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EXCEL - IDEA: XBRL DOCUMENT - BLACK BOX CORPFinancial_Report.xls
EX-31.2 - EXHIBIT 31.2 - BLACK BOX CORPexhibit312_masterx2q15.htm
EX-31.1 - EXHIBIT 31.1 - BLACK BOX CORPexhibit311_masterx2q15.htm
EX-32.1 - EXHIBIT 32.1 - BLACK BOX CORPexhibit321_masterx2q15.htm
EX-21.1 - EXHIBIT 21.1 - BLACK BOX CORPexhibit211_masterx2q15.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 2014
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
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See 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 þ
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No
As of October 10, 2014, there were 15,451,600 shares of common stock, par value $.001 (the "common stock"), outstanding.

1


BLACK BOX CORPORATION
FOR THE QUARTER ENDED SEPTEMBER 27, 2014
INDEX




2


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

BLACK BOX CORPORATION
CONSOLIDATED BALANCE SHEETS

 
(Unaudited)

 
In thousands, except par value
September 27, 2014

March 31, 2014

Assets
 
 
Cash and cash equivalents
$
28,352

$
30,810

Accounts receivable, net of allowance for doubtful accounts of $5,771 and $6,004
165,297

156,549

Inventories, net
51,205

52,211

Costs/estimated earnings in excess of billings on uncompleted contracts
88,911

89,789

Other assets
25,843

26,974

Total current assets
359,608

356,333

Property, plant and equipment, net
29,227

29,052

Goodwill, net
192,486

192,954

Intangibles, net
93,353

98,645

Other assets
32,320

35,045

Total assets
$
706,994

$
712,029

Liabilities
 
 
Accounts payable
$
61,842

$
64,603

Accrued compensation and benefits
19,658

26,075

Deferred revenue
31,570

33,847

Billings in excess of costs/estimated earnings on uncompleted contracts
20,588

15,932

Income taxes
4,026

3,169

Other liabilities
41,462

37,015

Total current liabilities
179,146

180,641

Long-term debt
161,423

160,429

Other liabilities
19,537

19,842

Total liabilities
$
360,106

$
360,912

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

$

Common stock authorized 100,000, par value $.001, 15,441 and 15,558 shares outstanding, 26,286 and 26,136 issued
26

26

Additional paid-in capital
495,719

492,427

Retained earnings
253,265

249,217

Accumulated other comprehensive income
1,694

7,327

Treasury stock, at cost 10,845 and 10,578 shares
(403,816
)
(397,880
)
Total stockholders’ equity
$
346,888

$
351,117

Total liabilities and stockholders’ equity
$
706,994

$
712,029

 
 
 
See Notes to the Consolidated Financial Statements

3


BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
Three-months ended
Six-months ended
 
September 27 and September 28
September 27 and September 28
In thousands, except per share amounts
2014

2013

2014

2013

Revenues
 
 
 
 
Products
$
44,549

$
43,191

$
87,768

$
91,399

Services
204,324

203,619

406,331

402,308

Total
248,873

246,810

494,099

493,707

Cost of sales *
 
 
 
 
Products
25,943

24,249

51,214

52,744

Services
149,221

145,433

293,947

286,804

Total
175,164

169,682

345,161

339,548

Gross profit
73,709

77,128

148,938

154,159

Selling, general & administrative expenses
64,016

60,490

128,031

121,760

Intangibles amortization
2,643

3,109

5,293

6,418

Operating income (loss)
7,050

13,529

15,614

25,981

Interest expense, net
1,027

1,378

2,158

2,301

Other expenses (income), net
180

910

139

1,026

Income (loss) before provision for income taxes
5,843

11,241

13,317

22,654

Provision (benefit) for income taxes
2,640

5,656

6,171

10,164

Net income (loss)
$
3,203

$
5,585

$
7,146

$
12,490

Earnings (loss) per common share
 
 
 
 
Basic
$
0.21

$
0.35

$
0.46

$
0.78

Diluted
$
0.21

$
0.35

$
0.46

$
0.78

Weighted-average common shares outstanding
 
 
 
 
Basic
15,480

15,955

15,483

15,994

Diluted
15,516

16,036

15,546

16,085

Dividends per share
$
0.10

$
0.09

$
0.20

$
0.18

* Exclusive of depreciation and intangibles amortization.
See Notes to the Consolidated Financial Statements

4


BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

 
Three-months ended
Six-months ended
 
September 27 and September 28
September 27 and September 28
In thousands
2014

2013

2014

2013

Net income (loss)
$
3,203

$
5,585

$
7,146

$
12,490

Other comprehensive income (loss)
 
 
 
 
Foreign currency translation adjustment
(5,953
)
4,171

(5,833
)
3,448

Pension
 
 
 
 
Actuarial gain (loss), net of taxes of $1, $2, ($2) and ($1)
1

3

(3
)
(2
)
Amounts reclassified into results of operations, net of taxes of $28, $51, $56 and $102
43

78

86

156

Derivative instruments
 
 
 
 
Net change in fair value of cash flow hedges, net of taxes of $33, ($235), ($17) and ($345)
53

(383
)
(28
)
(562
)
Amounts reclassified into results of operations, net of taxes of $24, $90, $89 and $131
39

146

145

212

Other comprehensive income (loss)
$
(5,817
)
$
4,015

$
(5,633
)
$
3,252

Comprehensive income (loss)
$
(2,614
)
$
9,600

$
1,513

$
15,742

 
 
 
 
 

See Notes to the Consolidated Financial Statements




5


BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six-months ended
 
September 27 and September 28
In thousands
2014

2013

Operating Activities
 
 
Net income (loss)
$
7,146

$
12,490

Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities
 
 
Intangibles amortization
5,293

6,418

Depreciation
3,394

2,940

Loss (gain) on sale of property
(45
)
2

Deferred taxes
(180
)
4,627

Stock compensation expense
3,594

3,972

Change in fair value of interest-rate swaps
(546
)
(470
)
Joint venture investment loss

822

Changes in operating assets and liabilities (net of acquisitions)
 
 
Accounts receivable, net
(9,890
)
4,912

Inventories, net
663

3,882

Costs/estimated earnings in excess of billings on uncompleted contracts
705

(2,375
)
All other assets
2,648

2,219

Billings in excess of costs/estimated earnings on uncompleted contracts
4,675

1,270

Accounts payable
(2,047
)
(176
)
All other liabilities
(6,252
)
(11,071
)
Net cash provided by (used for) operating activities
$
9,158

$
29,462

Investing Activities
 
 
Capital expenditures
(3,522
)
(4,090
)
Capital disposals
45

4

Prior merger-related (payments)/recoveries
(776
)
(759
)
Net cash provided by (used for) investing activities
$
(4,253
)
$
(4,845
)
Financing Activities
 
 
Proceeds (repayments) from long-term debt
$
945

$
(14,662
)
Proceeds (repayments) from short-term debt
2,212

1,072

Deferred financing costs
1


Purchase of treasury stock
(5,936
)
(12,748
)
Proceeds from the exercise of stock options

975

Payment of dividends
(2,954
)
(2,736
)
Increase (decrease) in cash overdrafts
(364
)
(213
)
Net cash provided by (used for) financing activities
(6,096
)
(28,312
)
Foreign currency exchange impact on cash
$
(1,267
)
$
(184
)
Increase/(decrease) in cash and cash equivalents
$
(2,458
)
$
(3,879
)
Cash and cash equivalents at beginning of period
$
30,810

$
30,720

Cash and cash equivalents at end of period
$
28,352

$
26,841

Supplemental cash flow
 
 
Cash paid for interest
$
2,681

$
2,782

Cash paid for income taxes
3,129

7,490

Non-cash financing activities
 
 
Dividends payable
1,544

1,430

Capital leases
145

196

See Notes to the Consolidated Financial Statements

6


BLACK BOX CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 1: Business and Basis of Presentation
Business
Black Box Corporation ("Black Box," or "the Company”) is a leading technology solutions provider dedicated to helping customers design, build, manage, and secure their IT infrastructure. The Company offers Products and Services that it distributes through two platforms it has built over its 38-year history. The 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 product categories offered through this platform include: (i) IT infrastructure, (ii) specialty networking, (iii) multimedia and (iv) keyboard/video/mouse ("KVM") switching. The Services Platform is comprised of 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 include dedicated sales and engineering resources. The primary services offered through this platform include but are not limited to: (i) telephony and unified communications, (ii) wired and wireless infrastructure and (iii) managed services. Founded in 1976, Black Box, a Delaware corporation, is headquartered near Pittsburgh in Lawrence, Pennsylvania.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements of Black Box have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The Company believes that these consolidated financial statements reflect all normal, recurring adjustments needed to present fairly the Company’s results for the interim periods presented. The results as of and for interim periods presented may not be indicative of the results of operations for any other interim period or for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission ("SEC") for the fiscal year ended March 31, 2014 (the "Form 10-K").
The Company’s fiscal year ends on March 31. The fiscal quarters consist of 13 weeks and end on the Saturday generally nearest each calendar quarter end, adjusted to provide relatively equivalent business days for each fiscal quarter. The actual ending dates for the periods presented in these Notes to the Consolidated Financial Statements as of September 30, 2014 and 2013 were September 27, 2014 and September 28, 2013, respectively. 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 Black Box Corporation, the ultimate parent company, and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain items in the consolidated financial statements of prior years have been reclassified to conform to the current year's presentation.
The preparation of financial statements in conformity with GAAP requires Company management ("Management") to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates in these financial statements include project progress towards completion to estimated budget, allowances for doubtful accounts receivable, sales returns, net realizable value of inventories, loss contingencies, warranty reserves, intangible assets and goodwill. Actual results could differ from those estimates. Management believes these estimates are reasonable.
Note 2: Significant Accounting Policies
Significant Accounting Policies
The significant accounting policies used in the preparation of the Company’s consolidated financial statements are disclosed in Note 2 of the Notes to the Consolidated Financial Statements within the Form 10-K. No additional significant accounting policies have been adopted during Fiscal 2015.

7


Recent Accounting Pronouncements
There have been no accounting pronouncements adopted during Fiscal 2015 that have had a material impact on the Company's consolidated financial statements.
In May 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Codification ("ASC") Update No. 2014-09, "Revenue from Contracts with Customers" ("ASC 2014-09") that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The core principle of ASC 2014-09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expected to be entitled in exchange for those goods or services. Entities can use either of two methods: (i) retrospective to each prior period presented with the option to elect certain practical expedients as defined within ASC 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASC 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASC 2014-09. ASC 2014-09 is effective for annual reporting periods (including interim periods therein) beginning after December 15, 2016 for public companies and early adoption is not permitted. The Company is evaluating the method of adoption and the impact of the adoption of ASU 2014-09 on its consolidated financial statements.
Note 3: Inventories
The Company’s Inventories consist of the following:
 
September 30, 2014

March 31, 2014

Raw materials
$
1,507

$
1,294

Finished goods
67,325

68,303

Inventory, gross
68,832

69,597

Excess and obsolete inventory reserves
(17,627
)
(17,386
)
Inventories, net
$
51,205

$
52,211

Note 4: Goodwill
The following table summarizes Goodwill at the Company’s reporting segments:
 
North America Products

North America Services

International Products

International Services

Total

Goodwill (gross) at March 31, 2014
$
79,749

$
506,281

$
39,024

$
40,126

$
665,180

Accumulated impairment losses at March 31, 2014
(42,845
)
(364,036
)
(33,883
)
(31,462
)
(472,226
)
Goodwill (net) at March 31, 2014
$
36,904

$
142,245

$
5,141

$
8,664

$
192,954

 
 
 
 
 
 
Foreign currency translation adjustment
2

(10
)
233

(693
)
(468
)
 
 
 
 
 
 
Goodwill (gross) at September 30, 2014
$
79,751

$
506,271

$
39,257

$
39,433

$
664,712

Accumulated impairment losses at September 30, 2014
(42,845
)
(364,036
)
(33,883
)
(31,462
)
(472,226
)
Goodwill (net) at September 30, 2014
$
36,906

$
142,235

$
5,374

$
7,971

$
192,486

As previously disclosed, the Company completed its annual goodwill assessment during the fourth quarter of Fiscal 2014 that resulted in a goodwill impairment loss. The Company then adjusted the carrying value of its reporting units to reflect the goodwill impairment loss and compared that adjusted carrying value to the fair value of the reporting units. The excess of the fair value over this adjusted carrying value was $24,909, $51,957, $16,430 and $1,859 for North America Products, North America Services, International Products and International Services, respectively. A 100 basis point increase in the weighted-average cost of capital, which, holding all other assumptions constant, would have a significant impact on the fair value of a reporting unit and would decrease the fair value of the reporting units by $8,911, $39,375, $3,333 and $1,402 for North America Products, North America Services, International Products and International Services, respectively.

8


Consistent with prior years, during the third quarter of Fiscal 2015, the Company will conduct its annual goodwill impairment assessment. During that process, the Company will determine whether the recent downward adjustment in its profitability outlook for the remainder of Fiscal 2015 and an expected increase in its weighted-average cost of capital will impact the valuation of goodwill. A significant decrease in the fair value of our reporting units could result in a non-cash impairment charge, which could have a material adverse effect on our consolidated balance sheet and results of operations.
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 strategy for the Company's overall business or (iii) significant negative industry or economic trends.
Note 5: Intangible Assets
The following table summarizes the gross carrying amount, accumulated amortization and net carrying amount by intangible asset class:
 
September 30, 2014
March 31, 2014
 
Gross Carrying Amount

Accum. Amort.

Net Carrying Amount

Gross Carrying Amount

Accum. Amort.

Net Carrying Amount

Definite-lived
 
 
 
 
 
 
Non-compete agreements
$
12,139

$
11,641

$
498

$
12,261

$
11,577

$
684

Customer relationships
137,267

73,314

63,953

137,267

68,644

68,623

Acquired backlog
20,838

19,675

1,163

20,838

19,239

1,599

Total
$
170,244

$
104,630

$
65,614

$
170,366

$
99,460

$
70,906

Indefinite-lived
 
 
 
 
 
 
Trademarks
35,992

8,253

27,739

35,992

8,253

27,739

Total
$
206,236

$
112,883

$
93,353

$
206,358

$
107,713

$
98,645

The Company’s indefinite-lived intangible assets consist solely of the Company’s trademark portfolio. The Company’s definite-lived intangible assets are comprised of employee non-compete agreements, customer relationships and backlog obtained through business acquisitions.
The following table summarizes the changes to the net carrying amounts by intangible asset class:
 
Trademarks

Non-Competes and Backlog

Customer relationships

Total

March 31, 2014
$
27,739

$
2,283

$
68,623

$
98,645

Intangibles amortization

(623
)
(4,670
)
(5,293
)
Foreign currency translation adjustment

1


1

September 30, 2014
$
27,739

$
1,661

$
63,953

$
93,353

The following table details the estimated intangibles amortization expense for the remainder of Fiscal 2015, each of the succeeding four fiscal years and the periods thereafter.
Fiscal
 
2015
$
5,257

2016
10,271

2017
8,884

2018
7,428

2019
6,446

Thereafter
27,328

Total
$
65,614


9


Note 6: Indebtedness
The Company’s Long-term debt consists of the following:
 
September 30, 2014

March 31, 2014

Revolving credit agreement
$
161,360

$
160,355

Other
343

277

Total debt
$
161,703

$
160,632

Less: current portion (included in Other liabilities)
(280
)
(203
)
Long-term debt
$
161,423

$
160,429

On March 23, 2012, the Company entered into a Credit Agreement (the "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 September 30, 2014, the Company was in compliance with all covenants under the Credit Agreement.
The maximum amount of debt outstanding under the Credit Agreement, the weighted-average balance outstanding under the Credit Agreement and the weighted-average interest rate on all outstanding debt for the three-months ended September 30, 2014 was $198,055, $186,676 and 1.6%, respectively, compared to $196,185, $187,704 and 1.5%, respectively, for the three-months ended September 30, 2013. The maximum amount of debt outstanding under the Credit Agreement, the weighted-average balance outstanding under the Credit Agreement and the weighted-average interest rate on all outstanding debt for the six-months ended September 30, 2014 was $198,055, $181,478 and 1.5%, respectively, compared to $208,675, $190,415 and 1.6%, respectively, for the six-months ended September 30, 2013.
As of September 30, 2014, the Company had $4,050 outstanding in letters of credit and $234,590 in unused commitments under the Credit Agreement.
Note 7: Derivative Instruments and Hedging Activities
The Company is exposed to certain market risks, including the effect of changes in foreign currency exchange rates and interest rates. The Company uses derivative instruments to manage financial exposures that occur in the normal course of business. It does not hold or issue derivatives for speculative trading purposes. The Company is exposed to non-performance risk from the counterparties in its derivative instruments. This risk would be limited to any unrealized gains on current positions. To help mitigate this risk, the Company transacts only with counterparties that are rated as investment grade or higher and all counterparties are monitored on a continuous basis. The fair value of the Company’s derivatives reflects this credit risk.
Foreign currency contracts
The Company enters into foreign currency contracts to hedge exposure to variability in expected fluctuations in foreign currencies. 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.

10


As of September 30, 2014, the Company had open contracts in Australian and Canadian dollars, Danish krone, Euros, Mexican pesos, Norwegian kroner, British pounds sterling, Swedish krona, Swiss francs and Japanese yen, all of which have been designated as cash flow hedges. These contracts had a notional amount of $56,719 and will expire within eight months. There was no hedge ineffectiveness during Fiscal 2015 or Fiscal 2014.
Interest-rate Swaps
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, which is based on a three-month LIBOR rate versus a 1.25% fixed rate and has a notional value of $125,000. This interest-rate swap does not qualify for hedge accounting and is hereinafter referred to as the "interest-rate swap."
The following tables summarize the carrying amounts of derivative asset/liability and the impact on the Company's Consolidated Statements of Operations:
 
 
Asset Derivatives
Liability Derivatives
 
Classification
September 30,
2014

March 31,
2014

September 30,
2014

March 31,
2014

Derivatives designated as hedging instruments
 

 

 

 

Foreign currency contracts
Other liabilities (current)




$
2,357

$
358

Foreign currency contracts
Other assets (current)
$
351

$
478

 
 
Derivatives not designated as hedging instruments
 

 

 

 

Interest-rate swaps
Other liabilities (non-current)
 
 
$
1,001

$
1,547

 
 
Three-months ended
Six-months ended
 
 
September 30
September 30
 
Classification
2014

2013

2014

2013

Derivatives designated as hedging instruments
 

 

 
 
Gain (loss) recognized in other comprehensive income (effective portion), net of taxes
Other comprehensive income
$
53

$
(383
)
$
(28
)
$
(562
)
Amounts reclassified from AOCI into results of operations (effective portion), net of taxes
Selling, general &
administrative expenses
$
39

$
146

$
145

$
212

Derivatives not designated as hedging instruments
 
 
 
 
Gain (loss) recognized in results of operations
Interest expense (income), net
$
297

$
13

$
546

$
470

Note 8: Fair Value Disclosures
Recurring fair value measurements
The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2014, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:
 
Assets at Fair Value as of 1
 
September 30, 2014
 
Level 1

Level 2

Level 3

Total

Foreign currency contracts
$

$
351

$

$
351

1 Pension plan assets, not included in the table above, are measured annually using level 1 (mutual funds) and level 2 (common collective trust) inputs.

11


 
Liabilities at Fair Value as of
 
September 30, 2014
 
Level 1

Level 2

Level 3

Total

Foreign currency contracts
$

$
2,357

$

$
2,357

Interest-rate swaps

1,001


1,001

Total
$

$
3,358

$

$
3,358

Non-recurring fair value measurements
The Company's assets and liabilities that are measured at fair value on a non-recurring basis include non-financial assets and liabilities initially measured at fair value in a business combination and Goodwill.
Note 9: Stockholder's Equity
Accumulated Other Comprehensive Income
The components of AOCI consisted of the following for the periods presented:
 
September 30, 2014

March 31, 2014

Foreign currency translation adjustment
$
11,263

$
17,096

Derivative instruments, net of tax
(141
)
(258
)
Defined benefit pension, net of tax
(9,428
)
(9,511
)
Accumulated other comprehensive income
$
1,694

$
7,327

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

Aggregate Value

2Q15
September 26, 2014
October 10, 2014
$
0.10

$
1,544

1Q15
June 27, 2014
July 11, 2014
$
0.10

$
1,554

2Q14
September 27, 2013
October 11, 2013
$
0.09

$
1,430

1Q14
June 28, 2013
July 12, 2013
$
0.09

$
1,445

While the Company expects to continue to declare quarterly dividends, the payment of future dividends is at the discretion of the Company's Board of Directors (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 Credit Agreement, the Company is permitted to make any distribution or dividend as long as no Event of Default or Potential Default (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 is permitted under the Credit Agreement if such event would violate a consolidated leverage ratio required to be maintained under the Credit Agreement 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:
 
Three-months ended
Six-months ended
 
September 30
September 30
 
2014

2013

2014

2013

Common stock purchased
95,433

210,000

266,737

465,506

Aggregate purchase price
$
2,000

$
5,985

$
5,936

$
12,748

Average purchase price
$
20.96

$
28.50

$
22.26

$
27.38


12


During the six-month period ended September 30, 2014, the Company made tax payments of $949 and withheld 41,404 shares of common stock, which were designated as treasury shares, at an average price per share of $22.92, in order to satisfy employee income taxes due as a result of the vesting of certain restricted stock units and performance shares. During the six-month period ended September 30, 2013, the Company made tax payments of $1,322 and withheld 51,194 shares of common stock, which were designated as treasury shares, at an average price per share of $25.82, in order to satisfy employee income taxes due as a result of the vesting of certain restricted stock units.
Since the inception of its repurchase programs beginning in April 1999 and through September 30, 2014, the Company has repurchased 10,638,827 shares of common stock for an aggregate purchase price of $398,360, or an average purchase price per share of $37.44. These shares do not include the treasury shares withheld for tax payments due upon the vesting of certain restricted stock units and performance shares. As of September 30, 2014, 861,173 shares were available under the most recent repurchase program approved by the Board. 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. 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 (as defined in the Credit Agreement) 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 required to be maintained under the Credit Agreement.
Note 10: Income Taxes
The Company's provision for income taxes for the three-months ended September 30, 2014 was $2,640, an effective tax rate of 45.2% on income before provision for income taxes of $5,843, compared to a provision for income taxes for the three-months ended September 30, 2013 of $5,656, an effective tax rate of 50.3% on income before provision for income taxes of $11,241. The effective tax rate decrease from 50.3% to 45.2% was primarily due to the reduction of certain deferred tax liabilities associated with previously taxed income and foreign earnings taxed at lower statutory rates. The Company's provision for income taxes for the six-months ended September 30, 2014 was $6,171, an effective tax rate of 46.3% on income before provision for income taxes of $13,317, compared to a provision for income taxes for the six-months ended September 30, 2013 of $10,164, an effective tax rate of 44.9% on income before provision for income taxes of $22,654. The effective tax rate increase from 44.9% to 46.3% was primarily due to the write-off of certain deferred tax assets related to equity awards partially offset by a reduction of certain deferred tax liabilities associated with previously taxed income and foreign earnings taxed at lower statutory rates. The effective tax rate for the six-months ended September 30, 2014 of 46.3% differs from the federal statutory rate primarily due to state income taxes and the write-off of certain deferred tax assets related to equity awards partially offset by the reduction of certain deferred tax liabilities associated with previously taxed income and foreign earnings taxed at lower statutory rates.
The Company provides for income taxes at the end of each interim period based on the estimated effective tax rate adjusted for certain discrete items for the full fiscal year. Cumulative adjustments to the Company's estimate are recorded in the interim period in which a change in the estimated annual effective rate is determined.
Fiscal 2013 through Fiscal 2015 remain open to examination by the Internal Revenue Service ("IRS") and Fiscal 2010 through Fiscal 2015 remain open to examination by certain state and foreign taxing jurisdictions.
Note 11: Stock-based Compensation
In August 2008, the Company’s stockholders approved the 2008 Long-Term Incentive Plan (the "Incentive Plan"), which replaced the 1992 Stock Option Plan, as amended, and the 1992 Director Stock Option Plan, as amended. As of September 30, 2014, the Incentive Plan is authorized to issue stock options, restricted stock units and performance shares, among other types of awards, for up to 5,078,542 shares of common stock, par value $0.001 per share (the "common stock").
The Company recognized stock-based compensation expense of $1,282 and $1,526 for the three-months ended September 30, 2014 and 2013, respectively, and $3,594 and $3,972 for the six-months ended September 30, 2014 and 2013, respectively. The Company recognized total income tax benefit for stock-based compensation arrangements of $468 and $557 for the three-months ended September 30, 2014 and 2013, respectively, and $1,311 and $1,449 for the six-months ended September 30, 2014 and 2013, respectively. Stock-based compensation expense is recorded in Selling, general & administrative expense within the Company’s Consolidated Statements of Operations.

13


Stock options
Stock option awards are granted with an exercise price equal to the closing market price of the common stock on the date of grant; such stock options generally become exercisable in equal amounts over a three-year period and have a contractual life of ten-years from the grant date. The fair value of stock options is estimated on the grant date using the Black-Scholes option pricing model, which includes the following weighted-average assumptions.
 
Six-months ended
 
September 30
 
2014

2013

Expected life (in years)
7.7

6.8

Risk free interest rate
2.3
%
1.3
%
Annual forfeiture rate
1.5
%
2.5
%
Expected Volatility
45.1
%
42.3
%
Dividend yield
1.3
%
1.3
%
The following table summarizes the Company’s stock option activity:
 
Shares (in 000’s)

Weighted-Average Exercise Price

Weighted-Average Remaining Contractual Life (Years)
Intrinsic Value (000’s)

Outstanding at March 31, 2014
2,018

$
32.89

 
 
Granted
166

21.79

 
 
Exercised


 
 
Forfeited or cancelled
(276
)
34.69

 
 
Outstanding at September 30, 2014
1,908

$
31.67

4.0
$
578

Exercisable at September 30, 2014
1,608

$
33.23

3.1
$
166

The weighted-average grant-date fair value of options granted during the six-months ended September 30, 2014 and 2013 was $9.59 and $10.06, respectively. The intrinsic value of options exercised during the six-months ended September 30, 2014 and 2013 was $0 and $21, respectively. The aggregate intrinsic value in the preceding table is based on the closing stock price of the common stock on September 26, 2014, which was $23.91.
The following table summarizes certain information regarding the Company’s non-vested stock options:
 
Shares (in 000’s)

Weighted-Average Grant-Date Fair Value

March 31, 2014
258

$
10.07

Granted
166

9.59

Vested
(118
)
10.38

Forfeited
(6
)
9.77

September 30, 2014
300

$
9.68

As of September 30, 2014, there was $2,300 of total unrecognized pre-tax stock-based compensation expense related to non-vested stock options, which is expected to be recognized over a weighted-average period of 2.2 years.

14


Restricted stock units
Restricted stock unit awards are subject to a service condition and typically vest in equal amounts over a three-year period from the grant date. The fair value of restricted stock units is determined based on the number of restricted stock units granted and the closing market price of the common stock on the date of grant.
The following table summarizes the Company’s restricted stock unit activity:
 
Shares (in 000’s)

Weighted-Average Grant-Date Fair Value

March 31, 2014
289

$
25.73

Granted
181

21.79

Vested
(150
)
25.60

Forfeited
(13
)
24.64

September 30, 2014
307

$
23.51

The total fair value of shares that vested during the six-months ended September 30, 2014 and 2013 was $3,401 and $4,157, respectively.
As of September 30, 2014, there was $4,701 of total unrecognized pre-tax stock-based compensation expense related to non-vested restricted stock units, which is expected to be recognized over a weighted-average period of 2.0 years.
Performance share awards
Performance share awards are subject to one of the performance goals - the Company's Relative Total Shareholder Return ("TSR") Ranking or cumulative Adjusted EBITDA - each over a three-year period. The Company’s Relative TSR Ranking metric is based on the three-year cumulative return to stockholders from the change in stock price and dividends paid between the starting and ending dates. The fair value of performance share awards (subject to cumulative Adjusted EBITDA) is determined based on the number of performance shares granted and the closing market price of the common stock on the date of grant. The fair value of performance share awards (subject to the Company’s Relative TSR Ranking) is estimated on the grant date using the Monte-Carlo simulation valuation method which includes the following weighted-average assumptions.
 
Six-months ended
 
September 30
 
2014

2013

Risk free interest rate
0.8
%
0.4
%
Expected Volatility
44.7
%
41.1
%
Dividend yield
1.3
%
1.3
%
The following table summarizes the Company’s performance share award activity:
 
Shares (in 000’s)

Weighted-Average Grant-Date Fair Value

March 31, 2014
255

$
28.66

Granted
115

23.05

Vested


Forfeited
(88
)
33.92

September 30, 2014
282

$
24.72

The total fair value of shares that vested during the six-months ended September 30, 2014 and 2013 was $0 and $570, respectively.
As of September 30, 2014, there was $2,001 of total unrecognized pre-tax stock-based compensation expense related to non-vested performance share awards, which is expected to be recognized over a weighted-average period of 2.2 years.

15


Note 12: Earnings (loss) Per Share
The following table details the computation of basic and diluted earnings (loss) per common share from continuing operations for the periods presented (share numbers in thousands):
 
Three-months ended
Six-months ended
 
September 30
September 30
 
2014

2013

2014

2013

Net income (loss)
$
3,203

$
5,585

$
7,146

$
12,490

Weighted-average common shares outstanding (basic)
15,480

15,955

15,483

15,994

Effect of dilutive securities from equity awards
36

81

63

91

Weighted-average common shares outstanding (diluted)
15,516

16,036

15,546

16,085

Basic earnings (loss) per common share
$
0.21

$
0.35

$
0.46

$
0.78

Dilutive earnings (loss) per common share
$
0.21

$
0.35

$
0.46

$
0.78

 
 
 
 
 
The Weighted-average common shares outstanding (diluted) computation is not impacted during any period where the exercise price of a stock option is greater than the average market price. There were 2,014,132 and 2,156,490 non-dilutive equity awards outstanding for the three-months ended September 30, 2014 and 2013, respectively, and 1,931,703 and 2,326,449 non-dilutive equity awards outstanding for the six-months ended September 30, 2014 and 2013, respectively, that are not included in the corresponding period Weighted-average common shares outstanding (diluted) computation.
Note 13: Segment Information
The Company conducts business globally and is managed on a geographic-service type basis consisting of four operating segments which are (i) North America Products, (ii) North America Services, (iii) International Products and (iv) International Services. These operating segments are also the Company's reporting units for purposes of testing goodwill for impairment and its reporting segments for financial reporting purposes. Revenues within our North America segments are primarily attributed to the United States while revenues within our International segments are attributed to countries in Europe, the Pacific Rim and Latin America.
The accounting policies of the operating segments are the same as those of the Company. The Company allocates resources to its operating segments and evaluates the performance of the operating segments based upon operating income.

16


The financial results for the Company's reporting segments are as follows:
 
North America Products

North America Services

International Products

 International Services

Total

2Q15
 
 
 
 
 
Revenues
$
23,167

$
197,519

$
21,382

$
6,805

$
248,873

Gross profit
9,683

53,462

8,923

1,641

73,709

Operating income (loss)
1,860

5,404

(252
)
38

7,050

Depreciation expense
541

932

166

37

1,676

Intangibles amortization

2,643



2,643

Capital expenditures
607

866

97

43

1,613

Assets (as of September 30)
94,720

536,300

48,544

27,430

706,994

 
 
 
 
 
 
2Q14
 
 
 
 
 
Revenues
21,615

194,518

21,576

9,101

246,810

Gross profit
9,377

56,220

9,565

1,966

77,128

Operating income (loss)(1)
2,624

9,928

924

53

13,529

Depreciation expense
500

878

137

50

1,565

Intangibles amortization

3,103


6

3,109

Capital expenditures
907

1,052

95

33

2,087

Assets (as of September 30)
135,387

618,158

67,293

37,095

857,933

 
 
 
 
 
 
2QYTD15
 
 
 
 
 
Revenues
42,894

391,784

44,874

14,547

494,099

Gross profit
17,642

108,679

18,912

3,705

148,938

Operating income (loss)(1)
2,089

12,857

51

617

15,614

Depreciation expense
1,091

1,879

346

78

3,394

Intangibles amortization

5,290


3

5,293

Capital expenditures
967

2,283

229

43

3,522

Assets (as of September 30)
94,720

536,300

48,544

27,430

706,994

 
 
 
 
 
 
2QYTD14
 
 
 
 
 
Revenues
42,651

384,184

48,748

18,124

493,707

Gross profit
18,289

111,407

20,366

4,097

154,159

Operating income (loss)(1)
3,503

19,576

2,573

329

25,981

Depreciation expense
827

1,744

276

93

2,940

Intangibles amortization

6,406


12

6,418

Capital expenditures
2,173

1,545

320

52

4,090

Assets (as of September 30)
135,387

618,158

67,293

37,095

857,933

(1) These results reflect a reclassification of expense that reduced Operating income (loss) in North America Products by $250, $1,218 and $475 in 2Q14, 2QYTD15 and 2QYTD14, respectively, with a corresponding increase of the same amounts for Operating income (loss) in North America Services. This reclassification had no effect on our consolidated financial results.
Note 14: Commitments and Contingencies
The Company is involved in, or has pending, various legal proceedings, claims, suits and complaints arising out of the normal course of business. Based on the facts currently available to the Company, Management believes these matters are adequately provided for, covered by insurance, without merit or not probable that an unfavorable material outcome will result.
There has been no other significant or unusual activity during Fiscal 2015.

17


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations("MD&A").
The discussion and analysis for the three and six-months ended September 30, 2014 and 2013 as set forth below in this Part I, Item 2 should be read in conjunction with the response to Part I, Item 1 of this report and the consolidated financial statements of Black Box Corporation ("Black Box," the "Company," "we" or "our"), including the related notes, and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in the Company’s most recent Annual Report on Form 10-K, as filed with the Securities and Exchange Commission ("SEC") for the fiscal year ended March 31, 2014 (the "Form 10-K"). References to “2Q15” mean the three-month period ended September 30, 2014 while references to “2Q14” mean the three-month period ended September 30, 2013. References to “2QYTD15” mean the six-month period ended September 30, 2014 while references to “2QYTD14” mean the six-month period ended September 30, 2013. The Company’s fiscal year ends on March 31. The fiscal quarters consist of 13 weeks and generally end on the Saturday nearest each calendar quarter end, adjusted to provide relatively equivalent business days for each fiscal quarter. The actual ending dates for the periods presented as of September 30, 2014 and 2013 were September 27, 2014 and September 28, 2013, respectively. 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 technology solutions provider dedicated to helping customers design, build, manage, and secure their IT infrastructure. The Company offers Products and Services that it distributes through two platforms that it has built over its 38 year history.
The Products Platform ("Product") 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 IT infrastructure, specialty networking, multimedia and KVM switching.
The Company generates revenues in its Product business from the sale of technology products through its catalogs and Internet Web site. These products are sold in a highly fragmented and competitive market. The Company has been in this business for over 38 years and has developed a reputation for being a reliable provider of high-quality communications and infrastructure products. With an average order size of less than one thousand dollars, product revenues are less impacted by capital spending and more so by general information technology spending.
The Services Platform ("Service") is comprised of 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 include dedicated sales and engineering resources. The primary services offered through this platform include but are not limited to telephony and unified communications, wired and wireless infrastructure and managed services.
The Company generates revenues in its Service business from the design, sale and/or installation of new communications and data infrastructure systems, the support of existing systems and MAC (moves, adds and changes) work. The Company's diverse portfolio of offerings allows it to service the needs of its clients independent of the technology that they choose, which it believes is a unique competitive advantage. For the sale and implementation of new communications systems, or other major projects, 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 maintain and grow service revenues. Projects account for the majority of Service revenues and are primarily driven by the overall economic environment and information technology capital spending. The Company also serves government clients whose revenues are not as dependent on the overall economic environment as commercial clients but are subject to governmental budgetary constraints.
New communications systems orders often generate a post-implementation maintenance agreement to support the 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 earned ratably over the term of the contract. Recently, some of our clients have adopted a variable fee model based on time and materials per occurrence, similar to MAC work. While this shift decreases our contractually obligated revenues, the variable model also generates profitable revenues. Revenues from maintenance contracts generally are not dependent on the economy as clients contract for maintenance to extend the life of their existing equipment and delay capital spending on new communications systems. Maintenance and MAC work revenues are also dependent upon the Company's relationship with its clients and its long track record of providing high-quality service.

18


The Company generates backlog which is defined by the Company as orders and contracts considered to be firm. At September 30, 2014, the Company's total backlog, which relates primarily to Services, was $389,920, of which $257,939 is expected to be completed within the next twelve months.
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.

Broad geographic footprint: We have built a global footprint with offices throughout the world.

Deep organic resources: We have approximately 4,000 team members world-wide, with the experience and certifications to serve our clients with on-site and remote capabilities.

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

Strong financial position: We have a stable balance sheet and have generated positive cash flow for 38 consecutive years.

The Company services a variety of clients within most major industries, with the highest concentration in the government, business services, manufacturing, banking, retail, healthcare and technology industry verticals. 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.

19


2QYTD15 vs 2QYTD14 Summary
 
2QYTD15

2QYTD14

% Change

Revenues
$
494,099

$
493,707

 %
Gross profit margin
30.1
%
31.2
%
(4
)%
Operating income margin
3.2
%
5.3
%
(40
)%
Diluted EPS
$
0.46

$
0.78

(41
)%
Net cash provided by (used for) operating activities
$
9,158

$
29,462

(69
)%
Diluted EPS was $0.46, a decrease of 41% compared to Diluted EPS of $0.78 in the same period last year as a result of:
a $392 increase in Revenues as a result of an increase in Service Revenues primarily due to an increase in core commercial revenues in North America Services, which includes the Cisco solutions practice, and Wireless solutions practice, also in North America Services, partially offset by a decrease in Product Revenues primarily due to a non-recurring large order in International Products in Fiscal 2014,
a $5,221 decrease in Gross profit as a result of a decrease in Gross profit margin related to both Product and Service Revenues as discussed herein,
a $6,271 increase in Selling, general and administrative expenses which were primarily the result of current period investments for growth programs and an increase in restructuring expense of $875 partially offset by cost savings from restructuring activity in the prior year,
a $143 decrease in Interest expense (income), net resulting from the change in the fair value of the interest-rate swap of $76 (from a gain of $470 in 2QYTD14 to a gain of $546 in 2QYTD15),
a $3,993 decrease in Provision for income taxes as a result of a decrease in Income before provision for income taxes partially offset by an increase in the effective rate from 44.9% to 46.3% due to the write-off of certain deferred tax assets related to equity awards partially offset by a reduction of certain deferred tax liabilities associated with previously taxed income and foreign earnings taxed at lower statutory rates, and
a 539 reduction in Diluted weighted-average common shares outstanding resulting from the Company's common stock repurchases.
Net cash provided by operating activities was $9,158, which included Net income of $7,146 and an increase in working capital of $4,770, a decrease of 69% compared to $29,462, which included Net income of $12,490 and a decrease in working capital of $2,832, in the same period last year. The decrease was primarily due to the timing of working capital items.


20


Results of Operations
Segments
We conduct our business globally and manage our business by geographic-service type under the following four operating segments: North America Products, North America Services, International Products and International Services. The Revenues, Gross profit and Operating income amounts in the table below are presented on a basis consistent with accounting principles generally accepted in the United States.
 
2Q15

2Q14

% Change

 
2QYTD15

2QYTD14

% Change

Revenues
 
 
 
 
 
 
 
North America Products
$
23,167

$
21,615

7
 %
 
$
42,894

$
42,651

1
 %
International Products
$
21,382

$
21,576

(1
)%
 
$
44,874

$
48,748

(8
)%
Total Products
$
44,549

$
43,191

3
 %
 
$
87,768

$
91,399

(4
)%
North America Services
$
197,519

$
194,518

2
 %
 
$
391,784

$
384,184

2
 %
International Services
$
6,805

$
9,101

(25
)%
 
$
14,547

$
18,124

(20
)%
Total Services
$
204,324

$
203,619

 %
 
$
406,331

$
402,308

1
 %
Total Revenues
$
248,873

$
246,810

1
 %
 
$
494,099

$
493,707

 %
Gross profit
 
 
 
 
 
 
 
North America Products
$
9,683

$
9,377

3
 %
 
$
17,642

$
18,289

(4
)%
% of Revenues
41.8
 %
43.4
%
(4
)%
 
41.1
%
42.9
%
(4
)%
International Products
$
8,923

$
9,565

(7
)%
 
$
18,912

$
20,366

(7
)%
% of Revenues
41.7
 %
44.3
%
(6
)%
 
42.1
%
41.8
%
1
 %
Total Products
$
18,606

$
18,942

(2
)%
 
$
36,554

$
38,655

(5
)%
% of Revenues
41.8
 %
43.9
%
(5
)%
 
41.6
%
42.3
%
(2
)%
North America Services
$
53,462

$
56,220

(5
)%
 
$
108,679

$
111,407

(2
)%
% of Revenues
27.1
 %
28.9
%
(6
)%
 
27.7
%
29.0
%
(5
)%
International Services
$
1,641

$
1,966

(17
)%
 
$
3,705

$
4,097

(10
)%
% of Revenues
24.1
 %
21.6
%
12
 %
 
25.5
%
22.6
%
13
 %
Total Services
$
55,103

$
58,186

(5
)%
 
$
112,384

$
115,504

(3
)%
% of Revenues
27.0
 %
28.6
%
(6
)%
 
27.7
%
28.7
%
(4
)%
Total Gross Profit
73,709

77,128

(4
)%
 
148,938

154,159

(3
)%
% of Revenues
29.6
 %
31.2
%
(5
)%
 
30.1
%
31.2
%
(4
)%
Operating income (loss)(1)
 
 
 
 
 
 
 
North America Products
$
1,860

$
2,624

(29
)%
 
$
2,089

$
3,503

(40
)%
% of Revenues
8.0
 %
12.1
%
(34
)%
 
4.9
%
8.2
%
(40
)%
International Products
$
(252
)
$
924

(127
)%
 
$
51

$
2,573

(98
)%
% of Revenues
(1.2
)%
4.3
%
(128
)%
 
0.1
%
5.3
%
(98
)%
Total Products
$
1,608

$
3,548

(55
)%
 
$
2,140

$
6,076

(65
)%
% of Revenues
3.6
 %
8.2
%
(56
)%
 
2.4
%
6.6
%
(63
)%
North America Services
$
5,404

$
9,928

(46
)%
 
$
12,857

$
19,576

(34
)%
% of Revenues
2.7
 %
5.1
%
(47
)%
 
3.3
%
5.1
%
(35
)%
International Services
$
38

$
53

(28
)%
 
$
617

$
329

88
 %
% of Revenues
0.6
 %
0.6
%
 %
 
4.2
%
1.8
%
133
 %
Total Services
$
5,442

$
9,981

(46
)%
 
$
13,474

$
19,905

(32
)%
% of Revenues
2.7
 %
4.9
%
(45
)%
 
3.3
%
4.9
%
(33
)%
Total Operating Income (loss)
7,050

13,529

(48
)%
 
15,614

25,981

(40
)%
% of Revenues
2.8
 %
5.5
%
(49
)%
 
3.2
%
5.3
%
(40
)%
(1) These results reflect a reclassification of expense that reduced Operating income (loss) in North America Products by $250, $1,218 and $475 in 2Q14, 2QYTD15 and 2QYTD14, respectively, with a corresponding increase of the same amounts for Operating income (loss) in North America Services. This reclassification had no effect on our consolidated financial results. 


21



2Q15 vs 2Q14
Total Revenues were $248,873, an increase of 1% when compared to Total Revenues of $246,810 in the same period last year. Product Revenues were $44,549, an increase of 3% compared to Product Revenues of $43,191 in the same period last year primarily as a result of sales generated by a new direct sales program focused on larger opportunities. Service Revenues were $204,324, consistent with Service Revenues of $203,619 in the same period last year primarily due to an increase in core commercial revenues, which includes the Cisco solutions practice, and Wireless solutions practice in North America Services, partially offset by a decrease in government revenues in North America Services due to lower project bidding volume.
Total Gross profit margin was 29.6%, a decrease of 5% compared to Total Gross profit margin of 31.2% in the same period last year. Product Gross profit margin was 41.8%, a decrease of 5% compared to Product Gross profit margin of 43.9% in the same period last year primarily due to the impact of our new direct sales program focused on large competitive deals which tend to carry lower margins and product mix. Service Gross profit margin was 27.0%, a decrease of 6% compared to Service Gross profit margin of 28.6% in the same period last year primarily due to $3,067 of unanticipated costs required to complete a fixed price contract, which decreased gross profit margin by 1.2%, and a decrease in profitability associated with core commercial revenues in North America as a result of continued competition for lower priority budget dollars partially offset by an increase in profitability associated with government revenues in North America due to multiple projects with higher than normal profitability.
Total Operating income margin was 2.8%, a decrease of 49% compared to Total Operating income margin of 5.5% in the same period last year. Product Operating income margin was 3.6%, a decrease of 56% compared to Product Operating income margin of 8.2% in the same period last year, primarily due to current period investments for growth programs and infrastructure and a decrease in Gross profit margins as noted above. Service Operating income margin was 2.7%, a decrease of 45% compared to Service Operating income margin of 4.9% in the same period last year, primarily due to current period investments for growth programs and a decrease in Gross profit margins as noted above.
2QYTD15 vs 2QYTD14
Total Revenues were $494,099, consistent with Total Revenues of $493,707 in the same period last year. Product Revenues were $87,768, a decrease of 4% compared to Product Revenues of $91,399 in the same period last year primarily as a result of a non-recurring large order in International Products sold through integrators within business services whose end-users were government clients and reduced spending in both direct and indirect channels by our government clients in North America Products. The decrease in Product Revenues was partially offset by sales generated by a new direct sales program focused on larger opportunities. Service Revenues were $406,331, an increase of 1% compared to Service Revenues of $402,308 in the same period last year primarily due to an increase in core commercial revenues, which includes the Cisco solutions practice, and Wireless solutions practice in North America Services, partially offset by a decrease in government revenues in North America Services due to lower project bidding volume.
Total Gross profit margin was 30.1%, a decrease of 4% compared to Total Gross profit margin of 31.2% in the same period last year. Product Gross profit margin was 41.6%, a decrease of 2% compared to Product Gross profit margin of 42.3% in the same period last year primarily due to the impact of our new direct sales program focused on large competitive deals which tend to carry lower margins and product mix partially offset by lower margins on the non-recurring order in International Products noted above. Service Gross profit margin was 27.7%, a decrease of 4% compared to Service Gross profit margin of 28.7% in the same period last year primarily due to $3,067 of unanticipated costs required to complete a fixed price contract, which decreased gross profit margin by 0.7%, and a decrease in profitability associated with core commercial revenues in North America as a result of continued competition for lower priority budget dollars partially offset by an increase in profitability associated with government revenues in North America due to multiple projects with higher than normal profitability.
Total Operating income margin was 3.2%, a decrease of 40% compared to Total Operating income margin of 5.3% in the same period last year. Product Operating income margin was 2.4%, a decrease of 63% compared to Product Operating income margin of 6.6% in the same period last year, primarily due to current period investments for growth programs and infrastructure and a decrease in Gross profit margins as noted above. Service Operating income margin was 3.3%, a decrease of 33% compared to Service Operating income margin of 4.9% in the same period last year, primarily due to current period investments for growth programs and a decrease in Gross profit margins as noted above.
The Company anticipates it will continue its investment in longer-term programs designed to accelerate the growth in revenue and market penetration which are expected to result in its Operating income margin remaining at or near current levels for Fiscal 2015.

22


Interest expense, Other expense and Income Taxes
 
2Q15

2Q14

% Change

 
2QYTD15

2QYTD14

% Change

Interest expense
$
1,027

$
1,378

(26
)%
 
$
2,158

$
2,301

(6
)%
% of Revenues
0.4
%
0.6
%
(33
)%
 
0.4
%
0.5
%
(20
)%
Income taxes
$
2,640

$
5,656

(53
)%
 
$
6,171

$
10,164

(39
)%
Effective income tax rate
45.2
%
50.3
%
(10
)%
 
46.3
%
44.9
%
3
 %
2Q15 vs 2Q14
Interest expense was $1,027, a decrease of 26% compared to Interest expense of $1,378 in the same period last year primarily as a result of a change in the fair value of the interest-rate swap of $284 (from a gain of $13 in 2Q14 to a gain of $297 in 2Q15). Interest expense as a percent of Revenues was 0.4%, a decrease of 33% compared to Interest expense as a percent of Revenues of 0.6% in the same period last year. The weighted-average outstanding debt and weighted-average interest rate was $186,676 and 1.6%, respectively, compared to $187,704 and 1.5% in the same period last year.
Income taxes were $2,640, a decrease of 53% compared to Income taxes of $5,656 in the same period last year. The effective income tax rate was 45.2%, a decrease of 10% compared to the effective income tax rate of 50.3% in the same period last year. The effective income tax rate decrease from 50.3% to 45.2% was primarily due to the reduction of certain deferred tax liabilities associated with previously taxed income and foreign earnings taxed at lower statutory rates. The Company expects an effective income tax rate of approximately 39.0% for Fiscal 2015.
2QYTD15 vs 2QYTD14
Interest expense was $2,158, a decrease of 6% compared to Interest expense of $2,301 in the same period last year primarily as a result of a change in the fair value of the interest-rate swap of $76 (from a gain of $470 in 2QYTD14 to a gain of $546 in 2QYTD15). Interest expense as a percent of Revenues was 0.4%, a decrease of 20% compared to Interest expense as a percent of Revenues of 0.5% in the same period last year. The weighted-average outstanding debt and weighted-average interest rate was $181,478 and 1.5%, respectively, compared to $190,415 and 1.6% in the same period last year.
Income taxes were $6,171, a decrease of 39% compared to Income taxes of $10,164 in the same period last year. The effective income tax rate was 46.3%, an increase of 3% compared to the effective income tax rate of 44.9% in the same period last year. The effective income tax rate increase from 44.9% to 46.3% was primarily due to the write-off of certain deferred tax assets related to equity awards partially offset by the reduction of certain deferred tax liabilities associated with previously taxed income and foreign earnings taxed at lower statutory rates. The Company expects an effective income tax rate of approximately 39.0% for Fiscal 2015.
Liquidity and Capital Resources
Overview
A majority of our revenue is generated through individual sales of products and services. Less than 20% of our revenue is generated from long-term support contracts. We depend on repeat client business, as well as our ability to develop new client business, to sustain and grow our revenue. Most significant orders are subject to a competitive bidding process and, generally, competition can be significant for such new orders. Our business model provides us with flexibility in terms of capital expenditures and other required operating expenses. For the foreseeable future, we expect to continue to generate net cash provided by operating activities that exceeds our capital expenditures and other required operating expenses and will be available for discretionary investments.
We seek to allocate company resources in a manner that will enhance stockholder value. Our discretionary investments include: investments in growth programs and infrastructure, strategic acquisitions of high quality growth-oriented companies, a return to our stockholders through dividends and common stock repurchases and repaying our debt.

23


Liquidity Position
The following is a summary of our capitalization and liquidity position.
 
2Q15

4Q14

2Q14

Cash and cash equivalents
$
28,352

$
30,810

$
26,841

Working capital
$
180,462

$
175,692

$
181,397

Long-term debt
$
161,423

$
160,429

$
173,096

Stockholders’ equity
$
346,888

$
351,117

$
486,911

Unused portion of the Credit Agreement
$
234,590

$
235,595

$
222,945

We expect that our cash, the unused portion of the Credit Agreement (hereinafter defined) and net cash provided by operating activities should be sufficient to cover the Company's working capital requirements, capital expenditures, dividend program, potential stock repurchases, potential future acquisitions or strategic investments and other cash needs for at least the next 12 months.
Sources and Uses of Cash
The following is a summary of our sources and uses of cash.
 
2QYTD15

2QYTD14

Net cash provided by (used for) operating activities
$
9,158

$
29,462

Net cash provided by (used for) investing activities
$
(4,253
)
$
(4,845
)
Net cash provided by (used for) financing activities
$
(6,096
)
$
(28,312
)
Net cash provided by (used for) operating activities
Net cash provided by operating activities was $9,158, due primarily to Net income of $7,146, inclusive of non-cash charges, an increase in Accounts receivable, net of $9,890 and a decrease in All other liabilities of $6,252, compared to net cash provided by operating activities of $29,462 in the same period last year, due primarily to Net income of $12,490, inclusive of non-cash charges, a decrease in Accounts receivable, net of $4,912 and a decrease in All other liabilities of $11,071. Changes in the above accounts are based on average Fiscal 2015 and Fiscal 2014 exchange rates, as applicable.
Changes in working capital, and particularly changes in accounts receivable, costs in excess of billings and billings in excess of cost, can have a significant impact on net cash provided by operating activities, largely due to the timing of payments and receipts. The Company expects that its cash provided by operating activities and the availability under its Credit Agreement 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 next twelve-months.
Net cash provided by (used for) investing activities
Capital expenditures
The Company made investments of $3,522 compared to $4,090 in the same period last year which primarily related to information technology infrastructure, computer hardware and software and vehicles.
Net cash provided by (used for) financing activities
Proceeds from long-term debt
Proceeds from long-term debt was $945, which was used to fund common stock repurchases and operations, compared to repayment of long-term debt of $14,662 in the same period last year, which was funded by cash flow provided by operations.

24


Common stock repurchases
The Company made discretionary investments in the form of common stock repurchases of $4,987 compared to $11,426 in the same period last year. The Company also made tax payments of $949 compared to $1,322 in the prior year related to share withholding to satisfy employee income taxes due as a result of the vesting of certain restricted stock units and performance shares.
Since the inception of the repurchase program in April 1999 through September 30, 2014, the Company has repurchased 10,638,827 shares of common stock for an aggregate purchase price of $398,360, or an average purchase price per share of $37.44. These shares do not include the treasury shares withheld for tax payments due upon the vesting of certain restricted stock units and performance shares. As of September 30, 2014, 861,173 shares were available under repurchase programs. 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. 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 (as defined in the Credit Agreement) 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 required to be maintained under the Credit Agreement.
Dividends
The Company made discretionary investments in the form of dividends to its stockholders of $2,954 compared to $2,736 in the prior year. While the Company expects to continue to declare quarterly dividends, the payment of future dividends is at the discretion of the Company's Board of Directors (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 Credit Agreement, the Company is permitted to make any distribution or dividend as long as no Event of Default or Potential Default (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 is permitted under the Credit Agreement if such event would violate a consolidated leverage ratio required to be maintained under the Credit Agreement other than regular quarterly dividends not exceeding $15,000 per year.
Credit Agreement
On March 23, 2012, the Company entered into a Credit Agreement (the "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 which could limit the Company's ability to borrow the full amount of the credit facility. As of September 30, 2014, the Company was in compliance with all covenants under the Credit Agreement.
Legal Proceedings
See Note 14 of the Notes to the Consolidated Financial Statements of this Quarterly Report on Form 10‑Q (this "Form 10-Q"), which information is incorporated herein by reference.
Inflation
The overall effects of inflation on the Company have been nominal. Although long-term inflation rates are difficult to predict, the Company continues to strive to minimize the effect of inflation through improved productivity and cost reduction programs as well as price adjustments within the constraints of market competition.

25


Valuation of Goodwill
As previously disclosed, the Company completed its annual goodwill assessment during the fourth quarter of Fiscal 2014 that resulted in a goodwill impairment loss. The Company then adjusted the carrying value of its reporting units to reflect the goodwill impairment loss and compared that adjusted carrying value to the fair value of the reporting units. The excess of the fair value over this adjusted carrying value was $24,909, $51,957, $16,430 and $1,859 for North America Products, North America Services, International Products and International Services, respectively. A 100 basis point increase in the weighted-average cost of capital, which, holding all other assumptions constant, would have a significant impact on the fair value of a reporting unit and would decrease the fair value of the reporting units by $8,911, $39,375, $3,333 and $1,402 for North America Products, North America Services, International Products and International Services, respectively.
Consistent with prior years, during the third quarter of Fiscal 2015, the Company will conduct its annual goodwill impairment assessment. During that process, the Company will determine whether the recent downward adjustment in its profitability outlook for the remainder of Fiscal 2015 and an expected increase in its weighted-average cost of capital will impact the valuation of goodwill. A significant decrease in the fair value of our reporting units could result in a non-cash impairment charge, which could have a material adverse effect on our consolidated balance sheet and results of operations.
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 strategy for the Company's overall business or (iii) significant negative industry or economic trends.
Critical Accounting Policies/Impact of Recently Issued Accounting Pronouncements
Critical Accounting Policies
The Company’s critical accounting policies require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and are the most important to the portrayal of the Company’s consolidated financial statements. The Company’s critical accounting policies are disclosed in Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of the Form 10-K. The significant accounting policies used in the preparation of the Company’s consolidated financial statements are disclosed in Note 2 of the Notes to the Consolidated Financial Statements within the Form 10-K. No additional significant accounting policies have been adopted during Fiscal 2015.
Impact of Recently Issued Accounting Pronouncements
There have been no accounting pronouncements adopted during Fiscal 2015 that have had a material impact on the Company's consolidated financial statements.
In May 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Codification ("ASC") Update No. 2014-09, "Revenue from Contracts with Customers" ("ASC 2014-09") that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The core principle of ASC 2014-09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expected to be entitled in exchange for those goods or services. Entities can use either of two methods: (i) retrospective to each prior period presented with the option to elect certain practical expedients as defined within ASC 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASC 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASC 2014-09. ASC 2014-09 is effective for annual reporting periods (including interim periods therein) beginning after December 15, 2016 for public companies and early adoption is not permitted. The Company is evaluating the method of adoption and the impact of the adoption of ASU 2014-09 on its consolidated financial statements.

26


Cautionary Forward Looking Statements
When included in this Quarterly Report on Form 10-Q or in documents incorporated herein by reference, the words "should," "expects," "intends," "anticipates," "believes," "estimates," "approximates," "targets," "plans" and analogous expressions are intended to identify forward-looking statements. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. Although it is not possible to predict or identify all risk factors, such risks and uncertainties may include, among others, levels of business activity and operating expenses, expenses relating to corporate compliance requirements, cash flows, global economic and business conditions, successful integration of acquisitions, the timing and costs of restructuring programs and other initiatives, successful marketing of the Company's product and services offerings, successful implementation of the Company’s integration initiatives, 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 the Form 10-K. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and speak only as of the date of this Form 10‑Q. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be correct. 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 such statement is based.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to market risks in the ordinary course of business that include interest-rate volatility and foreign currency exchange rates volatility. Market risk is measured as the potential negative impact on earnings, cash flows or fair values resulting from a hypothetical change in interest rates or foreign currency exchange rates over the next year. The Company does not hold or issue any other financial derivative instruments (other than those specifically noted below) nor does it engage in speculative trading of financial derivatives.
Interest-rate Risk
The Company’s primary interest-rate risk relates to its long-term debt obligations. As of September 30, 2014, the Company had total long-term obligations of $161,360 under the Credit Agreement. Of the outstanding debt, $125,000 was in variable rate debt that was effectively converted to fixed rate debt through an interest-rate swap agreement (discussed in more detail below) and $36,360 was in variable rate obligations. As of September 30, 2014, an instantaneous 100 basis point increase in the interest rate of the variable rate debt would reduce the Company’s earnings in the subsequent fiscal quarter by $90 ($55 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.
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. Changes in the fair market value of the interest-rate swap 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.

27


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 and will continue in the future, on a selective basis, to enter into foreign currency contracts to reduce the foreign currency exposure related to certain intercompany transactions, primarily trade receivables and loans. All of the foreign currency contracts have been designated and qualify as cash flow hedges. The effective portion of any changes in the fair value of the derivative instruments is recorded in Accumulated Other Comprehensive Income ("AOCI") until the hedged forecasted transaction occurs or the recognized currency transaction affects earnings. Once the forecasted transaction occurs or the recognized currency transaction affects earnings, the effective portion of any related gains or losses on the cash flow hedge is reclassified from AOCI to the 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 September 30, 2014, the Company had open foreign currency contracts in Australian and Canadian dollars, Danish krone, Euros, Mexican pesos, Norwegian kroner, British pounds sterling, Swedish krona, Swiss francs and Japanese yen. The open contracts have contract rates ranging from 1.06 to 1.13 Australian dollar, 1.08 to 1.11 Canadian dollar, 5.41 to 5.68 Danish krone, 0.73 to 0.76 Euro, 13.26 to 13.26 Mexican peso, 6.08 to 6.33 Norwegian kroner, 0.59 to 0.61 British pound sterling, 6.48 to 7.23 Swedish krona, 0.90 to 0.92 Swiss franc and 102.77 to 104.95 Japanese yen, all per U.S. dollar. The total open contracts had a notional amount of $56,719 and will expire within eight months.
Item 4. Controls and Procedures.
Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures
Management, including the Company’s Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), for the Company. Management assessed the effectiveness of the Company’s disclosure controls and procedures as of September 27, 2014. Based upon this assessment, Management has concluded that the Company’s disclosure controls and procedures were effective as of September 27, 2014 to provide reasonable assurance that information required to be disclosed by the Company in the reports filed or submitted by it under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to Management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules  13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
Limitations on the Effectiveness of Controls
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent limitations, the Company’s internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

28


PART II. OTHER INFORMATION


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
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

June 29, 2014 to July 27, 2014

$


956,606

July 28, 2014 to August 24, 2014
95,433

$
20.96

95,433

861,173

August 25, 2014 to September 27, 2014

$


861,173

Total
95,433

$
20.96

95,433

861,173

As of September 27, 2014, 861,173 shares were available for the Company's repurchase under a repurchase program for 1,000,000 shares approved by the Board and announced on October 2, 2012. This repurchase program has no expiration date and none of the Company's repurchase 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. 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 (as defined in the Credit Agreement) 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 required to be maintained under the Credit Agreement.
Item 6. Exhibits.
Exhibit Number
Description
21.1
Subsidiaries of the Registrant (1)
31.1
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 (1)
31.2
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 (1)
32.1
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
101
Interactive Data File


(1)
Filed herewith.

29


SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BLACK BOX CORPORATION
Date: October 31, 2014                 
/s/ TIMOTHY C. HUFFMYER                                 
Timothy C. Huffmyer
Vice President, Chief Financial Officer,
Treasurer and Principal Accounting Officer
EXHIBIT INDEX

Exhibit Number
Description
21.1
Subsidiaries of the Registrant (1)
31.1
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 (1)
31.2
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 (1)
32.1
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
101
Interactive Data File
 
 
(1)
Filed herewith.


30