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Black Box CEO Hopes To ‘Create Additional Liquidity’ Through Sale Of Other Businesses

Black Box CEO Joel Trammell says the solution provider’s recent agreement to sell its federal business could be the “first of many” as the company looks to shed debt.

Black Box CEO Joel Trammell told investors on the solution provider’s earnings call Monday that while revenue was down slightly, it has a buyer for its federal business and is significantly reducing its debt. Black Box also is exploring sales of other businesses to “create additional liquidity,” he said.

The Lawrence, Pa.-based company said Saturday that it had reached an agreement to sell its federal services business for $75 million to an unnamed private equity firm. That money will be used to pay down the company’s restructured debt in accordance with a deal it reached with lenders in June.

“This is the first of potentially many transactions to create additional liquidity for the company,” Trammell said. “While this sale will reduce our debt significantly, it does not solve our financing issues. We will continue to work with our board, Raymond James, and our banking partners to position ourselves for future success.”

[Related: 5 Things You Need To Know Ahead of Black Box’s Earnings Call]

Revenue for the first quarter was $190.8 million, a decrease of less than a percentage point from the $191.6 posted in the year-ago quarter. The company also recorded a $7.3 million loss in net income from a year ago. Share prices responded positively to the news, up. 18 percent to $1.94 in early trading.

Trammell said a June 29 8-K filing with the U.S. Securities and Exchange Commission disclosed a refinancing deal with with lenders, but also highlighted some of the risks facing the company if certain milestones were not reached. One of those milestones was the sale of its federal business, which has a buyer and is set to close on schedule by the end of the month.

“Because of our disclosure of certain risk factors, inherent to the situation, we’ve seen negative impacts to our business,” he said. “We cannot yet quantify this impact, but it has created issues for certain vendors and customers. We are managing through those issues with the cooperation of our partners and our long-standing clients.”

Domestic revenue was flat this quarter, as the company said its channel strategy is stabilizing. The decline in revenue was due to declines in international product and international service revenue, the company told investors.

“While revenue was down slightly, year over year, and quarter over quarter, our margins did expand modestly,” Trammell said. “We continue to adjust costs to align with revenue levels. EBITDA levels increased significantly year over year, and quarter over quarter.”

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