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 30, 2006

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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ      Accelerated filer o      Non-accelerated filer 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 November 6, 2006, there were 17,357,753 shares of Common Stock, par value $.001 (the“Common Stock”), outstanding.

 

 

BLACK BOX CORPORATION

INDEX

				Page
PART I. FINANCIAL INFORMATION
Item 1.		Financial Statements (Unaudited)
		Consolidated Balance Sheets — September 30, 2006 and March 31, 2006			3
		Consolidated Statements of Income — Three months and six months ended September 30, 2006 and October 1, 2005			4
		Consolidated Statements of Cash Flows — Six months ended September 30, 2006 and October 1, 2005			5
		Notes to Consolidated Financial Statements			6
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3.		Quantitative and Qualitative Disclosures about Market Risk			35
Item 4.		Controls and Procedures			37
PART II.		OTHER INFORMATION
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			38
Item 4.		Submission of Matters to a Vote of Security Holders			39
Item 6.		Exhibits			40
SIGNATURE					41
EXHIBIT INDEX					42
EX-10.1
EX-21.1
EX-31.1
EX-31.2
EX-32.1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

BLACK BOX CORPORATION

		(Unaudited)
In thousands, except par value		September 30, 2006				March 31, 2006
Assets
Cash and cash equivalents		$	15,758			$	11,207
Accounts receivable, net of allowance for doubtful accounts of $14,783 and $9,517			185,333				116,713
Inventories, net			71,877				53,926
Costs and estimated earnings in excess of billings on uncompleted contracts			56,553				23,803
Deferred tax asset			9,489				8,973
Prepaid and other current assets			27,606				16,502
Total current assets			366,616				231,124
Property, plant and equipment, net			41,595				35,124
Goodwill, net			586,273				468,724
Intangibles:
Customer relationships, net			53,996				24,657
Other intangibles, net			34,799				30,783
Deferred tax asset			2,654				4,231
Other assets			4,343				5,091
Total assets		$	1,090,276			$	799,734
Liabilities
Accounts payable		$	87,127			$	44,943
Accrued compensation and benefits			20,656				13,954
Deferred revenue			51,120				22,211
Restructuring reserve			14,246				3,292
Billings in excess of costs and estimated earnings on uncompleted contracts			20,571				8,648
Current maturities of long-term debt			608				1,049
Other liabilities			59,253				33,771
Total current liabilities			253,581				127,868
Long-term debt			251,945				122,673
Other liabilities			27,708				8,293
Total liabilities			533,234				258,834
Stockholders’ Equity
Preferred Stock authorized 5,000, par value $1.00, none issued			—				—
Common Stock authorized 100,000, par value $.001, 17,349 and 17,593 shares outstanding			25				25
Additional paid-in capital			373,045				362,810
Treasury stock, at cost 7,376 and 6,935 shares			(314,411	)			(296,824	)
Accumulated other comprehensive income			17,746				13,036
Retained earnings			480,637				461,853
Total stockholders’ equity			557,042				540,900
Total liabilities and stockholders’ equity		$	1,090,276			$	799,734

BLACK BOX CORPORATION

		Unaudited								Unaudited
		Three months ended								Six months ended
In thousands, except per share		September 30,				October 1,				September 30,				October 1,
amounts		2006				2005				2006				2005
Revenues:
Hotline products		$	55,063			$	54,056			$	107,288			$	107,508
On-Site services			216,262				130,994				394,432				256,824
Total			271,325				185,050				501,720				364,332
Cost of sales:
Hotline products			27,847				26,829				53,308				52,703
On-Site services			144,442				84,339				263,532				166,807
Total			172,289				111,168				316,840				219,510
Gross profit			99,036				73,882				184,880				144,822
Selling, general & administrative expenses			72,784				50,647				141,357				101,567
Restructuring and other charges			—				—				—				5,290
Intangibles amortization			1,931				1,328				3,437				2,886
Operating income			24,321				21,907				40,086				35,079
Interest expense (income), net			4,126				2,330				7,766				4,289
Other expenses (income), net			72				40				187				(35	)
Income before provision for income taxes			20,123				19,537				32,133				30,825
Provision for income taxes			7,044				6,740				11,247				10,634
Net income		$	13,079			$	12,797			$	20,886			$	20,191
Earnings per common share:
Basic		$	0.75			$	0.75			$	1.20			$	1.19
Diluted		$	0.74			$	0.74			$	1.18			$	1.17
Weighted average common shares outstanding
Basic			17,513				17,022				17,415				16,933
Diluted			17,743				17,374				17,766				17,208
Dividends per share		$	0.06			$	0.06			$	0.12			$	0.12

See Notes to Consolidated Financial Statements

BLACK BOX CORPORATION

		(Unaudited)
		Six months ended
In thousands		September 30, 2006				October 1, 2005
Operating Activities
Net income		$	20,886			$	20,191
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Intangibles amortization and depreciation			9,453				7,380
Deferred taxes			1,166				(2,053	)
Stock compensation expense			3,192				—
Tax benefit from exercised stock options			(432	)			(1,971	)
Changes in operating assets and liabilities:
Accounts receivable, net			(3,518	)			(8,913	)
Inventories, net			(4,734	)			5,704
All other current assets excluding deferred tax asset			(516	)			1,586
Liabilities exclusive of long term debt			(3,774	)			550
Net cash provided by (used for) operating activities		$	21,723			$	22,474
Investing Activities
Capital expenditures		$	(2,112	)		$	(1,600	)
Capital disposals			403				1,001
Acquisition of businesses (payments)/recoveries			(127,402	)			(26,854	)
Prior merger-related (payments)/recoveries			(1,389	)			(165	)
Net cash provided by (used for) investing activities		$	(130,500	)		$	(27,618	)
Financing Activities
Proceeds from borrowings		$	258,519			$	105,948
Repayment of borrowings			(131,236	)			(105,235	)
Repayment on discounted lease rentals			(24	)			(667	)
Proceeds from exercise of options			6,611				7,452
Payment of dividends			(2,116	)			(2,021	)
Purchase of treasury stock			(17,587	)			(10	)
Net cash provided by (used for) financing activities		$	114,167			$	5,467
Foreign currency exchange impact on cash		$	(839	)		$	10
Increase / (decrease) in cash and cash equivalents		$	4,551			$	333
Cash and cash equivalents at beginning of period		$	11,207			$	11,592
Cash and cash equivalents at end of period		$	15,758			$	11,925
Supplemental Cash Flow:
Cash paid for interest		$	6,358			$	4,285
Cash paid for income taxes			7,391				6,212
Non-cash financing activities:
Dividends payable			1,041				1,028
Capital leases			127				683

See Notes to Consolidated Financial Statements

BLACK BOX CORPORATION

Note 1: Basis of Presentation

The accompanying unaudited interim consolidated financial statements of Black Box Corporation (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States 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 accounting principles generally accepted in the United States 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 for interim periods may not be indicative of the results of operations for any other interim period or for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto included in the 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, 2006 (“Form 10-K”).

The Company’s fiscal year ends on March 31. The fiscal quarters consist of 13 weeks and end on the Saturday nearest each calendar quarter end. The actual ending dates for the periods presented in these Notes as of September 30, 2006 and 2005 were September 30, 2006 and October 1, 2005. References 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.

Principles of Consolidation

The consolidated financial statements include the accounts of the parent company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires 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 allowances for doubtful accounts receivable, sales returns, net realizable value of inventories, loss contingencies, warranty reserves and intangible assets. Actual results could differ from those estimates. Management believes the estimates made are reasonable.

Reclassification

Certain reclassifications have been made to the financial statements for prior periods in order to conform to the presentation for the three and six months ended September 30, 2006.

Note 2: Significant Accounting Policies

The significant accounting policies used in the preparation of the Company’s consolidated financial statements are disclosed in Note 1 within Form 10-K. Additional significant accounting policies adopted during Fiscal 2007 are disclosed below.

Stock-Based Compensation

On April 1, 2006, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”) which requires companies to estimate the fair value of share-based payment awards and recognize compensation expense over the requisite service period for the portion of the award that is ultimately expected to vest. Prior to the adoption of SFAS 123(R), the Company accounted for share-based awards to employees and directors using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) as allowed under SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Under the intrinsic value method, no stock-based compensation expense related to stock options had been recognized because the exercise price of the Company’s stock options granted to employees and directors equaled or exceeded the fair market value of the underlying stock on the grant-date.

The Company adopted SFAS 123(R) using the modified prospective transition method which requires compensation cost to be recognized for all share-based payments granted after the date of adoption and for all unvested awards existing on the date of adoption. In accordance with the modified prospective transition method, the Company’s Consolidated Financial Statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123(R). However, the modified prospective transition method does require the Company to provide pro forma disclosure of specific income statement line items for periods prior to the adoption of SFAS 123(R) as if the fair-value-based method had been applied to all awards. See Note 13 of the Notes to Consolidated Financial Statements.

SFAS 123(R) requires companies to estimate the fair value of share-based payment awards on the grant-date using an option-pricing model. Upon adoption of SFAS 123(R), the Company began using the Black-Scholes option pricing model as the method of valuation for the Company’s stock options. The model requires the use of various assumptions. The key assumptions are summarized as follows:

Expected Volatility: The Company estimates the volatility of its Common Stock at the date of grant based on the historical volatility of its Common Stock.

Dividend Yield: The Company estimates the dividend yield assumption based on the Company’s historical and projected dividend payouts.

Risk-free interest rate: The Company bases risk-free interest rate on the observed interest rates appropriate for the term of the Company’s employee stock options.

Annual forfeiture rate and expected holding period: The Company estimates the annual forfeiture rate and expected holding period based on historical experience.

Amortization period: The Company recognizes the fair value of awards into expense over the requisite service periods associated with the award.

Recent Accounting Pronouncements

Income Taxes

In July 2006, the Financial Accounting Standards Board (the “FASB”) issued FASB Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). This Interpretation requires that realization of an uncertain income tax position must be “more likely than not” (i.e., greater than 50% likelihood of receiving a benefit) before it can be recognized in the financial statements. Further, FIN 48 prescribes the benefit to be recorded in the financial statements as the amount most likely to be realized assuming a review by tax authorities having all relevant information and applying current conventions. The Interpretation also clarifies the financial statement classification of tax-related penalties and interest and sets forth new disclosures regarding unrecognized tax benefits. FIN 48 is effective for the next fiscal year beginning after December 15, 2006. The Company plans to adopt the Interpretation as of April 1, 2007 as required. The Interpretation is currently being evaluated by the Company for its full impact and, at this time, the Company believes it has properly and adequately provided for all income tax positions and therefore expects minimal impact from adopting the Interpretation.

Stock-Based Compensation

In December 2004, the FASB issued SFAS 123 (R). SFAS (R) is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), supersedes APB 25 and amends SFAS No. 95, “Statement of Cash Flows.” SFAS 123(R) requires that companies recognize all share-based payments to employees, including grants of employee stock options, in the financial statements. The recognized cost is based on the fair value of the equity or liability instruments issued. Pro forma disclosure of this cost is no longer an alternative under SFAS 123(R). This Statement was effective for public companies at the beginning of the first annual reporting period beginning after June 15, 2005.

As permitted by SFAS 123, the Company accounted for its stock-based compensation plans under APB 25’s intrinsic value method and, as such, generally recognized no compensation cost for employee stock options. Accordingly, the adoption of SFAS 123(R)’s fair value method has had a significant impact on the Company’s results of operations, although it has had no impact on the Company’s overall financial position or cash flows. Based on SFAS 123(R), the Company transitioned to the new requirements by using the modified prospective transition method. This transition method requires compensation cost to be recognized for all share-based payments granted after the date of adoption and for all unvested awards existing on the date of adoption.

SFAS 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under past standards. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption when the benefits of tax deductions are in excess of recognized compensation cost. The amount of operating cash flows recognized for such excess tax deductions was $3,200, $3,472 and $6,789 during Fiscal 2006, 2005 and 2004, respectively, since there was no compensation cost recognized under APB 25.

The Company adopted the provisions of SFAS 123(R) as of April 1, 2006. See Significant Accounting Policies and Note 13 of the Notes to the Consolidated Financial Statements for further reference to the disclosures required by SFAS 123(R).

Note 3: Inventories

The Company’s inventories consist of the following:

		September 30, 2006				March 31, 2006
Raw materials		$	1,681			$	1,426
Finished goods			95,117				66,787
Subtotal			96,798				68,213
Excess and obsolete inventory reserves			(24,921	)			(14,287	)
Inventory, net		$	71,877			$	53,926

Note 4: Goodwill and Other Intangible Assets

As required by SFAS No. 142 “Goodwill and Other Intangible Assets,” goodwill and intangible assets with indefinite useful lives are not amortized. The Company is required to perform an impairment test annually, or as often as impairment indicators are present. The Company’s policy is to evaluate its non-amortizable intangible assets for impairment during the third quarter of each fiscal year. The Company performed the most recent test during the third quarter of Fiscal 2006, and concluded that no impairment existed. The Company’s intangibles, as identified in SFAS No. 141 “Business Combinations” (“SFAS 141”), other than goodwill, are its trademarks, non-compete agreements, customer relationships and acquired backlog.

The following table summarizes changes to goodwill at the Company’s reporting units during the period:

		North
		America				Europe				All Other				Total
Balance as of March 31, 2006		$	400,998			$	65,684			$	2,042			$	468,724
Currency translation			29				3,828				(3	)			3,854
Current Period Acquisitions (Note 9)			117,383				—				—				117,383
Prior Period Acquisitions			(3,707	)			—				—				(3,707	)
Earn-out payments			—				—				—				—
Other			19				—				—				19
Balance as of September 30, 2006		$	514,722			$	69,512			$	2,039			$	586,273

At September 30, 2006, certain merger agreements provided for contingent payments (earn-out) of up to $4,588. If future operating performance goals of the acquired companies are met, goodwill will be adjusted for the amount of the contingent payments.

The following table summarizes the gross carrying amount, accumulated amortization and net carrying amount by major intangible asset class:

		September 30, 2006												March 31, 2006
		Gross								Net				Gross								Net
		Carrying				Accum.				Carrying				Carrying				Accum.				Carrying
		Amount				Amort.				Amount				Amount				Amort.				Amount
Trademarks		$	35,992			$	8,253			$	27,739			$	35,992			$	8,253			$	27,739
Non-compete agreements			7,754				2,619				5,135				4,894				1,851				3,043
Customer relationships			56,364				2,368				53,996				25,654				997				24,657
Acquired backlog			7,231				5,306				1,925				3,935				3,934				1
Total		$	107,341			$	18,546			$	88,795			$	70,475			$	15,035			$	55,440

The Company’s indefinite lived intangible assets not subject to amortization consist solely of the Company’s trademark portfolio obtained through business acquisitions. The Company’s definite-lived intangible assets subject to amortization are comprised of employee non-compete contracts, backlog and customer relationships also obtained through business acquisitions. Intangible asset amortization is computed using the straight-line method based upon the estimated useful lives of the respective assets, which range from one to 20 years.

The following table summarizes the changes to carrying amounts of intangible assets during the period.

						Non-Competes				Customer
		Trademarks				and Backlog				Relationships				Total
Balance at March 31, 2006		$	27,739			$	3,044			$	24,657			$	55,440
Amortization expense			—				(2,066	)			(1,371	)			(3,437	)
Currency translation			—				58				—				58
Current Period Acquisitions (Note 9)			—				5,282				27,134				32,416
Prior Period Acquisitions			—				742				3,576				4,318
Balance at September 30, 2006		$	27,739			$	7,060			$	53,996			$	88,795

Intangible asset amortization expense was $1,931 and $3,437 for the three and six months ended September 30, 2006, respectively. Intangible asset amortization expense was $1,328 and $2,886 for the three and six months ended September 30, 2005, respectively. The Company acquired definite-lived intangibles from the completion of two acquisitions during the six month period ended September 30, 2006 (see Note 9 of the Notes to the Consolidated Financial Statements). The estimated definite-lived intangibles recorded of $32,416 were based on a preliminary allocation pending completion of third party valuation, which is expected to be completed during the third quarter of Fiscal 2007. The Company recorded amortization expense of $1,266 and $2,110 for the three and six month periods ended September 30, 2006 for these newly acquired definite-lived assets.

The following table details the estimated intangible amortization expense for the next five years. These estimates are based on the carrying amounts of intangible assets as of September 30, 2006 that are subject to change pending the outcome of purchase accounting related to our current acquisitions:

Years Ending March 31,
2007		$	7,242
2008			4,561
2009			4,139
2010			4,010
2011			3,438
Thereafter			41,103
Total		$	64,493

Note 5: Indebtedness

Long-term debt consisted of the following:

		September 30, 2006				March 31, 2006
Revolving credit agreement		$	249,400			$	121,303
Interest rate swap fair value (see Note 6)			1,395				—
Capital lease obligations			1,563				1,891
Other			195				528
Total debt			252,553				123,722
Less: current portion			(608	)			(1,049	)
Long-term debt		$	251,945			$	122,673

Revolving credit agreement:

On March 28, 2006, the Company entered into a Second Amendment to the Second Amended and Restated Credit Agreement dated January 24, 2005, as amended February 17, 2005 (collectively, the “Credit Agreement”) with Citizens Bank of Pennsylvania, as agent, and a group of lenders. The Credit Agreement expires on March 28, 2011. Borrowings under the Credit Agreement are permitted up to a maximum amount of $310,000, which includes up to $15,000 of swing line loans and $25,000 of letters of credit. The Credit Agreement may be increased by the Company up to an additional $90,000 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 or (b) a rate per annum equal to the LIBOR rate plus 0.75% to 1.25% (determined by a leverage ratio based on the Company’s EBITDA). The Credit Agreement requires the Company to maintain compliance with certain non-financial and financial covenants such as minimum net worth, leverage and fixed charge coverage ratios. As of September 30, 2006, the Company was in compliance with all required covenants under the Credit Agreement.

During the six month period ended September 30, 2006, the Company increased net borrowings under the Credit Agreement by approximately $128,097. The Company utilized the proceeds from net borrowings to fund the acquisitions of the USA Commercial and Government and Canadian operations of NextiraOne, LLC (“NextiraOne”) and Nu-Vision Technologies, Inc. and Nu-Vision Technologies, LLC (collectively referred to as “NUVT”) during the first quarter Fiscal 2007 (see Note 9 of the Notes to the Consolidated Financial Statements) and to repurchase the Company’s Common Stock during the second quarter Fiscal 2007.

During the three month period ended September 30, 2006, the maximum amount and weighted average balance outstanding under the Credit Agreement were $284,470 and $265,437, respectively. The weighted average interest rate on all outstanding debt was approximately 6.26% and 5.04% for the three month periods ended September 30, 2006 and 2005, respectively. During the six month period ended September 30, 2006, the maximum amount and weighted average balance outstanding under the Credit Agreement were $284,470 and $243,390, respectively. The weighted average interest rate on all outstanding debt was approximately 6.17% and 4.53% for the six month periods ended September 30, 2006 and 2005, respectively.

Capital Lease Obligations:

The capital lease obligations are primarily for facilities and equipment. The lease agreements have remaining terms ranging from less than one year to four years with interest rates ranging from 3.83% to 10.83%.

Other:

Other debt is comprised of various bank and third party loans secured by specific pieces of equipment and real property. The loans have remaining terms of less than one year to five years with interest rates ranging from 0.0% to 7.1%.

Unused Available Borrowings:

As of September 30, 2006, the Company had $4,565 outstanding in letters of credit and $56,035 available under the Credit Agreement.

Note 6: Derivative Instruments and Hedging Activities

Foreign Currency Forward Contracts:

The Company enters into foreign currency forward contracts to hedge exposure to variability in expected fluctuations in foreign currencies. As of September 30, 2006, the Company had open contracts in Australian and Canadian dollar, Danish krone, Euro, Japanese yen, Norwegian kroner, Pound sterling, Swedish krona and Swiss franc, which have been designated as cash flow hedges. These contracts had a notional amount of approximately $53,518 and a fair value of $52,175 and mature within the next thirty months.

As of September 30, 2006, an unrecognized gain of $1,203 on all open foreign currency forward contracts is included in the Company’s Consolidated Balance Sheets as a component of Other Comprehensive Income (loss) (“OCI”). This unrecognized gain is expected to be credited to earnings over the life of the maturing contracts as the hedged forecasted transaction occurs and it is expected that the gain will be offset by currency losses on the items being hedged.

During the three and six month period ending September 30, 2006, the Company recognized $106 and $292, respectively, into earnings on matured contracts. There was no hedge ineffectiveness during the six month period ending September 30, 2006.

Interest Rate Swap:

To mitigate the risk of interest-rate fluctuations associated with the Company’s variable rate long term debt, the Company has implemented an interest-rate risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings caused by interest rate volatility. The Company’s goal is to manage interest-rate sensitivity by modifying the re-pricing characteristics of certain balance sheet liabilities so that the net-interest margin is not, on a material basis, adversely affected by the movements in interest rates.

During the three month period ending September 30, 2006, the Company entered into a five year interest rate swap (“interest rate swap”) designated as a cash flow hedge which has been used to effectively convert a portion of the Company’s variable rate debt to fixed rate. The interest rate swap has a notional value of $100,000 reducing to $50,000 after three years. During the three and six month periods ending September 30, 2006, the Company recognized a gain of $9 related to the interest rate swap which is recorded in Interest Expense (Income). As of September 30, 2006, an unrecognized loss of $1,395 on this interest rate swap is included in the Company’s Consolidated Balance Sheets as a component of OCI and Long Term Debt. This unrecognized loss is expected to be reclassified into earnings when the forecasted hedged transactions occur.

Note 7: Earnings Per Share

The following table details the computation of basic and diluted earnings per common share from continuing operations:

		Three month period ended								Six month period ended
		September 30,								September 30,
		2006				2005				2006				2005
Net income, as reported		$	13,079			$	12,797			$	20,886			$	20,191
Weighted average common shares outstanding (basic)			17,513				17,022				17,415				16,933
Effect of dilutive securities from employee stock options			230				352				351				275
Weighted average common shares outstanding (diluted)			17,743				17,374				17,766				17,208
Basic earnings per common share		$	0.75			$	0.75			$	1.20			$	1.19
Dilutive earnings per common share		$	0.74			$	0.74			$	1.18			$	1.17

The Weighted Average Common Shares Outstanding (diluted) computation is not impacted during any period where the exercise price of a stock option is greater than the average market price. There were 3,240,830 and 1,957,098 non-dilutive stock options outstanding during the three month periods ended September 30, 2006 and 2005, respectively, that are not included in the corresponding period Weighted Average Common Shares Outstanding (diluted) computation. There were 774,038 and 2,595,489 non-dilutive stock options outstanding during the six month-periods ended September 30, 2006 and 2005, respectively, that are not included in the corresponding period Weighted Average Common Shares Outstanding (diluted) computation.

Note 8: Comprehensive Income and Stockholders’ Equity

The following table details the computation of comprehensive income:

		Three month period ended								Six month period ended
		September 30,								September 30,
		2006				2005				2006				2005
Net income		$	13,079			$	12,797			$	20,886			$	20,191
Foreign currency translation adjustment			(481	)			718				6,044				(9,046	)
Unrealized gains/(losses) on derivatives designated and qualified as cash flow hedges, net of reclassification of unrealized gains/(losses) on expired derivatives			(1,102	)			75				(1,334	)			233
Comprehensive income (loss)		$	11,496			$	13,590			$	25,596			$	11,378

The components of Accumulated Other Comprehensive Income consisted of the following:

		September 30, 2006				March 31, 2006
Foreign currency translation adjustment		$	17,938			$	11,894
Unrealized gains/(losses) on derivatives designated and qualified as cash flow hedges, net of reclassification of unrealized gains/(losses) on expired derivatives			(192	)			1,142
Total accumulated other comprehensive income		$	17,746			$	13,036

During the six month period ended September 30, 2006, additional paid-in-capital increased $10,235. The increase was comprised of $3,192 in stock compensation expense and $7,043 from stock option exercises, net of tax.

Note 9: Acquisitions

During the first quarter Fiscal 2007, the Company acquired the USA Commercial and Government and Canadian operations of NextiraOne. The following table summarizes the preliminary fair value of the NextiraOne assets acquired and liabilities assumed at the date of acquisition.

		At April 30, 2006
Current assets, primarily consisting of accounts receivable and inventories		$	87,864
Property, plant and equipment			10,806
Other non-current assets			1,386
Intangible assets			19,743
Goodwill			96,665
Total assets acquired		$	216,464
Current liabilities, primarily consisting of deferred revenue, restructuring reserve and accrued expenses		$	106,801
Other non-current liabilities, primarily consisting of restructuring reserve			22,319
Total liabilities acquired		$	129,120
Net assets acquired		$	87,344

The following table details the amounts recorded to each major intangible asset class:

		At April 30, 2006
Backlog		$	3,300
Customer relationships and contracts			16,443
Total intangible assets*		$	19,743

The transaction resulted in $96,665 of goodwill. The Company paid this premium for NextiraOne in order to further expand its operational footprint in the voice and data technology markets. In addition, the purchase increased the Company’s solutions offerings, providing for a stronger worldwide technical services partner for its collective clients.

The Company paid a cash total of $97,305 for the outstanding interests in NextiraOne which included an estimate for the equity book value (total assets less total liabilities, as adjusted by the parties for certain items) as of the closing date. The actual equity book value adjustment is expected to be confirmed during the third quarter, at which time the final purchase price will be determined. As of September 30, 2006, the equity book value adjustment resulted in a $10,535 receivable from the seller. This receivable is recorded in Other Current Assets and is considered fully collectible. The costs of the acquisitions were funded with borrowings under the Credit Agreement described in Note 5 of the Notes to the Consolidated Financial Statements.

Included in the total cash paid at closing was $42,143 that was allocated to escrow accounts, including a general escrow, and an escrow for certain specified items regarding litigation, accounts receivable, deposits and credits, equipment leases, accounts payable, worker’s compensation and real estate leases. The amounts in escrow have been and will continue to be released to NextiraOne’s seller or to the Company in accordance with the terms of the agreements.

After consummation of the acquisition, the Company began to integrate NextiraOne products, employees and facilities with its own. In so doing, the Company incurred $15,726 of costs related to facility consolidations and $8,857 of severance costs for the separation of approximately 250 employees. In accordance with SFAS 141, these costs were properly included in the purchase price allocation for NextiraOne. The majority of the severance costs will be paid in Fiscal 2007 with certain facility costs extending through Fiscal 2014.

In connection with the NextiraOne acquisition, the Company obtained various contractual obligations in the form of operating leases for facilities and vehicles. The following table summarizes the payments due by period related to those contractual obligations:

Payments Due by Period
Less than 1 year		$	15,872
1-3 years			18,271
3-5 years			977
More than 5 years			—
Total		$	35,120

Also, during first quarter Fiscal 2007, the Company acquired NUVT. In connection with the NUVT acquisition, the Company has made a preliminary allocation of $20,718 and $12,673 to goodwill and definite-lived intangible assets, respectively. The definite-lived intangible assets recorded represent the estimated fair market value of acquired backlog, customer relationships and non-compete agreements. The Company estimates that the definite-lived intangibles are to be amortized over a period of one to 20 years.

The allocation of the purchase price of these acquisitions is based on preliminary estimates of the fair values of certain assets acquired and liabilities assumed as of the date of the acquisition. Management, with the assistance of independent valuation specialists, is currently assessing the fair values of the tangible and intangible assets acquired and liabilities assumed. The preliminary allocations of purchase price are dependant upon certain estimates and assumptions, which are preliminary and may vary from the amounts reported herein.

NextiraOne and NUVT contributed on-site services revenues of $88,259 and $148,433 during the three and six month periods ended September 30, 2006, respectively.

The following unaudited pro forma summary presents the Company’s results of operations as if the acquisitions of NextiraOne and NUVT had occurred on April 1, 2005 and does not purport to represent what the Company’s results of operations would have been had the acquisitions occurred on such date or at the beginning of the period indicated, or to project the Company’s results of operations for any future date or period, or to be a fair reflection of the assets purchased at the date of acquisition. The pro forma results of operations exclude the impact of nonrecurring or extraordinary adjustments, together with related income tax effects. These pro forma results of operations do not include the effects of cost synergies and one-time nonrecurring transactions associated with the acquisition.

		For the three months ended								For the six months ended
		September 30,								September 30,
		2006				2005				2006				2005
Revenue (Pro forma)		$	271,325			$	310,496			$	532,366			$	646,438
Net Income from continuing operations (Pro forma), net of tax		$	13,079			$	12,601			$	19,089			$	24,072
Earnings per common share (Pro forma)
Basic		$	0.75			$	0.74			$	1.10			$	1.42
Diluted		$	0.74			$	0.73			$	1.09			$	1.40

Purchase Price Allocation Update (prior year acquisitions):

During first quarter Fiscal 2006, the Company acquired 100% of the issued and outstanding equity interests of Telecommunication Systems Management, Inc. (“TSM”), GTC Technology Group, Inc. and Technology Supply, Inc. (collectively referred to as “GTC”) and Business Communications, Inc., Bainbridge Communication, Inc., BCI of Tampa, LLC and Networx, L.L.C. (collectively referred to as “BCI”). These companies primarily provide full-service voice communication solutions and services in the Florida and Virginia markets. In connection with the acquisitions, the Company has allocated $8,385 and $5,846 to goodwill and definite-lived intangible assets, respectively. The definite-lived intangible assets recorded represent the fair market value of acquired customer relationships and non-compete agreements. The definite-lived intangibles are being amortized over a period of five to 20 years.

During second quarter Fiscal 2006, the Company acquired substantially all of the assets and certain liabilities of Universal Solutions of North America, L.L.C. and related entities (“Universal”). Universal primarily provides planning, installation and maintenance services for voice and data network systems in 14 states. In connection with the acquisition, the Company has allocated $9,430 and $8,000 to goodwill and definite-lived intangible assets, respectively. The definite-lived intangible assets recorded represent the estimated fair market value of acquired customer relationships and non-compete agreements. The definite-lived intangibles are being amortized over a period of five to 20 years.

During third quarter Fiscal 2006, the Company purchased 100% of the issued and outstanding equity interests of Communication is World InterActive Networking, Inc. (“C=WIN”) and Converged Solutions Group, LLC (“CSG”). C=WIN has an active customer base which includes commercial and various government agency accounts. CSG has an active customer base which includes commercial, education, health care and various government agency accounts. The C=WIN and CSG acquisitions primarily provide planning, installation and maintenance services for voice and data network systems in 15 states. In connection with the acquisitions, the Company has made a preliminary allocation of $9,153 and $6,779 to goodwill and definite-lived intangible assets, respectively. The definite-lived intangible assets recorded represent the estimated fair market value of acquired customer relationships and non-compete agreements. The Company estimates that the definite-lived intangibles are to be amortized over a period of four to 20 years.

The results of operations of TSM, GTC, BCI, Universal, C=WIN and CSG are included in the Company’s Consolidated Statements of Income beginning on their respective acquisition dates. The acquisitions taken individually did not have a material impact on the Company’s results of operations.

The following acquired companies will collectively be referred to as “Acquired Companies”: TSM, GTC, BCI, Universal, C=WIN, CSG, NextiraOne and NUVT.

Note 10: Commitments and Contingencies

Litigation

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 its legal matters are adequately provided for, covered by insurance or a third party indemnification obligation, without merit or not probable that a material unfavorable outcome will result.

Product Warranties

Estimated future warranty costs related to certain products are charged to operations in the period the related revenue is recognized. The product warranty liability reflects the Company’s best estimate of probable liability under those warranties. As of September 30, 2006 and March 31, 2006, the Company has recorded a warranty reserve of $5,059 and $1,383, respectively.

There has been no significant or unusual activity during the three and six month periods ended September 30, 2006 other than the acquisitions as discussed in Note 9 of the Notes to the Consolidated Financial Statements.

Note 11: Pension Plan Costs

On April 30, 2006, the Company acquired NextiraOne who is a sponsor of a non-contributory defined benefit plan (the “CWA Plan”) for the Communication Workers of America Local 1109 (“CWA 1109”). Benefits from the CWA Plan are based upon years of service and rates negotiated by the Company and CWA 1109. Pension costs are funded to satisfy minimum requirements prescribed by the Employee Retirement Income Security Act of 1974.

The following table summarizes the components of net periodic benefit cost for the three and six month periods ended September 30, 2006. Six month results include the net periodic benefit cost from May 1, 2006 (date following acquisition) through September 30, 2006:

		For the three months				For the six months
		ended September 30,				ended September 30,
		2006				2006
Service cost		$	148			$	219
Interest cost			465				581
Expected return on plan assets			(514	)			(622	)
Amortization of prior service cost			—				—
Amortization of unrealized gains and losses			(42	)			—
Net periodic benefit cost		$	57			$	178

As of April 30, 2006, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets were $25,400, $25,400 and $18,697, respectively. A liability of $6,703 representing the unfunded portion of the CWA Plan is included in Other Liabilities within the Consolidated Balance Sheets.

The following are the weighted-average assumptions utilized for this plan:

		April 30, 2006
Discount rate			5.50	%
Rate of compensation increase			N/A
Expected long-term rate of return			8.00	%

Note 12: Restructuring and Other Charges

The Company incurred $15,726 of costs related to facility consolidations and $8,857 of severance costs for the separation of approximately 250 employees. In accordance with SFAS 141, these costs were properly included in the purchase price allocation for NextiraOne. The majority of the severance costs will be paid in Fiscal 2007 with certain facility costs extending through Fiscal 2014. The Company paid $3,590 and $7,132 during the three and six month periods ended September 2006, respectively, relating to such obligations.

The following table summarizes the changes to the restructuring reserve during the period:

		Employee				Facility
		Severance				Closures				Total
Balance at March 31, 2006		$	260			$	10,438			$	10,698
Acquisition adjustments (see Note 9)			8,857				15,843				24,700
Cash expenditures			(4,997	)			(4,173	)			(9,170	)
Balance at September 30, 2006		$	4,120			$	22,108			$	26,228

Note 13: Stock-based Compensation

Stock-based compensation expense recognized in the Company’s Consolidated Statements of Income for the three and six months ended September 30, 2006 includes (i) compensation expense for share-based awards granted prior to, but not yet vested as of March 31, 2006, based on the grant-date fair value estimated in accordance with the pro forma provisions of SFAS 123 and (ii) compensation expense for the share-based payment awards granted subsequent to March 31, 2006 based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R).

For the three and six month periods ended September 30, 2006, the Company recognized compensation expense of $1,572 ($1,022 net of tax) or $0.06 per diluted share and $3,192 ($2,075 net of tax) or $0.12 per diluted share, respectively. This compensation expense is recorded to Selling, General and Administrative expense on the Company’s Consolidated Statement of Income.

The following table summarizes certain information regarding the Company’s outstanding stock options as of and for the period ending September 30, 2006.

		Six month period ended September 30, 2006
						Weighted-Average Exercise
		Shares				Price (per share)
Outstanding at March 31, 2006			5,055			$	38.28
Granted			70				39.12
Exercised			(197	)			33.61
Forfeited or expired			(58	)			38.62
Outstanding at September 30, 2006			4,870			$	38.48
Exercisable at September 30, 2006			4,377			$	38.91
Weighted average fair value of options granted during the period using Black-Scholes option pricing model						$	17.68

The Company has two stock option plans, the 1992 Stock Option Plan, as amended (the “Employee Plan”) and the 1992 Director Stock Option Plan, as amended (the “Director Plan”). As of September 30, 2006, the Employee Plan is authorized to issue stock options and stock appreciation rights (“SARs”) for up to 9,200,000 shares of the Company’s Common Stock. Options are granted by a committee appointed by the Company’s Board of Directors (the “Board”) to key employees of the Company and generally become exercisable in equal amounts over a three-year period. Option prices are equal to the fair market value of the stock on the date of the grant. As of September 30, 2006, the Director Plan is authorized to issue stock options and SARs for up to 270,000 shares of the Company’s Common Stock. Options are granted by the Board or a committee appointed by the Board and generally become exercisable in equal amounts over a three-year period. Option prices are equal to the fair market value of the Common Stock on the date of the grant. No SARs have been issued under either plan.

The weighted average fair value of stock options granted during the period was $17.68 based on the Black-Scholes option pricing model using the following weighted average assumptions.

		2Q07
Expected life (in years)			5.7
Risk free interest rate			4.18	%
Annual forfeiture rate			1.53	%
Volatility			44.75	%
Dividend yield			0.60	%

The following table summarizes information about stock options outstanding at September 30, 2006:

		Options Outstanding																Options Exercisable
						Weighted
						Average				Weighted				Average								Weighted				Average
		Shares				Remaining				Average				Intrinsic				Shares				Average				Intrinsic
Range of		Outstanding				Contractual				Exercise				Value				Exercisable				Exercise				Value
Exercise Prices		(000’s)				Life (Years)				Price				(000’s)				(000’s)				Price				(000’s)
$19.95 — $26.60			258				1.8			$	21.85			$	4,422				258			$	21.85			$	4,422
$26.60 — $33.25			356				2.6				30.07				3,174				356				30.07				3,174
$33.25 — $39.90			1,951				8.6				37.04				3,758				1,458				37.82				1,674
$39.90 — $46.55			2,147				5.2				42.37				—				2,147				42.37			—
$46.55 — $53.20			154				3.1				49.39				—				154				49.39			—
$53.20 — $59.85			2				3.3				55.88				—				2				55.88			—
$59.85 — $66.50			2				3.2				63.22				—				2				63.22			—
$19.95 — $66.50			4,870				6.1			$	38.48			$	11,354				4,377			$	38.91			$	9,270

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s average stock price on September 30, 2006 of $38.97, which would have been received by the option holders had all option holders exercised their options as of that date. As of September 30, 2006, there was approximately $7,295 of total unrecognized pre-tax compensation expense related to non-vested stock options granted under the plans which is expected to be recognized over a weighted average period of 3.0 years.

Pro forma Information

The Company adopted SFAS 123(R) using the modified prospective transition method. The modified prospective transition method requires the Company to provide pro forma disclosure of specific income statement line items for periods prior to the adoption of SFAS 123(R) as if the fair-value-based method had been applied to all awards. The following table illustrates the pro forma effect on net income (loss) and net income (loss) per share prior to the adoption of SFAS 123(R). This table only shows pro forma amounts for the three and six month period ending September 30, 2005 since the Company adopted the fair value recognition provisions of SFAS 123(R) on April 1, 2006 and, therefore, compensation expenses are recognized in the consolidated income statement for all share-based payments granted prior to, but not yet vested as of March 31, 2005.

		Three months ended				Six months ended
		September 30,				September 30,
		2005				2005
Net income (As reported)		$	12,797			$	20,191
Plus: Stock-based compensation expense included in reported net income, net of related tax			--				--
Less: Stock-based compensation expense determined by the fair value method for all awards, net of related tax			(2,645	)			(5,222	)
Net Income (Pro forma)		$	10,152			$	14,969
Earnings per common share
Basic — as reported		$	0.75			$	1.19
Basic — pro forma		$	0.60			$	0.88
Diluted — as reported		$	0.74			$	1.17
Diluted — pro forma		$	0.58			$	0.87

The pro forma impacts computed above were based on the Black-Scholes option pricing model using the following weighted average assumptions.

		2Q06
Expected life (in years)			5.1
Risk free interest rate			3.9	%
Volatility			59.0	%
Dividend yield			0.70	%

Note 14: Segment Reporting

Management reviews financial information for the consolidated Company accompanied by disaggregated information on net revenues, operating income and assets by geographic region for the purpose of making operational decisions and assessing financial performance. Additionally, Management is presented with and reviews net revenues and gross profit by service type. The accounting policies of the individual operating segments are the same as those of the Company.

The following table presents financial information about the Company’s reportable segments by geographic region:

		Three months ended								Six months ended
		September 30,								September 30,
		2006				2005				2006				2005
North America
Revenues		$	231,297			$	146,754			$	423,869			$	283,615
Operating income			18,937				16,537				29,963				28,396
Depreciation			3,580				2,057				5,741				4,017
Amortization			1,911				1,270				3,368				2,475
Segment assets (as of September 30, 2006)			1,022,370				748,322				1,022,370				748,322
Europe
Revenues		$	30,844			$	29,199			$	60,189			$	62,949
Operating income			3,489				3,427				6,632				3,060
Depreciation			112				166				231				362
Amortization			11				50				51				393
Segment assets (as of September 30, 2006)			125,745				123,837				125,745				123,837
All Other
Revenues		$	9,184			$	9,097			$	17,662			$	17,768
Operating income			1,895				1,943				3,491				3,623
Depreciation			24				38				44				115
Amortization			9				8				18				18
Segment assets (as of September 30, 2006)			15,888				14,955				15,888				14,955

The sum of segment revenues, operating income, depreciation and amortization equals the consolidated revenues, operating income, depreciation and amortization. The following reconciles segment assets to total consolidated assets:

		September 30, 2006				March 31, 2006
Segment assets for North America, Europe and All Other		$	1,164,003			$	878,879
Corporate eliminations			(73,727	)			(79,145	)
Total consolidated assets		$	1,090,276			$	799,734

The following table presents financial information about the Company by service type:

		Three months ended September 30								Six months ended September 30
		2006				2005				2006				2005
Data Services
Revenues		$	46,447			$	52,584			$	90,978			$	105,485
Gross Profit			13,907				15,482				27,224				31,006
Voice Services
Revenues		$	169,815			$	78,410			$	303,454			$	151,339
Gross Profit			57,913				31,173				103,676				59,011
Hotline Services
Revenues		$	55,063			$	54,056			$	107,288			$	107,508
Gross Profit			27,216				27,227				53,980				54,805

The sum of service type revenues and gross profit equals consolidated revenues and gross profit.

Note 15: Subsequent Events

Acquisitions:

On October 31, 2006, the Company announced the acquisition of Nortech Telecommunications, Inc. (“NTI”), a privately-held company based out of Chicago, IL. NTI has an active customer base which includes commercial, education and various government agency accounts. Annual historical revenues of NTI are approximately $8,000.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the response to Part I, Item 1 of this report and the consolidated financial statements of the Company, including the related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Form 10-K. All dollar amounts are presented in thousands unless otherwise noted.

The Company offers one-source network infrastructure services for: data networks (Data Services), including structured cabling for wired and wireless systems; voice systems (Voice Services), including new and upgraded telephony systems; and 24/7/365 hotline technical support (Hotline Services) for more than 118,000 network infrastructure products that it sells through its catalog, Internet Web site and on-site services offices.

Management is presented with and reviews revenues and operating income by geographical segment. In addition, revenues and gross profit information by service type are provided below for further analysis.

The Company has completed several acquisitions previously defined as “the Acquired Companies” from the first quarter of Fiscal 2006 through the second quarter of Fiscal 2007 that have a significant impact on the Company’s consolidated financial statements and, more specifically, North America Voice Services for the periods under review. In connection with certain acquisitions, the Company incurs expenses that it excludes when evaluating the continuing operations of the Company. The following table is included to provide a schedule of the current and an estimate of future acquisition related expenses based on the acquisition activity through September 30, 2006.

																		FY07
		1Q07				2Q07				3Q07				4Q07				Total				Thereafter
SGA
Asset write-up depreciation expense on acquisitions		$	—			$	1,197			$	713			$	652			$	2,562			$	3,560
Amortization
Amortization of intangible assets on acquisitions			1,439				1,892				1,849				1,863				7,043				56,772
Total		$	1,439			$	3,089			$	2,562			$	2,515			$	9,605			$	60,332

Information on revenues and operating income by reportable geographic segment (North America, Europe and All Other) is presented below:

		Three months ended September 30,																Six months ended September 30,
		2006								2005								2006								2005
						% of								% of								% of								% of
						total								total								total								total
		$				revenue				$				revenue				$				revenue				$				revenue
Revenues:
North America		$	231,297				85.2	%		$	146,754				79.3	%		$	423,869				84.5	%		$	283,615				77.8	%
Europe			30,844				11.4	%			29,199				15.8	%			60,189				12.0	%			62,949				17.3	%
All Other			9,184				3.4	%			9,097				4.9	%			17,662				3.5	%			17,768				4.9	%
Total		$	271,325				100	%		$	185,050				100	%		$	501,720				100	%		$	364,332				100	%
Operating Income:
North America		$	18,937							$	16,537							$	29,963							$	28,396
% of North America revenues			8.2	%							11.3	%							7.1	%							10.0	%
Europe		$	3,489							$	3,427							$	6,632							$	3,060
% of Europe revenues			11.3	%							11.7	%							11.0	%							4.9	%
All Other		$	1,895							$	1,943							$	3,491							$	3,623
% of All Other revenues			20.6	%							21.4	%							19.8	%							20.4	%
Total		$	24,321				9.0	%		$	21,907				11.8	%		$	40,086				8.0	%		$	35,079				9.6	%
Reconciling items:
North America		$	4,657							$	1,274							$	8,825							$	5,653
Europe			—								—								—								3,742
All Other			—								—								—								—
Total		$	4,657				1.7	%		$	1,274				0.7	%		$	8,825				1.8	%		$	9,395				2.6	%

Information on revenues and gross profit by service type (Data Services, Voice Services and Hotline Services) is presented below:

		Three months ended September 30,																Six months ended September 30,
		2006								2005								2006								2005
						% of								% of								% of								% of
						total								total								total								total
		$				revenue				$				revenue				$				revenue				$				revenue
Revenues:
Data Services(1)		$	46,447				17.1	%		$	52,584				28.4	%		$	90,978				18.1	%		$	105,485				29.0	%
Voice Services(1)			169,815				62.6	%			78,410				42.4	%			303,454				60.5	%			151,339				41.5	%
Hotline Services			55,063				20.3	%			54,056				29.2	%			107,288				21.4	%			107,508				29.5	%
Total		$	271,325				100	%		$	185,050				100	%		$	501,720				100	%		$	364,332				100	%
Gross Profit
Data Services		$	13,907							$	15,482							$	27,224							$	31,006
% of Data Services revenues			29.9	%							29.4	%							29.9	%							29.4	%
Voice Services		$	57,913							$	31,173							$	103,676							$	59,011
% of Voice Services revenues			34.1	%							39.8	%							34.2	%							39.0	%
Hotline Services		$	27,216							$	27,227							$	53,980							$	54,805
% of Hotline Services revenues			49.4	%							50.4	%							50.3	%							51.0	%
Total		$	99,036				36.5	%		$	73,882				39.9	%		$	184,880				36.8	%		$	144,822				39.8	%