Summary of BLACK BOX CORP - Yahoo! Finance

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The discussion and analysis for the fiscal years ended March 31, 2009, 2008 and 2007 as set forth below in this Item 7 should be read in conjunction with the consolidated financial statements of Black Box, including the related notes. The Company's fiscal year ends on March 31. 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 except for per share amounts or unless otherwise noted.
The Company
Black Box is the world's largest dedicated network infrastructure services provider. Black Box offers one-source network infrastructure services for communications systems. The Company's services offerings include design, installation, integration, monitoring and maintenance of voice, data and integrated communications systems. The Company's primary services offering is voice solutions; the Company also offers premise cabling and other data-related services and products. The Company provides 24/7/365 technical support for all of its solutions which encompass all major voice and data product manufacturers as well as 118,000 Hotline products that it sells through its catalog and Internet Web site and its On-Site services offices. As of March 31, 2009, the Company had more than 3,000 professional technical experts in 192 offices serving more than 175,000 clients in 141 countries throughout the world. Founded in 1976, Black Box operates subsidiaries on five continents and is headquartered near Pittsburgh in Lawrence, Pennsylvania.
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, 2006 through March 31, 2009 that have had an impact on the Company's consolidated financial statements and, more specifically, North America Voice Services and North America Data Services for the periods under review. Fiscal 2009 acquisitions include (i) UCI Communications LLC ("UCI"), (ii) Mutual Telecom Services Inc. ("MTS"), (iii) ACS Communications, Inc. ("ACS"), (iv) Network Communications Technologies, Inc. ("NCT") and (v) Scottel Voice & Data, Inc. ("Scottel"). 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"). Fiscal 2007 acquisitions include (i) USA Commercial and Government and Canadian operations of NextiraOne, LLC ("NextiraOne"), (ii) Nu-Vision Technologies, Inc. and Nu-Vision Technologies, LLC (collectively referred to as "NUVT"), (iii) Nortech Telecommunications Inc. ("NTI") and (iv) ADS Telecom, Inc. ("ADS").
The acquisitions noted above are collectively referred to as the "Acquired Companies." References to the Acquired Companies within our comparison of Fiscal 2009 and Fiscal 2008 are intended to describe the Acquired Companies from April 1, 2007 through March 31, 2009. References to the Acquired Companies within our comparison of Fiscal 2008 and Fiscal 2007 are intended to describe the Acquired Companies from April 1, 2006 through March 31, 2008. 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 past, current and an estimate of these future expenses based on information available to the Company as of March 31, 2009.

                                                                                              Fiscal
                                                2007                2008                2009                2010                2011          Thereafter

Selling, general & administrative
Asset write-up depreciation
expense on acquisitions                   $    2,646          $    2,178          $    1,888          $      184          $       --          $       --
Stock-based compensation expense 1             9,308               3,217               3,042               3,134               2,927                 474

Total                                         11,954               5,395               4,930               3,318               2,927                 474

Intangibles amortization
Amortization of intangible assets
on acquisitions                               10,075               6,501              10,671              13,435              11,446              90,028


Total                                     $   22,029          $   11,896          $   15,601          $   16,753          $   14,373          $   90,502

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The following table is included to provide a schedule of an estimate of these expenses for Fiscal 2010 (by quarter) on information available to the Company through March 31, 2009.

                                           1Q10              2Q10              3Q10              4Q10               FY10

Selling, general &
administrative
Asset write-up depreciation
expense on acquisitions               $     124         $      20         $      20         $      20         $      184
Stock-based compensation
expense 1                                   841               804               753               736              3,134

Total                                       965               824               773               756              3,318

Intangibles amortization
Amortization of intangible
assets on acquisitions                    4,032             3,359             3,022             3,022             13,435


Total                                 $   4,997         $   4,183         $   3,795         $   3,778         $   16,753

1 During the period from April 1, 2007 to March 31, 2009, the Company excluded stock-based compensation expense when evaluating the continuing operations of the Company. The Company will include such expenses prospectively. 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.

                                                                             Fiscal
                                       2009                                 2008                                  2007
                                                 % of                                  % of                                  % of
                                                total                                 total                                 total
                                $              revenue               $               revenue               $               revenue

Revenues
North America               $   838,871           83.9%         $     837,402           82.3%         $     850,088           83.7%
Europe                          121,839           12.2%               138,927           13.7%               129,278           12.7%
All Other                        38,838            3.9%                40,413            4.0%                36,944            3.6%

Total                       $   999,548            100%         $   1,016,742            100%         $   1,016,310            100%

Operating income
North America               $    61,651                         $      57,964                         $      49,481
% of North America
revenues                           7.3%                                  6.9%                                  5.8%

Europe                      $    12,548                         $      19,278                         $      16,442
% of Europe revenues              10.3%                                 13.9%                                 12.7%

All Other                   $     5,804                         $       7,390                         $       7,426
% of All Other
revenues                          14.9%                                 18.3%                                 20.1%


Total                       $    80,003            8.0%         $      84,632            8.3%         $      73,349            7.2%

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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.

                                                                             Fiscal
                                       2009                                 2008                                  2007
                                                 % of                                  % of                                  % of
                                                total                                 total                                 total
                                $              revenue               $               revenue               $               revenue

Revenues
Data Services               $   191,436           19.2%         $     194,454           19.1%         $     182,129           17.9%
Voice Services                  598,319           59.8%               586,974           57.7%               611,278           60.2%
Hotline Services                209,793           21.0%               235,314           23.2%               222,903           21.9%

Total                       $   999,548            100%         $   1,016,742            100%         $   1,016,310            100%

Gross profit
Data Services               $    55,407                         $      57,747                         $      55,598
% of Data Services
revenues                          28.9%                                 29.7%                                 30.5%

Voice Services              $   200,541                         $     195,570                         $     209,268
% of Voice Services
revenues                          33.5%                                 33.3%                                 34.2%

Hotline Services            $   101,232                         $     113,303                         $     109,123
% of Hotline Services
revenues                          48.3%                                 48.1%                                 49.0%


Total                       $   357,180           35.7%         $     366,620           36.1%         $     373,989           36.8%

The Company's distribution agreement with Avaya, Inc. ("Avaya") terminated on September 8, 2007. The Company evaluated the financial impact of this event including business strategies to minimize such impact. This event did not have a material impact on the Company's operating results during Fiscal 2009 or Fiscal 2008.
Fiscal 2009 Compared To Fiscal 2008
Total Revenues
Total revenues for Fiscal 2009 were $999,548, a decrease of 2% compared to total revenues for Fiscal 2008 of $1,016,742. The Acquired Companies contributed incremental revenue of $93,706 and $7,176 for Fiscal 2009 and Fiscal 2008, respectively. Excluding the effects of the acquisitions and the negative exchange rate impact of $6,526 in Fiscal 2009 relative to the U.S. dollar, total revenues would have decreased 10% from $1,009,566 to $912,368 for the reasons discussed below.
Revenues by Geography
North America
Revenues in North America for Fiscal 2009 were $838,871, nearly equivalent to revenues for Fiscal 2008 of $837,402. The Acquired Companies contributed incremental revenue of $93,706 and $7,176 for Fiscal 2009 and Fiscal 2008, respectively. Excluding the effects of the acquisitions and the negative exchange rate impact of $2,009 in Fiscal 2009 relative to the U.S. dollar, North American revenues would have decreased 10% from $830,226 to $747,174. The Company believes that this decrease is primarily due to an approximated $26,000 decrease of Voice Services revenues related to the previously-disclosed termination of the Company's distribution agreement with Avaya, 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 weaker general economic conditions that affected client demand for Data Services and Hotline Services.

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Europe
Revenues in Europe for Fiscal 2009 were $121,839, a decrease of 12% compared to revenues for Fiscal 2008 of $138,927. Excluding the negative exchange rate impact of $5,799 in Fiscal 2009 relative to the U.S. dollar, Europe revenues would have decreased 8% from $138,927 to $127,638. The Company believes the decrease is primarily due to weaker general economic conditions that affected client demand for its Hotline Services.
All Other
Revenues for All Other for Fiscal 2009 were $38,838, a decrease of 4% compared to revenues for Fiscal 2008 of $40,413. Excluding the positive exchange rate impact of $1,282 in Fiscal 2009 relative to the U.S. dollar, All Other revenues would have decreased 7% from $40,413 to $37,556. Revenue by Service Type
Data Services
Revenues from Data Services for Fiscal 2009 were $191,436, a decrease of 2% compared to revenues for Fiscal 2008 of $194,454. The Acquired Companies contributed incremental revenue of $27,603 and $0 for Fiscal 2009 and Fiscal 2008, respectively. Excluding the effects of the acquisitions and the negative exchange rate impact of $4,658 in Fiscal 2009 relative to the U.S. dollar for its international Data Services, Data Service revenues would have decreased 13% from $194,454 to $168,491. The Company believes this decrease is primarily due to weaker general economic conditions that affected client demand for these services in its North American segment.
Voice Services
Revenues from Voice Services for Fiscal 2009 were $598,319, an increase of 2% compared to revenues for Fiscal 2008 of $586,974. The Acquired Companies contributed incremental revenue of $66,103 and $7,176 for Fiscal 2009 and Fiscal 2008, respectively. Excluding the effects of the acquisitions, Voice Services revenues would have decreased 8% from $579,798 to $532,216. The Company believes that this decrease is primarily due to an approximated $26,000 decrease of Voice Services revenues related to the previously-disclosed termination of the Company's distribution agreement with Avaya and an approximated $14,000 decrease of Voice Services revenues related to the expected post-merger client attrition from the USA Commercial operations of NextiraOne. 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 Fiscal 2009 were $209,793, a decrease of 11% compared to revenues for Fiscal 2008 of $235,314. Excluding the negative exchange rate impact of $1,868 in Fiscal 2009 relative to the U.S. dollar for its international Hotline Services, Hotline Service revenues would have decreased 10% from $235,314 to $211,661. The Company believes this decrease is primarily due to weaker general economic conditions that affected client demand for these services.
Gross profit
Gross profit dollars for Fiscal 2009 were $357,180, a decrease of 3% compared to gross profit dollars for Fiscal 2008 of $366,620. Gross profit as a percent of revenues for Fiscal 2009 was 35.7%, a decrease of 0.4% compared to gross profit as a percentage of revenues for Fiscal 2008 of 36.1%. The Company believes the dollar and percent decrease was due primarily to the impact of pricing pressures in its Data Services segment and revenue mix between its services offerings. Gross profit dollars for Data Services for Fiscal 2009 were $55,407, or 28.9% of revenues, compared to gross profit dollars for Fiscal 2008 of $57,747, or 29.7% of revenues. Gross profit dollars for Voice Services for Fiscal 2009 were $200,541, or 33.5% of revenues, compared to gross profit dollars for Fiscal 2008 of $195,570, or 33.3% of revenues. Gross profit dollars for Hotline Services for Fiscal 2009 were $101,232, or 48.3% of revenues, compared to gross profit dollars for Fiscal 2008 of $113,303, or 48.1% of revenues. Please see the preceding paragraph for the analysis of gross profit variances by segment.

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Selling, general & administrative expenses Selling, general & administrative expenses for Fiscal 2009 were $266,387, a decrease of $8,922 compared to Selling, general & administrative expenses for Fiscal 2008 of $275,309. Selling, general & administrative expenses as a percent of revenue for Fiscal 2009 were 26.6% compared to 27.1% for Fiscal 2008. The decrease in Selling, general & administrative expense dollars and Selling, general & administrative expenses as a percent of revenue over the prior year was primarily due to the Company's continued effort to right-size the organization and more properly align the expense structure with anticipated revenues and changing market demand for its solutions and services and $1,524 of historical stock option granting practices investigation costs and expenses as a result of measures taken by the Company to address the application of
Section 409A of the Code ("Section 409A") incurred during Fiscal 2008 for which there was no comparable expense during Fiscal 2009. See "Section 409A Remedial Measures and other potential Section 409A Payments" below. Intangibles amortization
Intangibles amortization for Fiscal 2009 was $10,790, an increase of $4,111 compared to Intangible amortization for Fiscal 2008 of $6,679. The increase was primarily attributable to the addition of intangible assets from acquisitions completed subsequent to the fourth quarter of Fiscal 2008 partially offset by the amortization run-out for certain intangible assets. Operating income
As a result of the foregoing, Operating income for Fiscal 2009 was $80,003, or 8.0% of revenues, a decrease of $4,629 compared to Operating income for Fiscal 2008 of $84,632, or 8.3% of revenues.
Interest expense (income), net
Net interest expense for Fiscal 2009 was $10,279, or 1.0% of revenues, compared to net interest expense for Fiscal 2008 of $21,298, or 2.1% of revenues. The Company's interest-rate swap contributed a gain of $974 and a loss of $4,576 for Fiscal 2009 and Fiscal 2008, respectively, due to the change in fair value. Excluding the effect of the interest-rate swap, net interest expense would have decreased $5,469 from $16,722, or 1.6% of revenues, to $11,253, or 1.1% of revenues. This decrease in net interest expense is due to a decrease in the weighted-average outstanding debt and weighted-average interest rate to $237,991 and 3.3%, respectively, for Fiscal 2009 from $242,418 and 6.2%, respectively, for Fiscal 2008.
Provision for income taxes
The tax provision for Fiscal 2009 was $23,854, an effective tax rate of 34.5%. This compares to the tax provision for Fiscal 2008 of $24,298, an effective tax rate of 38.2%. The tax rate for Fiscal 2009 was lower than Fiscal 2008 due primarily to a reversal of previously-recorded expense related to a potential disallowed Section 162(m) deduction and the expected write-off of deferred tax assets related to stock-based compensation expense during Fiscal 2008 partially offset by increases to uncertain income tax positions as required under FIN 48 (as defined below) and increased valuation allowances for certain foreign net operating losses. 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 Fiscal 2009 was $45,309, or 4.5% of revenues, compared to Net income for Fiscal 2008 of $39,233, or 3.9% of revenues.
Fiscal 2008 Compared To Fiscal 2007
Total Revenues
Total revenues for Fiscal 2008 were $1,016,742, nearly equivalent to total revenues for Fiscal 2007 of $1,016,310. The Acquired Companies contributed incremental revenue of $270,683 and $304,669 for Fiscal 2008 and Fiscal 2007, respectively. Excluding the effects of the acquisitions and the positive exchange rate impact of $15,413 in Fiscal 2008 relative to the U.S. dollar, total revenues would have increased 3% from $711,641 to $730,646 for the reasons discussed below.
Revenues by Geography
North America
Revenues in North America for Fiscal 2008 were $837,402, a decrease of 1% compared to revenues for Fiscal 2007 of $850,088. The Acquired Companies contributed incremental revenue of $270,683 and $304,669 for Fiscal 2008 and Fiscal 2007, respectively. The decrease in Acquired Companies contributed revenue is primarily due to expected post-merger client attrition from the NextiraOne acquisition. Excluding the effects of the acquisitions and the positive exchange rate impact of $2,593 in Fiscal 2008 relative to the U.S. dollar, North American revenues would have increased 3% from $545,419 to $564,126. The Company believes this increase is due to the success in the Company's Data, Voice and Hotline ("DVH") cross-selling initiatives.

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Europe
Revenues in Europe for Fiscal 2008 were $138,927, an increase of 7% compared to revenues for Fiscal 2007 of $129,278. Excluding the positive exchange rate impact of $11,286 in Fiscal 2008 relative to the U.S. dollar, Europe revenues would have decreased 1% from $129,278 to $127,641. The Company believes the decrease is due to softer demand for its Hotline Services during the year offset in part by the success in the Company's DVH cross-selling initiatives. All Other
Revenues for All Other for Fiscal 2008 were $40,413, an increase of 9% compared to revenues for Fiscal 2007 of $36,944. Excluding the positive exchange rate impact of $1,534 in Fiscal 2008 relative to the U.S. dollar, All Other revenues would have increased 5% from $36,892 to $38,644. Revenue by Service Type
Data Services
Revenues from Data Services for Fiscal 2008 were $194,454, an increase of 7% compared to revenues for Fiscal 2007 of $182,129. Excluding the positive exchange rate impact of $5,727 in Fiscal 2008 relative to the U.S. dollar for its international Data Services, Data Service revenues would have increased 4% from $182,129 to $188,727. The Company believes the increase in Data Services revenues is due to the success of the Company's DVH cross-selling initiatives coupled with stable end-user markets.
Voice Services
Revenues from Voice Services for Fiscal 2008 were $586,974, a decrease of 4% compared to revenues for Fiscal 2007 of $611,278. The Acquired Companies contributed incremental revenue of $270,683 and $304,669 for Fiscal 2008 and Fiscal 2007, respectively. The decrease in Acquired Companies contributed revenue is primarily due to expected post-merger client attrition from the NextiraOne acquisition. Excluding the effects of the acquisitions, Voice Services revenues would have increased 3% from $306,609 to $316,291. The Company believes that the increase in Voice Services revenues is primarily due to the success of the Company's DVH cross-selling initiatives coupled with stable end-user markets. 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 Fiscal 2008 were $235,314, an increase of 6% compared to revenues for Fiscal 2007 of $222,903. Excluding the positive exchange rate impact of $9,686 in Fiscal 2008 relative to the U.S. dollar for its international Hotline Services, Hotline Service revenues would have increased 1% from $222,903 to $225,628. The Company believes this increase in Hotline Services revenues is primarily due to the success of the Company's DVH cross-selling initiatives and increases in web-based sales coupled with stable end-user markets.
Gross profit
Gross profit dollars for Fiscal 2008 were $366,620, a decrease of 2% compared to gross profit dollars for Fiscal 2007 of $373,989. Gross profit as a percent of revenues for Fiscal 2008 was 36.1%, a decrease of 0.7% compared to gross profit as a percentage of revenues for Fiscal 2007 of 36.8%. The Company believes the percent decrease was due primarily to the impact of lower gross profit in Voice Services driven by the acquisition of NextiraOne, several strategic investments in Voice Services and the impact of lower gross profit in Hotline Services driven by increased product costs and product mix.
Gross profit dollars for Data Services for Fiscal 2008 were $57,747, or 29.7% of revenues, compared to gross profit dollars for Fiscal 2007 of $55,598, or 30.5% of revenues. Gross profit dollars for Voice Services for Fiscal 2008 were $195,570, or 33.3% of revenues, compared to gross profit dollars for Fiscal 2007 of $209,268, or 34.2% of revenues. Gross profit dollars for Hotline Services for Fiscal 2008 were $113,303, or 48.1% of revenues, compared to gross profit dollars for Fiscal 2007 of $109,123, or 49.0% of revenues. Please see the preceding paragraph for the analysis of gross profit variances by segment. Selling, general & administrative expenses Selling, general & administrative expenses for Fiscal 2008 were $275,309, a decrease of $15,046 compared to Selling, general & administrative expenses for Fiscal 2007 of $290,355. Selling, general & administrative expenses as a percent of revenue for Fiscal 2008 were 27.1% compared to 28.6% for Fiscal 2007. The decrease in Selling, general & administrative expense dollars and Selling, general & administrative expenses as a percent of revenue over the prior year was primarily due to the Company's continued effort to right-size the organization and more properly align the expense structure with anticipated revenues and changing market demand for its solutions and services and a decrease in stock-based compensation expense of $6,091 partially offset by increases in restructuring/integration costs of $6,457 and $1,524 of historical stock option granting practices investigation costs and expenses as a result of measures taken by the Company to address the application of Section 409A of the Code. See "Section 409A Remedial Measures and other potential Section 409A Payments" below.

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Intangibles amortization
Intangibles amortization for Fiscal 2008 was $6,679, a decrease of $3,606 compared to Intangible amortization for Fiscal 2007 of $10,285. The decrease was primarily attributable to the amortization run-out for certain intangible assets partially offset by the finalization of purchase accounting and the addition of intangible assets from acquisitions completed subsequent to the fourth quarter of Fiscal 2007.
Operating income
As a result of the foregoing, Operating income for Fiscal 2008 was $84,632, or 8.3% of revenues, an increase of $11,283 compared to Operating income for Fiscal 2007 of $73,349, or 7.2% of revenues.
Interest expense (income), net
Net interest expense for Fiscal 2008 was $21,298, or 2.1% of revenues, compared . . .