FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended March 31, 2009
OR
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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
(Address of principal executive offices)
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15055
(Zip Code) |
Registrants telephone number, including area code: 724-746-5500
Securities registered pursuant to Section 12(b) of the Act:
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(Title of each class)
Common Stock, $.001 par value
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(Name of each exchange on which registered)
The NASDAQ Global Market |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. o Yes þ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. o Yes þ No
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 (§ 229.405 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§
229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. þ
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 the 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 þ
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Accelerated filer o
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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
The aggregate market value of the voting stock held by non-affiliates of the registrant as of
September 26, 2008 (based on closing price of such stock as reported by NASDAQ on such date) was
$634,798,032. For purposes of this calculation only, directors and executive officers of the
registrant and their affiliates are deemed to be affiliates of the registrant.
As of May 22, 2009, there were 17,533,305 shares of common stock, par value $.001 (the common
stock), outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for 2009 Annual Meeting of Stockholders (the Proxy Statement) Part III
BLACK BOX CORPORATION
FOR THE FISCAL YEAR ENDED MARCH 31, 2009
INDEX
PART I
Item 1. Business.
Overview. Black Box Corporation (Black Box, we, the Company or our) is the worlds largest
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; the Company
also offers premise cabling and other data-related services and products. The Company provides
24/7/365 technical support for all of its solutions which encompass all major voice and data
product manufacturers as well as 118,000 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
March 31, 2009, the Company had more than 3,000 professional technical experts in 192 offices
serving more than 175,000 clients in 141 countries throughout the world. Founded in 1976, Black
Box, a Delaware corporation, operates subsidiaries on five continents and is headquartered near
Pittsburgh in Lawrence, Pennsylvania.
Black Box differentiates itself from its competitors by providing exceptional levels of superior
technical services for communication solutions, its capability to provide these services globally
and its private-labeled BLACK BOX® brand network infrastructure products which feature
some of the most comprehensive warranties in the industry.
As the worlds largest and highest quality network infrastructure services company 100% dedicated
to this market, Black Box is in a unique position to capitalize on its service advantages, current
leadership position, diverse and loyal client base and strong financial performance.
The Companys fiscal year ends on March 31. References to Fiscal Year or Fiscal mean the
Companys fiscal year ended March 31 for the year referenced. All dollar amounts are in thousands
except for per share amounts or unless otherwise noted.
Industry Background. Black Box participates in the worldwide network infrastructure market
estimated at $60 billion.
Products and services are distributed to this market primarily through value-added resellers,
manufacturers, direct marketers, large system integrators and other technical services companies.
These companies range from very large, international companies, some of which have access to
greater resources than those available to Black Box, to small, local or regionally-focused
companies. In addition, competition for our Hotline Services business includes direct marketing
manufacturers, mass merchandisers, big box retailers, web retailers and others. Black Box
believes that it competes on the basis of its solution features offerings, technical capabilities,
service levels and price.
Business Strategy. Black Boxs business strategy is to provide its clients with one source for
services and products to meet all their networking infrastructure needs whether at a single
location or multiple locations worldwide. The Company believes that its combination of worldwide
Voice Services and Data Services performed at client locations integrated with Hotline Services
provides a unique advantage over its competitors in the network infrastructure market. The Company
believes its record of consistent operating profitability, positive cash flow and its high rate of
repeat clients is evidence of the strength of its strategy. Keys to the Companys success include
the following:
Expert Technical Support Deployed Three Ways.
Locally at Client Sites. Black Box provides complete voice, data and integrated solutions
including design, installation, remote monitoring and routine and emergency maintenance with
consistent high quality and uniformity. The Company maintains certifications from leading voice
and data product manufacturers,
including AVST®,
Cisco®,
Microsoft®,
Mitel®,
Nortel®,
NEC®,
ShoreTel®,
Siemens®,
Vertical® and CommScope®, among others. In
addition, the Company maintains what it believes is the industrys largest staff of Registered
Communications Distribution Designers (RCDDs) who assure that all designs meet or exceed ANSI,
TIA/EIA and National Electric Code® standards.
24/7/365 Technical Support. Black Box provides around-the-clock, seven days per week
technical support, available to clients in 141 countries worldwide. In Fiscal 2009 and 2008, the
Companys technical experts responded to 1.1 million and 1.3 million, respectively, client calls.
Black Box specialists receive continuous training to stay up-to-date on the latest technologies.
www.blackbox.com Internet Web Site. Black Box offers its 24/7/365 technical support on-line
at http://www.blackbox.com. With one click by an existing or a potential client on Talk to a
Tech, a technical expert makes contact with that person immediately. Technical information,
including Black Box Explains and Technology Overviews, is always available as well as the
ability to easily design and configure custom products on-line.
3
Worldwide Coverage. With 192 offices serving 141 countries, as of March 31, 2009, Black
Box has the largest footprint in the industry, serving every major industry sector. This worldwide
coverage and 33 years of experience makes one-source project management a reality for Black Box
clients. Black Box ensures that clients with these needs receive consistent high-quality design,
workmanship and technology from a single service provider. The Company is exposed to certain risks
because of its global operations discussed under the caption International operations in Part I,
Item 1A, Risk Factors, which is incorporated herein by reference.
Strategic Partnerships with Leading Voice and Data Product Manufacturers. Black Box has
partnerships and distribution agreements with leading voice and data product manufacturers. Access
to these multi-technology platforms provides Black Box clients with the convenience of a one-source
provider for its network infrastructure needs.
Quality Networking Solutions and Comprehensive Warranties. Black Box products and services
are covered by an umbrella of protection that extends beyond standard warranties. Black Box was
the first in the industry to introduce a No Questions Asked product warranty program offering
full protection regardless of cause of failure, including accidental, surge or water damage for the
life of the warranty and many products are guaranteed for life. Exclusive to Black Box are its
Guaranteed-for-Life Structured Cabling System and Certification Plus® guarantees that
provide assurance that a clients network will operate within the application it was designed to
support for life.
Brand Name. BLACK BOX is a widely-recognized brand name associated with high quality
products and services. The Company believes that the BLACK BOX trademark is important to its
business.
ISO 9001:2000 Certified. Black Box has received ISO 9001:2000 certification in Australia,
Brazil, Canada, Chile, France, Germany, Ireland, Italy, Japan, Mexico, the Netherlands, Puerto
Rico, Singapore, Spain, the United Kingdom and the United States. Rigorous quality control
processes must be documented and practiced to earn and maintain ISO 9001:2000 certification.
Proprietary Client List. Over the course of its 33 year history, the Company has built a
proprietary mailing list of approximately 1.5 million names representing over 1.4 million clients.
This database includes information on the past purchases of its clients. The Company routinely
analyzes this data in an effort to enhance client purchasing and ensure that targeted marketing
programs reach their specified audiences. The Company believes that its proprietary client list is
a valuable asset that represents a significant competitive advantage. The Company does not rent
its client list.
Rapid Order Fulfillment. Black Box has developed efficient inventory management and order
fulfillment systems that allow most standard products to be shipped that same day. Requests for
same day counter-to-counter delivery and special labeling, kitting and packaging are also available
from Black Box.
Growth Strategy. The principal components of Black Boxs growth strategy include: (i)
cross-selling marketing activities capitalizing on its one-source solution of DVH®
(Data, Voice and Hotline) Services, (ii) expanded product offerings and (iii) expanded global
technical support services primarily through mergers and acquisitions. The Company has completed
the following transactions during Fiscal 2009, Fiscal 2008 and Fiscal 2007:
Fiscal 2009:
During the fourth quarter of Fiscal 2009, the Company acquired Scottel Voice & Data, Inc.
(Scottel), a privately-held company based out of Culver City, CA. Scottel has an active customer
base which includes commercial, education and various government agency accounts.
During the third quarter of Fiscal 2009, the Company acquired Network Communications Technologies,
Inc. (NCT), a privately-held company based out of Charlotte, NC. NCT has an active customer base
which includes commercial, education and various government agency accounts.
Also, during the third quarter of Fiscal 2009, the Company acquired ACS Communications, Inc.
(ACS), a privately-held company based out of Austin, TX. ACS has an active customer base which
includes commercial, education and various government agency accounts.
During the second quarter of Fiscal 2009, the Company acquired Mutual Telecom Services Inc.
(MTS), a privately-held company based out of Needham, MA. MTS is a global telecommunications
services and solutions provider primarily servicing clients in the Department of Defense and other
federal agencies.
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During the first quarter of Fiscal 2009, the Company acquired UCI Communications LLC (UCI), a
privately-held company based out of Mobile, AL. UCI has an active customer base which includes
commercial, education and various government agency accounts.
Fiscal 2008:
During the fourth quarter of Fiscal 2008, the Company acquired BellSouth Communication Systems, LLC
d/b/a AT&T Communication Systems Southeasts (AT&T) NEC TDM voice CPE business line in AT&Ts
southeast region.
During the third quarter of Fiscal 2008, the Company acquired B & C Telephone, Inc. (B&C), a
privately-held company based out of Spokane, WA. B&C has an active customer base which includes
commercial, financial, healthcare and various government agency accounts.
Fiscal
2007:
During the fourth quarter of Fiscal 2007, the Company acquired ADS Telecom, Inc. (ADS), a
privately-held company based out of Orlando, FL. ADS has an active customer base which includes
commercial, financial, healthcare and various government agency accounts.
During the third quarter of Fiscal 2007, the Company acquired Nortech Telecommunications Inc.
(NTI), a privately-held company based out of Chicago, IL. NTI has an active customer base which
includes commercial, education and various government agency accounts.
During the first quarter of Fiscal 2007, the Company acquired the privately-held USA Commercial and
Government and Canadian operations of NextiraOne, LLC (NextiraOne). NextiraOne services
commercial and various government agency clients. Black Box and NextiraOne have completed the
integration process, including the re-branding of the NextiraOne business as Black Box Network
Services.
Also during the first quarter of Fiscal 2007, the Company acquired Nu-Vision Technologies, Inc. and
Nu-Vision Technologies, LLC (collectively referred to as NUVT), privately-held companies, which
provide planning, installation, monitoring and maintenance services for voice and data network
systems. NUVT has an active customer base, which includes commercial, education and various
government agency accounts.
The results of operations for all acquisitions noted above are included within the Companys
Consolidated Statements of Income beginning on their respective acquisition dates.
These acquired companies, which are focused on servicing the North America Voice Services and North
America Data Services market, have influenced the composition of the Companys service types as
profiled below:
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Percent of Consolidated Revenues |
Service Type |
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FY09 |
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FY08 |
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FY07 |
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FY06 |
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FY05 |
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Data Services |
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19 |
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19 |
% |
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18 |
% |
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27 |
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38 |
% |
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Voice Services |
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60 |
% |
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58 |
% |
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60 |
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43 |
% |
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20 |
% |
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Hotline Services |
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21 |
% |
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23 |
% |
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22 |
% |
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30 |
% |
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42 |
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Black Box Total |
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100 |
% |
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100 |
% |
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100 |
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100 |
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100 |
% |
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Clients. Black Box clients range from small organizations to many of the worlds largest
corporations and institutions. Black Box clients participate in many diverse industries, including
government, technology, retail, manufacturing, business services,
banking, healthcare,
distributors, education, real estate development and utilities, among others. Revenues from the Companys clients are segmented as approximately 55%
from large companies, approximately 15% from medium-sized companies and approximately 30% from
small companies.
Marketing. Black Boxs products and services are marketed primarily through direct sales driven by
its nearly 300 team members exclusively devoted to these efforts. This sales force is further
supported by the Companys direct marketing efforts in printed publications and on-line via the
Companys Web site. Black Box was the first company to engage exclusively in the sale of a broad
range of networking products through direct marketing techniques. Black Box targets its catalogs,
e-mail campaigns, advertisements and other marketing activities directly to its client-users who
make systems design and purchasing decisions. Black Boxs high quality marketing materials and its
Web site promote the Companys products and services by providing in-depth descriptions that
include product features and benefits, photographs, diagrams, applications, technical
specifications and other helpful information. The Companys printed catalogs have earned numerous
awards.
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During Fiscal 2009, Black Box won the Business-to-Business Multichannel Merchant of the Year Award.
Its the top honor for multichannel marketers and recognizes superior cross-channel marketing of a
print catalog and Web site. The company also won a gold award for its
2007 BLACK BOX®
Catalog and a silver award for its Web site. The gold award marks the thirteenth year in a row
Black Box has been recognized as best in its category.
Technical Services. Black Box believes that its technical services are the foundation of its
success enabling the Company to provide services ranging from quick-turn Hotline Services
consultation to site surveys, design and engineering, project management, single-site and
multi-site installations, remote monitoring, certification and maintenance of voice, data and
integrated communication solutions.
Worldwide Headquarters. The Companys worldwide headquarters and certain U.S. operations are
located in Lawrence, Pennsylvania (a suburb 20 miles south of Pittsburgh). This Company-owned
352,000 square foot facility is on an 84-acre site.
Products. Black Box believes that its ability to offer broad, innovative product solutions across
multiple technologies, supported by its 24/7/365 technical services capability, has been an
important competitive factor. Black Box currently offers more than 118,000 products through its
catalogs, On-Site services offices and Internet Web site. New products are regularly introduced.
Manufacturers and Suppliers. Black Box utilizes a network of original equipment manufacturers
(OEMs) and suppliers throughout the world. Each supplier is monitored for quality, delivery
performance and cost through a well-established certification program. This network has
manufacturing and engineering capabilities to customize products for specialized applications.
Black Box operates its own manufacturing and assembly operation at its Lawrence, Pennsylvania
location. The Company chooses to manufacture certain products in-house when outside OEMs are not
economical. Sourcing decisions of in-house versus third-party suppliers are based upon a balance
of quality, performance, delivery and cost.
Information Systems. The Company has committed significant resources to the development of
information systems that are used to manage all aspects of its business. The Companys systems
support and integrate technical support, client services, inventory management, purchasing,
distribution activities, accounting and project cost management. The Company continues to develop
and implement exclusive world-wide web applications. These applications allow clients to view order
status and product availability, view up-to-date information on their projects that are being
managed on a world-wide basis and provide a project management and forecasting tool for the
Companys offices. A technical knowledge-based application is also used to access problem
resolution information to help solve client issues more quickly. Information systems are focused
on delivering high-quality business applications that are geared to improve internal efficiencies
as well as client interactions.
The Companys new product introductions, multiple language requirements and design enhancements
require efficient modification of product presentations for its various catalogs. Black Box also
supports a publishing system that provides the flexibility and speed for both text and graphic
layout. This enables the timely, efficient and cost effective creation of marketing materials.
Backlog. The worldwide backlog of unfilled orders believed to be firm (i.e., to be completed
within six months) was approximately $194 million at March 31, 2009 compared to $159 million at
each of March 31, 2008 and March 31, 2007.
Team Members. As of March 31, 2009, the Company had 4,542 team members worldwide compared to 4,313
and 4,581 as of March 31, 2008 and 2007, respectively. Of the 4,542 current team members, 536 are
subject to collective bargaining agreements. The Company believes that its relationship with its
team members is good.
Financial Information. Financial information regarding the Company, including segment data, is set
forth in Item 8 of this Annual Report on Form 10-K for the fiscal year ended March 31, 2009 (this
Form 10-K) and is incorporated herein by reference.
International Revenues. Revenues from countries outside North America were $161 million, or 16% of
total revenues, for Fiscal 2009 compared to $179 million, or 18% of total revenues, and $166
million, or 16% of total revenues, for Fiscal 2008 and Fiscal 2007, respectively.
Other Information. The Company maintains an investor relations page on its Internet Web site at
http://www.blackbox.com. The Companys annual, quarterly and current reports and amendments to
such reports filed with or furnished to the Securities and Exchange Commission (SEC) are made
available, as soon as reasonably practical after such filing, and may be viewed or downloaded free
of charge in the About Us section of the Web site. The Companys Standards of Business Conduct,
Code of Ethics and the charter of each committee of the Companys Board of Directors (the Board)
are also available on its Web site, and may be viewed or downloaded free of charge in the About
Us section of the Web site.
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Item 1A. Risk Factors.
The following are some of the potential risk factors that could cause our actual results to differ
materially from those projected in any forward-looking statements. You should carefully consider
these factors, as well as the other information contained in this document, when evaluating your
investment in our securities. The below list of important factors is not all-inclusive or
necessarily in order of importance.
We have significant matters resulting from our stock option investigation and related
matters. As previously disclosed, on November 13, 2006, we received a letter of informal
inquiry from the staff of the SECs Division of Enforcement (the Staff) relating to our stock
option practices from January 1, 1997 to present. Our Audit Committee (the Audit Committee) of
the Board, with the assistance of outside legal counsel, conducted an independent review of our
historical stock option granting practices and related accounting for stock option grants. On
May 24, 2007, the SEC issued a formal order of investigation in connection with this matter, and,
on May 29, 2007, we received a document subpoena from the SEC acting pursuant to such order. See
the Explanatory Note preceding Part I, Item 1 of our Annual Report on Form 10-K for the fiscal
year ended March 31, 2007 for more information regarding this and related matters. On January 26,
2009, we received a Wells Notice from the SEC. The Wells Notice provided the Company with
notification that the Staff intended to recommend that the SEC bring a civil injunctive action
against the Company, alleging violations of the federal securities laws arising from certain
historical stock option practices. Under the process established by the SEC, recipients of a Wells
Notice have the opportunity to respond before the Staff makes a recommendation to the SEC regarding
what action, if any, should be brought by the SEC. In connection with this contemplated action,
the Staff may seek a permanent civil injunction barring future violations of the federal securities
laws and civil penalties. We continue to cooperate with the Staff with respect to the alleged
violations and possible resolution of the matters in question.
On September 20, 2006, we received formal notice from the Internal Revenue Service (IRS)
regarding its intent to begin an audit of our 2004 and 2005 tax years. On August 3, 2007, we
received formal notice from the IRS regarding its intent to begin an audit of our 2006 tax year.
In connection with these normal recurring audits, the IRS requested certain documentation with
respect to stock options for our 2004, 2005 and 2006 tax years. In connection with our Audit
Committees review of our historical stock option granting practices, we determined that a number
of officers may have exercised options for which the application of Section 162(m) (Section
162(m)) of the Internal Revenue Code of 1986, as amended (the Code), may apply. It was possible
that these options could have been treated as having been granted at less than fair market value
for federal income tax purposes because we incorrectly applied the measurement date as defined in
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25).
If such options were deemed to have been granted at less than fair market value for purposes of
Section 162(m), any non-performance based compensation to officers, including proceeds from options
exercised in any given tax year, in excess of $1,000 would have been disallowed as a deduction for
tax purposes. Based on this uncertain tax position, we estimated that the potential tax-effected
liability for any potential disallowed Section 162(m) deduction would approximate $3,587, which was
recorded as an expense during Fiscal 2004 and Fiscal 2005 and was recorded as a current liability
within Income taxes within our Consolidated Balance Sheets as of March 31, 2008. During Fiscal
2009, the IRS concluded its examination of the potential disallowed Section 162(m) deduction within
our filing position and did not propose an adjustment. During the fourth quarter of Fiscal 2009,
we reversed the previously-recorded expense of $3,587 through Provision for income taxes within the
Companys Consolidated Statements of Income. With respect to the normal recurring audits of our
tax years 2004, 2005 and 2006, the IRS has proposed adjustments to our filing position and we have
agreed to those adjustments which approximate $300.
In addition, in November, 2006, two stockholder derivative lawsuits were filed against us, as a
nominal defendant, and several of our current and former officers and directors in the United
States District Court for the Western District of Pennsylvania. The two substantially identical
stockholder derivative complaints allege that the individual defendants improperly backdated grants
of stock options to several officers and directors in violation of our stockholder-approved stock
option plans during the period 1996-2002, improperly recorded and accounted for backdated stock
options in violation of generally accepted accounting principles, improperly took tax deductions
based on backdated stock options in violation of the Code, produced and disseminated false
financial statements and SEC filings to our stockholders and to the market that improperly recorded
and accounted for the backdated option grants, concealed the alleged improper backdating of stock
options and obtained substantial benefits from sales of our common stock while in the possession of
material inside information. The complaints seek damages on our behalf against certain current and
former officers and directors and allege breach of fiduciary duty, unjust enrichment, securities
law violations and other claims. The two lawsuits have been consolidated into a single action as
In re Black Box Corporation Derivative Litigation, Master File No. 2:06-CV-1531-JFC, and plaintiffs
filed an amended consolidated shareholder derivative complaint on August 31, 2007. The parties
have stipulated that responses by the defendants, including us, are due on or before July 31, 2009,
and the court has entered an order to that effect.
The stock option investigations and related litigation have imposed, and are likely to continue to
impose, significant costs on us, both monetarily and in requiring attention by our management team.
While we are unable to estimate the costs that we may incur in the future, these are likely to
include:
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professional fees in connection with the conduct of the investigations and the defense of
the litigation; |
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potential damages, fines, penalties or settlement costs; and |
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payments to, or on behalf of, our current and former officers and directors subject to the
investigation or named in the litigation pursuant to our indemnification obligations (in
certain circumstances advance indemnification payments are recoverable if it is determined
under applicable law that the officer or director in question was not entitled to be
indemnified by us, but there is no assurance that we will be able to recover such payments). |
As of March 31, 2009, the total amount of such fees is $7,991, of which $5,000, the insurance
policy limit, has been paid by the insurance company. We recorded expense of $1,228, $1,221 and
$542 during Fiscal 2009, Fiscal 2008 and Fiscal 2007, respectively. The amount of expenses that we
could incur in the future with respect to these matters could be material.
Adverse developments in the legal proceedings or the investigation arising out of our historical
stock option granting practices or any other matter raised as a result thereof could have an
adverse impact on our business and our common stock price, including increased stock volatility.
We face intense competition. We operate in a highly competitive industry. Our competitors
may be able to deliver products and services at better prices or more quickly due to factors beyond
our control. New competitors may also arise in the future, which threaten our ability to sustain
or grow our market share. We cannot guarantee that we can continue to compete effectively in the
future and still be able to sustain our historical levels of profit margin.
Our financial results are dependent on our economic environments. We, our customers or our
vendors may experience economic hardships due to inflation or recession, changes in laws and
regulations, business disruptions due to natural disasters, acts of terrorism or war or other
factors that are beyond our control and that could negatively impact our financial condition or our
ability to meet our future financial goals.
We are dependent upon the successful integration of acquired businesses. We have completed
several acquisitions in recent years. Our future financial results are dependent on the successful
integration of those acquisitions within the projected timeframes and cost parameters. We also
face pressure to adequately conduct our ongoing operations while working toward the integration of
these businesses. We cannot guarantee that we will successfully integrate our acquisitions as
projected or without disruption to other areas of our business which could have a negative impact
on our financial results.
We are subject to the risks of international operations. We operate in countries outside
of the United States. Our operations or our financial condition may be negatively affected by
events surrounding our international operations such as changes in laws and regulations, political
or economic instability, currency fluctuations, supply chain disruptions, acts of terrorism,
natural disasters or other political, economic or environmental factors. We cannot rely on the
past results of our international operations as an indicator of future results or assure you that
we will not be adversely affected by those factors inherent with international operations.
We are dependent upon the retention of our key personnel. The success of our business
depends on our ability to attract and retain quality employees, executives and directors. We offer
comprehensive salary and benefit packages including long-term incentives as a means of attracting
and retaining personnel. We face pressure to maintain our profit margins and remain competitive in
our industry while we compete for personnel in our local markets with a variety of different
businesses that may be able to offer more attractive incentives due to their individual financial
situations. We cannot guarantee that we will continue to attract and retain personnel with our
current incentives and at costs that are consistent with our projected profit margins. In
addition, the success of our compensation program has historically relied heavily on the use of
stock options which provided both a compensation and retention element due to vesting. If we are
not able to replicate the compensation and retention benefits historically provided by our stock
options, we will need to rely more heavily on other forms of compensation, primarily cash
compensation or other equity instruments, to adequately compensate employees, executives and
directors.
We are dependent upon the demand for products and services. We and our competitors in the
industry are dependent on the demand for the products and services that we deliver. Changes in
technology or other unforeseen developments within our industry could result in decreased demand
for our products and services. We cannot guarantee that historical levels of demand will continue
or increase in the future.
We are dependent upon certain key supply chain and distribution agreements. Through our
recent acquisitions, we have significant arrangements with a small number of suppliers of voice
technology. If we experience disruptions in our supply chain with these manufacturers for any
reason or lose our distribution rights, we may not be able to fulfill customer commitments with an
acceptable alternative or we may not be able to obtain alternative solutions at similar costs.
8
On January 14, 2009, Nortel Networks Corporation (Nortel) announced that Nortel and certain other
subsidiaries of Nortel sought relief from their creditors in proceedings commenced in Canada, the
United States and other jurisdictions (the Nortel Bankruptcy). Nortel further announced that
certain of its affiliates, including the Nortel Government Solutions business, will continue to
operate in the ordinary course and are not included in these proceedings. Our management team
believes that the Nortel Bankruptcy will not have a material adverse effect on the Company;
however, there can be no assurance that such an effect will not occur in the future.
We are dependent upon future mergers and acquisitions for a portion of our growth. A key
component of our growth strategy is through strategic mergers and acquisitions. We may not
continue to be successful in our search for potential acquisition candidates that are acceptable
for our business model, or we may not be successful in our attempts to acquire new businesses that
we have identified as attractive acquisition candidates. We cannot guarantee that we will meet our
projected growth targets in the future if we are unsuccessful in our efforts to acquire additional
businesses.
A significant part of our business involves public sector customers which provides unique
risks. Our revenues from sales to the public sector, including sales to federal, state and
local governments and governmental agencies, has grown in recent years. These sales are made
through various direct contracts, through reseller agreements with government contractors and
through open market sales. Government contracting is a highly-regulated area. Failure to comply
with the technical requirements of regulations or contracts could subject us to fines, penalties,
suspension or debarment from doing business with such customers, which could have a material
adverse effect on our business.
Our revenue is dependent upon repeat customer business and generally is not subject to
long-term contracts. A majority of our revenue is generated through individual sales of
products and services and the nature of our business provides us with very little guaranteed or
contractual revenue beyond a relatively short time horizon. We depend on repeat customer business
as well as our ability to develop new customer business to sustain and grow our revenue. Although
our focus on delivering high-quality sales and service has proven to be successful in the past, we
cannot guarantee that we will be able to grow or even sustain our current level of revenue in the
future.
We can provide no assurance that we will continue to have adequate liquidity. Although we
generate positive cash flow and have access to a significant amount of additional credit, we cannot
be sure that our current liquidity situation will be adequate in future periods. We cannot
guarantee that we will be able to maintain our positive cash flow position or to obtain additional
credit or raise additional capital which may restrict our ability to operate or to pursue new
business opportunities in the future.
Our stock price fluctuates. Our stock price is affected by a number of factors, including
quarterly variations in our financial results. As a result, our stock price is subject to
volatility.
We have a significant amount of goodwill that could be subject to impairment. As a result
of our acquisition program, we have accumulated goodwill. We conduct an impairment assessment of
the carrying value of our goodwill at least annually. No impairment of goodwill has been
identified during any of the periods presented. We will continue to monitor market conditions and determine if any
additional interim review of goodwill is warranted. Further deterioration in the market or actual
results as compared with our projections may require us to conduct an interim assessment of our
goodwill and could ultimately result in a future impairment. In the event that we determine that
our goodwill is impaired in the future, we would need to recognize a non-cash impairment charge,
which could have a material adverse effect on our consolidated balance sheet and results of
operations.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
The Companys worldwide headquarters and certain U.S. operations are located in Lawrence,
Pennsylvania (located 20 miles south of Pittsburgh) in a 352,000 square foot owned facility on 84
acres.
The Company owns or leases additional offices or facilities throughout the world, none of which are
material in nature to Black Box.
The Company believes that its properties are adequate for its present and foreseeable needs.
9
Item 3. Legal Proceedings.
Regulatory Matters
As previously disclosed, on November 13, 2006, the Company received a letter of informal inquiry
from the Staff relating to the Companys stock option practices from January 1, 1997 to present.
On May 24, 2007, the SEC issued a formal order of investigation in connection with this matter,
and, on May 29, 2007, the Company received a document subpoena from the SEC acting pursuant to such
order. On January 26, 2009, the Company received a Wells Notice from the SEC. The Wells Notice
provided the Company with notification that the Staff intended to recommend that the SEC bring a
civil injunctive action against the Company, alleging violations of the federal securities laws
arising from certain historical stock option practices. Under the process established by the SEC,
recipients of a Wells Notice have the opportunity to respond before the Staff makes a
recommendation to the SEC regarding what action, if any, should be brought by the SEC. In
connection with this contemplated action, the Staff may seek a permanent civil injunction barring
future violations of the federal securities laws and civil penalties. The Company continues to
cooperate with the Staff with respect to the alleged violations and possible resolution of the
matters in question.
As previously disclosed, the Audit Committee, with the assistance of outside legal
counsel, conducted an independent review of the Companys historical stock option granting
practices and related accounting for stock option grants. See the Explanatory Note preceding
Part I, Item 1 of the Companys Annual Report on Form 10-K for the fiscal year ended March 31, 2007
for more information regarding the Audit Committees review and related matters. The Audit
Committee has concluded its review and has presented to the Board recommendations concerning
procedural enhancements, which the Board has adopted.
On September 20, 2006, the Company received formal notice from the IRS regarding its intent to
begin an audit of the Companys 2004 and 2005 tax years. On August 3, 2007, the Company received
formal notice from the IRS regarding its intent to begin an audit of the Companys 2006 tax year.
In connection with these normal recurring audits, the IRS requested certain documentation with
respect to stock options for the Companys 2004, 2005 and 2006 tax years. In connection with the
Audit Committees review of the Companys historical stock option granting practices, the Company
determined that a number of officers may have exercised options for which the application of
Section 162(m) of the Code may apply. It was possible that these options could have been treated
as having been granted at less than fair market value for federal income tax purposes because the
Company incorrectly applied the measurement date as defined in APB 25. If such options were deemed
to have been granted at less than fair market value for purposes of Section 162(m), any
non-performance based compensation to officers, including proceeds from options exercised in any
given tax year, in excess of $1,000 would have been disallowed as a deduction for tax purposes.
Based on this uncertain tax position, the Company estimated that the potential tax-effected
liability for any potential disallowed Section 162(m) deduction would approximate $3,587, which was
recorded as an expense during Fiscal 2004 and Fiscal 2005 and was recorded as a current liability
within Income taxes within the Companys Consolidated Balance Sheets as of March 31, 2008. During
Fiscal 2009, the IRS concluded its examination of the potential disallowed Section 162(m) deduction
within our filing position and did not propose an adjustment. During the fourth quarter of Fiscal
2009, we reversed the previously-recorded expense of $3,587 through Provision for income taxes
within the Companys Consolidated Statements of Income. With respect to the normal recurring
audits of our tax years 2004, 2005 and 2006, the IRS has proposed adjustments to our filing
position and we have agreed to those adjustments which approximate $300.
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 June 30, 2009 in
order for the parties to discuss the merits of these allegations prior to the possible commencement
of any litigation by the United States.
At the conclusion of these matters, the Company could be subject to damages, fines, penalties or
other costs, either through settlement or judgment, which could be material.
10
Litigation Matters
In November, 2006, two stockholder derivative lawsuits were filed against the Company itself, as a
nominal defendant, and several of the Companys current and former officers and directors in the
United States District Court for the Western District of Pennsylvania.
The two substantially identical stockholder derivative complaints allege that the individual
defendants improperly backdated grants of stock options to several officers and directors in
violation of the Companys stockholder-approved stock option plans during the period 1996-2002,
improperly recorded and accounted for backdated stock options in violation of generally accepted
accounting principles, improperly took tax deductions based on backdated stock options in violation
of the Code, produced and disseminated false financial statements and SEC filings to the Companys
stockholders and to the market that improperly recorded and accounted for the backdated option
grants, concealed the alleged improper backdating of stock options and obtained substantial
benefits from sales of Company stock while in the possession of material inside information. The
complaints seek damages on behalf of the Company against certain current and former officers and
directors and allege breach of fiduciary duty, unjust enrichment, securities law violations and
other claims. The two lawsuits have been consolidated into a single action as In re Black Box
Corporation Derivative Litigation, Master File No. 2:06-CV-1531-JFC, and plaintiffs filed an
amended consolidated shareholder derivative complaint on August 31, 2007. The parties have
stipulated that responses by the defendants, including the Company, are due on or before July 31,
2009, and the court has entered an order to that effect. The Company may have indemnification
obligations arising out of this matter to its current and former directors and officers named in
this litigation. The Company may incur costs or expenses in relation to this matter that could be
material.
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, Company management (Management) believes
the matters described under this caption Litigation Matters are adequately provided for, covered
by insurance, without merit or not probable that an unfavorable material outcome will result.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the three month period ended March 31, 2009 to a vote of security
holders, through the solicitation of proxies or otherwise.
Executive Officers of the Registrant
The executive officers of the Company and their respective ages and positions are as follows:
|
|
|
|
|
|
|
Name |
|
Age |
|
Position with the Company |
|
|
|
|
|
|
|
|
R. Terry Blakemore |
|
|
52 |
|
|
President and Chief Executive Officer |
|
|
|
|
|
|
|
Michael McAndrew
|
|
|
49 |
|
|
Vice President, Chief Financial Officer,
Treasurer, Secretary and Principal
Accounting Officer |
|
|
|
|
|
|
|
Francis W. Wertheimber
|
|
|
56 |
|
|
Senior Vice President Pacific Rim/Far East |
|
The following is a biographical summary of the experience of the executive officers of the Company:
R. TERRY BLAKEMORE, 52, was named President and Chief Executive Officer and was selected as a
member of the Board on October 13, 2007. He had served in the capacity of Interim President and
Chief Executive Officer of the Company from May 21, 2007. Previously, on May 15, 2007, the Board
had named Mr. Blakemore a Senior Vice President of the Company. Prior to becoming a Senior Vice
President, Mr. Blakemore served as a manager of business development and, prior thereto, as a
manager of the Companys Voice Services business unit. Mr. Blakemore has been with the Company
since 1999.
MICHAEL MCANDREW, 49, was promoted to Vice President and Chief Financial Officer on December 13,
2002. He became Secretary and Treasurer on January 31, 2003. He was Manager of Corporate Planning
and Analysis prior to December 13, 2002. Mr. McAndrew has been with the Company for 19 years.
FRANCIS W. WERTHEIMBER, 56, was promoted to Senior Vice President Pacific Rim/Far East in May
2004. He was promoted to Vice President Pacific Rim/Far East on May 9, 1997. He was Managing
Director of Black Box Japan prior to May 9, 1997. Mr. Wertheimber has been with Black Box for 16
years.
11
Directors of the Registrant
The following sets forth certain information concerning the members of the Board:
WILLIAM F. ANDREWS, 77, was elected as a director on May 18, 1992. Mr. Andrews currently is
Chairman of the Executive Committee of Corrections Corporation of America (private prisons),
Chairman of Katy Industries, Inc. (diversified manufacturing company) and Chairman of SVP Holdings
Limited (Singer sewing machines). He has been a principal with Kohlberg & Co., a private
investment company, since 1995. He is also a director of Corrections Corporation, Katy Industries,
OCharleys, Inc. and Trex Company, Inc., all publicly-held companies.
R. TERRY BLAKEMORE, 52, was named President and Chief Executive Officer and was selected as a
member of the Board on October 13, 2007. He had served in the capacity of Interim President and
Chief Executive Officer of the Company since May 21, 2007. Previously, on May 15, 2007, the Board
had named Mr. Blakemore a Senior Vice President of the Company. Prior to becoming a Senior Vice
President, Mr. Blakemore served as a manager of business development and, prior thereto, as a
manager of the Companys Voice Services business unit. Mr. Blakemore has been with the Company
since 1999.
RICHARD L. CROUCH, 62, was elected as a director on August 10, 2004. Mr. Crouch was a General
Partner with the firm of PricewaterhouseCoopers LLP from 1979 to 2004, having served as an Audit
Partner principally assigned to public companies. He served in various capacities for the firm,
including service as a regional accounting, auditing and SEC services consultant. He retired from
the firm in 2004.
THOMAS W. GOLONSKI, 66, was selected to be a director on February 11, 2003 and was elected by our
stockholders on August 12, 2003. Mr. Golonski served as Chairman, President and Chief Executive
Officer of National City Bank of Pennsylvania and Executive Vice President of National City
Corporation from 1996 to 2005. He retired from National City in 2005. He is active in
charitable, educational and health care organizations.
THOMAS G. GREIG, 61, was elected as a director on August 10, 1999 and appointed as non-executive
Chairman of the Board in May 2004. Mr. Greig has been a Managing Director of Liberty Capital
Partners, a private equity partnership, since 1998. He is also a director of publicly-held Rudolph
Technologies, Inc., a number of privately-held companies and a public, not-for-profit foundation.
EDWARD A. NICHOLSON, PH.D., 69, was elected as a director on August 10, 2004. Dr. Nicholson served
as President of Robert Morris University from 1989 to 2005 and is presently a Professor of
Management at Robert Morris. He has served a number of businesses and government agencies as a
consultant in the areas of long-range planning, organization design and labor relations. He is
also a director of Brentwood Bank and several regional economic, charitable and cultural
organizations.
12
PART II
Item 5. Market for Registrants Common Equity,
Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Common Stock Information:
The common stock is traded on NASDAQ under the symbol BBOX and has been assigned to the NASDAQ
Global Select tier. As of March 31, 2009, 25,159,500 shares of the common stock were issued, of
which 7,626,195 shares were held in treasury.
The following table sets forth the quarterly high and low sale prices of the common stock as
reported by the NASDAQ Global Select Market during each of the Companys fiscal quarters indicated
below.
|
|
|
|
|
|
|
|
|
|
|
High |
|
|
Low |
|
|
Fiscal 2009 |
|
|
|
|
|
|
|
|
1st Quarter |
|
$ |
32.67 |
|
|
$ |
27.62 |
|
2nd Quarter |
|
|
39.53 |
|
|
|
26.63 |
|
3rd Quarter |
|
|
36.36 |
|
|
|
19.75 |
|
4th Quarter |
|
|
28.37 |
|
|
|
16.24 |
|
|
|
|
|
|
|
|
|
|
Fiscal 2008 |
|
|
|
|
|
|
|
|
1st Quarter |
|
$ |
42.78 |
|
|
$ |
34.53 |
|
2nd Quarter |
|
|
44.58 |
|
|
|
38.79 |
|
3rd Quarter |
|
|
46.40 |
|
|
|
35.28 |
|
4th Quarter |
|
|
37.16 |
|
|
|
26.62 |
|
|
On May 22, 2009, the last reported sale price of the common stock was $30.43 per share.
Dividend Policy:
Cash dividends of $0.06 per share of common stock were declared during each quarter during Fiscal
2009 and Fiscal 2008. Dividends declared during Fiscal 2009 were paid on July 14, 2008, October
14, 2008, January 9, 2009 and April 15, 2009. Dividends declared during Fiscal 2008 were paid on
July 13, 2007, October 12, 2007, January 11, 2008 and April 14, 2008. 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 Companys Third Amended and
Restated Credit Agreement dated as of January 30, 2008 (the New Credit Agreement), the Company is
permitted to make any distribution or dividend or repurchase its common stock as long as no Event
of Default or Potential Default (each as defined in the New Credit Agreement) occurs or is
continuing.
Stockholders:
As of March 31, 2009, there were 1,433 holders of record of the common stock.
Equity Plan Compensation Information:
See the information set forth under the caption Equity Plan Compensation Information in the Proxy
Statement which is incorporated by reference into Item 12 of Part III of this Form 10-K.
Issuance of Unregistered Securities:
There were no issuances of unregistered securities during the three month period ended March 31,
2009.
13
Item 6. Selected Financial Data.
The following tables set forth certain selected historical financial data for the Company for the
periods indicated below (in thousands, except for per share amounts). This information should be
read in conjunction with the Companys consolidated financial statements, Managements Discussion
and Analysis of Financial Condition and Results of Operations and the Notes to the Consolidated
Financial Statements included elsewhere in this Form 10-K. Data Services and Voice Services may
collectively be referred to as On-Site services. Per share amounts may not total due to rounding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
Statements of Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotline products |
|
$ |
209,793 |
|
|
$ |
235,314 |
|
|
$ |
222,903 |
|
|
$ |
213,946 |
|
|
$ |
227,601 |
|
On-Site services |
|
|
789,755 |
|
|
|
781,428 |
|
|
|
793,407 |
|
|
|
507,389 |
|
|
|
307,475 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
999,548 |
|
|
|
1,016,742 |
|
|
|
1,016,310 |
|
|
|
721,335 |
|
|
|
535,076 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotline products |
|
|
108,561 |
|
|
|
122,011 |
|
|
|
113,780 |
|
|
|
108,220 |
|
|
|
108,281 |
|
On-Site services |
|
|
533,807 |
|
|
|
528,111 |
|
|
|
528,541 |
|
|
|
330,765 |
|
|
|
211,866 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
642,368 |
|
|
|
650,122 |
|
|
|
642,321 |
|
|
|
438,985 |
|
|
|
320,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
357,180 |
|
|
|
366,620 |
|
|
|
373,989 |
|
|
|
282,350 |
|
|
|
214,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general &
administrative expenses |
|
|
266,387 |
|
|
|
275,309 |
|
|
|
290,355 |
|
|
|
222,201 |
|
|
|
170,239 |
|
Intangibles amortization |
|
|
10,790 |
|
|
|
6,679 |
|
|
|
10,285 |
|
|
|
4,999 |
|
|
|
1,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
80,003 |
|
|
|
84,632 |
|
|
|
73,349 |
|
|
|
55,150 |
|
|
|
43,358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (income), net |
|
|
10,279 |
|
|
|
21,298 |
|
|
|
18,407 |
|
|
|
9,123 |
|
|
|
2,755 |
|
Other expenses (income), net |
|
|
561 |
|
|
|
(197 |
) |
|
|
42 |
|
|
|
36 |
|
|
|
115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for
income taxes |
|
|
69,163 |
|
|
|
63,531 |
|
|
|
54,900 |
|
|
|
45,991 |
|
|
|
40,488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
23,854 |
|
|
|
24,298 |
|
|
|
19,291 |
|
|
|
15,221 |
|
|
|
13,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
45,309 |
|
|
$ |
39,233 |
|
|
$ |
35,609 |
|
|
$ |
30,770 |
|
|
$ |
27,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
2.59 |
|
|
$ |
2.23 |
|
|
$ |
2.03 |
|
|
$ |
1.79 |
|
|
$ |
1.55 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
2.59 |
|
|
$ |
2.22 |
|
|
$ |
2.00 |
|
|
$ |
1.75 |
|
|
$ |
1.52 |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common
share |
|
$ |
0.24 |
|
|
$ |
0.24 |
|
|
$ |
0.24 |
|
|
$ |
0.24 |
|
|
$ |
0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at end of
period): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital (1) |
|
$ |
130,209 |
|
|
$ |
134,031 |
|
|
$ |
117,059 |
|
|
$ |
99,669 |
|
|
$ |
108,948 |
|
Total assets |
|
|
1,136,488 |
|
|
|
1,073,851 |
|
|
|
1,090,091 |
|
|
|
815,412 |
|
|
|
787,064 |
|
Long-term debt |
|
|
249,260 |
|
|
|
195,904 |
|
|
|
238,194 |
|
|
|
122,673 |
|
|
|
147,196 |
|
Total debt |
|
|
250,657 |
|
|
|
197,293 |
|
|
|
238,880 |
|
|
|
123,722 |
|
|
|
147,888 |
|
Stockholders equity |
|
|
647,299 |
|
|
|
640,274 |
|
|
|
599,696 |
|
|
|
552,991 |
|
|
|
501,288 |
|
|
(1)
|
|
Working capital is computed as current assets minus current liabilities. |
14
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
The discussion and analysis for the fiscal years ended March 31, 2009, 2008 and 2007 as set forth
below in this Item 7 should be read in conjunction with the consolidated financial statements of
Black Box, including the related notes. The Companys fiscal year ends on March 31. References to
Fiscal Year or Fiscal mean the Companys fiscal year ended March 31 for the year referenced.
All dollar amounts are presented in thousands except for per share amounts or unless otherwise
noted.
The Company
Black Box is the worlds largest 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; the Company also offers premise cabling and other data-related services and products.
The Company provides 24/7/365 technical support for all of its solutions which encompass all major
voice and data product manufacturers as well as 118,000 Hotline products that it sells through its
catalog and Internet Web site and its On-Site services offices. As of March 31, 2009, the Company
had more than 3,000 professional technical experts in 192 offices serving more than 175,000 clients
in 141 countries throughout the world. Founded in 1976, Black Box operates subsidiaries on five
continents and is headquartered near Pittsburgh in Lawrence, Pennsylvania.
Management is presented with and reviews revenues and operating income by geographical segment. In
addition, revenues and gross profit information by service type are provided herein for purposes of
further analysis.
The Company has completed several acquisitions from April 1, 2006 through March 31, 2009 that have
had an impact on the Companys consolidated financial statements and, more specifically, North
America Voice Services and North America Data Services for the periods under review. Fiscal 2009
acquisitions include (i) UCI Communications LLC (UCI), (ii) Mutual Telecom Services Inc. (MTS),
(iii) ACS Communications, Inc. (ACS), (iv) Network Communications Technologies, Inc. (NCT) and
(v) Scottel Voice & Data, Inc. (Scottel). Fiscal 2008 acquisitions include (i) B & C Telephone,
Inc. (B&C) and (ii) BellSouth Communication Systems, LLC d/b/a AT&T Communication Systems
Southeasts (AT&T) NEC TDM voice CPE business line in AT&Ts southeast region (AT&Ts southeast
NEC TDM business). Fiscal 2007 acquisitions include (i) USA Commercial and Government and
Canadian operations of NextiraOne, LLC (NextiraOne), (ii) Nu-Vision Technologies, Inc. and
Nu-Vision Technologies, LLC (collectively referred to as NUVT), (iii) Nortech Telecommunications
Inc. (NTI) and (iv) ADS Telecom, Inc. (ADS).
The acquisitions noted above are collectively referred to as the Acquired Companies. References
to the Acquired Companies within our comparison of Fiscal 2009 and Fiscal 2008 are intended to
describe the Acquired Companies from April 1, 2007 through March 31, 2009. References to the
Acquired Companies within our comparison of Fiscal 2008 and Fiscal 2007 are intended to describe
the Acquired Companies from April 1, 2006 through March 31, 2008. The results of operations of the
Acquired Companies are included within the Companys Consolidated Statements of Income beginning on
their respective acquisition dates.
The Company incurs certain expenses (i.e., stock-based compensation expense and expenses incurred
as a result of certain acquisitions) that it excludes when evaluating the continuing operations of
the Company. The following table is included to provide a schedule of the past, current and an
estimate of these future expenses based on information available to the Company as of March 31,
2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
Thereafter |
|
|
Selling, general &
administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset write-up
depreciation expense
on acquisitions |
|
$ |
2,646 |
|
|
$ |
2,178 |
|
|
$ |
1,888 |
|
|
$ |
184 |
|
|
$ |
-- |
|
|
$ |
-- |
|
Stock-based
compensation expense
1 |
|
|
9,308 |
|
|
|
3,217 |
|
|
|
3,042 |
|
|
|
3,134 |
|
|
|
2,927 |
|
|
|
474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
11,954 |
|
|
|
5,395 |
|
|
|
4,930 |
|
|
|
3,318 |
|
|
|
2,927 |
|
|
|
474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets on
acquisitions |
|
|
10,075 |
|
|
|
6,501 |
|
|
|
10,671 |
|
|
|
13,435 |
|
|
|
11,446 |
|
|
|
90,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
22,029 |
|
|
$ |
11,896 |
|
|
$ |
15,601 |
|
|
$ |
16,753 |
|
|
$ |
14,373 |
|
|
$ |
90,502 |
|
|
15
The following table is included to provide a schedule of an estimate of these expenses for Fiscal
2010 (by quarter) on information available to the Company through March 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Q10 |
|
|
2Q10 |
|
|
3Q10 |
|
|
4Q10 |
|
|
FY10 |
|
|
Selling, general & administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset write-up depreciation expense on
acquisitions |
|
$ |
124 |
|
|
$ |
20 |
|
|
$ |
20 |
|
|
$ |
20 |
|
|
$ |
184 |
|
Stock-based compensation expense 1 |
|
|
841 |
|
|
|
804 |
|
|
|
753 |
|
|
|
736 |
|
|
|
3,134 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
965 |
|
|
|
824 |
|
|
|
773 |
|
|
|
756 |
|
|
|
3,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets on
acquisitions |
|
|
4,032 |
|
|
|
3,359 |
|
|
|
3,022 |
|
|
|
3,022 |
|
|
|
13,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
4,997 |
|
|
$ |
4,183 |
|
|
$ |
3,795 |
|
|
$ |
3,778 |
|
|
$ |
16,753 |
|
|
1 During the period from April 1, 2007 to March 31, 2009, the Company excluded
stock-based compensation expense when evaluating the continuing operations of the Company. The
Company will include such expenses prospectively.
The following table provides information on Revenues and Operating income by reportable geographic
segment (North America, Europe and All Other). The table below should be read in conjunction with
the following discussions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
|
total |
|
|
|
|
|
|
total |
|
|
|
|
|
|
total |
|
|
|
$ |
|
|
revenue |
|
|
$ |
|
|
revenue |
|
|
$ |
|
|
revenue |
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
$ |
838,871 |
|
|
|
83.9% |
|
|
$ |
837,402 |
|
|
|
82.3% |
|
|
$ |
850,088 |
|
|
|
83.7% |
|
Europe |
|
|
121,839 |
|
|
|
12.2% |
|
|
|
138,927 |
|
|
|
13.7% |
|
|
|
129,278 |
|
|
|
12.7% |
|
All Other |
|
|
38,838 |
|
|
|
3.9% |
|
|
|
40,413 |
|
|
|
4.0% |
|
|
|
36,944 |
|
|
|
3.6% |
|
|
|
|
|
|
|
|
Total |
|
$ |
999,548 |
|
|
|
100% |
|
|
$ |
1,016,742 |
|
|
|
100% |
|
|
$ |
1,016,310 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
$ |
61,651 |
|
|
|
|
|
|
$ |
57,964 |
|
|
|
|
|
|
$ |
49,481 |
|
|
|
|
|
% of North America revenues |
|
|
7.3% |
|
|
|
|
|
|
|
6.9% |
|
|
|
|
|
|
|
5.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe |
|
$ |
12,548 |
|
|
|
|
|
|
$ |
19,278 |
|
|
|
|
|
|
$ |
16,442 |
|
|
|
|
|
% of Europe revenues |
|
|
10.3% |
|
|
|
|
|
|
|
13.9% |
|
|
|
|
|
|
|
12.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
$ |
5,804 |
|
|
|
|
|
|
$ |
7,390 |
|
|
|
|
|
|
$ |
7,426 |
|
|
|
|
|
% of All Other revenues |
|
|
14.9% |
|
|
|
|
|
|
|
18.3% |
|
|
|
|
|
|
|
20.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
80,003 |
|
|
|
8.0% |
|
|
$ |
84,632 |
|
|
|
8.3% |
|
|
$ |
73,349 |
|
|
|
7.2% |
|
|
16
The following table provides information on Revenues and Gross profit by service type (Data
Services, Voice Services and Hotline Services). The table below should be read in conjunction with
the following discussions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
|
total |
|
|
|
|
|
|
total |
|
|
|
|
|
|
total |
|
|
|
$ |
|
|
revenue |
|
|
$ |
|
|
revenue |
|
|
$ |
|
|
revenue |
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data Services |
|
$ |
191,436 |
|
|
|
19.2% |
|
|
$ |
194,454 |
|
|
|
19.1% |
|
|
$ |
182,129 |
|
|
|
17.9% |
|
Voice Services |
|
|
598,319 |
|
|
|
59.8% |
|
|
|
586,974 |
|
|
|
57.7% |
|
|
|
611,278 |
|
|
|
60.2% |
|
Hotline Services |
|
|
209,793 |
|
|
|
21.0% |
|
|
|
235,314 |
|
|
|
23.2% |
|
|
|
222,903 |
|
|
|
21.9% |
|
|
|
|
|
|
|
|
Total |
|
$ |
999,548 |
|
|
|
100% |
|
|
$ |
1,016,742 |
|
|
|
100% |
|
|
$ |
1,016,310 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data Services |
|
$ |
55,407 |
|
|
|
|
|
|
$ |
57,747 |
|
|
|
|
|
|
$ |
55,598 |
|
|
|
|
|
% of Data Services revenues |
|
|
28.9% |
|
|
|
|
|
|
|
29.7% |
|
|
|
|
|
|
|
30.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice Services |
|
$ |
200,541 |
|
|
|
|
|
|
$ |
195,570 |
|
|
|
|
|
|
$ |
209,268 |
|
|
|
|
|
% of Voice Services revenues |
|
|
33.5% |
|
|
|
|
|
|
|
33.3% |
|
|
|
|
|
|
|
34.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotline Services |
|
$ |
101,232 |
|
|
|
|
|
|
$ |
113,303 |
|
|
|
|
|
|
$ |
109,123 |
|
|
|
|
|
% of Hotline Services revenues |
|
|
48.3% |
|
|
|
|
|
|
|
48.1% |
|
|
|
|
|
|
|
49.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
357,180 |
|
|
|
35.7% |
|
|
$ |
366,620 |
|
|
|
36.1% |
|
|
$ |
373,989 |
|
|
|
36.8% |
|
|
The Companys distribution agreement with Avaya, Inc. (Avaya) terminated on September 8, 2007.
The Company evaluated the financial impact of this event including business strategies to minimize
such impact. This event did not have a material impact on the Companys operating results during
Fiscal 2009 or Fiscal 2008.
Fiscal 2009 Compared To Fiscal 2008
Total Revenues
Total revenues for Fiscal 2009 were $999,548, a decrease of 2% compared to total revenues for
Fiscal 2008 of $1,016,742. The Acquired Companies contributed incremental revenue of $93,706 and
$7,176 for Fiscal 2009 and Fiscal 2008, respectively. Excluding the effects of the acquisitions
and the negative exchange rate impact of $6,526 in Fiscal 2009 relative to the U.S. dollar, total
revenues would have decreased 10% from $1,009,566 to $912,368 for the reasons discussed below.
Revenues by Geography
North America
Revenues in North America for Fiscal 2009 were $838,871, nearly equivalent to revenues for Fiscal
2008 of $837,402. The Acquired Companies contributed incremental revenue of $93,706 and $7,176 for
Fiscal 2009 and Fiscal 2008, respectively. Excluding the effects of the acquisitions and the
negative exchange rate impact of $2,009 in Fiscal 2009 relative to the U.S. dollar, North American
revenues would have decreased 10% from $830,226 to $747,174. The Company believes that this
decrease is primarily due to an approximated $26,000 decrease of Voice Services revenues related to
the previously-disclosed termination of the Companys distribution agreement with Avaya, an
approximated $14,000 decrease of Voice Services revenues related to the expected post-merger client
attrition from the USA Commercial operations of NextiraOne and weaker general economic conditions
that affected client demand for Data Services and Hotline Services.
17
Europe
Revenues in Europe for Fiscal 2009 were $121,839, a decrease of 12% compared to revenues for Fiscal
2008 of $138,927. Excluding the negative exchange rate impact of $5,799 in Fiscal 2009 relative to
the U.S. dollar, Europe revenues would have decreased 8% from $138,927 to $127,638. The Company
believes the decrease is primarily due to weaker general economic conditions that affected client
demand for its Hotline Services.
All Other
Revenues for All Other for Fiscal 2009 were $38,838, a decrease of 4% compared to revenues for
Fiscal 2008 of $40,413. Excluding the positive exchange rate impact of $1,282 in Fiscal 2009
relative to the U.S. dollar, All Other revenues would have decreased 7% from $40,413 to $37,556.
Revenue by Service Type
Data Services
Revenues from Data Services for Fiscal 2009 were $191,436, a decrease of 2% compared to revenues
for Fiscal 2008 of $194,454. The Acquired Companies contributed incremental revenue of $27,603 and
$0 for Fiscal 2009 and Fiscal 2008, respectively. Excluding the effects of the acquisitions and
the negative exchange rate impact of $4,658 in Fiscal 2009 relative to the U.S. dollar for its
international Data Services, Data Service revenues would have decreased 13% from $194,454 to
$168,491. The Company believes this decrease is primarily due to weaker general economic
conditions that affected client demand for these services in its North American segment.
Voice Services
Revenues from Voice Services for Fiscal 2009 were $598,319, an increase of 2% compared to revenues
for Fiscal 2008 of $586,974. The Acquired Companies contributed incremental revenue of $66,103 and
$7,176 for Fiscal 2009 and Fiscal 2008, respectively. Excluding the effects of the acquisitions,
Voice Services revenues would have decreased 8% from $579,798 to $532,216. The Company believes
that this decrease is primarily due to an approximated $26,000 decrease of Voice Services revenues
related to the previously-disclosed termination of the Companys distribution agreement with Avaya
and an approximated $14,000 decrease of Voice Services revenues related to the expected post-merger
client attrition from the USA Commercial operations of NextiraOne. There was no exchange rate
impact on Voice Services revenues as all of the Companys Voice Services revenues are denominated
in U.S. dollars.
Hotline Services
Revenues from Hotline Services for Fiscal 2009 were $209,793, a decrease of 11% compared to
revenues for Fiscal 2008 of $235,314. Excluding the negative exchange rate impact of $1,868 in
Fiscal 2009 relative to the U.S. dollar for its international Hotline Services, Hotline Service
revenues would have decreased 10% from $235,314 to $211,661. The Company believes this decrease is
primarily due to weaker general economic conditions that affected client demand for these services.
Gross profit
Gross profit dollars for Fiscal 2009 were $357,180, a decrease of 3% compared to gross profit
dollars for Fiscal 2008 of $366,620. Gross profit as a percent of revenues for Fiscal 2009 was
35.7%, a decrease of 0.4% compared to gross profit as a percentage of revenues for Fiscal 2008 of
36.1%. The Company believes the dollar and percent decrease was due primarily to the impact of
pricing pressures in its Data Services segment and revenue mix between its services offerings.
Gross profit dollars for Data Services for Fiscal 2009 were $55,407, or 28.9% of revenues, compared
to gross profit dollars for Fiscal 2008 of $57,747, or 29.7% of revenues. Gross profit dollars for
Voice Services for Fiscal 2009 were $200,541, or 33.5% of revenues, compared to gross profit
dollars for Fiscal 2008 of $195,570, or 33.3% of revenues. Gross profit dollars for Hotline
Services for Fiscal 2009 were $101,232, or 48.3% of revenues, compared to gross profit dollars for
Fiscal 2008 of $113,303, or 48.1% of revenues. Please see the preceding paragraph for the analysis
of gross profit variances by segment.
18
Selling, general & administrative expenses
Selling, general & administrative expenses for Fiscal 2009 were $266,387, a decrease of $8,922
compared to Selling, general & administrative expenses for Fiscal 2008 of $275,309. Selling,
general & administrative expenses as a percent of revenue for Fiscal 2009 were 26.6% compared to
27.1% for Fiscal 2008. The decrease in Selling, general & administrative expense dollars and
Selling, general & administrative expenses as a percent of revenue over the prior year was
primarily due to the Companys continued effort to right-size the organization and more properly
align the expense structure with anticipated revenues and changing market demand for its solutions
and services and $1,524 of historical stock option granting practices investigation costs and
expenses as a result of
measures taken by the Company to address the application of Section 409A of the Code
(Section 409A) incurred during Fiscal 2008 for which there was no comparable expense during
Fiscal 2009. See Section 409A Remedial Measures and other potential Section 409A Payments below.
Intangibles amortization
Intangibles amortization for Fiscal 2009 was $10,790, an increase of $4,111 compared to Intangible
amortization for Fiscal 2008 of $6,679. The increase was primarily attributable to the addition of
intangible assets from acquisitions completed subsequent to the fourth quarter of Fiscal 2008
partially offset by the amortization run-out for certain intangible assets.
Operating income
As a result of the foregoing, Operating income for Fiscal 2009 was $80,003, or 8.0% of revenues, a
decrease of $4,629 compared to Operating income for Fiscal 2008 of $84,632, or 8.3% of revenues.
Interest expense (income), net
Net interest expense for Fiscal 2009 was $10,279, or 1.0% of revenues, compared to net interest
expense for Fiscal 2008 of $21,298, or 2.1% of revenues. The Companys interest-rate swap
contributed a gain of $974 and a loss of $4,576 for Fiscal 2009 and Fiscal 2008, respectively, due
to the change in fair value. Excluding the effect of the interest-rate swap, net interest expense
would have decreased $5,469 from $16,722, or 1.6% of revenues, to $11,253, or 1.1% of revenues.
This decrease in net interest expense is due to a decrease in the weighted-average outstanding debt
and weighted-average interest rate to $237,991 and 3.3%, respectively, for Fiscal 2009 from
$242,418 and 6.2%, respectively, for Fiscal 2008.
Provision for income taxes
The tax provision for Fiscal 2009 was $23,854, an effective tax rate of 34.5%. This compares to
the tax provision for Fiscal 2008 of $24,298, an effective tax rate of 38.2%. The tax rate for
Fiscal 2009 was lower than Fiscal 2008 due primarily to a reversal of previously-recorded expense
related to a potential disallowed Section 162(m) deduction and the expected write-off of deferred
tax assets related to stock-based compensation expense during Fiscal 2008 partially offset by
increases to uncertain income tax positions as required under FIN 48 (as defined below) and
increased valuation allowances for certain foreign net operating losses. The Company anticipates
that its deferred tax asset is realizable in the foreseeable future.
Net income
As a result of the foregoing, Net income for Fiscal 2009 was $45,309, or 4.5% of revenues, compared
to Net income for Fiscal 2008 of $39,233, or 3.9% of revenues.
Fiscal 2008 Compared To Fiscal 2007
Total Revenues
Total revenues for Fiscal 2008 were $1,016,742, nearly equivalent to total revenues for Fiscal 2007
of $1,016,310. The Acquired Companies contributed incremental revenue of $270,683 and $304,669 for
Fiscal 2008 and Fiscal 2007, respectively. Excluding the effects of the acquisitions and the
positive exchange rate impact of $15,413 in Fiscal 2008 relative to the U.S. dollar, total revenues
would have increased 3% from $711,641 to $730,646 for the reasons discussed below.
Revenues by Geography
North America
Revenues in North America for Fiscal 2008 were $837,402, a decrease of 1% compared to revenues for
Fiscal 2007 of $850,088. The Acquired Companies contributed incremental revenue of $270,683 and
$304,669 for Fiscal 2008 and Fiscal 2007, respectively. The decrease in Acquired Companies
contributed revenue is primarily due to expected post-merger client attrition from the NextiraOne
acquisition. Excluding the effects of the acquisitions and the positive exchange rate impact of
$2,593 in Fiscal 2008 relative to the U.S. dollar, North American revenues would have increased 3%
from $545,419 to $564,126. The Company believes this increase is due to the success in the
Companys Data, Voice and Hotline (DVH) cross-selling initiatives.
19
Europe
Revenues in Europe for Fiscal 2008 were $138,927, an increase of 7% compared to revenues for Fiscal
2007 of $129,278. Excluding the positive exchange rate impact of $11,286 in Fiscal 2008 relative
to the U.S. dollar, Europe revenues would have decreased 1% from $129,278 to $127,641. The Company
believes the decrease is due to softer demand for its Hotline Services during the year offset in
part by the success in the Companys DVH cross-selling initiatives.
All Other
Revenues for All Other for Fiscal 2008 were $40,413, an increase of 9% compared to revenues for
Fiscal 2007 of $36,944. Excluding the positive exchange rate impact of $1,534 in Fiscal 2008
relative to the U.S. dollar, All Other revenues would have increased 5% from $36,892 to $38,644.
Revenue by Service Type
Data Services
Revenues from Data Services for Fiscal 2008 were $194,454, an increase of 7% compared to revenues
for Fiscal 2007 of $182,129. Excluding the positive exchange rate impact of $5,727 in Fiscal 2008
relative to the U.S. dollar for its international Data Services, Data Service revenues would have
increased 4% from $182,129 to $188,727. The Company believes the increase in Data Services
revenues is due to the success of the Companys DVH cross-selling initiatives coupled with stable
end-user markets.
Voice Services
Revenues from Voice Services for Fiscal 2008 were $586,974, a decrease of 4% compared to revenues
for Fiscal 2007 of $611,278. The Acquired Companies contributed incremental revenue of $270,683
and $304,669 for Fiscal 2008 and Fiscal 2007, respectively. The decrease in Acquired Companies
contributed revenue is primarily due to expected post-merger client attrition from the NextiraOne
acquisition. Excluding the effects of the acquisitions, Voice Services revenues would have
increased 3% from $306,609 to $316,291. The Company believes that the increase in Voice Services
revenues is primarily due to the success of the Companys DVH cross-selling initiatives coupled
with stable end-user markets. 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 Fiscal 2008 were $235,314, an increase of 6% compared to
revenues for Fiscal 2007 of $222,903. Excluding the positive exchange rate impact of $9,686 in
Fiscal 2008 relative to the U.S. dollar for its international Hotline Services, Hotline Service
revenues would have increased 1% from $222,903 to $225,628. The Company believes this increase in
Hotline Services revenues is primarily due to the success of the Companys DVH cross-selling
initiatives and increases in web-based sales coupled with stable end-user markets.
Gross profit
Gross profit dollars for Fiscal 2008 were $366,620, a decrease of 2% compared to gross profit
dollars for Fiscal 2007 of $373,989. Gross profit as a percent of revenues for Fiscal 2008 was
36.1%, a decrease of 0.7% compared to gross profit as a percentage of revenues for Fiscal 2007 of
36.8%. The Company believes the percent decrease was due primarily to the impact of lower gross
profit in Voice Services driven by the acquisition of NextiraOne, several strategic investments in
Voice Services and the impact of lower gross profit in Hotline Services driven by increased product
costs and product mix.
Gross profit dollars for Data Services for Fiscal 2008 were $57,747, or 29.7% of revenues, compared
to gross profit dollars for Fiscal 2007 of $55,598, or 30.5% of revenues. Gross profit dollars for
Voice Services for Fiscal 2008 were $195,570, or 33.3% of revenues, compared to gross profit
dollars for Fiscal 2007 of $209,268, or 34.2% of revenues. Gross profit dollars for Hotline
Services for Fiscal 2008 were $113,303, or 48.1% of revenues, compared to gross profit dollars for
Fiscal 2007 of $109,123, or 49.0% of revenues. Please see the preceding paragraph for the analysis
of gross profit variances by segment.
Selling, general & administrative expenses
Selling, general & administrative expenses for Fiscal 2008 were $275,309, a decrease of $15,046
compared to Selling, general & administrative expenses for Fiscal 2007 of $290,355. Selling,
general & administrative expenses as a percent of revenue for Fiscal 2008 were 27.1% compared to
28.6% for Fiscal 2007. The decrease in Selling, general & administrative expense dollars and
Selling, general & administrative expenses as a percent of revenue over the prior year was
primarily due to the Companys continued effort to right-size the organization and more properly
align the expense structure with anticipated revenues and changing market demand for its solutions
and services and a decrease in stock-based compensation expense of $6,091 partially offset by
increases in restructuring/integration costs of $6,457 and $1,524 of historical stock option
granting practices investigation costs and expenses as a
result of measures taken by the Company to address the application of Section 409A of the Code.
See Section 409A Remedial Measures and other potential Section 409A Payments below.
20
Intangibles amortization
Intangibles amortization for Fiscal 2008 was $6,679, a decrease of $3,606 compared to Intangible
amortization for Fiscal 2007 of $10,285. The decrease was primarily attributable to the
amortization run-out for certain intangible assets partially offset by the finalization of purchase
accounting and the addition of intangible assets from acquisitions completed subsequent to the
fourth quarter of Fiscal 2007.
Operating income
As a result of the foregoing, Operating income for Fiscal 2008 was $84,632, or 8.3% of revenues, an
increase of $11,283 compared to Operating income for Fiscal 2007 of $73,349, or 7.2% of revenues.
Interest expense (income), net
Net interest expense for Fiscal 2008 was $21,298, or 2.1% of revenues, compared to net interest
expense for Fiscal 2007 of $18,407, or 1.8% of revenues. The Companys interest-rate swap
contributed losses of $4,576 and $1,734 for Fiscal 2008 and Fiscal 2007, respectively, due to the
change in fair value. Excluding the effect of the interest-rate swap, net interest expense would
have increased $49 from $16,673, or 1.6% of revenues, to $16,722, or 1.6% of revenues. The weighted
average outstanding debt and weighted average interest rate remained relatively consistent at
$242,418 and 6.2%, respectively, for Fiscal 2008 compared to $253,159 and 6.2%, respectively, for
Fiscal 2007.
Provision for income taxes
The tax provision for Fiscal 2008 was $24,298, an effective tax rate of 38.2%. This compares to
the tax provision for Fiscal 2007 of $19,291, an effective tax rate of 35.1%. The tax rate for
Fiscal 2008 was higher than Fiscal 2007 due to the expected write-off of deferred tax assets
related to stock-based compensation expense, changes in the overall mix of taxable income among
worldwide offices, additional tax liabilities recorded for uncertain income tax positions as
required under FIN 48 (as defined below) and the loss of the extraterritorial income deduction for
federal income tax purposes. The Company anticipates that its deferred tax asset is realizable in
the foreseeable future.
Net income
As a result of the foregoing, Net income for Fiscal 2008 was $39,233, or 3.9% of revenues, compared
to Net income for Fiscal 2007 of $35,609, or 3.5% of revenues.
Liquidity and Capital Resources
Cash Flows from Operating Activities
Net cash provided by operating activities during Fiscal 2009 was $71,566. Significant factors
contributing to the source of cash were: Net income of $45,309 inclusive of non-cash charges of
$20,722 for amortization / depreciation expense and $3,042 for stock compensation expense, as well
as decreases in net inventory of $11,455, net trade accounts receivable of $26,279 and the deferred
tax provision of $5,705 and increases in accrued compensation and benefits of $9,024. Significant
factors contributing to a use of cash include decreases in trade accounts payable, accrued
expenses, restructuring reserves, billings in excess of costs, accrued taxes and deferred revenue
of $8,385, $10,577, $2,264, $5,300, 8,049 and $2,429, respectively. Changes in the above accounts
are based on average Fiscal 2009 exchange rates.
Net cash provided by operating activities for Fiscal 2008 was $81,121. Significant factors
contributing to the source of cash were: Net income of $39,233 inclusive of non-cash charges of
$17,737, $3,217 and $4,576 for amortization / depreciation expense, stock compensation expense and
the change in fair value of interest-rate swap, respectively, and decreases in the deferred tax
provision of $11,693, net inventory of $7,829, prepaid and other current assets of $9,369, net
trade accounts receivable of $4,852 and costs in excess of billings of $2,959. Significant factors
contributing to a use of cash were: decreases in accrued expenses and restructuring reserves of
$10,973 and $6,860, respectively, and a decrease in trade accounts payable of $5,363. Changes in
the above accounts are based on an average Fiscal 2008 exchange rate.
21
Net cash provided by operating activities for Fiscal 2007 was $36,636. Significant factors
contributing to the source of cash were: Net income of $35,609 inclusive of non-cash charges of
$22,610, $9,308 and $1,734 for amortization / depreciation expense, stock compensation expense and
the change in fair value of interest-rate swap, respectively; a decrease in other current assets of
$6,126; a decrease in net trade accounts receivable of $19,202 inclusive of a non-cash contract
adjustment of $18,400; and an increase in billings in excess of costs of $3,304. Significant
factors contributing to a use of cash were: an increase in costs in excess of billings and net
inventory of $13,323 and $3,595, respectively; a decrease in the short and long-term restructuring
reserve of $17,913; a decrease of deferred revenue of $19,369, inclusive of a non-cash contract
adjustment of $18,400; and an offset of $5,269 related to accrued acquisition costs, which have not
been recognized as Investing Activities at Fiscal 2007 year-end. Changes in the above accounts are
based on an average Fiscal 2007 exchange rate.
As of March 31, 2009, 2008 and 2007, the Company had Cash and cash equivalents of $23,720, $26,652
and $17,157, respectively, working capital of $130,209, $134,031 and $117,059, respectively, and a
current ratio of 1.62, 1.63 and 1.52, 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 12 months.
Investing Activities
Net cash used by investing activities during Fiscal 2009 was $119,495. Significant factors
contributing to a use of cash were: $2,178 for Capital expenditures and $117,184 to acquire UCI,
MTS, ACS, NCT and Scottel. See Note 9 of the Notes to the Consolidated Financial Statements for
additional details regarding these acquisitions.
Net cash used by investing activities during Fiscal 2008 was $20,281. Significant factors
contributing to a use of cash were: $3,241 for Capital expenditures, $13,713 to acquire B&C and
AT&Ts southeast NEC TDM business and $3,432 for holdbacks and contingent fee payments related to
prior period acquisitions. See Note 9 of the Notes to the Consolidated Financial Statements for
additional details regarding these acquisitions.
Net cash used by investing activities during Fiscal 2007 was $134,909. Significant factors
contributing to a use of cash were: $5,886 for Capital expenditures and $127,716 to acquire
NextiraOne, NUVT, NTI and ADS. See Note 9 of the Notes to the Consolidated Financial Statements
for additional details regarding these acquisitions.
Financing Activities
Net cash provided by financing activities during Fiscal 2009 was $47,311. Significant factors
contributing to the cash inflow were $51,097 of net borrowings on long-term debt and $4,206 for the
payment of dividends.
Net cash used by financing activities during Fiscal 2008 was $48,160. Significant factors
contributing to the cash outflow were $43,280 of net payments on long-term debt, $6,062 for the
repurchase of common stock and $4,225 for the payment of dividends. Significant factors
contributing to cash inflow were $5,878 of proceeds from the exercise of stock options.
Net cash provided by financing activities during Fiscal 2007 was $104,703. Significant factors
contributing to the cash inflow were $114,175 of net borrowings on long-term debt and $14,970 of
proceeds from the exercise of stock options. Significant uses of cash were $20,209 for the
repurchase of common stock and $4,203 for the payment of dividends.
Total Debt
Revolving Credit Agreement - On March 28, 2006, the Company entered into the Second Amendment to
the Second Amended and Restated Credit Agreement dated January 24, 2005, as amended February 17,
2005 (collectively, the Credit Agreement) with Citizens Bank of Pennsylvania, as agent, and a
group of lenders. The Credit Agreement was scheduled to expire on March 28, 2011. Borrowings under
the Credit Agreement were permitted up to a maximum amount of $310,000, which included up to
$15,000 of swing-line loans and $25,000 of letters of credit. The Credit Agreement could have been
increased by the Company up to an additional $90,000 with the approval of the lenders and could
have been 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 accrued,
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 0.75% to 1.25% (determined by a leverage ratio based on the Companys Earnings
Before Interest Taxes Depreciation and Amortization (EBITDA)). The Credit Agreement required the
Company to maintain compliance with certain non-financial and financial covenants such as minimum
net worth, leverage and fixed charge coverage ratios.
22
On January 30, 2008, the Company entered into the New Credit Agreement. The New Credit Agreement,
which replaces the Credit Agreement, expires on January 30, 2013. Borrowings under the New 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 New 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 New 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
EBITDA). The New 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
March 31, 2009, the Company was in compliance with all financial covenants under the New Credit
Agreement.
As of March 31, 2009, the Company had total debt outstanding of $250,657. Total debt was comprised
of $247,650 outstanding under the New Credit Agreement, $2,908 of obligations under capital leases
and $99 of various other third-party, non-employee loans. The maximum amount of debt outstanding
under the New Credit Agreement, the weighted average balance outstanding under the New Credit
Agreement and the weighted average interest rate on all outstanding debt for Fiscal 2009 was
$277,735, $237,991 and 3.3%, respectively, compared to $270,825, $242,418 and 6.2% and $284,470,
$253,129 and 6.2%, for Fiscal 2008 and Fiscal 2007, respectively.
For Fiscal 2009, the Company increased net borrowings under the New Credit Agreement by $53,180,
the proceeds of which were used to fund the acquisitions of UCI, MTS, ACS, NCT and Scottel. For
Fiscal 2008, the Company decreased net borrowings under the New Credit Agreement / Credit Agreement
by $42,245. For Fiscal 2007, the Company increased net borrowings under the Credit Agreement by
$115,412, the proceeds of which were used to fund the acquisitions of NextiraOne, NUVT, NTI and ADS
and to repurchase common stock.
Dividends
Fiscal 2009 - During Fiscal 2009, the Board declared quarterly cash dividends of $0.06 ($0.24 for
Fiscal 2009) per share on all outstanding shares of the common stock at the close of business on
June 30, 2008, September 26, 2008, December 26, 2008 and March 31, 2009. The dividends totaled
$4,207 (including $1,052 for the fourth quarter of Fiscal 2009) and were paid on July 14, 2008,
October 14, 2008, January 9, 2009 and April 15, 2009.
Fiscal 2008 - During Fiscal 2008, the Board declared quarterly cash dividends of $0.06 ($0.24 for
Fiscal 2008) per share on all outstanding shares of the common stock at the close of business on
June 29, 2007, September 28, 2007, December 28, 2007 and March 31, 2008. The dividends totaled
$4,224 (including $1,050 for the fourth quarter of Fiscal 2008) and were paid on July 13, 2007,
October 12, 2007, January 11, 2008 and April 14, 2008.
Fiscal 2007 - During Fiscal 2007, the Board declared quarterly cash dividends of $0.06 ($0.24 for
Fiscal 2007) per share on all outstanding shares of the common stock at the close of business on
June 30, 2006, September 29, 2006, December 29, 2006 and March 30, 2007. The dividends totaled
$4,200 (including $1,052 for the fourth quarter of Fiscal 2007) and were paid on July 14, 2006,
October 13, 2006, January 15, 2007 and April 16, 2007.
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 New
Credit Agreement, the Company is permitted to make any distribution or dividend or repurchase its
common stock as long as no Event of Default or Potential Default (each as defined in the New Credit
Agreement) occurs or is continuing.
Repurchase of Common Stock
Fiscal
2009 - During Fiscal 2009, the Company did not repurchase any shares of common stock.
Fiscal 2008 - During Fiscal 2008, the Company repurchased 190,084 shares of common stock for an
aggregate purchase price of $6,062, or an average purchase price per share of $31.89.
Fiscal 2007 - During Fiscal 2007, the Company repurchased 500,712 shares of common stock for an
aggregate purchase price of $20,209, or an average purchase price per share of $40.36.
23
Since the inception of the repurchase program in April 1999 through March 31, 2009, the Company has
repurchased 7,626,195 shares for an aggregate purchase price of $323,095, or an average purchase
price per share of $42.37. As of March 31, 2009, 873,805 shares
were available for purchase 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 Companys New Credit Agreement, the Company is
permitted to make any distribution or dividend or repurchase its common stock as long as no Event
of Default or Potential Default (each as defined in the New Credit Agreement) occurs or is
continuing, and may not repurchase its common stock if the leverage ratio (after taking into
consideration the payment made to repurchase such common stock) would exceed 2.75 to 1.0 or if the
availability to borrow under the New Credit Facility would be less than $20 million.
Potential Tax Payments
In connection with the independent review by the Audit Committee of the Companys historical stock
option granting practices (See the Explanatory Note preceding Part I, Item 1 of the Companys
Annual Report on Form 10-K for the fiscal year ended March 31, 2007 for more information regarding
the Audit Committees review and related matters), the Company determined that a number of officers
may have exercised options for which the application of Section 162(m) of the Code may apply. It
was possible that these options could have been treated as having been granted at less than fair
market value for federal income tax purposes because the Company incorrectly applied the
measurement date as defined in APB 25. If such options were deemed to have been granted at less
than fair market value for purposes of Section 162(m), any non-performance based compensation to
officers, including proceeds from options exercised in any given tax year, in excess of $1,000
would have been disallowed as a deduction for tax purposes. The Company estimated that the
potential tax-effected liability for any potential disallowed Section 162(m) deduction would
approximate $3,587, which was recorded as an expense during Fiscal 2004 and Fiscal 2005 and was
recorded as a current liability within Income taxes within the Companys Consolidated Balance
Sheets as of March 31, 2008. During Fiscal 2009, the IRS concluded its examination of the
potential disallowed Section 162(m) deduction within our filing position and did not propose an
adjustment. During the fourth quarter of Fiscal 2009, we reversed the previously-recorded expense
of $3,587 through Provision for income taxes within the Companys Consolidated Statements of
Income.
Section 409A Remedial Measures and Other Potential Section 409A Payments
Following the completion of the Audit Committees independent review of the Companys historical
stock option granting practices, the Company determined that certain stock option grants which were
originally issued with exercise prices that were below fair market value for income tax purposes,
which vested or may vest after December 31, 2004 and which remained outstanding (i.e., unexercised)
as of December 31, 2005, were subject to adverse income taxation under Section 409A. For purposes
of this Form 10-K, these below-fair market value stock option grants are referred to as Affected
Stock Option Grants. Under Section 409A, individuals who held Affected Stock Option Grants could
have been subject to a 20% federal income tax and an interest penalty tax, in addition to the
regular income tax liability, plus interest on the value of these stock option grants at the time
of vesting (not exercise).
During the third quarter of Fiscal 2008, the Company conducted a tender offer to current
non-officer employees subject to taxation in the United States who held Affected Stock Option
Grants that afforded those employees the opportunity to avoid unfavorable tax consequences under
Section 409A. The provisions of the tender offer amended each Affected Stock Option Grant to
increase the original exercise price to the lower of: (i) the fair market value of the common stock
on the corrected measurement date (as determined for tax purposes) or (ii) the fair market value of
the common stock on the trading day immediately following the expiration of the tender offer
(December 19, 2007), provided that the new exercise price was in no event lower than the original
exercise price of the stock option grant. Additionally, and as part of the tender offer, the
Company offered current non-officer employees the right to receive a cash payment equal to the
increase, if any, in the exercise price of any Affected Stock Option Grant.
In instances where the original exercise price of a stock option grant was less than the new
exercise price (as determined above), the Company increased the original exercise price to the new
exercise price (an Amended Stock Option Grant) and paid a cash bonus to the employee. The total
cash bonus due to employees was $456 which was paid during January, 2008. The Company accounted
for the impact of the Amended Stock Option Grants as a stock option modification under Statement of
Financial Accounting Standards (SFAS) No. 123 (revised 2004), Share-Based Payment (SFAS
123(R)). As a result of the modification and the partial cash settlement, the Company recognized
$250 of additional stock-based compensation expense due to the increase in the fair market value of
these stock option grants that is recorded in Selling, general & administrative expense within the
Companys Consolidated Statements of Income.
24
In instances where the current exercise price of a stock option grant was greater than the new
exercise price, the original stock option grant was canceled and immediately replaced with a new
stock option grant under the 1992 Stock Option Plan, as amended (the Employee Plan) that has the
same terms as the canceled stock option grant, including the same exercise price per share and no
loss of vesting or change to the expiration date of the stock option grant term, but with a new
grant date (a Cancellation and New Stock Option Grant). Each Cancellation and New Stock Option
Grant qualifies as a cancellation of an award accompanied by the concurrent grant of a replacement
award, as defined in SFAS 123(R), which is accounted for as a modification. Under SFAS
123(R), incremental compensation cost is measured as the excess, if any, of the fair market value
of the modified award over the fair market value of the original award immediately before its terms
are modified. With respect to the Cancellation and New Stock Option Grants, there were no changes
to any of the terms of the original Affected Stock Option Grants. Thus, the Company recorded $0 of
non-cash stock-based compensation expense for these grants.
During the fourth quarter of Fiscal 2008, the Board approved a separate offer (the Separate
Offer) for R. Terry Blakemore, a director and the current President and Chief Executive Officer
(CEO) of the Company, that was intended to remedy the tax consequences under Section 409A
attributable to Affected Stock Option Grants to purchase 60,000 shares of common stock held by
Mr. Blakemore. These Affected Stock Option Grants were awarded prior to Mr. Blakemore becoming an
Executive Officer of the Company. The provisions of the Separate Offer were identical to the
tender offer for current non-officer employees described above. The fair market value of the
common stock on the trading day immediately following the expiration of the Separate Offer was
lower than the original exercise price of these Affected Stock Option Grants and, as a result, the
original Affected Stock Option Grants were canceled and immediately replaced with new stock option
grants under the Employee Plan that had the same terms as the canceled stock option grants (the
Separate Offer Cancellation and New Stock Option Grants). Consistent with our accounting
treatment for the Cancellation and New Stock Option Grants noted above, the Company accounted for
the Separate Offer Cancellation and New Stock Option Grants as modifications under SFAS 123(R).
With respect to the Separate Offer Cancellation and New Stock Option Grants, there were no changes
to any of the terms of the original Affected Stock Option Grants. Thus, the Company recorded $0 of
non-cash stock-based compensation expense for these grants.
With respect to certain employees who exercised Affected Stock Options Grants during calendar year
2007, the Company made a bonus payment (Calendar 2007 bonus payment) to such employees in
calendar year 2008 in an aggregate amount of $313. The Calendar 2007 bonus payment includes
amounts to compensate the employee for the additional Section 409A taxes that they will be required
to pay as well as an amount to gross-up such amount for the additional income and payroll taxes
owed on such payments. The Calendar 2007 bonus payment is recorded in Selling, general &
administrative expense within the Companys Consolidated Statements of Income for the period ending
March 31, 2008.
With respect to certain employees who exercised Affected Stock Options Grants during calendar year
2006, the Company made a cash payment (Calendar 2006 cash payment) to such employees in calendar
year 2008 in an aggregate amount of approximately $626. The Calendar 2006 cash payment includes
any applicable Section 409A additional taxes as well as an amount to gross up such amount for the
additional income and payroll taxes owed on such payments. The Calendar 2006 cash payment is
recorded in Selling, general & administrative expense within the Companys Consolidated Statements
of Income for the period ending March 31, 2008.
Expenses Incurred by the Company
The Company has incurred significant expenses, in excess of its insurance deductible of $500, in
Fiscal 2007, Fiscal 2008 and Fiscal 2009, and expects to continue to incur additional expenses
during Fiscal 2010, in relation to the following previously-disclosed items (i) the review by the
Audit Committee of the Companys historical stock option granting practices and related accounting
for stock option grants, (ii) the informal inquiry and formal order of investigation by the SEC
regarding the Companys past stock option granting practices, (iii) the derivative action relating
to the Companys historical stock option granting practices filed against the Company as a nominal
defendant and certain of the Companys current and former directors and officers, as to whom it may
have indemnification obligations and (iv) related matters. As of March 31, 2009, the total amount
of such fees is $7,991, of which $5,000, the insurance policy limit, has been paid by the insurance
company. The Company recorded expense of $1,228, $1,221 and $542 during Fiscal 2009, Fiscal 2008
and Fiscal 2007, respectively. The amount of expenses that the Company could incur in the future
with respect to these matters could be material.
25
Contractual Obligations
The Company has various contractual obligations and commitments to make future payments including
debt agreements, operating and capital lease obligations and discounted lease rental commitments.
The following table summarizes significant contractual obligations and commitments of the Company
as of March 31, 2009. Except as set forth in the following table, the Company does not have any
material long-term purchase obligations or other long-term liabilities that are reflected on its
balance sheet as of March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period |
|
|
Less than 1 |
|
|
|
|
|
|
|
|
|
|
More than |
|
|
|
|
|
|
year |
|
|
1-3 years |
|
|
3-5 years |
|
|
5 years |
|
|
Total |
|
|
Long-term debt obligations |
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
247,650 |
|
|
$ |
-- |
|
|
$ |
247,650 |
|
Interest expense on long-term debt |
|
|
4,846 |
|
|
|
9,692 |
|
|
|
8,882 |
|
|
|
-- |
|
|
|
23,420 |
|
Capital lease obligations |
|
|
1,397 |
|
|
|
1,337 |
|
|
|
273 |
|
|
|
-- |
|
|
|
3,007 |
|
Operating lease obligations |
|
|
18,226 |
|
|
|
21,945 |
|
|
|
4,682 |
|
|
|
1,570 |
|
|
|
46,423 |
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations |
|
$ |
24,469 |
|
|
$ |
32,974 |
|
|
$ |
261,487 |
|
|
$ |
1,570 |
|
|
$ |
320,500 |
|
|
The estimated interest expense payments on long-term debt reflected in the table above are based on
both the amount outstanding under the credit facility and the weighted average interest rate in
effect as of March 31, 2009.
As of March 31, 2009, the Company had commercial commitments of $5,554, which are generally due
within the next twelve (12) months.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on its financial condition, changes in its financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital resources, other
than those disclosed above, that are material to investors.
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.
Legal Proceedings
Please also see the matters discussed in Part I, Item 3, Legal Proceedings, of this Form 10-K,
which information is incorporated herein by reference.
Critical Accounting Policies
The Companys consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require the Company to make estimates and
assumptions that may affect the reported financial condition and results of operations should
actual results differ. The Company bases its estimates and assumptions on the best available
information and believes them to be reasonable for the circumstances. The Companys significant
accounting policies are described in Note 2 of the Notes to the Consolidated Financial Statements.
The Company believes that of its significant accounting policies, the following may involve a
higher degree of judgment and complexity.
Allowance for doubtful accounts receivable
The Company records an allowance for doubtful accounts receivable as an offset to accounts
receivable in order to present a net balance the Company believes will be collected. This
allowance is based on both recent trends of certain accounts receivable (specific reserve)
estimated to be a greater credit risk as well as general trends of the entire accounts receivable
pool (general reserve). The Company computes a specific reserve by identifying specifically
at-risk accounts receivable and applying historic reserve factors to the outstanding balance. The
Company computes a general reserve by reviewing the accounts receivable aging and applying reserve
factors based upon the age of the account receivable. If the estimate of uncollectible accounts
receivable should prove inaccurate at some future date, the results of operations for the period
could be materially affected by any necessary correction to the allowance for doubtful accounts.
26
Inventories
The Companys inventory is valued at the lower of cost or market value and has been reduced by an
allowance for excess and obsolete inventories. The Company records an estimate for slow moving and
obsolete inventory (inventory reserve) based upon product knowledge, physical inventory
observation, future demand, market conditions and an aging analysis of the inventory on hand. If
actual market conditions are less favorable than those projected by Management at some future date,
the results of operations for the period could be materially affected by any necessary correction
to the inventory reserve.
Deferred Income Taxes
The Company records deferred income tax assets and liabilities in its Consolidated Balance Sheets
related to events that impact the Companys financial statements and tax returns in different
periods. Deferred tax asset and liability balances are computed by identifying differences between
the book basis and tax basis of assets and liabilities (temporary differences) which are
multiplied by the current tax rate. A valuation allowance is provided on deferred tax assets if it
is determined that it is more likely than not that the asset will not be realized. If the
Companys estimate of the realizable deferred tax assets should prove inaccurate at some future
date, the results of operations for the period could be materially affected by any necessary
correction to the deferred tax asset allowance.
Long-Lived Assets other than Goodwill
The Company reviews long-lived assets, including property, plant, equipment and indefinite/definite
lived intangibles for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If the sum of the estimated future cash flows
(undiscounted) expected to result from the use and eventual disposition of an asset is less than
the carrying amount of the asset, an impairment loss is recognized. Measurement of an impairment
loss is based on the fair value of the asset. No impairments of long-lived assets have been
identified during any of the periods presented.
Goodwill
The Companys Goodwill is subject to, at a minimum, an annual impairment assessment of its carrying
value. Goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds
its estimated fair value. Estimated fair values of the reporting units are estimated using an
earnings model and a discounted cash flow valuation model. The discounted cash flow model
incorporates the Companys estimates of future cash flows, allocations of certain assets and cash
flows among reporting units, future growth rates and Managements judgment regarding the applicable
discount rates used to discount those estimated cash flows. If the Companys estimates and
assumptions used in the discounted cash flow valuation model should prove inaccurate at some future
date, the results of operations for the period could be materially affected by an impairment of
goodwill. No impairment of goodwill has been identified during any of the periods presented.
At March 31, 2009, the Companys market capitalization was below tangible book value. While the
market capitalization decline was considered in the Companys evaluation of fair value, the market
metric is only one indicator of fair value. In the Companys opinion, the market capitalization
approach, by itself, is not a reliable indicator of the value for the Company.
The Company will continue to monitor market conditions and determine if any additional interim
review of goodwill is warranted. Further deterioration in the market or actual results as compared
with our projections may ultimately result in a future impairment. In the event that the Company
determines goodwill is impaired in the future, it would need to recognize a non-cash impairment
charge, which could have a material adverse effect on its consolidated balance sheet and results of
operations.
Loss Contingencies
The Company incurs contingencies as a normal part of its business operations, such as future
warranty obligations and potential liabilities relating to legal or regulatory matters. The
Company accrues for contingent obligations when a loss is probable and the amount can be reasonably
estimated.
Restructuring Costs
The Company accrues the cost of restructuring activities in accordance with the appropriate
accounting guidance depending upon the facts and circumstances surrounding the situation. The
Company exercises its judgment in estimating the total costs of each of these activities. As these
activities are implemented, the actual costs may differ from the estimated costs due to changes in
the facts and circumstances that were not foreseen at the time of the initial cost accrual.
Revenue Recognition
Within the Companys Hotline Services service segment, revenues are recognized when title to
products sold passes to the customer, which generally occurs upon shipment from the Companys
location.
27
Within the Companys Data Services and Voice Services service segments, revenues are recognized
from maintenance service contracts, moves, adds and changes and network integration services when
the services are provided. Service contracts are generally pre-billed, recorded in Deferred
revenue within the Companys Consolidated Balance Sheets and are generally recognized over the
service period on a straight-line basis. Revenues from the sale and installation of products and
systems are recognized using the percentage-of-completion method based upon the proportion of
actual costs incurred to estimated total costs. At the time a loss on a contract becomes known,
the entire amount of the estimated loss is recognized immediately in the financial statements. The
Company has historically made reasonably accurate estimates of the extent of progress towards
completion, contract revenues and contract costs on its long-term contracts. However, due to
uncertainties inherent in the estimation process, actual results could differ materially from those
estimates.
Impact of Recently Issued Accounting Pronouncements
Uncertainty in Income Taxes
In July, 2006, the Financial Accounting Standards Board (the FASB) issued FASB Interpretation No.
48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 requires that realization of an
uncertain income tax position must be more likely than not (i.e., greater than 50% likelihood of
receiving a benefit) before it can be recognized in the financial statements. Further, FIN 48
prescribes the benefit to be recorded in the financial statements as the amount most likely to be
realized assuming a review by tax authorities having all relevant information and applying current
conventions. FIN 48 also clarifies the financial statement classification of tax-related penalties
and interest and sets forth new disclosures regarding unrecognized tax benefits. The Company
adopted FIN 48 on April 1, 2007. The adoption of FIN 48 resulted in a decrease to beginning
retained earnings of $5,110 representing the cumulative effect adjustment. See Note 2 and Note 12
of the Notes to the Consolidated Financial Statements.
Fair Value Measurements
In September, 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157), which
defines fair value, establishes a framework for measuring fair value in United States generally
accepted accounting principles and expands disclosures about fair value measurements. On April 1,
2008, the Company adopted the provisions of SFAS 157 with the exception of a one-year deferral of
implementation for non-financial assets and liabilities that are not recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually) as provided by FSP
SFAS 157-2, Effective Date of FASB Statement No. 157. The requirements of SFAS 157 were applied
prospectively. The adoption of SFAS 157 did not have a material impact on the Companys
consolidated financial statements. The Company is currently evaluating the impact of the adoption
of FAS 157 as of April 1, 2009 on our non-financial assets and liabilities that are not recognized
or disclosed at fair value on a recurring basis.
Defined Benefit Pension and Other Postretirement Plan
On April 30, 2006, the Company acquired NextiraOne, which is a sponsor of a non-contributory
defined benefit plan (the CWA Plan) for the Communication Workers of America Local 1109 (CWA
1109). Benefits from the CWA Plan are based upon years of service and rates negotiated by the
Company and CWA 1109. Pension costs are funded to satisfy minimum requirements prescribed by the
Employee Retirement Income Security Act of 1974. During Fiscal 2008, the Company amended the CWA
Plan, as of December 31, 2007, which effectively froze the benefits of the plan (i.e., no new
employees will be admitted into the Plan and those employees currently in the Plan will not earn
additional benefits based on service).
In September, 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans (SFAS 158) that would amend SFAS No. 87, Employers
Accounting for Pensions, SFAS No. 88, Employers Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits, SFAS No. 106, Employers Accounting
for Postretirement Benefits Other Than Pensions and SFAS No. 132 (Revised 2003), Employers
Disclosures about Pensions and Other Postretirement Benefits. This standard requires, among other
things, companies to recognize on the balance sheet the funded or unfunded status of pension and
other postretirement benefit plans and to recognize the change in funded status in the period the
change occurs through comprehensive income. The Company adopted SFAS 158 as of March 31, 2007.
Fiscal 2007 financial impact: The adoption of SFAS 158 had no impact on the Companys Consolidated
Statements of Income on the date of adoption. However, the Company did record, as of March 31,
2007, a liability of $3,452 representing the unfunded portion of the CWA Plan included in Other
liabilities within the Companys Consolidated Balance Sheets and an unrecognized gain of $2,717
($1,670 net of tax) included in Accumulated other comprehensive income (AOCI) within the
Companys Consolidated Balance Sheets.
Fiscal 2008 financial impact: As of March 31, 2008, the unfunded portion of the CWA Plan was
$5,909 and is included in Other liabilities within the Companys Consolidated Balance Sheets. The
Company recorded an unrecognized loss of $3,488 ($2,135 net of tax) included in AOCI within the
Companys Consolidated Balance Sheets and Comprehensive income due primarily to a decrease in value
for the CWA Plan assets. The Company made contributions of $1,000 to the CWA Plan during Fiscal
2008.
28
Fiscal 2009 financial impact: As of March 31, 2009, the unfunded portion of the CWA Plan was
$9,744 and is included in Other liabilities within the Companys Consolidated Balance Sheets. The
Company recorded an unrecognized loss of $3,916 ($2,394 net of
tax) included in AOCI within the Companys Consolidated Balance Sheets and Comprehensive income due
primarily to a decrease in value for the CWA Plan assets.
Fiscal 2010 outlook: Due to the decrease in value of the CWA Plan assets, the Company expects to
recognize expense and make cash contributions of approximately $1,000 during Fiscal 2010.
Business Combinations
In December, 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS
141(R)). SFAS 141(R) retains the fundamental requirements of the original pronouncement requiring
that the purchase method be used for all business combinations. SFAS 141(R) defines the acquirer
as the entity that obtains control of one or more businesses in the business combination,
establishes the acquisition date as the date that the acquirer achieves control and requires the
acquirer to recognize the assets acquired, liabilities assumed and any non-controlling interest at
their fair values as of the acquisition date. SFAS 141(R) requires, among other things, that
acquisition-related costs be recognized separately from the acquisition. For the Company, SFAS
141(R) applies prospectively to business combinations for which the acquisition date is on or after
April 1, 2009. SFAS 141(R) may have a material impact on business combinations after adoption.
The impact from application of SFAS 141(R) will depend on the facts and circumstances of the
business combinations after adoption.
Postretirement Benefit Plan Assets
In December, 2008, the FASB issued FSP FASB 132R-1, Employers Disclosures about Postretirement
Benefit Plan Assets (SFAS 132R-1). This statement provides additional guidance regarding
disclosures about plan assets of defined benefit pension or other postretirement plans. SFAS
132R-1 is effective for financial statements issued for fiscal years ending after December 15,
2009. The Company is evaluating the impact of the adoption of SFAS 132R-1 on its consolidated
financial statements.
See Note 2 of the Notes to the Consolidated Financial Statements for further discussion of recent
accounting pronouncements and the related impact on the Companys consolidated financial
statements.
Cautionary Forward Looking Statements
When included in this Form 10-K 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, the final outcome of the review of the Companys stock option granting practices, including
the related SEC investigation, shareholder derivative lawsuit, tax matters and
insurance/indemnification matters, and the impact of any actions that may be required or taken as a
result of such review, SEC investigation, shareholder derivative lawsuit, tax matters or
insurance/indemnification matters, levels of business activity and operating expenses, expenses
relating to corporate compliance requirements, cash flows, global economic and business conditions,
successful integration of acquisitions, including the NextiraOne business, 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 our 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. 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-K. 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.
Item 7A. 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.
29
Interest rate Risk
The Companys primary interest rate risk relates to its long-term debt obligations. As of March
31, 2009, the Company had total long-term obligations of $247,650 under the New Credit Agreement.
Of the outstanding debt, $100,000 was in variable rate debt that was effectively converted to a
fixed rate through an interest-rate swap agreement (discussed in more detail below) during Fiscal
2007 and $147,650 was in variable rate obligations. As of March 31, 2009, 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 year by $1,456 ($954 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 an interest-rate swap which has been used to effectively
convert a portion of the Companys variable rate debt to fixed rate. The floating-to-fixed
interest-rate swap is based on a 3-month LIBOR rate versus a 5.44% fixed rate, has a notional value
of $100,000 reducing to $50,000 after three 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 Currency 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 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 March 31, 2009, the Company had open foreign currency contracts in Australian and Canadian
dollars, Danish krone, Euros, Mexican pesos, Norwegian kroner, Pounds sterling, Swedish krona,
Swiss francs and Japanese yen. The open contracts have contract rates ranging from 1.15800 to
1.2577 Australian dollar, 1.1070 to 1.2992 Canadian dollar, 5.0928 to 5.9310 Danish krone, 0.6919
to 0.7976 Euro, 14.6136 to 15.9941 Mexican peso, 5.7660 to 7.2470 Norwegian kroner, 0.5621 to
0.7082 Pounds sterling, 6.6007 to 9.0349 Swedish krona, 1.0801 to 1.1859 Swiss franc and 90.1300 to
90.1300 Japanese yen, all per U.S. dollar. The total open contracts had a notional amount of
$52,118 and will expire within twelve (12) months.
30
Item 8. Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
31
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Black Box Corporation
Lawrence, Pennsylvania
We have audited the accompanying consolidated balance sheets of Black Box Corporation as of March
31, 2009 and 2008 and the related consolidated statements of income, changes in stockholders
equity and comprehensive income, and cash flows for each of the three years in the period ended
March 31, 2009. In connection with our audits of the financial statements, we have also audited
Schedule II Valuation and Qualifying Accounts. These financial statements and schedule are the
responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements and schedule, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial
statements and schedule. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Black Box Corporation at March 31, 2009 and 2008, and
the results of its operations and its cash flows for each of the three years in the period ended
March 31, 2009, in conformity with accounting principles generally accepted in the United States of
America.
Also, in our opinion, the financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
As disclosed in the consolidated financial statements, effective April 1, 2007, the Company changed
its method of accounting for uncertain tax positions to conform to FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Black Box Corporations internal control over financial reporting as of
March 31, 2009, based on criteria established in Internal Control Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated
May 27, 2009 expressed an unqualified opinion thereon.
/s/ BDO Seidman, LLP
Chicago, Illinois
May 27, 2009
32
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
In thousands, except per share amounts |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Hotline products |
|
$ |
209,793 |
|
|
$ |
235,314 |
|
|
$ |
222,903 |
|
On-Site services |
|
|
789,755 |
|
|
|
781,428 |
|
|
|
793,407 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
999,548 |
|
|
|
1,016,742 |
|
|
|
1,016,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
Hotline products |
|
|
108,561 |
|
|
|
122,011 |
|
|
|
113,780 |
|
On-Site services |
|
|
533,807 |
|
|
|
528,111 |
|
|
|
528,541 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
642,368 |
|
|
|
650,122 |
|
|
|
642,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
357,180 |
|
|
|
366,620 |
|
|
|
373,989 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general & administrative expenses |
|
|
266,387 |
|
|
|
275,309 |
|
|
|
290,355 |
|
Intangibles amortization |
|
|
10,790 |
|
|
|
6,679 |
|
|
|
10,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
80,003 |
|
|
|
84,632 |
|
|
|
73,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (income), net |
|
|
10,279 |
|
|
|
21,298 |
|
|
|
18,407 |
|
Other expenses (income), net |
|
|
561 |
|
|
|
(197) |
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
|
69,163 |
|
|
|
63,531 |
|
|
|
54,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
23,854 |
|
|
|
24,298 |
|
|
|
19,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
45,309 |
|
|
$ |
39,233 |
|
|
$ |
35,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
2.59 |
|
|
$ |
2.23 |
|
|
$ |
2.03 |
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
2.59 |
|
|
$ |
2.22 |
|
|
$ |
2.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
17,527 |
|
|
|
17,605 |
|
|
|
17,512 |
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
17,527 |
|
|
|
17,653 |
|
|
|
17,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per share |
|
$ |
0.24 |
|
|
$ |
0.24 |
|
|
$ |
0.24 |
|
|
See Notes to the Consolidated Financial Statements
33
BLACK BOX CORPORATION
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
In thousands, except par value |
|
2009 |
|
|
2008 |
|
|
Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
23,720 |
|
|
$ |
26,652 |
|
Accounts receivable, net of allowance for doubtful accounts of $9,934
and $12,612 |
|
|
163,975 |
|
|
|
162,289 |
|
Inventories, net |
|
|
55,898 |
|
|
|
67,537 |
|
Costs/estimated earnings in excess of billings on uncompleted contracts |
|
|
66,066 |
|
|
|
58,611 |
|
Prepaid and other current assets |
|
|
30,809 |
|
|
|
31,529 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
340,468 |
|
|
|
346,618 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
28,419 |
|
|
|
32,822 |
|
Goodwill |
|
|
621,948 |
|
|
|
586,856 |
|
Intangibles |
|
|
|
|
|
|
|
|
Customer relationships, net |
|
|
105,111 |
|
|
|
67,331 |
|
Other intangibles, net |
|
|
37,684 |
|
|
|
32,524 |
|
Other assets |
|
|
2,858 |
|
|
|
7,700 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,136,488 |
|
|
$ |
1,073,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
79,021 |
|
|
$ |
71,670 |
|
Accrued compensation and benefits |
|
|
30,446 |
|
|
|
22,654 |
|
Deferred revenue |
|
|
35,520 |
|
|
|
37,467 |
|
Billings in excess of costs/estimated earnings on uncompleted contracts |
|
|
18,217 |
|
|
|
19,946 |
|
Income taxes |
|
|
5,164 |
|
|
|
13,810 |
|
Other liabilities |
|
|
41,891 |
|
|
|
47,040 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
210,259 |
|
|
|
212,587 |
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
249,260 |
|
|
|
195,904 |
|
Other liabilities |
|
|
29,670 |
|
|
|
25,086 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
489,189 |
|
|
|
433,577 |
|
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
|
|
|
|
|
|
Preferred stock authorized 5,000, par value $1.00, none issued |
|
|
-- |
|
|
|
-- |
|
Common stock authorized 100,000, par value $.001, 17,533 and 17,516
shares outstanding |
|
|
25 |
|
|
|
25 |
|
Additional paid-in capital |
|
|
445,774 |
|
|
|
443,380 |
|
Retained earnings |
|
|
521,023 |
|
|
|
479,921 |
|
Accumulated other comprehensive income |
|
|
3,572 |
|
|
|
40,043 |
|
Treasury stock, at cost 7,626 and 7,626 shares |
|
|
(323,095) |
|
|
|
(323,095) |
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
647,299 |
|
|
|
640,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
1,136,488 |
|
|
$ |
1,073,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to the Consolidated Financial Statements
34
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other |
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Currency |
|
|
|
|
|
|
Defined |
|
|
|
|
|
|
|
|
|
|
|
|
|
($.001 |
|
|
Paid-in |
|
|
Treasury |
|
|
Trans- |
|
|
Derivative |
|
|
Benefit |
|
|
Retained |
|
|
|
|
In thousands |
|
Shares |
|
|
par) |
|
|
Capital |
|
|
Stock |
|
|
lation |
|
|
Instruments |
|
|
Pension |
|
|
Earnings |
|
|
Total |
|
|
Balance at March 31, 2006 |
|
|
24,528 |
|
|
|
$ 25 |
|
|
|
$ 418,141 |
|
|
$ |
(296,824) |
|
|
|
$ 11,894 |
|
|
|
$ 1,142 |
|
|
|
$ -- |
|
|
$ |
418,613 |
|
|
$ |
552,991 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
35,609 |
|
|
|
35,609 |
|
Foreign currency translation adjustment |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
11,458 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
11,458 |
|
Net change in fair value of cash flow hedging
instruments (net of tax) |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(111) |
|
|
|
-- |
|
|
|
-- |
|
|
|
(111) |
|
Amounts reclassified into results of operations |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(654) |
|
|
|
-- |
|
|
|
-- |
|
|
|
(654) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,302 |
|
Adjustment to initially apply SFAS 158 (net of
tax) |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
1,670 |
|
|
|
-- |
|
|
|
1,670 |
|
Stock compensation expense |
|
|
-- |
|
|
|
-- |
|
|
|
9,308 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
9,308 |
|
Dividends declared |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(4,200) |
|
|
|
(4,200) |
|
Repurchases of common stock |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(20,209) |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(20,209) |
|
Exercise of
options (net of tax) |
|
|
435 |
|
|
|
-- |
|
|
|
14,970 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
14,970 |
|
Tax impact from stock options |
|
|
-- |
|
|
|
-- |
|
|
|
(1,136) |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(1,136) |
|
|
|
|
Balance at March 31, 2007 |
|
|
24,963 |
|
|
|
$ 25 |
|
|
|
$ 441,283 |
|
|
$ |
(317,033) |
|
|
|
$ 23,352 |
|
|
|
$ 377 |
|
|
|
$ 1,670 |
|
|
$ |
450,022 |
|
|
$ |
599,696 |
|
Cumulative effect related to adoption of FIN 48 |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(5,110) |
|
|
|
(5,110) |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
39,233 |
|
|
|
39,233 |
|
Foreign currency translation adjustment |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
17,231 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
17,231 |
|
Pension: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(2,135) |
|
|
|
-- |
|
|
|
(2,135) |
|
Amounts reclassified into results of
operations |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(9) |
|
|
|
-- |
|
|
|
(9) |
|
Derivative Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in fair value of cash flow
hedging instruments (net of tax) |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(262) |
|
|
|
-- |
|
|
|
-- |
|
|
|
(262) |
|
Amounts reclassified into results of
operations |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(181) |
|
|
|
-- |
|
|
|
-- |
|
|
|
(181) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,877 |
|
Stock compensation expense |
|
|
-- |
|
|
|
-- |
|
|
|
3,217 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
3,217 |
|
Dividends declared |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(4,224) |
|
|
|
(4,224) |
|
Repurchases of common stock |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(6,062) |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(6,062) |
|
Exercise of
options (net of tax) |
|
|
179 |
|
|
|
-- |
|
|
|
5,878 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
5,878 |
|
Tax impact from stock options |
|
|
-- |
|
|
|
-- |
|
|
|
(6,792) |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(6,792) |
|
Other |
|
|
-- |
|
|
|
-- |
|
|
|
(206) |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(206) |
|
|
|
|
Balance at March 31, 2008 |
|
|
25,142 |
|
|
|
$ 25 |
|
|
$ |
443,380 |
|
|
$ |
(323,095) |
|
|
|
$ 40,583 |
|
|
|
$ (66) |
|
|
|
$ (474) |
|
|
$ |
479,921 |
|
|
$ |
640,274 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
45,309 |
|
|
|
45,309 |
|
Foreign currency translation adjustment |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(34,208) |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(34,208) |
|
Pension: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(2,394) |
|
|
|
-- |
|
|
|
(2,394) |
|
Derivative Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in fair value of cash flow
hedging instruments (net of tax) |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
470 |
|
|
|
-- |
|
|
|
-- |
|
|
|
470 |
|
Amounts reclassified into results of
operations |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(339) |
|
|
|
-- |
|
|
|
-- |
|
|
|
(339) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,838 |
|
Stock compensation expense |
|
|
-- |
|
|
|
-- |
|
|
|
3,042 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
3,042 |
|
Dividends declared |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(4,207) |
|
|
|
(4,207) |
|
Exercise of
options (net of tax) |
|
|
17 |
|
|
|
-- |
|
|
|
545 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
545 |
|
Tax impact from stock options |
|
|
-- |
|
|
|
-- |
|
|
|
(1,193) |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(1,193) |
|
|
|
|
Balance at March 31, 2009 |
|
|
25,159 |
|
|
|
$ 25 |
|
|
$ |
445,774 |
|
|
$ |
(323,095) |
|
|
|
$ 6,375 |
|
|
|
$ 65 |
|
|
|
$ (2,868) |
|
|
$ |
521,023 |
|
|
$ |
647,299 |
|
|
See Notes to the Consolidated Financial Statements
35
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
In thousands |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
45,309 |
|
|
$ |
39,233 |
|
|
$ |
35,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided
by (used for) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles amortization and depreciation |
|
|
20,722 |
|
|
|
17,737 |
|
|
|
22,610 |
|
Loss (gain) on sale of property |
|
|
(65) |
|
|
|
462 |
|
|
|
-- |
|
Deferred taxes |
|
|
4,512 |
|
|
|
4,901 |
|
|
|
(1,266) |
|
Tax impact from stock options |
|
|
1,193 |
|
|
|
6,792 |
|
|
|
1,136 |
|
Stock compensation expense |
|
|
3,042 |
|
|
|
3,217 |
|
|
|
9,308 |
|
Change in fair value of interest-rate swap |
|
|
(974) |
|
|
|
4,576 |
|
|
|
1,734 |
|
Changes in operating assets and liabilities (net of
acquisitions): |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
26,279 |
|
|
|
4,852 |
|
|
|
19,202 |
|
Inventories, net |
|
|
11,455 |
|
|
|
7,829 |
|
|
|
(3,595) |
|
All other current assets excluding deferred tax asset |
|
|
(11,933) |
|
|
|
12,328 |
|
|
|
3,349 |
|
Liabilities exclusive of long-term debt |
|
|
(27,974) |
|
|
|
(20,806) |
|
|
|
(51,451) |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) operating activities |
|
$ |
71,566 |
|
|
$ |
81,121 |
|
|
$ |
36,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
$ |
(2,178) |
|
|
$ |
(3,241) |
|
|
$ |
(5,886) |
|
Capital disposals |
|
|
288 |
|
|
|
105 |
|
|
|
1,017 |
|
Acquisition of businesses (payments)/recoveries |
|
|
(117,184) |
|
|
|
(13,713) |
|
|
|
(127,716) |
|
Prior merger-related (payments)/recoveries |
|
|
(421) |
|
|
|
(3,432) |
|
|
|
(2,324) |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) investing activities |
|
$ |
(119,495) |
|
|
$ |
(20,281) |
|
|
$ |
(134,909) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings |
|
$ |
308,567 |
|
|
$ |
196,750 |
|
|
$ |
354,254 |
|
Repayment of borrowings |
|
|
(257,470) |
|
|
|
(240,030) |
|
|
|
(240,079) |
|
Deferred financing costs |
|
|
(125) |
|
|
|
(471) |
|
|
|
-- |
|
Repayment on discounted lease rentals |
|
|
-- |
|
|
|
-- |
|
|
|
(30) |
|
Proceeds from exercise of options |
|
|
545 |
|
|
|
5,878 |
|
|
|
14,970 |
|
Payment of dividends |
|
|
(4,206) |
|
|
|
(4,225) |
|
|
|
(4,203) |
|
Purchase of treasury stock |
|
|
-- |
|
|
|
(6,062) |
|
|
|
(20,209) |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) financing activities |
|
$ |
47,311 |
|
|
$ |
(48,160) |
|
|
$ |
104,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange impact on cash |
|
$ |
(2,314) |
|
|
$ |
(3,185) |
|
|
$ |
(480) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase /
(decrease) in Cash and cash equivalents |
|
$ |
(2,932) |
|
|
$ |
9,495 |
|
|
$ |
5,950 |
|
Cash and cash equivalents at beginning of period |
|
$ |
26,652 |
|
|
$ |
17,157 |
|
|
$ |
11,207 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
23,720 |
|
|
$ |
26,652 |
|
|
$ |
17,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
11,656 |
|
|
$ |
17,141 |
|
|
$ |
15,333 |
|
Cash paid for income taxes |
|
|
26,539 |
|
|
|
11,041 |
|
|
|
16,877 |
|
Non-cash financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends payable |
|
|
1,052 |
|
|
|
1,050 |
|
|
|
1,052 |
|
Capital leases |
|
|
994 |
|
|
|
863 |
|
|
|
915 |
|
|
See Notes to the Consolidated Financial Statements
36
BLACK BOX CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Business and Basis of Presentation
Business
Black Box Corporation (Black Box, we, the Company or our) is the worlds largest 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; the Company also offers
premise cabling and other data-related services and products. The Company provides 24/7/365
technical support for all of its solutions which encompass all major voice and data product
manufacturers as well as 118,000 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 March
31, 2009, the Company had more than 3,000 professional technical experts in 192 offices serving
more than 175,000 clients in 141 countries throughout the world. Founded in 1976, Black Box, a
Delaware corporation, operates subsidiaries on five continents and is headquartered near Pittsburgh
in Lawrence, Pennsylvania.
Basis of Presentation
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 parent company and its
subsidiaries. All significant intercompany accounts and transactions have been eliminated in
consolidation. Certain items in the consolidated financial statements of prior years have been
reclassified to conform to the current years presentation.
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America 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. Actual results could differ from those estimates.
Note 2: Significant Accounting Policies
Cash and cash equivalents
The Company considers all highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents. Cash and cash equivalents are stated at cost, which
approximates fair value.
Allowance for doubtful accounts receivable
An allowance for doubtful accounts is recorded as an offset to accounts receivable in order to
present a net balance the Company believes will be collected. This allowance is based on both
recent trends of certain accounts receivable (specific reserve) estimated to be a greater credit
risk as well as general trends of the entire accounts receivable pool (general reserve). The
Company computes a specific reserve by identifying specifically at-risk accounts receivable and
applying historic reserve factors to the outstanding balance. The Company computes a general
reserve by reviewing the accounts receivable aging and applying reserve factors based upon the age
of the account receivable. Additions to the allowance for doubtful accounts are charged to
Selling, general & administrative expense within the Companys Consolidated Statement of Income,
and deductions from the allowance are recorded when specific accounts receivable are written off as
uncollectible.
Inventories
Inventories are valued at the lower of cost or market. The Company uses the first-in, first-out
average cost method to value the majority of its inventory. However, several locations within the
Company use other valuation methods, including first-in, first-out (FIFO) and actual current
costs. The Company records an estimate for slow moving and obsolete inventory (inventory
reserve) based upon product knowledge, physical inventory observation, future demand, market
conditions and an aging analysis of the inventory on hand. Upon a subsequent sale or disposal of
the impaired inventory, the corresponding reserve is relieved to ensure the cost basis of the
inventory reflects any reductions.
37
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation. Maintenance,
repairs and minor renewals are charged to operations as incurred. Major renewals and betterments,
which substantially extend the useful life of the property, are capitalized at cost. Upon sale or
other disposition of assets, the costs and related accumulated depreciation are removed from the
accounts and the resulting gain or loss, if any, is reflected in income.
Depreciation is computed using the straight-line method based on the estimated useful lives of 30
to 40 years for buildings and improvements and 3 to 5 years for machinery and equipment. Leasehold
improvements are depreciated over their lease terms, or useful lives, if shorter. The Company
reviews property, plant and equipment for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If the sum of the estimated
future cash flows (undiscounted) expected to result from the use and eventual disposition of an
asset is less than the carrying amount of the asset, an impairment loss is recognized. Measurement
of an impairment loss is based on the fair value of the asset. No impairment of property, plant
and equipment has been identified during any of the periods presented.
Goodwill
Goodwill is the excess of purchase price over the value of net assets acquired in acquisitions.
Goodwill is subject to, at a minimum, an annual impairment assessment of its carrying value.
Goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its
estimated fair value. Estimated fair values of the reporting units are estimated using an earnings
model and a discounted cash flow valuation model. The discounted cash flow model incorporates the
Companys estimates of future cash flows, allocations of certain assets and cash flows among
reporting units, future growth rates and managements judgment regarding the applicable discount
rates used to discount those estimated cash flows. No impairment of goodwill has been identified
during any of the periods presented.
Intangible Assets
Definite-lived intangible assets are amortized on a straight-line basis over their estimated useful
lives of 3 to 5 years for non-compete agreements, one year for backlog and 4 to 20 years for
customer relationships. Indefinite-lived intangible assets not subject to amortization consist
solely of the Companys trademark portfolio. The Company reviews intangible assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. If the sum of the estimated future cash flows (undiscounted) expected to result
from the use and eventual disposition of an asset is less than the carrying amount of the asset, an
impairment loss is recognized. Measurement of an impairment loss is based on the fair value of the
asset. No impairments of intangible assets have been identified during any of the periods
presented.
Derivative Instruments and Hedging Activities
Foreign Currency Contracts
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 are recognized on the consolidated balance sheet at fair value and 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.
Interest-rate Swap
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. The Companys interest-rate swap is recognized on the consolidated balance sheets
at fair value. It does not meet the requirements for hedge accounting and is marked to market
through Interest expense (income) within the Companys Consolidated Statement of Income.
38
Foreign Currency Translation
The financial statements of the Companys foreign subsidiaries, except those subsidiaries in Brazil
and Mexico, are recorded in the local currency, which is the functional currency. Foreign currency
assets and liabilities are translated into U.S. dollars at the rate of exchange existing at the
year-end date. Revenues and expenses are translated at the average monthly exchange rates.
Adjustments resulting from these translations are recorded in AOCI within the Companys
Consolidated Balance Sheets and will be included in income upon sale or liquidation of the foreign
investment. Gains and losses from foreign currency transactions, denominated in a currency other
than the functional currency, are recorded in Other expenses (income) within the Companys
Consolidated Statements of Income. The U.S. dollar is the functional currency for those
subsidiaries located in Brazil and Mexico.
Revenue
Within the Companys Hotline Services service type, revenues are recognized when title to products
sold passes to the customer, which generally occurs upon shipment from the Companys location.
Within the Companys Data Services and Voice Services segments, revenues are recognized from
maintenance service contracts, moves, adds and changes and network integration services when the
services are provided. Service contracts are generally pre-billed,
recorded in Deferred revenue within the Companys Consolidated Balance Sheets and are generally
recognized over the service period on a straight-line basis. Revenues from the sale and
installation of products and systems are recognized using the percentage-of-completion method based
upon the proportion of actual costs incurred to estimated total costs. At the time a loss on a
contract becomes known, the entire amount of the estimated loss is recognized immediately in the
financial statements. The Company has historically made reasonably accurate estimates of the
extent of progress towards completion, contract revenues and contract costs on its long-term
contracts. However, due to uncertainties inherent in the estimation process, actual results could
differ materially from those estimates.
Sales returns - At the time of sale, an estimate for sales returns is recorded based on historical
experience.
Warranties
- Estimated future warranty costs related to certain products are charged to operations
in the period the related revenue is recognized based on historical experience.
Shipping
and handling fees and costs - All fees billed to clients for shipping and handling are
classified as a component of Net Revenues. All costs associated with shipping and handling are
classified as a component of Cost of sales.
Sales tax and other tax presentation - Sales taxes and other taxes are collected from customers on
behalf of governmental authorities at the time of sale. These taxes are accounted for on a net
basis and are not included in net sales and operating revenues or cost of sales.
Stock-Based Compensation
Stock-based compensation expense is recognized only for those non-vested stock awards for which the
requisite service is expected to be rendered. The Company uses historical data about the future
employee turnover rates to estimate the number of shares for which the requisite service period
will not be rendered. The Company uses the Black-Scholes option pricing model as the method of
valuation for the Companys stock options. The key assumptions are summarized as follows:
Expected volatility: The Company estimates the volatility of its common stock, par value $.001 per
share (the common stock), at the date of grant based on the historical volatility of its common
stock.
Dividend yield: The Company estimates the dividend yield assumption based on the Companys
historical and projected dividend payouts.
Risk-free interest rate: The Company derives its risk-free interest rate on the observed interest
rates appropriate for the term of the Companys employee stock options.
Annual forfeiture rate and expected holding period: The Company estimates the annual forfeiture
rate and expected holding period based on historical experience.
Amortization period: The Company recognizes the fair value of awards into expense over the
requisite service periods associated with the award.
Marketing and Advertising Expenses
Catalogs and other direct marketing pieces are capitalized and amortized over their expected period
of future benefit ranging from 1 to 2 years, which is recorded in Prepaid and other current assets
within the Companys Consolidated Balance Sheets. All other advertising costs are expensed as
incurred.
Advertising expense was $8,191, $9,320 and $9,120 for Fiscal 2009, Fiscal 2008 and Fiscal 2007,
respectively, and is recorded in Selling, general & administrative expenses within the Companys
Consolidated Statements of Income.
39
Income Taxes
The Company accounts for income taxes using an asset and liability approach, which requires the
recognition of deferred income tax assets and liabilities for the expected future tax consequences
of events that have been recognized in the Companys financial statements or tax returns. Deferred
income tax assets and liabilities are determined based on the temporary differences between the
financial statement and tax bases of assets and liabilities using enacted tax rates. A valuation
allowance is provided on deferred tax assets if it is determined that it is more likely than not
that the asset will not be realized.
The Company requires that the realization of an uncertain income tax position must be more likely
than not (i.e., greater than 50% likelihood of receiving a benefit) before it can be recognized in
the financial statements. The benefit to be recorded in the financial statements is the amount
most likely to be realized assuming a review by tax authorities having all relevant information and
applying current conventions. The Company includes interest and penalties related to uncertain tax
positions within the Provision for income taxes within the Companys Consolidated Statements of
Income.
Per share information
Basic earnings per common share (basic EPS) is computed by dividing income available to common
stockholders by the weighted-average number of shares of the common stock outstanding during the
period. Diluted earnings per share of the common stock (diluted EPS) is computed similarly to
that of basic EPS, except that the weighted-average number of shares of the common stock
outstanding during the period is adjusted to include the number of additional shares of the common
stock that would have been outstanding if the potential number of dilutive shares of the common
stock had been issued.
Fair Value
The Companys assets and liabilities recorded at fair value are categorized based upon a fair value
hierarchy in accordance with Statement of Financial Accounting Standards (SFAS) No. 157, Fair
Value Measurements (SFAS 157). The fair value hierarchy ranks the quality and reliability of
the information used to determine fair value.
The levels of the fair value hierarchy are described below:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date
for identical, unrestricted assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset
or liability, either directly or indirectly, including quoted prices for similar assets or
liabilities in active markets; quoted prices for identical or similar assets or liabilities in
markets that are not active; inputs other than quoted prices that are observable for the asset or
liability (e.g., interest rates); and inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
Level 3: Inputs that are both significant to the fair value measurement and unobservable.
Assets and liabilities measured at fair value are based on one or more of the valuation techniques
noted in SFAS 157. The valuation techniques are described below.
Market approach: The market approach uses prices and other relevant information generated by
market transactions involving identical or comparable assets or liabilities.
Cost approach: The cost approach is based on the amount that currently would be required to
replace the service capacity of an asset (current replacement cost).
Income approach: The income approach uses valuation techniques to convert future amounts to a
single present amount.
The fair value of foreign currency contracts is determined using the market approach and primarily
based on observable foreign exchange forward rates. The fair value of the interest-rate swap (as
defined below) is determined using the income approach and is predominately based on observable
interest rates and yield curves. The fair value of certain of the Companys financial instruments,
including Cash and cash equivalents, Accounts receivable, Accounts payable and Long-term debt
approximates the carrying value due to the relatively short maturity of such instruments. There
have been no changes in the Companys valuation techniques used to measure fair values during
Fiscal 2009. See Recent Accounting Pronouncements within this Note 2 and Note 16 for further
reference.
40
Recent Accounting Pronouncements
Uncertainty in Income Taxes
In July, 2006, the Financial Accounting Standards Board (the FASB) issued FASB Interpretation No.
48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 requires that realization of an
uncertain income tax position must be more likely than not (i.e., greater than 50% likelihood of
receiving a benefit) before it can be recognized in the financial statements. Further, FIN 48
prescribes the benefit to be recorded in the financial statements as the amount most likely to be
realized assuming a review by tax authorities having all relevant information and applying current
conventions. FIN 48 also clarifies the financial statement classification of tax-related penalties
and interest and sets forth new disclosures regarding unrecognized tax benefits. The Company
adopted FIN 48 on April 1, 2007. The adoption of FIN 48 resulted in a decrease to beginning
retained earnings of $5,110 representing the cumulative effect adjustment. See Significant
Accounting Policies within this Note 2 and Note 12 for further reference.
Definition of Settlement in FIN 48
In May, 2007, the FASB issued FASB Staff Position (FSP) No. FIN 48-1, Definition of Settlement
in FASB Interpretation No. 48 (FSP FIN 48-1) which amended FIN 48 to provide guidance about how
an enterprise should determine whether a tax position is effectively settled for the purpose of
recognizing previously unrecognized tax benefits. Under FSP FIN 48-1, a tax position could be
effectively settled on completion of an examination by a taxing authority. The Company adopted FSP
FIN 48-1 in conjunction with adoption of FIN 48 as of April 1, 2007. The adoption of FSP FIN 48-1
did not have a material impact on the Companys consolidated financial statements.
Fair Value Measurements
In September, 2006, the FASB issued SFAS 157, which defines fair value, establishes a framework for
measuring fair value in United States generally accepted accounting principles and expands
disclosures about fair value measurements. SFAS 157 also requires the Company to consider its own
credit risk when measuring fair value, including derivatives. In February, 2008, the FASB issued
FASB Staff Position (FSP) SFAS 157-1, Application of FASB Statement No. 157 to FASB Statement
No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of
Lease Classification or Measurement under Statement 13, which removes certain leasing transactions
from the scope of SFAS 157. On April 1, 2008, the Company adopted the provisions of SFAS 157 with
the exception of a one-year deferral of implementation for non-financial assets and liabilities
that are not recognized or disclosed at fair value in the financial statements on a recurring basis
(at least annually) as provided by FSP SFAS 157-2, Effective Date of FASB Statement No. 157. In
October, 2008, the FASB issued FSP SFAS 157-3, Determining the Fair Value of a Financial Asset in
a Market That Is Not Active which clarifies the application of SFAS 157 when the market for a
financial asset is inactive. The significant categories of assets and liabilities included in the
Companys deferred implementation of SFAS 157 are non-financial assets and liabilities initially
measured at fair value in a business combination and impairment assessments of long-lived assets,
goodwill and intangible assets. The requirements of SFAS 157 were applied prospectively. The
adoption of SFAS 157 did not have a material impact on the Companys consolidated financial
statements. The Company is currently evaluating the impact of the adoption of FAS 157 as of April
1, 2009 on our non-financial assets and liabilities that are not recognized or disclosed at fair
value on a recurring basis. See Significant Accounting Policies within this Note 2 and Note 16
for further reference.
Defined Benefit Pension and Other Postretirement Plans
On April 30, 2006, the Company acquired the USA Commercial and Government and Canadian operations
of NextiraOne, LLC (NextiraOne), which is a sponsor of a non-contributory defined benefit plan
(the CWA Plan) for the Communication Workers of America Local 1109 (CWA 1109). Benefits from
the CWA Plan are based upon years of service and rates negotiated by the Company and CWA 1109.
Pension costs are funded to satisfy minimum requirements prescribed by the Employee Retirement
Income Security Act of 1974. During Fiscal 2008, the Company amended the CWA Plan, as of December
31, 2007, which effectively froze the benefits of the plan (i.e., no new employees will be
admitted into the Plan and those employees currently in the Plan will not earn additional benefits
based on service).
In September, 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans (SFAS 158) that would amend SFAS No. 87, Employers
Accounting for Pensions, SFAS No. 88, Employers Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits, SFAS No. 106, Employers Accounting
for Postretirement Benefits Other Than Pensions and SFAS No. 132 (Revised 2003), Employers
Disclosures about Pensions and Other Postretirement Benefits. This standard requires, among other
things, companies to recognize on the balance sheet the funded or unfunded status of pension and
other postretirement benefit plans and to recognize the change in funded status in the period the
change occurs through comprehensive income. The Company adopted SFAS 158 as of March 31, 2007.
41
Fiscal 2007 financial impact: The adoption of SFAS 158 had no impact on the Companys Consolidated
Statements of Income on the date of adoption. However, the Company did record, as of March 31,
2007, a liability of $3,452 representing the unfunded portion of the CWA Plan included in Other
liabilities within the Companys Consolidated Balance Sheets and an unrecognized gain of $2,717
($1,670 net of tax) included in AOCI within the Companys Consolidated Balance Sheets.
Fiscal 2008 financial impact: As of March 31, 2008, the unfunded portion of the CWA Plan was
$5,909 and is included in Other liabilities within the Companys Consolidated Balance Sheets. The
Company recorded an unrecognized loss of $3,488 ($2,135 net of tax) included in AOCI within the
Companys Consolidated Balance Sheets and Comprehensive income due primarily to a decrease in value
for the CWA Plan assets. The Company made contributions of $1,000 to the CWA Plan during Fiscal
2008.
Fiscal 2009 financial impact: As of March 31, 2009, the unfunded portion of the CWA Plan was
$9,744 and is included in Other liabilities within the Companys Consolidated Balance Sheets. The
Company recorded an unrecognized loss of $3,916 ($2,394 net of tax) included in AOCI within the
Companys Consolidated Balance Sheets and Comprehensive income due primarily to a decrease in value
for the CWA Plan assets.
Fiscal 2010 outlook: Due to the decrease in value of the CWA Plan assets, the Company expects to
recognize expense and make cash contributions of approximately $1,000 during Fiscal 2010.
Business Combinations
In December, 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS
141(R)). SFAS 141(R) retains the fundamental requirements of the original pronouncement requiring
that the purchase method be used for all business combinations. SFAS 141(R) defines the acquirer
as the entity that obtains control of one or more businesses in the business combination,
establishes the acquisition date as the date that the acquirer achieves control and requires the
acquirer to recognize the assets acquired, liabilities assumed and any non-controlling interest at
their fair values as of the acquisition date. SFAS 141(R) requires, among other things, that
acquisition-related costs be recognized separately from the acquisition. For the Company, SFAS
141(R) applies prospectively to business combinations for which the acquisition date is on or after
April 1, 2009. SFAS 141(R) may have a material impact on business combinations after adoption.
The impact from application of SFAS 141(R) will depend on the facts and circumstances of the
business combinations after adoption.
Non-controlling Interests
In December, 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statementsan Amendment to Accounting Research Bulletin No. 51 (SFAS 160). SFAS 160
amends Accounting Research Bulletin No. 51 to establish accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160
clarifies that a non-controlling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated financial statements.
SFAS 160 requires consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the non-controlling interest. The provisions of SFAS 160 are
effective for the Company as of April 1, 2009. The Company believes the adoption of SFAS 160 will
not have a material impact on the Companys consolidated financial statements.
Derivative Disclosures
In March, 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities (SFAS 161). SFAS 161, which amends SFAS No. 133, Accounting for Derivative
Investments and Hedging Activities (SFAS 133), is intended to improve financial reporting about
derivative instruments and hedging activities by requiring enhanced disclosures to enable investors
to better understand their effects on an entitys financial position, financial performance and
cash flows. The Company adopted SFAS 161 on March 31, 2009. The adoption of SFAS 161 did not have
a material impact on the Companys consolidated financial statements.
Useful lives of Intangible Assets
In April, 2008, the FASB issued FSP FASB 142-3, Determination of the Useful Life of Intangible
Assets (SFAS 142-3). SFAS 142-3 amends the factors that should be considered in developing
assumptions about renewal or extension used in estimating the useful life of a recognized
intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142) and
expands the disclosure requirements of SFAS 142. The provisions of SFAS 142-3 are effective for
the Company as of April 1, 2009. The provisions of SFAS 142-3 for determining the useful life of a
recognized intangible asset shall be applied prospectively to intangible assets acquired after the
effective date. The disclosure requirements shall be applied prospectively to all intangible
assets recognized as of, and subsequent to, the effective date. The Company believes the adoption
of SFAS 142-3 will not have a material impact on the Companys consolidated financial statements.
42
Postretirement Benefit Plan Assets
In December, 2008, the FASB issued FSP FASB 132R-1, Employers Disclosures about Postretirement
Benefit Plan Assets
(SFAS 132R-1). This statement provides additional guidance regarding
disclosures about plan assets of defined benefit pension or other postretirement plans. SFAS
132R-1 is effective for financial statements issued for fiscal years ending after December 15,
2009. The Company is evaluating the impact of the adoption of SFAS 132R-1 on its consolidated
financial statements.
Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies
In February, 2009, the FASB issued FSP SFAS 141(R)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies (SFAS 141(R)-1),
which amends the provisions related to the initial recognition and measurement, subsequent
measurement and disclosure of assets and liabilities arising from contingencies in a business
combination under SFAS 141(R). SFAS 141(R)-1 applies to all assets acquired and liabilities
assumed in a business combination that arise from contingencies that would be within the scope of
SFAS No. 5, Accounting for Contingencies, if not acquired or assumed in a business combination,
except for assets or liabilities arising from contingencies that are subject to specific guidance
in SFAS 141(R). For the Company, SFAS 141(R)-1 applies prospectively to business combinations for
which the acquisition date is on or after April 1, 2009. SFAS 141(R)-1 may have a material impact
on business combinations after adoption. The impact from application of SFAS 141(R)-1 will depend
on the facts and circumstances of the business combinations after adoption.
Interim Disclosures about Fair Value of Financial Instruments
In April, 2009, the FASB issued FSP No. SFAS 107-1 and APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments (SFAS 107-1 and APB 28-1), which requires disclosures about fair
value of financial instruments for interim reporting periods in addition to the existing
requirement for annual financial statements. SFAS 107-1 and APB 28-1 will be effective for interim
reporting periods ending after June 15, 2009. The adoption of SFAS 107-1 and APB 28-1 will not have
a material effect on the Companys consolidated financial statements.
Note 3: Inventories
The Companys inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
Raw materials |
|
$ |
1,624 |
|
|
$ |
1,736 |
|
Finished goods |
|
|
74,564 |
|
|
|
86,174 |
|
|
|
|
|
|
|
|
Subtotal |
|
|
76,188 |
|
|
|
87,910 |
|
Excess and obsolete inventory reserves |
|
|
(20,290) |
|
|
|
(20,373) |
|
|
|
|
|
|
|
|
Inventory, net |
|
$ |
55,898 |
|
|
$ |
67,537 |
|
|
Note 4: Property, Plant and Equipment
The Companys property, plant and equipment consist of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
Land |
|
$ |
2,396 |
|
|
$ |
2,396 |
|
Building and improvements |
|
|
28,971 |
|
|
|
28,105 |
|
Machinery |
|
|
70,859 |
|
|
|
71,876 |
|
|
|
|
|
|
|
|
Subtotal |
|
|
102,226 |
|
|
|
102,377 |
|
Accumulated depreciation |
|
|
(73,807) |
|
|
|
(69,555) |
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
$ |
28,419 |
|
|
$ |
32,822 |
|
|
Depreciation expense was $9,932, $11,058 and $12,325 for Fiscal 2009, Fiscal 2008 and Fiscal 2007,
respectively.
43
Note 5: Goodwill
The following table summarizes changes to goodwill at the Companys reporting units during Fiscal
2009 and Fiscal 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
Europe |
|
|
All Other |
|
|
Total |
|
|
Balance as of March 31, 2007 |
|
$ |
493,462 |
|
|
$ |
73,065 |
|
|
$ |
2,120 |
|
|
$ |
568,647 |
|
Currency translation |
|
|
(10) |
|
|
|
8,957 |
|
|
|
147 |
|
|
|
9,094 |
|
Current period acquisitions (Note 9) |
|
|
6,995 |
|
|
|
-- |
|
|
|
-- |
|
|
|
6,995 |
|
Prior period acquisitions |
|
|
2,070 |
|
|
|
-- |
|
|
|
50 |
|
|
|
2,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2008 |
|
$ |
502,517 |
|
|
$ |
82,022 |
|
|
$ |
2,317 |
|
|
$ |
586,856 |
|
Currency translation |
|
|
(35) |
|
|
|
(17,350) |
|
|
|
(311) |
|
|
|
(17,696) |
|
Current period acquisitions (Note 9) |
|
|
50,975 |
|
|
|
-- |
|
|
|
-- |
|
|
|
50,975 |
|
Prior period acquisitions |
|
|
1,813 |
|
|
|
-- |
|
|
|
-- |
|
|
|
1,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2009 |
|
$ |
555,270 |
|
|
$ |
64,672 |
|
|
$ |
2,006 |
|
|
$ |
621,948 |
|
|
Note 6: Intangible Assets
The following table summarizes the gross carrying amount, accumulated amortization and net carrying
amount by intangible asset class:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
|
Carrying |
|
|
Accum. |
|
|
Carrying |
|
|
Carrying |
|
|
Accum. |
|
|
Carrying |
|
|
|
Amount |
|
|
Amort. |
|
|
Amount |
|
|
Amount |
|
|
Amort. |
|
|
Amount |
|
|
Definite-lived |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-compete agreements |
|
$ |
15,115 |
|
|
$ |
6,517 |
|
|
$ |
8,598 |
|
|
$ |
9,776 |
|
|
$ |
4,991 |
|
|
$ |
4,785 |
|
Customer relationships |
|
|
120,077 |
|
|
|
14,966 |
|
|
|
105,111 |
|
|
|
75,526 |
|
|
|
8,195 |
|
|
|
67,331 |
|
Acquired backlog |
|
|
14,230 |
|
|
|
12,883 |
|
|
|
1,347 |
|
|
|
10,862 |
|
|
|
10,862 |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
149,422 |
|
|
$ |
34,366 |
|
|
$ |
115,056 |
|
|
$ |
96,164 |
|
|
$ |
24,048 |
|
|
$ |
72,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite-lived |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks |
|
|
35,992 |
|
|
|
8,253 |
|
|
|
27,739 |
|
|
|
35,992 |
|
|
|
8,253 |
|
|
|
27,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
185,414 |
|
|
$ |
42,619 |
|
|
$ |
142,795 |
|
|
$ |
132,156 |
|
|
$ |
32,301 |
|
|
$ |
99,855 |
|
|
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
contracts, backlog and customer relationships obtained through business acquisitions.
The following table summarizes the changes to carrying amounts of intangible assets during the
period:
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Competes |
|
|
Customer |
|
|
|
|
|
|
Trademarks |
|
|
and Backlog |
|
|
Relationships |
|
|
Total |
|
|
Balance at March 31, 2007 |
|
$ |
27,739 |
|
|
$ |
5,519 |
|
|
$ |
68,016 |
|
|
$ |
101,274 |
|
Amortization expense |
|
|
-- |
|
|
|
(2,457) |
|
|
|
(4,222) |
|
|
|
(6,679) |
|
Currency translation |
|
|
-- |
|
|
|
42 |
|
|
|
-- |
|
|
|
42 |
|
Current period acquisitions (Note 9) |
|
|
-- |
|
|
|
795 |
|
|
|
6,588 |
|
|
|
7,383 |
|
Prior period acquisitions |
|
|
-- |
|
|
|
886 |
|
|
|
(3,051) |
|
|
|
(2,165) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2008 |
|
$ |
27,739 |
|
|
$ |
4,785 |
|
|
$ |
67,331 |
|
|
$ |
99,855 |
|
Amortization expense |
|
|
-- |
|
|
|
(4,019) |
|
|
|
(6,771) |
|
|
|
(10,790) |
|
Currency translation |
|
|
-- |
|
|
|
(62) |
|
|
|
-- |
|
|
|
(62) |
|
Current period acquisitions (Note 9) |
|
|
-- |
|
|
|
9,953 |
|
|
|
47,815 |
|
|
|
57,768 |
|
Prior period acquisitions |
|
|
-- |
|
|
|
(712) |
|
|
|
(3,264) |
|
|
|
(3,976) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2009 |
|
$ |
27,739 |
|
|
$ |
9,945 |
|
|
$ |
105,111 |
|
|
$ |
142,795 |
|
|
Intangible asset amortization expense was $10,790, $6,679 and $10,285 for Fiscal 2009, Fiscal 2008
and Fiscal 2007, respectively. The Company acquired definite-lived intangibles from the completion
of several acquisitions during Fiscal 2009 and Fiscal 2008 (see Note 9). Intangibles amortization
for Fiscal 2009 acquisitions is based on preliminary allocations of purchase price and is dependant
upon certain estimates and assumptions, which are preliminary and may vary from the amounts
reported herein.
The following table details the estimated intangible amortization expense for the next five years.
These estimates are based on the carrying amounts of intangible assets as of March 31, 2009 that
are subject to change pending the outcome of purchase accounting related to certain acquisitions:
|
|
|
|
|
Fiscal |
|
|
|
|
|
2010 |
|
$ |
13,486 |
|
2011 |
|
|
11,491 |
|
2012 |
|
|
11,022 |
|
2013 |
|
|
9,739 |
|
2014 |
|
|
8,146 |
|
Thereafter |
|
|
61,172 |
|
|
|
|
|
|
Total |
|
$ |
115,056 |
|
|
Note 7: Indebtedness
The Companys long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
Revolving credit agreement |
|
$ |
247,650 |
|
|
$ |
194,470 |
|
Capital lease obligations |
|
|
2,908 |
|
|
|
2,261 |
|
Other |
|
|
99 |
|
|
|
562 |
|
|
|
|
|
|
|
|
Total debt |
|
$ |
250,657 |
|
|
$ |
197,293 |
|
Less: current portion (included in Other liabilities) |
|
|
(1,397) |
|
|
|
(1,389) |
|
|
|
|
|
|
|
|
Long-term debt |
|
$ |
249,260 |
|
|
$ |
195,904 |
|
|
45
Revolving Credit Agreement - On March 28, 2006, the Company entered into the Second Amendment to
the Second Amended and Restated Credit Agreement dated January 24, 2005, as amended February 17,
2005 (collectively, the Credit Agreement) with Citizens Bank of Pennsylvania, as agent, and a
group of lenders. The Credit Agreement was scheduled to expire on March 28, 2011. Borrowings
under the Credit Agreement were permitted up to a maximum amount of $310,000, which included up to
$15,000 of swing-line loans and $25,000 of letters of credit. The Credit Agreement could have been
increased by the Company up to an additional $90,000 with the approval of the lenders and could
have been 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 accrued,
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 0.75% to 1.25% (determined by a leverage ratio based on the Companys Earnings
Before Interest Taxes Depreciation and Amortization (EBITDA)). The Credit Agreement required the
Company to maintain compliance with certain non-financial and financial covenants such as minimum
net worth, leverage and fixed charge coverage ratios.
The Company entered into a Third Amended and Restated Credit Agreement dated as of January 30, 2008
(the New Credit Agreement) with Citizens Bank of Pennsylvania, as agent, and a group of lenders.
The New Credit Agreement, which replaces the Credit Agreement, expires on January 30, 2013.
Borrowings under the New 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 New 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 New 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 EBITDA). The New 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 March 31, 2009, the Company was in compliance with all financial covenants
under the New Credit Agreement.
The maximum amount of debt outstanding under the New Credit Agreement, the weighted average balance
outstanding under the New Credit Agreement and the weighted average interest rate on all
outstanding debt for Fiscal 2009 was $277,735, $237,991 and
3.3%, respectively, compared to $270,825, $242,418 and 6.2% and $284,470, $253,129 and 6.2%, for
Fiscal 2008 and Fiscal 2007, respectively.
For Fiscal 2009, the Company increased net borrowings under the New Credit Agreement by $53,180,
the proceeds of which were used to fund the acquisitions of UCI Communications LLC (UCI), Mutual
Telecom Services Inc. (MTS), ACS Communications, Inc. (ACS), Network Communications
Technologies, Inc. (NCT) and Scottel Voice & Data, Inc. (Scottel). For Fiscal 2008, the
Company decreased net borrowings under the New Credit Agreement / Credit Agreement by $42,245. For
Fiscal 2007, the Company increased net borrowings under the Credit Agreement by $115,412, the
proceeds of which were used to fund the acquisitions of NextiraOne, Nu-Vision Technologies, Inc.
and Nu-Vision Technologies, LLC (collectively referred to as NUVT), Nortech Telecommunications
Inc. (NTI) and ADS Telecom, Inc. (ADS) and to repurchase common stock.
Capital lease obligations
The capital lease obligations are primarily for equipment. The lease agreements have remaining
terms ranging from less than one year to five years with interest rates ranging from 3.3% to 12.2%.
Other
Other debt is comprised of other third-party, non-employee loans. The loans have remaining terms
of less than one to three years with interest rates ranging from 6.0% to 7.2%.
Unused available borrowings
As of March 31, 2009, the Company had $5,554 outstanding in letters of credit and $96,796 available
under the New Credit Agreement.
At March 31, 2009, scheduled maturities or required payments of long-term debt for each of the five
succeeding fiscal years were as follows:
|
|
|
|
|
Fiscal |
|
|
|
|
|
2010 |
|
$ |
1,397 |
|
2011 |
|
|
806 |
|
2012 |
|
|
531 |
|
2013 |
|
|
247,902 |
|
2014 |
|
|
21 |
|
|
|
|
|
|
Total |
|
$ |
250,657 |
|
|
46
Note 8: 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 our 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. As of March 31, 2009, the Company had open contracts in
Australian and Canadian dollars, Danish krone, Euros, Mexican pesos, Norwegian kroner, Pounds
sterling, Swedish krona, Swiss francs and Japanese yen which have been designated as cash flow
hedges. These contracts had a notional amount of $52,118 and will expire within twelve (12)
months. There was no hedge ineffectiveness during Fiscal 2009, Fiscal 2008 or Fiscal 2007. See
Note 2 for additional information.
Interest-rate Swap:
On July 26, 2006, the Company entered into a five-year interest-rate swap (interest-rate swap)
which has been used to effectively convert a portion of the Companys variable rate debt to fixed
rate. The floating-to-fixed interest-rate swap is based on a 3-month LIBOR rate versus a
5.44% fixed rate, has a notional value of $100,000 reducing to $50,000 after three years and does
not qualify for hedge accounting. See Note 2 for additional information.
The following tables detail the effect of derivative instruments on the Companys Consolidated
Balance Sheets and Consolidated Statements of Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives |
|
|
Liability Derivatives |
|
|
|
|
|
Fair |
|
|
Fair |
|
|
Fair |
|
|
Fair |
|
|
|
|
|
Value at |
|
|
Value at |
|
|
Value |
|
|
Value |
|
|
|
|
|
March |
|
|
March |
|
|
March |
|
|
March |
|
|
|
Classification |
|
31, 2009 |
|
|
31, 2008 |
|
|
31, 2009 |
|
|
31, 2008 |
|
|
Derivatives designated as
hedging instruments under
SFAS 133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts |
|
Other liabilities |
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
1,872 |
|
|
$ |
1,181 |
|
|
|
(short-term) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts |
|
Prepaid and other current |
|
$ |
923 |
|
|
$ |
2,511 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
|
assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated
as hedging instruments
under SFAS 133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-rate swap |
|
Other Liabilities |
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
5,336 |
|
|
$ |
6,311 |
|
|
|
(short-term) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
Classification |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
Derivatives
designated as
hedging instruments
under SFAS 133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss)
recognized in
Comprehensive
income on
(effective
portion) net of
taxes |
|
Other comprehensive
income |
|
$ |
470 |
|
|
$ |
(262) |
|
|
$ |
(111) |
|
Gain (loss)
reclassified from
AOCI into income
(effective
portion) net of
taxes |
|
Selling, general &
administrative expenses |
|
$ |
339 |
|
|
$ |
181 |
|
|
$ |
654 |
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
Classification |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
Derivatives not designated as
hedging instruments under SFAS
133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) recognized in income |
|
Interest expense
(income), net |
|
$ |
974 |
|
|
$ |
(4,576) |
|
|
$ |
(1,734) |
|
|
Note 9: Acquisitions
Fiscal 2009 acquisitions:
During the fourth quarter of Fiscal 2009, the Company acquired Scottel, a privately-held company
headquartered in Culver City, CA. Scottel has an active customer base which includes commercial,
education and various government agency accounts. In connection with the Scottel acquisition, the
Company has made a preliminary allocation to goodwill and definite-lived intangible assets,
respectively. The definite-lived intangible assets recorded represent the estimated fair market
value of customer relationships and non-compete agreements which the Company estimates are to be
amortized over a period of three to 10 years.
During the third quarter of Fiscal 2009, the Company acquired NCT, a privately-held company based
out of Charlotte, NC. NCT has an active customer base which includes commercial, education and
various government agency accounts. In connection with the NCT acquisition, the Company has made a
preliminary allocation to goodwill and definite-lived intangible assets, respectively. The
definite-lived intangible assets recorded represent the estimated fair market value of customer
relationships and non-compete agreements which the Company estimates are to be amortized over a
period of two to 15 years.
Also, during the third quarter of Fiscal 2009, the Company acquired ACS, a privately-held company
based out of Austin, TX. ACS has an active customer base which includes commercial, education and
various government agency accounts. In connection with the ACS acquisition, the Company has made a
preliminary allocation to goodwill and definite-lived intangible assets, respectively. The
definite-lived intangible assets recorded represent the estimated fair market value of customer
relationships and non-compete agreements which the Company estimates are to be amortized over a
period of five to 15 years.
During the second quarter of Fiscal 2009, the Company acquired MTS, a privately-held company based
out of Needham, MA. MTS is a global telecommunications services and solutions provider primarily
servicing clients in the Department of Defense and other federal agencies. In connection with the
MTS acquisition, the Company has made a preliminary allocation to goodwill and definite-lived
intangible assets, respectively. The definite-lived intangible assets recorded represent the
estimated fair market value of customer relationships, non-compete agreements and backlog which the
Company estimates are to be amortized over a period of one to 15 years.
During the first quarter of Fiscal 2009, the Company acquired UCI, a privately-held company based
out of Mobile, AL. UCI has an active customer base which includes commercial, education and
various government agency accounts. In connection with the UCI acquisition, the Company made an
allocation to goodwill and definite-lived intangible assets, respectively. The definite-lived
intangible assets recorded represent the fair market value of customer relationships and
non-compete agreements and are to be amortized over a period of five to 9 years.
The acquisitions of Scottel, NCT, ACS, MTS and UCI, both individually and in the aggregate, did not
have a material impact on the Companys consolidated financial statements.
As disclosed above, the allocation of the purchase price for Scottel, NCT, ACS and MTS is based on
preliminary estimates of the fair values of certain assets acquired and liabilities assumed as of
the date of the acquisition. Management is currently assessing the fair values of the tangible and
intangible assets acquired and liabilities assumed. The preliminary allocations of purchase price
are dependant upon certain estimates and assumptions, which are preliminary and may vary from the
amounts reported herein.
Fiscal 2008
During the fourth quarter of Fiscal 2008, the Company acquired BellSouth Communication Systems, LLC
d/b/a AT&T Communication Systems Southeasts (AT&T) NEC TDM voice CPE business line in AT&Ts
southeast region (AT&Ts southeast NEC TDM business). In connection with the acquisition of
AT&Ts southeast NEC TDM business, the Company made an allocation to goodwill and definite-lived
intangible assets, respectively. These definite-lived intangible assets recorded represent the
fair market value of acquired customer relationships and are to be amortized over a period of four
years.
48
During the third quarter of Fiscal 2008, the Company acquired B & C Telephone, Inc. (B&C), a
privately-held company based out of Spokane, Washington. B&C has an active customer base which
includes commercial, financial, healthcare and various government agency accounts. In connection
with the B&C acquisition, the Company made an allocation to goodwill and definite-lived intangible
assets, respectively. These definite-lived intangible assets recorded represent the fair market
value of acquired customer relationships and non-compete agreements and are to be amortized over a
period of five to 10 years.
The acquisitions of B&C and AT&Ts southeast NEC TDM business, both individually and in the
aggregate, did not have a material impact on the Companys consolidated financial statements.
Fiscal 2007
During the fourth quarter of Fiscal 2007, the Company acquired ADS, a privately-held company based
out of Orlando, FL. ADS has an active customer base which includes commercial, financial,
healthcare and various government agency accounts. In connection with the ADS acquisition, the
Company made an allocation to goodwill and definite-lived intangible assets. These definite-lived
intangible assets recorded represent the fair market value of acquired customer relationships and
non-compete agreements and are to be amortized over a period of five to 15 years.
During the third quarter of Fiscal 2007, the Company acquired NTI, a privately-held company based
out of Chicago, IL. In connection with the NTI acquisition, the Company made an allocation to
goodwill and definite-lived intangible assets. These definite-lived intangible assets recorded
represent the fair market value of acquired customer relationships and are to be amortized over a
period of 10 years.
The acquisitions of ADS and NTI, both individually and in the aggregate, did not have a material
impact on the Companys consolidated financial statements.
During the first quarter of Fiscal 2007, the Company acquired NextiraOne. The following table
summarizes the value of the NextiraOne assets acquired and liabilities assumed at the date of
acquisition.
|
|
|
|
|
|
|
April 30, 2006 |
|
|
Current assets, primarily consisting of accounts receivable and inventories |
|
$ |
90,448 |
|
Property, plant and equipment |
|
|
9,996 |
|
Other non-current assets |
|
|
19,623 |
|
Intangible assets |
|
|
24,100 |
|
Goodwill |
|
|
73,995 |
|
|
|
|
|
Total assets acquired |
|
$ |
218,162 |
|
|
|
|
|
|
Current liabilities, primarily consisting of deferred revenue,
restructuring reserve and accrued expenses |
|
$ |
113,705 |
|
Other non-current liabilities, primarily consisting of restructuring reserve |
|
|
23,734 |
|
|
|
|
|
Total liabilities acquired |
|
$ |
137,439 |
|
|
|
|
|
|
|
|
|
|
Net assets acquired |
|
$ |
80,723 |
|
|
The following table details the amounts recorded to each major intangible asset class:
|
|
|
|
|
|
|
April 30, 2006 |
|
|
Backlog |
|
$ |
6,700 |
|
Customer relationships and contracts |
|
|
17,400 |
|
|
|
|
|
Total intangible assets* |
|
$ |
24,100 |
|
|
* The estimated weighted average amortization period for these definite-lived assets is 12.5 years.
The Company paid a cash total of $80,723 for the outstanding interests in NextiraOne which included
certain amounts allocated to escrow accounts. As of March 31, 2009, the amount remaining in escrow
was $7,584. The amount in escrow has been and will continue to be released to NextiraOnes seller
or to the Company in accordance with the terms of the agreement. The transaction resulted in
$73,995 of goodwill, parts of which were and continue to be deductible for tax purposes (see Note
12 for further reference). The Company paid this premium for NextiraOne in order to further expand
its operational footprint in the voice and data technology markets. In addition, the purchase
increased the Companys solutions offerings, providing for a stronger worldwide technical services
partner for its collective clients.
49
After consummation of the acquisition, the Company began to integrate NextiraOne products,
employees and facilities with its own. In so doing, the Company incurred $15,760 of costs related
to facility consolidations and $10,766 of severance costs for the separation of approximately 300
employees each of which were included in the purchase price allocation for NextiraOne. The
majority of the severance costs were paid in Fiscal 2007 with certain facility costs extending
through Fiscal 2014.
Also, during the first quarter of Fiscal 2007, the Company acquired NUVT. In connection with the
NUVT acquisition, the Company allocated $15,058 to goodwill, parts of which were and continue to be
deductible for tax purposes (see Note 12 for further reference) and $18,601 to definite-lived
intangible assets. These definite-lived intangible assets recorded represent the fair market value
of acquired backlog, customer relationships and non-compete agreements and are to be amortized over
a period of one to 20 years.
Note 10: Restructuring
The Company has incurred and continues to incur costs related to facility consolidations, such as
idle facility rent obligations and the write-off of leasehold improvements, and employee severance
(collectively referred to as restructuring charges) in an attempt to right-size the organization
and more appropriately align the expense structure with anticipated revenues and changing market
demand for its solutions and services. Employee severance is generally payable within the next six
(6) months with certain facility costs extending through Fiscal 2014.
The Company incurred restructuring charges of $9,666, $6,848 and $0 during Fiscal 2009, Fiscal 2008
and Fiscal 2007, respectively. These costs have been recorded in Selling, general & administrative
expenses in the Companys Consolidated Statements of Income.
The following table summarizes the changes to the restructuring reserve for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Severance |
|
|
Facility Closures |
|
|
Total |
|
|
Balance at March 31, 2007 |
|
$ |
3,006 |
|
|
$ |
16,422 |
|
|
$ |
19,428 |
|
Restructuring charge |
|
|
5,628 |
|
|
|
1,220 |
|
|
|
6,848 |
|
Asset write-downs |
|
|
-- |
|
|
|
(411) |
|
|
|
(411) |
|
Cash expenditures |
|
|
(6,196) |
|
|
|
(7,077) |
|
|
|
(13,273) |
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2008 |
|
$ |
2,438 |
|
|
$ |
10,154 |
|
|
$ |
12,592 |
|
Restructuring charge |
|
|
7,596 |
|
|
|
2,070 |
|
|
|
9,666 |
|
Acquisition adjustments |
|
|
264 |
|
|
|
-- |
|
|
|
264 |
|
Asset write-downs |
|
|
-- |
|
|
|
(67) |
|
|
|
(67) |
|
Cash expenditures |
|
|
(6,133) |
|
|
|
(5,808) |
|
|
|
(11,941) |
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2009 |
|
$ |
4,165 |
|
|
$ |
6,349 |
|
|
$ |
10,514 |
|
|
Of the $10,514 above, $7,307 is classified as a current liability under Other liabilities on the
Companys Consolidated Balance Sheets for the period ended March 31, 2009.
Note 11: Operating Leases
The Company leases offices, facilities, equipment and vehicles throughout the world. While most of
the leases are operating leases that expire over the next 8 years, certain vehicles and equipment
are leased under capital leases that expire over the next 5 years. As leases expire, it can be
expected that, in the normal course of business, certain leases will be renewed or replaced.
Certain lease agreements include renewal options and escalating rents over the lease terms.
Generally, the Company expenses rent on a straight-line basis over the life of the lease which
commences on the date the Company has the right to control the property. The cumulative expense
recognized on a straight-line basis in excess of the cumulative payments is included in Accrued
expenses and Other liabilities within the Companys Consolidated Balance Sheets. Rent expense was
$26,903, $26,833 and $23,381 for Fiscal 2009, Fiscal 2008 and Fiscal 2007, respectively.
50
The future minimum lease payments under non-cancelable capital and operating leases with initial or
remaining terms of one year or more as of March 31, 2009 are as follows:
|
|
|
|
|
Fiscal |
|
|
|
|
|
2010 |
|
$ |
18,226 |
|
2011 |
|
|
13,324 |
|
2012 |
|
|
8,621 |
|
2013 |
|
|
2,869 |
|
2014 |
|
|
1,813 |
|
Thereafter |
|
|
1,570 |
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments |
|
$ |
46,423 |
|
|
In connection with the NextiraOne acquisition during the first quarter of Fiscal 2007, the Company
obtained various contractual obligations in the form of operating leases for facilities and
vehicles of approximately $35,120 at the acquisition date. The remaining balance for those
contractual obligations is included within the total minimum lease payments provided above.
Note 12: Income Taxes
The domestic and foreign components of Income before provision of income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
Domestic |
|
$ |
46,885 |
|
|
$ |
31,767 |
|
|
$ |
27,523 |
|
Foreign |
|
|
22,278 |
|
|
|
31,764 |
|
|
|
27,377 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
69,163 |
|
|
$ |
63,531 |
|
|
$ |
54,900 |
|
|
The provision/(benefit) for income taxes consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
10,238 |
|
|
$ |
10,205 |
|
|
$ |
12,598 |
|
State |
|
|
2,546 |
|
|
|
1,914 |
|
|
|
1,363 |
|
Foreign |
|
|
4,298 |
|
|
|
6,585 |
|
|
|
4,384 |
|
|
|
|
|
|
|
|
|
|
|
Total current |
|
|
17,082 |
|
|
|
18,704 |
|
|
|
18,345 |
|
Deferred |
|
|
6,772 |
|
|
|
5,594 |
|
|
|
946 |
|
|
|
|
|
|
|
|
|
|
|
Total provision for income taxes |
|
$ |
23,854 |
|
|
$ |
24,298 |
|
|
$ |
19,291 |
|
|
Reconciliations between income taxes computed using the federal statutory income tax rate and the
Companys effective tax rate are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
Federal statutory tax rate |
|
|
35.0% |
|
|
|
35.0% |
|
|
|
35.0% |
|
Foreign taxes, net of foreign tax credits |
|
|
(0.9) |
|
|
|
(1.8) |
|
|
|
(1.3) |
|
Effect of permanent book / tax differences |
|
|
(0.1) |
|
|
|
(0.4) |
|
|
|
(0.1) |
|
State income taxes, net of federal benefit |
|
|
3.2 |
|
|
|
2.4 |
|
|
|
1.8 |
|
Valuation allowance |
|
|
2.5 |
|
|
|
1.4 |
|
|
|
0.9 |
|
Reversal of
section 162(m) accrual (see below for definition) |
|
|
(5.2) |
|
|
|
-- |
|
|
|
-- |
|
Other, net |
|
|
-- |
|
|
|
1.6 |
|
|
|
(1.2) |
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
34.5% |
|
|
|
38.2% |
|
|
|
35.1% |
|
|
51
The components of current and long-term deferred tax liabilities/assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
Deferred Tax Liabilities: |
|
|
|
|
|
|
|
|
Tradename and trademarks |
|
$ |
10,411 |
|
|
$ |
10,140 |
|
Amortization of intangibles |
|
|
33,661 |
|
|
|
14,107 |
|
Unremitted earnings of foreign subsidiaries |
|
|
2,757 |
|
|
|
3,460 |
|
Foreign exchange |
|
|
43 |
|
|
|
-- |
|
Other |
|
|
66 |
|
|
|
82 |
|
Other prepaid items |
|
|
206 |
|
|
|
298 |
|
|
|
|
|
|
|
|
Gross deferred tax liabilities |
|
|
47,144 |
|
|
|
28,087 |
|
|
|
|
|
|
|
|
|
|
Deferred Tax Assets: |
|
|
|
|
|
|
|
|
Net operating losses |
|
|
22,549 |
|
|
|
11,741 |
|
Restructuring reserves |
|
|
5,955 |
|
|
|
6,039 |
|
Basis of fixed assets |
|
|
764 |
|
|
|
493 |
|
Outsourced leases |
|
|
326 |
|
|
|
230 |
|
Basis of finished goods inventory |
|
|
9,269 |
|
|
|
8,359 |
|
Reserve for bad debts |
|
|
1,581 |
|
|
|
4,608 |
|
Miscellaneous accrued expenses |
|
|
8,352 |
|
|
|
6,086 |
|
Foreign tax credit carry-forwards |
|
|
2,671 |
|
|
|
2,569 |
|
Accrued employee costs |
|
|
3,965 |
|
|
|
1,521 |
|
Foreign exchange |
|
|
-- |
|
|
|
47 |
|
Unexercised stock options |
|
|
8,680 |
|
|
|
9,723 |
|
|
|
|
|
|
|
|
Gross deferred tax assets |
|
|
64,112 |
|
|
|
51,416 |
|
Valuation allowance |
|
|
(4,081) |
|
|
|
(2,373) |
|
|
|
|
|
|
|
|
Net deferred tax assets |
|
|
60,031 |
|
|
|
49,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets/(liabilities) |
|
$ |
12,887 |
|
|
$ |
20,956 |
|
|
At March 31, 2009, the Company had $33,201, $106,975 and $21,155 of federal, state and foreign
gross net operating loss carry-forwards, respectively. As a result of the Companys acquisition of
Norstan, Inc. and ACS, Section 382 of the Internal Revenue Code of 1986, as amended (the Code)
limits the amount of net operating losses available to the Company to approximately $2,110 per
year. The federal gross net operating loss carry-forwards expire in Fiscal 2027. The state gross
net operating loss carry-forwards expire at various times through Fiscal 2029 and the foreign gross
net operating loss carry-forwards expire at various times through
Fiscal 2019, with the exception of $220 for Austria, $493 for Belgium, $7,091 for Brazil and $1,559
for France, which have no expirations.
A valuation allowance is provided when it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The Company has recorded a valuation allowance of $4,081
for certain state and foreign net operating loss carry-forwards anticipated to produce no tax
benefit. The valuation allowance was increased in Fiscal 2009 by $1,708 in order to reflect the
inability to use certain foreign net operating loss carry-forwards.
In connection with the acquisitions of NextiraOne, NUVT, NTI and ADS during Fiscal 2007, the
Company acquired approximately $96,000 of goodwill. The Company believes that $65,549 will be
recognized as a tax deduction over the next 15 years. In addition, the Company recorded
approximately $19,197 of deferred tax assets related to purchase accounting.
In general, except for certain earnings in Japan and earnings associated with inter-company loan
balances, it is the Companys intention to reinvest all undistributed earnings of non-U.S.
subsidiaries for an indefinite period of time. Therefore, except for the exceptions noted above,
no deferred U.S. income taxes have been provided on undistributed earnings of non-U.S.
subsidiaries, which aggregate approximately $7,576 based on exchange rates at March 31, 2009.
However, additional taxes could be necessary if future foreign earnings were loaned to the parent,
if the foreign subsidiaries declare dividends to the U.S. parent or the Company should sell its
stock in the subsidiaries.
As discussed in Note 2, the Company adopted FIN 48 on April 1, 2007. As a result of the adoption of
FIN 48, the Company recorded a $5,110 reduction to the beginning balance of Retained earnings
representing the cumulative effect of a change in accounting principle, an increase to current
liabilities of $3,656 recorded within Income taxes and a decrease to non-current assets of $1,454
recorded within Other assets, each of which is reflected within the Companys Consolidated Balance
Sheets. As of March 31, 2009 and March 31, 2008, the gross liability for income taxes associated
with uncertain tax positions was $7,075 and $7,340, respectively.
If the uncertain tax positions
are recognized, they would all favorably affect the Companys effective tax rate. The Company
includes interest and penalties related to uncertain tax positions within the Provision for income
taxes within the Companys Consolidated Statements of Income. As of March 31, 2009 and March 31,
2008, the Company recorded $1,443 and $1,131, respectively, of interest and penalties related to
uncertain tax positions relating to current liabilities within Income taxes.
52
A reconciliation of the change in the tax liability for unrecognized tax benefits from April 1,
2007 to March 31, 2009 is as follows:
|
|
|
|
|
|
Balance at April 1, 2007 |
|
$ |
6,974 |
|
Additions for tax positions related to the current year |
|
|
90 |
|
Additions for tax positions related to prior years |
|
|
362 |
|
Reductions for tax positions related to prior years |
|
|
(86) |
|
Settlements |
|
|
-- |
|
|
|
|
|
Balance at March 31, 2008 |
|
$ |
7,340 |
|
Additions for tax positions related to the current year |
|
|
396 |
|
Additions for tax positions related to prior years |
|
|
312 |
|
Reductions for tax positions related to prior years |
|
|
(675) |
|
Settlements |
|
|
(298 |
) |
|
|
|
|
Balance at March 31, 2009 |
|
$ |
7,075 |
|
|
On September 20, 2006, the Company received formal notice from the Internal Revenue Service (IRS)
regarding its intent to begin an audit of the Companys 2004 and 2005 tax years. On August 3,
2007, the Company received formal notice from the IRS regarding its intent to begin an audit of the
Companys 2006 tax year. In connection with these normal recurring audits, the IRS requested
certain documentation with respect to stock options for the Companys 2004, 2005 and 2006 tax
years. In connection with the review by the Audit Committee (the Audit Committee) of the
Companys Board of Directors (the Board) of the Companys historical stock option granting
practices, the Company determined that a number of officers may have exercised options for which
the application of Section 162(m) (Section 162(m)) of the Code may apply. It was possible that
these options could have been treated as having been granted at less than fair market value for
federal income tax purposes because the Company incorrectly applied the measurement date as defined
in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees
(APB 25). If such options were deemed to have been granted at less than fair market value for
purposes of Section 162(m), any non-performance based compensation to officers, including proceeds
from options exercised in any given tax year, in excess of $1,000 would have been disallowed as a
deduction for tax purposes. Based on this uncertain tax position, the Company estimated that the
potential tax-effected liability for any potential disallowed Section 162(m) deduction would
approximate $3,587, which was recorded as an expense during Fiscal
2004 and Fiscal 2005 (in addition to the amount shown above for the
reconciliation of the change in the tax liability for unrecognized
tax benefits) and is
recorded as a current liability within Income taxes within the Companys Consolidated Balance
Sheets as of March 31, 2008. During Fiscal 2009, the IRS concluded its examination of the
potential disallowed Section 162(m) deduction within our filing position and did not propose an
adjustment. During the fourth quarter of Fiscal 2009, we reversed the previously-recorded expense
of $3,587 through Provision for income taxes within the Companys Consolidated Statements of
Income. With respect to the normal recurring audits of our tax years 2004, 2005 and 2006, the IRS
has proposed adjustments to our filing position and we have agreed to those adjustments which
approximate $300.
Fiscal 2008 and Fiscal 2007 remains open to examination by the IRS. Fiscal 2004 through Fiscal
2008 remain open to examination by state and foreign taxing jurisdictions.
Note 13: Incentive Compensation Plans
Performance Bonus
The Company has variable compensation plans covering certain team members. These plans provide a
bonus contingent on the attainment of certain annual or quarterly performance targets. The Company
recorded expense of $9,408, $5,689 and $4,562 under its variable compensation plans for Fiscal
2009, Fiscal 2008 and Fiscal 2007, respectively.
Profit Sharing and Savings Plan (the savings plans)
The Company has multiple profit sharing and savings plans which qualify as deferred salary
arrangements under Section 401(k) of the Code. Participants may elect to contribute a portion of
their eligible compensation, subject to limits imposed by the savings plans, which are
partially matched by the Company. The Company recorded expense of $3,198, $3,290 and $3,569 for
these plans during Fiscal 2009, Fiscal 2008 and Fiscal 2007, respectively.
53
Stock-based compensation plans
On August 12, 2008 (the Effective Date), the Companys stockholders approved the 2008 Long-Term
Incentive Plan (the Incentive Plan) which is designed to advance the Companys interests and the
interests of Companys stockholders by providing incentives to certain employees, directors,
consultants, independent contractors and persons to whom an offer of employment has been extended
by the Company (hereinafter referred to as Eligible Persons). The Incentive Plan replaced the
1992 Stock Option Plan, as amended (the Employee Plan), and the 1992 Director Stock Option Plan,
as amended (the Director Plan), on the Effective Date. Stock option grants under the Employee
Plan and the Director Plan, prior to the effective date of the Incentive Plan, remain outstanding
and will continue to be administered in accordance with the terms of their respective plans and
plan agreements.
Awards (as defined below) under the Incentive Plan may include, but need not be limited to, one or
more of the following types, either alone or in any combination thereof: (i) stock options,
(ii) stock appreciation rights (SARs), (iii) restricted stock, (iv) restricted stock units,
(v) performance grants, (vi) other share-based awards and (vii) any other type of award deemed by
the Committee (as defined below), in its sole discretion, to be consistent with the purposes of the
Incentive Plan (hereinafter referred to as Awards).
The Incentive Plan will be administered by the Compensation Committee of the Board, or any
successor thereto, or such other committee of the Board as is appointed by the Board to administer
the Incentive Plan (hereinafter referred to as the Committee). The Committee will have all the
powers vested in it by the terms of the Incentive Plan, such powers to include the exclusive
authority to select the Eligible Persons to be granted Awards under the Incentive Plan, to
determine the type, size, terms and conditions of the Award to be made to each Eligible Person
selected, to modify or waive (with certain limitations specified in the Incentive Plan) the terms
and conditions of any Award that has been granted, to determine the time when Awards will be
granted, to establish performance objectives, to make any adjustments necessary or desirable as a
result of the granting of Awards to Eligible Persons located outside the United States and to
prescribe the form of the agreements evidencing Awards made under the Incentive Plan.
The maximum aggregate number of shares of common stock, available for issuance under Awards granted
under the Incentive Plan, shall be 900,000 plus the number of shares that were available for the
grant of stock options under the Employee Plan and the Director Plan on the Effective Date, plus
the number of shares subject to stock options outstanding under the Employee Plan and the Director
Plan on the Effective Date that are forfeited or cancelled prior to exercise. The following table
details the shares of common stock authorized for grant under the Incentive Plan as of March 31,
2009.
|
|
|
Shares in thousands |
|
Shares |
|
Shares initially authorized under the Incentive Plan |
|
900 |
Number of shares that were available for the grant of stock options
under the Employee Plan and the Director Plan on August 12, 2008, the
Effective Date |
|
888 |
Number of shares subject to stock options outstanding under the Employee
Plan and the Director Plan on August 12, 2008, the Effective Date, that
were forfeited or cancelled, prior to exercise, through March 31, 2009 |
|
307 |
|
|
Shares authorized for grant under the Incentive Plan as of March 31, 2009 |
|
2,095 |
Shares available for grant under the Incentive Plan as of March 31, 2009 |
|
2,086 |
|
As of March 31, 2009, the Company has granted only stock options. Those stock option grants
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 Company recognized stock-based compensation expense
related to stock option grants of $3,042 ($1,993 net of tax) or $0.11 per diluted share, $3,468
($2,142 net of tax) or $0.12 per diluted share and $9,308 ($6,050 net of tax) or $0.34 per diluted
share during Fiscal 2009, Fiscal 2008 and Fiscal 2007, respectively. Included in stock-based
compensation expense for Fiscal 2008 is $250 which resulted from the previously-disclosed tender
offer regarding certain Affected Stock Option Grants (as defined below), the details of which are
described below. Stock-based compensation expense is recorded in
Selling, general & administrative expense
within the Companys Consolidated Statements of Income.
54
The following table summarizes the Companys stock option activity for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Exercise |
|
|
|
|
|
|
Exercise |
|
|
|
|
|
|
Exercise |
|
|
|
|
|
|
|
Price (per |
|
|
|
|
|
|
Price (per |
|
|
|
|
|
|
Price (per |
|
Shares in thousands |
|
Shares |
|
|
share) |
|
|
Shares |
|
|
share) |
|
|
Shares |
|
|
share) |
|
|
Outstanding at March 31, 2008 |
|
|
2,584 |
|
|
$ |
40.27 |
|
|
|
4,621 |
|
|
$ |
38.66 |
|
|
|
5,055 |
|
|
$ |
38.28 |
|
Granted |
|
|
1,083 |
|
|
|
28.87 |
|
|
|
627 |
|
|
|
40.13 |
|
|
|
70 |
|
|
|
39.12 |
|
Exercised |
|
|
(17) |
|
|
|
32.00 |
|
|
|
(179) |
|
|
|
32.81 |
|
|
|
(435) |
|
|
|
34.42 |
|
Forfeited or cancelled |
|
|
(341) |
|
|
|
41.61 |
|
|
|
(2,485) |
|
|
|
38.17 |
|
|
|
(69) |
|
|
|
38.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2009 |
|
|
3,309 |
|
|
$ |
36.45 |
|
|
|
2,584 |
|
|
$ |
40.27 |
|
|
|
4,621 |
|
|
$ |
38.66 |
|
Exercisable at March 31, 2009 |
|
|
2,220 |
|
|
$ |
40.07 |
|
|
|
2,499 |
|
|
$ |
40.39 |
|
|
|
4,131 |
|
|
$ |
39.12 |
|
Weighted-average fair value
of options granted during
the period |
|
|
|
|
|
$ |
8.68 |
|
|
|
|
|
|
$ |
7.70 |
|
|
|
|
|
|
$ |
17.88 |
|
|
The total intrinsic value of options exercised during Fiscal 2009, Fiscal 2008 and Fiscal 2007 was
$38, $1,395 and $3,597, respectively. The weighted average fair value of stock options granted
during Fiscal 2009, Fiscal 2008 and Fiscal 2007 were based on the Black-Scholes option pricing
model using the following weighted average assumptions. The Company granted 627,000 shares during
Fiscal 2008 which resulted from the previously-disclosed tender offer (described below). See below
for reference to the Companys valuation methodologies for these grants.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
Expected life (in years) |
|
|
4.8 |
|
|
|
3.8 |
|
|
|
5.7 |
|
Risk free interest rate |
|
|
3.4% |
|
|
|
4.0% |
|
|
|
4.2% |
|
Annual forfeiture rate |
|
|
2.4% |
|
|
|
0.0% |
|
|
|
1.5% |
|
Volatility |
|
|
30.5% |
|
|
|
29.4% |
|
|
|
45.5% |
|
Dividend yield |
|
|
0.7% |
|
|
|
0.6% |
|
|
|
0.6% |
|
|
The following table summarizes certain information regarding the Companys non-vested shares as of
and for the period ending March 31, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Weighted- |
|
|
|
Shares (in |
|
|
Average Grant- |
|
Shares in thousands |
|
000s) |
|
|
Date Fair Value |
|
|
Non-vested as of March 31, 2007 |
|
|
490 |
$ |
|
|
19.29 |
|
Granted |
|
|
-- |
|
|
|
-- |
|
Forfeited |
|
|
(308) |
|
|
|
20.08 |
|
Vested |
|
|
(97) |
|
|
|
17.60 |
|
|
|
|
|
Non-vested as of March 31, 2008 |
|
|
85 |
|
|
|
18.35 |
|
Granted |
|
|
1,083 |
|
|
|
8.68 |
|
Forfeited |
|
|
(65) |
|
|
|
18.48 |
|
Vested |
|
|
(14) |
|
|
|
8.89 |
|
|
|
|
|
Non-vested as of March 31, 2009 |
|
|
1,089 |
|
|
|
8.85 |
|
|
Remedial Measures
The Audit Committee has completed its previously-disclosed independent review of the Companys
historical stock option granting practices. See the Explanatory Note preceding Part I, Item 1 of
the Companys Annual Report on Form 10-K for the fiscal year ended March 31, 2007 for more
information regarding the Audit Committees review and related matters. In light of the findings
of its review, the Audit Committee recommended to the Board, and the Board adopted, enhancements to
the Companys corporate record-keeping and stock option granting procedures. In advance of this
action by the Audit Committee and the Board, the Company had implemented additional procedures to
its process for approving stock option grants that are focused on formalized documentation of
appropriate approvals and determination of grant terms to employees.
55
The Audit Committees review included an evaluation of the role of current and former Company
personnel in identified problems during the period from 1992 to the present (the Review Period),
and the Audit Committees consideration of remedial actions has included and will continue to
include a review of claims that have been or may be asserted against such current or former Company
personnel as well as other remedial actions that may be appropriate under all circumstances. As
previously reported, based on the findings of the Audit Committee as to Fred C. Young, the
Companys former Chief Executive Officer who resigned on May 20, 2007, the Audit Committee
concluded and recommended to the Board, and the Board determined, that Mr. Young could have been
terminated due to Cause for Termination (as defined in his agreement dated May 11, 2004) at the
time Mr. Young resigned as a director and as an officer of the Company on May 20, 2007. In light
of that determination and the terms of the agreements with Mr. Young, all outstanding stock options
held by Mr. Young (1,455,402 shares) terminated as of the date of his resignation, which occurred
during the first quarter of Fiscal 2008. Accordingly, the Company has determined that the
consequences of these events should be considered a first quarter of Fiscal 2008 event for
accounting purposes. These events had the following impacts on the Companys consolidated financial
statements and related notes for Fiscal 2008: (1) a decrease in outstanding stock options of
1,455,402, (2) immaterial impact on the Diluted earnings per common share computation, (3) a
decrease in deferred tax assets of $6,252 with the offsetting entry of $5,514 to Additional paid-in
capital and (4) additional tax expense impact of $738.
The following table summarizes certain information regarding the Companys outstanding stock
options at March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding |
|
|
Options Exercisable |
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
|
|
|
average |
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
average |
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
Remaining |
|
|
average |
|
|
Intrinsic |
|
|
|
|
|
|
Remaining |
|
|
average |
|
|
Intrinsic |
|
Range of |
|
|
Shares |
|
|
Contractual |
|
|
Exercise |
|
|
Value |
|
|
|
Shares |
|
|
Contractual |
|
|
Exercise |
|
|
Value |
|
Exercise Prices |
|
|
(000s) |
|
|
Life (Years) |
|
|
Price |
|
|
(000s) |
|
|
|
(000s) |
|
|
Life (Years) |
|
|
Price |
|
|
(000s) |
|
|
$26.60 - $33.25 |
|
|
1,100 |
|
|
|
9.0 |
|
|
|
$ 28.88 |
|
|
|
$ -- |
|
|
|
31 |
|
|
|
3.8 |
|
|
|
$ 29.31 |
|
|
|
$ -- |
|
$33.25 - $39.90 |
|
|
1,192 |
|
|
|
6.2 |
|
|
|
38.06 |
|
|
|
-- |
|
|
|
1,172 |
|
|
|
6.1 |
|
|
|
38.04 |
|
|
|
-- |
|
$39.90 - $46.55 |
|
|
983 |
|
|
|
2.7 |
|
|
|
42.32 |
|
|
|
-- |
|
|
|
983 |
|
|
|
2.7 |
|
|
|
42.32 |
|
|
|
-- |
|
$46.55 - $53.20 |
|
|
15 |
|
|
|
1.8 |
|
|
|
50.72 |
|
|
|
-- |
|
|
|
15 |
|
|
|
1.8 |
|
|
|
50.72 |
|
|
|
-- |
|
$53.20 - $59.85 |
|
|
17 |
|
|
|
1.1 |
|
|
|
58.15 |
|
|
|
-- |
|
|
|
17 |
|
|
|
1.1 |
|
|
|
58.15 |
|
|
|
-- |
|
$59.85 - $66.50 |
|
|
2 |
|
|
|
0.7 |
|
|
|
63.22 |
|
|
|
-- |
|
|
|
2 |
|
|
|
0.7 |
|
|
|
63.22 |
|
|
|
-- |
|
|
|
|
|
|
$26.60 - $66.50 |
|
|
3,309 |
|
|
|
6.0 |
|
|
|
$ 36.45 |
|
|
|
$ -- |
|
|
|
2,220 |
|
|
|
4.5 |
|
|
|
$ 40.07 |
|
|
|
$ -- |
|
|
The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value,
based on the Companys average stock price (i.e., the average of the open and close prices of the
common stock) on March 31, 2009 of $23.66, which would have been received by the option holders had
all option holders exercised their options as of that date. As of March 31, 2009, there was $6,456
of total unrecognized pre-tax stock-based compensation expense related to non-vested stock options
granted which is expected to be recognized over a weighted-average period of 2.8 years.
Section 409A Remedial Measures and Other Potential Section 409A Payments
Following the completion of the Audit Committees independent review of the Companys historical
stock option granting practices, the Company determined that certain stock option grants which were
originally issued with exercise prices that were below fair market value for income tax purposes,
which vested or may vest after December 31, 2004 and which remained outstanding (i.e., unexercised)
as of December 31, 2005, were subject to adverse income taxation under Section 409A of the Code
(Section 409A). For purposes of this Annual Report on Form 10-K for the fiscal year ended
March 31, 2009, these below-fair market value stock option grants are referred to as Affected
Stock Option Grants. Under Section 409A, individuals who hold Affected Stock Option Grants may be
subject to a 20% federal income tax and an interest penalty tax, in addition to the regular income
tax liability, plus interest on the value of these stock option grants at the time of vesting (not
exercise).
During the third quarter of Fiscal 2008, the Company conducted a tender offer to current
non-officer employees subject to taxation in the United States who held Affected Stock Option
Grants that afforded those employees the opportunity to avoid unfavorable tax consequences under
Section 409A. The provisions of the tender offer amended each Affected Stock Option Grant to
increase the original exercise price to the lower of: (i) the fair market value of the common stock
on the corrected measurement date (as determined for tax purposes) or (ii) the fair market value of
the common stock on the trading day immediately following the expiration of the tender offer
(December 19, 2007), provided that the new exercise price was in no event lower than the original
exercise price of the stock option grant. Additionally, and as part of the tender offer, the
Company offered current non-officer employees the right to receive a cash payment equal to the
increase, if any, in the exercise price of any Affected Stock Option Grant.
56
In instances where the original exercise price of a stock option grant was less than the new
exercise price (as determined above), the Company increased the original exercise price to the new
exercise price (an Amended Stock Option Grant) and paid a cash bonus to the employee. The total
cash bonus due to employees was $456 which was paid during January, 2008. The Company accounted
for the impact of the Amended Stock Option Grant as a stock option modification under SFAS No. 123
(revised 2004), Share-Based Payment (SFAS 123(R)). As a result of the modification and the
partial cash settlement, the Company recognized $250 of additional stock-based compensation expense
due to the increase in the fair market value of these stock option grants that is recorded in
Selling, general & administrative expense within the Companys Consolidated Statements of Income.
In instances where the current exercise price of a stock option grant was greater than the new
exercise price, the original stock option grant was canceled and immediately replaced with a new
stock option grant under the Employee Plan that has the same terms as the canceled stock option
grant, including the same exercise price per share and no loss of vesting or change to the
expiration date of the stock option grant term, but with a new grant date (a Cancellation and New
Stock Option Grant). Each Cancellation and New Stock Option Grant qualifies as a cancellation of
an award accompanied by the concurrent grant of a replacement award, as defined in SFAS 123(R),
which is accounted for as a modification. Under SFAS 123(R), incremental compensation cost is
measured as the excess, if any, of the fair market value of the modified award over the fair market
value of the original award immediately before its terms are modified. With respect to the
Cancellation and New Stock Option Grants, there were no changes to any of the terms of the original
Affected Stock Option Grants. Thus, the Company recorded $0 of non-cash stock-based compensation
expense for these grants.
During the fourth quarter of Fiscal 2008, the Board approved a separate offer (the Separate
Offer) for R. Terry Blakemore, a director and the current President and Chief Executive Officer of
the Company, that was intended to remedy the tax consequences under Section 409A attributable to
Affected Stock Option Grants to purchase 60,000 shares of common stock held by Mr. Blakemore.
These Affected Stock Option Grants were awarded prior to Mr. Blakemore becoming an Executive
Officer of the Company. The provisions of the Separate Offer were identical to the tender offer
for current non-officer employees described above. The fair market value of the common stock on
the trading day immediately following the expiration of the Separate Offer was lower than the
original exercise price of these Affected Stock Option Grants and, as a result, the original
Affected Stock Option Grants were canceled and immediately replaced with new stock option grants
under the Employee Plan that had the same terms as the canceled stock option grants (the Separate
Offer Cancellation and New Stock Option Grants). Consistent with our accounting treatment for the
Cancellation and New Stock Option Grants noted above, the Company accounted for the Separate Offer
Cancellation and New Stock Option Grants as modifications under SFAS 123(R). With respect to the
Separate Offer Cancellation and New Stock Option Grants, there were no changes to any of the terms
of the original Affected Stock Option Grants. Thus, the Company recorded $0 of non-cash
stock-based compensation expense for these grants.
With respect to certain employees who exercised Affected Stock Options Grants during calendar year
2007, the Company made a bonus payment (the Calendar 2007 bonus payment) to such employees in
calendar year 2008 in an aggregate amount of $313. The Calendar 2007 bonus payment includes
amounts to compensate the employee for the additional Section 409A taxes that they will be required
to pay as well as an amount to gross-up such amount for the additional income and payroll taxes
owed on such payments. The Calendar 2007 bonus payment is recorded in Selling, general &
administrative expense within the Companys Consolidated Statements of Income for the period ending
March 31, 2008.
With respect to certain employees who exercised Affected Stock Options Grants during calendar year
2006, the Company made a cash payment (Calendar 2006 cash payment) to such employees in calendar
year 2008 in an aggregate amount of approximately $626. The Calendar 2006 cash payment includes
any applicable Section 409A additional taxes as well as an amount to gross up such amount for the
additional income and payroll taxes owed on such payments. The Calendar 2006 cash payment is
recorded in Selling, general & administrative expense within the Companys Consolidated Statements
of Income for the period ending March 31, 2008.
57
Note 14: Earnings Per Share
The following table details the computation of basic and diluted earnings per common share from
continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Net income |
|
$ |
45,309 |
|
|
$ |
39,233 |
|
|
$ |
35,609 |
|
|
Weighted-average common shares outstanding (basic) |
|
|
17,527 |
|
|
|
17,605 |
|
|
|
17,512 |
|
Effect of dilutive securities from employee stock options |
|
|
-- |
|
|
|
48 |
|
|
|
296 |
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding (diluted) |
|
|
17,527 |
|
|
|
17,653 |
|
|
|
17,808 |
|
|
Basic earnings per common share |
|
$ |
2.59 |
|
|
$ |
2.23 |
|
|
$ |
2.03 |
|
Dilutive earnings per common share |
|
$ |
2.59 |
|
|
$ |
2.22 |
|
|
$ |
2.00 |
|
|
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 3,309,300, 2,097,558 and 1,246,215 non-dilutive stock options outstanding during Fiscal 2009,
Fiscal 2008 and Fiscal 2007, respectively, that are not included in the corresponding period
Weighted-average common shares outstanding (diluted) computation.
Note 15: Repurchase of Common Stock
Fiscal 2009 - During Fiscal 2009, the Company did not repurchase any shares of common stock.
Fiscal 2008 - During Fiscal 2008, the Company repurchased 190,084 shares of common stock for an
aggregate purchase price of $6,062, or an average purchase price per share of $31.89.
Fiscal 2007 - During Fiscal 2007, the Company repurchased 500,712 shares of common stock for an
aggregate purchase price of $20,209, or an average purchase price per share of $40.36.
Since the inception of the repurchase program in April 1999 through March 31, 2009, the Company has
repurchased 7,626,195 shares for an aggregate purchase price of $323,095, or an average purchase
price per share of $42.37. As of March 31, 2009, 873,805 shares were available under repurchase
programs approved by the Board. Additional repurchases of the 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 the common stock for the foreseeable
future, there can be no assurance as to the timing or amount of such repurchases. Under the
Companys New Credit Agreement, the Company is permitted to make any distribution or dividend or
repurchase its common stock as long as no Event of Default or Potential Default (each as defined in
the New Credit Agreement) occurs or is continuing, and may not repurchase its common stock if the
leverage ratio (after taking into consideration the payment made to repurchase the common stock)
would exceed 2.75 to 1.0 or if the availability to borrow under the New Credit Facility would be
less than $20 million.
58
Note 16: Fair Value Disclosures
As discussed in Note 2, the Company adopted SFAS 157 on April 1, 2008 with the exception of a
one-year deferral of implementation for non-financial assets and liabilities that are not
recognized or disclosed at fair value in the financial statements on a recurring basis (at least
annually). The following table presents information about the Companys assets and liabilities
measured at fair value on a recurring basis as of March 31, 2009, and indicate the fair value
hierarchy of the valuation techniques utilized by the Company to determine such fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets at Fair Value as of March 31, 2009 |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Foreign currency contracts |
|
$ |
-- |
|
|
$ |
923 |
|
|
$ |
-- |
|
|
$ |
923 |
|
|
|
Liabilities at Fair Value as of March 31, 2009 |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Foreign currency contracts |
|
$ |
-- |
|
|
$ |
1,872 |
|
|
$ |
-- |
|
|
$ |
1,872 |
Interest-rate swap |
|
|
-- |
|
|
|
5,336 |
|
|
|
-- |
|
|
|
5,336 |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
-- |
|
|
$ |
7,208 |
|
|
$ |
-- |
|
|
$ |
7,208 |
|
|
Note 17: Commitments and Contingencies
Regulatory Matters
As previously disclosed, on November 13, 2006, the Company received a letter of informal inquiry
from the staff of the Securities and Exchange Commissions (the SEC) Division of Enforcement (the
Staff) relating to the Companys stock option practices from January 1, 1997 to present. On
May 24, 2007, the SEC issued a formal order of investigation in connection with this matter, and,
on May 29, 2007, the Company received a document subpoena from the SEC acting pursuant to such
order. On January 26, 2009, the Company received a Wells Notice from the SEC. The Wells Notice
provided the Company with notification that the Staff intended to recommend that the SEC bring a
civil injunctive action against the Company, alleging violations of the federal securities laws
arising from certain historical stock option practices. Under the process established by the SEC,
recipients of a Wells Notice have the opportunity to respond before the Staff makes a
recommendation to the SEC regarding what action, if any, should be brought by the SEC. In
connection with this contemplated action, the Staff may seek a permanent civil injunction barring
future violations of the federal securities laws and civil penalties. The Company continues to
cooperate with the Staff with respect to the alleged violations and possible resolution of the
matters in question.
As previously disclosed, the Audit Committee, with the assistance of outside legal
counsel, conducted an independent review of the Companys historical stock option granting
practices and related accounting for stock option grants. See the Explanatory Note preceding
Part I, Item 1 of the Companys Annual Report on Form 10-K for the fiscal year ended March 31, 2007
for more information regarding the Audit Committees review and related matters. The Audit
Committee has concluded its review and has presented to the Board recommendations concerning
procedural enhancements, which the Board has adopted.
See Note 12 regarding the status of certain IRS 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 June 30, 2009 in
order for the parties to discuss the merits of these allegations prior to the possible commencement
of any litigation by the United States.
At the conclusion of these matters, the Company could be subject to damages, fines, penalties or
other costs, either through settlement or judgment, which could be material.
59
Litigation Matters
In November, 2006, two stockholder derivative lawsuits were filed against the Company itself, as a
nominal defendant, and several of the Companys current and former officers and directors in the
United States District Court for the Western District of Pennsylvania. The two substantially
identical stockholder derivative complaints allege that the individual defendants improperly
backdated grants of stock options to several officers and directors in violation of the Companys
stockholder-approved stock option plans during the period 1996-2002, improperly recorded and
accounted for backdated stock options in violation of U.S. generally accepted accounting principles,
improperly took tax deductions based on backdated stock options in violation of the Code, produced
and disseminated false financial statements and SEC filings to the Companys stockholders and to
the market that improperly recorded and accounted for the backdated option grants, concealed the
alleged improper backdating of stock options and obtained substantial benefits from sales of
Company stock while in the possession of material inside information. The complaints seek damages
on behalf of the Company against certain current and former officers and directors and allege
breach of fiduciary duty, unjust enrichment, securities law violations and other claims. The two
lawsuits have been consolidated into a single action as In re Black Box Corporation Derivative
Litigation, Master File No. 2:06-CV-1531-JFC, and plaintiffs filed an amended consolidated
shareholder derivative complaint on August 31, 2007. The parties have stipulated that responses by
the defendants, including the Company, are due on or before July 31, 2009, and the court has
entered an order to that effect. The Company may have indemnification obligations arising out of
this matter to its current and former directors and officers named in this litigation. The Company
may incur costs or expenses in relation to this matter that could be material.
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 the matters described
under this caption Litigation Matters are adequately provided for, covered by insurance, without
merit or not probable that an unfavorable material outcome will result.
Expenses Incurred by the Company
The Company has incurred significant expenses, in excess of its insurance deductible of $500, in
Fiscal 2007, Fiscal 2008 and Fiscal 2009, and expects to continue to incur additional expenses
during Fiscal 2010, in relation to the following previously-disclosed items (i) the review by the
Audit Committee of the Companys historical stock option granting practices and related accounting
for stock option grants, (ii) the informal inquiry and formal order of investigation by the SEC
regarding the Companys past stock option granting practices, (iii) the derivative action relating
to the Companys historical stock option granting practices filed against the Company as a nominal
defendant and certain of the Companys current and former directors and officers, as to whom it may
have indemnification obligations and (iv) related matters. See the Explanatory Note preceding
Part I, Item 1 of the Companys Annual Report on Form
10-K for the fiscal year ended March 31, 2007,
for more information regarding the Audit Committees review and related matters. As of March 31,
2009, the total amount of such fees is $7,991, of which $5,000, the insurance policy limit, has
been paid by the insurance company. The Company recorded expense of $1,228, $1,221 and $542 during
Fiscal 2009, Fiscal 2008 and Fiscal 2007, respectively. These expenses are recorded in Selling,
general & administrative expense within the Companys Consolidated Statements of Income. The amount
of expenses that the Company could incur in the future with respect to these matters could be
material.
Product Warranties
Estimated future warranty costs related to certain products are charged to expense during the
period the related revenue is recognized. The product warranty liability reflects the Companys
best estimate of probable obligations under those warranties. As of March 31, 2009 and 2008, the
Company has recorded a warranty reserve of $3,889 and $4,182, respectively.
There has been no other significant or unusual activity during Fiscal 2009.
60
Note 18: 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
2009 |
|
2008 |
|
2007 |
|
North America |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
838,871 |
|
|
$ |
837,402 |
|
|
$ |
850,088 |
|
Operating income |
|
|
61,651 |
|
|
|
57,964 |
|
|
|
49,481 |
|
Depreciation |
|
|
9,378 |
|
|
|
10,500 |
|
|
|
11,742 |
|
Intangibles amortization |
|
|
10,715 |
|
|
|
6,579 |
|
|
|
10,156 |
|
Segment assets (as of March 31) |
|
|
1,060,491 |
|
|
|
962,729 |
|
|
|
1,007,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
121,839 |
|
|
$ |
138,927 |
|
|
$ |
129,278 |
|
Operating income |
|
|
12,548 |
|
|
|
19,278 |
|
|
|
16,442 |
|
Depreciation |
|
|
420 |
|
|
|
447 |
|
|
|
498 |
|
Intangibles amortization |
|
|
59 |
|
|
|
64 |
|
|
|
91 |
|
Segment assets (as of March 31) |
|
|
125,781 |
|
|
|
159,661 |
|
|
|
139,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
38,838 |
|
|
$ |
40,413 |
|
|
$ |
36,944 |
|
Operating income |
|
|
5,804 |
|
|
|
7,390 |
|
|
|
7,426 |
|
Depreciation |
|
|
134 |
|
|
|
111 |
|
|
|
85 |
|
Intangibles amortization |
|
|
16 |
|
|
|
36 |
|
|
|
38 |
|
Segment assets (as of March 31) |
|
|
18,291 |
|
|
|
21,519 |
|
|
|
17,318 |
|
|
|
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: |
|
|
|
March 31, |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Segment assets for North America, Europe and All Other |
|
$ |
1,204,563 |
|
|
$ |
1,143,909 |
|
|
$ |
1,164,544 |
|
Corporate eliminations |
|
|
(68,075) |
|
|
|
(70,058) |
|
|
|
(74,453) |
|
|
|
|
|
|
Total consolidated assets |
|
$ |
1,136,488 |
|
|
$ |
1,073,851 |
|
|
$ |
1,090,091 |
|
|
61
The following table presents financial information about the Company by service type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
2009 |
|
2008 |
|
2007 |
|
Data Services |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
191,436 |
|
|
$ |
194,454 |
|
|
$ |
182,129 |
|
Gross profit |
|
|
55,407 |
|
|
|
57,747 |
|
|
|
55,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice Services |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
598,319 |
|
|
$ |
586,974 |
|
|
$ |
611,278 |
|
Gross profit |
|
|
200,541 |
|
|
|
195,570 |
|
|
|
209,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotline Services |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
209,793 |
|
|
$ |
235,314 |
|
|
$ |
222,903 |
|
Gross profit |
|
|
101,232 |
|
|
|
113,303 |
|
|
|
109,123 |
|
|
The sum of service type revenues and gross profit equals consolidated revenues and gross profit.
62
Note 19: Quarterly Data (Unaudited)
The following tables represent summary Quarterly (Unaudited) Consolidated Statements of Income for
Fiscal 2009 and Fiscal 2008. All dollar amounts are in thousands, except per share amounts.
Earnings per share data may not compute due to rounding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2009 (Unaudited) |
|
|
1Q09 |
|
|
2Q09 |
|
|
3Q09 |
|
|
4Q09 |
|
|
FY09 |
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotline products |
|
$ |
55,639 |
|
|
$ |
56,819 |
|
|
$ |
51,550 |
|
|
$ |
45,785 |
|
|
$ |
209,793 |
|
On-Site services |
|
|
186,914 |
|
|
|
196,991 |
|
|
|
210,303 |
|
|
|
195,547 |
|
|
|
789,755 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
242,553 |
|
|
|
253,810 |
|
|
|
261,853 |
|
|
|
241,332 |
|
|
|
999,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotline products |
|
|
27,982 |
|
|
|
28,917 |
|
|
|
27,380 |
|
|
|
24,282 |
|
|
|
108,561 |
|
On-Site services |
|
|
126,429 |
|
|
|
131,836 |
|
|
|
143,555 |
|
|
|
131,987 |
|
|
|
533,807 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
154,411 |
|
|
|
160,753 |
|
|
|
170,935 |
|
|
|
156,269 |
|
|
|
642,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
88,142 |
|
|
|
93,057 |
|
|
|
90,918 |
|
|
|
85,063 |
|
|
|
357,180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general &
administrative expenses |
|
|
66,468 |
|
|
|
65,729 |
|
|
|
66,085 |
|
|
|
68,105 |
|
|
|
266,387 |
|
Intangibles amortization |
|
|
1,826 |
|
|
|
1,900 |
|
|
|
3,261 |
|
|
|
3,803 |
|
|
|
10,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
19,848 |
|
|
|
25,428 |
|
|
|
21,572 |
|
|
|
13,155 |
|
|
|
80,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (income), net |
|
|
(265 |
) |
|
|
2,648 |
|
|
|
5,722 |
|
|
|
2,174 |
|
|
|
10,279 |
|
Other expenses (income), net |
|
|
(96 |
) |
|
|
263 |
|
|
|
376 |
|
|
|
18 |
|
|
|
561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for
income taxes |
|
|
20,209 |
|
|
|
22,517 |
|
|
|
15,474 |
|
|
|
10,963 |
|
|
|
69,163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
7,376 |
|
|
|
8,218 |
|
|
|
5,647 |
|
|
|
2,613 |
|
|
|
23,854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
12,833 |
|
|
$ |
14,299 |
|
|
$ |
9,827 |
|
|
$ |
8,350 |
|
|
$ |
45,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.73 |
|
|
$ |
0.82 |
|
|
$ |
0.56 |
|
|
$ |
0.48 |
|
|
$ |
2.59 |
|
Diluted |
|
$ |
0.73 |
|
|
$ |
0.82 |
|
|
$ |
0.56 |
|
|
$ |
0.48 |
|
|
$ |
2.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008 (Unaudited) |
|
|
1Q08 |
|
|
2Q08 |
|
|
3Q08 |
|
|
4Q08 |
|
|
FY08 |
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotline products |
|
$ |
56,139 |
|
|
$ |
59,619 |
|
|
$ |
59,269 |
|
|
$ |
60,287 |
|
|
$ |
235,314 |
|
On-Site services |
|
|
196,152 |
|
|
|
201,011 |
|
|
|
199,055 |
|
|
|
185,210 |
|
|
|
781,428 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
252,291 |
|
|
|
260,630 |
|
|
|
258,324 |
|
|
|
245,497 |
|
|
|
1,016,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotline products |
|
|
29,362 |
|
|
|
31,457 |
|
|
|
30,891 |
|
|
|
30,301 |
|
|
|
122,011 |
|
On-Site services |
|
|
131,699 |
|
|
|
136,884 |
|
|
|
133,312 |
|
|
|
126,216 |
|
|
|
528,111 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
161,061 |
|
|
|
168,341 |
|
|
|
164,203 |
|
|
|
156,517 |
|
|
|
650,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
91,230 |
|
|
|
92,289 |
|
|
|
94,121 |
|
|
|
88,980 |
|
|
|
366,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general &
administrative expenses |
|
|
72,743 |
|
|
|
66,784 |
|
|
|
68,522 |
|
|
|
67,260 |
|
|
|
275,309 |
|
Intangibles amortization |
|
|
2,318 |
|
|
|
1,344 |
|
|
|
1,382 |
|
|
|
1,635 |
|
|
|
6,679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
16,169 |
|
|
|
24,161 |
|
|
|
24,217 |
|
|
|
20,085 |
|
|
|
84,632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (income), net |
|
|
3,280 |
|
|
|
6,143 |
|
|
|
5,780 |
|
|
|
6,095 |
|
|
|
21,298 |
|
Other expenses (income), net |
|
|
(67) |
|
|
|
(73) |
|
|
|
(16) |
|
|
|
(41) |
|
|
|
(197) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for
income taxes |
|
|
12,956 |
|
|
|
18,091 |
|
|
|
18,453 |
|
|
|
14,031 |
|
|
|
63,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
4,768 |
|
|
|
6,781 |
|
|
|
7,112 |
|
|
|
5,637 |
|
|
|
24,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
8,188 |
|
|
$ |
11,310 |
|
|
$ |
11,341 |
|
|
$ |
8,394 |
|
|
$ |
39,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.47 |
|
|
$ |
0.64 |
|
|
$ |
0.64 |
|
|
$ |
0.48 |
|
|
$ |
2.23 |
|
Diluted |
|
$ |
0.46 |
|
|
$ |
0.64 |
|
|
$ |
0.64 |
|
|
$ |
0.48 |
|
|
$ |
2.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
None.
Item 9A. Controls and Procedures.
Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures
Management, including the Companys CEO and Chief Financial Officer (CFO), 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 March 31, 2009. Based upon this assessment, Management has concluded that the
Companys disclosure controls and procedures were effective as of March 31, 2009 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.
64
Managements Report on Internal Control Over Financial Reporting
Management, including the Companys CEO and CFO, is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f)
under the Exchange Act) for the Company. Management assessed the effectiveness of the Companys
internal control over financial reporting as of March 31, 2009 based on the framework described in
Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations
(COSO) of the Treadway Commission. Based on this assessment, Management has concluded that the
Companys internal control over financial reporting was effective, as of March 31, 2009, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external reporting purposes in accordance with U.S. generally accepted
accounting principles. Management of the Company reviewed the results of its assessment with the
Audit Committee.
Excluded Acquired Companies
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-K, Black Box completed the
acquisitions of Scottel, NCT, ACS, MTS and UCI in Fiscal 2009 prior to March 31, 2009. Scottel,
NCT, ACS, MTS and UCI represent 3%, 1%, 4%, 5% and 1%, respectively, of the Companys total assets
as of March 31, 2009. Managements assessment and conclusion on the effectiveness of the Companys
disclosure controls and procedures and internal control over financial reporting as of March 31,
2009 excludes an assessment of the internal control over financial reporting of Scottel, NCT, ACS,
MTS and UCI.
BDO Seidman, LLP, the Companys independent registered public accounting firm, has issued an
attestation report on the Companys internal control over financial reporting, which is included in
this Form 10-K.
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.
65
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
Board of Directors and Stockholders
Black Box Corporation
Lawrence, Pennsylvania
We have audited Black Box Corporations internal control over financial reporting as of March 31,
2009, based on criteria established in Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Companys
management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in
the accompanying Item 9A, Managements Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Companys internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, 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 or procedures may deteriorate.
As indicated in the accompanying Item 9A, Managements Report on Internal Control over Financial
Reporting, managements assessment of and conclusion on the effectiveness of internal control over
financial reporting did not include the internal controls of Scottel Voice & Data, Inc, Network
Communications Technologies, Inc., ACS Communications, Inc., Mutual Telecom Services Inc, and UCI
Communications LLC, (the acquired subsidiaries) which were acquired within the year ended March
31, 2009, and which are included in the consolidated balance sheets of Black Box Corporation as of
March 31, 2009, and the related consolidated statements of income, changes in stockholders equity
and comprehensive income, and cash flows for the year then ended. The acquired subsidiaries
constituted 14% and 20% of total assets and net assets, respectively, as of March 31, 2009, and 8%
and 5% of revenues and net income, respectively, for the year then ended. Management did not
assess the effectiveness of internal control over financial reporting of the acquired subsidiaries
because of the timing of the acquisitions which were completed during the year ending March 31,
2009. Our audit of internal control over financial reporting of Black Box Corporation also did not
include an evaluation of the internal control over financial reporting of the acquired
subsidiaries.
In our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of March 31, 2009, based on the COSO criteria.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Black Box Corporation as of March 31,
2009 and 2008, and the related consolidated statements of income, changes in stockholders equity
and comprehensive income, and cash flows for each of the three years in the period ended March 31,
2009 and our report dated May 27, 2009 expressed an unqualified opinion thereon.
/s/ BDO Seidman, LLP
Chicago, Illinois
May 27, 2009
66
Item 9B. Other Information.
None.
67
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Certain of the information required by this item is incorporated herein by reference to the
information set forth under Part I of this Form 10-K under the
caption Business Other
Information in Item 1 and under the caption Executive Officers of the Registrant.
The other information required by this item is incorporated herein by reference to the information
set forth under the captions Annual Meeting Matters, Board of Directors and Certain Board
Committees and Litigation Involving Directors and Officers in the Proxy Statement to be filed
pursuant to Regulation 14A of the Exchange Act.
Item 11. Executive Compensation.
The information required by this item is incorporated herein by reference to the information under
the captions Compensation of Directors and Executive Compensation and Other Information in the
Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners And Management And Related Stockholder Matters.
The information required by this item is incorporated herein by reference to the information set
forth under the captions Equity Plan Compensation Information, Security Ownership of Certain
Beneficial Owners and Security Ownership of Management in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item is incorporated herein by reference to the information set
forth under the captions Annual Meeting Matters, Board of Directors and Certain Board
Committees and Policies and Procedures Related to the Approval
of Transactions with Related Persons in the Proxy Statement.
Item 14. Principal Accounting Fees and Services.
The information required by this item is incorporated herein by reference to the information set
forth under the caption Independent Public Accountants in the Proxy Statement.
68
PART IV
Item 15. Exhibits and Financial Statement Schedules.
Financial statements, financial statement schedules and exhibits not listed below have been omitted
where the required information is included in the consolidated financial statements or notes
thereto, or is not applicable or required.
(a) |
|
Documents filed as part of this report |
|
(1) |
|
Financial Statements - no financial statements have been filed in this Form 10-K other than
those in Item 8 |
|
(2) |
|
Financial Statement Schedule |
|
|
|
Schedule II - Valuation and Qualifying Accounts |
|
(3) |
|
Exhibits |
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
|
|
Agreement and Plan of Merger, dated as of December 20, 2004, by and among the Company, SF
Acquisition Co. and Norstan,
Inc. (1) |
|
|
|
|
|
Tender and Voting Agreement, dated as of December 20, 2004, by and among the Company, SF
Acquisition Co. and Norstan,
Inc. (1) |
|
|
|
|
|
Stock Option Agreement, dated as of December 20, 2004, by and among the Company, SF
Acquisition Co. and Norstan, Inc. (1) |
|
|
|
|
|
Interest Purchase Agreement by and between Platinum Equity, LLC and the Company dated as of
April 10, 2006 (2) |
|
|
|
|
|
Amendment to the Interest Purchase Agreement by and between Platinum Equity, LLC and the
Company dated as of
April 30, 2006(3) |
|
|
|
|
|
Second Restated Certificate of Incorporation of the Company, as amended (4) |
|
|
|
|
|
Amended and Restated By-laws of the Company, as amended (5) |
|
|
|
|
|
Second Amended and Restated Credit Agreement, dated as of January 24, 2005, by and among
Black Box Corporation of Pennsylvania and SF Acquisition Co., as Borrowers, the Company, the
Guarantors parties thereto, the Lenders parties thereto and Citizens Bank of Pennsylvania
(6) |
|
|
|
|
|
Guaranty and Suretyship Agreement, dated as of January 24, 2005, by and among the Company,
the Lenders and Citizens Bank of Pennsylvania (7) |
|
|
|
|
|
Guaranty and Suretyship Agreement, dated as of January 24, 2005, by and among the Guarantors,
the Lenders and Citizens Bank of Pennsylvania (7) |
|
|
|
|
|
First Amendment to the Second Amended and Restated Credit Agreement, dated as of February 17,
2005, by and among Black Box Corporation of Pennsylvania and Norstan, Inc., as Borrowers, the
Company, the Guarantors parties thereto, the Lenders parties thereto and Citizens Bank of
Pennsylvania (8) |
|
|
|
|
|
Second Amendment to the Second Amended and Restated Credit Agreement, dated as of March 28,
2006, by and among Black Box Corporation of Pennsylvania and Norstan Inc., as Borrowers, the
Company, the Guarantors parties thereto, the Lenders parties thereto and Citizens Bank of
Pennsylvania (3) |
|
|
|
|
|
Waiver Letter dated February 28, 2007 by and among Black Box Corporation of Pennsylvania and
Norstan, Inc., as Borrowers, the Company, the Guarantors parties thereto, the Lenders parties
thereto and Citizens Bank of Pennsylvania (9) |
69
|
|
|
|
|
Waiver Letter dated May 28, 2007 by and among Black Box Corporation of Pennsylvania and
Norstan, Inc., as Borrowers, the Company, the Guarantors parties thereto, the Lenders parties
thereto and Citizens Bank of Pennsylvania (9) |
|
|
|
|
|
Waiver Letter dated June 11, 2007 by and among Black Box Corporation of Pennsylvania and
Norstan, Inc., as Borrowers, the Company, the Guarantors parties thereto, the Lenders parties
thereto and Citizens Bank of Pennsylvania (9) |
|
|
|
|
|
Waiver Letter dated July 25, 2007 by and among Black Box Corporation of Pennsylvania and
Norstan, Inc., as Borrowers,
the Company, the Guarantors parties thereto, the Lenders parties thereto and Citizens Bank of
Pennsylvania (10) |
|
|
|
|
|
Third Amended and Restated Credit Agreement, dated as of January 30, 2008, by and among
Black Box Corporation of Pennsylvania and Norstan, Inc., as Borrowers, the Company, the
Guarantors parties thereto, the Lenders parties thereto and Citizens Bank of Pennsylvania
(11) |
|
|
|
|
|
Guaranty and Suretyship Agreement, dated as of January 30, 2008, by and among the Company,
the Lenders and Citizens Bank of Pennsylvania (12) |
|
|
|
|
|
Guaranty and Suretyship Agreement, dated as of January 30, 2008, by and among the
Guarantors, the Lenders and Citizens Bank of Pennsylvania (12) |
|
|
|
|
|
Agreement between the Company and Francis W. Wertheimber (13) |
|
|
|
|
|
Amended and Restated Agreement between the Company and Michael McAndrew (14) |
|
|
|
|
|
Amended and Restated Agreement between the Company and R. Terry Blakemore (15) |
|
|
|
|
|
1992 Stock Option Plan, as amended through August 9, 2007 (16) |
|
|
|
|
|
1992 Director Stock Option Plan, as amended through August 9, 2007 (16) |
|
|
|
|
|
Form of Black Box Corporation Non-Qualified Stock Option Agreement (pursuant to the 1992
Director Stock Option Plan; form of agreement in effect prior to August 10, 2004)
(13) |
|
|
|
|
|
Form of Black Box Corporation Non-Qualified Stock Option Agreement (pursuant to the 1992
Director Stock Option Plan; form of agreement in effect as of August 10, 2004) (13) |
|
|
|
|
|
Form of Black Box Corporation Non-Qualified Stock Option Agreement (pursuant to the 1992
Director Stock Option Plan; form of agreement in effect as of October 31, 2005)
(17) |
|
|
|
|
|
Form of Black Box Corporation Non-Qualified Stock Option Agreement (pursuant to the 1992
Stock Option Plan) (13) |
|
|
|
|
|
Form of Black Box Corporation Non-Qualified Stock Option Agreement (pursuant to the 1992
Stock Option Plan; form of agreement in effect as of October 31, 2005) (17) |
|
|
|
|
|
Description of Fiscal 2009 Annual Incentive Plan (18) |
|
|
|
|
|
Form of 2008 Long-Term Incentive Cash Award Agreement for Fiscal 2009 (18) |
|
|
|
|
|
2008 Long-Term Incentive Plan (19) |
|
|
|
|
|
Form of Black Box Corporation Non-Qualified Stock Option Agreement (pursuant to the 2008
Long-Term Incentive Plan) (14) |
|
|
|
|
|
Summary of Director Compensation (20) |
|
|
|
|
|
Subsidiaries of the Registrant (20) |
|
|
|
|
|
Consent of Independent Registered Accounting Firm (20) |
70
|
|
|
|
|
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities and
Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002
(20) |
|
|
|
|
|
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities and
Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002
(20) |
|
|
|
|
|
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule
13a-14(b) of the Securities and 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 (20) |
|
|
|
|
|
Filed as an exhibit to the Current Report on Form 8-K of the Company, file number
0-18706, filed with the SEC on December 23, 2004, and incorporated herein by reference. |
|
|
|
|
|
Filed as Exhibit 2.1 to the Current Report on Form 8-K of the Company, file number
0-18706, filed with the SEC on April 13, 2006, and incorporated herein by reference. |
|
|
|
|
|
Filed as an exhibit to the Current Report on Form 8-K of the Company, file number
0-18706, filed with the SEC on May 4, 2006, and incorporated herein by reference. |
|
|
|
|
|
Filed as Exhibit 3(i) to the Quarterly Report on Form 10-Q of the Company, file
number 0-18706, filed with the SEC on November 14, 2000, and incorporated herein by reference. |
|
|
|
|
|
Filed as an exhibit to the Annual Report on Form 10-K of the Company, file number
0-18706, filed with the SEC on June 14, 2004, and incorporated herein by reference. |
|
|
|
|
|
Filed as Exhibit (b)(2) to Amendment No. 4 to the Schedule TO filed by the Company
and SF Acquisition Co. on January 26, 2005, and incorporated herein by reference. |
|
|
|
|
|
Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number
0-18706, filed with the SEC on February 10, 2005, and incorporated herein by reference. |
|
|
|
|
|
Filed as Exhibit 10.1 to the Current Report on Form 8-K of the Company, file number
0-18706, filed with the SEC on February 23, 2005, and incorporated herein by reference. |
|
|
|
|
|
Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number
0-18706, filed with the SEC on July 23, 2007, and incorporated herein by reference. |
|
|
|
|
|
Filed as Exhibit 10.9 to the Annual Report on Form 10-K of the Company, file number
0-18706, filed with the SEC on August 13, 2007, and incorporated herein by reference. |
|
|
|
|
|
Filed as Exhibit 10.1 to the Current Report on Form 8-K of the Company, file number
0-18706, filed with the SEC on February 5, 2008, and incorporated herein by reference. |
|
|
|
|
|
Filed as an exhibit to the Annual Report on Form 10-K of the Company, file number
0-18706, filed with the SEC on May 30, 2008, and incorporated herein by reference. |
|
|
|
|
|
Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file
number 0-18706, filed with the SEC on November 12, 2004, and incorporated herein by reference. |
|
|
|
|
|
Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file
number 0-18706, filed with the SEC on February 5, 2009, and incorporated herein by reference. |
|
|
|
|
|
Filed as Exhibit 10.1 to the Current Report on Form 8-K of the Company, file number
0-18706, filed with the SEC on October 18, 2007, and incorporated herein by reference. |
|
|
|
|
|
Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file
number 0-18706, filed with the SEC on August 16, 2007, and incorporated herein by reference. |
71
|
|
|
|
|
Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file
number 0-18706, filed with the SEC on November 10, 2005, and incorporated herein by reference. |
|
|
|
|
|
Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file
number 0-18706, filed with the SEC on August 7, 2008, and incorporated herein by reference. |
|
|
|
|
|
Filed as Exhibit I to the Proxy Statement for the 2008 Annual Meeting of
Stockholders filed on Schedule 14A, file number 0-18706, filed with the SEC on June 26, 2008. |
|
|
|
|
|
Filed herewith. |
72
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
|
|
|
|
|
BLACK BOX CORPORATION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Michael McAndrew |
|
|
|
|
|
|
|
|
|
Michael McAndrew, Vice President,
Chief Financial Officer, Treasurer,
Secretary and Principal Accounting Officer |
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
|
|
|
|
|
Signatures |
|
Capacity |
|
Date |
|
|
|
|
|
|
|
Director
|
|
May 29, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
May 29, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
May 29, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director and Chairman of the Board
|
|
May 29, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
May 29, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director, President and Chief Executive Officer
|
|
May 29, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice President, Chief Financial Officer,
Treasurer, Secretary and Principal
Accounting
Officer
|
|
May 29, 2009 |
|
|
|
|
|
73
SCHEDULE II
BLACK BOX CORPORATION
Valuation and Qualifying Accounts
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
Additions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance |
|
|
|
Beginning |
|
|
Charged |
|
|
Additions |
|
|
Reductions |
|
|
|
|
|
|
at End |
|
|
|
of |
|
|
to |
|
|
from |
|
|
from |
|
|
|
|
|
|
of |
|
Description |
|
Period |
|
|
Expenses |
|
|
Acquisitions |
|
|
Reserves |
|
|
Other |
|
|
Period |
|
|
Year Ended March
31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory reserves |
|
$ |
20,373 |
|
|
$ |
2,896 |
|
|
$ |
1,199 |
|
|
$ |
(4,178) |
|
|
$ |
-- |
|
|
$ |
20,290 |
|
Allowance for
doubtful
accounts/sales
returns |
|
|
12,612 |
|
|
|
4,336 |
|
|
|
203 |
|
|
|
(7,217) |
|
|
|
-- |
|
|
|
9,934 |
|
Restructuring
reserve |
|
|
12,592 |
|
|
|
9,666 |
|
|
|
-- |
|
|
|
(11,941) |
|
|
|
197 |
|
|
|
10,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March
31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory reserves |
|
$ |
22,761 |
|
|
$ |
3,258 |
|
|
$ |
160 |
|
|
$ |
(5,806) |
|
|
$ |
-- |
|
|
$ |
20,373 |
|
Allowance for
doubtful
accounts/sales
returns |
|
|
14,253 |
|
|
|
7,509 |
|
|
|
90 |
|
|
|
(9,240) |
|
|
|
-- |
|
|
|
12,612 |
|
Restructuring
reserve |
|
|
19,428 |
|
|
|
6,848 |
|
|
|
-- |
|
|
|
(13,684) |
|
|
|
-- |
|
|
|
12,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March
31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory reserves |
|
$ |
14,287 |
|
|
$ |
3,036 |
|
|
$ |
12,735 |
|
|
$ |
(7,297) |
|
|
$ |
-- |
|
|
$ |
22,761 |
|
Allowance for
doubtful
accounts/sales
returns |
|
|
9,517 |
|
|
|
8,710 |
|
|
|
5,423 |
|
|
|
(9,397) |
|
|
|
-- |
|
|
|
14,253 |
|
Restructuring
reserve |
|
|
10,698 |
|
|
|
-- |
|
|
|
27,034 |
|
|
|
(18,304) |
|
|
|
-- |
|
|
|
19,428 |
|
|
74
EXHIBIT INDEX
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
|
|
Agreement and Plan of Merger, dated as of December 20, 2004, by and among the Company, SF
Acquisition Co. and Norstan, Inc. (1) |
|
|
|
|
|
Tender and Voting Agreement, dated as of December 20, 2004, by and among the Company, SF
Acquisition Co. and Norstan,
Inc. (1) |
|
|
|
|
|
Stock Option Agreement, dated as of December 20, 2004, by and among the Company, SF
Acquisition Co. and Norstan, Inc. (1) |
|
|
|
|
|
Interest Purchase Agreement by and between Platinum Equity, LLC and the Company dated as of
April 10, 2006 (2) |
|
|
|
|
|
Amendment to the Interest Purchase Agreement by and between Platinum Equity, LLC and the
Company dated as of
April 30, 2006(3) |
|
|
|
|
|
Second Restated Certificate of Incorporation of the Company, as amended (4) |
|
|
|
|
|
Amended and Restated By-laws of the Company, as amended (5) |
|
|
|
|
|
Second Amended and Restated Credit Agreement, dated as of January 24, 2005, by and among
Black Box Corporation of Pennsylvania and SF Acquisition Co., as Borrowers, the Company, the
Guarantors parties thereto, the Lenders parties thereto and Citizens Bank of Pennsylvania
(6) |
|
|
|
|
|
Guaranty and Suretyship Agreement, dated as of January 24, 2005, by and among the Company,
the Lenders and Citizens Bank of Pennsylvania (7) |
|
|
|
|
|
Guaranty and Suretyship Agreement, dated as of January 24, 2005, by and among the Guarantors,
the Lenders and Citizens Bank of Pennsylvania (7) |
|
|
|
|
|
First Amendment to the Second Amended and Restated Credit Agreement, dated as of February 17,
2005, by and among Black Box Corporation of Pennsylvania and Norstan, Inc., as Borrowers, the
Company, the Guarantors parties thereto, the Lenders parties thereto and Citizens Bank of
Pennsylvania (8) |
|
|
|
|
|
Second Amendment to the Second Amended and Restated Credit Agreement, dated as of March 28,
2006, by and among Black Box Corporation of Pennsylvania and Norstan Inc., as Borrowers, the
Company, the Guarantors parties thereto, the Lenders parties thereto and Citizens Bank of
Pennsylvania (3) |
|
|
|
|
|
Waiver Letter dated February 28, 2007 by and among Black Box Corporation of Pennsylvania and
Norstan, Inc., as Borrowers, the Company, the Guarantors parties thereto, the Lenders parties
thereto and Citizens Bank of Pennsylvania (9) |
|
|
|
|
|
Waiver Letter dated May 28, 2007 by and among Black Box Corporation of Pennsylvania and
Norstan, Inc., as Borrowers, the Company, the Guarantors parties thereto, the Lenders parties
thereto and Citizens Bank of Pennsylvania (9) |
|
|
|
|
|
Waiver Letter dated June 11, 2007 by and among Black Box Corporation of Pennsylvania and
Norstan, Inc., as Borrowers, the Company, the Guarantors parties thereto, the Lenders parties
thereto and Citizens Bank of Pennsylvania (9) |
|
|
|
|
|
Waiver Letter dated July 25, 2007 by and among Black Box Corporation of Pennsylvania and
Norstan, Inc., as Borrowers, the Company, the Guarantors parties thereto, the Lenders parties
thereto and Citizens Bank of Pennsylvania (10) |
|
|
|
|
|
Third Amended and Restated Credit Agreement, dated as of January 30, 2008, by and among
Black Box Corporation of Pennsylvania and Norstan, Inc., as Borrowers, the Company, the
Guarantors parties thereto, the Lenders parties thereto and Citizens Bank of Pennsylvania
(11) |
|
|
|
|
|
Guaranty and Suretyship Agreement, dated as of January 30, 2008, by and among the Company,
the Lenders and Citizens Bank of Pennsylvania (12) |
75
|
|
|
|
|
Guaranty and Suretyship Agreement, dated as of January 30, 2008, by and among the
Guarantors, the Lenders and Citizens Bank of Pennsylvania (12) |
|
|
|
|
|
Agreement between the Company and Francis W. Wertheimber (13) |
|
|
|
|
|
Amended and Restated Agreement between the Company and Michael McAndrew (14) |
|
|
|
|
|
Amended and Restated Agreement between the Company and R. Terry Blakemore (15) |
|
|
|
|
|
1992 Stock Option Plan, as amended through August 9, 2007 (16) |
|
|
|
|
|
1992 Director Stock Option Plan, as amended through August 9, 2007 (16) |
|
|
|
|
|
Form of Black Box Corporation Non-Qualified Stock Option Agreement (pursuant to the 1992 Director Stock
Option Plan; form of agreement in effect prior to August 10, 2004) (13) |
|
|
|
|
|
Form of Black Box Corporation Non-Qualified Stock Option Agreement (pursuant to the 1992
Director Stock
Option Plan; form of agreement in effect as of August 10, 2004) (13) |
|
|
|
|
|
Form of Black Box Corporation Non-Qualified Stock Option Agreement (pursuant to the 1992
Director Stock
Option Plan; form of agreement in effect as of October 31, 2005) (17) |
|
|
|
|
|
Form of Black Box Corporation Non-Qualified Stock Option Agreement (pursuant to the 1992
Stock Option Plan) (13) |
|
|
|
|
|
Form of Black Box Corporation Non-Qualified Stock Option Agreement (pursuant to the 1992
Stock Option Plan;
form of agreement in effect as of October 31, 2005) (17) |
|
|
|
|
|
Description of Fiscal 2009 Annual Incentive Plan (18) |
|
|
|
|
|
Form of 2008 Long-Term Incentive Cash Award Agreement for Fiscal 2009 (18) |
|
|
|
|
|
2008 Long-Term Incentive Plan (19) |
|
|
|
|
|
Form of Black Box Corporation Non-Qualified Stock Option Agreement (pursuant to the 2008
Long-Term Incentive Plan) (14) |
|
|
|
|
|
Summary of Director Compensation (20) |
|
|
|
|
|
Subsidiaries of the Registrant (20) |
|
|
|
|
|
Consent of Independent Registered Accounting Firm (20) |
|
|
|
|
|
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities and
Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002
(20) |
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Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities and
Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002
(20) |
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Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule
13a-14(b) of the Securities and 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 (20) |
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Filed as an exhibit to the Current Report on Form 8-K of the Company, file number
0-18706, filed with the SEC on December 23, 2004, and incorporated herein by reference. |
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Filed as Exhibit 2.1 to the Current Report on Form 8-K of the Company, file number
0-18706, filed with the SEC on April 13, 2006, and incorporated herein by reference. |
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Filed as an exhibit to the Current Report on Form 8-K of the Company, file number
0-18706, filed with the SEC on May 4, 2006, and incorporated herein by reference. |
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Filed as Exhibit 3(i) to the Quarterly Report on Form 10-Q of the Company, file
number 0-18706, filed with the SEC on November 14, 2000, and incorporated herein by reference. |
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Filed as an exhibit to the Annual Report on Form 10-K of the Company, file number
0-18706, filed with the SEC on June 14, 2004, and incorporated herein by reference. |
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Filed as Exhibit (b)(2) to Amendment No. 4 to the Schedule TO filed by the Company
and SF Acquisition Co. on January 26, 2005, and incorporated herein by reference. |
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Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number
0-18706, filed with the SEC on February 10, 2005, and incorporated herein by reference. |
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Filed as Exhibit 10.1 to the Current Report on Form 8-K of the Company, file number
0-18706, filed with the SEC on February 23, 2005, and incorporated herein by reference. |
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Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number
0-18706, filed with the SEC on July 23, 2007, and incorporated herein by reference. |
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Filed as Exhibit 10.9 to the Annual Report on Form 10-K of the Company, file number
0-18706, filed with the SEC on August 13, 2007, and incorporated herein by reference. |
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Filed as Exhibit 10.1 to the Current Report on Form 8-K of the Company, file number
0-18706, filed with the SEC on February 5, 2008, and incorporated herein by reference. |
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Filed as an exhibit to the Annual Report on Form 10-K of the Company, file number
0-18706, filed with the SEC on May 30, 2008, and incorporated herein by reference. |
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Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file
number 0-18706, filed with the SEC on November 12, 2004, and incorporated herein by reference. |
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Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file
number 0-18706, filed with the SEC on February 5, 2009, and incorporated herein by reference. |
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Filed as Exhibit 10.1 to the Current Report on Form 8-K of the Company, file number
0-18706, filed with the SEC on October 18, 2007, and incorporated herein by reference. |
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Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file
number 0-18706, filed with the SEC on August 16, 2007, and incorporated herein by reference. |
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Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file
number 0-18706, filed with the SEC on November 10, 2005, and incorporated herein by reference. |
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Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file
number 0-18706, filed with the SEC on August 7, 2008, and incorporated herein by reference. |
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Filed as Exhibit I to the Proxy Statement for the 2008 Annual Meeting of
Stockholders filed on Schedule 14A, file number 0-18706, filed with the SEC on June 26, 2008. |
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Filed herewith. |
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