-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SEQosDrMhE4GZMTEggYn6fE+zTltCy1iuZy9dTbFmBx3joVTjsUCwoWGJjcKD3ml xmb4L/paXOo58DWwcyNaUA== 0000950128-98-000886.txt : 19980630 0000950128-98-000886.hdr.sgml : 19980630 ACCESSION NUMBER: 0000950128-98-000886 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980629 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLACK BOX CORP CENTRAL INDEX KEY: 0000849547 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 953086563 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-18706 FILM NUMBER: 98656623 BUSINESS ADDRESS: STREET 1: 1000 PARK DR CITY: LAWRENCE STATE: PA ZIP: 15055 BUSINESS PHONE: 4128736788 FORMER COMPANY: FORMER CONFORMED NAME: BLACK BOX INCORPORATED DATE OF NAME CHANGE: 19910825 10-K405 1 BLACK BOX CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K / / Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1998 / / Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the transition period from ________ to ________. Commission File Number: 0-18706 BLACK BOX CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 95-3086563 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1000 Park Drive Lawrence, Pennsylvania 15055 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 724-746-5500 Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.001 PAR VALUE. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __x__ No _____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / X / Indicate by check mark whether the registrant has filed all documents required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes __x__ No _____ Aggregate market value of outstanding Common Stock, $.001 par value, (the "Common Stock") held by non-affiliates of the Registrant at June 19, 1998, was $556,698,110 based on the closing sale price reported on the NASDAQ National Market for June 19, 1998. For purposes of this calculation only, directors and executive officers of the Registrant and their affiliates are deemed to be affiliates of the Registrant. Number of outstanding shares of Common Stock at June 19, 1998, was 16,774,331. Document Incorporated by Reference ---------------------------------- Proxy Statement for 1998 Annual Meeting of Stockholders -- Part III 2 PART I ITEM 1 -- BUSINESS GENERAL. Until June 3, 1994, Black Box Corporation (the "Company" or "Black Box"), operated through two independent subsidiaries, Black Box Corporation of Pennsylvania ("Black Box-PA") and MICOM Communications Corp. ("MICOM"). On July 22, 1993, the Board of Directors of the Company approved in principle a plan to distribute all of the outstanding shares of MICOM Common Stock (the "Distribution") to all holders of the Company's outstanding Common Stock (the "MICOM Spin-off"). On May 10, 1994, the Company's Board of Directors formally approved the Distribution and declared a dividend payable to each holder of record at the close of business on May 20, 1994 (the "Record Date") of two shares of MICOM Common Stock for each three shares of the Company's Common Stock held by such holder on the Record Date. On June 3, 1994, the Distribution was effected. Accordingly the operating results of MICOM have been classified as discontinued operations for all periods presented. The Company was incorporated in Delaware in 1987. OVERVIEW. Black Box is a leading worldwide direct marketer and technical service provider of computer communications and networking equipment and services. In Fiscal 1998, the Company mailed 10.5 million catalogs and direct marketing pieces in 11 languages to targeted customers including MIS and business professionals, purchasing agents and resellers. Black Box catalogs offer businesses in 77 countries access to more than 7,000 computer communications and networking products, the majority of which carry the BLACK BOX(R) private label. The Company sells to businesses of all sizes around the world, including a majority of the Fortune 1000 companies in the U.S. Black Box differentiates itself from other direct marketers and distributors through its private label brand, BLACK BOX(R), and through unparalleled levels of technical support. The Black Box brand has earned a reputation for high quality and reliability since the Company was founded in 1976. Black Box complements its catalog mailings with over 130 technical support professionals, available seven days per week, 24 hours per day by phone, who are trained to understand complex computer communications problems and to recommend products which best meet customers' needs. Black Box's MIS and inventory management systems enable it to ship 95% of orders for stock products on the day the orders are received. The successful combination of cost-effective direct marketing and high value technical support has resulted in the Company's consistent growth in revenues and operating income and its high level of customer satisfaction. 2 3 To take advantage of the increased utilization of computer systems and networks around the world, Black Box has consistently expanded its international presence every year. In Fiscal 1998, 48% of total revenues were generated outside of the U.S. and Canada. The Company operates subsidiaries in 14 countries including the United Kingdom, France, Japan and Brazil. In addition, the Company has distributor arrangements in 63 other countries. The Company continually assesses worldwide market and business conditions for continued growth in the worldwide marketplace. Since its inception, the Company has experienced consistent growth in revenues and profitability due to continual (1) delivery of high quality technical services on demand, (ii) enhancement of its global direct marketing activities, (iii) expansion of its product offerings and (iv) expansion of its operations worldwide. INDUSTRY BACKGROUND. The rapidly growing need to interconnect new and existing computer resources over local and geographically dispersed areas continues to create an increased demand for computer communications and networking products. The continual development of new and often incompatible technologies has also made the task of creating and maintaining such systems increasingly complex. Manufacturers often do not provide sufficient technical advice or devices to connect or integrate their products with products of different manufacturers. Even sophisticated MIS staffs often require third party technical advice and a wide range of specialized computer communications and networking products to install and maintain computer systems. Black Box addresses these needs by providing its customers with a convenient and technically proficient means to purchase computer communications and networking solutions. BUSINESS STRATEGY. Black Box's business strategy is to be a "one-stop shop" for organizations with simple to complex computer communications and networking needs who benefit from high levels of technical support and customer service. The Company believes that its combination of cost-effective direct marketing, technical support and customer service is the best method to sell into its markets. The Company's 21 years of experience in the industry have enabled it to compile an extensive database of loyal active accounts and establish the BLACK BOX(R) private label brand as the premier line of computer communications and networking solutions. The success of this strategy is evidenced by the Company's record of consistent growth in revenues and operating income and its high rate of repeat customers. Keys to the Company's success include the following: Unparalleled Technical Support. Black Box believes that its ability to provide in-depth technical support and prompt and efficient customer service is critical to its success. Black Box maintains a dedicated technical support staff, located in 14 different countries, that is available seven days per week, 24 hours a day to assist customers on product selection, service requirements, technical specifications and product compatibility both before and after purchase. The Company also has a dial-up 3 4 automated fax-back service and web-based technical data for customers who need written comprehensive application and technical product details. Cost-Effective Direct Marketing. Because of the broad range of products sold, average order size of $645 in Fiscal 1998 and a geographically dispersed customer base, Black Box believes that its direct mail strategy is the most cost-effective and efficient way to sell products to both existing and prospective customers. The high quality, 700 page BLACK BOX(R) Catalog provides customers around the world access to a comprehensive range of computer communications and networking products, including complete technical specifications and recommended uses, and allows them to make technical decisions and purchases without leaving their offices. The Company believes that, in conjunction with the BLACK BOX(R) Catalog, its trained technical and customer support staffs can be a more effective sales tool than a more expensive traditional direct sales force. Proprietary Customer List. Over the past 21 years, the Company has built a proprietary mailing list containing approximately 1.7 million names representing nearly 700,000 customers. This database includes information on the past purchases of its customers. The Company routinely analyzes this data in an effort to enhance customer response and purchasing rates, increase average order size and ensure that targeted mailings reach specific customer groups. The Company believes that its proprietary list is a valuable asset that represents a significant competitive advantage and does not rent the list to other parties. Broad and Responsive Product Mix. The Black Box Catalogs offer over 7,000 products in 12 categories, the vast majority of which are BLACK BOX(R) private labeled. Black Box continuously refines its product mix based on information compiled from customers through the thousands of calls received daily to place orders, request technical assistance or develop custom products. Black Box also actively monitors communications industry technology and product developments to identify new product areas to respond to evolving customer needs. The Company also offers custom capabilities and sources products outside of its standard product set to meet a customer's exact specifications and requirements. Revenue from custom products has grown rapidly during the past several years. Quality Products and Brand Name. BLACK BOX(R) is a widely recognized brand name associated with high quality products and knowledgeable customer support services. The Company believes that the Black Box(R) tradename is important to its business. As a result, manufacturers of computer communications and networking products have sought to distribute their products under the BLACK BOX(R) private label to take advantage of this broad and cost-effective distribution channel. In 1994, Black Box received ISO9000 certification, becoming the first U.S. technical direct marketer to be so certified. In addition, the Australia, Brazil, France, Japan, Mexico and United Kingdom subsidiaries have also received the ISO certification. Rigorous quality control processes must be documented and practiced to earn and maintain 4 5 ISO9000 certification, which is increasingly required of vendors (like Black Box) by the purchasing departments of many businesses around the world. Black Box guarantees all of its products by permitting customers to return or exchange them within the first 45 days. In addition, the Company provides warranties of at least one year and lifetime warranties with many products. In Fiscal 1998, Black Box became the first in the industry to introduce a warranty program offering full protection regardless of cause of failure, including accidental, surge or water damage. In-Stock Availability and Rapid Order Fulfillment. The Company has developed an efficient inventory management and order fulfillment systems that allow more than 95% of orders for standard product received before midnight ET to be shipped that same day. GROWTH STRATEGY. The principal components of Black Box's growth strategy include (i) expanded technical support services, (ii) enhanced global direct marketing activities, (iii) expanded product offerings and (iv) continued expansion worldwide. Expanded Technical Support Services. With the merger with ATIMCO Network Services, Inc. in Fiscal 1998, Black Box expanded its technical support services to include on-site design, installation and maintenance of connectivity solutions. The Company believes there is a large growing and lucrative market for these services worldwide, and expects to be able to provide such services in other major U.S. markets in the future. On June 22, 1998, the Company acquired through merger Associated Network Solutions, Inc. ("ANSI"). ANSI is a privately-held company that provides network design and installation services, premise cabeling and related products in the geographic markets of Northern and Central Florida. Enhanced Global Direct Marketing Activities. Black Box continues to make changes in its catalog design, improving product presentations, expanding technical information, and better use of eye-catching icons. In addition to the BLACK BOX(R) catalog, the Company also mails an interim New Product Supplement and, on a monthly basis, mini-catalogs featuring "hot new products" or specific products and applications. These regular mailings enable the Company to introduce new products more quickly than its twice per year BLACK BOX(R) Catalog distributions, and serve as a more cost-effective method to prospect for new customers and maintain contact with existing customers. In addition to producing state-of-the-art color catalogs, the Company publishes a family of technical guides on topics such as local and remote communications, power and data protection, and internetworking, as well as a monthly subscription technical newsletter, Connectivity NEWS(sm) that includes technical tips and application notes and discusses technology trends. 5 6 Expanded Product Offerings. The Company serves markets which are growing rapidly and new products are continuously developed as a result of technological advances. In response to this dynamic environment, Black Box continues to broaden its existing product lines by offering line extensions and new technologies. In Fiscal 1998, the Company introduced 1,650 new products. Expansion Worldwide. In Fiscal 1998, Black Box's revenues outside the U.S. and Canada were $134.6 million, or 48% of total revenues. New technologies have typically been introduced and widely accepted in the United States before reaching many foreign countries. Consequently, Black Box believes that the international market for its products will continue to grow more rapidly than the U.S. market. Black Box currently distributes products in 77 countries through 13 subsidiaries, one joint venture and a network of third-party distributors. CUSTOMERS. Black Box customers range from small organizations to many of the world's largest corporations and include educational institutions and federal, state and local governments. While Black Box's customers include the majority of the Fortune 1,000 companies, Black Box estimates that the majority of its active customers were non-Fortune 1,000 businesses. Many small and mid-sized companies lack the in-house expertise to evaluate and maintain increasingly complex computer systems and thus rely on Black Box's technical expertise, both before and after making purchases. Larger customers find the BLACK BOX(R) Catalog to be a convenient and comprehensive source for all their computer communications and networking needs and also utilize the Company's extensive base of technical knowledge. Additionally, the Company's overall average order size has increased consistently and was $645 in Fiscal 1998 compared to $620 in the prior year. The Company believes the increased average order size reflects the ability to sell products in volume, the successful introduction of more sophisticated, higher priced products and effective cross-selling and up-selling at the time of customer order. Black Box also provides products, service and support to over 10,000 domestic resellers who integrate and sell products directly to end users. In Fiscal 1998, the reseller program accounted for 26% of the revenues in North America and 17% of total revenues. The reseller program enables resellers to provide quality Black Box products to their end user customers who prefer to be serviced in person. This program provides the reseller with access to over 7,000 products, 24-hour technical support and rapid fulfillment that would be costly to replicate, manage and implement in their own operations. The customers of this program range from large distributors to small single proprietors who offer very specialized local solutions. CATALOGS. Black Box was the first company to engage exclusively in the sale of a broad range of computer communications and networking products through direct marketing techniques. Black Box employs a distribution method based on the targeted mailing of comprehensive, fully-illustrated color catalogs and other promotional material directly to its customers who make systems design decisions. 6 7 Black Box's catalogs present a wide choice of items using a combination of product features and benefits, photographs, product descriptions, product specifications, compatibility charts, potential applications and other helpful technical information. The catalogs have a distinctive look and are recognized by Black Box's customers. TECHNICAL SUPPORT. Black Box believes that its technical support is a critical component of its success. The Company's technical support personnel typically have technical or engineering backgrounds through education or relevant work experience. Technical support is available 24 hours per day, seven days per week, in 11 languages, and the Company's staff handles over 3,800 customer calls each day worldwide. Black Box also differentiates its technical support by providing very short customer wait times. Frequent contact between the Company's technical staff and customers enables it to modify existing products and/or introduce new products to meet changing applications and to identify emerging product trends. CUSTOMER SERVICE. Black Box strives to make purchasing its products as convenient as possible. The Company's customer service group daily handles over 4,000 calls worldwide, and is available 24 hours from Monday through Friday and on Saturdays. Order entry and fulfillment occurs at the Company's Pittsburgh and subsidiary locations. Calls are received by well-trained inbound customer service representatives who utilize on-line terminals to enter customer orders into computerized order processing systems. Using proprietary applications, each member of the customer service group has immediate access to customer files, including usage and billing information and real-time inventory levels. Using this data, inbound customer service personnel are also prompted by their computer screen to cross-sell selected products and to update customer list information. The Company regularly reviews performance to monitor productivity. Black Box also employs an outbound customer sales and service force to increase the frequency and order size of customer purchases. Black Box's telesales force is focused on expanding its customer list and improving the accuracy of its customer database. In addition, telesales personnel are utilized to obtain specifications for potential orders and to follow-up on such quotes. Black Box provides major account pricing to large corporate buyers and provides an assigned telesales representative who works with the corporate buyers to ensure that their requirements are satisfied. When an order is entered into the system, a credit check is performed and, when approved, the order is transmitted to the distribution center and a packing slip is printed for order fulfillment. All packages are inspected prior to shipment to ensure the accurate fulfillment of customers' orders. Orders generally are shipped by Federal Express and United Parcel Service in the United States and by similar small package delivery services internationally. WORLDWIDE OPERATIONS. The Company's headquarters and domestic operating facilities are located in Lawrence, Pennsylvania (a suburb of Pittsburgh). This 7 8 200,000 square foot facility is on an 84 acre site that houses administrative, sales and marketing, manufacturing and service operations. In Fiscal 1998, Black Box began construction of a new 132,000 square foot distribution center expansion. The facility will assure adequate distribution capacity for the foreseeable future. PRODUCTS. Black Box believes that the ability to offer a broad, innovative product line with plenty of new products, has been an important factor in consistently maintaining high growth rates and operating margins. Black Box currently offers private label, well known branded products and custom products aggregating more than 7,000. A majority of the 7,000 products carry the BLACK BOX(R) brand name. MANUFACTURERS AND SUPPLIERS. Black Box utilizes a network of over 200 manufacturers and suppliers throughout the world. Each supplier is monitored for quality, delivery performance and cost through a well established certification program. Manufacturers of computer communications and networking products distribute their products under the BLACK BOX(R) brand name because Black Box offers qualified technical support and provides a significant channel of distribution to end users. This network has manufacturing and engineering capabilities to customize products for specialized applications. Black Box believes that the loss of any single source of supply would not adversely affect its business. Black Box also operates its own manufacturing and assembly operation at its Lawrence, Pennsylvania location which currently supplies custom cable assemblies, switches and specialized active devices. The Company has chosen to manufacture certain products in-house when third-party sourcing is uneconomical or lead times cannot be met by third-parties. Sourcing decisions of in-house versus out-of-house are based upon a balance of quality, delivery, performance and cost. In Fiscal 1998, Black Box manufactured products represented approximately 16% of total revenues. MANAGEMENT INFORMATION SYSTEMS. The Company has committed significant resources to the development of sophisticated information systems which are used to manage all aspects of its business. The Company's systems support and integrate technical support and customer service, inventory management, purchasing, distribution activities and accounting. These systems provide the Company with real time, continuously updated information which allows the Company to monitor sales trends, make informed purchasing decisions, perform statistical analyses of its customer database and provide product availability and order status information. The Company's international operations utilize a remote customer access system to communicate with Pittsburgh-based information systems to check stock availability, order status and pricing and to place orders. The Company's changing product mix, multiple language requirements and design enhancements require efficient modification of product presentations for its various catalogs. Black Box has implemented a computerized publishing system that provides flexibility and speed for both text and graphic layout. Black Box believes 8 9 that this system enables it to efficiently update product lines in subsequent catalog issues and introduce new products on a timely basis. BACKLOG. Due to rapid order fulfillment, Black Box's backlog of orders is not significant to its operations. At March 31, 1998, the worldwide backlog of unfilled orders believed to be firm for Black Box products was approximately $3.3 million. EMPLOYEES. As of March 31, 1998, the Company had approximately 892 employees worldwide. The Company's ATIMCO subsidiary holds a collective bargaining agreement with 25 employees. The agreement expires April 21, 2001. The Company believes that its relationship with its employees is good. FINANCIAL INFORMATION. Financial information regarding the Company, including geographic sales data, is set forth in Item 8 of this Form 10-K. COMPETITION. The Company competes with a variety of manufacturers, direct marketers, computer resellers and manufacturers' sales organizations. The Company also competes with the manufacturers of products that the Company sells under its private labels. The Company believes the principal competitive factors in its markets are product quality and selection, technical support, customer base and customer service. The Company believes it competes favorably with respect to these factors. The Company believes there are no dominate competitors in the industry. There are several direct marketing catalog competitors such as Micro Warehouse, Inc. CDW Computer Centers, Inc., and Viking Office Products who market like products in a similar manner. ITEM 2 -- PROPERTIES The Company's headquarters and domestic operating facilities are located in Lawrence, Pennsylvania (a suburb of Pittsburgh). This 200,000 square foot facility on a sixteen-acre site houses administrative, sales and marketing, manufacturing and service operations. In Fiscal 1998, Black Box began construction of a new 132,000 square foot addition to its product distribution center. This building will stand on 6 acres of previously undeveloped land adjacent to the existing facility. The Company expects the new facility to be operational near the end of 1998. Black Box also owns 62 undeveloped acres adjacent to such site. 9 10 The Company also owns or leases the following facilities: Location Own/Lease Square Footage -------- --------- -------------- Melbourne, Australia Lease 13,750 Zaventum, Belgium Lease 7,300 Sao Paulo, Brazil Lease 14,000 Ontario, Canada Lease 7,500 Rungis, France Lease 20,800 Hallbergmoos, Germany Lease 6,700 Vimodrone, Italy Lease 3,100 Tokyo, Japan Lease 15,100 Mexico City, Mexico Lease 6,500 Utrecht, Netherlands Lease 5,400 Altendorf, Switzerland Lease 9,800 Reading, England Own 19,400 The Company believes that its manufacturing facilities, located at its headquarters site, are adequate for its present level of production. The Company's other facilities, including the new distribution center, used primarily for sales and distribution, are also adequate given its present level of operations. ITEM 3 -- LEGAL PROCEEDINGS The Company is involved in, or has pending, various legal proceedings, claims, suits and complaints arising out of the normal course of business. Based on the facts currently available to the Company, management believes all such matters are adequately provided for, covered by insurance, without merit, or of such amounts which upon resolution will not have a material adverse effect on the consolidated financial position or the results of operations of the Company. In Fiscal 1996, the Company paid approximately $2.7 million in taxes and interest relating to California unitary tax issues arising prior to the spin-off of MICOM. The Company believes that subsequent to the date of the spin-off, June 3, 1994, the Company and MICOM are not part of a unitary group and, therefore, the Company will have no further liability for unitary taxes beyond that date. ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security-holders, through the solicitation of proxies or otherwise. 10 11 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 - ---- --- ------------------------- Frederick C. Young 42 Chairman of the Board, Chief Executive Officer, President, and Secretary Anna M. Baird 41 Vice President, Chief Financial Officer, Treasurer Kathleen Bullions 43 Vice President of Operations
- ------------ The following is a biographical summary of the experience of the executive officers of the Company: FREDERICK C. YOUNG, 42, was elected Chairman of the Board and Chief Executive Officer of the Company on June 24, 1998. He is currently President and Secretary of the Company and was elected a director of the Company on December 18, 1995. He served as Vice President and Chief Financial Officer, Treasurer and Secretary of Black Box Corporation since joining the Company in 1991 and was promoted to Senior Vice President and Chief Operating Officer in May 1996 and President in May 1997. ANNA M. BAIRD, 41, was promoted to Vice President, Chief Financial Officer, and Treasurer on May 9, 1997. She was Director of Finance since prior to March 1992. KATHLEEN BULLIONS, 43, was promoted to Vice President of Operations on May 9, 1997. She was Director of Operations since prior to March 1992. 11 12 PART II ITEM 5 -- MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Common Stock is traded on the Nasdaq National Market (trading symbol "BBOX"). On June 19, 1998, the last reported sale price of the Common Stock was $33-3/16 per share. The following table sets forth the quarterly high and low sale prices of the Common Stock as reported by the Nasdaq Stock Market during each of the Company's fiscal quarters following the MICOM spin-off on June 3, 1994. Such over the counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions. High Low ---- --- Fiscal 1996 1st Quarter 17-1/8 14-1/4 2nd Quarter 19-3/4 14-1/2 3rd Quarter 18-3/4 15-3/4 4th Quarter 18-1/2 13-1/4 Fiscal 1997 1st Quarter 24-3/4 17 2nd Quarter 33-1/2 19 3rd Quarter 41-1/2 32 4th Quarter 43-1/4 24-3/4 Fiscal 1998 1st Quarter 39-1/2 20-3/4 2nd Quarter 41-1/2 33-3/4 3rd Quarter 46 25 4th Quarter 40-1/4 29-1/2 At March 31, 1998, there were 137 holders of record. No cash dividends have been paid on the Common Stock. The Mellon Credit Agreement, dated May 6, 1994, between Black Box - PA and Mellon Bank, N.A., as amended (the "Mellon Credit Agreement"), and the associated Guarantee and Suretyship Agreement between the Company and Mellon Bank, N.A. (the "Mellon Guarantee") and the 8.81% Senior Notes and associated Guarantee Agreement limits the amount of dividends the Company can pay to its stockholders. On January 30, 1998, in connection with the acquisition of ATIMCO Network Services, Inc. ("ATIMCO"), the Company issued 68,115 shares of its Common Stock to 12 13 the two (2) previous owners of ATIMCO. As a result of the transaction, ATIMCO became a wholly-owned subsidiary of the Company. The issuance of these shares was exempt from the registration requirements of the Securities Act of 1933, as amended (the "Act"), by virtue of Section 4(2) of the Act and Regulation D promulgated thereunder. These exemptions were available because of the number and nature of the purchasers of the stock, the information provided to them, the lack of general solicitation and or advertisement in connection with the offer and sale of the stock, and the restrictions on transfer of the stock. 13 14 ITEM 6 -- SELECTED FINANCIAL DATA The following table sets forth certain selected historical consolidated financial data for the Company for the periods indicated. Information should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto included elsewhere in this report. The historical data presented below for Fiscal Years 1994 through 1998 were derived from the Consolidated Financial Statements of the Company.
Fiscal Year Ended March 31, ------------------------------------------------------------- Income Statement Data: 1994 1995 1996 1997 1998 ---- ---- ---- ---- ---- Revenues (1) $142,004 $164,766 $193,427 $232,158 $279,821 Cost of sales 65,456 73,191 87,455 108,512 138,993 ------ ------ ------ ------- ------- Gross profit 76,548 91,575 105,972 123,646 140,828 Selling, general & administrative expenses 44,830 54,564 64,267 74,094 82,678 ------ ------ ------ ------ ------ Operating income before amortization 31,718 37,011 41,705 49,552 58,150 Intangibles amortization 4,338 4,206 3,620 3,854 3,801 ----- ----- ----- ----- ----- Operating income 27,380 32,805 38,085 45,698 54,349 Interest expense, net 7,137 6,400 5,757 3,649 2,652 Income from continuing operations before extraordinary item 11,446 14,465 18,278 24,295 30,915 Income from discontinued operations 5,791 50 -- -- -- Extraordinary item (3,867)(2) -- -- -- -- ------ ------ ------ ------ ------ Net income $13,370 $14,515 $18,278 $24,295 $30,915 ======= ======= ======= ======= ======= Basic earnings per share: Income from continuing operations $0.73 $0.91 $1.13 $1.48 $1.85 before extraordinary item Income (loss) from discontinued 0.37 -- -- -- -- operations Extraordinary item (0.25) -- -- -- -- ------ ------ ------ ------ ------ Net income $0.85 $0.91 $1.13 $1.48 $1.85 ====== ====== ====== ====== ====== Diluted earnings per share: Income from continuing operations $0.71 $0.89 $1.10 $1.40 $1.75 before extraordinary item Income (loss) from discontinued 0.36 -- -- -- -- operations Extraordinary item (0.24) -- -- -- -- ------ ------ ------ ------ ------ Net income $0.83 $0.89 $1.10 $1.40 $1.75 ====== ====== ====== ====== ====== Balance Sheet Data (at end of period): Working capital $34,208 $23,093 $30,049 $38,232 $61,504 Total assets 186,261 152,132(3) 155,544 173,279 185,191 Total long-term debt 80,474 56,775 41,142 21,175 8,043 Stockholders' equity 65,347 47,115(3) 67,141 94,264 127,765
14 15 ADJUSTED BALANCE SHEET DATA:(4)
As of March 31, ------------------------------------------------------------------------ 1994 1995 1996 1997 1998 ---- ---- ---- ---- ---- Working capital $23,683 $23,093 $30,049 $38,232 $61,504 Total assets 150,722 152,132 155,544 173,279 185,191 Total long-term debt 80,474 56,775 41,142 21,175 8,043 Stockholders' equity 29,808 47,115 67,141 94,264 127,765
(1) Revenues are net of sales returns and allowances. (2) Represents the write-off of the original issue discount remaining on the then outstanding notes in connection with the May 1994 refinancing. (3) The decrease in total assets and stockholders' equity from March 31, 1994 reflects the impact of the MICOM Spin-off. (4) Adjusted to exclude the net assets of MICOM as of March 31, 1994. ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS) GENERAL: The table below should be read in conjunction with the following discussion (percentages are based on total revenues.) FISCAL YEAR ENDED MARCH 31, - ------------------------------------------------------------------------------- 1996 1997 1998 =============================================================================== Revenues $193,427 $232,158 $279,821 North America 56.9% 52.6% 51.9% International 43.1 47.4 48.1 Total 100.0 100.0 100.0 =============================================================================== FISCAL 1998 COMPARED TO FISCAL 1997: Revenues for Fiscal 1998 were $279,821, an increase of 20.5% over Fiscal 1997 revenues of $232,158, reflecting strong growth worldwide. North American revenues increased to $145,177 from $122,133, or 18.9% over the prior year. The growth was driven by both the success of new product sales and an increase in the number of medium and large orders. Reported revenues from International operations increased to $134,644 from $110,025, or 22.4% over the prior year. If exchange rates had remained constant from the prior year, International revenues would have increased 29.4% from Fiscal 1997. Reported revenue dollar and percentage growth for the Company's largest subsidiaries were as follows: Japan increased $4,245, or 16.0%; United Kingdom increased $6,882, or 32.7%; France increased $907, or 5.0%; and Brazil increased $4,834, or 58.6%. Reported revenue growth in France was reduced due to a stronger U.S. dollar in Fiscal 15 16 1998, and without the currency effect, operating revenues increased 19.2% from the prior year. Excluding Japan, United Kingdom, France, and Brazil, the remaining International business units grew $7,771, or 21.6%, from Fiscal 1997. The overall growth in International revenues was due to an increase in the number of orders as well as the success of new product sales. Gross profit in Fiscal 1998 increased to $140,828, or 50.3% of revenues, from $123,646, or 53.3% of revenues, in Fiscal 1997. The decrease in gross profit margin was due to the combined effects of an increase in medium and large orders, which receive larger discounts and carry slightly lower profit margins than small orders, and the impact of strong sales growth of the Company's local area networking product line which provides slightly lower gross margins. The revaluation of foreign denominated intercompany receivables had little impact on gross profit margin. Excluding the impact of revaluing the intercompany receivables, the gross profit margin was 50.6% in Fiscal 1998 compared to 53.5% in Fiscal 1997. Selling, general and administrative ("SG&A") expenses for Fiscal 1998 were $82,678, or 29.5% of revenues, an increase of $8,584 over SG&A expenses of $74,094, or 31.9% of revenues in Fiscal 1997. SG&A expense as a percentage of revenues decreased from last year as the Company was able to leverage its existing cost structure. The dollar increase over the prior year related to additional marketing and personnel costs, primarily at the International locations. Operating income before amortization in Fiscal 1998 was $58,150, or 20.8% of revenues, compared to $49,552, or 21.3% of revenues, in Fiscal 1997. Intangibles amortization for the year was $3,801, comparable to the prior year amount of $3,854. Net interest expense for Fiscal 1998 declined to $2,652 from $3,649 in Fiscal 1997 due to lower average borrowings. The annual effective tax rate of 40.7% for Fiscal 1998 was higher than the U.S. statutory rate of 35.0% primarily due to state income taxes, foreign income taxes higher than the U.S. rate, and the unfavorable impact of non-deductible intangibles amortization. Net income for Fiscal 1998 was $30,915 compared to $24,295 in Fiscal 1997, an increase of 27.2%. This growth was primarily due to strong revenue growth in North America and Europe and the Company's ability to leverage its existing cost structure. FISCAL 1997 COMPARED TO FISCAL 1996: Revenues for Fiscal 1997 were $232,158, an increase of $38,731, or 20.0%, over Fiscal 1996 revenues of $193,427. North American revenues increased to $122,133 from $109,980, or 11.1% over the prior year. The growth was the result of improved marketing programs and introductions of new products. 16 17 Reported revenues from International operations increased to $110,026 from $83,452, or 31.8% over the prior year. The growth was primarily as a result of strong marketing programs, new product introductions and the acquisition of the joint venture partner's interest in Black Box Australia. In total, revenues at the Company's largest subsidiaries, Japan, United Kingdom and France, increased 25.0% from Fiscal 1996. The acquisition of the joint venture interest in Black Box Australia increased international revenues by approximately $4,300 in Fiscal 1997. The stronger U.S. dollar, particularly against the Japanese yen and French franc, reduced total Fiscal 1997 revenues by approximately $6,600 compared to Fiscal 1996. Gross profit in Fiscal 1997 increased to $123,646, or 53.3% of revenues, from $105,972, or 54.8% of revenues, in Fiscal 1996. The decrease in gross profit margin was due primarily to the impact of a stronger US dollar in Fiscal 1997 compared to Fiscal 1996, resulting in an unfavorable impact from the revaluation of foreign denominated intercompany receivables. Excluding the impact of revaluing the intercompany receivables, the gross profit margin remained relatively constant at 53.6% in Fiscal 1997 compared to 53.9% in Fiscal 1996. SG&A expenses for Fiscal 1997 were $74,094, or 31.9% of revenues, an increase of $9,827 over SG&A expenses of $64,267, or 33.2% of revenues, in Fiscal 1996. SG&A expense decreased as a percentage of revenues due to the leveraging of the Company's existing cost structure and the improvement in the Brazil operations compared to Fiscal 1996. The majority of the dollar increase was due to increased worldwide marketing expenditures and personnel costs primarily at the International locations. SG&A expenses included approximately $1,600 relating to expenses in Australia, which were more than offset by approximately $2,100 of favorable translation currency impact on expenses. Operating income before amortization in Fiscal 1997 was $49,552, or 21.3% of revenues, compared to $41,705, or 21.6% of revenues, in Fiscal 1996. Intangibles amortization in Fiscal 1997 increased slightly to $3,854 from $3,620 in Fiscal 1996. Net interest expense for Fiscal 1997 declined to $3,649 from $5,757 in Fiscal 1996 due primarily to lower average borrowings. The annual effective tax rate of 42.0% for Fiscal 1997 was higher than the U.S. statutory rate of 35.0% primarily because of foreign subsidiary income tax rates higher than the U.S. statutory rate, state income taxes and the unfavorable impact of non-deductible intangibles amortization. Net income for Fiscal 1997 was $24,295 compared to $18,278 in Fiscal 1996, an increase of 32.9%. This growth was primarily due to strong revenue growth in North America, Europe, and the Pacific Rim and the Company's ability to leverage its existing cost structure. 17 18 LIQUIDITY AND CAPITAL RESOURCES: The Company continues to meet all of its cash requirements through cash flow from operations. During Fiscal 1998, cash flow before debt reduction was $22,030 and the Company reduced debt by $12,823. The Company also made capital expenditures of $2,332 during Fiscal 1998. As of March 31, 1998, the Company had cash and cash equivalents of $10,560, working capital of $61,504 and long-term debt of $8,043. The Company's total debt at March 31, 1998 of $16,480 was comprised of $16,000 aggregate principal amount of 8.81% Senior Notes, and $480 of various other loans. The weighted average interest rate on all indebtedness of the Company as of March 31, 1998 was approximately 8.8% compared to 8.5% as of March 31, 1997. In addition, at March 31, 1998, the Company had $39,010 of additional funds available under the Mellon Credit Agreement. The Mellon Credit Agreement provides for a maximum borrowing of $40,000 through March 31, 1999. Interest on borrowings is variable based on the Company's option of selecting the bank's prime rate (8-1/2 percent at March 31, 1998), the Euro-dollar rate plus an applicable margin, as defined in the agreement or Mellon's ABS rate plus an applicable margin, as defined in the agreement. The applicable margin added to the Euro-dollar rate and Mellon's ABS rate is adjusted each quarter based on the cash flow ratio, as defined in the agreement and can vary from 2 percent to 3/4 percent (3/4 percent at March 31, 1998). The Company has operations, customers and suppliers worldwide, thereby exposing the Company's financial results to foreign currency fluctuations. In an effort to reduce this risk, the Company generally sells and purchases inventory based on prices denominated in U.S. dollars. Intercompany sales to subsidiaries are generally denominated in the subsidiaries' local currency, although intercompany sales to the Company's subsidiaries in Brazil and Mexico are denominated in U.S. dollars. The gains and losses resulting from the revaluation of the intercompany balances denominated in foreign currencies are recorded to gross profit to the extent the intercompany transaction resulted from an intercompany sale of inventory. The Company has entered into and will continue in the future, on a selective basis, to enter into forward exchange contracts to reduce the foreign currency exposure related to these intercompany transactions. On a monthly basis, the open contracts are revalued to the current exchange rates and the resulting gains and losses are recorded in other income. These gains and losses offset the revaluation of the related foreign currency denominated receivables. At March 31, 1998, the Company did not have any open forward contracts. During Fiscal 1998, the net impact from revaluing forward contracts was not material. The Company believes that its cash flow from operations and existing credit facilities will be sufficient to satisfy its liquidity needs for the foreseeable future. YEAR 2000 COSTS: The Company has conducted a review of its computer systems to identify the systems that could be affected by Year 2000 issues and, in some cases, has made the required changes. The Company believes the remaining compliance work 18 19 will be completed in a timely manner and that the overall cost of such work will not be material. The Company expenses such costs when incurred. ACCOUNTING STANDARDS: In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive Income" which establishes standards for reporting and display of comprehensive income and its components in financial statements. As required by SFAS No. 130, the Company expects to adopt the new standard in the first quarter Fiscal 1999. The Company has reviewed SFAS No. 130 and determined that the only component of comprehensive income which applies to the Company will be foreign currency translation adjustments currently recorded directly to Stockholder's Equity in accordance with SFAS No. 52. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," which establishes standards for the way that public business enterprises report financial and descriptive information about their reportable operating segments. As required by SFAS No. 131, the Company will adopt the new statement in the fiscal year ended March 31, 1999 and apply it to interim financial statements in subsequent fiscal years. INFLATION: The overall effects of inflation on the Company have been nominal. Although long-term inflation rates are difficult to predict, the Company continues to strive to minimize the effect of inflation through improved productivity and cost reduction programs as well as price increases within the constraints of market competition. FORWARD-LOOKING STATEMENTS: When included in this Annual Report on Form 10-K or in documents incorporated herein by reference, the words "expects," "intends," "anticipates," "believes," "estimates," and analogous expressions are intended to identify forward-looking statements. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, among others, general economic and business conditions, competition, changes in foreign, political and economic conditions, fluctuating foreign currencies compared to the U.S. dollar, rapid changes in technologies, customer preferences and various other matters, many of which are beyond the Company's control. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and speak only as of the date of this Annual Report on Form 10-K. The Company expressly disclaims any obligation or undertaking to release publicly any updates or any changes in the Company's expectations with regard thereto or any change in events, conditions, or circumstances on which any statement is based. 19 20 ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA BLACK BOX CORPORATION AND SUBSIDIARIES Report of Independent Public Accountants Consolidated Statements of Income Consolidated Balance Sheets Consolidated Statements of Changes in Stockholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements 20 21 ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Black Box Corporation: We have audited the accompanying consolidated balance sheets of Black Box Corporation (a Delaware corporation and the "Company") and subsidiaries as of March 31, 1998 and 1997, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended March 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Black Box Corporation and subsidiaries as of March 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1998, in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP ----------------------- Arthur Andersen LLP Pittsburgh, Pennsylvania May 1, 1998 22 BLACK BOX CORPORATION CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED MARCH 31, ------------------------------------------------- 1996 1997 1998 - --------------------------------------------------------------------------------------------- Revenues $193,427 $232,158 $279,821 Cost of sales 87,455 108,512 138,993 - --------------------------------------------------------------------------------------------- Gross profit 105,972 123,646 140,828 SG&A expense 64,267 74,094 82,678 Intangibles amortization 3,620 3,854 3,801 - --------------------------------------------------------------------------------------------- Operating income 38,085 45,698 54,349 Interest expense, net 5,757 3,649 2,652 Other expense (income), net (295) 160 (417) - --------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 32,623 41,889 52,114 Provision for income taxes 14,345 17,594 21,199 - --------------------------------------------------------------------------------------------- Net income $18,278 $24,295 $30,915 ============================================================================================= Basic earnings per common share $1.13 $1.48 $1.85 Diluted earnings per common share $1.10 $1.40 $1.75 - --------------------------------------------------------------------------------------------- Weighted average common shares 16,135 16,415 16,700 Weighted average common and common equivalent shares 16,584 17,292 17,616 =============================================================================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 22 23 BLACK BOX CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
MARCH 31, --------------------------------- 1997 1998 ============================================================================================== ASSETS Current assets Cash and cash equivalents $ 1,353 $ 10,560 Accounts receivable, net of allowance for doubtful accounts of $2,499 and $2,655, respectively 43,900 47,197 Inventories, net 30,435 31,922 Prepaid catalog expenses 5,332 5,845 Other current assets 2,895 4,303 - ---------------------------------------------------------------------------------------------- Total current assets 83,915 99,827 Property, plant and equipment 12,923 12,782 Intangibles, net 75,955 72,164 Other assets 486 418 - ---------------------------------------------------------------------------------------------- Total assets $ 173,279 $ 185,191 ============================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current debt $ 8,128 $ 8,437 Accounts payable 19,924 14,098 Accrued compensation and benefits 5,688 5,940 Other accrued expenses 6,127 6,582 Accrued income taxes 5,816 3,266 - ---------------------------------------------------------------------------------------------- Total current liabilities 45,683 38,323 Long-term debt 21,175 8,043 Other liabilities, primarily deferred taxes 12,157 11,060 Stockholders' equity Preferred stock authorized 5,000,000; par value $1.00; none issued and outstanding Common stock authorized 40,000,000; par value $.001; issued and outstanding 16,518,682 and 16,765,110, respectively 17 17 Additional paid-in capital 29,897 33,805 Retaining earnings 66,504 97,998 Cumulative foreign currency translation (2,154) (3,619) Dividend declared to former ATIMCO shareholders prior to merger -- (436) - ---------------------------------------------------------------------------------------------- Total stockholders' equity 94,264 127,765 - ---------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 173,279 $ 185,191 ==============================================================================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 23 24 BLACK BOX CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
COMMON STOCK ADDITIONAL ------------------- PAID-IN RETAINED TRANSLATION DIVIDEND SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT DECLARED TOTAL ================================================================================================================================= BALANCE AT MARCH 31, 1995 16,061,557 $16 $23,169 $23,931 $(1) $47,115 Net income 18,278 18,278 Exercise of options 240,697 2,057 2,057 Tax benefit from exercised options 678 678 Foreign currency translation adjustment (987) (987) - --------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1996 16,302,254 16 25,904 42,209 (988) 67,141 Net income 24,295 24,295 Exercise of options 216,428 1 2,473 2,474 Tax benefit from exercised options 1,520 1,520 Foreign currency translation adjustment (1,166) (1,166) - --------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1997 16,518,682 17 29,897 66,504 (2,154) 94,264 Net income 30,915 30,915 Contribution from merger 62 579 641 Issuance of common stock 68,115 Exercise of options 178,313 2,038 2,038 Tax benefit from exercised options 1,808 1,808 Foreign currency translation adjustments (1,465) (1,465) Dividends declared to former ATIMCO shareholders prior to merger (436) (436) - --------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1998 16,765,110 $17 $33,805 $97,998 $(3,619) $(436) $127,765 =================================================================================================================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 24 25 BLACK BOX CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED MARCH 31, ------------------------------------------------- 1996 1997 1998 =============================================================================================================== CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 18,278 $ 24,295 $ 30,915 Adjustments to reconcile net income to cash provided by operating activities Depreciation and amortization 6,057 6,199 6,325 All other (109) 99 (48) Changes in working capital items Accounts receivable, net (6,235) (8,529) (2,795) Inventories, net (1,404) (11,050) (1,446) Other assets (1,609) (660) (1,860) Accounts payable 4,179 7,214 (5,887) Accrued compensation and benefits 1,031 1,237 252 Accrued expenses (1,135) 236 419 Accrued income taxes (1,070) 2,873 (3,618) - --------------------------------------------------------------------------------------------------------------- Cash provided by operating activities 17,983 21,914 22,257 - --------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (2,476) (2,758) (2,332) ATIMCO merger -- -- 160 Acquisition of joint venture -- (934) -- - --------------------------------------------------------------------------------------------------------------- Cash used in investing activities (2,476) (3,692) (2,172) - --------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings (50,894) (68,407) (94,028) Proceeds from borrowings 33,663 48,384 81,205 Proceeds from the exercise of options 2,057 2,474 3,846 Dividends paid to former ATIMCO shareholders prior to merger -- -- (436) - --------------------------------------------------------------------------------------------------------------- Cash used in financing activities (15,174) (17,549) (9,413) - --------------------------------------------------------------------------------------------------------------- Foreign currency exchange impact on cash (955) (1,244) (1,465) - --------------------------------------------------------------------------------------------------------------- (Decrease) increase in cash and cash equivalents (622) (571) 9,207 Cash and cash equivalents at beginning of year 2,546 1,924 1,353 - --------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 1,924 $ 1,353 $ 10,560 =============================================================================================================== Interest paid $ 6,445 $ 3,663 $ 2,749 =============================================================================================================== Income taxes paid $ 14,495 $ 13,282 $ 16,107 ===============================================================================================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 25 26 BLACK BOX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS: Black Box Corporation is a leading worldwide direct marketer and technical service provider of computer communications and networking equipment and services to businesses of all sizes, operating in 77 countries throughout the world. FISCAL YEARS AND INTERIM PERIODS: Prior to the fiscal year ended March 31, 1998, the Company followed a 52 or 53 week fiscal year that ended on the Sunday nearest March 31. Each fiscal quarter consisted of 13 weeks, and the last quarter was adjusted for those years having 53 weeks. For fiscal years ended March 31, 1998 and after, the Company changed the fiscal year end to March 31. The first three quarters consisted of 13 weeks, and the fourth quarter was adjusted to end on March 31. The ending dates for the years ended March 31, 1998, 1997 and 1996 were actually March 31, 1998, March 30, 1997 and March 31, 1996, respectively. For simplicity, March 31 is used for all year end references. PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of Black Box Corporation and its wholly-owned and majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. CASH EQUIVALENTS: The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. The carrying amount approximates fair value because of the short maturity of those instruments. INVENTORIES: Inventories are stated at the lower of cost (first-in, first-out method) or market. The net inventory balances at March 31 are as follows: 1997 1998 ============================================================================ Raw materials $ 2,152 $1,654 Work-in-process 28 41 Finished goods 29,865 33,081 Inventory reserve (1,610) (2,854) - ---------------------------------------------------------------------------- Inventory, net $ 30,435 $ 31,922 ============================================================================ PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets. The useful life for buildings and improvements is 30 years and for machinery and equipment is three to seven years. Maintenance and minor repair costs are charged to expense as incurred. Major replacements or betterment's 26 27 are capitalized. When items are sold, retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and, if applicable, a gain or loss is recorded. Property, plant and equipment balances, net of accumulated depreciation, at March 31 are as follows: 1997 1998 ============================================================================= Land $ 1,962 $ 1,962 Building and improvements 9,750 10,087 Machinery and equipment 12,983 14,964 - ----------------------------------------------------------------------------- 24,695 27,013 Accumulated depreciation (11,772) (14,231) - ----------------------------------------------------------------------------- Property, plant and equipment, net $ 12,923 $ 12,782 ============================================================================= INTANGIBLES: Intangibles include the reorganization value in excess of amounts allocable to identifiable assets (the portion of the reorganization value which could not be attributed to specific, tangible or identifiable intangible assets), goodwill (the excess of the purchase cost over the fair value of the assets acquired) and tradename and trademarks. These intangibles are amortized over 20, 30 to 40, and 40 years, respectively. The intangible assets and associated accumulated amortization at March 31 are as follows: 1997 1998 ================================================================================ Reorganization value in excess of amounts allocable to identifiable assets, less accumulated amortization of $16,096 and $18,880, respectively $ 40,978 $ 38,194 - -------------------------------------------------------------------------------- Goodwill, less accumulated amortization of $422 and $527, respectively 3,682 3,577 - -------------------------------------------------------------------------------- Tradename and trademarks, less accumulated amortization of $4,647 and $5,549, respectively 31,295 30,393 - -------------------------------------------------------------------------------- Intangibles, net $ 75,955 $ 72,164 ================================================================================ The Company evaluates the recoverability of intangible assets, including goodwill, at each balance sheet date based on forecasted future operations, undiscounted cash flows and other significant criteria. Based upon the available data, management believes that the carrying amount of these intangible assets will be realized over their respective remaining amortization periods. INCOME TAXES: Deferred income taxes are recognized for all temporary differences between the tax and financial bases of the Company's assets and liabilities, using the enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. FOREIGN CURRENCY TRANSLATION: The financial statements of the Company's foreign subsidiaries, except for the subsidiaries located in Brazil and Mexico, are recorded in the local currency which is the functional currency. Accordingly, assets and liabilities 27 28 of these subsidiaries are translated using prevailing exchange rates at the appropriate balance sheet date and revenues and expenses are translated using an average monthly exchange rate. Translation adjustments resulting from this process are recorded as a separate component of "Stockholders' Equity" and will be included in income upon sale or liquidation of the foreign investment. Gains and losses from transactions denominated in a currency other than the functional currency are included in net earnings. For the subsidiaries located in Brazil and Mexico, the U.S. dollar is the functional currency, hence a combination of current and historical rates is used in translating assets and liabilities and the related exchange adjustments are included in net earnings. RISK MANAGEMENT AND FINANCIAL DERIVATIVES: The Company has operations, customers and suppliers worldwide, thereby exposing the Company's financial results to foreign currency fluctuations. In an effort to reduce this risk, the Company generally sells and purchases inventory based on prices denominated in U.S. dollars. Intercompany sales to all subsidiaries except Brazil and Mexico are denominated in the subsidiaries local currency. Intercompany sales to the subsidiaries in Brazil and Mexico are denominated in U.S. dollars. The gains and losses resulting from the revaluation of the intercompany balances denominated in foreign currencies is recorded to gross profit to the extent the intercompany transaction resulted from an intercompany sale of inventory. The Company has entered and will continue in the future, on a selective basis, to enter into forward exchange contracts to reduce the foreign currency exposure related to these intercompany transactions. These contracts have a term of 12 months or less and are with a major commercial bank. Accordingly, the Company expects the counterparty to the contracts to meet its obligations. On a monthly basis, the open contracts are revalued to the current exchange rates, and the resulting gains and losses are recorded in other income. These gains and losses offset the revaluation of the related foreign currency denominated receivables. At March 31, 1998, the Company did not have any open forward exchange contracts. During Fiscal 1998, the net impact from revaluing forward contracts was not material. The Company does not hold or issue any other financial derivative instruments nor does it engage in speculative trading of financial derivatives. EARNINGS PER SHARE: Basic earnings per common share were computed based on the weighted average number of common shares issued and outstanding, during the relevant periods. Diluted earnings per common share were computed under the treasury stock method based on the weighted average number of common shares issued and outstanding, plus additional shares assumed to be outstanding to reflect the dilutive effect of common stock equivalents, less the number of shares assumed to be repurchased with the tax savings resulting from compensation expense of exercisable options. 28 29 USE OF ESTIMATES: The preparation of financial statements in accordance with generally accepted accounting standards requires management to make estimates and assumptions. These estimates and assumptions affect the amounts reported in the accompanying financial statements. Actual results could differ from those amounts. NOTE 2: CHANGES IN BUSINESS ACQUISITIONS AND NEW SUBSIDIARIES: In January 1998, the Company acquired through merger 100% of ATIMCO, a privately-held company that provides network design and installation services, premise cabling and related products. The acquisition was accounted for as a pooling of interests. The Company issued 68,115 shares of common stock in the transaction, which was accounted for by a pooling of interests. ATIMCO's revenues in Fiscal 1998 were $3,200. ATIMCO's results of operations are not considered material to the Company, and, as such, prior periods have not been restated. In March 1997, the Company purchased the remaining 50 percent of its joint venture operation in Australia, Black Box Catalog Australia Pty. Ltd. ("Black Box Australia"). The purchase price was $1,100 of which the majority, $766, was allocated to goodwill. The Company has consolidated the results of operations for Black Box Australia as of the beginning of Fiscal 1997. The operations and financial position of Black Box Australia are not material to either the consolidated financial position or results of operations of the Company and therefore, no pro forma information has been provided. In May 1995, the Company established a new wholly-owned subsidiary in Mexico City, Mexico, Black Box de Mexico, S.A. de C.V. ("Black Box Mexico"). In December 1994, the Company established a new majority-owned subsidiary in Sao Paulo, Brazil, Black Box do Brazil Industria e Comercia Ltda. ("Black Box Brazil"). The ownership agreement provides the Company with the option beginning in October 1997 and ending in September 1999 to purchase the minority shareholders' shares based on a defined price calculation. If the Company does not exercise its option prior to September 1999, the Company is required to purchase the minority shareholders' shares in October 1999 based on a defined price calculation. The minority shareholders are restricted from competing with Black Box Brazil for a period of two years after having any affiliation with Black Box Brazil. One of the minority shareholders is Michael E. Barker, a member of the Board of Directors of the Company. In November 1997, the Company exercised its option to repurchase the minority interest under the agreement. Mr. Barker has objected to the valuation of his interest and the matter is currently in arbitration. DISCONTINUED OPERATIONS AND DISPOSALS: On June 3, 1994, the Company distributed all of the outstanding shares of MICOM Communications Corp. ("MICOM") common stock to all holders of the Company's outstanding common stock who held shares on May 20, 1994, the record date of distribution. 29 30 NOTE 3: INDEBTEDNESS Long-term debt at March 31 is as follows: 1997 1998 ===================================================================== Revolving credit $ 5,100 $ -- Notes 24,000 16,000 Other debt 203 480 - --------------------------------------------------------------------- 29,303 16,480 Less current portion (8,128) (8,437) - --------------------------------------------------------------------- Long-term debt $ 21,175 $ 8,043 ===================================================================== In May 1994, Black Box Corporation of Pennsylvania, a domestic operating subsidiary of the Company entered into a Revolving Credit Agreement with Mellon Bank, N.A. ("Mellon") for the purpose of refinancing the then existing revolving credit agreement and to provide additional working capital. On April 1, 1996, this agreement was amended to extend the term and modify the interest rate options. The current agreement, as amended, provides for a maximum borrowing of $40,000 through March 31, 1999. Interest on borrowings is variable based on the Company's option of selecting the bank's prime rate (8-1/2 percent at March 31, 1998), the Euro-dollar rate plus an applicable margin, as defined in the agreement or Mellon's Automated Borrowing Services ("ABS") rate plus an applicable margin, as defined in the agreement. The applicable margin added to the Euro-dollar rate and Mellon's ABS rate is adjusted each quarter based on the cash flow ratio, as defined in the agreement and can vary from 2 percent to 3/4 percent (3/4 percent at March 31, 1998). The agreement requires the Company to pay an annual commitment fee of 3/8 percent on the daily unborrowed portion of the total commitment. The agreement is unsecured; however, all borrowings are guaranteed by the Company, as parent. The agreement contains restrictive covenants which relate to levels of dividend payments and capital expenditures and various financial ratios. The Company is in compliance with these covenants. In May 1994, the domestic subsidiary of the Company entered into a $40,000, five year Senior Note Agreement with certain financial institution parties for the purpose of refinancing a portion of the existing notes outstanding. The Senior Notes are payable in five equal installments of $8,000 per year starting in May 1995 and ending in May 1999. Interest on the notes is fixed at 8.81 percent and prepayments are permitted subject to the payment of a yield-maintenance amount, as defined in the agreement. The agreement is unsecured; however, all borrowings are guaranteed by the Company, as parent. The agreement contains restrictive covenants which relate to levels of dividend payments and capital expenditures and various financial ratios. The Company is in compliance with these covenants. 30 31 Other debt is composed of various bank, industrial revenue and third party loans secured by specific pieces of equipment and real property. Interest on these loans are fixed and range from 3 to 5 percent. The due dates occur at various times through May 2000. At March 31, 1998, the Company had $990 of letters of credit outstanding. The aggregated amount of the minimum principal payments for each of the five fiscal years subsequent to March 31, 1998 for all long-term indebtedness is as follows: 1999-$8,437; 2000-$8,040; 2001-$3; 2002-$0; 2003-$0. The fair value of the Company's debt at March 31, 1998 approximates the carrying value. The fair value is based on management's estimate of current rates available to the Company for similar debt with the same remaining maturity. NOTE 4: INCOME TAXES The domestic and foreign components of pretax income from continuing operations for the years ended March 31 are as follows: 1996 1997 1998 ======================================================================= Domestic $ 24,641 $ 30,950 $ 38,872 Foreign 7,982 10,939 13,242 - ----------------------------------------------------------------------- Consolidated $ 32,623 $ 41,889 $ 52,114 ======================================================================= The provision for income tax charged to continuing operations for the years ended March 31 consists of the following: 1996 1997 1998 ======================================================================= Current: Federal $ 6,692 $ 9,507 $ 9,666 State 1,025 1,158 856 Foreign 4,713 7,045 7,579 - ----------------------------------------------------------------------- Total current 12,430 17,710 18,101 Deferred 1,915 (116) 3,098 - ----------------------------------------------------------------------- Provision for income taxes $14,345 $17,594 $21,199 ======================================================================= Reconciliations between income taxes from continuing operations computed using the federal statutory income tax rate and the Company's effective tax rate for the years ended March 31 are as follows: 1996 1997 1998 ================================================================================ Federal statutory tax rate 35.0% 35.0% 35.0% Foreign taxes, net of foreign tax credits 5.9 0.6 2.8 Amortization of intangibles 2.9 2.3 1.9 State income taxes, net of federal benefit 2.3 2.0 1.6 Other, net (2.1) 2.1 (0.6) - -------------------------------------------------------------------------------- Effective tax rate 44.0% 42.0% 40.7% ================================================================================ 31 32 The components of deferred tax (liabilities) assets included in "Other Liabilities" at March 31 are as follows:
1997 1998 ======================================================================================== Tradename and trademarks $ (10,941) $ (10,627) State taxes (3,450) (1,283) Unremitted earnings of Japanese subsidiary (2,917) (3,551) Basis of fixed assets (916) (961) Other (3,245) (4,790) - ---------------------------------------------------------------------------------------- Gross deferred tax liabilities (21,649) (21,212) Net operating losses and foreign tax credit carryforwards 6,821 7,430 Other 2,996 3,014 - ---------------------------------------------------------------------------------------- Gross deferred tax assets 9,817 10,444 - ---------------------------------------------------------------------------------------- Net deferred tax liabilities $ (11,832) $ (10,768) ========================================================================================
At March 31, 1998, the Company had $45,090 of net operating loss carryforwards and $39,993 of alternative minimum tax loss carryforwards. As a result of the Company's reorganization in 1992 and concurrent ownership change, Section 382 of the Internal Revenue Code limits the amount of net operating losses available to the Company to approximately $600 per year. The carryforwards expire in the fiscal years 2004 through 2007; however, due to the limitation stated above, the Company expects to utilize only the unrestricted portion of the operating loss carryforwards, prior to expiration. In general, except for certain earnings in Japan, it is management's intention to reinvest undistributed earnings of foreign subsidiaries, which aggregate approximately $13,000 based on exchange rates at March 31, 1998. However, from time to time, the foreign subsidiaries declare dividends to the U.S. parent, at which time the appropriate amount of tax is determined. Also, additional taxes could be necessary if foreign earnings were lent to the parent or if the Company should sell its stock in the subsidiaries. It is not practicable to estimate the amount of additional tax that might be payable on undistributed foreign earnings. NOTE 5: COMMITMENTS AND CONTINGENCIES The Company leases certain equipment under noncancelable operating lease agreements, which contain provisions for certain rental adjustments as well as renewal options. Rent expense under these operating leases for the years ended March 31, 1998, 1997 and 1996 was $812, $809, and $868, respectively. At March 31, 1998, the minimum lease commitments for the next five years are as follows: 1999-$815; 2000-$742; 2001-$6; 2002-$0; 2003-$0. The Company is involved in, or has pending, various legal proceedings, claims, suits and complaints arising out of the normal course of business. Based on the facts currently available to the Company, management believes all such matters are adequately provided for, covered by insurance, are without merit, or are of such 32 33 amounts which upon resolution will not have a material adverse effect on the consolidated financial position or the results of operations of the Company. NOTE 6: RELATED PARTY TRANSACTIONS For a portion of Fiscal 1996, the Company had a services agreement with Odyssey Investors, Inc. ("Odyssey Investors"), a related party to the Company's former majority stockholder, which provided for an annual service fee. One-half of this service fee was paid to Odyssey Investors and one-half to Michael E. Barker, a member of the Board of Directors of the Company. For the year ended March 31, 1996, the Company expensed $113 under the agreement. In addition, Odyssey Investors was entitled to reimbursement of certain expenses incurred on behalf of the Company. For the year ended March 31, 1996, the Company paid, in the normal course of business, fees and expenses of $152. This agreement expired on December 22, 1995. No fees or expenses were paid to these parties in Fiscal 1997 and 1998. See Note 2 for other related party information. NOTE 7: INCENTIVE COMPENSATION PLANS PERFORMANCE BONUS: The Company has a variable compensation plan covering substantially all employees. This plan provides for the payment of a bonus based on certain annual performance targets. All payments are subject to approval by the Board of Directors upon the completion of the annual audit. In addition, the Company had an incentive compensation plan which covered certain key employees. Amounts paid under this plan were based on the attainment of certain operating targets over a three year period ending March 31, 1998. The amounts expensed under the variable and incentive compensation plans for the years ended March 31, 1996, 1997 and 1998 were $2,134, $2,954, and $2,084, respectively. PROFIT SHARING AND SAVINGS PLAN: The Company has a Profit Sharing and Savings Plan ("Plan") which qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code covering only U.S. employees. Under the Plan, participants are permitted to make contributions of up to 12 percent of their compensation, as defined. The Company matches 25 percent of the participant's contributions and increases its matching contribution percentage if the Company achieves specific revenue and profit targets established at the beginning of each fiscal year. The total Company contribution for the years ended March 31, 1996, 1997 and 1998 was $437, $505, and $523, respectively. STOCK OPTION PLANS: The Company has two stock option plans, the 1992 Stock Option Plan, as amended (the "Employee Plan"), and the 1992 Directors Stock Option Plan, as amended (the "Directors Plan"). The Employee Plan authorizes the issuance of options and stock appreciation rights ("SARs") up to 3,200 shares of Common Stock. Options are issued by the Board of Directors or Board Committee to key employees of the Company and generally become exercisable in equal amounts over a three year 33 34 period. A portion of these options are held by MICOM employees as the options were granted prior to the spin-off of MICOM. Option prices are equal to the fair market value of the stock on the date of the grant and have been adjusted to reflect the effect of the MICOM distribution on June 3, 1994. No SARs have been issued. The Directors Plan authorizes the issuance of options and SARs up to 75 shares of Common Stock. Options are issued by the Board of Directors or Board Committee and become exercisable in equal amounts over a three year period. Option prices are equal to the fair market value of the stock on the date of the grant and have been adjusted to reflect the effect of the MICOM distribution on June 3, 1994. No SARs have been issued. The following is a summary of the Company's stock option plans for years ended March 31:
1996 1997 1998 ---- ---- ---- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ========================================================================== Outstanding, beginning of the year 1,305 $ 9.34 1,754 $11.96 1,750 $14.11 Granted 807 15.29 400 23.38 1,047 28.73 Exercised (239) 8.42 (214) 11.47 (178) 11.43 Forfeited (119) 12.96 (190) 16.70 (96) 19.43 - ------------------------------------------------------------------------------------------------------------ Outstanding, end of the year 1,754 $11.96 1,750 $14.11 2,523 $20.17 Exercisable, end of year 511 $ 9.04 822 $10.54 1,119 $12.32 Weighted average fair value of options granted during the year $7.77 $11.89 $14.92 ============================================================================================================
34 35 The following table summarizes information about the stock options outstanding at March 31, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------- ------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED RANGE OF REMAINING AVERAGE AVERAGE EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE ============================================================================================================ $7.77 73 4.7 years $ 7.77 73 $ 7.77 $8.92 - $9.35 90 5.5 years 9.35 90 9.35 $9.78 - $13.06 555 6.3 years 10.07 555 10.07 $13.65 - $15.75 482 7.2 years 15.03 314 15.01 $20.50 - $24.75 474 8.6 years 22.80 87 23.85 $30.25 - $35.19 849 9.7 years 30.43 -- -- ============================================================================================================ $7.77 - $35.19 2,523 8.0 years $ 20.17 1,119 $ 12.32 ============================================================================================================
The Company continues to apply APB Opinion No. 25 in accounting for stock-based compensation. To-date, all stock options have been issued at market value; accordingly, no compensation cost has been recognized. Had the Company elected to recognize compensation cost based on the fair value basis under SFAS No. 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts for the years ended March 31: 1997 1998 ============================================================================== Net income As reported $24,295 $30,915 Pro forma 23,024 28,570 Earnings per share As reported $ 1.40 $ 1.75 Pro forma 1.32 1.62 ============================================================================== The fair value of each option grant is estimated on the date of grant using the Black-Scholes options pricing model with the following assumptions for the years ending March 31: 1997 1998 ============================================================================== Expected life (in years) 7.0 7.3 Risk free interest rate 6.6% 5.7% Volatility 35% 50% Dividend yield -- -- ============================================================================== 35 36 NOTE 8: EARNINGS PER SHARE Basic earnings per common share were computed based on the weighted average number of common shares issued and outstanding during the relevant periods. Diluted earnings per common share were computed under the treasury stock method based on the weighted average number of common shares issued and outstanding, plus additional shares assumed to be outstanding to reflect the dilutive effect of common stock equivalents, less the number of shares assumed to be repurchased with the tax savings resulting from compensation expense of exercisable options. The following table details this calculation:
YEAR ENDED MARCH 31, ------------------------------------------- 1996 1997 1998 ========================================================================================================== Net income for earnings per share computation $ 18,278 $ 24,295 $ 30,915 Basic earnings per common share: Weighted average common shares 16,135 16,415 16,700 Basic earnings per common share $1.13 $1.48 $1.85 - ------------------------------------------------------------------------ --------------- -- -------------- Diluted earnings per common share: Weighted average common shares $16,135 16,415 16,700 Shares issuable from assumed conversion of common stock equivalents 556 998 1,049 Shares buyable with tax savings from compensation expense of exercised options (107) (121) (133) - ------------------------------------------------------------------------ --------------- -- -------------- Weighted average common and common equivalent shares 16,584 17,292 17,616 Diluted earnings per common share $1.10 $1.40 $1.75 ==========================================================================================================
NOTE 9: SEGMENT INFORMATION The Company operates in one industry segment as a direct marketer and technical service provider of computer communications and networking equipment and services to businesses of all sizes. Geographic segment information for the years ended March 31 is as follows:
CORPORATE AND UNITED INTERCOMPANY STATES EUROPE OTHER ELIMINATIONS CONSOLIDATED ===================================================================================================================== 1996 Revenues $ 141,638 $ 48,761 $28,495 $ (25,467) $ 193,427 Operating income (1) 31,982 5,174 2,715 (1,786) 38,085 Identifiable assets 128,729 30,132 16,257 (19,574) 155,544 - --------------------------------------------------------------------------------------------------------------------- 1997 Revenue $ 165,730 $ 58,488 $45,297 $ (37,357) $ 232,158 Operating income (1) 36,027 5,781 6,212 (2,322) 45,698 Identifiable assets 152,043 28,146 24,585 (31,495) 173,279 - --------------------------------------------------------------------------------------------------------------------- 1998 Revenues $ 200,428 $ 69,576 $56,919 $ (47,102) $ 279,821 Operating income (1) 42,479 6,153 7,410 (1,693) 54,349 Identifiable assets 165,649 33,089 25,500 (38,997) 185,191 =====================================================================================================================
(1) The amount presented represents local operating income which differs from the internal measurement used by the Company. Internally, intercompany profits generated in the US are allocated back to the location which records the third-party sale. 36 37 NOTE 10: QUARTERLY DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER YEAR ============================================================================================================ FISCAL 1997 Revenues $ 53,788 $ 56,912 $ 58,589 $ 62,869 $ 232,158 Gross profit 28,978 30,595 31,136 32,937 123,646 Net income 5,205 5,825 6,110 7,155 24,295 Basic earnings per common share 0.32 0.36 0.37 0.43 1.48 Diluted earnings per common share 0.31 0.34 0.35 0.41 1.40(1) - ------------------------------------------------------------------------------------------------------------ FISCAL 1998 Revenues $ 65,032 $ 69,665 $ 68,989 $ 76,135 $ 279,821 Gross Profit 33,342 35,015 35,009 37,462 140,828 Net income 6,962 7,459 7,863 8,631 30,915 Basic earnings per common share 0.42 0.45 0.47 0.51 1.85 Diluted earnings per common share 0.40 0.42 0.44 0.49 1.75 ============================================================================================================
(1) Earnings per share for the year is less than the sum of the quarterly earnings per share due to the change in shares each quarter. NOTE 11: SUBSEQUENT EVENT (UNAUDITED) In June 1998, the Company acquired by merger 100% of Associated Network Solutions, Inc. ("ANSI"). ANSI is a privately-held company that provides network design and installation services, premise cabling and related products in the geographic markets of northern and central Florida. The Company will account for the acquisition as a pooling of interests. ANSI's results of operations are not expected to be material to the Company as a whole. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AUDITING AND FINANCIAL DISCLOSURE Not applicable. 37 38 PART III ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item is incorporated herein by reference to the information set forth under the caption "Executive Officers of the Registrant" included under Part I of this Form 10-K. The other information required by this item is incorporated herein by reference to the information set forth under the captions "Election of Directors" and "Board of Directors and Certain Board Committees" in the Company's definitive proxy statement for the 1998 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended (the "Proxy Statement"). ITEM 11 -- EXECUTIVE COMPENSATION The information required by this item is incorporated herein by reference to the information set forth under the captions "Board of Directors and Certain Board Committees", "Executive Compensation and Other Information", and "Compensation Committee Interlocks and Insider Participation" in the Proxy Statement; provided, however, that the compensation committee report and performance graph in the Proxy Statement are not incorporated herein by reference. ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated herein by reference to the information set forth under the captions "Security Ownership of Certain Beneficial Owners", "Compensation Committee Interlocks and Insider Participation -- Change of Control Agreement", "Compensation Committee Interlocks and Insider Participation -- Seperation Agreement", and "Security Ownership of Management" in the Proxy Statement. ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated herein by reference to the information set forth under the captions "Election of Directors" and "Compensation Committee Interlocks and Insider Participation" in the Proxy Statement. 38 39 PART IV ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K Financial statements, financial statement schedules and exhibits not listed here have been omitted where the required information is included in the consolidated financial statements or notes thereto, or is not applicable or required. (a) Documents filed as part of this report (1) Financial Statements - no financial statements have been filed in this Form 10-K other than those in Item 8. (2) Financial Statement Schedules Report of Independent Public Accountants on Supplemental Schedules Schedule II - Valuation and Qualifying Accounts (3) Exhibits Exhibit Number Description ------ ----------- 3(i) Second Restated Certificate of Incorporation of the Company, as amended (15) 3(ii) Restated Bylaws, as amended (2) 10.1 1992 Stock Option Plan, as amended (1) 10.2 1992 Director Stock Option Plan, as amended (13) 10.3(i) Mortgage on property in the Township of Cecil, in the Commonwealth of Pennsylvania, dated September 27, 1988, from Black Box - PA to the Agent (the "Mortgage") (5) 10.3 (ii) First Amendment to the Mortgage, dated December 3, 1991 (3) 39 40 10.4 $40,000,000 Senior Note Agreement, dated as of May 6, 1994, between Black Box - PA and various holders of the Senior Notes (the "Holders") (7) 10.5(i) Form of Senior Note, dated as of May 6, 1994 (7) 10.5(ii) Modification of Note Purchase Agreements between Black Box-PA and the Holders, dated November 21, 1996 (14) 10.5(iii) Second Modification of Note Purchase Agreements between Black Box-PA and Holders, dated November 21, 1996. (14) 10.6(i) Guarantee Agreement, dated as of May 6, 1994, between the Company and the Holders (7) 10.6(ii) Amendment to Guarantee Agreement between Black Box Corporation and Holders, dated November 21, 1996 (14) 10.7(i) Credit Agreement, dated as of May 6, 1994, between Mellon and Black Box - PA (7) 10.7(ii) First Amendment to Credit Agreement, dated March 30, 1995 (9) 10.7(iii) Second Amendment to the Credit Agreement between Black Box - PA and Mellon, dated August 1, 1995 (10) 10.7(iv) Third Amendment to the Credit Agreement between Black Box - PA and Mellon, dated April 1, 1996 (12) 10.7(v) Fourth Amendment to Credit Agreement between Black Box-PA and Mellon, dated November 21, 1996 (14) 10.7(vi) Fifth Amendment to Credit Agreement between Black Box-PA and Mellon, dated November 21, 1996 (14) 10.8(i) Form of $50,000,000 Revolving Credit Note, dated as of May 6, 1994, between Black Box - PA and Mellon (7) 10.8(ii) First Amended and Restated Revolving Credit Note, dated March 30, 1995 (9) 10.9(i) Guaranty and Suretyship Agreement, dated as of May 6, 1994, between the Company and Mellon (7) 40 41 10.9(ii) First Amendment to Guaranty and Suretyship Agreement, dated March 30, 1995 (9) 10.9(iii) Second Amendment to Guaranty and Suretyship between Black Box Corporation and Mellon, dated November 21, 1996 (14) 10.10 Intercreditor Agreement, dated as of May 6, 1994, between Mellon and the Holders (7) 10.11 Agreement and Plan of Distribution, dated as of May 10, 1994, among the Company, Black Box - PA and MICOM (4) 10.12 Indemnification and Liability Assumption Agreement, dated as of June 3, 1994, among the Company, Black Box - PA and MICOM (4) 10.13(i) Tax Sharing Agreement, dated as of January 28, 1992, among the Company (previously known as MB Holdings, Inc.), Black Box and MICOM (4) 10.13(ii) Amendment to Tax Sharing Agreement, dated as of June 3, 1994 (4) 10.14 Separation Agreement, dated as of October 17, 1991, between the Company (previously known as MB Holdings, Inc.), and MICOM (4) 10.15 Black Box do Brasil Industria E. Comercio LTDA. Quotaholder Agreement (6) 10.16 Private Instrument of Amendment to the Articles of Association of Black Box do Brasil Industria E. Comercio LTDA. (6) 10.17 Change of Control Agreement with Jeffery M. Boetticher, dated as of December 20, 1994 (9) 10.18 Change of Control Agreement with Frederick C. Young, dated as of December 20, 1994 (9) 10.19 Executive Incentive Program Summary (1996-1998) (12) 10.20 Subscription Agreement and Plan of Acquisition of BBOX Holding Company by Black Box Corporation dated November 21, 1996 (14) 10.21 Guaranty and Suretyship Agreement between BBOX Holding Company and Mellon, dated November 21, 1996 (14) 41 42 10.22 Holding Company Guarantee Agreement between BBOX Holding Company and Holders, dated November 21, 1996 (14) 10.23 Executive Incentive Program Summary (1999-2001) (1) 10.24 Separation Agreement, dated as of June 23, 1998, between the Company and Jeffrey M. Boetticher (1) 21 Subsidiaries of the Company (1) 23.1 Consent and Report of Arthur Andersen LLP, independent public accountants (1) 27.1 Financial Data Schedule (1) 27.2 Restated Financial Data Schedule for Form 10-Q for the Fiscal 1998 Third Quarter (1) 27.3 Restated Financial Data Schedule for Form 10-Q for the Fiscal 1998 Second Quarter (1) 27.4 Restated Financial Data Schedule for Form 10-Q for the Fiscal 1998 First Quarter (1) 27.5 Restated Financial Data Schedule for Form 10-K for Fiscal 1997 (1) 27.6 Restated Financial Data Schedule for Form 10-Q for Fiscal 1997 Third Quarter (1) 27.7 Restated Financial Data Schedule for Form 10-Q for Fiscal 1997 Second Quarter (1) 27.8 Restated Financial Data Schedule for Form 10-Q for Fiscal 1997 First Quarter (1) 27.9 Restated Financial Data Schedule for Form 10-K for Fiscal 1996 (1) (1) Filed herewith. (2) Filed as an exhibit to the 1993 Annual Report on Form 10-K of the Company, file number 0-18706, filed with the Commission on June 26, 1993, and incorporated herein by reference. (3) Filed as an exhibit to the Registration Statement No. 33-50104 on Form S-1 of the Company, filed with the Commission on July 28, 1992, as amended through April 13, 1993, and incorporated herein by reference. 42 43 (4) Filed as an exhibit to the Report on Form 8-K, file number 0-18706, filed with the Commission on June 20, 1994, and incorporated herein by reference. (5) Filed as an exhibit to the Registration Statement No. 33-28207 on Form S-1 of the Company, filed with the Commission on April 24, 1989, as amended through July 26, 1989, and incorporated herein by reference. (6) Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number 0-18706, filed with the Commission on February 15, 1994, and incorporated herein by reference. (7) Filed as an exhibit to the 1994 Annual Report on Form 10-K of the Company, file number 0-18706, filed with the Commission on June 28, 1994, and incorporated herein by reference. (8) Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number 0-18706, filed with the Commission on August 17, 1994 and incorporated herein by reference. (9) Filed as an exhibit to the 1995 Form 10-K of the Company, file number 0-18706, filed with the Commission on June 19, 1995 and incorporated herein by reference. (10) Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, filed number 0-18706, filed with the Commission on August 10, 1995, and incorporated herein by reference. (11) Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number 0-18706, filed with the Commission on November 15, 1995, and incorporated herein by reference. (12) Filed as an exhibit to the 1996 Form 10-K of the Company, file number 0-18706, filed with the Commission on June 25, 1996 and incorporated herein by reference. (13) Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number 0-18706, filed with the Commission on November 13, 1996, and incorporated herein by reference. (14) Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number 0-18706, filed with the Commission on February 12, 1997, and incorporated herein by reference. 43 44 (15) Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number 0-18706, filed with the Commission on November 10, 1997, and incorporated herein by reference. (b) Reports on Form 8-K. None. (c) The Company hereby files as exhibits to the Form 10-K the exhibits set forth in Item 14(a)(3) hereof which are not incorporated by reference. (d) The Company hereby files as financial statement schedules to this Form 10-K the financial statement schedules which are set forth in Item 14(a)(2) hereof. 44 45 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1943, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BLACK BOX CORPORATION Dated: June 19, 1998 /s/ ANNA M. BAIRD ---------------------------------------------- Anna M. Baird, Vice President, Chief Financial Officer, Treasurer, and principal accounting officer Pursuant to the requirements of the Securities Exchange Act of 1934 as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signatures Capacity Date ---------- -------- ---- /s/ WILLIAM F. ANDREWS Director June 19, 1998 - ---------------------------------------- William F. Andrews Director June 19, 1998 - ---------------------------------------- Michael E. Barker /s/ JEFFERY M. BOETTICHER Director, Chairman of the June 19, 1998 - ---------------------------------------- Board, and Chief Executive Jeffery M. Boetticher Officer /s/ WILLIAM R. NEWLIN Director June 19, 1998 - ---------------------------------------- William R. Newlin /s/ WILLIAM NORRED Director June 19, 1998 - ---------------------------------------- William Norred /s/ BRIAN D. YOUNG Director June 19, 1998 - ---------------------------------------- Brian D. Young /s/ FRED C. YOUNG Director, June 19, 1998 - ---------------------------------------- President, Chief Operating Fred C. Young Officer, and Secretary /s/ ANNA M. BAIRD Vice President, Chief Financial June 19, 1998 - ---------------------------------------- Officer, Treasurer, and Anna M. Baird principal accounting officer
46 ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Black Box Corporation: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements of Black Box Corporation and Subsidiaries included in this Form 10-K, and have issued our report thereon dated May 1, 1998. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the accompanying index is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ ARTHUR ANDERSEN LLP ----------------------- Arthur Andersen LLP Pittsburgh, Pennsylvania May 1, 1998 47 SCHEDULE II BLACK BOX CORPORATION VALUATIONS AND QUALIFYING ACCOUNTS (DOLLARS IN THOUSANDS)
BALANCE AT ADDITIONS BEGINNING CHARGED TO REDUCTIONS BALANCE AT OF COSTS AND FROM END OF DESCRIPTION PERIOD EXPENSES RESERVES PERIOD ----------- ------ -------- -------- ------ YEAR ENDED MARCH 31, 1996 Inventory reserves $1,273 $1,047 $ 672 $1,648 Allowance for unrealizable accounts/sales returns $2,059 $1,163 $ 815 $2,407 YEAR ENDED MARCH 31, 1997 Inventory reserves $1,648 $1,398 $1,436 $1,610 Allowance for unrealizable accounts/sales returns $2,407 $ 664 $ 572 $2,499 YEAR ENDED MARCH 31, 1998 Inventory reserves $1,610 $3,653 $2,409 $2,854 Allowance for unrealizable accounts/sales returns $2,499 $1,333 $1,177 $2,655
EX-10.1 2 BLACK BOX CORPORATION 1 Exhibit 10.1 BLACK BOX CORPORATION 1992 STOCK OPTION PLAN (AS AMENDED THROUGH FEBRUARY 3, 1998) I. PURPOSES BLACK BOX CORPORATION (the "Company") desires to afford certain of its key employees and the key employees of any subsidiary corporation or parent corporation of the Company now existing or hereafter formed or acquired who are responsible for the continued growth of the Company an opportunity to acquire a proprietary interest in the Company, and thus to create in such key employees an increased interest in and a greater concern for the welfare of the Company and its subsidiaries. The Company, by means of this 1992 Stock Option Plan as originally approved on November 11, 1992, and as further amended on May 10,1994, August 9, 1994, August 7, 1995, August 12, 1996, August 13, 1997, and February 3, 1998 (the "Plan"), seeks to retain the services of persons now holding key positions and to secure the services of persons capable of filling such positions. The stock options ("Options") and stock appreciation rights ("Rights") offered pursuant to the Plan are a matter of separate inducement and are not in lieu of any salary or other compensation for the services of any key employee. The Options granted under the Plan are intended to be either incentive stock options ("Incentive Options") within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or options that do not meet the requirements for Incentive Options ("Non-Qualified Options"), but the Company makes no warranty as to the qualification of any Option as an Incentive Option. II. AMOUNT OF STOCK SUBJECT TO THE PLAN The total number of shares of common stock of the Company which may be purchased or acquired pursuant to the exercise of Options or Rights granted under the Plan shall not exceed, in the aggregate, 3,200,000 shares of the authorized common stock, $.001 par value per share, of the Company (the "Shares"), such number subject to adjustment as provided in Article XII hereof. Shares that are the subject of Rights and related Options shall be counted only once in determining whether the maximum number of Shares that may be purchased or awarded under the Plan has been exceeded. Shares acquired under the Plan may be either authorized but unissued Shares or Shares of issued stock held in the Company's treasury, or both, at the discretion of the Company. If and to the extent that Options or Rights granted under the Plan expire or terminate without having been exercised, the Shares covered by such expired or terminated Options or Rights shall again become available for award under the Plan. Except as provided in Articles XIX and XXII and subject to Article II, the Company may, from time to time during the period beginning on the date on which the Company consummates an underwritten initial public offering of Shares (the "Effective Date") and ending on November 30, 2002 (the "Termination Date"), grant to certain key employees of the Company, or of any subsidiary corporation or parent corporation of the Company now existing or hereafter formed or acquired, Incentive Options and/or Non-Qualified Options and/or Rights under the terms hereinafter set forth. Provisions of the Plan that pertain to Options or Rights granted to an employee shall apply to Options, Rights or a combination thereof. As used in the Plan, the term "subsidiary corporation" and "parent corporation" shall mean, respectively, a corporation coming within the definition of such terms contained in Sections 424(f) and 424(e) of the Code. 1 2 III. ADMINISTRATION The board of directors of the Company (the "Board of Directors") shall designate from among its members an option committee, which may be the Compensation Committee of the Board of Directors (the "Committee"), to administer the Plan. The Committee shall consist of no fewer than two members of the Board of Directors, each of whom shall be a "disinterested person" within the meaning of Rule 16b-3 (or any successor rule or regulation) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). A majority of the members of the Committee shall constitute a quorum, and the act of a majority of the members of the Committee shall be the act of the Committee. Any member of the Committee may be removed at any time either with or without cause by resolution adopted by the Board of Directors, and any vacancy on the Committee at any time may be filled by resolution adopted by the Board of Directors. Subject to the express provisions of the Plan the Committee shall have authority, in its discretion, to determine the employees to whom Options or Rights shall be granted, the time when such Options or Rights shall be granted, the number of Shares which shall be subject to each Option or Right, the purchase price or exercise price of each Option or Right, the period(s) during which such Options or Rights shall become exercisable (whether in whole or in part) and the other terms and provisions thereof (which need not be identical). Subject to the express provisions of the Plan, the Committee also shall have authority to construe the Plan and the Options and Rights granted thereunder, to amend the Plan and the Options and Rights granted thereunder, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms and provisions of the Options (which need not be identical) and Rights (which need not be identical) granted thereunder and to make all other determinations necessary or advisable for administering the Plan. The Committee also shall have the authority to require, in its discretion, as a condition of the granting of any such Option or Right, that the employee agree (i) not to sell or otherwise dispose of Shares acquired pursuant to the exercise of such Option or Right for a period of six (6) months following the date of the acquisition of such Option or Right and (ii) that in the event of termination of employment of such employee, other than as a result of dismissal without cause, such employee will not, for a period to be fixed at the time of the grant of the Option or Right, enter into any other employment or participate directly or indirectly in any other business or enterprise which is competitive with the business of the Company or any subsidiary corporation or parent corporation of the Company, or enter into any employment in which such employee will be called upon to utilize special knowledge obtained through employment with the Company or any subsidiary corporation or parent corporation thereof. In no event will an employee who is subject to the reporting requirements of Section 16(a) of the Exchange Act be entitled to sell or otherwise dispose of any Shares acquired pursuant to exercise of any such Options or Rights for a period of six (6) months from the date of the acquisition of such Options or Rights. The determination of the Committee on matters referred to in this Article III shall be conclusive. The Committee may employ such legal counsel, consultants and agents as it may deem desirable for the administration of the Plan and may rely upon any opinion or computation received from any such legal counsel, consultant or agent. Expenses incurred by the Committee in the engagement of such counsel, consultant or agent shall be paid by the Company. No member or former member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any award of Options or Rights granted hereunder. IV. ELIGIBILITY Options and Rights may be granted only to salaried key employees of the Company or of any subsidiary corporation or parent corporation of the Company, except as hereinafter provided, and shall not be granted to any officer or director who is not also a salaried key employee or to any member of the Committee. Any person who shall have retired from active employment by the Company or a subsidiary corporation or parent corporation thereof, although such person shall have entered into a consulting contract with the Company or a subsidiary corporation or parent corporation thereof, shall not be eligible to receive an Option or a Right. The Plan does not create a right in any employee to participate in the Plan, nor does it create a right in any employee to have any Options or Rights granted to him or her. 2 3 V. OPTION PRICE AND PAYMENT The price for each Share purchasable under any Option granted hereunder shall be such amount as the Committee shall, in its best judgment, determine to be not less than one hundred percent (100%) of the fair market value per Share at the date the Option is granted; provided, however, that in the case of an Incentive Option granted to a person who, at the time such Option is granted, owns shares of the Company or any subsidiary corporation or parent corporation of the Company which possesses more than ten percent (10%) of the total combined voting power of all classes of shares of the Company or of any subsidiary corporation or parent corporation of the Company, the purchase price for each Share shall be such amount as the Committee in its best judgment shall determine to be not less than one hundred ten percent (110%) of the fair market value per Share at the date the Option is granted. In determining stock ownership of an employee for any purposes under the Plan, the rules of Section 424(d) of the Code shall be applied, and the Committee may rely on representations of fact made to it by the employee and believed by it to be true. If the Shares are listed on a national securities exchange in the United States (which, for purposes of this Article V, shall be deemed to include any last sale reported over-the-counter market), on any date on which the fair market value per Share is to be determined, the fair market value per Share shall be deemed to be the average of the high and low quotations at which such Shares are sold on such national securities exchange on the date such Option is granted. If the Shares are listed on a national securities exchange in the United States on such date, but the Shares are not traded on such date, or such national securities exchange is not open for business on such date, the fair market value per Share shall be determined as of the closest preceding date on which such exchange shall have been open for business and the Shares shall have been traded. If the Shares are listed on more than one national securities exchange in the United States on the date on which the fair market value per Share is to be determined, the Committee shall determine which national securities exchange shall be used for the purpose of determining the fair market value per Share. If a public market exists for the Shares on any date on which the fair market value per Share is to be determined but the Shares are not listed on a national securities exchange in the United States, the fair market value per Share shall be deemed to be the mean between the closing bid and asked quotations in the over-the-counter market for the Shares on such date. If there are no bid and asked quotations for the Shares on such date, the fair market value per Share shall be deemed to be the mean between the closing bid and asked quotations in the over-the-counter market for the Shares on the closest date preceding such date for which such quotations are available. If no public market exists for the Shares on any date on which the fair market value per Share is to be determined, the Committee shall, in its sole discretion and best judgment, determine the fair market value of a Share. For purposes of this Plan, the determination by the Committee of the fair market value of a Share shall be conclusive. Upon the exercise of an Option granted hereunder, the Company shall cause the purchased Shares to be issued only when it shall have received the full purchase price for the Shares in cash or by certified check; provided, however, that in lieu of cash, the holder of an Option may, if and to the extent the terms of such Option so provide and to the extent permitted by applicable law, exercise an Option (i) in whole or in part, by delivering to the Company shares of common stock of the Company (in proper form for transfer and accompanied by all requisite stock transfer tax stamps or cash in lieu thereof) owned by such holder having a fair market value equal to the exercise price applicable to that portion of the Option being exercised by the delivery of such Shares or (ii) in part, by delivering to the Company an executed promissory note on such terms and conditions as the Committee shall determine, at the time of grant, in its sole discretion; provided, however, that the principal amount of such note shall not exceed eighty percent (80%) (or such lesser percentage as would be permitted by applicable margin regulations) of the aggregate purchase price of the Shares then being purchased pursuant to the exercise of such Option. The fair market value of the stock so delivered shall be determined as of the date immediately preceding the date on which the Option is exercised, or as may be required in order to comply with or to conform to the requirements of any applicable laws or regulations. 3 4 VI. USE OF PROCEEDS The cash proceeds of the sale of Shares pursuant to the Plan are to be added to the general funds of the Company and used for its general corporate purposes as the Board of Directors shall determine. VII. TERM OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE Any Option shall be exercisable at such times, in such amounts and during such period or periods as the Committee shall determine at the date of the grant of such Option; provided, however, that an Incentive Option shall not be exercisable after the expiration of ten (10) years from the date such Option is granted; and provided further that, in the case of an Incentive Option granted to a person who, at the time such Option is granted, owns stock of the Company or any subsidiary corporation or parent corporation of the Company possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any subsidiary corporation or parent corporation of the Company, such Option shall not be exercisable after the expiration of five (5) years from the date such Option is granted. Except to the extent otherwise provided under the Code, to the extent that the aggregate fair market value of stock for which Incentive Options are exercisable for the first time by an employee during any calendar year (under all stock option plans of the Company and of any parent corporation or subsidiary corporation of the Company) exceeds one hundred thousand dollars ($100,000), such Options shall be treated as Non-Qualified Options. For purposes of this limitation, (i) the fair market value of stock is determined as of the time the Option is granted, and (ii) the limitation will be applied by taking into account Options in the order in which they were granted. Subject to the provisions of Article XVIII, the Committee shall have the right to accelerate, in whole or in part, from time to time, conditionally or unconditionally, rights to exercise any Option granted hereunder. To the extent that an Option is not exercised within the period of exercisability specified therein, it shall expire as to the then unexercised part. In no event shall an Option granted hereunder be exercised for a fraction of a Share. VIII. EXERCISE OF OPTIONS Options granted under the Plan shall be exercised by the optionee as to all or part of the Shares covered thereby by the giving of written notice of the exercise thereof to the Corporate Secretary of the Company at the principal business office of the Company, specifying the number of Shares to be purchased and specifying a business day not more than fifteen (15) days from the date such notice is given for the payment of the purchase price against delivery of the Shares being purchased. Subject to the terms of Articles XIV, XVI, and XVII, the Company shall cause certificates for the Shares so purchased to be delivered to the optionee at the principal business office of the Company, against payment of the full purchase price, on the date specified in the notice of exercise. IX. STOCK APPRECIATION RIGHTS In the discretion of the Committee, a Right may be granted (i) alone, (ii) simultaneously with the grant of an Option (either Incentive or Non-Qualified) and in conjunction therewith or in the alternative thereto or (iii) subsequent to the grant of a Non-Qualified Option and in conjunction therewith or in the alternative thereto. The exercise price of a Right granted alone shall be determined by the Committee but shall not be less than one hundred percent (100%) of the fair market value of one Share on the date of grant of such Right. A Right granted simultaneously with or subsequent to the grant of an Option and in conjunction therewith or in the alternative thereto shall have the same exercise price as the related Option, shall be transferable only upon the same terms and conditions as the related Option, and shall be exercisable only to the same extent as the related Option; provided, however, that a Right, by its terms, shall be exercisable only when the fair market value of the Shares subject to the Right and related Option exceeds the exercise price thereof. Upon exercise of a Right granted simultaneously with or subsequent to an Option and in the alternative thereto, the number of Shares for which the related Option shall be exercisable shall be reduced by the number 4 5 of Shares for which the Right shall have been exercised. The number of Shares for which a Right shall be exercisable shall be reduced upon any exercise of a related Option by the number of Shares for which such Option shall have been exercised. Any Right shall be exercisable upon such additional terms and conditions as may from time to time be prescribed by the Committee. A Right shall entitle the holder upon exercise thereof to receive from the Company, upon a written request filed with the Secretary of the Company at its principal offices (the "Request"), a number of Shares (with or without restrictions as to substantial risk of forfeiture and transferability, as determined by the Committee in its sole discretion), an amount of cash, or any combination of Shares and cash, as specified in the Request (but subject to the approval of the Committee in its sole discretion, at any time up to and including the time of payment, as to the making of any cash payment), having an aggregate fair market value equal to the product of (i) the excess of the fair market value, on the day of such Request, of one Share over the exercise price per share specified in such Right or its related Option, multiplied by (ii) the number of Shares for which such Right shall be exercised. Any election by a holder of a Right to receive cash in full or partial settlement of such Right, and any exercise of such Right for cash, may be made only by a Request filed with the Corporate Secretary of the Company during the period beginning on the third business day following the date of release for publication by the Company of quarterly or annual summary statements of sales and earnings and ending on the twelfth business day following such date. Within thirty (30) days of the receipt by the Company of a Request to receive cash in full or partial settlement of a Right or to exercise such Right for cash, the Committee shall, in its sole discretion, either consent to or disapprove, in whole or in part, such Request. A Request to receive cash in full or partial settlement of a Right or to exercise a Right for cash may provide that, in the event the Committee shall disapprove such Request, such Request shall be deemed to be an exercise of such Right for Shares. If the Committee disapproves in whole or in part any election by a holder to receive cash in full or partial settlement of a Right or to exercise such Right for cash, such disapproval shall not affect such holder's right to exercise such Right at a later date, to the extent that such Right shall be otherwise exercisable, or to elect the form of payment at a later date, provided that an election to receive cash upon such later exercise shall be subject to the approval of the Committee. Additionally, such disapproval shall not affect such holder's right to exercise any related Option or Options granted to such holder under the Plan. A holder of a Right shall not be entitled to request or receive cash in full or partial payment of such Right unless such Right shall have been held for six (6) months from the date of acquisition to the date of cash settlement thereof; provided, however, that such prohibition shall not apply if the holder of such Right is not subject to the reporting requirements of Section 16(a) of the Exchange Act. In no event will a holder of a Right who is subject to the reporting requirements of Section 16(a) of the Exchange Act be entitled to make such a request or receive cash in full or partial payment of such Right until the Company shall have satisfied the informational requirements of Rule 16b-3(e)(1) promulgated under the Exchange Act for the specified one year period. A Right shall be deemed exercised on the last day of its term, if not otherwise exercised by the holder thereof, provided that the fair market value of the Shares subject to the Right exceeds the exercise price thereof on such date. For all purposes of this Article IX, the fair market value of Shares shall be determined in accordance with the principles set forth in the Article V. X. NON-TRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS Neither an Option nor a Right granted hereunder shall be transferable, whether by operation of law or otherwise, other than by will or the laws of descent and distribution, and any Option or Right granted hereunder shall be exercisable during the lifetime of the holder only by such holder. Except to the extent provided above, Options and Rights may not be assigned, transferred, pledged, hypothecated or disposed of in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. 5 6 XI. TERMINATION OF EMPLOYMENT Upon termination of employment of any employee with the Company and all subsidiary corporations and parent corporations of the Company, an Option or Right previously granted to the employee, unless otherwise specified by the Committee in the Option or Right, shall, to the extent not theretofore exercised, terminate and become null and void, provided that: (a) if the employee shall die while in the employ of such corporation or during either the three (3) month or one (1) year period, whichever is applicable, specified in clause (b) below and at a time when such employee was entitled to exercise an Option or Right as herein provided, the legal representative of such employee, or such person who acquired such Option or Right by bequest or inheritance or by reason of the death of the employee, may, not later than one (1) year from the date of death, exercise such Option or Right, to the extent not theretofore exercised, in respect of any or all of such number of Shares as specified by the Committee in such Option or Right; and (b) if the employment of an employee to whom such Option or Right shall have been granted shall terminate by reason of the employee's retirement (at such age or upon such conditions as shall be specified by the Board of Directors), disability (as described in Section 22(e)(3) of the Code) or dismissal by the employer other than for cause (as defined below), and while such employee is entitled to exercise such Option or Right as herein provided, such employee shall have the right to exercise such Option or Right so granted, to the extent not theretofore exercised, in respect of any or all of such number of Shares as specified by the Committee in such Option or Right, at any time up to and including (i) three (3) months after the date of such termination of employment in the case of termination by reason of retirement or dismissal other than for cause and (ii) one (1) year after the date of termination of employment in the case of termination by reason of disability. If an employee voluntarily terminates his or her employment, or is discharged for cause, any Option or Right granted hereunder shall, unless otherwise specified by the Committee in the Option or Right, forthwith terminate with respect to any unexercised portion thereof. If an Option or Right granted hereunder shall be exercised by the legal representative of a deceased or disabled employee or former employee, or by a person who acquired an Option or Right granted hereunder by bequest or inheritance or by reason of death of any employee or former employee, written notice of such exercise shall be accompanied by a certified copy of letters testamentary or equivalent proof of the right of such legal representative or other person to exercise such Option or Right. For the purposes of the Plan, the term "for cause" shall mean (i) with respect to an employee who is party to a written agreement with, or, alternatively, participates in a compensation or benefit plan of the Company or a subsidiary corporation or parent corporation of the Company, which agreement or plan contains a definition of "for cause" or "cause" (or words of like import) for purposes of termination of employment thereunder by the Company or such subsidiary corporation or parent corporation of the Company, "for cause" or "cause" as defined in the most recent of such agreements or plans, or (ii) in all other cases, (a) the willful commission by an employee of a criminal or other act that causes substantial economic damage to the Company or a subsidiary corporation or parent corporation of the Company or substantial injury to the business reputation of the Company or a subsidiary corporation or parent corporation of the Company; (b) the commission by an employee of an act of fraud in the performance of such employee's duties on behalf of the Company or a subsidiary corporation or parent corporation of the Company; or (c) the continuing willful failure of an employee to perform the duties of such employee to the Company or a subsidiary corporation or parent corporation of the Company (other than such failure resulting from the employee's incapacity due to physical or mental illness) after written notice thereof (specifying the particulars thereof in reasonable detail) and a reasonable opportunity to be heard and cure such failure are given to the employee by the Board of Directors or the Committee. For purposes of the Plan, no act, or failure to act, on the employee's part shall be considered "willful" unless done or omitted to be done by the employee not in good faith and without reasonable belief that the employee's action or omission was in the best interest of the Company or a subsidiary corporation or parent corporation of the Company. For the purposes of the Plan, an employment relationship shall be deemed to exist between an individual and a corporation if, at the time of the determination, the individual was an "employee" of such corporation for purposes of Section 422(a) of the Code. If an individual is on military, sick leave or other bona 6 7 fide leave of absence, such individual shall be considered an "employee" for purposes of the exercise of an Option or Right and shall be entitled to exercise such Option or Right during such leave if the period of such leave does not exceed 90 days, or, if longer, so long as the individual's right to reemployment with the corporation granting the option (or a related corporation) is guaranteed either by statute or by contract. If the period of leave exceeds ninety (90) days, the employment relationship shall be deemed to have terminated on the ninety-first (91st) day of such leave, unless the individual's right to reemployment is guaranteed by statute or contract. A termination of employment shall not be deemed to occur by reason of (i) the transfer of an employee from employment by the Company to employment by a subsidiary corporation or a parent corporation of the Company or (ii) the transfer of an employee from employment by a subsidiary corporation or a parent corporation of the Company to employment by the Company or by another subsidiary corporation or parent corporation of the Company. Furthermore, solely for purposes of determining the rights and obligations under any outstanding Options or Rights theretofore granted, in the event that the Company ceases to own, directly or indirectly, stock possessing 50% or more of the total combined voting power of all classes of stock of a subsidiary company by virtue of a recapitalization, stock dividend, stock split, split-up, spin-off, combination of shares or other like change in capital structure of the Company, the Committee may determine that employment by such former subsidiary (or any parent or subsidiary company of such subsidiary) shall continue to be deemed to be employment by the Company for purposes of the Plan. In the event of the complete liquidation or dissolution of a subsidiary corporation, or in the event that the Company ceases to own, directly or indirectly, stock possessing 50% or more of the total combined voting power of all classes of stock of such corporation, any unexercised Options or Rights theretofore granted to any person employed by such subsidiary corporation will be deemed canceled unless such person is employed by the Company or by any parent corporation or another subsidiary corporation after the occurrence of such event. In the event an Option or Right is to be canceled pursuant to the provisions of the previous sentence, notice of such cancellation will be given to each employee holding unexercised Options or Rights and such holder will have the right to exercise such Options or Rights in full (without regard to any limitation set forth or imposed pursuant to Article VII) during the 30 day period following notice of such cancellation. Notwithstanding anything to the contrary contained in this Article XI, in no event, however, shall any person be entitled to exercise any Option or Right after the expiration of the period of exercisability of such Option or Right as specified therein. XII. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN TRANSACTIONS In the event of any change in the outstanding Shares through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, issuance of rights to subscribe for Shares, or other like change in capital structure of the Company, the Committee shall make such adjustment to each outstanding Option and Right that it, in its sole discretion, deems appropriate. The term "Shares" after any such change shall refer to the securities, cash and/or property then receivable upon exercise of an Option or Right. In addition, in the event of any such change, the Committee shall make any further adjustments as may be appropriate to the maximum number of Shares which may be acquired under the Plan pursuant to the exercise of Options and Rights, the maximum number of Shares which may be so acquired by one employee and the number of Shares and prices per Share subject to outstanding Options and Rights as shall be equitable to prevent dilution or enlargement of rights under such Options or Rights, and the determination of the Committee as to these matters shall be conclusive. Notwithstanding the foregoing, (i) each such adjustment with respect to an Incentive Option and any related Right shall comply with the rules of Section 424(a) of the Code and (ii) in no event shall any adjustment be made which would render any Incentive Option granted hereunder to be other than an "incentive stock option" for purposes of Section 422 of the Code. In the event of a "change in control" of the Company, all then outstanding Options and Rights shall immediately become exercisable. For purposes of the Plan, a "change in control" of the Company occurs if: (a) any "Person" (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act), other than Odyssey Partners, L.P. and its affiliates (which, for purposes of this Article XII only, is deemed to include E.R. Yost) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of the Company representing (i) 50% or more of the combined voting power of the Company's then-outstanding securities; or (ii) 25% or more but less than 50% of the combined voting power of the Company's 7 8 then-outstanding securities if such transaction(s) giving rise to such beneficial ownership are not approved by the Company's Board of Directors; or (b) at any time a majority of the members of the Board of Directors has been elected or designated by any Person, other than Odyssey Partners, L.P. and its affiliates (which, for purposes of this Article XII only, is deemed to include E.R. Yost); or (c) the Board of Directors shall approve a sale of all or substantially all of the assets of the Company or any merger, consolidation, issuance of securities or purchase of assets, in all cases other than to or with Odyssey Partners, L.P. or its affiliates (which, for purposes of this Article XII only, is deemed to include E.R. Yost), the result of which would be the occurrence of any event described in clause (a) or (b) above. The Committee, in its discretion, may determine that, upon the occurrence of a transaction described in the preceding paragraph, each Option or Right outstanding hereunder shall terminate within a specified number of days after notice to the holder, and such holder shall receive, with respect to each Share subject to such Option or Right, cash in an amount equal to the excess of the fair market value of such Shares immediately prior to the occurrence of such transaction over the exercise price per share of such Option or Right. The provisions contained in the preceding sentence shall be inapplicable to an Option or Right granted within six (6) months before the occurrence of a transaction described above if the holder of such Option or Right is subject to the reporting requirements of Section 16(a) of the Exchange Act. XIII. RIGHT TO TERMINATE EMPLOYMENT The Plan shall not impose any obligation on the Company or on any subsidiary corporation or parent corporation thereof to continue the employment of any holder of Options or Rights and it shall not impose any obligation on the part of any holder of Options or Rights to remain in the employ of the Company or of any subsidiary corporation or parent corporation thereof. XIV. PURCHASE FOR INVESTMENT Except for hereinafter provided, the Committee may require an employee, as a condition upon exercise of any Option or Right granted hereunder, to execute and deliver to the Company (a) stock powers with respect to Shares underlying a particular Option or Right and required to be held by a custodian, and (b) a written statement, in form satisfactory to the Committee in which the employee represents and warrants that Shares are being acquired for such person's own account for investment only and not with a view to the resale or distribution thereof. The employee shall, at the request of the Committee, be required to represent and warrant in writing that any subsequent resale or distribution of Shares by the Employee shall be made only pursuant to either (i) a Registration Statement on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act"), which Registration Statement has become effective and is current with regard to the Shares being sold, or (ii) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption the employee shall, prior to any offer of sale or sale of such Shares, obtain a prior favorable written opinion of counsel, in form and substance satisfactory to counsel for the Company, as to the application of such exemption thereto. The foregoing restriction shall not apply to (i) issuances by the Company so long as the Shares being issued are registered under the Securities Act and a prospectus in respect thereof is current or (ii) re-offerings of Shares by affiliates of the Company (as defined in Rule 405 or any successor rule or regulation promulgated under the Securities Act) if the Shares being re-offered are registered under the Securities Act and a prospectus in respect thereof is current. XV. ISSUE OF CERTIFICATES, LEGENDS, PAYMENT OF EXPENSES Upon any exercise of an Option or Right which may be granted hereunder and, in the case of an Option, payment of the purchase price, a certificate or certificates for the Shares shall be issued by the Company in the name of the person exercising the Option or Right and shall be delivered to or upon the order of such person. The Company may endorse such legend or legends upon the certificates for Shares issued pursuant to the Plan and may issue such "stop transfer" instructions to its transfer agent in respect of such Shares as, in its discretion, it determines to be necessary or appropriate to (i) prevent a violation of, or to perfect an exemption from, the registration requirements of the Securities Act, (ii) implement the provisions of the Plan and any agreement between the Company and the optionee or grantee with respect to such Shares, or (iii) permit the Company to determine the occurrence of a disqualifying disposition, as described in Section 421(b) of the Code, of Shares transferred upon exercise of an Incentive Option granted under the Plan. 8 9 The Company shall pay all issue or transfer taxes with respect to the issuance of transfer of Shares, as well as all fees and expenses necessarily incurred by the Company in connection with such issuance or transfer, except fees and expenses which may be necessitated by the filing or amending of a Registration Statement under the Securities Act, which fees and expenses shall be borne by the recipient of the Shares unless such Registration Statement has been filed by the Company for its own corporate purposes (and the Company so states) in which event the recipient of the Shares shall bear only fees and expenses as are attributable solely to the inclusion of the Shares he or she received in the Registration Statement. All Shares issued as provided herein shall be fully paid and non-assessable to the extent permitted by law. XVI. WITHHOLDING TAXES The Company may require an employee exercising a Right or Non-Qualified Option granted hereunder, or disposing of Shares acquired pursuant to the exercise of an Incentive Option in a disqualifying disposition (within the meaning of Section 421(b) of the Code), to reimburse the corporation that employs such employee for any taxes required by any government to be withheld or otherwise deducted and paid by such corporation in respect of the issuance or disposition of such Shares. In lieu thereof, the corporation that employs such employee shall have the right to withhold the amount of such taxes from any other sums due or to become due from such corporation to the employee upon such terms and conditions as the Committee shall prescribe. The corporation that employs such employee may, in its discretion, hold the stock certificate to which such employee is entitled upon the exercise of an Option as security for the payment of such withholding tax liability, until cash sufficient to pay that liability has been accumulated. In addition, at any time that the Company becomes subject to a withholding obligation under applicable law with respect to the exercise of a Right or Non-Qualified Option (the "Tax Date"), except as set forth below, a holder of a Right or Non-Qualified Option may elect to satisfy, in whole or in part, the holder's related personal tax liabilities (an "Election") by (i) directing the Company to withhold from Shares issuable in the related exercise either a specified number of Shares or Shares having a specified value (in each case not in excess of the related personal tax liabilities), (ii) tendering Shares previously issued pursuant to the exercise of an Option or Right or other Shares of the Company's common stock owned by the holder or (iii) combining any or all of the foregoing options in any fashion. An Election shall be irrevocable. The withheld Shares and other Shares tendered in payment shall be valued at their fair market value (determined in accordance with the principles set forth in Article V of the Plan) on the Tax Date. The Committee may disapprove of any Election, suspend or terminate the right to make Elections or provide that the right to make Elections shall not apply to particular Shares or exercises. The Committee may prescribe additional rules, in its discretion, to permit a holder of an Option or Right who is subject to the reporting requirements of Section 16(a) of the Exchange Act to effect such tax withholding in compliance with the Rules promulgated under Section 16 of the Exchange Act and the positions of the staff of the Securities and Exchange Commission expressed in no-action or interpretative letters exempting such tax withholding transactions from liability under Section 16(b) of the Exchange Act. The Committee may also impose any additional conditions or restrictions on the right to make an Election as it shall deem appropriate. XVII. LISTING OF SHARES AND RELATED MATTERS The Committee may delay any award, issuance or delivery of Shares if it determines that listing, registration or qualification of Shares or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the sale or purchase of Shares under the Plan, until such listing, registration, qualification, consent or approval shall have been effected or obtained, or otherwise provided for, free of any conditions not acceptable to the Committee. XVIII. AMENDMENT OF THE PLAN The Board of Directors or the Committee, as the case may be, may, from time to time, amend the Plan, provided that no amendment shall be made, without the approval of the stockholders of the Company, that will (i) increase the total number of Shares reserved for Options under the Plan (other than an increase resulting from an adjustment provided for in Article XII), (ii) reduce the exercise price of any Incentive Option granted hereunder below the price required by Article V, (iii) modify the provisions of the Plan relating to eligibility, or (iv) materially increase the benefits accruing to participants under the Plan. The Board of Directors or the Committee, as the case may be, shall be authorized to amend the Plan and the Options granted thereunder to permit the Incentive Options granted thereunder to qualify as incentive stock options within the meaning of 9 10 Section 422 of the Code. The rights and obligations under any Option or Right granted before amendment of the Plan or any unexercised portion of such Option or Right shall not be adversely affected by amendment of the Plan, Option or Right without the consent of the holder of such Option or Right. XIX. TERMINATION OR SUSPENSION OF THE PLAN The Board of Directors may at any time suspend or terminate the Plan. The Plan, unless sooner terminated by action of the Board of Directors, shall terminate at the close of business on the Termination Date. Options and Rights may not be granted while the Plan is suspended or after it is terminated. Rights and obligations under any Option or Right granted while the Plan is in effect shall not be altered or impaired by suspension or termination of the Plan, except upon the consent of the person to whom the Option or Right was granted. The power of the Committee to construe and administer any Options or Rights granted prior to the termination or suspension of the Plan under Article III nevertheless shall continue after such termination or during such suspension. XX. GOVERNING LAW The Plan, such Options and Rights as may be granted thereunder and all related matters shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware from time to time obtaining. XXI. PARTIAL INVALIDITY The invalidity or illegibility of any provision hereof shall not be deemed to affect the validity of any other provision. XXII. EFFECTIVE DATE This Plan became effective at 5:30 P.M., New York City Time, on the Effective Date. 10 EX-10.23 3 BLACK BOX CORPORATION 1 EXHIBIT 10.23 EXECUTIVE INCENTIVE PROGRAM SUMMARY (1999 - 2001) The purpose of this program is to provide incentive compensation to key employees of Black Box Corporation (the "Company"), in order to motivate and retain such key employees. Payment of the incentive compensation is based on the Company meeting or exceeding cumulative three year targets for both revenue and earnings per share. The three year period covers fiscal 1999, 2000 and 2001. If the targets are achieved, a fixed lump-sum cash payment will be made within the first 45 days of fiscal 2002. EX-10.24 4 BLACK BOX CORPORATION 1 Exhibit 10.24 [BLACK BOX LETTERHEAD] June 22, 1998 VIA MESSENGER - ------------- Mr. Jeffery M. Boetticher 110 Sherborne Drive McMurray, PA 15317 Re: Separation Agreement -------------------- Dear Mr. Boetticher: This letter agreement ("Agreement") is intended to set forth the understandings we recently reached regarding your retirement from active employment by Black Box Corporation (the "Corporation") and certain related matters, as follows: Section 1. Cessation of Active Employment. Your last day of full-time work at the Corporation will be June 30, 1998. You will be on paid vacation for the period July 1, 1998 through December 8, 1998 (the "Retirement Date"), during which period you will be treated for all purposes as a regular Corporation employee who is on an approved vacation leave. Section 2. Additional Payments. The Corporation shall make the following payments to you: (i) $850,000 representing the remaining portion of your award under the Corporation's Key Employee Incentive Compensation Plan, with respect to fiscal years 1996-1998, which amount shall be paid to you on or before the earlier to occur of (a) December 31, 1998 and (b) the date on which such amount or portion thereof is accrued as a liability on the books and records of the Corporation in accordance with generally accepted accounting principles, and (ii) $36,000, representing accrued but unpaid vacation, which amount shall be paid to you on December 8, 1998. Section 3. Stock Options. Effective as of September 1, 1998, you will be fully vested in all of the stock options which you have been awarded under the Black Box Corporation 1992 Stock Option Plan ("Plan"). As of the Retirement Date, you will be deemed to have terminated employment with the Corporation on account of "retirement" for purposes of Article XI, subparagraph (b) of the Plan and each related Non-Qualified Stock Option Agreement to which you are a party. To the extent that the vesting provisions of any option agreements to which you and the Corporation are parties are inconsistent with the foregoing, such provisions shall be disregarded. Such options will remain exercisable through March 8, 1999 (i.e., three (3) months from the Retirement Date). The Corporation shall take such action as may be necessary to effectuate the acceleration of vesting and exercisability of options described in this Section 3. 1000 Park Drive, Lawrence, PA 15055-1018 * (724)746-5500 * FAX (724)746-0746 2 June 22, 1998 Page 2 Section 4. Consulting. For the nine-month period beginning December 9, 1998 and ending August 31, 1998 ("Consulting Period"), you will be available to act as a consultant (and not as an employee) to the Corporation. The Corporation will pay you a per diem consulting fee of $500 for each day of consultation provided by you at the request of the Corporation, payable as of the last business day of each calender month during the Consulting Period. During the Consulting Period, you agree to be available to the Corporation to assist in various projects as may be assigned to you by the Corporation from time to time. The Corporation agrees to reimburse you for any travel and out of pocket expenses you may incur in conjunction with such assignments. Section 5. Participation in Employee Benefit Plans. Your participation as an active employee in the Corporation's employee benefit plans will cease as of the Retirement Date or at such later date as may be provided pursuant to the terms of any such plans. Section 6. Payments Upon Death or Disability. In the event of your disability or death prior to receipt of the various payments and benefits provided to you and your eligible dependents pursuant to the terms of this Agreement, any remaining payments or benefits shall be provided to you in the event of your disability or to your surviving spouse (if then living, otherwise equally to your surviving children, or to such other beneficiaries as you may designate in writing provided to the Corporation from time to time) in the event of your death. Section 7. Non-Compete/Non-Solicit. Your obligations pursuant to the Non-Compete and Non-Solicit Agreement dated January 1998 shall remain in full force and effect and those obligations shall be in addition to any other obligations enforceable against you pursuant to this Agreement or Attachment A. Section 8. Release and Remedies. Your right to receive the benefits referred to in this Agreement is conditioned on your execution of the Release and Separation Agreement that is attached hereto as Attachment A, the terms of which are incorporated into this Agreement. Your sole and exclusive remedy in the event of a breach of this Agreement by the Corporation shall be, and the Corporation's liability shall be limited to, damages equal to the payments and benefits required to be provided by the Corporation under this Agreement, plus reasonable attorney fees and costs incurred by you if you are successful in enforcing your rights under the Agreement. Section 9. Arbitration. Except as otherwise provided in this Agreement, the Corporation and you hereby consent to the resolution by arbitration of all claims or controversies for which a court otherwise would be authorized by law to grant relief, in any way arising out of, relating to or associated with the terms and/or enforcement of this Agreement. This does not apply to claims by the Corporation for injunctive and/or other equitable relief for prohibited competition and/or solicitation and/or the use and/or unauthorized disclosure of trade secrets or confidential information. 1000 Park Drive, Lawrence, PA 15055-1018 * (724)746-5500 * FAX (724)746-0746 3 June 22, 1998 Page 3 Any claims subject to arbitration pursuant to this Agreement, upon the request of you or the Corporation, shall be submitted to and settled by arbitration before a single arbitrator in the Commonwealth of Pennsylvania pursuant to the commercial arbitration rules then in effect of the American Arbitration Association (or at any other place or under any other form of arbitration mutually acceptable to you and the Corporation). Any award rendered shall be final and conclusive upon you and the Corporation, and a judgement may be entered in the highest court, state or federal, having jurisdiction. Section 10. Successors. (a) This Agreement shall be binding upon and inure to the benefit of you and your heirs and estate and the Corporation and its successors and assigns. (b) The Corporation shall require any successor (direct or indirect, by consolidation, liquidation, purchase, acquisition of assets, or otherwise) to expressly assume and perform the Corporation's responsibilities and liability hereunder to the same extent that the Corporation would have been required to perform if no succession had taken place. Section 11. Assignment. (a) Any rights and interest that you, your beneficiaries and/or your estate may have hereunder shall not be assignable (in law or equity) or subject to any manner of alienation, sale, transfer, claims of creditors, pledge, attachment, garnishment, levy, execution, or encumbrances of any kind, and any attempt to do so shall be void. (b) Any assignment of the Corporation's responsibilities and liability hereunder shall not relieve the Corporation of its responsibilities and liability hereunder. Section 12. No Funding. Your rights and interest hereunder shall be that of a general unsecured creditor of the Corporation, and you shall not have any preferred claims on, or any beneficial interest in, the assets of the Corporation. Section 13. Withholding. All amounts payable hereunder shall be subject to withholding for taxes (federal, state, and local) to the extent required by applicable law. Section 14. Severability and Waivers. (a) Any provisions of this Agreement prohibited by law shall be ineffective to the extent of such prohibition without invalidating the remaining provisions. (b) The failure by you or the Corporation to insist upon strict compliance with any provisions of this Agreement shall not be deemed to be a waiver of such provision. Any waiver of any provision of this Agreement shall not be deemed to be a waiver of any other provision, 1000 Park Drive, Lawrence, PA 15055-1018 * (724)746-5500 * FAX (724)746-0746 4 June 22, 1998 Page 4 and any waiver of default in any provision of this Agreement shall not be deemed to be a waiver of any later default. Section 15. Entire Understanding Amendment. (a) This Agreement represents the entire understanding of you and the Corporation with respect to the matters set forth herein. (b) Any previous agreements to which you and the Corporation or its predecessors or related entities are parties, including, without limitation, the Agreement dated December 20, 1994 between you and the Corporation, shall be null and void and of no effect whatsoever. (c) Termination, revocation, or amendment of this Agreement shall be made only in a writing executed by both you and the Corporation. Section 16. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. You should carefully consider the matters outlined in this Agreement. If, after due deliberation and consultation with such professional advisors as you deem appropriate, including a lawyer of your own choice, you agree with the terms of this Agreement, please sign where indicated below and return this letter to my office prior to July 14, 1998. The additional enclosed copy of this letter is for your files. Very truly yours, BLACK BOX CORPORATION By: /s/ FRED C. YOUNG -------------------------------- Fred C. Young, President Accepted and Agreed: /s/ JEFFERY M. BOETTICHER - ----------------------------- Jeffery M. Boetticher Date: June 22, 1998 1000 Park Drive, Lawrence, PA 15055-1018 * (724)746-5500 * FAX (724)746-0746 5 ATTACHMENT "A" RELEASE AND SEPARATION AGREEMENT THIS RELEASE AND SEPARATION AGREEMENT ("Separation Agreement"), effective as of June 22, 1998, by and between Black Box Corporation ("Corporation") and Jeffery M. Boetticher ("Executive"). WITNESSETH: WHEREAS, the Executive has been employed by the Corporation and is a party to a letter agreement with the Corporation dated June 22, 1998 ("Letter Agreement"), which requires the Executive to execute this Separation Agreement in order to receive the benefits provided under the Letter Agreement; and WHEREAS, the Executive desires to execute this Separation Agreement in order to receive the benefits ("Termination Benefits") provided under the Letter Agreement; NOW THEREFORE, the parties, intending to be legally bound hereby, and in consideration of the representations and covenants set forth herein, agree to the following terms and conditions: 1. Recitals. The above recitals are true and correct and are incorporated into the substantive provisions of the Separation Agreement. 2. Release and Waiver of Rights. In consideration of the Termination Benefits provided to the Executive by the Corporation pursuant to the Letter Agreement, the Executive, intending to be legally bound: (a) hereby releases and forever discharges the Corporation as of the date of this Separation Agreement and thereafter, its subsidiaries, successors, assigns and affiliates, and all its and their present or former employees, agents and directors and their respective heirs, executors, administrators, successors and assigns, from all claims, charges, complaints or causes of action except with respect to the Corporation's obligations to provide the Termination Benefits, and which the undersigned now has or may or can hereafter have, known or unknown, by reason of any cause whatsoever, on account of, or in anywise arising out of any transactions or events which have occurred prior to the signing of this Agreement, and specifically with regard to or relating to the Executive's employment with the Corporation or the termination thereof, under Title VII of the Civil Rights Act of 1964, as amended, the Pennsylvania Human Relations Act, as amended, the Equal Pay Act, as amended, the Age Discrimination in Employment Act of 1967, as amended, The Americans With Disabilities Act, The Employee Retirement Income Security Act of 1974, the Pittsburgh Ordinance on Human Relations, or any similar federal, state or local statutes, ordinances or regulations. (b) hereby agrees not to file or aid or participate in any lawsuit filed against the Corporation as of the date of this Separation Agreement and thereafter, its subsidiaries, successors, assigns and affiliates, and all its and their present or former officers, employees, 1000 Park Drive, Lawrence, PA 15055-1018 * (724)746-5500 * FAX (724)746-0746 6 agents and directors and their respective heirs, executors, administrators, successors and assigns arising out of, or related to, any employment relationship between the Corporation and the Executive or any other person or persons. If Executive breaches this promise and files a lawsuit against any person or entity released hereby, Executive agrees to pay any such person or entity the legal fees and related expenses incurred as a result of his broken promise. (c) hereby agrees to abide by the terms of the Letter Agreement and the Non-Compete and Non-Solicit Agreement referred to in Section 7 of that Agreement. 3. Remedies for Breach. In further consideration of the benefits provided to the Executive by the Corporation pursuant to the Letter Agreement, the Executive, intending to be legally bound, hereby recognizes that damages in the event of breach of this Separation Agreement by the Executive would be impossible to ascertain, and therefore agrees that the Corporation, in addition to and without limiting any other remedy or right it may have, shall have the right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and the Executive hereby waives any and all defenses he may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right shall not preclude the Corporation from pursuing all other rights and remedies at law or in equity that the Corporation may have. 4. Successors. The rights of the Corporation and any subsidiary corporations hereunder shall run in favor of the Corporation and such subsidiary corporations and their respective successors, assigns, nominees or other legal representatives. Termination of the Executive's employment shall not operate to relieve the Executive of any remaining obligations hereunder, and all such obligations are binding upon his heirs, executors, administrators, or other legal representatives. The obligations of the Corporation hereunder shall be binding upon the Corporation and its respective successors, assigns, nominees or other legal representatives. 5. Termination of Employment. The Executive hereby acknowledges that his employment with the Corporation will terminate in accordance with the terms of the Letter Agreement and that thereafter he will no longer have any rights as an active employee. The Executive specifically understands and agrees that the Executive's separation from employment is not in violation of any oral or written promise or agreements of any nature whatsoever, whether express or implied. 6. Consultation with Attorney and Right of Revocation. The Executive is advised to consult with an attorney of his choice before signing this Release and Separation Agreement. The Executive will be allowed a period of twenty-one (21) days from June 22, 1998, in which to consult with an attorney about the terms of this Separation Agreement. This Separation Agreement shall not become effective until seven (7) calendar days following the date of the Executive's signature. Prior to that time, the Executive may revoke this Agreement by giving written notification to the Corporation, and repay the Corporation all monies paid and costs incurred by the Corporation hereunder. 7. Return of Corporation Property. The Executive agrees that he or she will return to the Corporation any of its property which Executive may have in his or her possession including -2- 1000 Park Drive, Lawrence, PA 15055-1018 * (724)746-5500 * FAX (724)746-0746 7 but not limited to computers, telephones, beepers, other office equipment, records and data (regardless of the medium in which it is stored). In the event Executive fails to return any of the Corporation property, Executive hereby authorizes the Corporation to deduct the fair market value of any such property from any payments which are made to Executive by the Corporation. 8. Amendment. This Release and Separation Agreement shall be amended only pursuant to written agreement signed by the parties. -3- 1000 Park Drive, Lawrence, PA 15055-1018 * (724)746-5500 * FAX (724)746-0746 8 9. Construction of Agreement. This Release and Separation Agreement shall be governed by and construed under the laws of the Commonwealth of Pennsylvania without regard to its laws relating to choice of laws. In the event that any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired thereby. BY SIGNING THIS RELEASE AND SEPARATION AGREEMENT, YOU ARE WAIVING IMPORTANT RIGHTS. WITNESS: BLACK BOX CORPORATION /s/ ANNA M. BAIRD By: /s/ FRED C. YOUNG - -------------------------------- ------------------------------------- Name: Anna M. Baird Fred C. Young, President Date: June 22, 1998 Date: June 22, 1998 -- -- WITNESS: /s/ ANNA M. BAIRD /s/ JEFFERY M. BOETTICHER - -------------------------------- ---------------------------------------- Jeffery M. Boetticher Date: June 22, 1998 Date: June 22, 1998 ------- ------- -4- 1000 Park Drive, Lawrence, PA 15055-1018 * (724)746-5500 * FAX (724)746-0746 9 I, Jeffery M. Boetticher, received the Release and Separation Agreement from Black Box Corporation on June 22, 1998, and hereby acknowledge the following: 1. Black Box Corporation has given me twenty-one (21) days from June 22, 1998, in which to consult an attorney or otherwise consider the terms of this Agreement; and 2. I have fully considered the matters contained in this Release and Separation Agreement and have voluntarily elected to execute this Agreement prior to the expiration of the Twenty-one (21) day period. This election has been made by me after having a full and fair opportunity to discuss this matter with an attorney or any other advisors of my choice. Date: June 23, 1998 /s/ JEFFERY M. BOETTICHER ------------------------------ Jeffery M. Boetticher Date: June 23, 1998 /s/ ANNA M. BAIRD ------------------------------ Witness -5- 1000 Park Drive, Lawrence, PA 15055-1018 * (724)746-5500 * FAX (724)746-0746 EX-21 5 BLACK BOX CORPORATION 1 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY
NAME LOCATION STATE OF INCORPORATION - ---- -------- ---------------------- Black Box Corporation Lawrence, Pennsylvania, USA Delaware BBOX Holding Company Wilmington, Delaware, USA Delaware Black Box of Pennsylvania Lawrence, Pennsylvania, USA Delaware BB Technologies, Inc. Wilmington, Delaware, USA Delaware Associated Network Solutions, Inc. St. Petersburg, Florida, USA Florida ATIMCO Network Services, Inc. Pittsburgh, Pennsylvania, USA Pennsylvania Black Box Foreign Sales Corporation St. Thomas, U.S.V.I. Black Box Communication SANV Zaventum, Belgium Black Box do Brazil Industria e Comercio Ltda. Sao Paulo, Brazil Black Box Canada Corporation Ontario, Canada Black Box Catalogue, Ltd. Reading, England Black Box France, S.A. Rungis, France Black Box Deutschland GmbH Munich, Germany Black Box Italia, SpA Vimodrone, Italy Black Box Japan Kabushiki Kaisha Tokyo, Japan Black Box de Mexico, S.A. de C.V. Mexico City, Mexico Black Box Datacom, B.V. Utrecht, Netherlands Datacom Black Box Services AG Altendorf, Switzerland Datacom Black Box Holding, AG Zug, Switzerland Black Box Australia Pty, Ltd. Croydon VIC, Australia Black Box Catalog New Zealand Limited Wellington, New Zealand
EX-23.1 6 BLACK BOX CORPORATION 1 Exhibit 23.1 ARTHUR ANDERSEN LLP CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports, included or incorporated by reference in this Form 10-K, into the Company's previously filed registration statements on Form S-8, Registration No. 33-75254; Form S-8, Registration No. 33-75252; Form S-8, Registration No. 33-92656; Form S-8, Registration No. 333-01978; Form S-8, Registration No. 333-34839; and Form S-8, Registration No. 333-34837, relating to the Company's 1992 Employee Stock Option Plan, 1992 Director Stock Option Plan, First Amendment to the Employee Plan, Second Amendment to the Employee Plan, Third Amendment to the Employee Plan and First Amendment to the Director Plan, and Form S-3, Registration No. 333-48421, and Form S-4, Registration No. 333-52937. It should be noted that we have not audited any financial statements of the Company subsequent to March 31, 1998, or performed any audit procedures subsequent to the date of our report. /s/ ARTHUR ANDERSEN LLP ----------------------- Arthur Andersen LLP Pittsburgh, Pennsylvania June 29, 1998 EX-27.1 7 BLACK BOX CORPORATION
5 1,000 YEAR MAR-31-1998 APR-01-1997 MAR-31-1998 10,560 0 49,852 2,655 31,922 99,827 27,013 14,231 185,191 38,323 8,043 0 0 17 127,748 185,191 279,821 279,821 138,993 138,993 (417) 825 2,652 52,114 21,199 30,915 0 0 0 30,915 1.85 1.75
EX-27.2 8 BLACK BOX CORPORATION
5 1,000 3-MOS MAR-31-1998 OCT-01-1997 DEC-31-1997 1,413 0 45,845 2,666 36,648 91,775 26,815 13,769 178,415 40,307 8,051 0 0 17 118,253 178,415 68,989 68,989 33,980 33,980 (184) 162 592 12,945 5,082 7,863 0 0 0 7,863 0.47 0.44
EX-27.3 9 BLACK BOX CORPORATION
5 1,000 3-MOS MAR-31-1998 JUL-01-1997 SEP-30-1997 1,484 0 48,759 2,408 36,295 95,354 26,408 13,137 183,184 44,145 17,359 0 0 17 109,679 183,184 69,665 69,665 34,650 34,650 (262) 251 736 12,711 5,252 7,459 0 0 0 7,459 0.45 0.42
EX-27.4 10 BLACK BOX CORPORATION
5 1,000 3-MOS MAR-31-1998 APR-01-1997 JUN-30-1997 1,160 0 46,892 2,365 36,457 92,498 25,439 12,486 180,940 44,929 21,167 0 0 17 102,721 180,940 65,032 65,032 31,690 31,690 96 160 807 11,829 4,867 6,962 0 0 0 6,962 0.42 0.40
EX-27.5 11 BLACK BOX CORPORATION
5 1,000 YEAR MAR-31-1997 APR-01-1996 MAR-31-1997 1,353 0 46,399 2,499 30,435 83,915 24,695 11,772 173,279 45,683 21,175 0 0 17 94,247 173,279 232,158 232,158 108,512 108,512 160 664 3,649 41,889 17,594 24,295 0 0 0 24,295 1.48 1.40
EX-27.6 12 BLACK BOX CORPORATION
5 1,000 3-MOS MAR-31-1997 OCT-01-1996 DEC-31-1996 1,567 0 38,831 2,552 25,135 71,150 23,376 11,076 161,133 35,677 24,734 0 0 16 88,126 161,133 58,589 58,589 27,453 27,453 63 0 839 10,535 4,425 6,110 0 0 0 6,110 0.37 0.35
EX-27.7 13 BLACK BOX CORPORATION
5 1,000 3-MOS MAR-31-1997 JUL-01-1996 SEP-30-1996 2,232 0 39,421 2,608 22,913 69,301 22,638 10,425 160,124 37,197 30,540 0 0 16 78,537 160,124 56,912 56,912 26,317 26,317 82 0 1,040 10,050 4,225 5,825 0 0 0 5,825 0.36 0.34
EX-27.8 14 BLACK BOX CORPORATION
5 1,000 3-MOS MAR-31-1997 APR-01-1996 JUN-30-1996 2,171 0 36,968 2,460 20,522 63,499 22,222 9,939 155,245 31,016 37,541 0 0 16 72,699 155,245 53,788 53,788 24,810 24,810 (26) 0 1,126 9,294 4,089 5,205 0 0 0 5,205 0.32 0.31
EX-27.9 15 BLACK BOX CORPORATION
5 1,000 12-MOS MAR-31-1996 APR-01-1995 MAR-31-1996 1,924 0 37,211 2,407 18,781 62,842 21,922 9,623 155,544 32,793 41,142 0 0 16 67,125 155,544 193,427 193,427 87,455 87,455 (295) 1,163 5,757 32,623 14,345 18,278 0 0 0 18,278 1.13 1.10
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