Black Box Corporation
BLACK BOX CORP (Form: 10-K, Received: 05/30/2013 16:04:39)
Table of Contents                                                 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)
 
 
R
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2013
OR
o
 
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)
Delaware
 
95-3086563
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
1000 Park Drive, Lawrence, Pennsylvania
 
15055
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: 724-746-5500
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class)
 
(Name of each exchange on which registered)
Common Stock, $.001 par value
 
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 R 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 R 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. R 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). R 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 registrant’s 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. R
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):
Large accelerated filer o
 
Accelerated filer R
 
Non-accelerated filer o
 
Smaller reporting company o
 
 
 
 
(Do not check if a smaller reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes R No
The aggregate market value of the voting stock held by non-affiliates of the registrant as of September 28, 2012 (based on closing price of such stock as reported by NASDAQ on such date) was $417,165,079 . 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 10, 2013 , there were 16,132,572 shares of common stock, par value $.001 (the "common stock"), outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for 2013 Annual Meeting of Stockholders (the "Proxy Statement") – Part III





BLACK BOX CORPORATION
FOR THE FISCAL YEAR ENDED MARCH 31, 2013
INDEX

 
 
Page
 
 
Mine Safety Disclosures
 
 
 
 
 
 
 
 


2

Table of Contents                                                 

PART I

Item 1. Business.

Overview

Black Box Corporation ("Black Box," "we," the "Company," "our" or “us”) is a leading communications system integrator dedicated to designing, sourcing, implementing and maintaining today's complex communications solutions. Our primary service offering is voice communications solutions ("Voice Communications"); We also offer premise cabling and other data-related services solutions ("Data Infrastructure") and technology product solutions (“Technology Products”). Voice Communications and Data Infrastructure may collectively be referred to as “On-Site services.” We employed 3,900 and 4,302 employees as of March 31, 2013 and March 31, 2012, respectively.

We participate in the worldwide communications and network infrastructure markets. Voice Communications and Data Infrastructure products and services are distributed to these markets primarily through value-added resellers, manufacturers, large system integrators and other technical services companies. Technology products similar to those sold by us are distributed through direct marketing manufacturers, mass merchandisers, "big box" retailers, web retailers and others. We believe that we compete well in both markets on the basis of our solution features, technical capabilities, service levels and price.

We conduct our business globally and, as of March 31, 2013, manage our business by geography under the following three reporting segments: North America, Europe and All Other. For revenues and other information (including large customers) regarding these reporting segments, see Note 17 of the Notes to the Consolidated Financial Statements. For information regarding backlog, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

In connection with a transition in executive management and a refinement of business strategy, we have realigned our organizational structure which will result in new reporting segments (North America Services, North America Products, International Services and International Products) for the purpose of making operational decisions and assessing financial performance. The new reporting segments will be effective, on a prospective basis, beginning on April 1, 2013. This is consistent with the proliferation of voice-over-internet-protocol (VOIP) solutions and the adoption of unified communication technologies which has resulted in a trend toward convergence of voice and data networks. We believe that, in the near future, the distinction between our voice and data solution offerings will not be significant and, increasingly, these services are bundled together. As such, those historical Voice Communications and Data Infrastructure offerings will be aggregated into Services in their respective geography. We will report financial information (revenue through operating income) for these new reporting segments which should provide enhanced visibility and transparency into our operations, our business drivers and the value of our enterprise.

Products and Services Platforms

Since our founding in 1976, we have built robust communications-based platforms that allow us to identify customer needs, and then design, source, implement and support the appropriate communications solutions. Our two platforms for serving customers and generating growth are as follows:

Products Platform
Our Products Platform is comprised of global sales and distribution, free 24/7/365 technical support, custom solutions, same-day delivery, lifetime warranties, quality control, global product management and sourcing. The current products offered through the platform include but are not limited to switches & routers, cabling infrastructure, cabinets and racks, wireless networking and digital signage.

The Company generates Technology Products revenues from the sale of data networking products through its catalog, Internet Web site and direct sales. In order to meet client demand, we keep a moderate level of inventory which consumes part of our working capital. The market for these products is a highly fragmented and competitive. The Company has participated in this market for 37-years and has earned a reputation for providing high quality products, rapid order fulfillment and free 24/7/365 technical support. With an average order size of less than one thousand dollars, the Company's Technology Products revenue is primarily driven by general information technology spending rather than capital spending.


3

Table of Contents                                                 

We utilize 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 sourcing is not economical. Sourcing decisions of in-house versus third-party suppliers are based upon a balance of quality, performance, delivery and cost factors.

Services Platform
Our Services Platform is comprised of our Voice Communications and Data Infrastructure offerings including engineering and design, network operations centers, technical certifications, local and national sales teams, remote monitoring, on-site service teams and technology partner centers of excellence which includes specific sales and engineering resources around the technology. The primary services offered through this platform include but are not limited to communications lifecycle services, structured cabling, unified communications, video/AV services, in-building wireless and data center services.

For Voice Communications, the Company's revenues are primarily generated from the sale and/or installation of new voice communications systems, the support of voice communications systems and moves, adds and changes ("MAC work"). We periodically generate revenues from contracts performed over time that may result in an asset on our balance sheet for multiple periods constituting part of our working capital. We have not experienced significant collectability issues related to such contracts. Sales of new voice communications systems and, to a lesser extent, MAC work, are dependent upon general economic growth and our clients' capital spending. Installed voice communications systems may be updated to provide users with increased unified communications functionality and integration with traditional data network applications such as email or messaging. Revenues from support contracts generally are not directly dependent on the economy as clients may seek to extend the life of their existing equipment and delay capital spending on new voice communications systems.

Similarly, the Company's revenues for Data Infrastructure are generated from the installation or upgrade of data networks and MAC work. The installation of new data networks is also dependent upon general economic growth and our clients' capital spending. Installed data networks may also need to be upgraded in order to accommodate the growing use of network technology. Similar to Voice Communications, Data Infrastructure projects can include MAC work which is dependent on economic factors that are the same as those factors discussed above in relation to the Voice Communications business.

The Company routinely competes against original equipment manufacturers, local or regional manufacturer-specific channel partners in the Voice Communications and Data Infrastructure markets for enterprise clients. The Company believes that it favorably differentiates against this competition through its technology independent approach which draws the appropriate product from our portfolio of different partner solutions , broad geographic footprint and deep industry and technical expertise. Through its network of local offices and network operations centers, the company can provide clients with both on-site and remote services.

Management has initiated programs that it believes will leverage these platforms, introduce the Company into new markets and increase the number of offerings that it can provide to its existing clients.


Key Differentiators
Our platforms introduce scale, flexibility and leverage to the business, and provide the following competitive advantages:

A diversified client base: We have built a diversified client base that ranges from small organizations to many of the world's largest corporations and institutions. Black Box clients participate in many industries, including government, healthcare, business services, manufacturing, retail, technology and banking, among others. Revenues from our clients are segmented with approximately 60% from large companies ( i.e. , revenues greater than $1 billion, including federal governments), approximately 20% from medium-sized companies ( i.e. , revenues between $50 million and $1 billion, including state governments) and approximately 20% from small companies ( i.e. , revenues less than $50 million, including local governments). We strive to develop extensive and long-term relationships with high-quality clients as we believe that satisfied clients will demand quality services and product offerings even in economic downturns. Also, we believe that our distinctive portfolio of products and services will allow us to introduce additional offerings to satisfied clients.

Key relationships with leading technology partners: We have built long-term relationships with all major communications equipment manufacturers and we are a top partner with the market leaders, including Avaya ® , Cisco ® , CommScope ® , Genband ® , Mitel ® , NEC ® , ShoreTel ® and Siemens ® , among others.

Broad geographic footprint: We have built a global footprint of approximately 200 offices serving more than 175,000 clients in approximately 150 countries throughout the world.

4

Table of Contents                                                 


Deep organic resources: We have approximately 4,000 team members world-wide, approximately 3,000 of whom are technical and engineering talent who provide our clients with on-site and remote capabilities.

Dedicated sales force: We have a team of over 300 direct sales people world-wide.

Strong financial position: We have a stable balance sheet and have generated positive cash flow for 37 consecutive years.


Strategic Focus

We believe that the services and products that we provide enable our clients to fully optimize their communications investment. Our strategy is based on the following core beliefs about our clients and the markets we serve:

Enablement: Communication is an organization's most important process.  When we enable it, we create value.

Independence: Client focused solutions are better than channel focused solutions.

Interoperability: Business leaders will choose best of breed solutions and require operational integration.

Innovation: A dynamic communications market requires partners and process to adapt and transform.

Our overall business growth strategy includes the following four areas of focus:

Strengthen and expand our portfolio of high-value communication solutions.

Leverage centralized expertise with local skills and relationships.

Realign organizational structure and incentives.

Implement a consistent, comprehensive market penetration approach.

We are actively operating programs that reflect our commitment to this strategy. These programs will continue to diversify our offerings and will reflect client demand in the rapidly changing communications market.

Our fiscal year ends on March 31. References to "Fiscal Year" or "Fiscal" mean our fiscal year ended March 31 for the year referenced. All dollar amounts are in thousands except for per share amounts or unless otherwise noted. We were incorporated in Delaware in 1976, and our headquarters is near Pittsburgh in Lawrence, Pennsylvania. Our mailing address is 1000 Park Drive, Lawrence, Pennsylvania 15055 and our phone number is (724) 746-5500. Our website is http://www.blackbox.com. Through the Investor Relations section of our website, we make available the following filings as soon as practicable after they are electronically filed with the Securities and Exchange Commission ("SEC"): our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. All such filings are available free of charge. Also available on our website under the About Us section, is the Company's Standards of Business Conduct, Code of Ethics and the charter of each committee of the Company's Board of Directors (the "Board") each of which is available free of charge.


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 following list of important factors is not all-inclusive.

We are dependent upon certain key supply chain and distribution agreements. We have significant arrangements with a small number of technology suppliers. 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 client commitments with an acceptable alternative or we may not be able to obtain alternative solutions at similar costs.


5

Table of Contents                                                 

We are dependent upon the demand for our 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 face intense competition. We operate in a highly competitive industry. Our competitors, who include our technology suppliers and certain clients, may be able to deliver products and services at better prices or more quickly due to factors beyond our control. New competitors may also emerge in the future, which may 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 clients 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.

Our revenue is dependent upon repeat client 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 less than twenty (20%) of our revenue is generated from long-term maintenance contracts. We depend on repeat client business as well as our ability to develop new client 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.

A significant part of our business involves public sector clients which provides unique risks . Approximately 25% of our revenues is derived from sales to agencies and departments of federal, state and local governments. Legislatures typically appropriate funds for a given program annually. These appropriations may be influenced by, among other things, the state of the economy, competing priorities for appropriation, changes in administration or control of legislatures, the timing and amount of tax receipts and the overall level of government expenditures. A decrease in appropriations for certain programs could have a material adverse effect on our business.

In addition, our revenues from sales to these public sector clients 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 regulations or contracts could subject us to fines, penalties, suspension or debarment from doing business with such clients, which could have a material adverse effect on our business.

Our ability to experience organic growth is dependent upon successful execution of new initiatives. We have recently experienced a change in management, including a new Chief Executive Officer. In connection therewith, we have re-aligned our organizational structure and have introduced new programs in order to better capitalize on internal assets and expertise, which we believe will enable us to introduce new product and service offerings as well as to support additional offerings for our clients resulting in increased revenues (including organic growth) and profitability. The failure of these programs could have a material adverse effect on our ability to increase revenues and profitability.
We are dependent upon the successful integration of acquired businesses. Our future financial results are dependent on the successful integration of acquisitions within the projected timeframes and cost parameters. We also face pressure to adequately conduct our ongoing operations while working toward the integration of acquired 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 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.

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.


6

Table of Contents                                                 

Our business operations could be disrupted if our information technology systems fail to perform adequately. The efficient operation of our business depends on our information technology systems. We rely on our information technology systems to effectively manage our business data, communications, order entry and fulfillment and other business processes. The failure of our information technology systems to perform as we anticipate could disrupt our business and could result in transaction errors, processing inefficiencies and the loss of sales and customers, causing our business and results of operations to suffer. In addition, our information technology systems may be vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters, power outages, systems failures, security breaches and viruses. Any such damage or interruption could have a material adverse effect on our business.

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 certain 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.

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.

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 and could accumulate additional goodwill that could be subject to impairment. As a result of our past acquisition program and given the service nature of our business, we have accumulated goodwill. Part of our current growth strategy is to acquire strategic companies in high growth markets and given the service nature of those future acquisitions, we will accumulate additional goodwill. We conduct an impairment assessment of the carrying value of our goodwill at least annually and we monitor market conditions to determine if any additional interim review of goodwill is warranted. Deterioration in the market or actual results as compared to our projections or any reorganization of our business segments or under performance of future acquisitions 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. The information set forth under the caption “Goodwill” in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report is incorporated herein by reference in order to supplement this information including the discussions of new operating segments effective on April 1, 2013.


Item 1B. Unresolved Staff Comments.

None.


Item 2. Properties.

The Company’s 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.


Item 3. Legal Proceedings.

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 these matters are adequately provided for, covered by insurance, without merit or not probable that an unfavorable material outcome will result.

7

Table of Contents                                                 

Item 4. Mine Safety Disclosures.

Not applicable.


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
Michael McAndrew
53
President and Chief Executive Officer
Timothy C. Huffmyer
39
Vice President, Chief Financial Officer and Treasurer (Principal Accounting Officer)
Kenneth P. Davis
49
Executive Vice President of North America Commercial Services

Ronald Basso
53
Executive Vice President of Business Development, General Counsel & Secretary

The following is a biographical summary of the experience of the executive officers of the Company:

MICHAEL MCANDREW , 53 , was selected as a member of the Board on April 1, 2013 and was named Chief Executive Officer effective that same date. On October 2, 2012, he was promoted to President and Chief Operating Officer. On May 11, 2010, he was promoted to Executive Vice President. He had previously been promoted to the position of 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 with the Company prior to December 13, 2002. Mr. McAndrew has been with the Company for 23 years.

TIMOTHY C. HUFFMYER , 39 , was named Vice President, Chief Financial Officer and Treasurer (and, in those roles, he serves as the Company's principal financial officer and principal accounting officer) on October 2, 2012. In connection with Mr. Huffmyer's appointment, Mr. McAndrew ceased to serve as Executive Vice President, Chief Financial Officer, Treasurer and Secretary (and, in those roles, as principal financial officer and principal accounting officer) as of such date. Mr. Huffmyer was promoted to Director of Finance in February, 2008. He served as Corporate Controller from June, 2004 and in other finance roles prior thereto. Mr. Huffmyer has been with the Company for 9 years.

KENNETH P. DAVIS , 49 , was named as Executive Vice President of North America Commercial Services on October 2, 2012. Mr. Davis was previously named Vice President - Voice Communications North, Europe and Latin America on November 1, 2010. Mr. Davis has served in a number of operating roles within the Company, including as Vice President and General Manager of the Northeast Region, Europe and Latin America. Mr. Davis has been with the Company for 13 years.

RONALD BASSO , 53 , was named Executive Vice President of Business Development, General Counsel and Secretary on January 28, 2013. Mr. Basso was a shareholder of the law firm of Buchanan Ingersoll & Rooney PC from 1985 where he served as the Company's lead engagement partner.

Directors of the Registrant

The following sets forth certain information concerning the members of the Board:

WILLIAM F. ANDREWS , 81 , 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) and Chairman of Katy Industries, Inc. (diversified manufacturing company). He has been a principal with Kohlberg & Co., a private investment company, since 1995. He is also a director of Corrections Corporation of America and Katy Industries, Inc., publicly-held companies, and SVP Holdings Limited.

R. TERRY BLAKEMORE , 56 , was selected to be a director on October 13, 2007 and was named President and Chief Executive Officer of the Company on the same date. He held the position of President until October 2, 2012 and the position of Chief Executive Officer until March 31, 2013. He was elected as a director by our stockholders on August 12, 2008. 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 Company's Voice Communications business unit.


8

Table of Contents                                                 

RICHARD L. CROUCH , 66 , 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 on July 2, 2004.

THOMAS W. GOLONSKI , 70 , 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 a director of several educational and health care organizations and active in other charitable organizations.

THOMAS G. GREIG , 65 , 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 Senior Managing Director of Liberty Capital Partners, a private equity partnership, since 1998. He is also a director of publicly-held Rudolph Technologies, Inc. and a number of privately-held companies.

JOHN S. HELLER , 59 , was selected to be a director on March 27, 2013. Mr. Heller retired from Caterpillar Inc. (manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives) in February 2012. He held a number of positions of increasing responsibility at Caterpillar during a 38-year career, last serving as Vice President and Chief Information Officer for more than the last 5 years.

WILLIAM H. HERNANDEZ, 65 , was selected to be a director on December 3, 2009 and was elected by our stockholders on August 10, 2010. Mr. Hernandez was the Senior Vice President, Finance and Chief Financial Officer of PPG Industries, Inc. (“PPG”), a global supplier of paints, coatings, optical products, specialty materials, chemicals, glass and fiber glass, from 1995 until October 15, 2009. Prior to assuming those duties in 1995, he served as PPG's Controller from 1990 to 1994 and as Vice President and Controller from 1994. From 1974 until 1990, he held a number of positions at Borg-Warner Corporation, a supplier of motor vehicle parts and systems. He is a Certified Management Accountant. He is a director of USG Corporation, Eastman Kodak Company and Albemarle Corporation, all publicly-held companies.

MICHAEL MCANDREW , 53 , was selected to be a director effective April 1, 2013 in connection with his appointment as the Chief Executive Officer of the Company, which became effective on the same date. Mr. McAndrew has been with the Company for 23 years. In October 2012, he was named President and Chief Operating Officer of the Company. Prior to that, he served as Executive Vice President and Chief Financial Officer from May 2010 to October 2012, and Vice President and Chief Financial Officer, from December 2002 to May 2010. He also served as Secretary and Treasurer from January 2003 to October 2012. Prior to 2002, he held the position of Manager of Corporate Planning and Analysis.

EDWARD A. NICHOLSON, PH.D. , 73 , 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 University. He is also a director of Brentwood Bank and several regional economic, charitable and cultural organizations. 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.

JOEL T. TRAMMELL , 48 , was selected to be a director on March 27, 2013. Mr. Trammell has been a Managing Partner of Lone Rock Technology Group (private equity) since 2011. He was a founder and the CEO of CacheIQ, Inc. (network computing) from June 2010 until it was acquired by NetApp, Inc. in November 2012. Previously, he was a founder and served as the CEO of NetQoS, Inc. (network management software and services) from June 2000 to November 2009.


PART II

Item 5. Market for Registrant’s 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, 2013 , 25,897,762 shares of the common stock were issued, of which 9,765,190 shares were held in treasury.


9

Table of Contents                                                 

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 Company’s fiscal quarters indicated below.
 
High

Low

Fiscal 2013
 
 
1 st  Quarter
$
28.87

$
20.26

2 nd  Quarter
28.80

21.28

3 rd  Quarter
26.57

19.31

4 th  Quarter
26.85

21.63

Fiscal 2012
 
 
1 st  Quarter
$
36.20

$
28.87

2 nd  Quarter
32.78

20.84

3 rd  Quarter
29.96

19.80

4 th  Quarter
31.94

24.34


On May 10, 2013 , the last reported sale price of the common stock was $24.64 per share.

Dividend Policy
Cash dividends of $0.08 per share of common stock declared during Fiscal 2013 were paid on July 13, 2012 , October 12, 2012 , January 11, 2013 and April 12, 2013 . Cash dividends of $0.07 per share of common stock declared during Fiscal 2012 were paid on July 14, 2011 , October 13, 2011 , January 12, 2012 and April 13, 2012 . 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 the financial condition of the Company.

Under the Company’s Credit Agreement dated as of March 23, 2012 (the " 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 Credit Agreement) shall have occurred and is continuing or shall occur as a result thereof. In addition, no distribution or dividend on or repurchase of common stock is permitted under the Credit Agreement if such event would violate a consolidated leverage ratio other than regular quarterly dividends not exceeding $15,000 per year.

Stockholders
As of March 31, 2013 , there were 1,026 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 Annual Report.

Issuance of Unregistered Securities:
There were no issuances of unregistered securities by the Company during the three-year period ended March 31, 2013 .

Issuer Purchases of Equity Securities:

Period
Total Number of Shares Purchased

Average Price
Paid per Share

Total Number of Shares Purchased
 as Part of Publicly Announced Plans
or Programs

Maximum Number of Shares that May Yet Be Purchased Under the Plans
or Programs

December 30, 2012 to January 27, 2013

$


1,008,960

January 28, 2013 to February 24, 2013
167,187

$
25.08

167,187

841,773

February 25, 2013 to March 31, 2013

$


841,773

Total
167,187

$
25.08

167,187

841,773


As of March 31, 2013 , 841,773 shares were available under repurchase programs approved by the Board. This includes 1,000,000 shares approved for repurchase by the Board on each of May 4, 2012 and October 2, 2012.


10

Table of Contents                                                 

The repurchase programs have no expiration date and no programs were terminated prior to the full repurchase of the authorized amount.

Additional repurchases of common stock may occur from time to time depending upon factors such as the Company's 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.


Item 6. Selected Financial Data.

The following tables set forth certain selected historical financial data for the Company (in thousands, except for per share amounts). This information should be read in conjunction with the Company’s consolidated financial statements, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and the Notes to the Consolidated Financial Statements included elsewhere in this Annual Report.
 
Fiscal
 
2013

2012

2011

2010

2009

Statements of Operations
 
 
 
 
 
Revenues
$
997,786

$
1,087,528

$
1,068,229

$
961,393

$
999,548

Gross profit
319,930

346,496

357,110

335,381

357,180

Operating income (loss)
56,269

(239,673
)
91,058

63,043

80,003

Net income (loss)
28,806

(247,734
)
52,862

34,503

45,309

Basic earnings (loss) per share
1.73

(13.98
)
2.99

1.97

2.59

Diluted earnings (loss) per share
1.73

(13.98
)
2.97

1.97

2.59

Dividends per share
0.32

0.28

0.24

0.24

0.24

Balance Sheet Data (at end of period)
 
 
 
 
 
Working capital *
184,229

166,167

164,595

126,585

130,209

Total assets
878,001

888,023

1,171,983

1,125,364

1,136,488

Long-term debt
187,648

179,621

181,127

210,873

249,260

Stockholders’ equity
482,247

494,384

766,259

689,994

647,299

* Working capital is computed as current assets minus current liabilities.


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A").

The discussion and analysis for the fiscal years ended March 31, 2013 , 2012 and 2011 as set forth below in this Item 7 should be read in conjunction with the consolidated financial statements of Black Box, including the related notes. The Company’s fiscal year ends on March 31. References to "Fiscal Year" or "Fiscal" mean the Company’s fiscal year ended March 31 for the year referenced. All dollar amounts are presented in thousands except for per share amounts or unless otherwise noted.

The Company
Black Box is a leading communications system integrator dedicated to designing, sourcing, implementing and maintaining today's complex communications solutions. The Company's primary service offering is Voice Communications; the Company also offers Data Infrastructure and Technology Products. As of March 31, 2013 , the Company had more than 3,000 professional technical experts in approximately 200 offices serving more than 175,000 clients in approximately 150 countries throughout the world. Founded in 1976, Black Box operates subsidiaries on five continents and is headquartered near Pittsburgh in Lawrence, Pennsylvania.


11

Table of Contents                                                 

With respect to Voice Communications, the Company's revenues are primarily generated from the sale and/or installation of new voice communications systems, the support of voice communications systems and moves, adds and changes ("MAC work") as clients' employees change locations or as clients move or remodel their physical space. The Company's diverse portfolio of product offerings allows it to service the needs of its clients independently of the manufacturer that they choose, which it believes is a unique competitive advantage. For the sale of new voice communications systems, most significant orders are subject to competitive bidding processes and, generally, competition can be significant for such new orders. The Company is continually bidding on new projects to replace projects that are completed. New voice communications systems orders often generate an agreement to support the voice communications system, which generally ranges from 1-3 years for commercial clients and 3-5 years for government clients. Historically, such an agreement would result in a fixed fee model over a period of time; however, some of our clients are migrating toward a variable fee model based on time and materials over a period of time. While this shift decreases our contractually obligated revenues and corresponding profits, the Company believes the variable model, which is dependent on the clients need for our services, will generate revenues with similar profitability to the fixed-fee model. Sales of new voice communications systems and, to a lesser extent, MAC work, are dependent upon general economic growth and the Company's clients' capital spending. On the other hand, revenues from support agreements (fixed and variable) contracts generally are not dependent on the economy as clients seek to extend the life of their existing equipment and delay capital spending on new voice communications systems. The Company also has government contracts that generate significant revenues and are not as dependent on the overall economic environment as commercial clients. Maintenance and MAC work revenues are also dependent upon the Company's history and relationship with its clients and its long track record of providing high-quality service.
Similarly, the Company’s revenues for Data Infrastructure are generated from the installation or upgrade of data networks and MAC work. The installation of new data networks is also dependent upon general economic growth and our clients' capital spending. Installed data networks, however, may need to be upgraded in order to accommodate the growing use of network technology. Additionally, Data Infrastructure projects can include MAC work, similar to Voice Communications, which is dependent on economic factors that are the same as those factors discussed above in relation to the Voice Communications business.

There is and has been a trend toward convergence of voice and data networks, in each of which the Company has technical expertise which the Company believes is a competitive advantage. Both the Voice Communications and Data Infrastructure businesses generate backlog which is defined by the Company as orders and contracts considered to be firm. At March 31, 2013 , the Company’s total backlog, which relates primarily to Voice Communications and Data Infrastructure, was $369,711 of which $264,027 is expected to be completed within the next twelve months.

The Company generates Technology Products revenues from the sale of technology products such as cables, switches and media infrastructure products through its catalog, Internet Web site and direct sales. The sale of these products is a highly fragmented and competitive business. The Company has been in this business for over 30-years and has developed a reputation for providing high quality products, free 24/7/365 technical support, comprehensive warranties and rapid order fulfillment. With an average order size of less than one thousand dollars, the Company’s Technology Products is less impacted by capital spending and more so by general information technology spending. The Company’s Technology Products business provides additional distribution and support capabilities along with access to Black Box branded products to both the Voice Communications and Data Infrastructure businesses which provide cost benefits.

The Company services a variety of clients within most major industries, with the highest concentration in government, healthcare, business services, manufacturing, retail, technology and banking. Factors that impact those verticals, therefore, could have an impact on the Company. While the Company generates most of its revenues in North America, the Company also generates revenues from around the world, primarily Europe, such that factors that impact European markets could impact the Company.

The Company strives to develop extensive and long-term relationships with high-quality clients as Management believes that satisfied clients will demand quality services and product offerings even in economic downturns.


12

Table of Contents                                                 

The Company targets strategic acquisitions which it believes will deepen its capabilities and expand market opportunity. The Company has completed several acquisitions from April 1, 2010 through March 31, 2013 that have had an impact on the Company’s consolidated financial statements and, more specifically, North America Voice Communications and North America Data Infrastructure for the periods under review. There were no acquisitions during Fiscal 2013 . Fiscal 2012 acquisitions include (i) InnerWireless, Inc. ("Innerwireless"), a privately-held company headquartered in Richardson, TX, services clients in every industry from healthcare to Fortune 500 enterprises and was the first Black Box acquisition in the rapidly-growing in-building wireless market and (ii) PS Technologies, LLC, a privately-held company headquartered in Dayton, OH, services clients in the healthcare and government verticals and was the first Black Box acquisition in the rapidly-growing enterprise video communications market. The only Fiscal 2011 acquisition was LOGOS Communications Systems, Inc., a privately-held company headquartered in Westlake, OH, with an active client base which includes commercial, education and various local government agency accounts. These acquisitions are collectively referred to as the "Acquired Companies." References to the Acquired Companies within our comparison of Fiscal 2013 and Fiscal 2012 are intended to describe the Acquired Companies from April 1, 2011 through March 31, 2013 . References to the Acquired Companies within our comparison of Fiscal 2012 and Fiscal 2011 are intended to describe the Acquired Companies from April 1, 2010 through March 31, 2012 . The results of operations of the Acquired Companies are included within the Company’s Consolidated Statements of Operations beginning on their respective acquisition dates.
The Company incurs certain expenses such as the amortization of intangible assets on acquisitions, restructuring expense, the goodwill impairment loss, the change in fair value of the interest-rate swaps and the joint venture investment loss that it excludes when evaluating the continuing operations of the Company. The following table summarizes those expenses and their impact on Operating income (loss) and Income (loss) before provision (benefit) for income taxes for the periods presented:
 
Fiscal
 
2013

2012

2011

Amortization of intangible assets on acquisitions
13,713

12,980

12,111

Restructuring expense
8,445

1,866

1,793

Goodwill impairment loss

317,797


Impact on Operating income (loss)
$
(22,158
)
$
(332,643
)
$
(13,904
)
Change in fair value of interest-rate swaps
606

(530
)
(2,968
)
Joint venture investment loss
$
2,670

$

$

Impact on Income (loss) before provision (benefit) for income taxes
$
(25,434
)
$
(332,113
)
$
(10,936
)

Fiscal 2013 vs Fiscal 2012 Summary

In Fiscal 2013, revenues decreased by 8% which, on a geographic segment basis, included decreases of 9% in North America, 8% in Europe and 2% in All Other. From a service-type perspective, the 8% total decrease included decreases of 1% for Data Infrastructure, which includes a full year of revenues during Fiscal 2013 from Innerwireless whereas the prior year would have only included a partial year of revenues, 11% for Voice Communications and 9% for Technology Products. Our government (primarily federal) revenue vertical was down 15% as a result of delays in funding as well as project and task order initiation and our commercial revenue vertical was down 10% as a result of slower than expected economic recovery and sluggish client adoption of the rapidly changing communications technology for Voice Communications and lower IT infrastructure spend and investment levels by our end customers for Data Infrastructure which is highly dependent on project-oriented revenues.

We operate in the rapidly changing communication technology market which has inherent market risk. Economic recovery has not been as strong or as consistent in our markets as we had expected. The changes in communications technology have been rapid, and client adoption has been weak. Our management team has responded by providing technology independent solutions to meet our clients' evolving needs. However, in recent years, we have not been able to create or sustain organic growth.

Our response to the changes in our market needs to be decisive. We occupy a unique position in the market and our relationship with our partners and clients provides Black Box with valuable insight into the future of enterprise communications. We believe that communications is an organization's most important process and that our clients are best served with a technology-independent approach to meeting their communications challenges. We also believe that enterprises will adopt best of breed solutions. In response, our strategy includes four areas of focus:

Strengthen and expand our portfolio of high-value communications solutions. As enterprise communications become more complex, we must be prepared to offer our clients the very latest solution alternatives.


13

Table of Contents                                                 

Leverage our centralized expertise with our local skills and relationships. Over time, we have built the most competitive footprint of local technical resources in the industry. We can drive additional products and services through that platform by investing in centralized engineering and project management resources.

Realign our organizational structure and incentive programs. During the year, we announced leadership changes within our executive and operating teams. These changes add focus and accountability to our business.

Implement a consistent, comprehensive market penetration approach. Just as we can leverage our product and service platforms to serve our clients, we can also leverage our local resources more efficiently with focused centralized sales and marketing programs.

Successful implementation of this strategy begins with a transition of our business to a more flexible organization that can adapt to the rapid changes in communications technology. As such, the Company has realigned its organizational structure which will result in new reporting segments (North America Services, North America Products, International Services and International Products) for the purpose of making operational decisions and assessing financial performance which will be effective, on a prospective basis, beginning on April 1, 2013. This is consistent with the proliferation of voice-over-internet-protocol (VOIP) solutions and the adoption of unified communication technologies which has resulted in a trend toward convergence of voice and data networks. We believe that, in the near future, the distinction between our voice and data solution offerings will not be significant. As such, those historical Voice Communications and Data Infrastructure offerings have been aggregated into Services in their respective geography. We will report financial information (revenue through operating income) for these new reporting segments which should provide enhanced visibility and transparency into our operations, our business drivers and the value of our enterprise. We believe that a successful transition will better position Black Box as a comprehensive communications system integrator where we can support our clients with multiple offerings.

As a first step in this transition, we are focused on leveraging our technology-independent service model. We continue to believe that our best of breed, client-focused offering is a competitive advantage for Black Box. With the broad service platform that we have built, we have the opportunity to enable all of our offices with access to a comprehensive portfolio of products and services. The transition of our service model will include more client-focused resources in the field, supported by centralized expertise.

During Fiscal 2013, we worked to align our organizational structure to enable our field with better access to technical expertise and partner resources. Also, we are realigning sales and account management incentives to promote new product penetration, in effect, driving focus and action to cross-selling our portfolio of communications solutions. We believe that these changes will enable us to efficiently and effectively introduce additional new product and service offerings over time and allow us to support multiple offerings for each of our clients which, in turn, should grow our revenues organically and could increase profitability as a result of new product offerings and efficiencies in the delivery model.

The transition that we are implementing is in response to a dynamic market. Although our voice-centric approach has served us well, we recognize that the future of enterprise communications requires a more robust offering. We expect our clients to continue to look to us for creative solutions and we, in turn, expect to deliver them. As we transition, we will continue to be responsive to our clients' evolving views on enterprise communications.

The changes that we have made during Fiscal 2013 did not require significant additional investments. However, we intend to make investments in sales and marketing efforts which could have an impact on our profitability in the near term.

While we have implemented a strategy to profitably grow our revenues in this rapidly changing communication technology market, the success of that strategy and our ability to grow revenues is dependent on a reasonable level of government spending, economic recovery along with IT infrastructure spend and investments by our end customers and client adoption of rapidly-changing communications technology. There is no assurance that this strategy will be successful and any failure could impact our financial condition.

Gross profit margins increased by 0.2% to 32.1% primarily as a result of competitive market conditions for Voice Communications and Technology Products. The Company believes that the addition of new services and products to its existing technology independent service model should result in stable gross profit margins.

Operating income increased 123% which was due to the goodwill impairment loss of $317,797 incurred in the prior year partially offset by a decrease in Revenues. Operating income included $8,445 of restructuring expense which was incurred as a response to the continued weakness in our end markets to better align our costs with revenues in the form of headcount reductions and back office and real estate consolidation initiatives; we expect these actions to result in annualized savings of approximately $12 million. We will continue to evaluate all of our operating costs and investments to ensure an efficient and effective use of our resources.

14

Table of Contents                                                 

As previously noted, certain of our Selling, general and administrative expenses do not change significantly with changes in revenue. As such, we believe that we can realize significant leverage from our Selling, general and administrative expenses with increases in our Revenues.

Diluted EPS increased 112% due to the net after-tax impact of the goodwill impairment loss of $295,996 incurred in the prior year as well as a 6% decrease in our Diluted weighted-average shares outstanding partially offset by a decrease in Revenues. The decrease in our Diluted weighted-average shares outstanding was the result of the repurchase of shares of our common stock noted below.

Cash flow from operations decreased 29% which was due to the decrease in Revenues. We returned value to our investors by repurchasing 1,515,445 shares of common stock for $37,214, paying $5,206 in annual dividends and investing $6,323 of capital expenditures to support our operational infrastructure.

Management is presented with and reviews revenues and operating income (loss) by geographical segment and revenues and gross profit information by service type. The following table provides information on Revenues and Operating income (loss) by reportable geographic segment ( North America , Europe and All Other ). The table below should be read in conjunction with the following discussions.
 
Fiscal
 
2013
2012
2011
 
$

% of
total
revenue
$

% of
total
revenue
$

% of
total
revenue
Revenues
 
 
 
 
 
 
North America
$
862,957

86.5%
$
943,717

86.8%
$
931,181

87.2%
Europe
97,114

9.7%
105,492

9.7%
100,221

9.4%
All Other
37,715

3.8%
38,319

3.5%
36,827

3.4%
Total
$
997,786

100%
$
1,087,528

100%
$
1,068,229

100%
Operating income (loss)
 
 
 
 
 
 
North America 1
$
47,413

 
$
(214,448
)
 
$
76,789

 
% of North America revenues
5.5
%
 
(22.7
)%
 
8.2
%
 
Europe 2
$
5,191

 
$
(30,347
)
 
$
8,032

 
% of Europe revenues
5.3
%
 
(28.8
)%
 
8.0
%
 
All Other
$
3,665

 
$
5,122

 
$
6,237

 
% of All Other revenues
9.7
%
 
13.4
 %
 
16.9
%
 
Total
$
56,269

5.6%
$
(239,673
)
(22.0)%
$
91,058

8.5%
1 Includes goodwill impairment loss of $277,132 recorded during the third quarter of Fiscal 2012.

2 Includes goodwill impairment loss of $40,665 recorded during the third quarter of Fiscal 2012.


15

Table of Contents                                                 

The following table provides information on Revenues and Gross profit by service type ( Data Infrastructure , Voice Communications and Technology Products ). The table below should be read in conjunction with the following discussions.
 
Fiscal
 
2013
2012
2011
 
$

% of
total
revenue
$

% of
total
revenue
$

% of
total
revenue
Revenues
 
 
 
 
 
 
Data Infrastructure
$
243,711

24.4%
$
247,157

22.7%
$
230,719

21.6%
Voice Communications
572,371

57.4%
641,731

59.0%
648,512

60.7%
Technology Products
181,704

18.2%
198,640

18.3%
188,998

17.7%
Total
$
997,786

100%
$
1,087,528

100%
$
1,068,229

100%
Gross profit
 
 
 
 
 
 
Data Infrastructure
$
63,370

 
$
62,032

 
$
59,287

 
% of Data Infrastructure revenues
26.0
%
 
25.1
%
 
25.7
%
 
Voice Communications
$
176,057

 
$
196,279

 
$
210,558

 
% of Voice Communications revenues
30.8
%
 
30.6
%
 
32.5
%
 
Technology Products
$
80,503

 
$
88,185

 
$
87,265

 
% of Technology Products revenues
44.3
%
 
44.4
%
 
46.2
%
 
Total
$
319,930

32.1%
$
346,496

31.9%
$
357,110

33.4%


Fiscal 2013 Compared To Fiscal 2012

Total Revenues
Total revenues for Fiscal 2013 were $997,786 , a decrease of 8% compared to total revenues for Fiscal 2012 of $1,087,528 . The Acquired Companies contributed incremental revenue of $56,647 and $31,453 for Fiscal 2013 and Fiscal 2012 , respectively. Excluding the effects of the acquisitions and the negative exchange rate impact of $5,088 in Fiscal 2013 relative to the U.S. dollar, total revenues would have decreased 10% from $1,056,075 in Fiscal 2012 to $946,227 in Fiscal 2013 for the reasons discussed below.


Revenues by Geography

North America
Revenues in North America for Fiscal 2013 were $862,957 , a decrease of 9% compared to revenues for Fiscal 2012 of $943,717 . The Acquired Companies contributed incremental revenue of $56,647 and $31,453 for Fiscal 2013 and Fiscal 2012 , respectively. Excluding the effects of the acquisitions and the negative exchange rate impact of $144 in Fiscal 2013 relative to the U.S. dollar, North American revenues would have decreased 12% from $912,264 in Fiscal 2012 to $806,454 in Fiscal 2013 . This decrease was primarily due to a decrease for Voice Communications within the government revenue vertical, primarily caused by delays in funding as well as project and task order initiation and within the financial services, retail services, education and healthcare revenue verticals primarily as a result of slower than expected economic recovery and sluggish client adoption of the rapidly changing communications technology; for Data Infrastructure within the business services, financial services and retail services revenue verticals, primarily as a result of lower IT infrastructure spend and investment levels by our end customers; and for Technology Products within the government and business services revenue verticals, primarily as a result of slower than expected economic recovery and lower IT infrastructure spend and investment levels by our end customers.

Europe
Revenues in Europe for Fiscal 2013 were $97,114 , a decrease of 8% compared to revenues for Fiscal 2012 of $105,492 . Excluding the negative exchange rate impact of $4,249 in Fiscal 2013 relative to the U.S. dollar, revenues in Europe would have decreased 4% from $105,492 in Fiscal 2012 to $101,363 in Fiscal 2013 . This decrease was primarily due to sluggish economic recovery that has affected demand for Data Infrastructure and Technology Products.


16

Table of Contents                                                 

All Other
Revenues for All Other for Fiscal 2013 were $37,715 , a decrease of 2% compared to revenues for Fiscal 2012 of $38,319 . Excluding the negative exchange rate impact of $695 in Fiscal 2013 relative to the U.S. dollar, All Other revenues would have been relatively consistent at $38,319 in Fiscal 2012 and $38,410 in Fiscal 2013 .


Revenue by Service Type

Data Infrastructure
Revenues from Data Infrastructure for Fiscal 2013 were $243,711 , a decrease of 1% compared to revenues for Fiscal 2012 of $247,157 . The Acquired Companies contributed incremental revenue of $30,107 and $6,025 for Fiscal 2013 and Fiscal 2012 , respectively. Excluding the effects of the acquisitions and the negative exchange rate impact of $1,263 in Fiscal 2013 relative to the U.S. dollar for international Data Infrastructure, Data Infrastructure revenues would have decreased 11% from $241,132 in Fiscal 2012 to $214,867 in Fiscal 2013 . This decrease was primarily due to lower IT infrastructure spend and investment levels by our end customers in North America within the business services, financial services and retail services revenue verticals and a sluggish economic recovery that has affected demand in Europe.

Voice Communications
Revenues from Voice Communications for Fiscal 2013 were $572,371 , a decrease of 11% compared to revenues for Fiscal 2012 of $641,731 . The Acquired Companies contributed incremental revenue of $26,540 and $25,428 for Fiscal 2013 and Fiscal 2012 , respectively. Excluding the effects of the acquisitions and the negative exchange rate impact of $79 in Fiscal 2013 relative to the U.S. dollar for international Voice Communications,Voice Communications revenues would have decreased 11% from $616,303 in Fiscal 2012 to $545,910 in Fiscal 2013 . This decrease was primarily due to delays in funding as well as project and task order initiation in the government revenue vertical and slower than expected economic recovery and sluggish client adoption of the rapidly changing communications technology within business services, retail services, education and healthcare revenue verticals.

Technology Products
Revenues from Technology Products for Fiscal 2013 were $181,704 , a decrease of 9% compared to revenues for Fiscal 2012 of $198,640 . Excluding the negative exchange rate impact of $3,746 in Fiscal 2013 relative to the U.S. dollar for international Technology Products, Technology Products revenues would have decreased 7% from $198,640 in Fiscal 2012 to $185,450 in Fiscal 2013 . This decrease was primarily due to slower than expected economic recovery and lower IT infrastructure spend and investment levels by our end customers in North America within the government and business services revenue verticals and a sluggish economic recovery that has affected demand in Europe.


Gross profit
Gross profit for Fiscal 2013 was $319,930 , a decrease of 8% compared to gross profit for Fiscal 2012 of $346,496 . Gross profit as a percent of revenues for Fiscal 2013 was 32.1% , an increase of 0.2% compared to gross profit as a percentage of revenues for Fiscal 2012 of 31.9% . The decrease in gross profit was primarily due to the decrease in revenues. The increase in gross profit as a percent of revenue was the result of a percentage increase in Data Infrastructure primarily due to project mix and the completion, in Fiscal 2012, of several lower margin projects. Voice Communications and Technology Products had comparable margins period over period as a result of continued competitive market conditions.

Gross profit for Data Infrastructure for Fiscal 2013 was $63,370 , or 26.0% of revenues, compared to gross profit for Fiscal 2012 of $62,032 , or 25.1% of revenues. Gross profit for Voice Communications for Fiscal 2013 was $176,057 , or 30.8% of revenues, compared to gross profit for Fiscal 2012 of $196,279 , or 30.6% of revenues. Gross profit for Technology Products for Fiscal 2013 was $80,503 , or 44.3% of revenues, compared to gross profit for Fiscal 2012 of $88,185 , or 44.4% 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 2013 were $249,924 , a decrease of 2% compared to Selling, general & administrative expenses for Fiscal 2012 of $255,347 . Selling, general & administrative expenses as a percent of revenues for Fiscal 2013 were 25.0% , an increase of 1.5% compared to Selling, general & administrative expenses as a percent of revenues for Fiscal 2012 of 23.5% . The decrease in Selling, general & administrative expenses, which included $8,445 of restructuring expense, was due primarily to cost savings from headcount reductions, back office and real estate consolidation initiatives to better align our costs with revenues in response to continued weakness in certain of our end markets as well as streamline certain functions. The increase in Selling, general & administrative expenses as a percent of revenue over the prior year was primarily due to decreased Revenues partially offset by the decrease in Selling, general & administrative expenses.

17

Table of Contents                                                 


Selling, general & administrative expenses generally include expenses for sales and marketing, engineering, product management, centers of excellence and corporate expenses. Certain of these expenses do not change significantly with changes in revenue.


Goodwill impairment loss
There was no Goodwill impairment loss for Fiscal 2013 compared to Goodwill impairment loss of $317,797 for Fiscal 2012 . See "Goodwill" below for additional information.


Intangibles amortization
Intangibles amortization for Fiscal 2013 was $13,737 , an increase of 6% compared to Intangible amortization for Fiscal 2012 of $13,025 . The increase was primarily attributable to a full year of amortization during Fiscal 2013 compared to a partial year of amortization during Fiscal 2012 for acquisitions completed during Fiscal 2012.


Operating income (loss)
As a result of the foregoing, Operating income for Fiscal 2013 was $56,269 compared to Operating loss for Fiscal 2012 of $239,673 .


Interest expense (income), net
Interest expense for Fiscal 2013 was $6,090 , an increase of 18% compared to Interest expense for Fiscal 2012 of $5,148 . Interest expense as a percent of revenues for Fiscal 2013 was 0.6% , an increase of 0.1% compared to Interest expense as a percent of revenues for Fiscal 2012 of 0.5% . The Company’s interest-rate swaps contributed a loss of $606 and a gain of $530 for Fiscal 2013 and Fiscal 2012 , respectively, due to the change in fair value.

Excluding the Company's interest-rate swaps, the decrease in Interest expense is primarily due to a decrease in fixed settlements on the interest rate swaps caused by a reduction in the weighted-average swap rate partially offset by increases in the weighted-average interest rate from 1.1% for Fiscal 2012 to 1.5% for Fiscal 2013 and in the weighted-average outstanding debt from $194,055 for Fiscal 2012 to $203,072 for Fiscal 2013. The increase in the weighted-average interest rate is due primarily to the Credit Agreement (see below) entered into by the Company on March 23, 2012 that has slightly less favorable terms than did its predecessor.


Other expenses (income), net
Other expense for Fiscal 2013 was $3,716 , an increase of 198% compared to Other expense for Fiscal 2012 of $1,245 . The increase was primarily due to a loss of $2,670 during the third quarter of Fiscal 2013 due to the probable divestiture of our non-controlling interest in Genesis Networks Integration Services, LLC ("GNIS"), a joint venture company which was formed in conjunction with Genesis Networks Enterprises, LLC. The GNIS divestiture was not material to the Company's consolidated financial statements and is not expected to have a material impact on future operations.


Provision (benefit) for income taxes
The tax provision for Fiscal 2013 was $17,657 , an effective tax rate of 38.0% . This compared to the tax provision for Fiscal 2012 of $1,668 , an effective tax rate of (0.7)% . The tax rate for Fiscal 2013 was higher than the tax rate for Fiscal 2012 primarily due to $262,703 of non-deductible goodwill impairment loss resulting from the goodwill impairment in the third quarter of Fiscal 2012 and a reduction in reserves of $1,579 during second quarter of Fiscal 2012 related to the settlement of an Internal Revenue Service audit for Fiscal 2007 through Fiscal 2010. The Company anticipates that its deferred tax asset is realizable in the foreseeable future.


Net income (loss)
As a result of the foregoing, Net income for Fiscal 2013 was $28,806 compared to Net loss for Fiscal 2012 of $247,734 .



18

Table of Contents                                                 

Fiscal 2012 Compared To Fiscal 2011

Total Revenues
Total revenues for Fiscal 2012 were $1,087,528 , an increase of 2% compared to total revenues for Fiscal 2011 of $1,068,229 . The Acquired Companies contributed incremental revenue of $77,336 and $8,973 for Fiscal 2012 and Fiscal 2011 , respectively. Excluding the effects of the acquisitions and the positive exchange rate impact of $6,725 in Fiscal 2012 relative to the U.S. dollar, total revenues would have decreased 5% from $1,059,256 in Fiscal 2011 to $1,003,467 in Fiscal 2012 for the reasons discussed below.


Revenues by Geography

North America
Revenues in North America for Fiscal 2012 were $943,717 , an increase of 1% compared to revenues for Fiscal 2011 of $931,181 . The Acquired Companies contributed incremental revenue of $77,336 and $8,973 for Fiscal 2012 and Fiscal 2011 , respectively. Excluding the effects of the acquisitions and the positive exchange rate impact of $697 in Fiscal 2012 relative to the U.S. dollar, North American revenues would have decreased 6% from $922,208 in Fiscal 2011 to $865,684 in Fiscal 2012 . This decrease was primarily due to decreased activity for Voice Communications within the government revenue vertical primarily caused by delays in funding as well as project and task order initiation partially offset by increased activity for both end-user and indirect sales of Data Infrastructure within the business services, financial services, retail and manufacturing revenue verticals which was a result of strategic pricing initiatives designed to grow revenues and further penetrate these markets and a general increase in activity for Technology Products primarily due to strategic pricing initiatives.

Europe
Revenues in Europe for Fiscal 2012 were $105,492 , an increase of 5% compared to revenues for Fiscal 2011 of $100,221 . Excluding the positive exchange rate impact of $4,382 in Fiscal 2012 relative to the U.S. dollar, revenues in Europe would have increased 1% from $100,221 in Fiscal 2011 to $101,110 in Fiscal 2012 . Data Infrastructure and Technology Products activity was relatively comparable period over period.

All Other
Revenues for All Other for Fiscal 2012 were $38,319 , an increase of 4% compared to revenues for Fiscal 2011 of $36,827 . Excluding the positive exchange rate impact of $1,646 in Fiscal 2012 relative to the U.S. dollar, All Other revenues would have been relatively consistent at $36,827 in Fiscal 2011 and $36,673 in Fiscal 2012 .


Revenue by Service Type

Data Infrastructure
Revenues from Data Infrastructure for Fiscal 2012 were $247,157 , an increase of 7% compared to revenues for Fiscal 2011 of $230,719 . The Acquired Companies contributed incremental revenue of $6,025 and $0 for Fiscal 2012 and Fiscal 2011, respectively. Excluding the effects of the acquisitions and the positive exchange rate impact of $2,042 in Fiscal 2012 relative to the U.S. dollar for international Data Infrastructure, Data Infrastructure revenues would have increased 4% from $230,719 in Fiscal 2011 to $239,090 in Fiscal 2012 . This increase was primarily due to increased activity for both end-user and indirect sales in North America within the business services, financial services, retail and manufacturing revenue verticals which was a result of strategic pricing initiatives designed to grow revenues and further penetrate this market as well as a general increase in activity in Europe.

Voice Communications
Revenues from Voice Communications for Fiscal 2012 were $641,731 , a decrease of 1% compared to revenues for Fiscal 2011 of $648,512 . The Acquired Companies contributed incremental revenue of $71,311 and $8,973 for Fiscal 2012 and Fiscal 2011 , respectively. Excluding the effects of the acquisitions, Voice Communications revenues would have decreased 11% from $639,539 in Fiscal 2011 to $570,420 in Fiscal 2012 . This decrease was primarily due to decreased activity within the government revenue vertical primarily caused by delays in funding as well as project and task order initiation. There was no exchange rate impact on Voice Communications revenues as all of the Company's Voice Communications revenues are denominated in U.S. dollars.


19

Table of Contents                                                 

Technology Products
Revenues from Technology Products for Fiscal 2012 were $198,640 , an increase of 5% compared to revenues for Fiscal 2011 of $188,998 . Excluding the positive exchange rate impact of $4,683 in Fiscal 2012 relative to the U.S. dollar for international Technology Products, Technology Products revenues would have increased 3% from $188,998 in Fiscal 2011 to $193,957 in Fiscal 2012 . The Company believes this increase was primarily due to a general increase in activity in North America primarily due to strategic pricing initiatives along with relatively comparable activity in Europe.


Gross profit
Gross profit for Fiscal 2012 was $346,496 , a decrease of 3% compared to gross profit for Fiscal 2011 of $357,110 . Gross profit as a percent of revenues for Fiscal 2012 was 31.9% , a decrease of 1.5% compared to gross profit as a percentage of revenues for Fiscal 2011 of 33.4% . The percent decrease was due primarily to overall service type mix, strategic pricing initiatives for Voice Communications, Data Infrastructure and Technology Products and product mix and increased product costs for Technology Products. The dollar decrease was primarily due to a decrease in gross profit as a percentage of revenues.

Gross profit for Data Infrastructure for Fiscal 2012 was $62,032 , or 25.1% of revenues, compared to gross profit for Fiscal 2011 of $59,287 , or 25.7% of revenues. Gross profit for Voice Communications for Fiscal 2012 was $196,279 , or 30.6% of revenues, compared to gross profit for Fiscal 2011 of $210,558 , or 32.5% of revenues. Gross profit for Technology Products for Fiscal 2012 was $88,185 , or 44.4% of revenues, compared to gross profit for Fiscal 2011 of $87,265 , or 46.2% 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 2012 were $255,347 , an increase of 1% compared to Selling, general & administrative expenses for Fiscal 2011 of $253,896 . Selling, general & administrative expenses as a percent of revenues for Fiscal 2012 were 23.5% , a decrease of 0.3% compared to Selling, general & administrative expenses as a percent of revenues for Fiscal 2011 of 23.8% . The increase in Selling, general & administrative expenses was primarily due to additional operating expenses for the Acquired Companies of approximately $8,645. Excluding the Acquired Companies' Selling, general & administrative expenses of $10,651 and $2,006 for Fiscal 2012 and Fiscal 2011, respectively, and the revenues of the Acquired Companies noted above, Selling, general & administrative expenses as a percent of revenues increased over the prior year primarily due to additional operating expenses related to expected higher revenues levels.

Selling, general & administrative expenses generally include expenses for sales and marketing, engineering, product management, centers of excellence and corporate expenses. Certain of these expenses do not change significantly with changes in revenue.


Goodwill impairment loss
Goodwill impairment loss for Fiscal 2012 was $317,797. There was no goodwill impairment loss for Fiscal 2011 . See "Goodwill" below for additional information.


Intangibles amortization
Intangibles amortization for Fiscal 2012 was $13,025 , an increase of 7% compared to Intangible amortization for Fiscal 2011 of $12,156 . The increase was primarily attributable to the addition of intangible assets from acquisitions completed subsequent to the fourth quarter of Fiscal 2011 partially offset by the amortization run-out for certain intangible assets.


Operating income (loss)
As a result of the foregoing, Operating loss for Fiscal 2012 was $239,673 compared to Operating income for Fiscal 2011 of $91,058 .


Interest expense (income), net
Interest expense for Fiscal 2012 was $5,148 , a decrease of 5% compared to Interest expense for Fiscal 2011 of $5,430 . Interest expense as a percent of revenues was 0.5% for each of Fiscal 2012 and Fiscal 2011 . The Company’s interest-rate swaps contributed gains of $530 and $2,968 for Fiscal 2012 and Fiscal 2011 , respectively, due to the change in fair value.


20

Table of Contents                                                 

Excluding the Company's interest-rate swaps, the decrease in interest expense was due to decreases in the weighted-average interest rate from 1.2% for Fiscal 2011 to 1.1% for Fiscal 2012 and in the weighted-average outstanding debt from $213,124 for Fiscal 2011 to $194,055 for Fiscal 2012 . The decrease in the weighted-average interest rate was due primarily to the overall decline in short-term interest rates.


Provision (benefit) for income taxes
The tax provision for Fiscal 2012 was $1,668 , an effective tax rate of (0.7)% . This compared to the tax provision for Fiscal 2011 of $32,418 , an effective tax rate of 38.0% . The tax rate for Fiscal 2012 was lower than the tax rate for Fiscal 2011 primarily due to $262,703 of non-deductible goodwill impairment loss resulting from the goodwill impairment in the third quarter of Fiscal 2012 and a reduction in reserves of $1,579 during second quarter of Fiscal 2012 related to the settlement of an Internal Revenue Service audit for Fiscal 2007 through Fiscal 2010 and a state audit for Fiscal 2005 through Fiscal 2011. The Company anticipates that its deferred tax asset is realizable in the foreseeable future.


Net income (loss)
As a result of the foregoing, Net loss for Fiscal 2012 was $247,734 compared to Net income for Fiscal 2011 of $52,862 .


Liquidity and Capital Resources

Operating Activities
Net cash provided by operating activities during Fiscal 2013 was $46,701 . Significant factors contributing to the source of cash were: net income of $28,806 inclusive of non-cash charges of $19,123 and $7,712 for amortization/depreciation expense and stock compensation expense, respectively, as well as a decrease in trade accounts receivable of $10,047. Significant factors contributing to the use of cash include an increase in costs in excess of billings of $13,928 (primarily due to large contracts with government clients where contract billing terms do not necessarily coincide with percentage-of-completion revenue recognition) and a decrease in accrued compensation of $5,801. Changes in the above accounts are based on average Fiscal 2013 exchange rates.

Net cash provided by operating activities during Fiscal 2012 was $65,821 . Significant factors contributing to the source of cash were: net loss of $247,734 inclusive of non-cash charges of $18,459 , $9,296 and $317,797 for amortization/depreciation expense, stock compensation expense and goodwill impairment loss, respectively, as well as a decrease in costs in excess of billings of $19,133. Significant factors contributing to a use of cash were: increases in deferred taxes of $23,328 (primarily related to the tax deductible portion of the goodwill impairment loss) and inventory of $3,540 and decreases in accrued compensation, trade accounts payable, billings in excess of costs and accrued taxes of $3,963, $3,460, $6,603 and $9,238, respectively. Changes in the above accounts are based on average Fiscal 2012 exchange rates.

Net cash provided by operating activities during Fiscal 2011 was $54,865 . Significant factors contributing to the source of cash were: net income of $52,862 inclusive of non-cash charges of $18,222 , $10,270 and $7,806 for amortization/depreciation expense, stock compensation expense and deferred taxes, respectively, as well as increases in billings in excess of costs of $2,146 and accrued taxes of $2,292. Significant factors contributing to a use of cash were: increases in trade accounts receivable and costs in excess of billings of $10,393 and $17,537, respectively, as well as decreases in restructuring reserves of $3,458 and accrued expenses of $6,439. Changes in the above accounts are based on average Fiscal 2011 exchange rates.

As of March 31, 2013 , 2012 and 2011 , the Company had Cash and cash equivalents of $30,720 , $22,444 and $31,212 , respectively, working capital of $184,229 , $166,167 and $164,595 , respectively, and a current ratio of 2.0 , 1.9 and 1.8 , respectively.

The Company believes that its cash provided by operating activities and availability under its credit facility will be sufficient to fund the Company’s working capital requirements, capital expenditures, dividend program, potential stock repurchases, potential future acquisitions or strategic investments and other cash needs for the foreseeable future.

Investing Activities
Net cash used by investing activities during Fiscal 2013 was $8,305 . Significant factors contributing to the use of cash were: $6,323 for gross capital expenditures and $2,371 for acquisitions.

Net cash used by investing activities during Fiscal 2012 was $48,418 . Significant factors contributing to the use of cash were: $41,065 for acquisitions and $7,633 for gross capital expenditures.


21

Table of Contents                                                 

Net cash used by investing activities during Fiscal 2011 was $19,670 . Significant factors contributing to the use of cash were: $14,640 for acquisitions and $5,149 for gross capital expenditures.

See Note 11 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report for additional details regarding these acquisitions.

Financing Activities
Net cash used for financing activities during Fiscal 2013 was $29,463 . Significant factors contributing to the cash outflow were: $37,214 for the purchase of common stock (including $983 for the purchase of common stock related to the vesting in May 2012 of certain restricted stock units) and $5,206 for the payment of dividends.

Net cash used for financing activities during Fiscal 2012 was $23,744 . Significant factors contributing to the cash outflow were: $15,292 for the purchase of common stock (including $1,521 for the purchase of common stock related to the vesting in May 2011 of certain restricted stock units and performance shares), $4,798 for the payment of dividends, $1,911 of net payments on long-term debt and $1,743 for the payment of deferred financing costs related to the Credit Agreement.

Net cash used for financing activities during Fiscal 2011 was $26,462 . Significant factors contributing to the use of cash were:$30,284 of net payments on long-term debt and $4,232 for the payment of dividends. A significant factor contributing to the source of cash was $9,239 of proceeds from the exercise of stock options.


Total Debt
On March 23, 2012, the Company entered into a Credit Agreement with Citizens Bank of Pennsylvania, as administrative agent, and certain other lender parties. The Credit Agreement expires on March 23, 2017. Borrowings under the Credit Agreement are permitted up to a maximum amount of $400,000 , which includes up to $25,000 of swing-line loans and $25,000 of letters of credit. The Credit Agreement may be increased by the Company up to an additional $100,000 with the approval of the lenders and may be unilaterally and permanently reduced by the Company to not less than the then outstanding amount of all borrowings. Interest on outstanding indebtedness under the Credit Agreement accrues, at the Company’s 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, in each case plus 0% to 0.75% (determined by a leverage ratio based on the Company’s consolidated Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")) or (b) a rate per annum equal to the LIBOR rate plus 0.875% to 1.750% (determined by a leverage ratio based on the Company’s consolidated EBITDA). The Credit Agreement requires the Company to maintain compliance with certain non-financial and financial covenants such as leverage and fixed-charge coverage ratios. As of March 31, 2013 , the Company was in compliance with all covenants under the Credit Agreement.

As of March 31, 2013 , the Company had total debt outstanding of $187,752 . Total debt was comprised of $187,610 outstanding under the Credit Agreement and $142 of obligations under capital leases and various other third-party, non-employee loans. The maximum amount of debt outstanding under the Credit Agreement, the weighted-average balance outstanding under the Credit Agreement and the weighted-average interest rate on all outstanding debt for Fiscal 2013 was $220,470 , $203,072 and 1.5% , respectively, compared to $216,180 , $194,055 and 1.1% , respectively, for Fiscal 2012 , and $237,255 , $213,124 and 1.2% , respectively, for Fiscal 2011 .

As of March 31, 2013 , the Company had $4,050 outstanding in letters of credit and $208,340 in unused commitments under the Credit Agreement.



22

Table of Contents                                                 

Dividends
The following table presents information about the Company's dividend program:
Period
Record Date
Payment Date
Rate

Aggregate Value

4Q13
March 29, 2013
April 12, 2013
$
0.08

$
1,291

3Q13
December 28, 2012
January 11, 2013
$
0.08

$
1,304

2Q13
September 28, 2012
October 12, 2012
$
0.08

$
1,323

1Q13
June 29, 2012
July 13, 2012
$
0.08

$
1,355

4Q12
March 30, 2012
April 13, 2012
$
0.07

$
1,223

3Q12
December 30, 2011
January 12, 2012
$
0.07

$
1,223

2Q12
September 30, 2011
October 13, 2011
$
0.07

$
1,238

1Q12
July 1, 2011
July 14, 2011
$
0.07

$
1,263


On May 9, 2013, the Company announced that, for the third consecutive year, it had increased its dividend by $.01 per share. While the Company expects to continue to declare quarterly dividends, the payment of future dividends is at the discretion of the Company's Board and the timing and amount of any future dividends will depend upon earnings, cash requirements and the financial condition of the Company. Under the Credit Agreement, the Company is permitted to make any distribution or dividend as long as no Event of Default or Potential Default shall have occurred and is continuing or shall occur as a result thereof. In addition, no distribution or dividend is permitted under the Credit Agreement if such event would violate a consolidated leverage ratio other than regular quarterly dividends not exceeding $15,000 per year.


Common Stock Repurchases
The following table presents information about the Company's common stock repurchases:
 
Fiscal
 
2013

2012

Common stock purchased
1,515,445

606,978

Aggregate purchase price
$
37,214

$
15,292

Average purchase price
$
24.56

$
25.19


During the first quarter of Fiscal 2013 , the Company made tax payments of $983 and withheld 44,697 shares of common stock, which were designated as treasury shares, at an average price per share of $21.98 , related to share withholding to satisfy employee income taxes due as a result of the vesting in May 2012 of certain restricted stock units. During the first quarter of Fiscal 2012 , the Company made tax payments of $1,521 and withheld 45,778 shares of common stock, which were designated as treasury shares, at an average price per share of $33.22 , related to share withholding to satisfy employee income taxes due as a result of the vesting in May 2011 of certain restricted stock units and performance shares.

Since the inception of the repurchase program in April 1999 through March 31, 2013 , the Company has repurchased 9,658,227 shares of common stock for an aggregate purchase price of $373,101 , or an average purchase price per share of $38.63 . These shares do not include the treasury shares withheld for tax payments resulting from the vesting of certain restricted stock units and performance shares. As of March 31, 2013 , 841,773 shares were available under repurchase programs approved by the Board. This includes 1,000,000 shares approved for repurchase by the Board on each of May 4, 2012 and October 2, 2012. Additional repurchases of common stock may occur from time to time depending upon various factors such as the Company’s cash flows and general market conditions. There can be no assurance as to the timing or amount of such repurchases. Under the Credit Agreement, the Company is permitted to repurchase its common stock as long as no Event of Default or Potential Default shall have occurred and is continuing or shall occur as a result thereof. In addition, no repurchase of common stock is permitted under the Credit Agreement if such event would violate a consolidated leverage ratio.


Contractual Obligations
The Company has various contractual obligations and commitments to make future payments including those arising under its debt agreements, operating and capital lease obligations and discounted lease rental commitments.


23

Table of Contents                                                 

The following table summarizes significant contractual obligations and commitments of the Company as of March 31, 2013 . 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, 2013 :
 
Payments Due by Period 1
 
Less than 1 year

1-3 years

3-5 years

More than 5 years

Total

Long-term debt obligations
$

$

$
187,610

$

$
187,610

Interest expense on long-term debt
2,933

5,866

2,861


11,660

Capital lease obligations
104

32

6


142

Operating lease obligations
11,721

14,005

6,173

3,555

35,454

Total contractual obligations
$
14,758

$
19,903

$
196,650

$
3,555

$
234,866

1 Not included in the above table are potential cash obligations of $18,132 associated with an unfunded pension liability due to the high degree of uncertainty regarding the timing of future cash outflows associated with such obligation.

The estimated interest expense payments on long-term debt reflected in the table above are based on both the amount outstanding under the Company's credit facility and the weighted-average interest rate in effect as of March 31, 2013 .

As of March 31, 2013 , the Company had commercial commitments of $4,050 , which are generally due within the next twelve-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 see the matters discussed in Part I, Item 3, "Legal Proceedings" of this Annual Report, which information is incorporated herein by reference.


Critical Accounting Policies
The Company’s 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 affect the reported financial condition and results of operations. Such estimates and assumptions may differ from actual results. The Company bases its estimates and assumptions on the best available information and believes them to be reasonable for the circumstances. The Company’s 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 the net balance that the Company believes will be collected. This allowance is based on both recent trends in certain accounts receivable ("specific reserve") estimated to be a greater credit risk as well as general trends in 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 reported for the period could be materially affected by any necessary correction to the allowance for doubtful accounts.


24

Table of Contents                                                 

Inventories
The Company’s 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 our product knowledge, physical inventory observation, future demand, market conditions and an aging analysis of the inventory on hand. For “convenience,” we reduce inventory cost through a contra asset rather than through a new cost basis. If actual market conditions are less favorable than those projected by Management at some future date, the results of operations reported 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 Company’s 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 Company’s estimate of the realizable deferred tax assets should prove inaccurate at some future date, the results of operations reported for the period could be materially affected by any necessary correction to the deferred tax asset allowance.

Goodwill
The Company conducts its annual goodwill impairment assessment during the third quarter of its fiscal year, using data as of the end of the second quarter of its fiscal year. Goodwill is tested using a two-step process. The first step of the goodwill impairment assessment, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill ("net book value"). If the fair value of a reporting unit exceeds its net book value, goodwill of the reporting unit is considered not impaired, thus the second step of the impairment test is unnecessary. If net book value of a reporting unit exceeds its fair value, the second step of the goodwill impairment test will be performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment assessment, used to measure the amount of impairment loss, if any, compares the implied fair value of reporting unit goodwill, which is determined in the same manner as the amount of goodwill recognized in a business combination, with the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess.

In the first step of the goodwill impairment assessment, the Company uses an income approach to derive a present value of the reporting unit’s projected future annual cash flows and the present residual value of the reporting unit. The Company uses the income approach because it believes that the discounted future cash flows provide greater detail and opportunity to reflect facts, circumstances and economic conditions for each reporting unit. In addition, the Company believes that this valuation approach is a proven valuation technique and methodology for its industry and is widely accepted by investors. The Company uses a variety of underlying assumptions to estimate these future cash flows, which vary for each of the reporting units and include (i) future revenue growth rates, (ii) future operating profitability, (iii) the weighted-average cost of capital and (iv) a terminal growth rate. If the Company’s estimates and assumptions used in the discounted future cash flows should change at some future date, the Company could incur an impairment charge which could have a material adverse effect on the results of operations reported for the period in which the impairment occurs.

In addition to estimating fair value of the Company’s reporting units using the income approach, the Company also estimates fair value using a market-based approach which relies on values based on market multiples derived from comparable public companies. The Company uses the estimated fair value of the reporting units under the market approach to validate the estimated fair value of the reporting units under the income approach.

Fiscal 2013
The Company conducted its annual goodwill impairment assessment during the third quarter of Fiscal 2013 using data as of September 29, 2012. The first step of the goodwill impairment assessment, used to identify potential impairment, resulted in a surplus of fair value over carrying amount for each of our reporting units, thus the reporting units are considered not impaired and the second step of the impairment test is not necessary.

At March 31, 2013 , the Company's stock market capitalization was below its net book value. However, each of the Company's reporting units continues to operate profitably and generate cash flow from operations, and the Company expects that each will continue to do so in Fiscal 2014 and beyond. The Company also believes that a reasonable potential buyer would offer a control premium for the business that would adequately cover any difference between the recent stock trading prices and the book value.


25

Table of Contents                                                 

Future events that could result in an interim assessment of goodwill impairment and/or a potential impairment loss include, but are not limited to, (i) significant underperformance relative to historical or projected future operating results, (ii) significant changes in the manner of or use of the assets or the Company's overall business strategy, (iii) significant negative industry or economic trends, (iv) a further decline in market capitalization below book value and (v) a modification to the Company's operating segments.

In connection with a new management team and a renewed business strategy, the Company has realigned its organizational structure which will result in new operating segments for the purpose of making operational decisions and assessing financial performance which changes will be effective, on a prospective basis, beginning on April 1, 2013. This change in operating segments will affect the reporting units currently being used in the Company's annual goodwill impairment assessment. Although, at the present time, we do not expect a material charge as a result of the segment change, we provide no assurance that such a charge will not occur.

Fiscal 2012
Beginning in 1998 and continuing through the present time, the Company has pursued a strategy to expand its technical capabilities and geographic footprint to include Data Infrastructure and Voice Communications in North America and Data Infrastructure in Europe by acquiring over one hundred companies that resulted in recording goodwill on its balance sheet. The North America and Europe reporting units continue to operate profitably and generate positive cash flow from operations. However, the fair value as of October 1, 2011, derived from a discounted cash flow model, of the North America and Europe reporting units did not support the book value of goodwill recorded from those acquisitions. The primary factors contributing to the difference in fair value to book value were an increased weighted-average cost of capital for North America (primarily driven by an increase in the risk premium associated with the Company's industry segment relative to a control group) and lower profitability as a result of competitive market conditions for both North America and Europe.

As previously disclosed, as a result of its annual goodwill assessment conducted as of October 1, 2011, the Company, after consultation by Management with the Audit Committee (the "Audit Committee") of the Board, recorded a non-cash, pre-tax goodwill impairment charge of $317,797 during the third quarter of Fiscal 2012. The impairment charge did not impact the Company's business operations, compliance with debt covenants or future cash flows, or result in any cash expenditures.

In determining the impairment charge, the implied fair value of the reporting unit goodwill was compared to the carrying amount of the goodwill. The implied fair value of reporting unit goodwill was determined as the residual between the fair value of the reporting unit and the fair value of its assets (including any unrecognized intangible assets) and liabilities as of the annual goodwill assessment date.

Long-Lived Assets other than Goodwill
The Company reviews long-lived assets including 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 impairments of long-lived assets have been identified during any of the periods presented.

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.

Revenue Recognition
Within the Company’s Technology Products service segment, revenues are recognized when title to products sold passes to the client, which generally occurs upon shipment from the Company’s location.

Within the Company’s Data Infrastructure and Voice Communications service segments, revenues are recognized from maintenance service contracts, MAC work and network integration services when the services are provided. Service contracts are generally pre-billed, recorded in Deferred revenue within the Company’s 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.


26

Table of Contents                                                 

Impact of Recently Issued Accounting Pronouncements
There have been no accounting pronouncements adopted during Fiscal 2013 , Fiscal 2012 or Fiscal 2011 that had a material impact on the Company’s consolidated financial statements. There have been no new accounting pronouncements issued but not yet adopted that are expected to have a material impact on the Company’s consolidated financial statements.


Cautionary Forward Looking Statements
When included in this Annual Report or in documents incorporated herein by reference, the words "should," "expects," "intends," "anticipates," "believes," "estimates," "approximates," "targets," "plans" and analogous expressions are intended to identify forward-looking statements. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. Although it is not possible to predict or identify all risk factors, such risks and uncertainties may include, among others, levels of business activity and operating expenses, expenses relating to corporate compliance requirements, cash flows, global economic and business conditions, successful integration of acquisitions, the timing and costs of restructuring programs, successful marketing of the Company's product and services offerings, successful implementation of the Company’s M&A program including identifying appropriate targets, consummating transactions and successfully integrating the businesses, successful implementation of the Company’s 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 Company’s arrangements with suppliers of voice equipment and technology, government budgetary constraints and various other matters, many of which are beyond the Company’s control. Additional risk factors are included in this Annual Report. 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 Annual Report. The Company expressly disclaims any obligation or undertaking to release publicly any updates or any changes in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based and cautions you not to unduly rely on any such forward-looking statements.


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 financial derivative instruments (other than those specifically noted below) nor does it engage in speculative trading of financial derivatives.

Interest-rate Risk
The Company’s primary interest-rate risk relates to its long-term debt obligations. As of March 31, 2013 , the Company had total long-term obligations of $187,610 under the Credit Agreement. Of the outstanding debt, $125,000 was in variable rate debt that was effectively converted to a fixed rate through an interest-rate swap agreement (discussed in more detail below) and $62,610 was in variable rate obligations. As of March 31, 2013 , an instantaneous 100 basis point increase in the interest rate of the variable rate debt would reduce the Company’s net income (loss) in the subsequent fiscal year by $154 ( $95 net of tax) assuming the Company employed no intervention strategies.

To mitigate the risk of interest-rate fluctuations associated with the Company’s 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 Company’s 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.


27

Table of Contents                                                 

On June 15, 2009 , the Company entered into a three -year floating-to-fixed interest-rate swap, with an effective date of July 27, 2009 , that was based on a three -month LIBOR rate versus a 2.28% fixed rate and had a notional value of $100,000 (which reduced to $50,000 on July 27, 2011 and terminated on July 27, 2012). On May 19, 2011 , the Company entered into a one -year floating-to-fixed interest-rate swap, with an effective date of July 26, 2011 , that was based on a three -month LIBOR rate versus a 0.58% fixed rate and had a notional value of $75,000 and terminated on July 26, 2012. On November 15, 2011 , the Company entered into a three -year floating-to-fixed interest-rate swap, with an effective start date of July 26, 2012 , that is based on a three -month LIBOR rate versus a 1.25%  fixed rate and has a notional value of $125,000 . The foregoing are sometimes referred to herein as the "Company's interest-rate swaps". Changes in the fair market value of the Company's interest-rate swaps are recorded as an asset or liability within the Company's Consolidated Balance Sheets and Interest expense (income) within the Company's Consolidated Statements of Operations.

Foreign Exchange Rate Risk
The Company has operations, clients and suppliers worldwide, thereby exposing the Company’s 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 into and will continue to enter into, on a selective basis, foreign currency contracts to reduce the foreign currency exposure related to certain intercompany transactions, primarily trade receivables and loans. All of the foreign currency contracts have been designated and qualify as cash flow hedges. The effective portion of any changes in the fair value of the derivative instruments is recorded in Accumulated Other Comprehensive Income ("AOCI") until the hedged forecasted transaction occurs or the recognized currency transaction affects earnings. Once the forecasted transaction occurs or the recognized currency transaction affects earnings, the effective portion of any related gains or losses on the cash flow hedge is reclassified from AOCI to the Company’s Consolidated Statements of Operations. 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 Company’s Consolidated Statements of Operations.

As of March 31, 2013 , the Company had open foreign currency contracts in Australian and Canadian dollars, Danish krone, Euros, Mexican pesos, Norwegian kroner, British pounds sterling, Swedish krona, Swiss francs and Japanese yen. The open contracts have contract rates ranging from 0.97 to 0.99 Australian dollar, 0.99 to 1.04 Canadian dollar, 5.54 to 6.02 Danish krone, 0.74 to 0.80 Euro, 12.88 to 12.99 Mexican peso, 5.60 to 6.07 Norwegian kroner, 0.62 to 0.66 British pound sterling, 6.35 to 6.76 Swedish krona, 0.93 to 0.95 Swiss franc and 92.98 to 94.83 Japanese yen, all per U.S. dollar. The total open contracts had a notional amount of $57,451 and will expire within eleven months.



28

Table of Contents                                                 


Item 8. Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
Page
 
 
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
 
 
 
 
 
 
Consolidated Statements of Comprehensive Income (Loss)
 
 
 
 
 
 


29

Table of Contents                                                 

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, 2013 and 2012 and the related consolidated statements of operations, comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended March 31, 2013. 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 Company's 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, 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, 2013 and 2012, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2013 , 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.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Black Box Corporation's internal control over financial reporting as of March 31, 2013, 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 30, 2013, expressed an unqualified opinion thereon.


/s/ BDO USA, LLP

Chicago, Illinois
May 30, 2013


30

Table of Contents                                                 

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 Corporation's internal control over financial reporting as of March 31, 2013, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company's 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, Management's Report on Internal Control Over Financial Reporting.” Our responsibility is to express an opinion on the company's 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 company's 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 company's 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 company's 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.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2013, 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, 2013 and 2012, and the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the three years in the period ended March 31, 2013 and our report dated May 30, 2013 expressed an unqualified opinion thereon.

/s/ BDO USA, LLP

Chicago, Illinois
May 30, 2013


31

Table of Contents                                                 

BLACK BOX CORPORATION
CONSOLIDATED BALANCE SHEETS
 
March 31,
In thousands, except par value
2013

2012

Assets
 
 
Cash and cash equivalents
$
30,720

$
22,444

Accounts receivable, net of allowance for doubtful accounts of $6,300 and $6,273
152,967

163,888

Inventories, net
55,469

56,956

Costs/estimated earnings in excess of billings on uncompleted contracts
101,458

87,634

Other assets
26,068

22,678

Total current assets
366,682

353,600

Property, plant and equipment, net
27,720

27,109

Goodwill, net
345,397

346,438

Intangibles, net
110,668

126,541

Other assets
27,534

34,335

Total assets
$
878,001

$
888,023

Liabilities
 
 
Accounts payable
$
66,236

$
71,095

Accrued compensation and benefits
25,186

31,151

Deferred revenue
33,869

35,601

Billings in excess of costs/estimated earnings on uncompleted contracts
13,386

14,315

Income taxes
6,650

2,574

Other liabilities
37,126

32,697

Total current liabilities
182,453

187,433

Long-term debt
187,648

179,621

Other liabilities
25,653

26,585

Total liabilities
395,754

393,639

Stockholders’ equity
 
 
Preferred stock authorized 5,000, par value $1.00, none issued


Common stock authorized 100,000, par value $.001, 16,133 and 17,480 shares outstanding, 25,898 and 25,730 issued
26

26

Additional paid-in capital
486,075

478,726

Retained earnings
370,775

347,242

Accumulated other comprehensive income
1,457

7,262

Treasury stock, at cost 9,765 and 8,250 shares
(376,086
)
(338,872
)
Total stockholders’ equity
482,247

494,384

Total liabilities and stockholders’ equity
$
878,001

$
888,023

 
 
 

See Notes to the Consolidated Financial Statements

32

Table of Contents                                                 

BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
 
Year Ended March 31,
In thousands, except per share amounts
2013

2012

2011

Revenues
 
 
 
Products
$
181,704

$
198,640

$
188,998

On-Site services
816,082

888,888

879,231

Total
997,786

1,087,528

1,068,229

Cost of sales *
 
 
 
Products
101,201

110,455

101,733

On-Site services
576,655

630,577

609,386

Total
677,856

741,032

711,119

Gross profit
319,930

346,496

357,110

Selling, general & administrative expenses
249,924

255,347

253,896

Goodwill impairment loss

317,797


Intangibles amortization
13,737

13,025

12,156

Operating income (loss)
56,269

(239,673
)
91,058

Interest expense (income), net
6,090

5,148

5,430

Other expenses (income), net
3,716

1,245

348

Income (loss) before provision for income taxes
46,463

(246,066
)
85,280

Provision for income taxes
17,657

1,668

32,418

Net income (loss)
$
28,806

$
(247,734
)
$
52,862

Earnings (loss) per common share
 
 
 
Basic
$
1.73

$
(13.98
)
$
2.99

Diluted
$
1.73

$
(13.98
)
$
2.97

Weighted-average common shares outstanding
 
 
 
Basic
16,627

17,725

17,680

Diluted
16,689

17,725

17,795

Dividends per share
$
0.32

$
0.28

$
0.24

* Exclusive of depreciation and intangibles amortization.

See Notes to the Consolidated Financial Statements

33

Table of Contents                                                 

BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


 
Year Ended March 31,
In thousands
2013

2012

2011

Net income (loss)
$
28,806

$
(247,734
)
$
52,862

Other comprehensive income (loss)
 
 
 
Foreign currency translation adjustment
(4,237
)
(6,868
)
10,616

Pension
 
 
 
Actuarial gain (loss), net of taxes of ($692), ($2,091) and ($516)
(1,823
)
(5,503
)
(1,360
)
Amounts reclassified into results of operations, net of taxes of $104, $39 and $52
273

99

140

Derivative instruments
 
 
 
Net change in fair value of cash flow hedges, net of taxes of ($142), ($54) and ($111)
(375
)
(143
)
(291
)
Amounts reclassified into results of operations, net of taxes of $136, $59 and $170
357

154

447

Other comprehensive income (loss)
$
(5,805
)
$
(12,261
)
$
9,552

Comprehensive income (loss)
$
23,001

$
(259,995
)
$
62,414

 
 
 
 

See Notes to the Consolidated Financial Statements


34

Table of Contents                                                 

BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
 
Common Stock
Treasury Stock
 
Accumulated Other
Comprehensive Income
 
 
In thousands
Shares

$.001 par

Shares

$

Additional Paid-in Capital

Foreign Currency Translation Adjustment

Derivative Instruments

Defined Benefit Pension

Retained Earnings

Total

March 31, 2010
25,174

$
25

7,626

$
(323,095
)
$
451,778

$
13,298

$
(320
)
$
(3,007
)
$
551,315

$
689,994

Net income (loss)
 
 
 
 
 
 
 
 
52,862

52,862

Foreign currency translation adjustment
 
 
 
 
 
10,616

 
 
 
10,616

Pension, net of taxes
 
 
 
 
 
  
 
  
 

Actuarial gain (loss)
 
 
 
 
 
 
 
(1,360
)
 
(1,360
)
Actuarial gain (loss) reclassified into results of operations
 
 
 
 
 
 
 
140

 
140

Derivative Instruments, net of taxes
 
 
 
 
 
 
 
  
 

Net change in fair value of cash flow hedges
 
 
 
 
 
 
(291
)
 
 
(291
)
Amounts reclassified into results of operations
 
 
 
 
 
 
447

 
 
447

Stock compensation expense
 
 
 
 
10,270

 
 
 
 
10,270

Dividends declared
 
 
 
 
 
 
 
 
(4,254
)
(4,254
)
Issuance of common stock
387

1

 
 
9,239

 
 
 
 
9,240

Repurchases of common stock
 
 
17

(485
)
 
 
 
 
 
(485
)
Tax impact from equity awards
 
 
 
 
(920
)
 
 
 
 
(920
)
March 31, 2011
25,561

$
26

7,643

$
(323,580
)
$
470,367

$
23,914

$
(164
)
$
(4,227
)
$
599,923

$
766,259

Net income (loss)
 
 
 
 
 
 
 
 
(247,734
)
(247,734
)
Foreign currency translation adjustment
 
 
 
 
 
(6,868
)
 
 
 
(6,868
)
Pension, net of taxes
 
 
 
 
 
  
 
 
 
 
Actuarial gain (loss)
 
 
 
 
 
 
 
(5,503
)
 
(5,503
)
Actuarial gain (loss) reclassified into results of operations
 
 
 
 
 
 
 
99

 
99

Derivative Instruments, net of taxes
 
 
 
 
 
 
 
  
 
 
Net change in fair value of cash flow hedges
 
 
 
 
 
 
(143
)
 
 
(143
)
Amounts reclassified into results of operations
 
 
 
 
 
 
154

 
 
154

Stock compensation expense
 
 
 
 
9,296

 
 
 
 
9,296

Dividends declared
 
 
 
 
 
 
 
 
(4,947
)
(4,947
)
Issuance of common stock
169


 
 

 
 
 
 

Repurchases of common stock
 
 
607

(15,292
)
 
 
 
 
 
(15,292
)
Tax impact from equity awards
 
 
 
 
(937
)
 
 
 
 
(937
)
March 31, 2012
25,730

$
26

8,250

$
(338,872
)
$
478,726

$
17,046

$
(153
)
$
(9,631
)
$
347,242

$
494,384

Net income (loss)
 
 
 
 
 
 
 
 
28,806

28,806

Foreign currency translation adjustment
 
 
 
 
 
(4,237
)
 
 
 
(4,237
)
Pension, net of taxes
 
 
 
 
 
  
 
  
 
 
Actuarial gain (loss)
 
 
 
 
 
 
 
(1,823
)
 
(1,823
)
Actuarial gain (loss) reclassified into results of operations
 
 
 
 
 
 
 
273

 
273

Derivative Instruments, net of taxes
 
 
 
 
 
 
 
  
 
 
Net change in fair value of cash flow hedges
 
 
 
 
 
 
(375
)
 
 
(375
)
Amounts reclassified into results of operations
 
 
 
 
 
 
357

 
 
357

Stock compensation expense
 
 
 
 
7,712

 
 
 
 
7,712

Dividends declared
 
 
 
 
 
 
 
 
(5,273
)
(5,273
)
Issuance of common stock
168


 
 

 
 
 
 

Repurchases of common stock
 
 
1,515

(37,214
)
 
 
 
 
 
(37,214
)
Tax impact from equity awards
 
 
 
 
(363
)
 
 
 
 
(363
)
March 31, 2013
25,898

$
26

9,765

$
(376,086
)
$
486,075

$
12,809

$
(171
)
$
(11,181
)
$
370,775

$
482,247


See Notes to the Consolidated Financial Statements

35

Table of Contents                                                 

BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Year Ended March 31,
In thousands
2013

2012

2011

Operating Activities
 
 
 
Net income (loss)
$
28,806

$
(247,734
)
$
52,862

Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities
 
 
 
Intangibles amortization and depreciation
19,123

18,459

18,222

Loss (gain) on sale of property
(105
)
(253
)
(71
)
Deferred taxes
4,144

(18,398
)
8,456

Stock compensation expense
7,712

9,296

10,270

Change in fair value of interest-rate swaps
606

(530
)
(2,968
)
Goodwill impairment loss

317,797


Joint venture investment loss
2,670



Changes in operating assets and liabilities (net of acquisitions)
 
 

Accounts receivable, net
10,047

135

(10,393
)
Inventories, net
1,231

(3,540
)
459

Costs/estimated earnings in excess of billings on uncompleted contracts
(13,928
)
19,133

(17,537
)
All other assets
(3,217
)
(2,822
)
(1,468
)
Billings in excess of costs/estimated earnings on uncompleted contracts
(908
)
(6,603
)
2,146

All other liabilities
(9,480
)
(19,119
)
(5,113
)
Net cash provided by (used for) operating activities
$
46,701

$
65,821

$
54,865

Investing Activities
 
 
 
Capital expenditures
$
(6,323
)
$
(7,633
)
$
(5,149
)
Capital disposals
389

280

119

Acquisition of businesses (payments)/recoveries
17

(39,770
)
(12,811
)
Prior merger-related (payments)/recoveries
(2,388
)
(1,295
)
(1,829
)
Net cash provided by (used for) investing activities
$
(8,305
)
$
(48,418
)
$
(19,670
)
Financing Activities
 
 
 
Proceeds (repayments) from long-term debt
$
7,735

$
(1,911
)
$
(30,284
)
Proceeds (repayments) from short-term debt
4,005



Deferred financing costs
(20
)
(1,743
)
(700
)
Purchase of treasury stock
(37,214
)
(15,292
)
(485
)
Proceeds from the exercise of stock options


9,239

Payment of dividends
(5,206
)
(4,798
)
(4,232
)
Increase (decrease) in cash overdrafts
1,237



Net cash provided by (used for) financing activities
$
(29,463
)
$
(23,744
)
$
(26,462
)
Foreign currency exchange impact on cash
$
(657
)
$
(2,427
)
$
1,594

Increase/(decrease) in cash and cash equivalents
$
8,276

$
(8,768
)
$
10,327

Cash and cash equivalents at beginning of period
$
22,444

$
31,212

$
20,885

Cash and cash equivalents at end of period
$
30,720

$
22,444

$
31,212

Supplemental cash flow
 
 
 
Cash paid for interest
$
5,092

$
6,557

$
8,557

Cash paid for income taxes
10,097

29,437

21,513

Non-cash financing activities
 
 
 
Dividends payable
1,291

1,223

1,075

Capital leases
33

36

143


See Notes to the Consolidated Financial Statements

36

Table of Contents                                                 

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 a leading communications system integrator dedicated to designing, sourcing, implementing and maintaining today's complex communications solutions. The Company's primary service offering is voice communications solutions ("Voice Communications"); the Company also offers premise cabling and other data-related services solutions ("Data Infrastructure") and technology product solutions (“Technology Products”). Voice Communications and Data Infrastructure may collectively be referred to as “On-Site services.” As of March 31, 2013 , the Company had more than 3,000 professional technical experts in approximately 200 offices serving more than 175,000 clients in approximately 150 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 Company’s 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 wholly-owned 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 year’s 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. Significant estimates in these financial statements include project progress towards completion to estimated budget, allowances for doubtful accounts receivable, sales returns, net realizable value of inventories, loss contingencies, warranty reserves, intangible assets and goodwill. Actual results could differ from those estimates. Management believes the estimates made are reasonable.


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 the net balance that the Company believes will be collected. This allowance is based on both recent trends in certain accounts receivable ("specific reserve") estimated to be a greater credit risk as well as general trends in 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 Company’s Consolidated Statements of Operations, and deductions from the allowance are recorded when specific accounts receivable are written off as uncollectible. The provision for doubtful accounts expense was $3,556 , $3,006 and $2,674 for Fiscal 2013, Fiscal 2012 and Fiscal 2011, respectively.

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"). The Company records an estimate for slow moving and obsolete inventory ("inventory reserve") based upon our product knowledge, physical inventory observation, future demand, market conditions and an aging analysis of the inventory on hand. For “convenience,” we reduce inventory cost through a contra asset rather than through a new cost basis. 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

Table of Contents                                                 

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 the Consolidated Statements of Operations.

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 equipment and computer hardware and software. 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. The Company conducts its annual goodwill impairment assessment during the third quarter of its fiscal year, using data as of the end of the second quarter of its fiscal year. Goodwill is tested using a two-step process. The first step of the goodwill impairment assessment, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill ("net book value"). If the fair value of a reporting unit exceeds its net book value, goodwill of the reporting unit is considered not impaired, thus the second step of the impairment test is unnecessary. If net book value of a reporting unit exceeds its fair value, the second step of the goodwill impairment test will be performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment assessment, used to measure the amount of impairment loss, if any, compares the implied fair value of reporting unit goodwill, which is determined in the same manner as the amount of goodwill recognized in a business combination, with the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess.

In the first step of the goodwill impairment assessment, the Company uses an income approach to derive a present value of the reporting unit’s projected future annual cash flows and the present residual value of the reporting unit. The Company uses the income approach because it believes that the discounted future cash flows provide greater detail and opportunity to reflect facts, circumstances and economic conditions for each reporting unit. In addition, the Company believes that this valuation approach is a proven valuation technique and methodology for its industry and is widely accepted by investors. The Company uses a variety of underlying assumptions to estimate these future cash flows, which vary for each of the reporting units and include (i) future revenue growth rates, (ii) future operating profitability, (iii) the weighted-average cost of capital and (iv) a terminal growth rate. If the Company’s estimates and assumptions used in the discounted future cash flows should change at some future date, the Company could incur an impairment charge which could have a material adverse effect on the results of operations reported for the period in which the impairment occurs.

In addition to estimating fair value of the Company’s reporting units using the income approach, the Company also estimates fair value using a market-based approach which relies on values based on market multiples derived from comparable public companies. The Company uses the estimated fair value of the reporting units under the market approach to validate the estimated fair value of the reporting units under the income approach. See Note 5 for additional reference.

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 Company’s trademark portfolio and are reviewed for impairment annually. The Company reviews definite-lived 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.


38

Table of Contents                                                 

Derivative Instruments and Hedging Activities
Foreign Currency Contracts
The Company has operations, clients and suppliers worldwide, thereby exposing the Company’s 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 Company’s Consolidated Statements of Operations. 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 Company’s Consolidated Statements of Operations.

Interest-rate Swap
To mitigate the risk of interest rate fluctuations associated with the Company’s 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 Company’s 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 interest-rate swaps (defined below) are recognized on the consolidated balance sheets at fair value. They do not meet the requirements for hedge accounting and are marked to market through Interest expense (income) within the Company’s Consolidated Statements of Operations.

Foreign Currency Translation
The financial statements of the Company’s 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 Company’s Consolidated Balance Sheets and will be included in the Company’s Consolidated Statements of Operations 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 insignificant to the Consolidated Statement of Operations and are recorded in Other expenses (income) within the Company’s Consolidated Statements of Operations. The U.S. dollar is the functional currency for those subsidiaries located in Brazil and Mexico.

Revenue
Within the Company’s Technology Products service type, revenues are recognized when title to products sold passes to the client, which generally occurs upon shipment from the Company’s location.

Within the Company’s Data Infrastructure and Voice Communications 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 Company’s 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 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 clients on behalf of governmental authorities at the time of sale. These taxes are accounted for on a net basis and are not included in Revenues or Cost of sales.

39

Table of Contents                                                 

Stock-Based Compensation
Stock options: The Company records expense for those stock awards, vesting during the period, for which the requisite service period is expected to be rendered. The Company uses historical data in order to project the future employee turnover rates used to estimate the number of stock options for which the requisite service period will not be rendered. The fair value of stock options is determined on the grant date using a Black-Scholes option pricing model which includes several subjective assumptions. The Company recognizes the fair value of these awards into expense ratably over the requisite service periods associated with the award. The assumptions are summarized as follows:

Expected volatility: The Company estimates the volatility of its common stock, pa