Summary of BLACK BOX CORP - Yahoo! Finance

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The discussion and analysis for the three (3) and six (6) months ended September 30, 2008 and 2007 as set forth below in this Item 2 should be read in conjunction with the response to Part 1, Item 1 of this report and the consolidated financial statements of Black Box Corporation ("Black Box" or the "Company"), including the related notes, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission ("SEC") for the fiscal year ended March 31, 2008 (the "Form 10-K"). The Company's fiscal year ends on March 31. The fiscal quarters consist of 13 weeks and end on the Saturday nearest each calendar quarter end. The actual ending dates for the periods presented as of September 30, 2008 and 2007 were September 27, 2008 and September 29, 2007. References to "Fiscal Year" or "Fiscal" mean the Company's fiscal year ended March 31 for the year referenced. All dollar amounts are presented in thousands unless otherwise noted.
Black Box is the world's largest dedicated network infrastructure services provider. Black Box offers one-source network infrastructure services for communication systems. The Company's service offerings include design, installation, integration, monitoring and maintenance of voice, data and integrated communication systems. The Company's primary service offering is voice solutions, while providing premise cabling and other data-related services and products. The Company provides 24/7/365 technical support for all of its solutions which encompasses all major voice and data manufacturers as well as 118,000 network infrastructure products ("Hotline products") that it sells through its catalog and Internet Web site (such catalog and Internet Web site business, together with technical support for such business, being referred to as "Hotline Services") and its Voice Services and Data Services (collectively referred to as "On-Site services") offices. With more than 3,000 professional technical experts and 189 offices, as of September 30, 2008, Black Box serves more than 175,000 clients in 141 countries throughout the world. Founded in 1976, Black Box, a Delaware corporation, operates subsidiaries on five continents and is headquartered near Pittsburgh in Lawrence, Pennsylvania. Company management ("Management") is presented with and reviews revenues and operating income by geographical segment. In addition, revenues and gross profit information by service type are provided herein for purposes of further analysis.
The Company has completed several acquisitions from April 1, 2007 through September 30, 2008 that have had an impact on the Company's consolidated financial statements and, more specifically, North America Voice Services for the periods under review. Fiscal 2009 acquisitions include (i) Mutual Telecom Services Inc. ("MTS") and (ii) UCI Communications LLC ("UCI"). Fiscal 2008 acquisitions include (i) B & C Telephone, Inc. ("B&C") and (ii) BellSouth Communication Systems, LLC d/b/a AT&T Communication Systems Southeast's ("AT&T") NEC TDM voice CPE business line in AT&T's southeast region ("AT&T's southeast NEC TDM business"). The acquisitions noted above are collectively referred to as the "Acquired Companies." The results of operations of the Acquired Companies are included within the Company's Consolidated Statements of Income beginning on their respective acquisition dates.
The Company incurs certain expenses (i.e., stock-based compensation expense and expenses incurred as a result of certain acquisitions) that it excludes when evaluating the continuing operations of the Company. The following table is included to provide a schedule of the current and an estimate of these future expenses for Fiscal 2009 (by quarter) based on information available to the Company as of September 30, 2008.

                                        1Q09            2Q09            3Q09            4Q09         Fiscal 2009

  Selling, general &
  administrative expenses
  Asset write-up depreciation
  expense on acquisitions           $    448        $    448        $    468        $    471        $      1,835
  Stock-based compensation
  expense                                542             840             853             835               3,070

  Total                                  990           1,288           1,321           1,306               4,905

  Intangibles amortization
  Amortization of intangible
  assets on acquisitions               1,791           1,864           3,379           3,379              10,413


  Total                             $  2,781        $  3,152        $  4,700        $  4,685        $     15,318

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The following table is included to provide a schedule of these expenses during Fiscal 2008 (by quarter).

                                        1Q08            2Q08            3Q08            4Q08         Fiscal 2008

  Selling, general &
  administrative expenses
  Asset write-up depreciation
  expense on acquisitions           $    659        $    448        $    457        $    614        $      2,178
  Stock-based compensation
  expense                              1,716           1,155           (152)             498               3,217

  Total                                2,375           1,603             305           1,112               5,395

  Intangibles amortization
  Amortization of intangible
  assets on acquisitions               2,269           1,298           1,335           1,599               6,501


  Total                             $  4,644        $  2,901        $  1,640        $  2,711        $     11,896

The following table provides information on Revenues and Operating income by reportable geographic segment (North America, Europe and All Other). The table below should be read in conjunction with the following discussions.

                                 Three (3) months ended September 30,                         Six (6) months ended September 30,
                                  2008                          2007                          2008                          2007
                                          % of                          % of                          % of                          % of
                                         total                         total                         total                         total
                              $         revenue             $         revenue             $         revenue             $         revenue

  Revenues
  North America          $ 211,467         83.3%       $ 217,002         83.3%       $ 407,803         82.2%       $ 427,004         83.2%
  Europe                    31,753         12.5%          33,706         12.9%          67,521         13.6%          66,505         13.0%
  All Other                 10,590          4.2%           9,922          3.8%          21,039          4.2%          19,412          3.8%

  Total                  $ 253,810          100%       $ 260,630          100%       $ 496,363          100%       $ 512,921          100%

  Operating income
  North America          $  20,163                     $  18,104                     $  34,647                     $  28,686
  % of North America
  revenues                    9.5%                          8.3%                          8.5%                          6.7%

  Europe                 $   3,456                     $   4,292                     $   7,269                     $   8,240
  % of Europe
  revenues                   10.9%                         12.7%                         10.8%                         12.4%

  All Other              $   1,809                     $   1,765                     $   3,360                     $   3,404
  % of All Other
  revenues                   17.1%                         17.8%                         16.0%                         17.5%


  Total                  $  25,428         10.0%       $  24,161          9.3%       $  45,276          9.1%       $  40,330          7.9%

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The following table provides information on Revenues and Gross profit by service type (Data Services, Voice Services and Hotline Services). The table below should be read in conjunction with the following discussions.

                                Three (3) months ended September 30,                         Six (6) months ended September 30,
                                 2008                          2007                          2008                          2007
                                         % of                          % of                          % of                          % of
                                        total                         total                         total                         total
                             $         revenue             $         revenue             $         revenue             $         revenue

  Revenues
  Data Services         $  42,714         16.8%       $  50,200         19.3%       $  89,598         18.0%       $  96,365         18.8%
  Voice Services          154,277         60.8%         150,811         57.8%         294,307         59.3%         300,798         58.6%
  Hotline Services         56,819         22.4%          59,619         22.9%         112,458         22.7%         115,758         22.6%

  Total                 $ 253,810          100%       $ 260,630          100%       $ 496,363          100%       $ 512,921          100%

  Gross profit
  Data Services         $  12,879                     $  14,374                     $  26,166                     $  28,551
  % of Data
  Services revenues         30.2%                         28.6%                         29.2%                         29.6%

  Voice Services        $  52,276                     $  49,753                     $  99,474                     $ 100,029
  % of Voice
  Services revenues         33.9%                         33.0%                         33.8%                         33.3%

  Hotline Services      $  27,902                     $  28,162                     $  55,559                     $  54,939
  % of Hotline
  Services revenues         49.1%                         47.2%                         49.4%                         47.5%


  Total                 $  93,057         36.7%       $  92,289         35.4%       $ 181,199         36.5%       $ 183,519         35.8%

Second quarter of Fiscal 2009 ("2Q09") compared to second quarter of Fiscal 2008 ("2Q08"):
Total Revenues
Total revenues for 2Q09 were $253,810, a decrease of 3% compared to total revenues for 2Q08 of $260,630. The Acquired Companies contributed incremental revenue of $18,817 and $0 for 2Q09 and 2Q08, respectively. Excluding the effects of the acquisitions and the positive exchange rate impact of $1,715 in 2Q09 relative to the U.S. dollar, total revenues would have decreased 10% from $260,630 to $233,278 for the reasons discussed below. Revenues by Geography
North America
Revenues in North America for 2Q09 were $211,467, a decrease of 3% compared to revenues for 2Q08 of $217,002. The Acquired Companies contributed incremental revenue of $18,817 and $0 for 2Q09 and 2Q08, respectively. Excluding the effects of the acquisitions of the Acquired Companies and the positive exchange rate impact of $8 in 2Q09 relative to the U.S. dollar, North American revenues would have decreased 11% from $217,002 to $192,642. The Company believes that this decrease is primarily due to an approximated $5,000 decrease of Voice Services revenues related to the expected post-merger client attrition from the USA Commercial operations of NextiraOne, LLC, which was acquired in April 2006 ("NextiraOne"), and an approximated $8,000 decrease of Voice Services revenues related to the previously-disclosed termination of the Company's distribution agreement with Avaya Inc. ("Avaya"), weak general economic conditions that affected client demand for Data Services and a nonrecurring Hotline Services project completed during Fiscal 2008.
Europe
Revenues in Europe for 2Q09 were $31,753, a decrease of 6% compared to revenues for 2Q08 of $33,706. Excluding the positive exchange rate impact of $1,225 in 2Q09 relative to the U.S. dollar, Europe revenues would have decreased 9% from $33,706 to $30,528. The Company believes the decrease is primarily due to weak general economic conditions that affected client demand for its Hotline Services.

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All Other
Revenues for All Other for 2Q09 were $10,590, an increase of 7% compared to revenues for 2Q08 of $9,922. Excluding the positive exchange rate impact of $482 in 2Q09 relative to the U.S. dollar, All Other revenues would have increased 2% from $9,922 to $10,108.
Revenue by Service Type
Data Services
Revenues from Data Services for 2Q09 were $42,714, a decrease of 15% compared to revenues for 2Q08 of $50,200. Excluding the positive exchange rate impact of $205 in 2Q09 relative to the U.S. dollar for its International Data Services, Data Services revenues would have decreased 15% from $50,200 to $42,509. The Company believes this decrease is primarily due to weak general economic conditions that affected client demand for these services in its North American segment.
Voice Services
Revenues from Voice Services for 2Q09 were $154,277, an increase of 2% compared to revenues for 2Q08 of $150,811. The Acquired Companies contributed incremental revenue of $18,817 and $0 for 2Q09 and 2Q08, respectively. Excluding the effects of the acquisitions, Voice Services revenues would have decreased 10% from $150,811 to $135,460. The Company believes that this decrease is primarily due to an approximated $5,000 decrease of revenues related to the expected post-merger client attrition from the USA Commercial operations of NextiraOne and an approximated $8,000 decrease of revenues related to the previously-disclosed termination of the Company's distribution agreement with Avaya. There was no exchange rate impact on Voice Services revenues as all of the Company's Voice Services revenues are denominated in U.S. dollars. Hotline Services
Revenues from Hotline Services for 2Q09 were $56,819, a decrease of 5% compared to revenues for 2Q08 of $59,619. Excluding the positive exchange rate impact of $1,510 in 2Q09 relative to the U.S. dollar for its International Hotline Services, Hotline Service revenues would have decreased 7% from $59,619 to $55,309. The Company believes this decrease is primarily due to weak general economic conditions that affected client demand in its international segments and a nonrecurring project completed during Fiscal 2008 in its North American segment.
Gross profit
Gross profit dollars for 2Q09 were $93,057, an increase of 1% compared to gross profit dollars for 2Q08 of $92,289. Gross profit as a percent of revenues for 2Q09 was 36.7%, an increase of 1.3% compared to gross profit as a percentage of revenues for 2Q08 of 35.4%. The Company believes the percent increase was due primarily to the impact of reduced product cost, increased selling price and product mix in Hotline Services and cost overruns on a domestic Data Services contract coupled with several strategic investments in the Voice Services segment during 2Q08 for which there were no comparable costs during 2Q09. Gross profit dollars for Data Services for 2Q09 were $12,879, or 30.2% of revenues, compared to gross profit dollars for 2Q08 of $14,374, or 28.6% of revenues. Gross profit dollars for Voice Services for 2Q09 were $52,276, or 33.9% of revenues, compared to gross profit dollars for 2Q08 of $49,753, or 33.0% of revenues. Gross profit dollars for Hotline Services for 2Q09 were $27,902, or 49.1% of revenues, compared to gross profit dollars for 2Q08 of $28,162, or 47.2% of revenues, for the reasons discussed in the preceding paragraph.
Selling, general & administrative expenses Selling, general & administrative expenses for 2Q09 were $65,729, a decrease of $1,055 compared to Selling, general & administrative expenses for 2Q08 of $66,784. Selling, general & administrative expenses as a percent of revenue for 2Q09 were 25.9% compared to 25.6% for 2Q08. The decrease in Selling, general & administrative expense dollars and increase in Selling, general & administrative expenses as a percent of revenue over the prior year was primarily due to decreases in historical stock option review costs of $686 and non-cash stock-based compensation expense of $315. Intangibles amortization
Intangibles amortization for 2Q09 was $1,900, an increase of $556 compared to Intangible amortization for 2Q08 of $1,344. The increase was primarily attributable to the addition of intangible assets from acquisitions completed subsequent to the first quarter of Fiscal 2008 partially offset by the amortization run-out for certain intangible assets.

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Operating income
Operating income for 2Q09 was $25,428, or 10.0% of revenues, an increase of $1,267 compared to Operating income for 2Q08 of $24,161, or 9.3% of revenues. Interest expense (income), net
Net interest expense for 2Q09 was $2,648 compared to net interest expense for 2Q08 of $6,143. The Company's interest-rate swap contributed a gain of $169 and a loss of $1,746 for 2Q09 and 2Q08, respectively, due to the change in fair value. Excluding the effect of the interest-rate swap, net interest expense would have decreased $1,580 from $4,397 to $2,817. This decrease in net interest expense is due to a decrease in the weighted-average outstanding debt and weighted-average interest-rate from $249,789 and 6.6%, respectively, for 2Q08 to $221,457 and 3.5%, respectively, for 2Q09. Provision for income taxes
The tax provision for 2Q09 was $8,218, an effective tax rate of 36.5%. This compares to the tax provision for 2Q08 of $6,781, an effective tax rate of 37.5%. The Company anticipates that its deferred tax asset is realizable in the foreseeable future.
Net income
As a result of the foregoing, Net income for 2Q09 was $14,299, or 5.6% of revenues, compared to Net income for 2Q08 of $11,310, or 4.3% of revenues. Six-months Fiscal 2009 ("2QYTD09") compared to Six-months Fiscal 2008 ("2QYTD08"):
Total Revenues
Total revenues for 2QYTD09 were $496,363, a decrease of 3% compared to total revenues for 2QYTD08 of $512,921. The Acquired Companies contributed incremental revenue of $26,710 and $0 for 2QYTD09 and 2QYTD08, respectively. Excluding the effects of the acquisitions and the positive exchange rate impact of $6,330 in 2QYTD09 relative to the U.S. dollar, total revenues would have decreased 10% from $512,921 to $463,323 for the reasons discussed below. Revenues by Geography
North America
Revenues in North America for 2QYTD09 were $407,803, a decrease of 4% compared to revenues for 2QYTD08 of $427,004. The Acquired Companies contributed incremental revenue of $26,710 and $0 for 2QYTD09 and 2QYTD08, respectively. Excluding the effects of the acquisitions of the Acquired Companies and the positive exchange rate impact of $518 in 2QYTD09 relative to the U.S. dollar, North American revenues would have decreased 11% from $427,004 to $380,575. The Company believes that this decrease is primarily due to an approximated $14,000 decrease of Voice Services revenues related to the expected post-merger client attrition from the USA Commercial operations of NextiraOne and an approximated $15,000 decrease of Voice Services revenues related to the previously-disclosed termination of the Company's distribution agreement with Avaya, weak general economic conditions that affected client demand for Data Services and a nonrecurring Hotline Services project completed during Fiscal 2008. Europe
Revenues in Europe for 2QYTD09 were $67,521, an increase of 2% compared to revenues for 2QYTD08 of $66,505. Excluding the positive exchange rate impact of $4,527 in 2QYTD09 relative to the U.S. dollar, Europe revenues would have decreased 5% from $66,505 to $62,994. The Company believes the decrease is primarily due to weak general economic conditions that affected client demand for its Hotline Services.
All Other
Revenues for All Other for 2QYTD09 were $21,039, an increase of 8% compared to revenues for 2QYTD08 of $19,412. Excluding the positive exchange rate impact of $1,285 in 2QYTD09 relative to the U.S. dollar, All Other revenues would have increased 2% from $19,412 to $19,754.
Revenue by Service Type
Data Services
Revenues from Data Services for 2QYTD09 were $89,598, a decrease of 7% compared to revenues for 2QYTD08 of $96,365. Excluding the positive exchange rate impact of $1,630 in 2QYTD09 relative to the U.S. dollar for its International Data Services, Data Services revenues would have decreased 9% from $96,365 to $87,968. The Company believes this decrease is primarily due to weak general economic conditions that affected client demand for these services in its North American segment.

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Voice Services
Revenues from Voice Services for 2QYTD09 were $294,307, a decrease of 2% compared to revenues for 2QYTD08 of $300,798. The Acquired Companies contributed incremental revenue of $26,710 and $0 for 2QYTD09 and 2QYTD08, respectively. Excluding the effects of the acquisitions of the Acquired Companies, Voice Services revenues would have decreased 11% from $300,798 to $267,597. The Company believes that this decrease is primarily due to an approximated $14,000 decrease of revenues related to the expected post-merger client attrition from the USA Commercial operations of NextiraOne and an approximated $15,000 decrease of revenues related to the previously-disclosed termination of the Company's distribution agreement with Avaya. There was no exchange rate impact on Voice Services revenues as all of the Company's Voice Services revenues are denominated in U.S. dollars.
Hotline Services
Revenues from Hotline Services for 2QYTD09 were $112,458, a decrease of 3% compared to revenues for 2QYTD08 of $115,758. Excluding the positive exchange rate impact of $4,700 in 2QYTD09 relative to the U.S. dollar for its International Hotline Services, Hotline Service revenues would have decreased 7% from $115,758 to $107,758. The Company believes this decrease is primarily due to weak general economic conditions that affected client demand in its international segments and a nonrecurring project completed during Fiscal 2008 in its North American segment.
Gross profit
Gross profit dollars for 2QYTD09 were $181,199, a decrease of 1% compared to gross profit dollars for 2QYTD08 of $183,519. Gross profit as a percent of revenues for 2QYTD09 was 36.5%, an increase of 0.7% compared to gross profit as a percentage of revenues for 2QYTD08 of 35.8%. The Company believes the percent increase was due primarily to the impact of reduced product cost, increased selling price and product mix in Hotline Services and several strategic investments in the Voice Services segment during 2QYTD08 for which there were no comparable costs during 2QYTD09.
Gross profit dollars for Data Services for 2QYTD09 were $26,166, or 29.2% of revenues, compared to gross profit dollars for 2QYTD08 of $28,551, or 29.6% of revenues. Gross profit dollars for Voice Services for 2QYTD09 were $99,474, or 33.8% of revenues, compared to gross profit dollars for 2QYTD08 of $100,029, or 33.3% of revenues. Gross profit dollars for Hotline Services for 2QYTD09 were $55,559, or 49.4% of revenues, compared to gross profit dollars for 2QYTD08 of $54,939, or 47.5% of revenues, for the reasons discussed in the preceding paragraph.
Selling, general & administrative expenses Selling, general & administrative expenses for 2QYTD09 were $132,197, a decrease of $7,330 compared to Selling, general & administrative expenses for 2QYTD08 of $139,527. Selling, general & administrative expenses as a percent of revenue for 2QYTD09 were 26.6% compared to 27.2% for 2QYTD08. The decrease in Selling, general & administrative expense dollars and decrease in Selling, general & administrative expenses as a percent of revenue over the prior year was primarily due to restructuring/integration costs of $4,903 incurred during 2QYTD08 for which there was no comparable expense during 2QYTD09 and decreases in non-cash stock-based compensation expense of $1,489 and historical stock option review costs of $686.
Intangibles amortization
Intangibles amortization for 2QYTD09 was $3,726, an increase of $64 compared to intangible amortization for 2QYTD08 of $3,662. The increase was primarily attributable to the addition of intangible assets from acquisitions completed subsequent to the first quarter of Fiscal 2008 partially offset by the amortization run-out for certain intangible assets. Operating income
Operating income for 2QYTD09 was $45,276, or 9.1% of revenues, an increase of $4,946 compared to Operating income for 2QYTD08 of $40,330, or 7.9% of revenues. Interest expense (income), net
Net interest expense for 2QYTD09 was $2,383 compared to net interest expense for 2QYTD08 of $9,423. The Company's interest-rate swap contributed a gain of $2,877 and a loss of $438 for 2QYTD09 and 2QYTD08, respectively, due to the change in fair value. Excluding the effect of the interest-rate swap, net interest expense would have decreased $3,725 from $8,985 to $5,260. This decrease in net interest expense is due to a decrease in the weighted-average outstanding debt and weighted-average interest-rate from $250,949 and 6.6%, respectively, for 2QYTD08 to $216,384 and 3.6%, respectively, for 2QYTD09.

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Provision for income taxes
The tax provision for 2QYTD09 was $15,594, an effective tax rate of 36.5%. This compares to the tax provision for 2QYTD08 of $11,549, an effective tax rate of 37.2%. The Company anticipates that its deferred tax asset is realizable in the foreseeable future.
Net income
As a result of the foregoing, Net income for 2QYTD09 was $27,132, or 5.5% of revenues, compared to Net income for 2QYTD08 of $19,498, or 3.8% of revenues. Liquidity and Capital Resources
Operating Activities
Net cash provided by operating activities during 2QYTD09 was $38,385. Significant factors contributing to the source of cash were: net income of $27,132 inclusive of non-cash charges of $8,599 and $1,382 for amortization / depreciation expense and stock compensation expense, respectively, as well as decreases in net inventory of $5,321, accounts receivable of $11,804 and the deferred tax provision of $1,903, and increases in accrued compensation and benefits of $1,451 and accrued taxes of $1,366. Significant factors contributing to a use of cash include a non-cash charge of $2,877 for change in fair value of interest rate swap, as well as decreases in accounts payable, deferred revenue and restructuring reserves of $1,716, $1,759 and $4,254, respectively, and an increase in costs in excess of billings of $4,670. Changes in the above accounts are based on average Fiscal 2009 exchange rates.
Net cash provided by operating activities during 2QYTD08 was $12,232. Significant factors contributing to the source of cash were: net income of $19,498 inclusive of non-cash charges of $9,345 and $2,871 for amortization / . . .