e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended January 1, 2011
OR
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o |
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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)
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Delaware
(State or other jurisdiction of incorporation or organization)
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95-3086563
(I.R.S. Employer Identification No.) |
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1000 Park Drive, Lawrence, Pennsylvania
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15055 |
(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: 724-746-5500
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. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
o Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). o Yes þ No
As of February 4, 2011, there were 17,763,686 shares of common stock, par value $.001 (the common
stock), outstanding.
BLACK BOX CORPORATION
FOR THE QUARTER ENDED JANUARY 1, 2011
INDEX
2
PART I FINANCIAL INFORMATION
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Item 1. Financial Statements. |
BLACK BOX CORPORATION
CONSOLIDATED BALANCE SHEETS
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January 1, 2011 |
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In thousands, except par value |
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(Unaudited) |
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March 31, 2010* |
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Assets |
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Cash and cash equivalents |
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$ |
27,960 |
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$ |
20,885 |
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Accounts receivable, net of allowance for doubtful accounts of $7,623
and $9,505 |
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154,557 |
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141,211 |
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Inventories, net |
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54,565 |
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51,507 |
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Costs/estimated earnings in excess of billings on uncompleted contracts |
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111,234 |
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86,086 |
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Prepaid and other current assets |
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27,140 |
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28,090 |
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Total current assets |
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375,456 |
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327,779 |
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Property, plant and equipment, net |
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22,210 |
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23,568 |
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Goodwill |
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646,620 |
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641,965 |
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Intangibles |
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Customer relationships, net |
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90,829 |
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93,619 |
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Other intangibles, net |
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29,295 |
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30,374 |
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Other assets |
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10,304 |
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8,059 |
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Total assets |
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$ |
1,174,714 |
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$ |
1,125,364 |
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Liabilities |
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Accounts payable |
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$ |
76,547 |
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$ |
66,934 |
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Accrued compensation and benefits |
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32,919 |
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33,260 |
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Deferred revenue |
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35,402 |
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34,876 |
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Billings in excess of costs/estimated earnings on uncompleted contracts |
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20,018 |
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14,839 |
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Income taxes |
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11,030 |
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9,487 |
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Other liabilities |
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39,884 |
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41,798 |
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Total current liabilities |
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215,800 |
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201,194 |
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Long-term debt |
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198,452 |
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210,873 |
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Other liabilities |
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17,524 |
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23,303 |
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Total liabilities |
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$ |
431,776 |
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$ |
435,370 |
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Stockholders equity |
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Preferred stock authorized 5,000, par value $1.00, none issued |
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$ |
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$ |
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Common stock authorized 100,000, par value $.001, 17,764 and 17,548
shares outstanding |
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25 |
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25 |
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Additional paid-in capital |
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463,494 |
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451,778 |
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Retained earnings |
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588,740 |
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551,315 |
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Accumulated other comprehensive income |
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14,257 |
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9,971 |
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Treasury stock, at cost 7,643 and 7,626 shares |
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(323,578 |
) |
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(323,095 |
) |
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Total stockholders equity |
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$ |
742,938 |
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$ |
689,994 |
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Total liabilities and stockholders equity |
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$ |
1,174,714 |
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$ |
1,125,364 |
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* Derived from audited financial statements |
See Notes to the Consolidated Financial Statements
3
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three (3) months ended |
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Nine (9) months ended |
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January 1 and December 26, |
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January 1 and December 26, |
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In thousands, except per share amounts |
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2011 |
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2009 |
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2011 |
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2009 |
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Revenues |
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Hotline products |
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$ |
49,545 |
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$ |
47,012 |
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$ |
142,009 |
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$ |
134,805 |
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On-Site services |
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227,134 |
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206,373 |
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671,190 |
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585,705 |
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Total |
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276,679 |
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253,385 |
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813,199 |
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720,510 |
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Cost of sales |
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Hotline products |
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26,987 |
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24,406 |
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76,823 |
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70,267 |
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On-Site services |
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159,040 |
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142,150 |
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465,990 |
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398,727 |
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Total |
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186,027 |
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166,556 |
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542,813 |
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468,994 |
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Gross profit |
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90,652 |
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86,829 |
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270,386 |
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251,516 |
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Selling, general & administrative expenses |
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64,296 |
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64,198 |
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191,450 |
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192,596 |
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Intangibles amortization |
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2,901 |
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3,108 |
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9,061 |
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9,303 |
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Operating income |
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23,455 |
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19,523 |
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69,875 |
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49,617 |
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Interest expense (income), net |
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1,028 |
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1,852 |
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4,460 |
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6,592 |
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Other expenses (income), net |
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(11 |
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40 |
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(76 |
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(187 |
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Income before provision for income taxes |
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22,438 |
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17,631 |
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65,491 |
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43,212 |
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Provision for income taxes |
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8,528 |
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6,612 |
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24,887 |
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16,205 |
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Net income |
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$ |
13,910 |
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$ |
11,019 |
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$ |
40,604 |
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$ |
27,007 |
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Earnings per common share |
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Basic |
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$ |
0.79 |
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$ |
0.63 |
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$ |
2.31 |
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$ |
1.54 |
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Diluted |
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$ |
0.78 |
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$ |
0.63 |
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$ |
2.30 |
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$ |
1.54 |
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Weighted-average common shares outstanding |
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Basic |
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17,703 |
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17,548 |
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17,611 |
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17,545 |
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Diluted |
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17,940 |
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17,561 |
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17,675 |
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17,545 |
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Dividends per share |
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$ |
0.06 |
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$ |
0.06 |
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$ |
0.18 |
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$ |
0.18 |
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See Notes to the Consolidated Financial Statements
4
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Nine (9) months ended |
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January 1 and December 26, |
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In thousands |
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2011 |
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2009 |
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Operating Activities |
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Net income |
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$ |
40,604 |
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$ |
27,007 |
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Adjustments to reconcile net income to net cash provided by (used for) operating activities |
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Intangibles amortization and depreciation |
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13,672 |
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15,097 |
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Loss (gain) on sale of property |
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(67 |
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10 |
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Deferred taxes |
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5,579 |
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1,197 |
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Tax impact from equity awards |
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995 |
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766 |
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Stock compensation expense |
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7,999 |
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5,022 |
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Change in fair value of interest-rate swaps |
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(1,920 |
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(126 |
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Changes in operating assets and liabilities (net of acquisitions): |
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Accounts receivable, net |
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(9,161 |
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11,568 |
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Inventories, net |
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(2,320 |
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3,617 |
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Costs/estimated earnings in excess of billings on uncompleted contracts |
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(25,012 |
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(22,623 |
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All other current assets excluding deferred tax asset |
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(972 |
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6,037 |
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Billings in excess of costs/estimated earnings on uncompleted contracts |
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4,723 |
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(3,704 |
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Liabilities exclusive of long-term debt |
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1,952 |
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(1,735 |
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Net cash provided by (used for) operating activities |
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$ |
36,072 |
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$ |
42,133 |
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Investing Activities |
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Capital expenditures |
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(2,906 |
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(1,573 |
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Capital disposals |
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98 |
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132 |
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Acquisition of businesses (payments)/recoveries (see Note 9) |
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(12,811 |
) |
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(10,687 |
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Prior merger-related (payments)/recoveries (see Note 9) |
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(1,829 |
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(7,738 |
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Net cash provided by (used for) investing activities |
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$ |
(17,448 |
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$ |
(19,866 |
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Financing Activities |
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Proceeds from borrowings |
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$ |
174,815 |
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$ |
130,890 |
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Repayment of borrowings |
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(187,636 |
) |
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(145,298 |
) |
Deferred financing costs |
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(700 |
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Purchase of treasury stock |
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(483 |
) |
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Proceeds from the exercise of stock options |
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4,712 |
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Payment of dividends |
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(3,166 |
) |
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(3,157 |
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Net cash provided by (used for) financing activities |
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(12,458 |
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(17,565 |
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Foreign currency exchange impact on cash |
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$ |
909 |
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$ |
634 |
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Increase / (decrease) in cash and cash equivalents |
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$ |
7,075 |
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$ |
5,336 |
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Cash and cash equivalents at beginning of period |
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$ |
20,885 |
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$ |
23,720 |
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Cash and cash equivalents at end of period |
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$ |
27,960 |
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$ |
29,056 |
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Supplemental Cash Flow: |
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Cash paid for interest |
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$ |
6,460 |
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$ |
7,198 |
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Cash paid for income taxes |
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17,040 |
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11,618 |
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Non-cash financing activities: |
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Dividends payable |
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1,066 |
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1,053 |
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Capital leases |
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121 |
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4 |
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See Notes to the Consolidated Financial Statements
5
BLACK BOX CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1: Business and Basis of Presentation
Business
Black Box Corporation (Black Box or the Company) is a leading dedicated network infrastructure
services provider. Black Box offers one-source network infrastructure services for communications
systems. The Companys services offerings include design, installation, integration, monitoring and
maintenance of voice, data and integrated communications systems. The Companys primary services
offering is voice solutions (Voice Services); the Company also offers premise cabling and other
data-related services (Data 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 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. As of January 1, 2011, the
Company had more than 3,000 professional technical experts in 195 offices serving 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.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements of Black Box have been
prepared in accordance with accounting principles generally accepted in the United States (GAAP)
and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete financial statements.
The Company believes that these consolidated financial statements reflect all normal, recurring
adjustments needed to present fairly the Companys results for the interim periods presented. The
results as of and for interim periods may not be indicative of the results of operations for any
other interim period or for the full year. These financial statements should be read in conjunction
with the financial statements and notes thereto included in the Companys most recent Annual Report
on Form 10-K as filed with the Securities and Exchange Commission (SEC) for the fiscal year ended
March 31, 2010 (the Form 10-K).
The Companys fiscal year ends on March 31. The fiscal quarters consist of 13 weeks and end on the
Saturday generally nearest each calendar quarter end, adjusted to provide relatively equivalent
business days for each fiscal quarter. The actual ending dates for the periods presented in these
Notes to the Consolidated Financial Statements as of December 31, 2010 and 2009 were January 1,
2011 and December 26, 2009. References herein to Fiscal Year or Fiscal mean the Companys
fiscal year ended March 31 for the year referenced. All references to dollar amounts herein are
presented in thousands, except per share amounts, unless otherwise noted.
The consolidated financial statements include the accounts of the Company, which is the parent
company, and its subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
The preparation of financial statements in conformity with GAAP requires Company management
(Management) to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period.
Significant estimates in these financial statements include project progress towards completion to
estimated budget, allowances for doubtful accounts receivable, sales returns, net realizable value
of inventories, loss contingencies, warranty reserves, intangible assets and goodwill. Actual
results could differ from those estimates. Management believes the estimates made are reasonable.
The Company assessed events subsequent to December 31, 2010 for potential recognition and
disclosure in the consolidated financial statements. No events have occurred that would require
adjustment to or disclosure in the consolidated financial statements.
Note 2: Significant Accounting Policies / Recent Accounting Pronouncements
Significant Accounting Policies
The significant accounting policies used in the preparation of the Companys consolidated financial
statements are disclosed in Note 2 of the Notes to the Consolidated Financial Statements within the
Form 10-K. No additional significant accounting policies have been adopted during Fiscal 2011.
6
Recent Accounting Pronouncements
There have been no accounting pronouncements adopted during Fiscal 2011 that had a material impact
on the Companys consolidated financial statements. There have been no new accounting
pronouncements issued during Fiscal 2011 but not yet adopted that are expected to have a material
impact on the Companys consolidated financial statements. During Fiscal 2011, the Company
evaluated the impact of certain new accounting pronouncements that were disclosed in the Form 10-K
but had not yet been adopted or evaluated by the Company. The Companys evaluation of such new
accounting pronouncements is set forth below.
Revenue Arrangements with Multiple Deliverables
In October 2009, the Financial Accounting Standards Board (the FASB) issued Accounting Standards
Codification (ASC) Update 2009-13, Multiple-Deliverable Revenue Arrangements (ASC Update
2009-13). ASC Update 2009-13 provides amendments to the criteria in Subtopic 605-24 for separating
consideration in multiple-deliverable revenue arrangements. It establishes a hierarchy of selling
prices to determine the selling price of each specific deliverable which includes vendor-specific
objective evidence (if available), third-party evidence (if vendor-specific evidence is not
available) or estimated selling price if neither of the first two is available. ASC Update 2009-13
also eliminates the residual method for allocating revenue between the elements of an arrangement
and requires that arrangement consideration be allocated at the inception of the arrangement.
Finally, ASC Update 2009-13 expands the disclosure requirements regarding a vendors
multiple-deliverable revenue arrangements. ASC Update 2009-13 should be applied on a prospective
basis for revenue arrangements entered into or materially modified in fiscal years beginning on or
after June 15, 2010. This guidance does not apply to the Company.
Certain Revenue Arrangements That Include Software Elements
In October 2009, the FASB issued ASC Update 2009-14, Certain Revenue Arrangements That Include
Software Elements (ASC Update 2009-14). ASC Update 2009-14 amends existing guidance to exclude
tangible products that include software and non-software components that function together to
deliver the products essential functionality. ASC Update 2009-14 shall be applied on a prospective
basis for revenue arrangements entered into or materially modified in fiscal years beginning on or
after June 15, 2010. Earlier application is permitted as of the beginning of a companys fiscal
year provided the company has not previously issued financial statements for any period within that
year. An entity shall not elect early application of ASC Update 2009-14 unless it also elects early
application of ASC Update 2009-13. The adoption of ASC Update 2009-14, as of April 1, 2011, will
not have a material impact on the Companys consolidated financial statements.
Note 3: Inventories
The Companys inventories consist of the following:
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December 31, 2010 |
|
|
March 31, 2010 |
|
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Raw materials |
|
$ |
1,335 |
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|
$ |
1,545 |
|
Finished goods |
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|
73,382 |
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|
69,952 |
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Subtotal |
|
$ |
74,717 |
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|
$ |
71,497 |
|
Excess and obsolete inventory reserves |
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|
(20,152 |
) |
|
|
(19,990 |
) |
|
|
|
Inventory, net |
|
$ |
54,565 |
|
|
$ |
51,507 |
|
|
Note 4: Goodwill
The following table summarizes changes to Goodwill at the Companys reportable segments for the
periods presented:
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North |
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America |
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Europe |
|
|
All Other |
|
|
Total |
|
|
Balance at March 31, 2010 |
|
$ |
571,867 |
|
|
$ |
67,913 |
|
|
$ |
2,185 |
|
|
$ |
641,965 |
|
Currency translation |
|
|
(2 |
) |
|
|
1,497 |
|
|
|
86 |
|
|
|
1,581 |
|
Current period acquisitions (see Note 9) |
|
|
3,155 |
|
|
|
|
|
|
|
|
|
|
|
3,155 |
|
Prior period acquisitions (see Note 9) |
|
|
(81 |
) |
|
|
|
|
|
|
|
|
|
|
(81 |
) |
|
|
|
Balance at December 31, 2010 |
|
$ |
574,939 |
|
|
$ |
69,410 |
|
|
$ |
2,271 |
|
|
$ |
646,620 |
|
|
7
The Company conducted its annual goodwill impairment assessment during the third quarter of
Fiscal 2011 using data as of October 2, 2010. The following table reconciles the carrying value of
goodwill, as of October 2, 2010, for the Companys reportable segments as reported in its
consolidated financial statements, to the carrying value of goodwill by reporting unit which is
used for the annual goodwill impairment assessment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North |
|
|
|
|
|
|
All |
|
|
|
|
|
|
America |
|
|
Europe |
|
|
Other |
|
|
Total |
|
|
Goodwill (as reported in financial statements) |
|
|
571,673 |
|
|
|
70,515 |
|
|
|
2,228 |
|
|
|
644,416 |
|
Adjustment |
|
|
(30,370 |
) |
|
|
27,333 |
|
|
|
3,037 |
|
|
|
|
|
|
|
|
Goodwill (for annual impairment assessment) 1 |
|
|
541,303 |
|
|
|
97,848 |
|
|
|
5,265 |
|
|
|
644,416 |
|
|
|
|
|
1 Goodwill (for annual impairment assessment) represents the amount of
goodwill that is at risk by reporting unit. |
The results of the Companys annual goodwill impairment assessment conducted during the third
quarter of Fiscal 2011 indicate that goodwill is not impaired in any of the Companys reporting
units. The following table summarizes the estimated fair value of the reporting unit, the net book
value of the reporting unit and the surplus of the estimated fair value of the reporting unit over
the net book value of the reporting unit as of October 2, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North |
|
|
|
|
|
|
All |
|
|
|
|
|
|
America |
|
|
Europe |
|
|
Other |
|
|
Total |
|
|
Estimated fair value of the reporting unit |
|
|
716,924 |
|
|
|
126,140 |
|
|
|
62,601 |
|
|
|
905,665 |
|
Net book value of the reporting unit |
|
|
584,718 |
|
|
|
116,108 |
|
|
|
24,754 |
|
|
|
725,580 |
|
|
|
|
Surplus |
|
|
132,206 |
|
|
|
10,032 |
|
|
|
37,847 |
|
|
|
180,085 |
|
|
As previously disclosed, the Company uses an income approach to derive a present value of the
reporting units projected future annual cash flows and the present residual value of the reporting
unit. The Company uses a variety of underlying assumptions to estimate these future cash flows,
which vary for each of the reporting units and include (i) future revenue growth rates, (ii) future
operating profitability, (iii) the weighted-average cost of capital and (iv) a terminal growth
rate. To illustrate the sensitivity of the discounted future cash flows, an instantaneous 100 basis
point increase in the weighted-average cost of capital, which, holding all other assumptions
constant, would be material to the estimated fair value of the reporting unit, would produce a
decrease in the fair value of the reporting units by $110,030, $13,810 and $5,461 for North
America, Europe and All Other, respectively.
Since October 2, 2010, the Companys stock market capitalization has generally been lower than its
net book value. Each of the Companys reporting units continues to operate profitably and generate
significant cash flow from operations, and the Company expects that each will continue to do so in
Fiscal 2011 and beyond. The Company also believes that a reasonable potential buyer would offer a
control premium for the business that would adequately cover the difference between the recent
stock trading prices and the book value.
Future events that could result in an interim assessment of goodwill impairment and/or an
impairment loss include, but are not limited to, (i) significant underperformance relative to
historical or projected future operating results, (ii) significant changes in the manner of or use
of the assets or the strategy for the
Companys overall business, (iii) significant negative industry or economic trends, (iv) a further
decline in market capitalization below book value and (v) a modification to the Companys reporting
segments. Management is currently considering alternative reporting segments for the purpose of
making operational decisions and assessing financial performance. This contemplated change in
reporting segments would affect the reporting units currently being used in the Companys annual
goodwill impairment assessment. Any such change could result in an impairment charge which could
have a material adverse effect on the results of operations for the period in which the impairment
occurs.
8
Note 5: Intangible Assets
The following table summarizes the gross carrying amount, accumulated amortization and net carrying
amount by intangible asset class for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
March 31, 2010 |
|
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
|
Carrying |
|
|
Accum. |
|
|
Carrying |
|
|
Carrying |
|
|
Accum. |
|
|
Carrying |
|
|
|
Amount |
|
|
Amort. |
|
|
Amount |
|
|
Amount |
|
|
Amort. |
|
|
Amount |
|
|
Definite-lived |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-compete agreements |
|
$ |
10,572 |
|
|
$ |
9,016 |
|
|
$ |
1,556 |
|
|
$ |
10,391 |
|
|
$ |
8,193 |
|
|
$ |
2,198 |
|
Customer relationships |
|
|
123,265 |
|
|
|
32,436 |
|
|
|
90,829 |
|
|
|
118,209 |
|
|
|
24,590 |
|
|
|
93,619 |
|
Acquired backlog |
|
|
17,349 |
|
|
|
17,349 |
|
|
|
|
|
|
|
17,349 |
|
|
|
16,912 |
|
|
|
437 |
|
|
|
|
Total |
|
$ |
151,186 |
|
|
$ |
58,801 |
|
|
$ |
92,385 |
|
|
$ |
145,949 |
|
|
$ |
49,695 |
|
|
$ |
96,254 |
|
Indefinite-lived |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks |
|
|
35,992 |
|
|
|
8,253 |
|
|
|
27,739 |
|
|
|
35,992 |
|
|
|
8,253 |
|
|
|
27,739 |
|
|
|
|
Total |
|
$ |
187,178 |
|
|
$ |
67,054 |
|
|
$ |
120,124 |
|
|
$ |
181,941 |
|
|
$ |
57,948 |
|
|
$ |
123,993 |
|
|
The Companys indefinite-lived intangible assets consist solely of the Companys trademark
portfolio. The Companys definite-lived intangible assets are comprised of employee non-compete
agreements, customer relationships and backlog obtained through business acquisitions.
The following table summarizes the changes to carrying amounts of intangible assets for the periods
presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Competes |
|
|
Customer |
|
|
|
|
|
|
Trademarks |
|
|
and Backlog |
|
|
Relationships |
|
|
Total |
|
|
Balance at March 31, 2010 |
|
$ |
27,739 |
|
|
$ |
2,635 |
|
|
$ |
93,619 |
|
|
$ |
123,993 |
|
Amortization expense |
|
|
|
|
|
|
(1,215 |
) |
|
|
(7,846 |
) |
|
|
(9,061 |
) |
Currency translation |
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
10 |
|
Current period acquisitions (see Note 9) |
|
|
|
|
|
|
126 |
|
|
|
5,056 |
|
|
|
5,182 |
|
|
|
|
Balance at December 31, 2010 |
|
$ |
27,739 |
|
|
$ |
1,556 |
|
|
$ |
90,829 |
|
|
$ |
120,124 |
|
|
Intangibles amortization was $2,901 and $3,108 for the three (3) months ended December 31, 2010 and
2009, respectively, and $9,061 and $9,303 for the nine (9) months ended December 31, 2010 and 2009,
respectively. The Company acquired definite-lived intangibles from the completion of several
acquisitions during Fiscal 2011 and 2010.
The following table details the estimated intangibles amortization expense for the remainder of
Fiscal 2011, each of the succeeding four (4) fiscal years and the periods thereafter. These
estimates are based on the carrying amounts of intangible assets as of December 31, 2010 that are
provisional measurements of fair value and are subject to change pending the outcome of purchase
accounting related to certain acquisitions:
|
|
|
|
|
Fiscal |
|
|
|
|
|
2011 |
|
$ |
2,941 |
|
2012 |
|
|
11,495 |
|
2013 |
|
|
10,517 |
|
2014 |
|
|
9,336 |
|
2015 |
|
|
8,197 |
|
Thereafter |
|
|
49,899 |
|
|
|
|
Total |
|
$ |
92,385 |
|
|
9
Note 6: Indebtedness
The Companys long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
March 31, 2010 |
|
|
Revolving credit agreement |
|
$ |
197,815 |
|
|
$ |
209,860 |
|
Capital lease obligations |
|
|
1,334 |
|
|
|
1,967 |
|
Other |
|
|
151 |
|
|
|
7 |
|
|
|
|
Total debt |
|
$ |
199,300 |
|
|
$ |
211,834 |
|
Less: current portion (included in Other liabilities) |
|
|
(848 |
) |
|
|
(961 |
) |
|
|
|
Long-term debt |
|
$ |
198,452 |
|
|
$ |
210,873 |
|
|
Revolving Credit Agreement
On January 30, 2008, the Company entered into a Third Amended and Restated Credit Agreement dated
as of January 30, 2008 with Citizens Bank of Pennsylvania, as agent, and a group of lenders and, on
October 8, 2010, the Company entered into the First Amendment to Credit Agreement primarily to
permit the Company to make certain joint venture investments (as amended, the Credit Agreement).
The Credit Agreement expires on January 30, 2013. Borrowings under the Credit Agreement are
permitted up to a maximum amount of $350,000, which includes up to $20,000 of swing-line loans and
$25,000 of letters of credit. The Credit Agreement may be increased by the Company up to an
additional $100,000 with the approval of the lenders and may be unilaterally and permanently
reduced by the Company to not less than the then outstanding amount of all borrowings. Interest on
outstanding indebtedness under the Credit Agreement accrues, at the Companys option, at a rate
based on either: (a) the greater of (i) the prime rate per annum of the agent then in effect and
(ii) 0.50% plus the rate per annum announced by the Federal Reserve Bank of New York as being the
weighted-average of the rates on overnight Federal funds transactions arranged by Federal funds
brokers on the previous trading day or (b) a rate per annum equal to the LIBOR rate plus 0.50% to
1.125% (determined by a leverage ratio based on the Companys consolidated Earnings Before Interest
Taxes Depreciation and Amortization (EBITDA)). The Credit Agreement requires the Company to
maintain compliance with certain non-financial and financial covenants such as leverage and
fixed-charge coverage ratios. As of December 31, 2010, the Company was in compliance with all
financial covenants under the Credit Agreement.
The maximum amount of debt outstanding under the Credit Agreement, the weighted-average balance
outstanding under the Credit Agreement and the weighted-average interest rate on all outstanding
debt for the three (3) months ended December 31, 2010 was $222,000, $212,871 and 1.2%,
respectively, compared to $255,725, $244,475 and 1.2%, respectively, for the three (3) months ended
December 31, 2009. The maximum amount of debt outstanding under the Credit Agreement, the
weighted-average balance outstanding under the Credit Agreement and the weighted-average interest
rate on all outstanding debt for the nine (9) months ended December 31, 2010 was $237,255, $219,389
and 1.3%, respectively, compared to $261,750, $247,550 and 1.4%, respectively, for the nine (9)
months ended December 31, 2009.
Capital lease obligations
The capital lease obligations are primarily for equipment. The lease agreements have remaining
terms ranging from less than one (1) year to five (5) years with interest rates ranging from 4.5%
to 12.3%.
Other
Other debt is comprised of other third-party, non-employee loans.
Unused available borrowings
As of December 31, 2010, the Company had $4,565 outstanding in letters of credit and $147,620 in
unused commitments under the Credit Agreement.
10
Note 7: Derivative Instruments and Hedging Activities
The Company is exposed to certain market risks, including the effect of changes in foreign currency
exchange rates and interest rates. The Company uses derivative instruments to manage financial
exposures that occur in the normal course of business. It does not hold or issue derivatives for
speculative trading purposes. The Company is exposed to non-performance risk from the
counterparties in its derivative instruments. This risk would be limited to any unrealized gains on
current positions. To help mitigate this risk, the Company transacts only with counterparties that
are rated as investment grade or higher and all counterparties are monitored on a continuous basis.
The fair value of the Companys derivatives reflects this credit risk.
Foreign Currency Contracts
The Company enters into foreign currency contracts to hedge exposure to variability in expected
fluctuations in foreign currencies. Foreign currency assets and liabilities are translated into
U.S. dollars at the rate of exchange existing at the year-end date. Adjustments resulting from
these translations are recorded in Accumulated Other Comprehensive Income (AOCI) within the
Companys Consolidated Balance Sheets and will be included in income upon sale or liquidation of
the foreign investment. As of December 31, 2010, the Company had open contracts in Australian and
Canadian dollars, Danish krone, Euros, Mexican pesos, Norwegian kroner, British pounds sterling,
Swedish krona, Swiss francs and Japanese yen which have been designated as cash flow hedges. These
contracts had a notional amount of $70,490 and will expire within seven (7) months. There was no
hedge ineffectiveness for the three (3) and nine (9) months ended December 31, 2010 and 2009,
respectively.
Interest-rate Swaps
On July 26, 2006, the Company entered into a five-year floating-to-fixed interest-rate swap that is
based on a 3-month LIBOR rate versus a 5.44% fixed rate, has a notional value of $100,000 (which
reduced to $50,000 as of June 26, 2009) and does not qualify for hedge accounting. On June 15,
2009, the Company entered into a three-year floating-to-fixed interest-rate swap that is based on a
3-month LIBOR rate versus a 2.28% fixed rate, has a notional value of $100,000 reducing to $50,000
after two (2) years and does not qualify for hedge accounting. Each interest-rate swap discussed
above is collectively hereinafter referred to as the interest-rate swaps.
The following tables detail the effect of derivative instruments on the Companys Consolidated
Balance Sheets and Consolidated Statements of Income for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives |
|
|
Liability Derivatives |
|
|
|
|
|
December 31, |
|
|
March 31, |
|
|
December 31, |
|
|
March 31, |
|
|
|
Classification |
|
2010 |
|
|
2010 |
|
|
2010 |
|
|
2010 |
|
|
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts |
|
Other liabilities (short-term) |
|
$ |
|
|
|
$ |
|
|
|
$ |
933 |
|
|
$ |
3,130 |
|
Foreign currency contracts |
|
Prepaid and other current assets |
|
$ |
2,267 |
|
|
$ |
514 |
|
|
$ |
|
|
|
$ |
|
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-rate swaps |
|
Other liabilities (short-term) |
|
$ |
|
|
|
$ |
|
|
|
$ |
3,351 |
|
|
$ |
5,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three (3) months ended |
|
|
Nine (9) months ended |
|
|
|
|
|
December 31 |
|
|
December 31 |
|
|
|
Classification |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) recognized in Comprehensive
income on (effective portion) net of
taxes |
|
Other comprehensive income |
|
$ |
360 |
|
|
$ |
(41 |
) |
|
$ |
(92 |
) |
|
$ |
(619 |
) |
(Gain) loss reclassified from AOCI into income (effective portion) net of taxes |
|
Selling, general & administrative expenses |
|
$ |
89 |
|
|
$ |
92 |
|
|
$ |
407 |
|
|
$ |
282 |
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three (3) months ended |
|
|
Nine (9) months ended |
|
|
|
|
|
December 31 |
|
|
December 31 |
|
|
|
Classification |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) recognized in income |
|
Interest expense (income), net |
|
$ |
1,074 |
|
|
$ |
303 |
|
|
$ |
1,920 |
|
|
$ |
126 |
|
|
Note 8: Fair Value Disclosures
Recurring fair value measurements
The following table presents information about the Companys assets and liabilities measured at
fair value on a recurring basis as of December 31, 2010, and indicates the fair value hierarchy of
the valuation techniques utilized by the Company to determine such fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets at Fair Value as of |
|
|
|
December 31, 2010 |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
|
|
Foreign currency contracts |
|
$ |
|
|
|
$ |
2,267 |
|
|
$ |
|
|
|
$ |
2,267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities at Fair Value as of |
|
|
|
December 31, 2010 |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
|
|
Foreign currency contracts |
|
$ |
|
|
|
$ |
933 |
|
|
$ |
|
|
|
$ |
933 |
|
Interest-rate swaps |
|
|
|
|
|
|
3,351 |
|
|
|
|
|
|
|
3,351 |
|
|
|
|
Total |
|
$ |
|
|
|
$ |
4,284 |
|
|
$ |
|
|
|
$ |
4,284 |
|
|
Non-recurring fair value measurements
The Companys assets and liabilities that are measured at fair value on a non-recurring basis
include non-financial assets and liabilities initially measured at fair value in a business
combination. As disclosed in Note 9, the Company completed an acquisition during the three (3)
months ended December 31, 2010 which included operating assets, liabilities and certain intangible
assets. The Company utilized level 2 and level 3 inputs to measure the fair value of these items.
Note 9: Acquisitions
Fiscal 2011 acquisitions
During the third quarter of Fiscal 2011, the Company acquired LOGOS Communications Systems, Inc.
(Logos), a privately-held company headquartered in Westlake, OH. Logos has an active customer
base which includes commercial, education and various local government agency accounts.
Also during the third quarter of Fiscal 2011, the Company acquired a non-controlling interest in
Genesis Networks Integration Services, LLC, a new joint venture company which was formed in
conjunction with Genesis Networks Enterprises, LLC (Genesis). This new joint venture company,
based on Genesis existing Networks Integration Services Division, strengthens and enhances
Genesis ability to deliver and support voice and data communications solutions to its enterprise
customers.
The Company believes that Genesis Networks Integration Services, LLC is a variable interest entity.
However, the Company is not the primary beneficiary and thus it will account for its
non-controlling interest under the equity method. The non-controlling interest is recorded as a
long-term asset in Other assets within the Companys Consolidated Balance Sheets and the net income
(loss) attributable to the non-controlling interest is recorded in Other expenses (income), net
within the Companys Consolidated Statements of Income.
12
The acquisition of Logos and the non-controlling interest in Genesis Networks Integration Services,
LLC did not have a material impact on the Companys consolidated financial statements.
Fiscal 2010 acquisitions
During the third quarter of Fiscal 2010, the Company acquired Quanta Systems, LLC (Quanta), a
privately-held company headquartered in Gaithersburg, MD. Quanta has an active customer base which
includes various United States Department of Defense and government agency accounts.
Also, during the third quarter of Fiscal 2010, the Company acquired CBS Technologies Corp. (CBS),
a privately-held company headquartered in Islandia, NY. CBS has an active customer base which
includes commercial, education and various government agency accounts.
The acquisitions of Quanta and CBS, both individually and in the aggregate, did not have a material
impact on the Companys consolidated financial statements.
The fair values of assets acquired and liabilities assumed for Logos are provisional and are based
on the information that was available as of the acquisition date to estimate the fair value of
assets acquired and liabilities assumed. The Company believes that the information available
provides a reasonable basis for estimating the fair values of assets acquired and liabilities
assumed but additional information not yet available is necessary to finalize those fair values.
Thus, the provisional measurements of fair value are subject to change. The Company expects to
finalize the valuation and complete the purchase price allocation as soon as practicable but no
later than one-year from the acquisition date.
The results of operations of Logos, Quanta and CBS are included within the Companys Consolidated
Statements of Income beginning on their respective acquisition dates.
Note 10: Income Taxes
The Company recorded income tax expense of $8,528, an effective tax rate of 38.0%, and $6,612, an
effective tax rate of 37.5%, for the three (3) months ended December 31, 2010 and 2009,
respectively, and $24,887, an effective tax rate of 38.0%, and $16,205, an effective tax rate of
37.5%, for the nine (9) months ended December 31, 2010 and 2009, respectively. The effective rate
for the nine (9) months ended December 31, 2010 of 38.0% differs from the federal statutory rate
primarily due to state income taxes, partially offset by uncertain income tax positions (including
interest and penalties) and foreign earnings taxed at a lower statutory rate.
The Company provides for income taxes at the end of each interim period based on the estimated
effective tax rate for the full fiscal year. Cumulative adjustments to the Companys estimate are
recorded in the interim period in which a change in the estimated annual effective rate is
determined.
During the three (3) months ended December 31, 2010, the Internal Revenue Services (IRS)
commenced an examination of the Companys U.S. federal income tax return for Fiscal 2009. The IRS
has not yet
proposed any adjustment to the Companys filing positions in connection with this examination. Upon
completion of this examination, it is reasonably possible that the total amount of unrecognized
benefits will change. Any adjustment to the unrecognized tax benefits would impact the effective
tax rate. The Company cannot make an estimate of the impact on the effective rate for any potential
adjustment at this time.
Fiscal 2008 and Fiscal 2010 remain open to examination by the IRS. Fiscal 2006 through Fiscal 2010
remain open to examination by state and foreign taxing jurisdictions.
Note 11: Stock-based Compensation
In August 2008, the Companys stockholders approved the 2008 Long-Term Incentive Plan (the
Incentive Plan) which replaces the 1992 Stock Option Plan, as amended, and the 1992 Director
Stock Option Plan, as amended. As of December 31, 2010, the Incentive Plan is authorized to issue
stock options, restricted stock units and performance shares, among other types of awards, for up
to 2,583,022 shares of common stock, par value $.001 (the common stock).
The Company recognized stock-based compensation expense of $2,493 ($1,545 net of tax), or $0.09 per
diluted share, and $1,743
($1,089 net of tax), or $0.06 per diluted share, for the three (3) months ended December 31, 2010
and 2009, respectively, and $7,999 ($4,959 net of tax), or $0.28 per diluted share, and $5,022
($3,139 net of tax), or $0.18 per diluted share, for the nine (9) months ended December 31, 2010
and 2009, respectively. Stock-based compensation expense is recorded in Selling, general &
administrative expense within the Companys Consolidated Statements of Income.
13
Stock options
Stock option awards are granted with an exercise price equal to the closing market price of the
common stock on the date of grant; such stock options generally become exercisable in equal amounts
over a three-year period and have a contractual life of ten (10) years from the grant date. The
fair value of stock options is estimated on the grant date using the Black-Scholes option pricing
model which includes the following weighted-average assumptions.
|
|
|
|
|
|
|
|
|
|
|
Nine (9) months ended |
|
|
|
|
|
|
|
|
|
|
|
December 31 |
|
|
2010 |
|
|
2009 |
|
|
Expected life (in years) |
|
|
4.9 |
|
|
|
5.0 |
|
|
|
|
|
|
|
|
|
|
Risk free interest rate |
|
|
2.3 |
% |
|
|
2.6 |
% |
|
|
|
|
|
|
|
|
|
Annual forfeiture rate |
|
|
2.1 |
% |
|
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
Volatility |
|
|
41.4 |
% |
|
|
45.6 |
% |
|
|
|
|
|
|
|
|
|
Dividend yield |
|
|
0.8 |
% |
|
|
0.9 |
% |
|
The following table summarizes the Companys stock option activity for the period presented and as
of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Average |
|
|
|
|
|
|
Shares |
|
|
Average |
|
|
Remaining |
|
|
Intrinsic |
|
|
|
(in |
|
|
Exercise |
|
|
Contractual |
|
|
Value |
|
|
|
000s) |
|
|
Price |
|
|
Life (Years) |
|
|
(000s) |
|
|
Outstanding at March 31, 2010 |
|
|
3,187 |
|
|
$ |
35.66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
234 |
|
|
|
32.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(163 |
) |
|
|
28.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
(199 |
) |
|
|
42.41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2010 |
|
|
3,059 |
|
|
$ |
35.33 |
|
|
|
5.4 |
|
|
$ |
12,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2010 |
|
|
2,367 |
|
|
$ |
36.68 |
|
|
|
4.6 |
|
|
$ |
6,892 |
|
|
The weighted-average grant-date fair value of options granted during the nine (9) months ended
December 31, 2010 and 2009 was $11.69 and $12.54, respectively. The total intrinsic value of
options exercised during the nine (9) months ended December 31, 2010 and 2009 was $1,035 and $0,
respectively, based on the closing stock price of the common stock on December 31, 2010 of $38.29.
The following table summarizes certain information regarding the Companys non-vested stock options
for the period presented:
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Weighted- |
|
|
|
(in |
|
|
Average Grant- |
|
|
|
000s) |
|
|
Date Fair Value |
|
|
Non-vested at March 31, 2010 |
|
|
866 |
|
|
$ |
9.42 |
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
234 |
|
|
|
11.69 |
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(3 |
) |
|
|
8.56 |
|
|
|
|
|
|
|
|
|
|
Vested |
|
|
(405 |
) |
|
|
9.21 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested at December 31, 2010 |
|
|
692 |
|
|
$ |
10.32 |
|
|
As of December 31, 2010, there was $4,173 of total unrecognized pre-tax stock-based compensation
expense related to non-vested stock options which is expected to be recognized over a
weighted-average period of 1.2 years.
14
Restricted stock units
Restricted stock unit awards are subject to a service condition and typically vest in equal amounts
over a three-year period from the grant date. The fair value of restricted stock units is
determined based on the
number of restricted stock units granted and the closing market price of the common stock on the
date of grant.
The following table summarizes the Companys restricted stock unit activity for the period
presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Weighted- |
|
|
|
(in |
|
|
Average Grant- |
|
|
|
000s) |
|
|
Date Fair Value |
|
|
Outstanding at March 31, 2010 |
|
|
149 |
|
|
$ |
28.75 |
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
175 |
|
|
|
30.72 |
|
|
|
|
|
|
|
|
|
|
Vested |
|
|
(68 |
) |
|
|
29.28 |
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(7 |
) |
|
|
29.58 |
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2010 |
|
|
249 |
|
|
$ |
29.97 |
|
|
The total fair value of shares that vested during the nine (9) months ended December 31, 2010 and
2009 was $1,985 and $517, respectively.
As of December 31, 2010, there was $5,369 of total unrecognized pre-tax stock-based compensation
expense related to non-vested restricted stock units which is expected to be recognized over a
weighted-average period of 2.0 years.
Performance share awards
Performance share awards are subject to certain performance goals including the Companys Relative
Total Shareholder Return (TSR) Ranking and cumulative Adjusted EBITDA over a two (2) or three (3)
year period. The Companys Relative TSR Ranking metric is based on the two (2) or three (3) year
cumulative return to shareholders from the change in stock price and dividends paid between the
starting and ending dates. The fair value of performance share awards (subject to cumulative
Adjusted EBITDA) is determined based on the number of performance shares granted and the closing
market price of the common stock on the date of grant. The fair value of performance share awards
(subject to the Companys Relative TSR Ranking) is estimated on the grant date using the
Monte-Carlo simulation which includes the following weighted-average assumptions.
|
|
|
|
|
|
|
|
|
|
|
Nine (9) months ended |
|
|
December 31 |
|
|
2010 |
|
|
2009 |
|
|
Expected Volatility |
|
|
52.3 |
% |
|
|
59.1 |
% |
|
|
|
|
|
|
|
|
|
Risk free interest rate |
|
|
1.4 |
% |
|
|
1.1 |
% |
|
|
|
|
|
|
|
|
|
Dividend yield |
|
|
0.8 |
% |
|
|
0.8 |
% |
|
The following table summarizes the Companys performance share award activity for the period
presented:
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Weighted- |
|
|
|
(in |
|
|
Average Grant- |
|
|
|
000s) |
|
|
Date Fair Value |
|
|
Outstanding at March 31, 2010 |
|
|
100 |
|
|
$ |
33.05 |
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
79 |
|
|
|
33.24 |
|
|
|
|
|
|
|
|
|
|
Vested |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2010 |
|
|
179 |
|
|
$ |
33.13 |
|
|
No shares vested during the nine (9) months ended December 31, 2010.
As of December 31, 2010, there was $3,246 of total unrecognized pre-tax stock-based compensation
expense related to non-vested performance share awards which is expected to be recognized over a
weighted-average period of 1.3 years.
15
Note 12: Earnings Per Share
The following table details the computation of basic and diluted earnings per common share from
continuing operations for the periods presented (share numbers in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three (3) months ended |
|
|
Nine (9) months ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31 |
|
December 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
13,910 |
|
|
$ |
11,019 |
|
|
$ |
40,604 |
|
|
$ |
27,007 |
|
|
|
|
Weighted-average common shares outstanding
(basic) |
|
|
17,703 |
|
|
|
17,548 |
|
|
|
17,611 |
|
|
|
17,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities from equity awards |
|
|
237 |
|
|
|
13 |
|
|
|
64 |
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding
(diluted) |
|
|
17,940 |
|
|
|
17,561 |
|
|
|
17,675 |
|
|
|
17,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share |
|
$ |
0.79 |
|
|
$ |
0.63 |
|
|
$ |
2.31 |
|
|
$ |
1.54 |
|
|
|
|
Dilutive earnings per common share |
|
$ |
0.78 |
|
|
$ |
0.63 |
|
|
$ |
2.30 |
|
|
$ |
1.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Weighted-average common shares outstanding (diluted) computation is not impacted during any
period where the exercise price of a stock option is greater than the average market price. There
were 1,229,978 and 3,325,772 non-dilutive equity awards outstanding for the three (3) months ended
December 31, 2010 and 2009, respectively, and 1,239,231 and 3,428,447 non-dilutive equity awards
outstanding for the nine (9) months ended December 31, 2010 and 2009, respectively, that are not
included in the corresponding period Weighted-average common shares outstanding (diluted)
computation.
Note 13: Comprehensive income and AOCI
The following table details the computation of comprehensive income for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three (3) months ended |
|
|
Nine (9) months ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31 |
|
December 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
13,910 |
|
|
$ |
11,019 |
|
|
$ |
40,604 |
|
|
$ |
27,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
(2,087 |
) |
|
|
(1,749 |
) |
|
|
3,849 |
|
|
|
13,721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Instruments (net of tax): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in fair value of cash flow hedging
instruments (net of tax) |
|
|
360 |
|
|
|
(41 |
) |
|
|
(92 |
) |
|
|
(619 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified into results of operations |
|
|
89 |
|
|
|
92 |
|
|
|
407 |
|
|
|
282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension (net of tax): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) |
|
|
4 |
|
|
|
1 |
|
|
|
17 |
|
|
|
(138 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified into results of operations |
|
|
35 |
|
|
|
35 |
|
|
|
105 |
|
|
|
105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) |
|
$ |
(1,599 |
) |
|
$ |
(1,662 |
) |
|
$ |
4,286 |
|
|
$ |
13,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
$ |
12,311 |
|
|
$ |
9,357 |
|
|
$ |
44,890 |
|
|
$ |
40,358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of AOCI consisted of the following for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2010 |
|
|
Foreign currency translation adjustment |
|
$ |
17,147 |
|
|
$ |
13,298 |
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on derivatives designated
and qualified as cash flow hedges |
|
|
(5 |
) |
|
|
(320 |
) |
|
|
|
|
|
|
|
|
|
Unrecognized gain (losses) on defined benefit pension |
|
|
(2,885 |
) |
|
|
(3,007 |
) |
|
|
|
Accumulated other comprehensive income |
|
$ |
14,257 |
|
|
$ |
9,971 |
|
|
16
Note 14: Segment Reporting
Management reviews financial information for the consolidated Company accompanied by disaggregated
information on revenues, operating income and assets by geographic region for the purpose of making
operational decisions and assessing financial performance. Additionally, Management is presented
with and reviews revenues and gross profit by service type. The accounting policies of the
individual operating segments are the same as those of the Company.
The following table presents financial information about the Companys reportable segments by
geographic region for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three (3) months ended |
|
Nine (9) months ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31 |
|
December 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
239,455 |
|
|
$ |
217,124 |
|
|
$ |
710,479 |
|
|
$ |
621,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
18,749 |
|
|
|
14,890 |
|
|
|
58,600 |
|
|
|
38,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
1,350 |
|
|
|
1,767 |
|
|
|
4,240 |
|
|
|
5,447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles amortization |
|
|
2,890 |
|
|
|
3,098 |
|
|
|
9,028 |
|
|
|
9,270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets (as of December 31) |
|
|
1,070,513 |
|
|
|
1,064,527 |
|
|
|
1,070,513 |
|
|
|
1,064,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
27,446 |
|
|
$ |
27,190 |
|
|
$ |
75,186 |
|
|
$ |
75,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
2,851 |
|
|
|
3,111 |
|
|
|
6,340 |
|
|
|
7,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
90 |
|
|
|
76 |
|
|
|
261 |
|
|
|
253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles amortization |
|
|
9 |
|
|
|
9 |
|
|
|
28 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets (as of December 31) |
|
|
134,236 |
|
|
|
138,081 |
|
|
|
134,236 |
|
|
|
138,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
9,778 |
|
|
$ |
9,071 |
|
|
$ |
27,534 |
|
|
$ |
23,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
1,855 |
|
|
|
1,522 |
|
|
|
4,935 |
|
|
|
3,584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
35 |
|
|
|
34 |
|
|
|
110 |
|
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles amortization |
|
|
2 |
|
|
|
1 |
|
|
|
5 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets (as of December 31) |
|
|
27,905 |
|
|
|
24,567 |
|
|
|
27,905 |
|
|
|
24,567 |
|
|
The sum of the segment revenues, operating income, depreciation and intangibles amortization equals
the consolidated revenues, operating income, depreciation and intangibles amortization. The
following reconciles segment assets to total consolidated assets as of December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
December 31 |
|
|
2010 |
|
|
2009 |
|
|
Segment assets for North America, Europe and All Other |
|
$ |
1,232,654 |
|
|
$ |
1,227,175 |
|
|
|
|
|
|
Corporate eliminations |
|
|
(57,940 |
) |
|
|
(62,622 |
) |
|
|
|
Total consolidated assets |
|
$ |
1,174,714 |
|
|
$ |
1,164,553 |
|
|
17
The following table presents financial information about the Company by service type for the
periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three (3) months ended |
|
Nine (9) months ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31 |
|
December 31 |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
Data Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
62,890 |
|
|
$ |
45,342 |
|
|
$ |
170,836 |
|
|
$ |
140,680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
15,427 |
|
|
|
12,078 |
|
|
|
43,853 |
|
|
|
38,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
164,244 |
|
|
$ |
161,031 |
|
|
$ |
500,354 |
|
|
$ |
445,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
52,667 |
|
|
|
52,145 |
|
|
|
161,347 |
|
|
|
148,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotline Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
49,545 |
|
|
$ |
47,012 |
|
|
$ |
142,009 |
|
|
$ |
134,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
22,558 |
|
|
|
22,606 |
|
|
|
65,186 |
|
|
|
64,538 |
|
|
The sum of service type revenues and gross profit equals consolidated revenues and gross profit.
Note 15: Commitments and Contingencies
Regulatory Matters
As previously disclosed, the Company received a subpoena, dated December 8, 2004, from the United
States General Services Administration (GSA), Office of Inspector General. The subpoena requires
production of documents and information. The Company understands that the materials are being
sought in connection with an investigation regarding potential violations of the terms of a GSA
Multiple Award Schedule contract. On October 2, 2007, the Company was contacted by the United
States Department of Justice which informed the Company that it was reviewing allegations by the
GSA that certain of the Companys pricing practices under a GSA Multiple Award Schedule contract
violated the Civil False Claims Act. The Company has executed an agreement with the United States
tolling the statute of limitations on any action by the United States through July 1, 2010 in order
for the parties to discuss the merits of these allegations prior to the possible commencement of
any litigation by the United States. During Fiscal 2010, the Company recorded expense of $2,850 in
connection with this investigation. The Company continues to work with the GSA related to this
matter. At the conclusion of this matter, the Company could be subject to damages, fines, penalties
or other costs, either through settlement or judgment, which could be material.
Litigation Matters
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 these matters are adequately provided for, covered by insurance,
without merit or not probable that an unfavorable outcome will result.
There has been no other significant or unusual activity during Fiscal 2011.
18
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
The discussion and analysis for the three (3) and nine (9) months ended December 31, 2010 and
2009 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, the Company, we or our), including the related notes, and Managements Discussion and
Analysis of Financial Condition and Results of Operations included in the Companys most recent
Annual Report on Form 10-K as filed with the Securities and Exchange Commission (SEC) for the
fiscal year ended March 31, 2010 (the Form 10-K). The Companys fiscal year ends on March 31. The
fiscal quarters consist of 13 weeks and generally end on the Saturday nearest each calendar quarter
end, adjusted to provide relatively equivalent business days for each fiscal quarter. The actual
ending dates for the periods presented as of December 31, 2010 and 2009 were January 1, 2011 and
December 26, 2009, respectively. References to Fiscal Year or Fiscal mean the Companys fiscal
year ended March 31 of the year referenced. All dollar amounts are presented in thousands unless
otherwise noted.
The Company
Black Box is a leading dedicated network infrastructure services provider. Black Box offers
one-source network infrastructure services for communications systems. The Companys services
offerings include design, installation, integration, monitoring and maintenance of voice, data and
integrated communications systems. The Companys primary services offering is voice solutions
(Voice Services); the Company also offers premise cabling and other data-related services (Data
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 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. As of December 31, 2010, the Company had
more than 3,000 professional technical experts in 195 offices serving 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.
With respect to Voice Services, the Companys revenues are primarily generated from the sale and/or
installation of new voice communication systems, the maintenance of voice communication systems and
moves, adds and changes (MAC work) as customers employees change locations or as customers move
or remodel their physical space. The Companys diverse portfolio of product offerings allows it to
service the needs of its customers which it believes is a unique competitive advantage. With
respect to the sale of new voice communication systems, most significant orders are subject to
competitive bidding processes and, generally, competition can be significant for such new orders.
The Company is continually bidding on new projects to replace projects that are completed. New
voice communication system orders often generate a maintenance agreement to maintain the voice
communication system which generally ranges from 1-3 years for commercial clients and 3-5 years for government
clients. Sales of new voice communication systems and, to a lesser extent, MAC work, is dependent
upon general economic growth and the Companys customers capital spending. On the other hand,
revenues from maintenance contracts generally are not dependent on the economy as customers seek to
extend the life of their existing equipment and delay capital spending on new voice communication
systems. The Company also has government contracts which generate significant revenues and are not
as dependent on the overall economic environment as commercial customers. Maintenance and MAC work
revenues also are dependent upon the Companys history and relationship with its customers and its
long track record of providing high-quality service.
Similarly, the Companys revenues for Data Services are generated from the installation or upgrade
of data networks and MAC work. The installation of new data networks is largely dependent upon
commercial employment and building occupancy rates. Installed data networks, however, may need to
be upgraded in order to provide for larger, faster networks to accommodate the growing use of
network technology. Additionally, Data Services projects can include MAC work, similar to Voice
Services projects, which is dependent on economic factors that are the same as those factors
discussed above in relation to the Voice Services business.
There is and has been a trend toward convergence of voice and data networks. Since the Company has
technical expertise in both of these areas, the Company believes that this is a competitive
advantage. Both the Voice Services and Data Services businesses generate backlog. At December 31,
2010, the Companys backlog, defined as expected revenue related to executed client purchase orders
or contracts that are estimated to be complete within 180 days, was approximately $212,000 and
relates primarily to Voice Services and Data Services.
19
The Company generates Hotline Services revenues from the sale of more than 118,000 products through
its catalog, Internet Web site and the Companys On-Site services offices. The sale of these
products is a highly fragmented and competitive business. The Company has been in this business for
over 30 years and has developed a reputation for providing high quality products, free 24/7/365
technical support, comprehensive warranties and rapid order fulfillment. With an average order size
of less than one thousand dollars, the Companys Hotline Services is less impacted by capital
spending and more so on general IT spending. The Companys Hotline Services business provides
additional distribution and support capabilities along with access to Black Box branded products to
both the Data Services and Voice Services businesses which provides cost benefits.
The Company services a variety of customers within most major industries, with the highest
concentration in government, business services, technology, retail, healthcare and manufacturing.
Factors that impact those verticals, therefore, could have an impact on the Company. While the
Company generates most of its revenues in North America, the Company also generates revenues from
around the world, primarily Europe, such that factors that impact the European market could impact
the Company.
Company management (Management) strives to develop extensive and long-term relationships with
high-quality customers as Management believes that satisfied customers will demand quality services
and product offerings even in economic downturns.
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 three (3) acquisitions from April 1, 2009 through December 31, 2010 that
have had an impact on the Companys consolidated financial statements and, more specifically, North
America Voice Services for the periods under review. During Fiscal 2011, the Company acquired LOGOS
Communications Systems, Inc. (Logos). Fiscal 2010 acquisitions were (i) Quanta Systems, LLC
(Quanta) and (ii) CBS Technologies Corp. (CBS). The acquisitions noted above are collectively
referred to as the Acquired Companies. The results of operations of the Acquired Companies are
included within the Companys Consolidated Statements of Income beginning on their respective
acquisition dates.
The Company incurs certain expenses (i.e., 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 these current expenses and an estimate of these future expenses
for Fiscal 2011 (by quarter) based on information available to the Company as of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Q11 |
|
|
2Q11 |
|
|
3Q11 |
|
|
4Q11 |
|
|
Fiscal 2011 |
|
|
Selling, general & administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset write-up depreciation expense on acquisitions |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Intangibles amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets on acquisitions |
|
|
3,093 |
|
|
|
3,045 |
|
|
|
2,890 |
|
|
|
2,929 |
|
|
|
11,957 |
|
|
|
|
Total |
|
$ |
3,093 |
|
|
$ |
3,045 |
|
|
$ |
2,890 |
|
|
$ |
2,929 |
|
|
$ |
11,957 |
|
|
The following table is included to provide a schedule of these expenses during Fiscal 2010 (by
quarter):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Q10 |
|
|
2Q10 |
|
|
3Q10 |
|
|
4Q10 |
|
|
Fiscal 2010 |
|
|
Selling, general & administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset write-up depreciation expense on acquisitions |
|
$ |
|
|
|
$ |
|
|
|
$ |
128 |
|
|
$ |
348 |
|
|
$ |
476 |
|
Intangibles amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets on acquisitions |
|
|
4,031 |
|
|
|
2,134 |
|
|
|
3,099 |
|
|
|
5,886 |
|
|
|
15,150 |
|
|
|
|
Total |
|
$ |
4,031 |
|
|
$ |
2,134 |
|
|
$ |
3,227 |
|
|
$ |
6,234 |
|
|
$ |
15,626 |
|
|
20
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 |
|
|
Nine (9) months ended |
|
|
|
December 31 |
|
|
December 31 |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
|
total |
|
|
|
|
|
|
total |
|
|
|
|
|
|
total |
|
|
|
|
|
|
total |
|
|
|
$ |
|
|
revenue |
|
|
$ |
|
|
revenue |
|
|
$ |
|
|
revenue |
|
|
$ |
|
|
revenue |
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
$ |
239,455 |
|
|
|
86.6 |
% |
|
$ |
217,124 |
|
|
|
85.7 |
% |
|
$ |
710,479 |
|
|
|
87.4 |
% |
|
$ |
621,635 |
|
|
|
86.3 |
% |
Europe |
|
|
27,446 |
|
|
|
9.9 |
% |
|
|
27,190 |
|
|
|
10.7 |
% |
|
|
75,186 |
|
|
|
9.2 |
% |
|
|
75,248 |
|
|
|
10.4 |
% |
All Other |
|
|
9,778 |
|
|
|
3.5 |
% |
|
|
9,071 |
|
|
|
3.6 |
% |
|
|
27,534 |
|
|
|
3.4 |
% |
|
|
23,627 |
|
|
|
3.3 |
% |
|
|
|
Total |
|
$ |
276,679 |
|
|
|
100 |
% |
|
$ |
253,385 |
|
|
|
100 |
% |
|
$ |
813,199 |
|
|
|
100 |
% |
|
$ |
720,510 |
|
|
|
100 |
% |
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
$ |
18,749 |
|
|
|
|
|
|
$ |
14,890 |
|
|
|
|
|
|
$ |
58,600 |
|
|
|
|
|
|
$ |
38,278 |
|
|
|
|
|
% of North America revenues |
|
|
7.8 |
% |
|
|
|
|
|
|
6.9 |
% |
|
|
|
|
|
|
8.2 |
% |
|
|
|
|
|
|
6.2 |
% |
|
|
|
|
Europe |
|
$ |
2,851 |
|
|
|
|
|
|
$ |
3,111 |
|
|
|
|
|
|
$ |
6,340 |
|
|
|
|
|
|
$ |
7,755 |
|
|
|
|
|
% of Europe revenues |
|
|
10.4 |
% |
|
|
|
|
|
|
11.4 |
% |
|
|
|
|
|
|
8.4 |
% |
|
|
|
|
|
|
10.3 |
% |
|
|
|
|
All Other |
|
$ |
1,855 |
|
|
|
|
|
|
$ |
1,522 |
|
|
|
|
|
|
$ |
4,935 |
|
|
|
|
|
|
$ |
3,584 |
|
|
|
|
|
% of All Other revenues |
|
|
19.0 |
% |
|
|
|
|
|
|
16.8 |
% |
|
|
|
|
|
|
17.9 |
% |
|
|
|
|
|
|
15.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
23,455 |
|
|
|
8.5 |
% |
|
$ |
19,523 |
|
|
|
7.7 |
% |
|
$ |
69,875 |
|
|
|
8.6 |
% |
|
$ |
49,617 |
|
|
|
6.9 |
% |
|
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 |
|
|
Nine (9) months ended |
|
|
|
December 31 |
|
|
December 31 |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
|
total |
|
|
|
|
|
|
total |
|
|
|
|
|
|
total |
|
|
|
|
|
|
total |
|
|
|
$ |
|
|
revenue |
|
|
$ |
|
|
revenue |
|
|
$ |
|
|
revenue |
|
|
$ |
|
|
revenue |
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data Services |
|
$ |
62,890 |
|
|
|
22.7 |
% |
|
$ |
45,342 |
|
|
|
17.9 |
% |
|
$ |
170,836 |
|
|
|
21.0 |
% |
|
$ |
140,680 |
|
|
|
19.5 |
% |
Voice Services |
|
|
164,244 |
|
|
|
59.4 |
% |
|
|
161,031 |
|
|
|
63.6 |
% |
|
|
500,354 |
|
|
|
61.5 |
% |
|
|
445,025 |
|
|
|
61.8 |
% |
Hotline Services |
|
|
49,545 |
|
|
|
17.9 |
% |
|
|
47,012 |
|
|
|
18.5 |
% |
|
|
142,009 |
|
|
|
17.5 |
% |
|
|
134,805 |
|
|
|
18.7 |
% |
|
|
|
Total |
|
$ |
276,679 |
|
|
|
100 |
% |
|
$ |
253,385 |
|
|
|
100 |
% |
|
$ |
813,199 |
|
|
|
100 |
% |
|
$ |
720,510 |
|
|
|
100 |
% |
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data Services |
|
$ |
15,427 |
|
|
|
|
|
|
$ |
12,078 |
|
|
|
|
|
|
$ |
43,853 |
|
|
|
|
|
|
$ |
38,167 |
|
|
|
|
|
% of Data Services revenues |
|
|
24.5 |
% |
|
|
|
|
|
|
26.6 |
% |
|
|
|
|
|
|
25.7 |
% |
|
|
|
|
|
|
27.1 |
% |
|
|
|
|
Voice Services |
|
$ |
52,667 |
|
|
|
|
|
|
$ |
52,145 |
|
|
|
|
|
|
$ |
161,347 |
|
|
|
|
|
|
$ |
148,811 |
|
|
|
|
|
% of Voice Services revenues |
|
|
32.1 |
% |
|
|
|
|
|
|
32.4 |
% |
|
|
|
|
|
|
32.2 |
% |
|
|
|
|
|
|
33.4 |
% |
|
|
|
|
Hotline Services |
|
$ |
22,558 |
|
|
|
|
|
|
$ |
22,606 |
|
|
|
|
|
|
$ |
65,186 |
|
|
|
|
|
|
$ |
64,538 |
|
|
|
|
|
% of Hotline Services revenues |
|
|
45.5 |
% |
|
|
|
|
|
|
48.1 |
% |
|
|
|
|
|
|
45.9 |
% |
|
|
|
|
|
|
47.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
90,652 |
|
|
|
32.8 |
% |
|
$ |
86,829 |
|
|
|
34.3 |
% |
|
$ |
270,386 |
|
|
|
33.2 |
% |
|
$ |
251,516 |
|
|
|
34.9 |
% |
|
21
Third quarter of Fiscal 2011 (3Q11) compared to third quarter of Fiscal 2010 (3Q10):
Total Revenues
Total revenues for 3Q11 were $276,679, an increase of 9% compared to total revenues for 3Q10 of
$253,385. The Acquired Companies contributed incremental revenue of $10,280 and $4,403 for 3Q11 and
3Q10, respectively. Excluding the effects of the acquisitions and the negative exchange rate impact
of $696 in 3Q11 relative to the U.S. dollar, total revenues would have increased 7% from $248,982
to $267,095 for the reasons discussed below.
Revenues by Geography
North America
Revenues in North America for 3Q11 were $239,455, an increase of 10% compared to revenues for 3Q10
of $217,124. The Acquired Companies contributed incremental revenue of $10,280 and $4,403 for 3Q11
and 3Q10, respectively. Excluding the effects of the acquisitions and the positive exchange rate
impact of $332 in 3Q11 relative to the U.S. dollar, North American revenues would have increased 8%
from $212,721 to $228,843. The Company believes that this increase is primarily due to increased
activity for both end-user and indirect sales of Data Services within the business services and
financial services revenue verticals and a general increase in activity for Hotline Services.
Europe
Revenues in Europe for 3Q11 were $27,446, an increase of 1% compared to revenues for 3Q10 of
$27,190. Excluding the negative exchange rate impact of $1,541 in 3Q11 relative to the U.S. dollar,
Europe revenues would have increased 7% from $27,190 to $28,987. The Company believes this increase
is primarily due to a large order for Hotline Services within the business services revenue
vertical. Revenues in Europe otherwise continue to be impacted by weak general economic conditions
that affected client demand for Data Services and Hotline Services.
All Other
Revenues for All Other for 3Q11 were $9,778, an increase of 8% compared to revenues for 3Q10 of
$9,071. Excluding the positive exchange rate impact of $513 in 3Q11 relative to the U.S. dollar,
All Other revenues would have increased 2% from $9,071 to $9,265.
Revenue by Service Type
Data Services
Revenues from Data Services for 3Q11 were $62,890, an increase of 39% compared to revenues for 3Q10
of $45,342. Excluding the negative exchange rate impact of $35 in 3Q11 relative to the U.S. dollar
for international Data Services, Data Services revenues would have increased 39% from $45,342 to
$62,925. The Company believes that this increase is primarily due to increased revenue activity for
both end-user and indirect sales in North America within the business services and financial
services revenue verticals.
Voice Services
Revenues from Voice Services for 3Q11 were $164,244, an increase of 2% compared to revenues for
3Q10 of $161,031. The Acquired Companies contributed incremental revenue of $10,280 and $4,403 for
3Q11 and 3Q10, respectively. Excluding the effects of the acquisitions, Voice Services revenues
would have decreased 2% from $156,628 to $153,964. The Company believes that this decrease is
primarily due to the timing of revenue recognition for certain projects. There was no exchange rate
impact on Voice Services revenues as all of the Companys Voice Services revenues are denominated
in U.S. dollars.
Hotline Services
Revenues from Hotline Services for 3Q11 were $49,545, an increase of 5% compared to revenues for
3Q10 of $47,012. Excluding the negative exchange rate impact of $661 in 3Q11 relative to the U.S.
dollar for international Hotline Services, Hotline Services revenues would have increased 7% from
$47,012 to $50,206. The Company believes this increase is primarily due to a large order in Europe
within the business services revenue vertical and a general increase in activity in North America
and All Other.
22
Gross profit
Gross profit dollars for 3Q11 were $90,652, an increase of 4% compared to gross profit dollars for
3Q10 of $86,829. Gross profit as a percent of revenues for 3Q11 was 32.8%, a decrease of 1.5%
compared to Gross profit as a percentage of revenues for 3Q10 of 34.3%. The Company believes the
percent decrease was due primarily to an increase in project-related work, which carries a lower
margin than MAC work and maintenance work, for Voice Services, lower margin projects primarily due
to several strategic investments and continued pricing pressures for Data Services and product mix
for Hotline Services. The dollar increase is primarily due to the increase in revenues partially
offset by the decrease in gross profit as a percentage of revenues.
Gross profit dollars for Data Services for 3Q11 were $15,427, or 24.5% of revenues, compared to
gross profit dollars for 3Q10 of $12,078, or 26.6% of revenues. Gross profit dollars for Voice
Services for 3Q11 were $52,667, or 32.1% of revenues, compared to gross profit dollars for 3Q10 of
$52,145, or 32.4% of revenues. Gross profit dollars for Hotline Services for 3Q11 were $22,558, or
45.5% of revenues, compared to gross profit dollars for 3Q10 of $22,606, or 48.1% 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 3Q11 were $64,296, nearly equivalent to Selling,
general & administrative expenses for 3Q10 of $64,198. Selling, general & administrative expenses
as a percent of revenues for 3Q11 were 23.2%, a decrease of 2.1% compared to Selling, general &
administrative expenses as a percent of revenues for 3Q10 of 25.3%. The Company incurred certain
Selling, general & administrative expenses that Management considers non-operating items. These
items are historical stock option granting practices investigation and related matters costs of $0
and $318 and severance expenses of $226 and $860 for a total of $226 and $1,178, or 0.1% and 0.5%
of revenues, for 3Q11 and 3Q10, respectively. Excluding these items, Selling, general &
administrative expenses would have increased 2% from $63,020 to $64,070 and Selling, general &
administrative expenses as a percent of revenues would have decreased 1.7% from 24.9% to 23.2% for
3Q10 and 3Q11, respectively. Management believes that the foregoing provides insight into
components of these expenses to enable a better understanding of the Companys results of
operations.
The increase in Selling, general & administrative expenses was primarily due to the increase in
costs to support the total revenue growth discussed above. The decrease in Selling, general &
administrative expenses as a percent of revenue over the prior year was primarily due to certain
leveraging of the Companys cost structure as revenues continue to increase and efficiencies
resulting from an ongoing evaluation of the Companys cost structure.
Intangibles amortization
Intangibles amortization for 3Q11 was $2,901, a decrease of 7% compared to Intangibles amortization
for 3Q10 of $3,108. The decrease was primarily attributable to the amortization run-out for certain
intangible assets partially offset by the addition of intangible assets from acquisitions completed
subsequent to the third quarter of Fiscal 2010.
Operating income
As a result of the foregoing, Operating income for 3Q11 was $23,455, an increase of 20% compared to
Operating income for 3Q10 of $19,523 and Operating income as a percent of revenues for 3Q11 was
8.5%, an increase of 0.8% compared to Operating income as a percent of revenues for 3Q10 of 7.7%.
Interest expense (income), net
Net interest expense for 3Q11 was $1,028, a decrease of 44% compared to net interest expense for
3Q10 of $1,852. Net interest expense as a percent of revenues for 3Q11 was 0.4%, a decrease of 0.3%
compared to Net interest expense as a percent of revenues for 3Q10 of 0.7%. The Companys
interest-rate swaps contributed gains of $1,074 and $303 for 3Q11 and 3Q10 respectively, due to the
change in fair value. Excluding the effect of the interest-rate swaps, net interest expense would
have decreased 2% from $2,155, or 0.9% of revenues, for 3Q10, to $2,102, or 0.8% of revenues, for
3Q11. This decrease in net interest expense is due to a decrease in the weighted-average
outstanding debt from $244,475 for 3Q10 to $212,871 for 3Q11.
Provision for income taxes
The tax provision for 3Q11 was $8,528, an effective tax rate of 38.0%. This compares to the tax
provision for 3Q10 of $6,612, an effective tax rate of 37.5%. The tax rate for 3Q11 was higher than
3Q10 due to an increase in uncertain income tax positions (including interest and penalties)
partially offset by foreign currency exchange effects on previously-taxed income. The Company
anticipates that its deferred tax asset is realizable in the foreseeable future.
23
Net income
As a result of the foregoing, Net income for 3Q11 was $13,910, an increase of 26% compared to Net
income for 3Q10 of $11,019 and Net income as a percent of revenues for 3Q11 was 5.0%, an increase
of 0.7% compared to Net income as a percent of revenues for 3Q10 of 4.3%.
Nine (9) months Fiscal 2011 (3QYTD11) compared to nine (9) months Fiscal 2010 (3QYTD10):
Total Revenues
Total revenues for 3QYTD11 were $813,199, an increase of 13% compared to total revenues for 3QYTD10
of $720,510. The Acquired Companies contributed incremental revenue of $25,546 and $4,403 for
3QYTD11 and 3QYTD10, respectively. Excluding the effects of the acquisitions and the negative
exchange rate impact of $1,182 in 3QYTD11 relative to the U.S. dollar, total revenues would have
increased 10% from $716,107 to $788,835 for the reasons discussed below.
Revenues by Geography
North America
Revenues in North America for 3QYTD11 were $710,479, an increase of 14% compared to revenues for
3QYTD10 of $621,635. The Acquired Companies contributed incremental revenue of $25,546 and $4,403
for 3QYTD11 and 3QYTD10, respectively. Excluding the effects of the acquisitions and the positive
exchange rate impact of $1,374 in 3QYTD11 relative to the U.S. dollar, North American revenues
would have increased 11% from $617,232 to $683,559. The Company believes that this increase is
primarily due to increased activity for both end-user and indirect sales of Voice Services within
the government (primarily federal and state) and retail revenue verticals, increased activity for
both end-user and indirect sales of Data Services within the business services, financial services
and technology revenue verticals and a general increase in activity for Hotline Services.
Europe
Revenues in Europe for 3QYTD11 were $75,186, nearly equivalent to revenues for 3QYTD10 of $75,248.
Excluding the negative exchange rate impact of $4,022 in 3QYTD11 relative to the U.S. dollar,
Europe revenues would have increased 5% from $75,248 to $79,208. The Company believes this increase
is primarily due to several large orders for Hotline Services within the business services revenue
vertical. Revenues in Europe otherwise continue to be impacted by weak general economic conditions
that affected client demand for Data Services and Hotline Services.
All Other
Revenues for All Other for 3QYTD11 were $27,534, an increase of 17% compared to revenues for
3QYTD10 of $23,627. Excluding the positive exchange rate impact of $1,466 in 3QYTD11 relative to
the U.S. dollar, All Other revenues would have increased 10% from $23,627 to $26,068.
Revenue by Service Type
Data Services
Revenues from Data Services for 3QYTD11 were $170,836, an increase of 21% compared to revenues for
3QYTD10 of $140,680. Excluding the positive exchange rate impact of $183 in 3QYTD11 relative to the
U.S. dollar for international Data Services, Data Services revenues would have increased 21% from
$140,680 to $170,653. The Company believes that this increase is primarily due to increased
activity for both end-user and indirect sales in North America within the business services,
financial services and technology revenue verticals.
Voice Services
Revenues from Voice Services for 3QYTD11 were $500,354, an increase of 12% compared to revenues for
3QYTD10 of $445,025. The Acquired Companies contributed incremental revenue of $25,546 and $4,403
for 3QYTD11 and 3QYTD10, respectively. Excluding the effects of the acquisitions, Voice Services
revenues would have increased 8% from $440,622 to $474,808. The Company believes that this increase
is primarily due to increased activity for both indirect and end-user sales of Voice Services
within the government (primarily federal and state) and retail revenue verticals. There was no
exchange rate impact on Voice Services revenues as all of the Companys Voice Services revenues are
denominated in U.S. dollars.
24
Hotline Services
Revenues from Hotline Services for 3QYTD11 were $142,009, an increase of 5% compared to revenues
for 3QYTD10 of $134,805. Excluding the negative exchange rate impact of $1,365 in 3QYTD11 relative
to the U.S. dollar for international Hotline Services, Hotline Services revenues would have
increased 6% from $134,805 to $143,374. The Company believes this increase is primarily due to
several large orders in Europe within the business services revenue vertical and a general increase
in activity in North America and All Other.
Gross profit
Gross profit dollars for 3QYTD11 were $270,386, an increase of 8% compared to gross profit dollars
for 3QYTD10 of $251,516. Gross profit as a percent of revenues for 3QYTD11 was 33.2%, a decrease of
1.7% compared to Gross profit as a percent of revenues for 3QYTD10 of 34.9%. The Company believes
the percent decrease was due primarily to an increase in project-related work, which carries a
lower margin than MAC work and maintenance work, for Voice Services, lower margin projects
primarily due to several strategic investments and continued pricing pressures for Data Services
and product mix for Hotline Services. The dollar increase is primarily due to the increase in
revenues partially offset by the decrease in gross profit as a percentage of revenues.
Gross profit dollars for Data Services for 3QYTD11 were $43,853, or 25.7% of revenues, compared to
gross profit dollars for 3QYTD10 of $38,167, or 27.1% of revenues. Gross profit dollars for Voice
Services for 3QYTD11 were $161,347, or 32.2% of revenues, compared to gross profit dollars for
3QYTD10 of $148,811, or 33.4% of revenues. Gross profit dollars for Hotline Services for 3QYTD11
were $65,186, or 45.9% of revenues, compared to gross profit dollars for 3QYTD10 of $64,538, or
47.9% 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 3QYTD11 were $191,450, a decrease of 1% compared to
Selling, general & administrative expenses for 3QYTD10 of $192,596. Selling, general &
administrative expenses as a percent of revenues for 3QYTD11 were 23.5%, a decrease of 3.2%
compared to Selling, general & administrative expenses as a percent of revenues for 3QYTD10 of
26.7%. The Company incurred certain Selling, general & administrative expenses that Management
considers non-operating items. These items are historical stock option granting practices
investigation and related matters costs of $0 and $4,574, the United States General Services
Administration settlement of $0 and $2,145 and severance expenses of $1,304 and $2,521 for a total
of $1,304 and $9,240, or 0.2% and 1.3% of revenues, for 3QYTD11 and 3QYTD10, respectively.
Excluding these items, Selling, general & administrative expenses would have increased 4% from
$183,356 to $190,146 and Selling, general & administrative expenses as a percent of revenues would
have decreased 2.0% from 25.4% to 23.4% for 3QYTD10 and 3QYTD11, respectively. Management believes
that the foregoing provides insight into components of these expenses to enable a better
understanding of the Companys results of operations.
The increase in Selling, general & administrative expenses was primarily due to the increase in
costs to support the total revenue growth discussed above. The decrease in Selling, general &
administrative expenses as a percent of revenue over the prior year was primarily due to certain
leveraging of the Companys cost structure as revenues continue to increase and efficiencies
resulting from an ongoing evaluation of the Companys cost structure.
Intangibles amortization
Intangibles amortization for 3QYTD11 was $9,061, a decrease of 3% compared to Intangibles
amortization for 3QYTD10 of $9,303. The decrease was primarily attributable to the amortization
run-out for certain intangible assets partially offset by addition of intangible assets from
acquisitions completed subsequent to the third quarter of Fiscal 2010.
Operating income
As a result of the foregoing, Operating income for 3QYTD11 was $69,875, an increase of 41% compared
to Operating income for 3QYTD10 of $49,617 and Operating income as a percent of revenues for
3QYTD11 was 8.6%, an increase of 1.7% compared to Operating income as a percent of revenues for
3QYTD10 of 6.9%.
25
Interest expense (income), net
Net interest expense for 3QYTD11 was $4,460, a decrease of 32% compared to net interest expense for
3QYTD10 of $6,592. Net interest expense as a percent of revenues for 3QYTD11 was 0.5%, a decrease
of 0.4% compared to Net interest expense as a percent of revenues for 3QYTD10 of 0.9%. The
Companys interest-rate swaps contributed gains of $1,920 and $126 for 3QYTD11 and 3QYTD10,
respectively, due to the change in fair value. Excluding the effect of the interest-rate swaps, net
interest expense would have decreased 5% from $6,718, or 0.9% of revenues, for 3QYTD10, to $6,380,
or 0.8% of revenues, for 3QYTD11. This decrease in net interest expense is due to decreases in the
weighted-average interest rate from 1.4% for 3QYTD10 to 1.3% for 3QYTD11 and in the
weighted-average outstanding debt from $247,550 for 3QYTD10 to $219,389 for 3QYTD11. The decrease
in the weighted-average interest rate is due primarily to the overall decline in short-term
interest rates.
Provision for income taxes
The tax provision for 3QYTD11 was $24,887, an effective tax rate of 38.0%. This compares to the tax
provision for 3QYTD10 of $16,205, an effective tax rate of 37.5%. The tax rate for 3QYTD11 was
higher than 3QYTD10 due to an increase in uncertain income tax positions (including interest and
penalties) partially offset by foreign currency exchange effects on previously-taxed income. 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 3QYTD11 was $40,604, an increase of 50% compared to
Net income for 3QYTD10 of $27,007 and Net income as a percent of revenues for 3QYTD11 was 5.0%, an
increase of 1.3% compared to Net income as a percent of revenues for 3QYTD10 of 3.7%.
Liquidity and Capital Resources
Operating Activities
Net cash provided by operating activities during 3QYTD11 was $36,072. Significant factors
contributing to the source of cash were: net income of $40,604 inclusive of non-cash charges of
$13,672 and $7,999 for amortization/depreciation expense and stock compensation expense,
respectively, as well as increases in trade accounts payable of $6,140, billings in excess of costs
of $4,723 and accrued taxes of $1,449. Significant factors contributing to a use of cash include
increases in trade accounts receivable, net inventory and costs in excess of billings of $9,161,
$2,320 and $25,012, respectively, as well as decreases in restructuring reserves of $3,071 and
other liabilities of $2,667. The increase in costs in excess of billings reflects additional large
contracts where contract billing terms do not necessarily coincide with percentage-of-completion
revenue recognition. It should be noted that the increase in costs in excess of billings represents
revenue growth and not a delay in the collection of working capital. Changes in the above accounts
are based on average Fiscal 2011 exchange rates.
Net cash provided by operating activities during 3QYTD10 was $42,133. Significant factors
contributing to the source of cash were: net income of $27,007 inclusive of non-cash charges of
$15,097 and $5,022 for amortization/depreciation expense and stock compensation expense,
respectively, as well as decreases in net inventory of $3,617 and net trade accounts receivable of
$11,568 and an increase in accrued expenses and accrued
taxes of $3,069 and $2,814, respectively. Significant factors contributing to a use of cash include
decreases in billings in excess of costs and restructuring reserves of $3,704 and $5,178,
respectively, and an increase in costs in excess of billings of $22,623. The increase in costs in
excess of billings is primarily related to billing terms associated with certain government-related
contracts. Changes in the above accounts are based on average Fiscal 2010 exchange rates.
As of December 31, 2010 and 2009, the Company had cash and cash equivalents of $27,960 and $29,056,
respectively, working capital of $159,656 and $141,378, respectively, and a current ratio of 1.7
and 1.7, respectively.
The Company believes that its cash provided by operating activities and availability under its
credit facility will be sufficient to fund the Companys working capital requirements, capital
expenditures, dividend program, potential stock repurchases, potential future acquisitions or
strategic investments and other cash needs for the next twelve (12) months.
26
Investing Activities
Net cash used by investing activities during 3QYTD11 was $17,448. Significant factors contributing
to the cash outflow were: $12,811 to acquire 100% of Logos and a non-controlling interest in
Genesis Networks Integration Services, LLC, $2,906 for gross capital expenditures and $1,829 for
holdbacks and contingent fee payments related to prior period acquisitions.
Net cash used by investing activities during 3QYTD10 was $19,866. Significant factors contributing
to the cash outflow were: $10,687 to acquire Quanta and CBS, $7,738 for holdbacks and contingent
fee payments related to prior period acquisitions and $1,573 for gross capital expenditures.
Financing Activities
Net cash used by financing activities during 3QYTD11 was $12,458. Significant factors contributing
to the cash outflow were $12,821 of net payments on long-term debt and $3,166 for the payment of
dividends. Significant factors contributing to the cash inflow were $4,712 of proceeds from the
exercise of employee stock options.
Net cash used by financing activities during 3QYTD10 was $17,565. Significant factors contributing
to the cash outflow were $14,408 of net payments on long-term debt and $3,157 for the payment of
dividends.
Total Debt
Revolving
Credit Agreement On January 30, 2008, the Company entered into a Third Amended and
Restated Credit Agreement dated as of January 30, 2008 with Citizens Bank of Pennsylvania, as
agent, and a group of lenders and, on October 8, 2010, the Company entered into the First Amendment
to Credit Agreement primarily to permit the Company to make certain joint venture investments (as
amended, the Credit Agreement). The Credit Agreement expires on January 30, 2013. Borrowings
under the Credit Agreement are permitted up to a maximum amount of $350,000, which includes up to
$20,000 of swing-line loans and $25,000 of letters of credit. The Credit Agreement may be increased
by the Company up to an additional $100,000 with the approval of the lenders and may be
unilaterally and permanently reduced by the Company to not less than the then outstanding amount of
all borrowings. Interest on outstanding indebtedness under the Credit Agreement accrues, at the
Companys option, at a rate based on either: (a) the greater of (i) the prime rate per annum of the
agent then in effect and (ii) 0.50% plus the rate per annum announced by the Federal Reserve Bank
of New York as being the weighted-average of the rates on overnight Federal funds transactions
arranged by Federal funds brokers on the previous trading day or (b) a rate per annum equal to the
LIBOR rate plus 0.50% to 1.125% (determined by a leverage ratio based on the Companys consolidated
Earnings Before Interest Taxes Depreciation and Amortization (EBITDA)). The Credit Agreement
requires the Company to maintain compliance with certain non-financial and financial covenants such
as leverage and fixed-charge coverage ratios. As of December 31, 2010, the Company was in
compliance with all financial covenants under the Credit Agreement.
As of December 31, 2010, the Company had total debt outstanding of $199,300. Total debt was
comprised of $197,815 outstanding under the Credit Agreement and $1,334 of obligations under
capital leases. The maximum amount of debt outstanding under the Credit Agreement, the
weighted-average balance outstanding under the Credit Agreement and the weighted-average interest
rate on all outstanding debt for the three (3) months ended December 31, 2010 was $222,000,
$212,871 and 1.2%, respectively, compared to $255,725, $244,475 and 1.2%, respectively, for the
three (3) months ended December 31, 2009. The maximum amount of debt outstanding under the Credit
Agreement, the weighted-average balance outstanding under the Credit Agreement and the
weighted-average interest rate on all outstanding debt for the nine (9) months ended December 31,
2010 was $237,255, $219,389 and 1.3%, respectively, compared to $261,750, $247,550 and 1.4%,
respectively, for the nine (9) months ended December 31, 2009.
As of December 31, 2010, the Company had $4,565 outstanding in letters of credit and $147,620 in
unused commitments under the Credit Agreement.
Dividends
Fiscal 2011
3Q11 - The Companys Board of Directors (the Board) declared a cash dividend of $0.06 per share
on all outstanding shares of the common stock. The dividend totaled $1,066 and was paid on January
14, 2011 to stockholders of record at the close of business on December 31, 2010.
27
2Q11 - The Board declared a cash dividend of $0.06 per share on all outstanding shares of the
common stock. The dividend totaled $1,057 and was paid on October 15, 2010 to stockholders of
record at the close of business on October 1, 2010.
1Q11 - The Board declared a cash dividend of $0.06 per share on all outstanding shares of the
common stock. The dividend totaled $1,056 and was paid on July 19, 2010 to stockholders of record
at the close of business on July 2, 2010.
Fiscal 2010
3Q10 - The Board declared a cash dividend of $0.06 per share on all outstanding shares of the
common stock. The dividend totaled $1,053 and was paid on January 8, 2010 to stockholders of record
at the close of business on December 24, 2009.
2Q10 - The Board declared a cash dividend of $0.06 per share on all outstanding shares of the
common stock. The dividend totaled $1,053 and was paid on October 9, 2009 to stockholders of record
at the close of business on September 25, 2009.
1Q10 - The Board declared a cash dividend of $0.06 per share on all outstanding shares of the
common stock. The dividend totaled $1,052 and was paid on July 10, 2009 to stockholders of record
at the close of business on June 26, 2009.
While the Company expects to continue to declare quarterly dividends, the payment of future
dividends is at the discretion of the Board and the timing and amount of any future dividends will
depend upon earnings, cash requirements and financial condition of the Company. Under the Credit
Agreement, the Company is permitted to make any distribution or dividend as long as no Event of
Default or Potential Default (each as defined in the Credit Agreement) occurs or is continuing.
Repurchase of Common Stock
Fiscal 2011
3Q11 - During the three (3) months ended December 31, 2010, the Company repurchased 28 shares of
its common stock for an aggregate purchase price of $1, or an average purchase price per share of
$36.08.
2Q11 - There were no repurchases of common stock during the three (3) months ended September 30,
2010.
1Q11 - During the three (3) months ended June 30, 2010, the Company made tax payments of $482 and
withheld 16,488 shares of common stock, which were designated as treasury shares, for an average
price per share of $29.26, related to share withholding to satisfy employee income taxes due as a
result of the vesting in May 2010 of certain restricted stock units.
Fiscal 2010
There were no repurchases of common stock during Fiscal 2010.
Since the inception of the repurchase program in April 1999 through December 31, 2010, the Company
has repurchased 7,626,223 shares of common stock for an aggregate purchase price of $323,096, or an
average
purchase price per share of $42.37. These shares do not include the treasury shares withheld for
tax payments resulting from the vesting in May 2010 of certain restricted stock units. As of
December 31, 2010, 873,777 shares were available under repurchase programs approved by the Board.
Additional repurchases of common stock may occur from time to time depending upon factors such as
the Companys cash flows and general market conditions. While the Company expects to continue to
repurchase shares of common stock for the foreseeable future, there can be no assurance as to the
timing or amount of such repurchases. Under the Credit Agreement, the Company is permitted to
repurchase its common stock as long as no Event of Default or Potential Default (each as defined in
the Credit Agreement) occurs or is continuing, the leverage ratio (after taking into consideration
the payment made to repurchase such common stock) would not exceed 2.75 to 1.0 and the availability
to borrow under the Credit Facility would not be less than $20,000.
Legal Proceedings
See the matter discussed in Note 15 of the Notes to the Consolidated Financial Statements of this
Quarterly Report on Form 10-Q (this Form 10-Q), which information is incorporated herein by
reference.
Inflation
The overall effects of inflation on the Company have been nominal. Although long-term inflation
rates are difficult to predict, the Company continues to strive to minimize the effect of inflation
through improved productivity and cost reduction programs as well as price adjustments within the
constraints of market competition.
28
Valuation of Goodwill
The Company conducted its annual goodwill impairment assessment during the third quarter of Fiscal
2011 using data as of October 2, 2010. The following table reconciles the carrying value of
goodwill, as of October 2, 2010, for the Companys reportable segments as reported in its
consolidated financial statements, to the carrying value of goodwill by reporting unit which is
used for the annual goodwill impairment assessment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North |
|
|
|
|
|
|
All |
|
|
|
|
|
|
America |
|
|
Europe |
|
|
Other |
|
|
Total |
|
|
Goodwill (as reported in financial statements) |
|
$ |
571,673 |
|
|
$ |
70,515 |
|
|
$ |
2,228 |
|
|
$ |
644,416 |
|
Adjustment |
|
|
(30,370 |
) |
|
|
27,333 |
|
|
|
3,037 |
|
|
|
|
|
|
|
|
Goodwill (for annual impairment assessment) 1 |
|
$ |
541,303 |
|
|
$ |
97,848 |
|
|
$ |
5,265 |
|
|
$ |
644,416 |
|
|
1 Goodwill (for annual impairment assessment) represents the amount of goodwill
that is at risk by reporting unit.
The results of the Companys annual goodwill impairment assessment conducted during the third
quarter of Fiscal 2011 indicate that goodwill is not impaired in any of the Companys reporting
units. The following table summarizes the estimated fair value of the reporting unit, the net book
value of the reporting unit and the surplus of the estimated fair value of the reporting unit over
the net book value of the reporting unit as of October 2, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North |
|
|
|
|
|
|
All |
|
|
|
|
|
|
America |
|
|
Europe |
|
|
Other |
|
|
Total |
|
|
Estimated fair value of the reporting unit |
|
$ |
716,924 |
|
|
$ |
126,140 |
|
|
$ |
62,601 |
|
|
$ |
905,665 |
|
Net book value of the reporting unit |
|
|
584,718 |
|
|
|
116,108 |
|
|
|
24,754 |
|
|
|
725,580 |
|
|
|
|
Surplus |
|
$ |
132,206 |
|
|
$ |
10,032 |
|
|
$ |
37,847 |
|
|
$ |
180,085 |
|
|
As previously disclosed, the Company uses an income approach to derive a present value of the
reporting units projected future annual cash flows and the present residual value of the reporting
unit. The Company uses a variety of underlying assumptions to estimate these future cash flows,
which vary for each of the reporting units and include (i) future revenue growth rates, (ii) future
operating profitability, (iii) the weighted-average cost of capital and (iv) a terminal growth
rate. To illustrate the sensitivity of the discounted future cash flows, an instantaneous 100 basis
point increase in the weighted-average cost of capital, which, holding all other assumptions
constant, would be material to the estimated fair value of the reporting unit, would produce a
decrease in the fair value of the reporting units by $110,030, $13,810 and $5,461 for North
America, Europe and All Other, respectively.
Since October 2, 2010, the Companys stock market capitalization has generally been lower than its
net book value. Each of the Companys reporting units continues to operate profitably and generate
significant cash flow from operations, and the Company expects that each will continue to do so in
Fiscal 2011 and beyond. The Company also believes that a reasonable potential buyer would offer a
control premium for the business that would adequately cover the difference between the recent
stock trading prices and the book value.
Future events that could result in an interim assessment of goodwill impairment and/or an
impairment loss include, but are not limited to, (i) significant underperformance relative to
historical or projected future operating results, (ii) significant changes in the manner of or use
of the assets or the strategy for the Companys overall business, (iii) significant negative
industry or economic trends, (iv) a further decline in market capitalization below book value and
(v) a modification to the Companys reporting segments. Management is currently considering
alternative reporting segments for the purpose of making operational decisions and assessing
financial performance. This contemplated change in reporting segments would affect the reporting
units currently being used in the Companys annual goodwill impairment assessment. Any such change
could result in an impairment charge which could have a material adverse effect on the results of
operations for the period in which the impairment occurs.
29
Critical Accounting Policies/Impact of Recently Issued Accounting Pronouncements
Critical Accounting Policies
The Companys critical accounting policies require the most difficult, subjective or complex
judgments, often as a result of the need to make estimates about the effect of matters that are
inherently uncertain and are the most important to the portrayal of the Companys consolidated
financial statements. The Companys critical accounting policies are disclosed in Part II, Item 7,
Managements Discussion and Analysis of Financial Condition and Results of Operations of the Form
10-K. There have been no changes to the Companys critical accounting policies during the three (3)
and nine (9) months ended December 31, 2010.
Impact of Recently Issued Accounting Pronouncements
See Note 2 of the Notes to the Consolidated Financial Statements for further discussion of
recently-issued accounting standards and the related impact on the Companys consolidated financial
statements.
Cautionary Forward Looking Statements
When included in this Form 10-Q or in documents incorporated herein by reference, the words
should, expects, intends, anticipates, believes, estimates, approximates, targets,
plans and analogous expressions are intended to identify forward-looking statements. One can also
identify forward-looking statements by the fact that they do not relate strictly to historical or
current facts. Such statements are inherently subject to a variety of risks and uncertainties that
could cause actual results to differ materially from those projected. Although it is not possible
to predict or identify all risk factors, such risks and uncertainties may include, among others,
levels of business activity and operating expenses, expenses relating to corporate compliance
requirements, cash flows, global economic and business conditions, successful integration of
acquisitions, the timing and costs of restructuring programs, successful marketing of DVH services,
successful implementation of the Companys M&A program, including identifying appropriate targets,
consummating transactions and successfully integrating the businesses, successful implementation of
the Companys government contracting programs, competition, changes in foreign, political and
economic conditions, fluctuating foreign currencies compared to the U.S. dollar, rapid changes in
technologies, client preferences, the Companys arrangements with suppliers of voice equipment and
technology and various other matters, many of which are beyond the Companys control. Additional
risk factors are included in the Form 10-K. 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 Form 10-Q. The Company expressly disclaims any obligation or undertaking to
release publicly any updates or any changes in the Companys expectations with regard thereto or
any change in events, conditions or circumstances on which any statement is based.
30
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to market risks in the ordinary course of business that include
interest-rate volatility and foreign currency exchange rates volatility. Market risk is measured as
the potential negative impact on earnings, cash flows or fair values resulting from a hypothetical
change in interest rates or foreign currency exchange rates over the next year. The Company does
not hold or issue any other financial derivative instruments (other than those specifically noted
below) nor does it engage in speculative trading of financial derivatives.
Interest-rate Risk
The Companys primary interest-rate risk relates to its long-term debt obligations. As of December
31, 2010, the Company had total long-term obligations of $197,815 under the Credit Agreement. Of
the outstanding debt, $150,000 was in variable rate debt that was effectively converted to a fixed
rate through multiple interest-rate swap agreements (discussed in more detail below) and $47,815
was in variable rate obligations. As of December 31, 2010, an instantaneous 100 basis point
increase in the interest rate of the variable rate debt would reduce the Companys net income in
the subsequent fiscal quarter by $118 ($73 net of tax) assuming the Company employed no
intervention strategies.
To mitigate the risk of interest-rate fluctuations associated with the Companys variable rate
long-term debt, the Company has implemented an interest-rate risk management strategy that
incorporates the use of derivative instruments to minimize significant unplanned fluctuations in
earnings caused by interest-rate volatility. The Companys goal is to manage interest-rate
sensitivity by modifying the re-pricing characteristics of certain balance sheet liabilities so
that the net-interest margin is not, on a material basis, adversely affected by the movements in
interest rates.
On July 26, 2006, the Company entered into a five-year floating-to-fixed interest-rate swap that is
based on a 3-month LIBOR rate versus a 5.44% fixed rate, has a notional value of $100,000 (which
reduced to $50,000 as of June 26, 2009) and does not qualify for hedge accounting. On June 15,
2009, the Company entered into a three-year floating-to-fixed interest-rate swap that is based on a
3-month LIBOR rate versus a 2.28% fixed rate, has a notional value of $100,000 reducing to $50,000
after two (2) years and does not qualify for hedge accounting. Changes in the fair market value of
the interest-rate swap are recorded as an asset or liability within the Companys Consolidated
Balance Sheets and Interest expense (income) within the Companys Consolidated Statements of
Income.
Foreign Exchange Rate Risk
The Company has operations, clients and suppliers worldwide, thereby exposing the Companys
financial results to foreign currency fluctuations. In an effort to reduce this risk of foreign
currency fluctuations, 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. The Company has entered and will continue in the future, on a
selective basis, to enter into foreign currency contracts to reduce the foreign currency exposure
related to certain intercompany transactions, primarily trade receivables and loans. All of the
foreign currency contracts have been designated and qualify as cash
flow hedges. The effective portion of any changes in the fair value of the derivative instruments
is recorded in Accumulated Other Comprehensive Income (AOCI) until the hedged forecasted
transaction occurs or the recognized currency transaction affects earnings. Once the forecasted
transaction occurs or the recognized currency transaction affects earnings, the effective portion
of any related gains or losses on the cash flow hedge is reclassified from AOCI to the Companys
Consolidated Statements of Income. In the event it becomes probable that the hedged forecasted
transaction will not occur, the ineffective portion of any gain or loss on the related cash flow
hedge would be reclassified from AOCI to the Companys Consolidated Statements of Income.
As of December 31, 2010, the Company had open foreign currency contracts in Australian and Canadian
dollars, Danish krone, Euros, Mexican pesos, Norwegian kroner, British pounds sterling, Swedish
krona, Swiss francs and Japanese yen. The open contracts have contract rates ranging from 1.01 to
1.15 Australian dollar, 1.01 to 1.08 Canadian dollar, 5.71 to 5.99 Danish krone, 0.71 to 0.82 Euro,
12.66 to 12.66 Mexican peso, 5.81 to 6.57 Norwegian kroner, 0.62 to 0.68 British pound sterling,
6.65 to 7.51 Swedish krona, 0.96 to 1.15 Swiss franc and 93.10 to 93.10 Japanese yen, all per U.S.
dollar. The total open contracts had a notional amount of $70,490 and will expire within seven (7)
months.
31
Item 4. Controls and Procedures.
Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures
Management, including the Companys Chief Executive Officer and Chief Financial Officer, is
responsible for establishing and maintaining adequate disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
Exchange Act)) for the Company. Management assessed the effectiveness of the Companys disclosure
controls and procedures as of December 31, 2010. Based upon this assessment, Management has
concluded that the Companys disclosure controls and procedures were effective as of December 31,
2010 to provide reasonable assurance that information required to be disclosed by the Company in
the reports filed or submitted by it under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SECs rules and forms, and to provide reasonable
assurance that information required to be disclosed by the Company in such reports is accumulated
and communicated to Management, including its principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required disclosure.
The SECs general guidance permits the exclusion of an assessment of the effectiveness of a
registrants disclosure controls and procedures as they relate to its internal control over
financial reporting for an acquired business during the first year following such acquisition if,
among other circumstances and factors, there is not adequate time between the acquisition date and
the date of assessment. As previously noted in this Form 10-Q, Black Box completed the acquisition
of Logos during Fiscal 2011. Logos represents approximately 1.0% of the Companys total assets as
of December 31, 2010. Managements assessment and conclusion on the effectiveness of the Companys
disclosure controls and procedures as of December 31, 2010 excludes an assessment of the internal
control over financial reporting of Logos.
Changes in Internal Control Over Financial Reporting
There have not been any changes in the Companys internal control over financial reporting (as such
term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal
quarter that have materially affected or are reasonably likely to materially affect the Companys
internal control over financial reporting.
Limitations on the Effectiveness of Controls
All internal control systems, no matter how well designed, have inherent limitations. Therefore,
even those systems determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. Because of its inherent limitations, the
Companys internal control over financial reporting may not prevent or detect misstatements. In
addition, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies and procedures may deteriorate.
32
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
Maximum Number |
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased |
|
|
of Shares that May |
|
|
|
Total Number |
|
|
|
|
|
|
as Part of Publicly |
|
|
Yet Be Purchased |
|
|
|
of Shares |
|
|
Average Price |
|
|
Announced Plans |
|
|
Under the Plans |
|
Period |
|
Purchased |
|
|
Paid per Share |
|
|
or Programs |
|
|
or Programs |
|
|
October 3, 2010 to
October 31, 2010 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
873,805 |
|
November 1, 2010 to
November 28, 2010 |
|
|
28 |
|
|
$ |
36.08 |
|
|
|
28 |
|
|
|
873,777 |
|
November 29, 2010
to January 1, 2011 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
873,777 |
|
|
|
|
Total |
|
|
28 |
|
|
$ |
36.08 |
|
|
|
28 |
|
|
|
873,777 |
|
|
As of December 31, 2010, 873,777 shares were available under repurchase programs approved by the
Board and announced on November 20, 2003, August 12, 2004 and November 7, 2006.
The repurchase programs have no expiration date and no programs were terminated prior to the full
repurchase of the authorized amount.
Additional repurchases of common stock may occur from time to time depending upon factors such as
the Companys cash flows and general market conditions. While the Company expects to continue to
repurchase shares of common stock for the foreseeable future, there can be no assurance as to the
timing or amount of such repurchases. Under the Credit Agreement, the Company is permitted to
repurchase its common stock as long as no Event of Default or Potential Default (each as defined in
the Credit Agreement) occurs or is continuing, the leverage ratio (after taking into consideration
the payment made to repurchase such common stock) would not exceed 2.75 to 1.0 and the availability
to borrow under the credit facility would not be less than $20 million.
33
Item 6. Exhibits.
|
|
|
Exhibit |
|
|
Number |
|
Description |
10.1
|
|
First Amendment to Credit Agreement, dated as of October 8, 2010, by
and among Black Box Corporation of Pennsylvania and Norstan, Inc.,
as Borrowers, the Company, the other Guarantors parties thereto, the
Lenders parties thereto and Citizens Bank of Pennsylvania
(1) |
|
|
|
10.2
|
|
Agreement between the Company and Kenneth P. Davis (1) |
|
|
|
21.1
|
|
Subsidiaries of the Registrant (1) |
|
|
|
31.1
|
|
Certification of the Chief Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended, and
Section 302 of the Sarbanes-Oxley Act of 2002 (1) |
|
|
|
31.2
|
|
Certification of the Chief Financial Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended, and
Section 302 of the Sarbanes-Oxley Act of 2002 (1) |
|
|
|
32.1
|
|
Certification of the Chief Executive Officer and Chief Financial
Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of
1934, as amended, and 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (1) |
34
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
Dated: February 10, 2011
|
BLACK BOX CORPORATION
|
|
|
/s/ Michael McAndrew
|
|
|
Michael McAndrew, Executive Vice |
|
|
President, Chief Financial Officer, Treasurer,
Secretary and Principal Accounting Officer |
|
35
EXHIBIT INDEX
|
|
|
Exhibit |
|
|
Number |
|
Description |
10.1
|
|
First Amendment to Credit Agreement, dated as of October 8, 2010, by
and among Black Box Corporation of Pennsylvania and Norstan, Inc.,
as Borrowers, the Company, the other Guarantors parties thereto, the
Lenders parties thereto and Citizens Bank of Pennsylvania
(1) |
|
|
|
10.2
|
|
Agreement between the Company and Kenneth P. Davis (1) |
|
|
|
21.1
|
|
Subsidiaries of the Registrant (1) |
|
|
|
31.1
|
|
Certification of the Chief Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended, and
Section 302 of the Sarbanes-Oxley Act of 2002 (1) |
|
|
|
31.2
|
|
Certification of the Chief Financial Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended, and
Section 302 of the Sarbanes-Oxley Act of 2002 (1) |
|
|
|
32.1
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Certification of the Chief Executive Officer and Chief Financial
Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of
1934, as amended, and 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (1) |
36