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 29, 2007

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 1, 2007, there were 17,682,945 shares of common stock, par value $.001 (the “common stock”), outstanding.

 

 

BLACK BOX CORPORATION
FOR THE QUARTER ENDED SEPTEMBER 29, 2007
INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets – September 29, 2007 and March 31, 2007			3
Consolidated Statements of Income – Three (3) and Six (6) months ended September 29, 2007 and September 30, 2006			4
Consolidated Statements of Cash Flows –Six (6) months ended September 29, 2007 and September 30, 2006			5
Notes to the Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 3. Quantitative and Qualitative Disclosures about Market Risk			27
Item 4. Controls and Procedures			28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			29
Item 1A. Risk Factors			30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			32
Item 6. Exhibits			32
SIGNATURE			33
EXHIBIT INDEX			34
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 29, 2007				March 31, 2007
Assets
Cash and cash equivalents		$	18,220			$	17,157
Accounts receivable, net of allowance for doubtful accounts of $14,046 and $14,253			188,243				161,733
Inventories, net			69,780				72,807
Costs/estimated earnings in excess of billings on uncompleted contracts			66,051				61,001
Prepaid and other current assets			33,444				31,057
Total current assets			375,738				343,755
Property, plant and equipment, net			35,753				39,051
Goodwill, net			572,821				568,647
Intangibles:
Customer relationships, net			66,048				68,016
Other intangibles, net			31,588				33,258
Other assets			32,273				37,364
Total assets		$	1,114,221			$	1,090,091
Liabilities
Accounts payable		$	83,347			$	74,727
Accrued compensation and benefits			20,359				21,811
Deferred revenue			35,441				35,630
Billings in excess of costs/estimated earnings on uncompleted contracts			24,147				19,027
Income taxes			17,555				13,430
Other liabilities			59,007				62,071
Total current liabilities			239,856				226,696
Long-term debt			230,324				238,194
Other liabilities			20,429				25,505
Total liabilities			490,609				490,395
Stockholders’ equity
Preferred stock authorized 5,000, par value $1.00, none issued			—				—
Common stock authorized 100,000, par value $.001, 17,683 and 17,527 shares issued and outstanding			25				25
Additional paid-in capital			444,938				441,283
Retained earnings			462,297				450,022
Accumulated other comprehensive income			33,386				25,399
Treasury stock, at cost 7,436 and 7,436 shares			(317,034	)			(317,033	)
Total stockholders’ equity			623,612				599,696
Total liabilities and stockholders’ equity		$	1,114,221			$	1,090,091

See Notes to the Consolidated Financial Statements

BLACK BOX CORPORATION

		(Unaudited)								(Unaudited)
		Three month period ended								Six month period ended
		September 29 and 30,								September 29 and 30,
In thousands, except per share amounts		2007				2006				2007				2006
Revenues
Hotline products		$	59,619			$	55,063			$	115,758			$	107,288
On-Site services			201,011				216,262				397,163				394,432
Total			260,630				271,325				512,921				501,720
Cost of Sales
Hotline products			31,457				27,847				60,819				53,308
On-Site services			136,884				144,442				268,583				263,532
Total			168,341				172,289				329,402				316,840
Gross profit			92,289				99,036				183,519				184,880
Selling, general & administrative expenses			66,784				73,599				139,527				143,801
Intangibles amortization			1,344				1,931				3,662				3,437
Operating income			24,161				23,506				40,330				37,642
Interest expense (income), net			6,143				5,521				9,423				9,161
Other expenses (income), net			(73	)			72				(140	)			187
Income before provision for income taxes			18,091				17,913				31,047				28,294
Provision for income taxes			6,781				6,238				11,549				9,806
Net income		$	11,310			$	11,675			$	19,498			$	18,488
Earnings per common share
Basic		$	0.64			$	0.67			$	1.11			$	1.06
Diluted		$	0.64			$	0.66			$	1.10			$	1.04
Weighted average common shares outstanding
Basic			17,594				17,513				17,561				17,415
Diluted			17,752				17,743				17,670				17,766
Dividends per share		$	0.06			$	0.06			$	0.12			$	0.12

See Notes to the Consolidated Financial Statements

BLACK BOX CORPORATION

		(Unaudited)
		Six month period ended September 29 and 30,
In thousands		2007				2006
Operating Activities
Net income		$	19,498			$	18,488
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Intangibles amortization and depreciation			9,345				9,453
Loss on sale of property			472				—
Deferred taxes			(9,738	)			318
Stock compensation expense			2,871				5,636
Tax impact from stock options			4,386				327
Change in fair value of interest-rate swap			438				1,395
Changes in operating assets and liabilities:
Accounts receivable, net			(23,989	)			(3,518	)
Inventories, net			3,798				(4,734	)
All other current assets excluding deferred tax asset			(2,903	)			(1,380	)
Liabilities exclusive of long-term debt			8,054				(4,262	)
Net cash provided by (used for) operating activities		$	12,232			$	21,723
Investing Activities
Capital expenditures		$	(1,926	)		$	(2,112	)
Capital disposals			51				403
Acquisition of businesses (payments)/recoveries			—				(127,402	)
Prior merger-related (payments)/recoveries			(3,215	)			(1,389	)
Net cash provided by (used for) investing activities		$	(5,090	)		$	(130,500	)
Financing Activities
Proceeds from borrowings		$	99,450			$	258,519
Repayment of borrowings			(107,687	)			(131,236	)
Repayment on discounted lease rentals			—				(24	)
Proceeds from exercise of options			5,170				6,611
Payment of dividends			(2,104	)			(2,116	)
Purchase of Treasury Stock			(1	)			(17,587	)
Net cash provided by (used for) financing activities		$	(5,172	)		$	114,167
Foreign currency exchange impact on cash		$	(907	)		$	(839	)
Increase / (decrease) in cash and cash equivalents		$	1,063			$	4,551
Cash and cash equivalents at beginning of period		$	17,157			$	11,207
Cash and cash equivalents at end of period		$	18,220			$	15,758
Supplemental Cash Flow:
Cash paid for interest		$	9,265			$	6,358
Cash paid for income taxes			12,719				7,391
Non-cash financing activities:
Dividends payable			1,061				1,041
Capital leases			472				127

See Notes to the Consolidated Financial Statements

BLACK BOX CORPORATION

Note 1: Basis of Presentation

The accompanying unaudited interim consolidated financial statements of Black Box Corporation (“Black Box” or 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, 2007 (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 nearest each calendar quarter end. The actual ending dates for the periods presented in these Notes to the Consolidated Financial Statements as of September 30, 2007 and 2006 were September 29, 2007 and September 30, 2006. 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, intangible assets and goodwill. 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 (3) and six (6) month periods ended September 30, 2007.

Note 2: Significant Accounting Policies / Recent Accounting Pronouncements

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 Company’s Form 10-K. Additional significant accounting policies adopted during Fiscal 2008 are disclosed below.

Uncertainty in Income Taxes:

The Company requires that the realization of an uncertain income tax position must be “more likely than not” (i.e., greater than 50% likelihood of receiving a benefit) before it can be recognized in the financial statements. The benefit to be recorded in the financial statements is the amount most likely to be realized assuming a review by tax authorities having all relevant information and applying current conventions. The Company includes interest and penalties related to uncertain tax positions within the Provision for income taxes within the Company’s Consolidated Statements of Income.

Recent Accounting Pronouncements

Fair Value Option for Financial Assets and Financial Liabilities

In February, 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 permits an entity to elect to measure eligible items at fair value (“fair value option”) including many financial instruments. The provisions of SFAS 159 are effective for      

the Company as of April 1, 2008. If the fair value option is elected, the Company will report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. The fair value option may be applied for a single eligible item without electing it for other identical items, with certain exceptions, and must be applied to the entire eligible item and not to a portion of the eligible item. The Company is currently evaluating the irrevocable election of the fair value option pursuant to SFAS 159.

Fair Value Measurements

In September, 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for the Company beginning on April 1, 2008. The requirements of SFAS 157 will be applied prospectively except for certain derivative instruments that would be adjusted through the opening balance of retained earnings in the period of adoption. The Company is evaluating the impact of the adoption of SFAS 157 on its consolidated financial statements.

Uncertainty in Income Taxes

In July, 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 requires that realization of an uncertain income tax position must be “more likely than not” (i.e., greater than 50% likelihood of receiving a benefit) before it can be recognized in the financial statements. Further, FIN 48 prescribes the benefit to be recorded in the financial statements as the amount most likely to be realized assuming a review by tax authorities having all relevant information and applying current conventions. FIN 48 also clarifies the financial statement classification of tax-related penalties and interest and sets forth new disclosures regarding unrecognized tax benefits. FIN 48 is effective for the next fiscal year beginning after December 15, 2006. The Company adopted FIN 48 as of April 1, 2007, as required. The adoption of FIN 48 resulted in a decrease to beginning retained earnings of $5,110 representing the cumulative effect adjustment. The adjustment to beginning retained earnings is summarized in the following table. See “Significant Accounting Policies” within this Note 2 and Note 14 for further reference.

		Retained Earnings
Balance as of April 1, 2007		$	450,022
Adjustment for adoption of FIN 48			(5,110	)
Balance as currently reported		$	444,912

Definition of Settlement in FIN 48

In May, 2007, the FASB issued staff position No. FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48” (“FSP FIN 48-1”) which amended FIN 48 to provide guidance about how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. Under FSP FIN 48-1, a tax position could be effectively settled on completion of an examination by a taxing authority. The Company adopted FSP FIN 48-1 in conjunction with adoption of FIN 48 as of April 1, 2007. The adoption of FSP FIN 48-1 did not have a material impact on the Company’s consolidated financial statements.

Note 3: Inventories

The Company’s inventories consist of the following:

		September 30, 2007				March 31, 2007
Raw materials		$	1,803			$	1,774
Finished goods			89,702				93,794
Subtotal		$	91,505			$	95,568
Excess and obsolete inventory reserves			(21,725	)			(22,761	)
Inventory, net		$	69,780			$	72,807

Note 4: Goodwill

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, 2007		$	493,462			$	73,065			$	2,120			$	568,647
Currency translation			(12	)			4,354				37				4,379
Prior period acquisitions			(205	)			—				—				(205	)
Balance as of September 30, 2007		$	493,245			$	77,419			$	2,157			$	572,821

At September 30, 2007, certain merger agreements provided for contingent payments (earn-out) of up to $2,294. If future operating performance goals of the acquired companies are met, goodwill will be adjusted for the amount of the contingent payments.

Note 5: Intangible Assets

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

		September 30, 2007												March 31, 2007
		Gross								Net				Gross								Net
		Carrying				Accum.				Carrying				Carrying				Accum.				Carrying
		Amount				Amort.				Amount				Amount				Amort.				Amount
Definite-lived
Non-compete agreements		$	8,086			$	4,237			$	3,849			$	7,963			$	3,414			$	4,549
Customer relationships			71,989				5,941				66,048				71,989				3,973				68,016
Acquired backlog			10,783				10,783				—				10,783				9,813				970
Total		$	90,858			$	20,961			$	69,897			$	90,735			$	17,200			$	73,535
Indefinite-lived
Trademarks			35,992				8,253				27,739				35,992				8,253				27,739
Total		$	126,850			$	29,214			$	97,636			$	126,727			$	25,453			$	101,274

The Company’s indefinite-lived intangible assets consist solely of the Company’s trademark portfolio obtained through business acquisitions. The Company’s definite-lived intangible assets are comprised of employee non-compete contracts, backlog and customer relationships also obtained through business acquisitions.

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, 2007		$	27,739			$	5,519			$	68,016			$	101,274
Amortization expense			—				(1,694	)			(1,968	)			(3,662	)
Currency translation			—				24				—				24
Balance at September 30, 2007		$	27,739			$	3,849			$	66,048			$	97,636

During the three (3) month periods ended September 30, 2007 and 2006, the Company recognized intangible amortization expense of $1,344 and $1,931, respectively. During the six (6) month periods ended September 30, 2007 and 2006, the Company recognized intangible amortization expense of $3,662 and $3,437, respectively.

The following table details the estimated intangible amortization expense during the remainder of Fiscal 2008, each of the succeeding five fiscal years and the periods thereafter. These estimates are based on the carrying amounts of intangible assets as of September 30, 2007 that are subject to change pending the outcome of purchase accounting related to certain acquisitions:

Fiscal years ending March 31,
2008		$	2,676
2009			5,232
2010			5,094
2011			4,519
2012			4,150
2013			3,963
Thereafter			44,263
Total		$	69,897

Note 6: Indebtedness

The Company’s long-term debt consists of the following:

		September 30, 2007				March 31, 2007
Revolving credit agreement		$	228,830			$	236,715
Capital lease obligations			2,252				2,123
Other			33				42
Total debt		$	231,115			$	238,880
Less: current portion (included in Other liabilities)			(791	)			(686	)
Long-term debt		$	230,324			$	238,194

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, 2007, the Company was in compliance with all financial covenants under the Credit Agreement.

The maximum amount of debt outstanding under the Credit Agreement, the weighted average balance outstanding under the Credit Agreement and the weighted average interest-rate on all outstanding debt for the three (3) month period ended September 30, 2007 was $270,825, $249,789 and 6.63%, respectively, compared to $284,470, $265,437 and 6.26%, respectively, for the three (3) month period ended September 30, 2006. 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 (6) month period ended September 30, 2007 was $270,825, $250,949 and 6.61%, respectively, compared to $284,470, $243,390 and 6.17%, respectively, for the six (6) month period ended September 30, 2006.

Capital lease obligations — The capital lease obligations are primarily for equipment. The lease agreements have remaining terms ranging from less than one year to five years with interest-rates ranging from 3.83% to 11.73%.

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 to three years with interest-rates ranging from 0.0% to 5.9%.

Unused available borrowings - As of September 30, 2007, the Company had $5,234 outstanding in letters of credit and $75,936 available under the Credit Agreement.

Note 7: 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, 2007, the Company had open contracts in Australian and Canadian dollars, Danish krone, Euros, Mexican pesos, Norwegian kroner, Pounds sterling, Swedish krona, Swiss francs and Japanese yen which have been designated as cash flow hedges. These contracts had a notional amount of approximately $67,117 and a fair value of $68,635 and mature within the next eighteen months.

As of September 30, 2007, an unrecognized gain of $102 ($62 net of tax) on all open foreign currency forward contracts is included within the Company’s Consolidated Balance Sheets as a component of Other comprehensive income (“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 (3) month periods ended September 30, 2007 and 2006, the Company recognized a loss of $80 ($49 net of tax) and a gain of $106, respectively, on matured contracts. During the six (6) month periods ended September 30, 2007 and 2006, the Company recognized a loss of $176 ($108 net of tax) and a gain of $292, respectively, on matured contracts. There was no hedge ineffectiveness for the six (6) month periods ended September 30, 2007 and 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.

On July 26, 2006, the Company entered into a five-year interest-rate swap (“interest-rate swap”) which has been used to effectively convert a portion of the 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 and does not qualify for hedge accounting. The Company recognizes gains/losses related to the change in fair value of the interest-rate swap which is included in Interest expense (income) within the Company’s Consolidated Statements of Income. During the three (3) month periods ended September 30, 2007 and 2006, the Company recognized losses of $1,746 and $1,395, respectively, related to the change in fair value of the interest-rate swap. During the six (6) month periods ended September 30, 2007 and 2006, the Company recognized losses of $438 and $1,395, respectively, related to the change in fair value of the interest-rate swap. As of September 30, 2007, the Company has recorded a liability of $2,172 related to the cumulative change in fair value of the interest-rate swap which is a long-term liability recorded in Other liabilities within the Company’s Consolidated Balance Sheets.

Note 8: Acquisitions

Current fiscal year acquisitions:

There have been no acquisitions during the six (6) month period ended September 30, 2007.

Fiscal 2007 acquisitions:

During the fourth quarter of Fiscal 2007, the Company acquired ADS Telecom, Inc. (“ADS”), a privately-held company based out of Orlando, FL. ADS has an active customer base which includes commercial, financial, healthcare and various government agency accounts. In connection with the ADS acquisition, the Company has made a preliminary allocation to goodwill and definite-lived intangible assets, respectively. The definite-lived intangible assets recorded represent the estimated fair market value of customer relationships and non-compete agreements. The Company estimates that the definite-lived intangibles are to be amortized over a period of five to 20 years.

During the third quarter of Fiscal 2007, the Company acquired Nortech Telecommunications Inc. (“NTI”), a privately-held company based out of Chicago, IL. In connection with the NTI acquisition, the Company has made a preliminary allocation to goodwill and definite-lived intangible assets, respectively. The definite-lived intangible assets recorded represent the estimated fair market value of customer relationships and non-compete agreements. The Company estimates that the definite-lived intangibles are to be amortized over a period of five to 20 years.

The allocation of the purchase price for ADS and NTI is based on preliminary estimates of the fair values of certain assets acquired and liabilities assumed as of the date of the acquisition. Management is currently assessing the fair values of the tangible and intangible assets acquired and liabilities assumed. The preliminary allocations of purchase price are dependant upon certain estimates and assumptions, which are preliminary and may vary from the amounts reported herein. The acquisitions of ADS and NTI, taken individually and in the aggregate, did not have a material impact on the Company’s consolidated financial statements.

During the first quarter of Fiscal 2007, the Company acquired the privately-held USA Commercial and Government and Canadian operations of NextiraOne, LLC (“NextiraOne”). The acquired operations service commercial and various government agency clients. In connection with the NextiraOne acquisition, the Company has allocated $73,995 and $24,100 to goodwill and definite-lived intangible assets, respectively. The definite-lived intangible assets recorded represent the fair market value of customer relationships and non-compete agreements. These definite-lived intangibles are to be amortized over a period of one to 20 years.

Also, during first quarter of Fiscal 2007, the Company acquired Nu-Vision Technologies, Inc. and Nu-Vision Technologies, LLC (collectively referred to as “NUVT”). The acquired operations provide planning, installation, monitoring and maintenance services for voice and data network systems. NUVT has an active customer base, which includes commercial, education and various government agency accounts. In connection with the NUVT acquisition, the Company has allocated $15,058 and $18,601 to goodwill and definite-lived intangible assets, respectively. The definite-lived intangible assets recorded represent the fair market value of acquired backlog, customer relationships and non-compete agreements. These definite-lived intangibles are to be amortized over a period of one to 20 years.

The results of operations of ADS, NTI, NextiraOne and NUVT are included within the Company’s Consolidated Statements of Income beginning on their respective acquisition dates.

Note 9: Restructuring

In connection with acquisitions during Fiscal 2007, the Company has incurred costs related to facility consolidations, such as idle facility rent obligations and the write-off of leasehold improvements, and employee severance in an attempt to right-size the organization and more appropriately align the expense structure with anticipated revenues and changing market demand for its solutions and services. The majority of Fiscal 2007 costs were incurred in connection with acquisitions and as such were included in the purchase price allocation. Employee severance is generally payable within the next twelve months with certain facility costs extending through Fiscal 2014.

During the first quarter of Fiscal 2008, the Company incurred $3,591 of costs related to facility consolidations and employee severance. These costs have been recorded in Selling, general & administrative expenses in the Company’s Consolidated Statements of Income. There were no comparable costs during the second quarter of Fiscal 2008.

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

		Employee Severance				Facility Closures				Total
Balance at March 31, 2007		$	3,006			$	16,422			$	19,428
Restructuring charge			2,371				1,220				3,591
Asset write-downs			—				(411	)			(411	)
Cash expenditures			(3,857	)			(3,668	)			(7,525	)
Balance at September 30, 2007		$	1,520			$	13,563			$	15,083

Of the $15,083 above, $7,780 is classified as a current liability under Other liabilities on the Company’s Consolidated Balance Sheets for the period ended September 30, 2007.

Note 10: Stock-based Compensation

Stock-Based Compensation

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, 2007, the Employee Plan is authorized to issue stock options and stock appreciation rights (“SARs”) for up to 9,200,000 shares of common stock. The Employee Plan provides that options are to be granted by a committee appointed by the Company’s Board of Directors (the “Board”) to key employees of the Company; such stock options generally become exercisable in equal amounts over a three-year period. As of September 30, 2007, the Director Plan is authorized to issue stock options and SARs for up to 270,000 shares of common stock. The Director Plan provides that options are to be granted by the Board or a committee appointed by the Board; such options generally become exercisable in equal amounts over a three-year period. No SARs have been issued under either plan.

During the three (3) month periods ended September 30, 2007 and 2006, the Company recognized non-cash stock-based compensation expense of $1,155 ($722 net of tax) or $0.04 per diluted share and $2,387 ($1,551 net of tax) or $0.09 per diluted share, respectively. During the six (6) month periods ended September 30, 2007 and 2006, the Company recognized non-cash stock-based compensation expense of $2,871 ($1,804 net of tax) or $0.10 per diluted share and $5,636 ($3,664 net of tax) or $0.21 per diluted share, respectively. Non-cash stock-based compensation expense is recorded in Selling, general & administrative expense within the Company’s Consolidated Statements of Income.

The following table summarizes the Company’s stock option activity for the six (6) month period ended September 30, 2007.

		Six month period ended September 30, 2007
						Weighted-Average
Shares in thousands		Shares				Exercise Price (per share)
Outstanding at beginning of period			4,621			$	38.66
Granted			—				—
Exercised			(156	)			33.19
Forfeited or expired			(1,661	)			37.16
Outstanding at end of period			2,804			$	40.04
Exercisable at end of period			2,692			$	40.23
Weighted average fair value of options granted during the period						$	—

The Audit Committee of the Board (the “Audit Committee”) has now completed its previously-disclosed independent review of the Company’s historical stock option granting practices. See the “Explanatory Note” preceding Part I, Item 1 of the Form 10-K for more information regarding the Audit Committee’s review and related matters. In light of the findings of its review, the Audit Committee is considering and will present to the Board recommendations regarding procedural enhancements and/or additional remedial measures. The Board will then consider the Audit Committee’s recommendations for adoption. In advance of action by the Audit Committee, the Board and/or the appropriate Board committee, the Company has implemented additional procedures to its process for approving stock option grants that are focused on formalized documentation of appropriate approvals and determination of grant terms to employees.

The Audit Committee’s review included an evaluation of the role of current and former Company personnel in identified problems during the period from 1992 to the present (the “Review Period”), and the Audit Committee’s consideration of remedial actions will include a review of claims that have been or may be asserted against such current or former Company personnel as well as other remedial actions that may be appropriate under all circumstances. As previously reported, based on the findings of the Audit Committee as to Fred C. Young, the Company’s former Chief Executive Officer who resigned on May 20, 2007, the Audit Committee concluded and recommended to the Board, and the Board determined, that Mr. Young could have been terminated due to Cause for Termination (as defined in his agreement dated May 11, 2004) at the time Mr. Young resigned as a director and as an officer of the Company on May 20, 2007. In light of that determination and the terms of the agreements with Mr. Young, all outstanding stock options held by Mr. Young (1,455,402 shares) terminated as of the date of his resignation, which occurred during the first quarter of Fiscal 2008. Accordingly, the Company has determined that the consequences of these events should be considered a first quarter of Fiscal 2008 event for accounting purposes. These events had the following impacts on the Company’s consolidated financial statements and related notes for the six (6) month period ended September 30, 2007: (1) a decrease in outstanding stock options of 1,455,402, (2) immaterial impact on the Diluted earnings per common share computation, (3) a decrease in deferred tax assets of $4,637 with the offsetting entry of $3,899 to Additional paid-in capital and (4) additional tax expense impact of approximately $738.

The following table summarizes certain information regarding the Company’s outstanding stock options at September 30, 2007:

				Options Outstanding																Options Exercisable
								Weighted																Weighted
				Shares				Average				Weighted				Average				Shares				Average				Weighted				Average
				Out-				Remaining				Average				Intrinsic				Exer-				Remaining				Average				Intrinsic
Range of				standing				Contractual				Exercise				Value				cisable				Contractual				Exercise				Value
Exercise Prices				(000’s)				Life (Years)				Price				(000’s)				(000’s)				Life (Years)				Price				(000’s)
$19.95 — $26.60					2				1.0			$	21.94			$	49				2				1.0			$	21.94			$	49
$26.60 — $33.25					82				3.3				29.82				1,069				82				3.3				29.82				1,069
$33.25 — $39.90					1,283				7.7				37.62				6,735				1,171				7.7				37.81				5,924
$39.90 — $46.55					1,394				4.2				42.47				558				1,394				4.2				42.47				558
$46.55 — $53.20					24				2.8				50.69				—				24				2.8				50.69			—
$53.20 — $59.85					17				2.6				58.15				—				17				2.6				58.15			—
$59.85 — $66.50					2				2.3				63.22				—				2				2.3				63.22			—
$19.95 — $66.50					2,804				5.8			$	40.04			$	8,411				2,692				5.8			$	40.23			$	7,600

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the Company’s average stock price (i.e., the average of the open and close prices of the common stock) on September 28, 2007 of $42.87, which would have been received by the option holders had all option holders exercised their options as of that date. As of September 30, 2007, there was approximately $1,313 of total unrecognized pre-tax stock-based compensation expense related to non-vested stock options granted under the plans which is expected to be recognized over a weighted average period of 2.0 years.

Note 11: Earnings Per Share

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

		Three month period								Six month period
		ended September 30,								ended September 30,
		2007				2006				2007				2006
Net income		$	11,310			$	11,675			$	19,498			$	18,488
Weighted average common shares outstanding (basic)			17,594				17,513				17,561				17,415
Effect of dilutive securities from employee stock options			158				230				109				351
Weighted average common shares outstanding (diluted)			17,752				17,743				17,670				17,766
Basic earnings per common share		$	0.64			$	0.67			$	1.11			$	1.06
Dilutive earnings per common share		$	0.64			$	0.66			$	1.10			$	1.04

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. During the three (3) month periods ended September 30, 2007 and 2006, there were 793,505 and 3,240,830 non-dilutive stock options outstanding, respectively, that are not included in the corresponding period Weighted average common shares outstanding (diluted) computation. During the six (6) month periods ended September 30, 2007 and 2006, there were 2,179,335 and 774,038 non-dilutive stock options outstanding, respectively, that are not included in the corresponding period Weighted average common shares outstanding (diluted) computation.

Note 12: Comprehensive income and Accumulated other comprehensive income (“AOCI”)

The following table details the computation of comprehensive income:

		Three month period								Six month period
		ended September 30,								ended September 30,
		2007				2006				2007				2006
Net income		$	11,310			$	11,675			$	19,498			$	18,488
Foreign currency translation adjustment			6,078				(481	)			8,302				6,044
Net change in fair value of cash flow hedging instruments			(574	)			399				(423	)			353
Amounts reclassified into results of operations			49				(106	)			108				(292	)
Other comprehensive income		$	5,553			$	(188	)		$	7,987			$	6,105
Comprehensive income		$	16,863			$	11,487			$	27,485			$	24,593

The components of AOCI consisted of the following:

		September 30, 2007				March 31, 2007
Foreign currency translation adjustment		$	31,654			$	23,352
Unrealized gains/(losses) on derivatives designated and qualified as cash flow hedges			62				377
Unrecognized gain on defined benefit pension			1,670				1,670
Accumulated other comprehensive income		$	33,386			$	25,399

Note 13: Commitments and Contingencies

Regulatory Matters

As previously disclosed, on November 13, 2006, the Company received a letter of informal inquiry from the Enforcement Division of the SEC relating to the Company’s stock option practices from January 1, 1997 to present. On May 24, 2007, the SEC issued a formal order of investigation in connection with this matter, and, on May 29, 2007, the Company received a document subpoena from the SEC acting pursuant to such order. The Company has cooperated with the SEC in this matter and intends to continue to do so.

As previously disclosed, the Audit Committee, with the assistance of outside legal counsel, conducted an independent review of the Company’s historical stock option granting practices and related accounting for stock option grants. See the “Explanatory Note” preceding Part I, Item 1 of the Form 10-K for more information regarding the Audit Committee’s review and related matters. The Audit Committee has concluded its review and is considering and will present to the Board recommendations concerning procedural enhancements and/or additional remedial measures.

On September 20, 2006, the Company received formal notice from the Internal Revenue Service (“IRS”) regarding its intent to begin an audit of the Company’s tax years 2004 and 2005. On August 3, 2007, the Company received formal notice from the IRS regarding its intent to begin an audit of the Company’s 2006 tax year. In connection with these normal recurring audits, the IRS has requested certain documentation with respect to stock options for the Company’s 2004, 2005 and 2006 tax years. The Company has produced various documents requested by the IRS and is currently in the process of responding to additional documentation requests. In connection with the Audit Committee’s review of the Company’s historical stock option granting practices, the Company determined that a number of officers may have exercised options for which the application of Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986, as amended (the “Code”) may apply. It is possible that these options will be treated as having been granted at less than fair market value for federal income tax purposes because the Company incorrectly applied the measurement date as defined in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). If such options are deemed to have been granted at less than fair market value, pursuant to Section 162(m), any compensation to officers, including proceeds from options exercised in any given tax year, in excess of $1,000 will be disallowed as a deduction for tax purposes. The Company estimates that the potential tax-effected liability for any such disallowed Section 162(m) deduction would approximate $3,587, which has been recorded as a current liability within Income taxes within the Company’s Consolidated Balance Sheets. The Company may also incur interest and penalties if it were to incur any such tax liability, which could be material.

With respect to the previously-disclosed matter regarding a United States General Services Administration (“GSA”) Multiple Award Schedule contract, on October 2, 2007, the Company was contacted by the United States Department of Justice which informed the Company that it was reviewing allegations by the GSA that certain of the Company’s pricing practices under the GSA contract violated the Civil False Claims Act. The Company has executed an agreement with the United States tolling the statute of limitations on any action by the United States through April 2, 2008 in order for the parties to discuss the merits of these allegations prior to the possible commencement of any litigation by the United States.

At the conclusion of these regulatory matters, the Company could be subject to additional taxes, fines, penalties or other costs which could be material.

Litigation Matters

In November 2006, two stockholder derivative lawsuits were filed against the Company itself, as a nominal defendant, and several of the Company’s current and former officers and directors in the United States District Court for the Western District of Pennsylvania. The two substantially identical stockholder derivative complaints allege that the individual defendants improperly backdated grants of stock options to several officers and directors in violation of the Company’s stockholder-approved stock option plans during the period 1996-2002, improperly recorded and accounted for backdated stock options in violation of generally accepted accounting principles, improperly took tax deductions based on backdated stock options in violation of the Code, produced and disseminated false financial statements and SEC filings to the Company’s stockholders and to the market that improperly recorded and accounted for the backdated option grants, concealed the alleged improper backdating of stock options and obtained substantial benefits from sales of Company stock while in the possession of material inside information. The complaints seek damages on behalf of the Company against certain current and former officers and directors and allege breach of fiduciary duty, unjust enrichment, securities law violations and other claims. The two lawsuits have been consolidated into a single action as In re Black Box Corporation Derivative Litigation, Master File No. 2:06-CV-1531-TMH, and plaintiffs filed an amended consolidated shareholder derivative complaint on August 31, 2007. The parties have stipulated that responses by the defendants, including the Company, are due on or before February 15, 2008. The Company may have indemnification obligations arising out of this matter to its current and former directors and officers named in this litigation. The Company has made a claim for such costs under an insurance policy.

The Company is, as a normal part of its business operations, a party to legal proceedings in addition to those described in current and previous filings.

Based on the facts currently available to the Company, management believes the matters described under this caption “Litigation Matters” are adequately provided for, covered by insurance, without merit or not probable that an unfavorable 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, 2007 and March 31, 2007, the Company has recorded a warranty reserve of $4,614 and $4,214, respectively.

There has been no other significant or unusual activity during Fiscal 2008.

Expenses Incurred by the Company

The Company has incurred significant expenses, in excess of its insurance deductible of $500, in Fiscal 2007 and Fiscal 2008, and expects to continue to incur additional expenses through the end of Fiscal 2008, in relation to (i) the Audit Committee’s review of the Company’s historical stock option granting practices and related accounting for stock option grants, (ii) the informal inquiry and formal order of investigation by the SEC regarding the Company’s past stock option practices, (iii) the previously-disclosed derivative action relating to the Company’s historical stock option granting practices filed against the Company as a nominal defendant and certain of the Company’s current and former directors and officers, as to whom it may have indemnification obligations and (iv) related matters. As of September 30, 2007, the total amount of such fees is approximately $4,744, of which $542 was expensed in Fiscal 2007 and $1,018 was expensed in Fiscal 2008 through September 30, 2007. The Company and the insurance company for its directors’ and officers’ indemnification insurance are currently in discussions with respect to which of these expenses in excess of the deductible will be paid by the insurance company. Accordingly, there can be no assurance that all expenses submitted or to be submitted to the insurance company for reimbursement will be reimbursed under the Company’s directors’ and officers’ indemnification insurance. The amount of such expenses not reimbursed by the insurance company could be material.

Note 14: Uncertainty in Income Taxes

As discussed in Note 2, the Company adopted FIN 48 on April 1, 2007. As a result of the adoption of FIN 48, the Company recorded a $5,110 reduction to the beginning balance of Retained earnings representing the cumulative effect of a change in accounting principle, an increase to current liabilities of $3,656 recorded within Income taxes and a decrease to non-current assets of $1,454 recorded within Other assets, each of which is reflected within the Company’s Consolidated Balance Sheets. At the adoption date of April 1, 2007, the gross liability for income taxes associated with uncertain tax positions was $6,974. If the uncertain tax positions are recognized, they would all favorably affect the Company’s effective tax rate. The Company includes interest and penalties related to uncertain tax positions within the Provision for income taxes within the Company’s Consolidated Statements of Income. As of April 1, 2007, the Company has recorded approximately $806 of interest and penalties related to uncertain tax positions. During the six (6) month period ended September 30, 2007, the Company recorded an additional increase to current liabilities within Income taxes of $454 related to uncertain tax positions.

The IRS commenced an examination of the Company’s U.S. federal income tax return for Fiscal 2004, Fiscal 2005 and Fiscal 2006. The IRS has not yet proposed any adjustment to the Company’s filing positions in connection with this examination. Upon completion of this examination, it is reasonably possible that the total amount of unrecognized benefits will change. Any adjustment to the unrecognized tax benefits would impact the effective tax rate. The Company cannot make an estimate of the impact on the effective rate for any potential adjustment at this time.

Fiscal 2007 remains open to examination by the IRS. Fiscal 2004 through Fiscal 2007 remain open to examination by state and foreign taxing jurisdictions.

Note 15: 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 month period								Six month period
		ended September 30,								ended September 30,
		2007				2006				2007				2006
North America
Revenues		$	217,002			$	231,297			$	427,004			$	423,869
Operating income			18,104				18,122				28,686				27,519
Depreciation			2,582				3,580				5,406				5,741
Amortization			1,319				1,911				3,609				3,368
Segment assets			1,018,336				1,038,242				1,018,336				1,038,242
Europe
Revenues		$	33,706			$	30,844			$	66,505			$	60,189
Operating income			4,292				3,489				8,240				6,632
Depreciation			117				112				220				231
Amortization			15				11				32				51
Segment assets			148,154				125,745				148,154				125,745
All Other
Revenues		$	9,922			$	9,184			$	19,412			$	17,662
Operating income			1,765				1,895				3,404				3,491
Depreciation			29				24				57				44
Amortization			10				9				21				18
Segment assets			20,202				15,888				20,202				15,888

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:

		As of September 30,
		2007				2006
Segment assets for North America, Europe and All Other		$	1,186,692			$	1,179,875
Corporate eliminations			(72,471	)			(73,727	)
Total consolidated assets		$	1,114,221			$	1,106,148

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

		Three month period								Six month period
		ended September 30,								ended September 30,
		2007				2006				2007				2006
Data Services
Revenues		$	50,200			$	46,447			$	96,365			$	90,978
Gross profit			14,374				13,907				28,551				27,224
Voice Services
Revenues		$	150,811			$	169,815			$	300,798			$	303,454
Gross profit			49,753				57,913				100,029				103,676
Hotline Services
Revenues		$	59,619			$	55,063			$	115,758			$	107,288
Gross profit			28,162				27,216				54,939				53,980

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

Note 16: Subsequent Events

On October 16, 2007, the Company announced the acquisition of B & C Telephone, Inc. (“B&C”), a privately-held company based out of Spokane, Washington. B&C has an active customer base which includes commercial, financial, healthcare and various government agency accounts. Annual historical revenues of B&C are approximately $18,000.

On October 26, 2007, the Company announced its intention to implement a plan regarding certain stock options under the Employee Plan that have been granted with a below-fair market value exercise price for tax purposes, and which vested or may vest after December 31, 2004.

With respect to outstanding stock options, the Company intends to conduct a tender offer to current employees who hold such options to amend each affected option grant to increase the exercise price to the lower of: (i) the fair market value of the common stock on the corrected measurement date (as determined for tax purposes) or (ii) the fair market value of the common stock on the trading day immediately following the expiration of the tender offer, provided that the new exercise price will in no event be lower than the current exercise price of the stock option. Pursuant to the tender offer, current employees subject to taxation in the United States will have the opportunity to avoid unfavorable tax consequences under Section 409A of the Code (“409A”). The Company intends to offer as part of the tender offer the right to receive a cash payment equal to the increase in the exercise price of the affected stock option. The Company anticipates that the cash payment will be made in January 2008.

For employees who exercised affected stock options in calendar 2006, the Company intends to submit directly to the IRS any applicable 409A additional taxes as well as an amount to “gross up” such amount for the additional income and payroll taxes owed on such payments. For employees who have exercised or who do exercise affected stock options in calendar 2007, the value of these options at exercise will be subject to additional taxes under 409A. The Company will pay a bonus to any such employees to compensate them for the additional 409A taxes that they will be required to pay as well as an amount to “gross up” such amount for the additional income and payroll taxes owed on such payments.

With respect to the tender offer, the amount of cash to be paid out by the Company is dependent upon the fair market value of the common stock on the trading day immediately following the expiration of the tender offer. Such amount will be recorded in the fiscal quarter in which the tender offer expires, which currently is expected to be the third quarter of Fiscal 2008. With respect to the expense to be incurred for amounts to be paid to the IRS or to employees for affected options exercised in 2006 and 2007, it is expected that the Company will record such expense in the third quarter of Fiscal 2008. All cash payments to be made by the Company under this plan (other than any payments directly to the IRS) are expected to be paid by January 31, 2008. Such amounts could be material.

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

The discussion and analysis for the three (3) and six (6) month periods ended September 30, 2007 and 2006 as set forth below in this Item 2 should be read in conjunction with the response to Part 1, Item 1 of this report and the consolidated financial statements of Black Box Corporation (“Black Box” or the “Company”), including the related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2007 (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 nearest each calendar quarter end. The actual ending dates for the periods presented as of September 30, 2007 and 2006 were September 29, 2007 and September 30, 2006. 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 unless otherwise noted.

The Company

Black Box is the world’s largest dedicated network infrastructure services provider. Black Box offers one-source network infrastructure services for communication systems. The Company’s service offerings include design, installation, integration, monitoring and maintenance of voice, data and integrated communication systems. The Company’s primary service offering is voice solutions, while providing premise cabling and other data-related services and products. The Company provides 24/7/365 technical support for all of its solutions which encompass all major voice and data manufacturers as well as 118,000 network infrastructure products that it sells through its catalog and Internet web site and its Voice and Data services (collectively referred to as “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 herein for purposes of further analysis.

The Company has completed several acquisitions from April 1, 2006 through September 30, 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. Fiscal 2007 acquisitions include (i) USA Commercial and Government and Canadian operations of NextiraOne, LLC (“NextiraOne”), (ii) Nu-Vision Technologies, Inc. and Nu-Vision Technologies, LLC (collectively referred to as “NUVT”), (iii) Nortech Telecommunications Inc. (“NTI”) and (iv) ADS Telecom, Inc. (“ADS”). The acquisitions noted above are collectively referred to as the “Acquired Companies.” The results of operations of the Acquired Companies are included in the Company’s Consolidated Statements of Income beginning on their respective acquisition dates.

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 past acquisition-related expenses during Fiscal 2007 (by quarter).

		1Q07				2Q07				3Q07				4Q07				Fiscal 2007
Selling general & administrative expenses
Asset write-up depreciation expense on acquisitions		$	—			$	1,191			$	713			$	742			$	2,646
Amortization
Amortization of intangible assets on acquisitions			1,433				1,894				2,621				4,127				10,075
Total		$	1,433			$	3,085			$	3,334			$	4,869			$	12,721

The following table is included to provide a schedule of the current and an estimate of future acquisition-related expenses for Fiscal 2008 (by quarter) based on the acquisition activity through September 30, 2007.

		1Q08				2Q08				3Q08				4Q08				Fiscal 2008
Selling general & administrative expenses
Asset write-up depreciation expense on acquisitions		$	659			$	448			$	439			$	472			$	2,018
Amortization
Amortization of intangible assets on acquisitions			2,269				1,298				1,307				1,287				6,161
Total		$	2,928			$	1,746			$	1,746			$	1,759			$	8,179

The following table provides information on revenues and operating income by reportable geographic segment (North America, Europe and All Other). The table below should be read in conjunction with the following discussion. The Company’s reconciling items of $4,792 and $5,472 for the three (3) month periods ended September 30, 2007 and 2006, respectively and $13,466 and $11,269 for the six (6) months ended September 30, 2007 and 2006, respectively, include restructuring charges, severance costs, other acquisition integration costs, amortization of intangible assets on acquisitions, stock-based compensation expense, asset write-up depreciation expense on acquisitions and historical stock option granting practices investigation costs.

		Three month period ended September 30,																Six month period ended September 30,
		2007								2006								2007								2006
						% of								% of								% of								% of
						total								total								total								total
		$				revenue				$				revenue				$				revenue				$				revenue
Revenues
North America		$	217,002				83.3	%		$	231,297				85.2	%		$	427,004				83.2	%		$	423,869				84.5	%
Europe			33,706				12.9	%			30,844				11.4	%			66,505				13.0	%			60,189				12.0	%
All Other			9,922				3.8	%			9,184				3.4	%			19,412				3.8	%			17,662				3.5	%
Total		$	260,630				100	%		$	271,325				100	%		$	512,921				100	%		$	501,720				100	%
Operating income
North America		$	18,104							$	18,122							$	28,686							$	27,519
% of North America revenues			8.3	%							7.8	%							6.7	%							6.5	%
Europe		$	4,292							$	3,489							$	8,240							$	6,632
% of Europe revenues			12.7	%							11.3	%							12.4	%							11.0	%
All Other		$	1,765							$	1,895							$	3,404							$	3,491
% of All Other revenues			17.8	%							20.6	%							17.5	%							19.8	%
Total		$	24,161				9.3	%		$	23,506				8.7	%		$	40,330				7.9	%		$	37,642				7.5	%
Reconciling items
North America		$	4,792							$	5,472							$	13,466							$	11,269
Europe			—								—								—								—
All Other			—								—								—								—
Total		$	4,792				1.8	%		$	5,472				2.0	%		$	13,466				2.6	%		$	11,269				2.2	%

The following table provides information on revenues and gross profit by service type (Data Services, Voice Services and Hotline Services). The table below should be read in conjunction with the following discussion.

		Three month period ended September 30,																Six month period ended September 30,
		2007								2006								2007								2006
						% of								% of								% of								% of
						total								total								total								total
		$				revenue				$				revenue				$				revenue				$				revenue
Revenues
Data Services		$	50,200				19.3	%		$	46,447				17.1	%		$	96,365				18.8	%		$	90,978				18.1	%
Voice Services			150,811				57.8	%			169,815				62.6	%			300,798				58.6	%			303,454				60.5	%
Hotline Services			59,619				22.9	%			55,063				20.3	%			115,758				22.6	%			107,288				21.4	%
Total		$	260,630				100	%		$	271,325				100	%		$	512,921				100	%		$	501,720				100	%
Gross profit
Data Services		$	14,374							$	13,907							$	28,551							$	27,224
% of Data Services revenues			28.6	%							29.9	%							29.6	%							29.9	%
Voice Services		$	49,753							$	57,913							$	100,029							$	103,676
% of Voice Services revenues			33.0	%							34.1	%							33.3	%							34.2	%
Hotline Services		$	28,162							$	27,216							$	54,939							$	53,980
% of Hotline Services revenues			47.2	%							49.4	%							47.5	%							50.3	%
Total		$	92,289				35.4	%		$	99,036				36.5	%		$	183,519				35.8	%		$	184,880				36.8	%