMANCE BONUS: The Company has a variable compensation plan covering
substantially all phone services employees. This plan provides for the payment
of a bonus based on the attainment of certain annual performance targets. The
amount expensed under this variable compensation plan for the years ended March
31, 2000, 2001 and 2002 was $3,366, $2,844 and $2,000, respectively. The Company
also has variable compensation plans covering key on-site services employees.
These plans also provide for the payment of bonuses based on attainment of
annual performance targets. All payments are subject to approval by the Board of
Directors upon the completion of the annual audit.
PROFIT SHARING AND SAVINGS PLAN: The Company has various Profit Sharing and
Savings Plans ("Plans") which qualify as deferred salary arrangements under
Section 401(k) of the Internal Revenue Code. Under the Plans, participants are
permitted to contribute various percentages of their compensation, as defined,
and the Company matches a percentage of the participant's contributions. The
total Company contribution for the years ended March 31, 2000, 2001 and 2002 was
$1,025, $3,841 and $3,185, 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") for up to 6.25
million shares of common stock. Options are issued by the Board of Directors or
a Board committee to key employees of the Company and generally 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. No SARs have
been issued.
The Directors Plan authorizes the issuance of options and SARs for up to 170
thousand shares of common stock. Options are issued by the Board of Directors or
a Board committee and generally 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. No SARs have been issued.
The following is a summary of the Company's stock option plans for the years
ended March 31:
37
2000 2001 2002
- -------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
(Shares in thousands) SHARES PRICE SHARES PRICE SHARES PRICE
- -------------------------------------------------------------------------------------------------------------------------------
Outstanding at beginning
of the year 2,802 $21.52 2,971 $28.54 3,678 $31.95
Granted 837 45.61 918 42.47 833 41.51
Exercised (644) 20.15 (175) 28.04 (290) 30.86
Forfeited (24) 27.22 (36) 37.98 (132) 41.35
- -------------------------------------------------------------------------------------------------------------------------------
Outstanding at end of
the year 2,971 $28.54 3,678 $31.95 4,089 $33.69
Exercisable at end of year 1,420 $20.64 1,995 $24.62 2,519 $28.24
Weighted average fair
value of options
granted during the year $19.33 $27.18 $29.07
===============================================================================================================================
The following table summarizes information about the stock options outstanding
at March 31, 2002:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------- ----------------------------
(Options in thousands) WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ------------------------------------------------------------------------------------------------------------------------------
$ 7.77 - $13.30 310 2.1 years $ 9.88 310 $ 9.88
$13.301 - $19.95 239 3.2 years 14.93 239 14.93
$19.951 - $26.60 694 6.0 years 22.22 694 22.22
$26.601 - $33.25 557 5.9 years 30.37 544 30.32
$33.251 - $39.90 16 5.4 years 35.19 16 35.19
$39.901 - $46.55 2,088 8.6 years 42.60 596 43.70
$46.551 - $53.20 175 7.6 years 49.43 115 49.42
$53.201 - $59.85 3 7.8 years 55.87 2 55.88
$59.851 - $66.55 7 7.9 years 65.51 3 64.89
- ------------------------------------------------------------------------------------------------------------------------------
$ 7.77 - $66.55 4,089 6.9 years $ 33.69 2,519 $ 28.24
==============================================================================================================================
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:
2000 2001 2002
- ---------------------------------------------------------------------------------------------------------------
Net income As reported $48,852 $64,190 $62,042
Pro forma 45,075 57,688 55,521
- ---------------------------------------------------------------------------------------------------------------
Diluted earnings per share As reported $ 2.60 $ 3.22 $ 2.97
Pro forma 2.40 2.89 2.66
===============================================================================================================
38
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
ended March 31:
2000 2001 2002
- --------------------------------------------------------------------------------
Expected life (in years) 4.0 4.4 4.4
Risk free interest rate 6.0% 4.9% 4.0%
Volatility 45% 62% 48%
Dividend yield -- -- --
================================================================================
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.
The following table details this calculation for the years ended March 31:
(Shares in thousands) 2000 2001 2002
- ----------------------------------------------------------------------------------------------------------
Net income for earnings per share computation $48,852 $64,190 $62,042
Basic earnings per common share:
Weighted average common shares 17,835 18,904 19,936
Basic earnings per common share $ 2.74 $ 3.40 $ 3.11
- ----------------------------------------------------------------------------------------------------------
Diluted earnings per common share:
Weighted average common shares 17,835 18,904 19,936
Shares issuable from assumed conversion of
stock options and contingently issuable shares
from acquisitions (net of tax savings) 950 1,025 924
- ----------------------------------------------------------------------------------------------------------
Weighted average common and common
equivalent shares 18,785 19,929 20,860
Diluted earnings per common share $ 2.60 $ 3.22 $ 2.97
==========================================================================================================
Options to purchase approximately 10 thousand and 13 thousand shares of Common
Stock were outstanding in Fiscal 2002 and 2001 but were not included in the
computation of diluted earnings per share because the exercise price exceeded
the average market price of the shares.
NOTE 9: TREASURY STOCK
The Company previously announced its intention to repurchase up to 2.5 million
shares of its Common Stock from April 1, 1999 through March 31, 2002. As of
March 31, 2002 the Company had repurchased 2.1 million shares at prevailing
market prices for an aggregate purchase price of $100,355. The Company's most
recent announcement was on July 21, 2000 to repurchase an additional 500
thousand shares of its Common Stock, of which 105 thousand were repurchased
during Fiscal 2001, and are included in the totals above. There were no stock
repurchases during Fiscal 2002. Funding for these stock repurchases came from
existing cash flow and borrowings under credit facilities.
39
NOTE 10: ACCUMULATED OTHER COMPREHENSIVE LOSS
The components of accumulated other comprehensive loss consisted of the
following as of March 31:
2001 2002
- -----------------------------------------------------------------------------------------------
Foreign currency translation adjustment $(9,014) $(9,403)
Unrealized losses on derivatives designated and qualified
as cash flow hedges -- (168)
- -----------------------------------------------------------------------------------------------
Total accumulated other comprehensive loss $(9,014) $(9,571)
===============================================================================================
NOTE 11: RESTRUCTURING
In the fourth quarter of Fiscal 2002, the Company recorded a restructuring
charge of approximately $3,500 primarily related to adjusting staffing levels in
its European and Latin American Operations and facility closures in the U.S. Of
this charge, $1,830 related to severance for 60 individuals in Europe, $230
related to severance for 19 individuals in Latin America, $108 related to
severance for 26 individuals in the U.S., and $1,332 related to lease costs and
other costs to consolidate two U.S. offices. The components of the charge and
the restructuring accrual at March 31, 2002 are as follows:
ACCRUED TOTAL CASH ACCRUED
MARCH 31, 2001 CHARGE EXPENDITURES MARCH 31, 2002
- ----------------------------------------------------------------------------------------------------------------------
Employee Severance $ -- $ 2,168 $ 725 $ 1,443
Facility Closures 705 1,332 598 1,439
- ----------------------------------------------------------------------------------------------------------------------
Total $ 705 $ 3,500 $ 1,323 $ 2,882
======================================================================================================================
The restructuring accrual at March 31, 2001 relates to continuing costs of a
previously closed facility done at the time of merger.
NOTE 12: SEGMENT REPORTING
The Company manages the business primarily on a product and service line basis.
Its two primary reportable segments are comprised of On-Site Services and Phone
Services. The "Other" information presented herein includes expenses directly
related to the Company's ongoing mergers and acquisitions program. The Company
reports its two segments separately because of differences in the ways the
product and service lines are operated. Consistent with SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," the
Company aggregates similar operating units into reportable segments.
The accounting policies of the various segments are the same as those described
in "Summary of Significant Accounting Principles" in Note 1. The Company
evaluates the performance of each segment based on "Worldwide Operating Income."
A segment's worldwide operating income is its operating income before
amortization. Revenues and the related profits on intercompany transactions are
reported by the segment providing the third-party revenues. Intersegment sales
and
40
segment interest income or expense and expenditures for segment assets are not
presented to or reviewed by management, and therefore are not presented below.
Summary information by reportable segment is as follows for the years ended
March 31:
On-Site Services 2000 2001 2002
- ---------------------------------------------------------------------------------------
Revenues $ 152,167 $ 437,296 $ 433,937
Worldwide operating income 20,975 57,038 46,639
Depreciation 1,461 7,790 4,025
Amortization 1,895 8,024 165
Segment assets 221,377 430,721 530,705
- ---------------------------------------------------------------------------------------
Phone Services 2000 2001 2002
- ---------------------------------------------------------------------------------------
Revenues $ 356,173 $ 389,697 $ 309,744
Worldwide operating income 70,970 75,045 60,602
Depreciation 3,512 4,228 4,330
Amortization 3,557 3,845 5
Segment assets 312,496 502,582 485,368
- ---------------------------------------------------------------------------------------
Other 2000 2001 2002
- ---------------------------------------------------------------------------------------
Revenues $ -- $ -- $ --
Worldwide operating income (2,292) (2,328) (2,058)
Depreciation (234) (233) (232)
Amortization 958 952 --
Segment assets 29,335 28,575 28,874
- ---------------------------------------------------------------------------------------
The following are reconciliations as required between certain reportable segment
data and the corresponding consolidated amounts for the years ended March 31:
REVENUES 2000 2001 2002
- ----------------------------------------------------------------------------------------------------------
Total revenues for phone and on-site segments $ 508,340 $ 826,993 $ 743,681
Other revenues -- -- --
- ----------------------------------------------------------------------------------------------------------
Total consolidated revenues $ 508,340 $ 826,993 $ 743,681
==========================================================================================================
WORLDWIDE OPERATING INCOME/OPERATING INCOME
2000 2001 2002
- -----------------------------------------------------------------------------------------------------------
Total worldwide operating income for phone
and on-site segments $ 91,945 $ 132,083 $ 107,241
Other worldwide operating income (2,292) (2,328) (2,058)
- -----------------------------------------------------------------------------------------------------------
Total consolidated worldwide operating income 89,653 129,755 105,183
Amortization expense 6,410 12,821 170
- -----------------------------------------------------------------------------------------------------------
Total operating income $ 83,243 $ 116,934 $ 105,013
===========================================================================================================
Fiscal 2002 On-Site Services worldwide operating income was reduced by a special
operating expense of approximately $5,000 incurred in the First Quarter of
Fiscal Year 2002 related primarily to two receivables from customers who filed
for bankruptcy protection in the quarter and
41
was also reduced by approximately $2,500 related to restructuring expenses.
Fiscal 2002 Phone Services worldwide operating income was reduced by
approximately $1,000 related to restructuring expenses.
ASSETS 2000 2001 2002
- ----------------------------------------------------------------------------------------------------------
Total assets for phone and on-site segments $ 533,873 $ 933,303 $ 1,016,073
Other assets 29,335 28,575 28,874
Corporate eliminations (110,919) (308,948) (394,160)
- ----------------------------------------------------------------------------------------------------------
Total consolidated assets $ 452,289 $ 652,930 $ 650,787
==========================================================================================================
Management is also presented with and reviews information about its geographic
areas. The following is presented for the years ended March 31:
REVENUES 2000 2001 2002
- ----------------------------------------------------------------------
North America $338,099 $608,855 $533,410
Europe 107,030 147,297 155,715
Pacific Rim 44,292 48,634 34,181
Latin America 18,919 22,207 20,375
- ----------------------------------------------------------------------
Total revenues $508,340 $826,993 $743,681
======================================================================
ASSETS 2000 2001 2002
- ----------------------------------------------------------------------
North America $364,303 $524,349 $513,008
Europe 60,311 98,860 111,584
Pacific Rim 16,200 17,579 11,653
Latin America 11,475 12,142 14,542
- ----------------------------------------------------------------------
Total assets $452,289 $652,930 $650,787
======================================================================
NOTE 13: QUARTERLY DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
- ----------------------------------------------------------------------------------------------------------------------------
FISCAL 2001
Revenues $171,133 $210,169 $220,534 $225,157 $826,993
Gross profit 70,525 84,280 88,685 89,642 333,132
Net income 14,128 16,182 16,774 17,106 64,190
Basic earnings per
common share 0.76 0.86 0.88 0.89 3.40(1)
Diluted earnings per
common share 0.72 0.82 0.84 0.85 3.22(1)
- ----------------------------------------------------------------------------------------------------------------------------
FISCAL 2002
Revenues $207,116 $197,072 $179,241 $160,252 $743,681
Gross profit 78,944 75,031 70,844 65,731 290,550
Net income 15,083 17,142 16,869 12,948 62,042
Basic earnings per
common share 0.77 0.86 0.84 0.64 3.11
Diluted earnings per
common share 0.73 0.83 0.81 0.62 2.97(1)
============================================================================================================================
(1) Earnings per share for the year is different than the sum of the quarterly
earnings per share due to rounding and average share prices.
42
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AUDITING AND FINANCIAL
DISCLOSURE
Not applicable.
43
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 2002 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, the report of the
audit committee of the board of directors, 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", "Security Ownership of Management", and "Equity Compensation
Plan Information" 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.
44
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 (3)
3(ii) Restated Bylaws, as amended (2)
10.1 1992 Stock Option Plan, as amended (4)
10.2 1992 Director Stock Option Plan, as amended (4)
10.4 Revolving Credit Agreement, dated as of
April 4, 2000, among Black Box Corporation of
Pennsylvania, Black Box Corporation, the Guarantors,
the Lenders and Mellon Bank, N.A. (5)
10.5 Short Term Credit Agreement, dated as of
April 4, 2000, among Black Box Corporation of
Pennsylvania, Black Box Corporation, the
Guarantors, the Lenders and Mellon Bank, N.A. (5)
10.6 Credit Agreement, dated as of August 27, 1999,
among Black Box Corporation of Pennsylvania,
Black Box Corporation and Mellon Bank, N.A. (5)
45
10.7 Credit Agreement, dated as of January 4, 2000,
among Black Box Corporation of Pennsylvania, Black
Box Corporation and Mellon Bank, N.A. (5)
10.8 First Amendment to Credit Agreements, dated March
30, 2001, among Black Box Corporation of
Pennsylvania, Black Box Corporation, the Guarantor,
the Lenders and Mellon Bank, N.A. (7)
10.9 Second Amendment to Credit Agreements, dated April
3, 2002, among Black Box Corporation of
Pennsylvania, Black Box Corporation, the Guarantor,
the Lenders and Mellon Bank, N.A. (1)
21.1 Subsidiaries of the Company (1)
23.1 Consent and Report of Arthur Andersen LLP,
independent public accountants (1)
99.1 Letter regarding Arthur Andersen Quality Control
Representation (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 Quarterly Report on Form 10-Q
of the Company, file number 0-18706, filed with the
Commission on November 14, 2000, and incorporated herein
by reference.
(4) 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 14, 2001.
(5) Filed as an exhibit to the Annual Report on Form 10-K of
the Company, file number 0-18706, filed with the
Commission on June 29, 2000.
(6) Filed as an exhibit to the Annual Report on Form 10-K of
the Company, file number 0-18706, filed with the
Commission on June 29, 1998.
(7) Filed as an exhibit to the Annual Report on Form 10-K of
the Company, file number 0-18706, filed with the
Commission on June 29, 2001.
46
(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.
47
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: May 17, 2002
/s/ Anna M. Baird
-----------------------------------
Anna M. Baird, Vice President, Chief
Financial Officer, Treasurer, Secretary,
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.
SIGNATURES CAPACITY DATE
/s/ WILLIAM F. ANDREWS Director May 17, 2002
----------------------
William F. Andrews
/s/ THOMAS G. GREIG Director May 17, 2002
-------------------
Thomas G. Greig
/s/ WILLIAM R. NEWLIN Director May 17, 2002
---------------------
William R. Newlin
/s/ BRIAN D. YOUNG Director May 17, 2002
------------------
Brian D. Young
/s/ FRED C. YOUNG Director, Chairman of May 17, 2002
----------------- the Board, Chief
Fred C. Young Executive Office
/s/ ANNA M. BAIRD Vice President, May 17, 2002
----------------- Chief Financial Officer,
Anna M. Baird Treasurer and Principal
Accounting Officer
48
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Black Box Corporation:
We have audited, in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements of Black Box Corporation
and Subsidiaries included in this Form 10-K, and have issued our report thereon
dated April 26, 2002. 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 the responsibility of the Company's management and 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
Pittsburgh, Pennsylvania
April 26, 2002
49
SCHEDULE II
BLACK BOX CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
ADDITIONS
BALANCE AT CHARGED TO ADDITIONS REDUCTIONS BALANCE
BEGINNING OF COSTS AND RESULTING FROM FROM AT END OF
DESCRIPTION PERIOD EXPENSES ACQUISITIONS RESERVES PERIOD
----------- ------ -------- ------------ -------- ------
YEAR ENDED MARCH 31, 2000
Inventory reserves $3,556 $1,319 $1,028 $2,119 $3,784
Allowance for unrealizable
accounts/sales returns 4,023 2,447 2,266 2,432 6,304
Restructuring reserve 1,298 -- -- 436 862
YEAR ENDED MARCH 31, 2001
Inventory reserves $3,784 $1,338 $ 791 $2,649 $3,264
Allowance for unrealizable
accounts/sales returns 6,304 2,302 2,683 3,512 7,777
Restructuring reserve 862 -- -- 157 705
YEAR ENDED MARCH 31, 2002
Inventory reserves $3,264 $1,078 $ 187 $1,171 $3,358
Allowance for unrealizable
accounts/sales returns 7,777 2,370 542 2,482 8,207
Restructuring reserve 705 3,500 -- 1,323 2,882
50