UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

(Mark One)

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2005

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

Registrant’s telephone number, including area code: 724-746-5500

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value

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. YES þ NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). YES þ NO o

The aggregate market value of the voting stock held by non-affiliates of the registrant as of October 2, 2004 (based on closing price of such stock as reported by NASDAQ on such date) was $655,113,908. For purposes of this calculation only, directors and executive officers of the registrant and their affiliates are deemed to be affiliates of the registrant.

As of June 10, 2005, there were 16,846,117 shares of Common Stock, par value $.001, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement for 2005 Annual Meeting of Stockholders — Part III

BLACK BOX CORPORATION

INDEX

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PART I

Item 1. Business.

Overview. Black Box Corporation (“Black Box” or the “Company”) is the world’s largest dedicated network infrastructure services provider. Black Box offers one-source network infrastructure services for: data networks, including structured cabling for wired and wireless systems; voice systems, including new and upgraded telephony systems; and 24/7/365 hotline technical support for more than 118,000 network infrastructure products that it sells through its catalog, Internet Web site and on-site services offices. With more than 2,300 technical experts and 122 offices, Black Box serves more than 152,000 clients in 141 countries throughout the world. Founded in 1976, Black Box, a Delaware corporation, operates subsidiaries on five continents and is headquartered near Pittsburgh in Lawrence, Pennsylvania.

Black Box differentiates itself from its competitors through comprehensive levels of superior technical services, its capability to provide these services globally and its private-labeled BLACK BOX^® brand network infrastructure products which carry some of the most comprehensive warranties in the industry.

In January 2005, the Company acquired 100% of the outstanding shares of Norstan, Inc. (“Norstan”) common stock for a purchase price of $102,553,000, net of cash acquired of $4,856,000. Norstan is a full-service communications solutions and services company delivering voice and data technology solutions and remanufactured equipment to corporate end-users and public sector companies. Norstan has offices throughout the U.S. and Canada. The Norstan solution is complementary to Black Box’s existing service solutions and will allow the Company to immediately expand its operational footprint, provide additional marketing opportunities via cross-selling and, most importantly, provide its collective customers a stronger worldwide technical services partner. The results of operations of Norstan are included in the Company’s Consolidated Statements of Income beginning on the acquisition date, January 25, 2005.

As the largest and highest quality network infrastructure services company 100% dedicated to this market in the world, Black Box is in a unique position to capitalize on its service advantages, current leadership position, diverse and loyal client base and strong financial performance.

References herein to “Fiscal Year” or “Fiscal” mean the Company’s Fiscal Year ended March 31 for the year referenced.

Industry Background. Black Box participates in the worldwide network infrastructure market estimated at $20 billion. The data services market is estimated at $8 billion and the voice services market is estimated at $12 billion.

Business Strategy. Black Box’s business strategy is to provide its clients with one source for products and services to meet all their networking infrastructure needs – whether at a single location or multiple locations worldwide. The Company believes that its combination of worldwide data and voice services performed at client locations – integrated with hotline technical services – provides a unique advantage over its competitors in the network infrastructure market. The Company believes its record of consistent operating profitability and its high rate of repeat clients is evidence of the strength of its strategy. Keys to the Company’s success include the following:

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Expert Technical Support Deployed Three Ways.

     24/7/365 Technical Support: Black Box provides its clients with around-the-clock, seven days per week technical support, available to clients in 141 countries worldwide. In Fiscal 2005, the Company’s technical experts responded to approximately 400,000 client calls with 99.3% answered in less than 20 seconds. Black Box specialists receive continuous training to stay up-to-date on the latest technologies.

     Locally at Client Sites: Black Box provides complete data and voice solutions – including design, installation and routine and emergency maintenance – with consistent high quality and uniformity. The Company maintains what it believes is the industry’s largest staff of Registered Communications Distribution Designers (RCDDs) who assure that all designs meet or exceed ANSI, TIA/EIA and National Electric Code^® (NEC^®) standards. Black Box technicians also stay up-to-date with BICSI^® standards and regularly attend the Company’s industry-recognized BLACK BOX Master Technician Courses.

     www.blackbox.com Internet Web Site: Black Box offers its 24/7/365 technical support on-line at www.blackbox.com. With one click by an existing or a potential client on “Talk to a Tech,” a technical expert makes contact with that person immediately. Technical information, including “Black Box Explains” and “Technology Overviews,” is available as is the ability to design custom products on-line.

Worldwide Coverage. With 122 offices serving 141 countries, Black Box has the largest footprint in the industry, serving every major industry sector. This worldwide coverage and more than 29 years of experience makes one-source project management a reality for Black Box clients. Black Box ensures that clients with these needs receive consistent high-quality design, workmanship and technology from a single service provider. The Company is exposed to certain risks because of its global operations discussed under the caption “The Company is subject to the risks of doing business internationally,” Part II, Item 7, Risk Factors which is incorporated herein by reference.

Quality Networking Solutions and Comprehensive Warranties. Black Box products and services are covered by an umbrella of protection that goes beyond standard warranties. Black Box was the first in the industry to introduce a “No Questions Asked” product warranty program offering full protection regardless of cause of failure, including accidental, surge or water damage for the life of the warranty – and many products are guaranteed for life. Exclusive to Black Box are its Guaranteed-for-Life Structured Cabling System and Certification Plus^® guarantees that provide assurance that a client’s network will operate within the application it was designed to support for life.

Brand Name. BLACK BOX is a widely recognized brand name associated with high quality products and services. The Company believes that the BLACK BOX tradename is important to its business.

ISO 9001:2000 Certified. Black Box has received ISO 9001:2000 certification in Australia, Belgium, Brazil, Canada, Chile, France, Germany, Ireland, Italy, Japan, Mexico, Netherlands, Puerto Rico, Spain, Switzerland, the United Kingdom and the United States. Rigorous quality control processes must be documented and practiced to earn and maintain ISO 9001:2000 certification.

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Proprietary Client List. For 29 years, the Company has built a proprietary mailing list of approximately 1.3 million names representing approximately one million clients. This database includes information on the past purchases of its clients. The Company routinely analyzes this data in an effort to enhance client purchasing and ensure that targeted marketing programs reach their targeted audiences. The Company believes that its proprietary list is a valuable asset that represents a significant competitive advantage. The Company does not rent its client list.

Rapid Order Fulfillment. The Company has developed efficient inventory management and order fulfillment systems that allow more than 95% of orders for standard product received before midnight Eastern Time to be shipped that same day. Requests for same day counter-to-counter delivery and special labeling, kitting and packaging are also available from Black Box.

Growth Strategy. The principle components of Black Box’s growth strategy include: (i) expanded global technical support services primarily through mergers and acquisitions, (ii) cross-selling marketing activities around its one-source solution of DVH (Data, Voice, Hotline) Services and (iii) expanded product offerings.

Clients. Black Box clients range from small organizations to many of the world’s largest corporations and institutions covering a diversity of industries, including manufacturing, retail, finance, education and government. Revenues from the Company’s clients are segmented as 42% from large companies, 17% from medium-sized companies and 41% from small companies.

Marketing. Black Box’s services are primarily marketed through its direct marketing materials, direct sales and online through the Company’s Internet Web site. Black Box was the first company to engage exclusively in the sale of a broad range of networking products through direct marketing techniques. Black Box targets its catalogs and marketing materials directly to its clients who make systems design and purchasing decisions. Black Box marketing materials present a wide choice of items using a combination of product features and benefits, photographs, product descriptions, product specifications, compatibility charts, potential applications and other helpful technical information. The Company has achieved the top honors of Catalog of the Year from Multichannel Merchant, formerly Catalog Age magazine, for two consecutive years for its 2003-2004 and 2004-2005 Black Box catalogs. The Company has also been recognized by Multichannel Merchant for a tenth year in a row as the best catalog in the Computer Equipment and Software category.

Technical Services. Black Box believes that its technical services are the foundation of its success enabling the Company to provide services ranging from quick-turn hotline consultation to site surveys, design and engineering, project management, single-site and multi-site installations, remote monitoring, certification and maintenance.

Worldwide Headquarters. The Company’s worldwide headquarters and certain U.S. operations are located in Lawrence, Pennsylvania (a suburb 20 miles south of Pittsburgh). This Company-owned 352,000 square foot facility is on an 84-acre site.

Products. Black Box believes that its ability to offer a broad, innovative product line, supported by readily available technical services, has been an important competitive factor. Black Box currently offers more than 118,000 products through its catalogs, on-site offices and Internet Web site. New products are introduced regularly.

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Manufacturers and Suppliers. Black Box utilizes a network of original equipment manufacturers and suppliers throughout the world. Each supplier is monitored for quality, delivery performance and cost through a well-established certification program. This network has manufacturing and engineering capabilities to customize products for specialized applications. Black Box believes that the loss of any single source of supply would not adversely affect its business in any material respect.

Black Box operates its own manufacturing and assembly operation at its Lawrence, Pennsylvania location. The Company chooses to manufacture certain products in-house when outside OEMs are not economical. Sourcing decisions of in-house versus out-of-house are based upon a balance of quality, delivery, performance and cost.

Information Systems. The Company has committed significant resources to the development of information systems that are used to manage all aspects of its business. The Company’s systems support and integrate technical support, client services, inventory management, purchasing, distribution activities, accounting and project cost management. The Company continues to develop and implement exclusive worldwide web applications. These applications allow clients to view order status and product availability, view up-to-date information on their projects that are being managed across the country or around the world and provide a project management and forecasting tool for the Company’s offices. A technical knowledge base application is also used to access problem resolution information to help solve client issues more quickly. Information systems are focused on delivering high quality business applications that are geared to improve internal efficiencies as well as client interactions.

The Company’s new product introductions, multiple language requirements and design enhancements require efficient modification of product presentations for its various catalogs. Black Box also supports a publishing system that provides the flexibility and speed for both text and graphic layout. This enables the timely and efficient creation of marketing materials.

Backlog. The worldwide backlog of unfilled orders believed to be firm (i.e., to be completed within six months) was approximately $97 million at March 31, 2005 compared to $56 million at March 31, 2004.

Team Members. As of March 31, 2005, the Company had approximately 3,400 team members worldwide of which approximately 382 are subject to collective bargaining agreements. The Company believes that its relationship with its team members is good.

Financial Information. Financial information regarding the Company, including segment data, is set forth in Item 8 of this Form 10-K and is incorporated herein by reference.

International Revenues. Revenues from countries outside North America were $180 million, or 34% of total revenues, for Fiscal 2005 comparable to $179 million, or 34% of total revenues, for Fiscal 2004.

Competition. The Company competes with other value added resellers, manufacturers and large project management companies. The Company believes its primary competitive advantage is its high quality and rapidly deployed worldwide technical services. The Company believes there are no dominant competitors in the industry.

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Other Information. The Company maintains an investor relations page on its Internet Web site at http://www.blackbox.com. The Company’s annual, quarterly and current reports and amendments to such reports filed with or furnished to the Securities and Exchange Commission (the “SEC”) are made available, as soon as reasonably practical after such filing, and may be viewed or downloaded free of charge in the “About Us” section of the Web site. The Company’s Standards of Business Conduct and Code of Ethics are furnished on its Web site, and may be viewed or downloaded free of charge in the “About Us” section of the Web site.

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Item 2. Properties.

The Company’s worldwide headquarters and certain U.S. operations are located in Lawrence, Pennsylvania (located 20 miles south of Pittsburgh) in a 352,000 square foot owned facility on 84 acres.

The Company owns or leases 121 additional offices or facilities throughout the world, none of which are material in nature to Black Box.

The Company believes that its properties are adequate for its present and foreseeable needs.

Item 3. Legal Proceedings.

The Company is involved in, or has pending, various legal proceedings, claims, suits and complaints arising out of the normal course of business.

As previously disclosed, the Company had appealed an adverse arbitration award. By opinion filed March 9, 2005, the Court of Appeals affirmed the decision of the District Court. On May 6, 2005, the Company paid approximately $1.8 million (including interest, fees and costs) in satisfaction of this judgment in full.

As previously disclosed, the Company received a subpoena, dated December 8, 2004, from the United States General Services Administration (“GSA”), Office of Inspector General. The subpoena requires production of documents and information. The Company understands that the materials are being sought in connection with an investigation regarding potential violations of the terms of a GSA Multiple Award Schedule contract. The Company is reviewing this matter and is complying with the requirements of the subpoena.

As previously disclosed, on January 25, 2005, the Company completed the acquisition of Norstan (see Note 18 of the Notes to Consolidated Financial Statements). Prior to the Company’s acquisition of Norstan, Norstan had disclosed that, in April 2004, it had received a Commitment Adjustment Letter from the Universal Services Administrative Company (“USAC”), which oversees the Federal Communications Commission’s School and Libraries Program of the Universal Service Fund, also called the “E-rate program.” Funding commitments under the E-rate program provide for discounts on eligible services such as telecommunications services, internet access, network equipment and wiring of instructional buildings and classrooms to connect to the Internet. Norstan’s previous disclosure stated that USAC had informed Norstan that USAC had undertaken an audit of the Navajo Preparatory School (“Navajo Prep”) project for funding year 2001, in which Norstan had installed specific equipment and services for which it had received approximately $2.2 million, and that the audit report concluded that Navajo Prep had not complied with key requirements of the E-rate program and, consistent with E-rate policies, USAC was seeking recovery of the full amount disbursed to Norstan on behalf of Navajo Prep. Norstan noted that, in June 2004, it had filed an appeal with USAC, had begun an internal investigation of the Navajo Prep project and had established a reserve of $2.2 million during the fourth quarter of its Fiscal 2004. Norstan further reported that, as a result of the internal investigation, Norstan has decided not to pursue the appeal and that, on its own initiative, Norstan would review its other E-rate projects for compliance with E-rate program requirements.

On March 31, 2005, Norstan refunded approximately $2.1 million related to the Navajo Prep project and its appeal was cancelled. Pursuant to USAC’s request following a review of its records, the Company intends to refund an additional $100,000 related to this project.

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As previously disclosed, the Company continued to work with Norstan on completion of the investigation and resolution of this matter following the Norstan acquisition and such investigation is now substantially complete. Based on the results of that investigation, the Company has advised USAC that its intends to refund amounts that Norstan had received from USAC in relation to one additional E-rate program project. Norstan had previously reserved approximately $1.7 million with respect to that project.

Based on the facts currently available to the Company, management believes its legal matters are adequately provided for, covered by insurance, without merit or not probable that an unfavorable outcome will result.

As previously disclosed, in October 2003, the Company received a formal order of investigation issued by the SEC. In connection therewith, during the quarter ended December 28, 2003, the Company and several of its officers, directors, team members and predecessor independent auditors provided information to the Staff of the SEC. In late January 2004, the SEC requested information relating to Fiscal 2002 from the Company’s predecessor independent auditors pursuant to an additional subpoena. The Company intends to continue to cooperate fully with the inquiry.

Item 4. Submission of Matters to a Vote of Security Holders.

No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders, through the solicitation of proxies or otherwise.

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Executive Officers of the Registrant

The executive officers of the Company and their respective ages and positions are as follows:

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

FRED C. YOUNG, 49, was elected Chairman of the Board and Chief Executive Officer of the Company on June 24, 1998. The role of non-executive Chairman was assumed by an independent director of the Company in May 2004. Mr. Young was first elected a director of the Company on December 18, 1995. He served as Vice President and Chief Financial Officer, Treasurer and Secretary of Black Box Corporation since joining the Company in 1991 and was promoted to Senior Vice President and Chief Operating Officer in May 1996 and President in May 1997. Mr. Young has been with the Company for 13 years.

MICHAEL MCANDREW, 45, was promoted to Vice President and Chief Financial Officer on December 13, 2002. He became Secretary and Treasurer on January 31, 2003. He was Manager of Corporate Planning and Analysis prior to December 13, 2002. Mr. McAndrew has been with the Company for 15 years.

ROGER E. M. CROFT, 56, was promoted to Senior Vice President – Europe and Latin America in May 2004. He was promoted to Vice President – Europe and Latin America in May 1998, having served as Vice President of European Operations since May 9, 1997 and was Managing Director of Black Box U.K. prior to May 9, 1997. Mr. Croft has been with Black Box for 20 years.

FRANCIS W. WERTHEIMBER, 52, was promoted to Senior Vice President – Pacific Rim/Far East in May 2004. He was promoted to Vice President – Pacific Rim/Far East on May 9, 1997. He was Managing Director of Black Box Japan prior to May 9, 1997. Mr. Wertheimber has been with Black Box for 12 years.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The Company’s common stock, par value $.001 per share (the “Common Stock”), is traded on the Nasdaq National Market (trading symbol “BBOX”). As of March 31, 2005, 23,774,950 shares of the Common Stock were issued, of which 6,934,834 are held in treasury. On June 10, 2005, the last reported sale price of the Common Stock was $34.69 per share. As of March 31, 2005, there were approximately 2,265 holders of record of the Common Stock.

The following table sets forth the quarterly high and low sale prices of the Common Stock as reported by the Nasdaq National Market during each of the Company’s fiscal quarters indicated.

Cash dividends of $0.05 per share of Common Stock were paid during each quarter of Fiscal 2004 on April 15, 2003, July 15, 2003, October 15, 2003 and January 15, 2004 and the first two quarters of Fiscal 2005 on April 15, 2004 and July 15, 2004. During the second quarter of Fiscal 2005, the Board of Directors voted to raise the Company’s cash dividend to an annual rate of twenty-four cents per share. Cash dividends of $0.06 per share of Common Stock were paid during the last two quarters of Fiscal 2005 on October 15, 2004 and January 14, 2005. A cash dividend of $0.06 per share of Common Stock also was paid during Fiscal 2006 on April 15, 2005. While the Company expects to continue to declare quarterly dividends, the payment of future dividends is at the discretion of the Board and the timing and amount of any future dividends will depend upon earnings, cash requirements and financial condition of the Company.

See “Equity Plan Compensation Information,” in the Proxy Statement (as defined herein) which is incorporated herein by reference.

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Issuer Purchases of Equity Securities

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

Additional repurchases of stock may occur from time to time depending upon factors such as the Company’s cash flows and general market conditions. While the Company expects to continue to repurchase shares of the Common Stock for the foreseeable future, there can be no assurance as to the timing or amount of such repurchases. The Second Amended and Restated Credit Facility, as amended (the “Credit Agreement”) (see Note 6 of the Notes to Consolidated Financial Statements), provides that the Company is not permitted to repurchase the Common Stock if the Company is in default under the Credit Agreement or would be in default under the Credit Agreement as a result of such repurchase. Additionally, without the consent of the lenders holding a majority of the commitments, which consent may not be unreasonably withheld, the Company is not permitted to repurchase more than $20,000,000 of the Common Stock from January 24, 2005 through and including July 24, 2005 and may not repurchase stock if it is not in compliance with a leverage ratio.

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Item 6. Selected Financial Data.

The following table sets forth certain selected historical consolidated financial data for the Company for the periods indicated. Information should be read in conjunction with the Company’s Consolidated Financial Statements and Notes thereto included elsewhere in this report. The historical data presented below for Fiscal Years 2001 through 2005 were derived from the Consolidated Financial Statements of the Company.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

References herein to “Fiscal Year” or “Fiscal” mean the Company’s Fiscal Year ended March 31 for the year referenced.

The Company manages its business based on geographic segments: North America, Europe and All Other. In addition, certain revenue and gross profit information by service type is also provided herein for purposes of further analysis. During the fiscal years ended 2005 and 2003, the Company recorded a pre-tax charge for restructuring and other charges of approximately $5.1 million and $6.5 million, respectively. In addition, the Company incurred charges during Fiscal 2005 of $7.1 million pre-tax, comprised of acquisition related expenses from the purchase of Norstan of $2.7 million and $4.4 million of costs associated with the compliance requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) (hereafter referred to as “reconciling items”).

On January 25, 2005, the Company completed the acquisition of Norstan. Norstan is a full-service communications solutions and services company delivering voice and data technology solutions, and remanufactured equipment to corporate end-users and public sector companies. Norstan has offices located throughout the U.S. and Canada. The Norstan solution is complementary to Black Box’s existing service solutions and will allow the Company to immediately expand its operational footprint; provide additional marketing opportunities via cross-selling; and, most importantly, provide its collective customers a stronger worldwide technical services partner. Norstan’s results of operations are included in the Company’s financial statements from the completion date of the acquisition. Norstan’s revenues are included in North America and Voice Services revenues.

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Dollars in Thousands, unless Otherwise Indicated

The tables below should be read in conjunction with the following discussion.

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Information on revenues and gross profit for data services, voice services and hotline services is presented below:

Fiscal 2005 Compared To Fiscal 2004

Total Revenues

Total revenues for Fiscal 2005 were $535,076, an increase of 3% compared to Fiscal 2004 total revenues of $520,412. The increase was due to the acquisition of Norstan during the fourth quarter, which added $35,208 of revenues to total Fiscal 2005 results. Excluding the Norstan acquisition, revenues would have decreased 4%. The overall decrease was generally due to weak general economic conditions that affected client demand, offset in part by $11,860 positive impact of exchange rates relative to the U.S. dollar. If exchange rates relative to the U.S. dollar had remained unchanged from Fiscal 2004, and excluding the impact of the Norstan acquisition, total Fiscal 2005 revenues would have decreased a total of 6% compared to Fiscal 2004.

Revenues by Geography

North America Revenues

Revenues in North America were $355,013 for Fiscal 2005, an increase of 4% compared to $341,299 for Fiscal 2004. The North America revenue increase was due to the acquisition of Norstan, which added $35,208 of revenues to total Fiscal 2005 results. Excluding the Norstan acquisition, revenues would have decreased 6%. The overall decrease was generally due to weak general economic conditions that affected client demand, offset in part by $235 positive impact of exchange rates

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relative to the U.S. dollar. If exchange rates relative to the U.S. dollar had remained unchanged from Fiscal 2004, and excluding the impact of the Norstan acquisition, total Fiscal 2005 revenues would have decreased a total of $21,729, with no change to the percentage decrease.

Europe Revenues

Revenues in Europe were $142,838 for Fiscal 2005, comparable to Fiscal 2004 revenues of $142,158. If exchange rates relative to the U.S. dollar had remained unchanged from Fiscal 2004, Europe revenues would have decreased by $10,253 to $132,585 for a decrease of 7%. The Company believes the overall decline in Europe revenues was due to weak general economic conditions that affected client demand.

All Other Revenues

Revenues for All Other were $37,225 for Fiscal 2005, an increase of 1% compared to $36,955 for Fiscal 2004. If exchange rates relative to the U.S. dollar had remained unchanged from Fiscal 2004, All Other revenues would have decreased by $1,372 to $35,853 for a decrease of 3%. The Company believes the overall revenue decline in these regions was due to weak general economic conditions that affected client demand.

Revenue by Service Type

Data Services

Revenues from Data Services were $200,935 for Fiscal 2005, a decrease of 6% compared to $214,299 for Fiscal 2004. The Company believes the overall decline in Data Services revenue was driven by weak general economic conditions, offset in part by $4,444 positive impact of exchange rates relative to the U.S. dollar for its International Data Services. If exchange rates relative to the U.S. dollar had remained unchanged from Fiscal 2004, Data Services revenues would have decreased 8%.

Voice Services

Revenues from Voice Services were $106,540 for Fiscal 2005, an increase of 56% compared to $68,241 for Fiscal 2004. The increase is primarily due to the acquisition of Norstan during the fourth quarter, which added $35,208 of revenues to total Fiscal 2005 results. Excluding the effects of the Norstan acquisition, Voice Services revenues increased 5% over Fiscal 2004. There was no exchange rate impact on Voice Service revenues as all of the Company’s Voice Services revenue is denominated in U.S. dollars.

Hotline Services

Revenues from Hotline Services were $227,601 for Fiscal 2005, a decrease of 4% compared to $237,872 for Fiscal 2004. The Company believes the overall decline in Hotline Services revenues was driven by weak general economic conditions, offset in part by $7,417 positive impact of exchange rates relative to the U.S. dollar for its International Hotline Services. If exchange rates relative to the U.S. dollar had remained unchanged from Fiscal 2004, Hotline Services revenues would have decreased 7%.

Gross Profit

Gross profit dollars for Fiscal 2005 decreased to $214,929 from $216,251 for Fiscal 2004. The decrease in gross profit dollars over the prior year was due to the decline in revenues. Gross profit as a percent of revenues for Fiscal 2005 decreased to 40.2% of revenues from 41.6% of revenues for Fiscal 2004. The decrease in gross profit percentage was due primarily to service mix and $1,028 of negative impact related to the amortization of the step-up to fair value of Norstan inventory recorded

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through purchase accounting (see Notes to Consolidated Financial Statements). The Company expects to record the remaining $1,543 of amortization during the first quarter of Fiscal 2006.

Gross profit dollars for Data Services were $59,354, or 29.5% of revenues, for Fiscal 2005 compared to $67,329, or 31.4% of revenues, for Fiscal 2004. Gross profit dollars for Voice Services were $36,255, or 34.0% of revenues, for Fiscal 2005 compared to $23,999, or 35.2% of revenues, for Fiscal 2004. Gross profit dollars for Hotline Services were $119,320, or 52.4% of revenues, for Fiscal 2005 compared to $124,923, or 52.5% of revenues, for Fiscal 2004.

SG&A Expenses

Selling, general and administrative (“SG&A”) expenses for Fiscal 2005 were $160,002, an increase of $19,197 over SG&A expenses of $140,805 for Fiscal 2004. SG&A expenses as a percent of revenue for Fiscal 2005 were 29.9% of revenues compared to 27.1% of revenues for Fiscal 2004. The dollar increase is primarily due to: the acquisition of Norstan which added $11,550 of SG&A expenses, $4,400 of costs incurred in relation to the Company’s compliance with the requirements of Section 404 and a $2,100 increase in worldwide marketing costs.

Restructuring and Other Charges

In the fourth quarter of Fiscal 2005, the Company recorded a restructuring and other charge of $5,059. This charge was comprised of $3,019 for staffing level adjustments and real estate consolidations in Europe and North America, and $2,040 for the final settlement of a previously disclosed litigation matter. Of this charge, $4,056 and $1,003 related to North America and Europe, respectively. See Notes to Consolidated Financial Statements for further details related to the restructuring and other charges. In addition, the Company expects to record in the first quarter of Fiscal 2006 a $4,000 to $5,000 pre-tax restructuring charge to complete its staffing level adjustments in Europe and North America and for real estate consolidations.

Intangibles Amortization

Intangibles amortization for Fiscal 2005 increased to $1,332 from $246 for Fiscal 2004. The increase was primarily attributable to the addition of $15,971 of intangible assets acquired through the Norstan acquisition. These intangibles consisted of non-compete agreements, backlog and customer relationships and will be amortized from one to twenty years (see Notes to Consolidated Financial Statements). The Company recorded an additional $759 of amortization expense in the fourth quarter due to these intangibles. The Company expects to incur additional amortization expense relative to these newly acquired intangibles of $3,808 in Fiscal 2006 and approximately $600 thereafter until Fiscal 2025. In addition, the Company paid $1,352 of deferred financing costs related to the Credit Agreement, for which $92 of amortization was recognized during Fiscal 2005. These costs will be amortized through Fiscal 2009.

Operating Income

Operating income for Fiscal 2005 was $48,536, or 9.1% of revenues, compared to $75,200, or 14.5% of revenues, for Fiscal 2004.

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Interest Expense, Net

Net interest expense for Fiscal 2005 increased to $2,755 from $1,808 for Fiscal 2004 due to an increase in the weighted average outstanding debt of approximately $74,977 for Fiscal 2005 compared to approximately $52,000 for Fiscal 2004. The increase in debt relates primarily to the Norstan acquisition. In addition, the weighted average interest rate outstanding for Fiscal 2005 was 2.98%, an increase of 1.01% compared to the Fiscal 2004 rate of 1.97%

Provision for Income Taxes

The tax provision for Fiscal 2005 was $15,754, an effective tax rate of 34.5%. This compares to the tax provision for Fiscal 2004 of $26,002, an effective tax rate of 35.5%. The tax rate for Fiscal 2005 was lower than Fiscal 2004 due to the effect of implementing various international tax planning strategies.

The annual effective tax rate is lower than the U.S. statutory rate of 35.0% primarily due to foreign income taxes at rates lower than 35.0%. The Company anticipates that its deferred tax asset is realizable in the foreseeable future.

Net Income

Net income for Fiscal 2005 was $29,912, or 5.6% of revenues, compared to $47,243, or 9.1% of revenues, for Fiscal 2004. The decrease in net income dollars is primarily due to the restructuring and other charges and reconciling items incurred during Fiscal 2005.

Fiscal 2004 Compared To Fiscal 2003

Total Revenues

Total revenues for Fiscal 2004 were $520,412, a decrease of 14% compared to Fiscal 2003 total revenues of $605,017. If exchange rates relative to the U.S. dollar had remained unchanged from Fiscal 2004, Fiscal 2004 total revenues would have been lower by an additional $21,154, for a total decrease of 17%.

Revenues by Geography

North America Revenues

Revenues in North America were $341,299 for Fiscal 2004, a decrease of 17% compared to $412,247 for Fiscal 2003. The North America revenue decline was generally due to weak general economic conditions that affected client demand. If exchange rates relative to the U.S. dollar had remained unchanged from Fiscal 2003, revenues would have decreased by an additional $559, for a total decrease of 17%.

Europe Revenues

Revenues in Europe were $142,158 for Fiscal 2004, a decrease of 7% compared to $153,477 for Fiscal 2003. The Europe revenue decline was due to weak general economic conditions that affected client demand, offset in part by $18,118 of positive impact of exchange rates relative to the U.S. dollar. If exchange rates relative to the U.S. dollar had remained unchanged from Fiscal 2003, Europe revenues would have decreased 19%.

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All Other Revenues

Revenues for All Other were $36,955 for Fiscal 2004, a decrease of 6% compared to $39,293 for Fiscal 2003. The revenue decline in these regions was due to weak general economic conditions that affected client demand, offset by $2,477 of positive impact of exchange rates relative to the U.S. dollar. If exchange rates relative to the U.S. dollar had remained unchanged from Fiscal 2003, All Other revenues would have decreased 12%.

Revenue by Service Type

Data Services

Revenues from Data Services were $214,299 for Fiscal 2004, a decrease of 22% compared to $275,842 for Fiscal 2003. The Company believes the overall decline in Data Services revenues was driven by weak general economic conditions, offset in part by $7,248 of positive impact of exchange rates relative to the U.S. dollar for its International Data Services. If exchange rates relative to the U.S. dollar had remained unchanged from Fiscal 2003, Data Services revenues would have decreased 25%.

Voice Services

Revenues from Voice Services were $68,241 for Fiscal 2004, a decrease of 11% compared to $77,070 for Fiscal 2003. The Company believes the overall decline in Voice Services revenues was driven by weak general economic conditions. There was no exchange rate impact on Voice Services revenues as all of the Company’s Voice Services revenue is denominated in U.S. dollars.

Hotline Services

Revenues from Hotline Services were $237,872 for Fiscal 2004, a decrease of 6% compared to $252,105 for Fiscal 2003. The Company believes the overall decline in Hotline Services revenues was driven by weak general economic conditions, offset in part by $13,906 of positive impact of exchange rates relative to the U.S. dollar for its International Hotline Services. If exchange rates relative to the U.S. dollar had remained unchanged from Fiscal 2003, Hotline Services revenues would have decreased 11%.

Gross Profit

Gross profit dollars for Fiscal 2004 decreased to $216,251 from $238,847 for Fiscal 2003. The decrease in gross profit dollars over the prior year was due to the decline in revenues. Gross profit as a percent of revenues for Fiscal 2004 increased to 41.6% of revenues from 39.5% of revenues for Fiscal 2003. The increase in gross profit percentage was due primarily to the positive impact of cost reduction programs.

Gross profit dollars for Hotline Services were $124,923, or 52.5% of revenues, for Fiscal 2004 compared to $128,635, or 51.0% of revenues, for Fiscal 2003. Gross profit dollars for Data Services were $67,329, or 31.4% of revenues, for Fiscal 2004 compared to $85,122, or 30.9% of revenues, for Fiscal 2003. Gross profit dollars for Voice Services were $23,999, or 35.2% of revenues, for Fiscal 2004 compared to $25,090, or 32.6% of revenues, for Fiscal 2003.

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SG&A Expenses

Selling, general and administrative (“SG&A”) expenses for Fiscal 2004 were $140,805, a decrease of $12,003 over SG&A expenses of $152,808 for Fiscal 2003. The dollar decrease from Fiscal 2003 to Fiscal 2004 was the result of the Company’s cost reduction efforts worldwide. SG&A expenses as a percent of revenue for Fiscal 2004 were 27.1% of revenues compared to 25.3% of revenues for Fiscal 2003. The percentage increase is due to the percentage change in revenues being greater than the percentage change in the overall cost structure.

Restructuring and Other Expense

There were no restructuring and other charges in Fiscal 2004.

In the fourth quarter of Fiscal 2003, the Company recorded a restructuring charge of $6,536 related to staffing level adjustments and real estate consolidations in North America, Europe and Latin America. Of this charge, $1,790, $4,592 and $154 related to North America, Europe and Latin America, respectively. See Notes to Consolidated Financial Statements for further details related to the restructuring charges.

Intangibles Amortization

Intangibles amortization for Fiscal 2004 decreased to $246 from $377 for Fiscal 2003 due to acquired backlog becoming fully amortized in first quarter Fiscal 2004.

Operating Income

Operating income for Fiscal 2004 was $75,200, or 14.5% of revenues, compared to $79,126, or 13.1% of revenues, for Fiscal 2003.

The decrease in operating income dollars is primarily due to the decrease in revenues. The increase in operating income as a percent of revenues was due primarily to the gross profit percentage improvement and restructuring expenses, offset in part by the increase in SG&A as a percent of revenues.

Interest Expense, Net

Net interest expense for Fiscal 2004 decreased to $1,808 from $2,826 for Fiscal 2003 due to reduction in the weighted average outstanding debt of approximately $52,000 for Fiscal 2004 compared to approximately $63,000 for Fiscal 2003, and a weighted average interest rate reduction of approximately 0.4% during Fiscal 2004.

Provision for Income Taxes

The tax provision for Fiscal 2004 was $26,002, an effective tax rate of 35.5%. This compares to the tax provision for Fiscal 2003 of $27,386, an effective tax rate of 36.0%. The tax rate for Fiscal 2004 was lower than Fiscal 2003 due to the change in the overall mix of taxable income among worldwide offices with differing tax rates. The annual effective tax rates were higher than the U.S. statutory rate of 35.0% primarily due to state income taxes, offset by foreign income tax credits. The Company anticipates that its deferred tax asset benefit is realizable.

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Net Income

Net income for Fiscal 2004 was $47,243, or 9.1% of revenues, compared to $48,685, or 8.0% of revenues, for Fiscal 2003. The decrease in net income dollars is primarily due to the year over year decline in revenues. The increase in net income percentage was due primarily to the gross profit percentage improvement, the decrease in the tax rate and the avoidance of restructuring expenses in Fiscal 2004, offset in part by the increase in SG&A as a percent of revenues.

Liquidity and Capital Resources

Cash Flows from Operating Activities

Net cash provided by operating activities for Fiscal 2005, 2004 and 2003 was $52,206, $74,955 and $92,577, respectively. Reflected as a source of cash in Fiscal 2005 are decreases in accounts receivable and other current assets, and increases in accounts payable and accrued liabilities. In both Fiscal 2004 and 2003, the decreases in accounts receivable, inventories and other current assets were a source of cash, while decreases in accounts payable and accrued liabilities were a use of cash.

At March 31, 2005, the Company had cash and cash equivalents of $11,592, working capital of $112,535 and long-term debt of $147,196.

The Company anticipates that approximately $1,500 to $2,500 will be incurred during Fiscal 2006 for the ongoing monitoring and testing requirements of Section 404.

The Company believes that its cash provided by operating activities and availability under its credit facility will be sufficient to fund the Company’s working capital requirements, capital expenditures, dividend program, potential stock repurchases, potential future acquisitions or strategic investments and other cash needs for the next 12 months.

Investing Activities

Net cash used in investing activities during Fiscal 2005, 2004 and 2003 was $104,765, $2,832 and $8,126, respectively. Cash used by investing activities for all periods primarily represented capital expenditures and acquisition of businesses.

During Fiscal 2005, gross capital expenditures were $3,506, while capital disposals were $1,187. Gross capital expenditures were $1,673, while capital disposals were $1,851 in Fiscal 2004. Gross capital expenditures were $1,557, while capital disposals were $1,253 in Fiscal 2003. Gross capital expenditures for Fiscal 2006 are projected to be $5,000 to $7,000 and will be spent primarily on information systems, general equipment and facility improvements.

The net cash impact of acquisitions during Fiscal 2005, 2004 and 2003 was $102,553, $0 and $4,639, respectively. See Note 18 of the Notes to Consolidated Financial Statements for additional detail on acquisitions made during Fiscal 2005 and 2003. The cash impact of prior merger-related (recoveries)/payments, such as earn-outs, made during Fiscal 2005, 2004 and 2003 was $(107), $3,010 and $3,183, respectively.

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Financing Activities

Net cash provided by/(used) in financing activities during Fiscal 2005, 2004 and 2003 was $55,800, $(76,875) and $(83,396), respectively. Cash provided by financing activities in Fiscal 2005 primarily represents the net increase in debt obligations and cash received from the exercise of stock options, offset by cash used for dividends and purchase of treasury stock. Cash provided by financing activities in Fiscal 2004 and 2003 primarily represents the net reduction of debt obligations, dividends and purchase of treasury stock, offset by cash received from the exercise of stock options.

Total Debt

In June 2004, the Company entered into a $120,000 amended and restated credit facility with Citizens Bank of Pennsylvania, as agent, and a group of lenders (the “Amended and Restated Credit Facility”). Under the Amended and Restated Credit Facility, up to $5,000 was available for use under a swing line facility (at a LIBOR rate plus a margin) and up to $15,000 was available for use in connection with letters of credit.

Interest under the Amended and Restated Credit Facility was variable based on the Company’s option of selecting the bank’s LIBOR rate plus an applicable margin or the base rate plus an applicable margin. The majority of the Company’s borrowings were under the LIBOR option. The applicable margin was adjusted each quarter based on the consolidated leverage ratio (as defined in the Amended and Restated Credit Facility). The applicable margin varied from 0.75% to 1.75% on the LIBOR rate option and from 0.00% to 0.75% on the base rate option. The Amended and Restated Credit Facility provided for the payment of quarterly commitment fees on unborrowed funds, also based on the consolidated leverage ratio. The commitment fee percentage ranged from 0.15% to 0.375%.

On January 24, 2005, in connection with the acquisition of Norstan (see Note 18 of the Notes to Consolidated Financial Statements), the Company amended and restated the Amended and Restated Credit Facility (the “Second Amended and Restated Credit Facility”), also with Citizens Bank of Pennsylvania, as agent, and a group of lenders. Borrowings under the Second Amended and Restated Credit Facility are permitted up to a maximum amount of $240,000, including up to $15,000 of swingline loans and $25,000 of letters of credit. The Second Amended and Restated Credit Facility may be increased by the Company up to an additional $60,000 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 Second Amended and Restated Credit Facility 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 1.50% (determined by a leverage ratio based on the Company’s EBITDA).

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The other terms and conditions of the Second Amended and Restated Credit Facility are substantially the same as the Amended and Restated Credit Facility. The Second Amended and Restated Credit Facility expires on August 31, 2008. As previously discussed, the Second Amended and Restated Credit Facility was amended and is referred to herein as the “Credit Agreement.”

The Company’s total debt as of March 31, 2005 of $147,888 was comprised of $146,560 under the Credit Agreement, $772 of obligations under capital leases and $556 of various other third-party, non-employee loans. The weighted average interest rate on all indebtedness of the Company during the fourth quarter ending March 31, 2005 and March 31, 2004 was approximately 3.61% and 1.84%, respectively, and the weighted average interest rate on all indebtedness of the Company during the year ended March 31, 2005 and March 31, 2004 was 2.98% and 1.97%, respectively. In addition, as of March 31, 2005, the Company had $7,909 of letters of credit outstanding and $85,531 available under the Credit Agreement.

Dividends

Beginning in the third quarter of Fiscal 2003 and in all subsequent quarters through the first quarter of Fiscal 2005, the Company’s Board of Directors declared quarterly cash dividends of $0.05 per share on all outstanding shares of Common Stock. In August 2004, the Company declared an increase to its current annual dividend payment rate from $0.20 to $0.24 so as to provide an additional return on investment to its stockholders. In the second quarter of Fiscal 2005 and in all subsequent quarters through the fourth quarter of Fiscal 2005, the Company’s Board of Directors declared quarterly cash dividends of $0.06 per share on all outstanding shares of Common Stock.

The dividend declared in the fourth quarter of Fiscal 2005 totaled $1,010 and was paid on April 15, 2005 to stockholders of record at the close of business on March 31, 2005. The dividend declared in the first quarter of Fiscal 2006 will be paid on July 15, 2005 to stockholders of record at the close of business on June 30, 2005. While the Company expects to continue to declare dividends for the foreseeable future, there can be no assurance as to the timing or amount of such dividends.

Repurchase of Common Stock

During the fourth quarter of Fiscal 2005, the Company repurchased approximately 494,000 shares of the Common Stock for an aggregate purchase price of approximately $19,327. Repurchases for the year ended March 31, 2005 totaled approximately 1,400,000 shares of the Common Stock for $56,912. Since inception of the repurchase program in April 1999 through March 31, 2005, the Company has repurchased in aggregate approximately 6,900,000 shares of the Common Stock for approximately $297,000. Funding for the stock repurchases came primarily from existing cash flow from operations. Additional repurchases of stock may occur from time to time depending upon factors such as the Company’s cash flows and general market conditions. While the Company expects to continue to repurchase shares of the Common Stock for the foreseeable future, there can be no assurance as to the timing or amount of such repurchases.

The Credit Agreement (see Note 6 of the Notes to Consolidated Financial Statements), provides that the Company is not permitted to repurchase the Common Stock if the Company is in default under the Credit Agreement or would be in default under the Credit Agreement as a result of such repurchase. Additionally, without the consent of the lenders holding a majority of the commitments, which consent may not be unreasonably withheld, the Company is not permitted to repurchase more than $20,000 of the Common Stock from January 24, 2005 through and including July 24, 2005 and may not repurchase stock if it is not in compliance with a leverage ratio.

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Foreign Currency Exchange Impact

The Company has operations, clients and suppliers worldwide, thereby exposing the Company’s financial results to foreign currency fluctuations. In an effort to reduce this risk, the Company generally sells and purchases inventory based on prices denominated in U.S. dollars. Intercompany sales to subsidiaries are generally denominated in the subsidiaries’ local currency, although intercompany sales to the Company’s subsidiaries in Brazil, Chile, Mexico and Singapore are denominated in U.S. dollars.

The Company has entered and will continue in the future, on a selective basis, to enter into foreign currency forward contracts to reduce the foreign currency exposure related to certain intercompany transactions, primarily trade receivables and loans. All of the contracts have been designated and qualify as cash flow hedges. The effective portion of any changes in the fair value of the derivative instruments is recorded in other comprehensive income (loss) (“OCI”) until the hedged forecasted transaction occurs or the recognized currency transaction affects earnings. Once the forecasted transaction occurs or the recognized currency transaction affects earnings, the effective portion of any related gains or losses on the cash flow hedge is reclassified from OCI to earnings. In the event the hedged forecasted transaction does not occur, or it becomes probable that it will not occur, the ineffective portion of any gain or loss on the related cash flow hedge would be reclassified from OCI to earnings at that time.

At March 31, 2005, the open foreign exchange contracts were in Euro, Pound sterling, Canadian dollar, Swiss franc, Japanese yen, Swedish krona, Danish krone, Norwegian kroner and Australian dollar. The open contracts have contract rates of 0.7462 to 0.7748 Euro, 0.5202 to 0.5398 Pound sterling, 1.1834 to 1.2403 Canadian dollar, 1.1270 to 1.1701 Swiss franc, 101.20 to 102.34 Japanese yen, 6.7407 to 6.9755 Swedish krona, 5.5175 to 5.7605 Danish krone, 6.0928 to 6.3252 Norwegian kroner and 1.2784 to 1.3053 Australian dollar, all per U.S. dollar.

The total open contracts, with a notional amount of approximately $30,413, have a fair value of $29,777 and will expire within six months.

Contractual Obligations

The Company has various contractual obligations and commitments to make future payments including debt agreements, operating and capital lease obligations and discounted lease rental commitments. See Notes 6, 7 and 9 of the Notes to Consolidated Financial Statements for additional information about these obligations and commitments.

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The following table summarizes significant contractual obligations and commitments of the Company as of March 31, 2005. Except as set forth in the following table, the Company does not have any material long-term purchase obligations (as defined in SEC Regulation S-K 303(a)(5)) nor other long-term liabilities that are reflected on its balance sheet as of March 31, 2005:

The following table summarizes significant commercial commitments of the Company as of March 31, 2005 and the related expiration per period:

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, other than those disclosed above, that are material to investors.

Recent Accounting Pronouncements

FIN No. 46, Consolidation of Variable Interest Entities

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51” (“FIN No. 46”). The guidance expanded upon and clarified existing accounting guidance that addresses when a company should include in its financial statements the assets, liabilities and activities of variable interest entities, including special-purpose entities or off-balance sheet structures. In December 2003, the FASB issued a revision to FIN No. 46 (“FIN No. 46R”) that modified some of the provisions and effective dates of FIN No. 46, and provided exemptions to certain entities from the original guidance.

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FIN No. 46R sets forth criteria to be used in determining whether an investment in a variable interest entity should be consolidated, and is based on the general premise that companies that control another entity through interests other than voting interests should consolidate the controlled entity. The consolidation requirements of FIN No. 46 apply immediately to variable interest entities created after January 31, 2003. As amended, the consolidation requirements apply to older entities in the first fiscal year or interim period ending after March 15, 2004. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. There was no impact to the Company upon the adoption of FIN No. 46 and FIN No. 46R.

SFAS No. 123 (revised 2004), Share-Based Payment

In December 2004, the FASB issued Statement No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”). SFAS No. 123(R) is a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation” (“FASB No. 123”), supersedes APB No. 25, “Accounting for Stock Issued to Employees” and amends FASB Statement No. 95, “Statement of Cash Flows.” SFAS No. 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 will be based on the fair value of the equity or liability instruments issued. Pro forma disclosure of this cost will no longer be an alternative under SFAS No. 123(R). The Statement is effective for public companies at the beginning of the first annual reporting period that begins after June 15, 2005.

As permitted by FASB No. 123, the Company currently accounts for its stock-based compensation plans under APB No. 25’s intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. Accordingly, the adoption of SFAS No. 123(R)’s fair value method will have a significant impact on the Company’s results of operations, although it will have no impact on the Company’s overall financial position or cash flows. The impact of adopting SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had the Company adopted SFAS No. 123(R) in prior periods, the impact would have approximated the amounts in its pro forma disclosure as described in the disclosure of pro forma net income and earnings per share in Note 1 of the Notes to Consolidated Financial Statements. Based on SFAS No. 123(R), the Company will transition 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 No. 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 current standards. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. The Company cannot estimate what those amounts will be in the future because they are dependant on, among other things, when employees exercise stock options. The amount of operating cash flows recognized for such excess tax deductions was $3,472, $6,789 and $1,822 during Fiscal 2005, 2004 and 2003, respectively.

The Company plans to adopt SFAS No. 123(R) as of the first day of the first quarter of Fiscal 2007, or April 1, 2006, as required.

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FSP No. FAS 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004

In October 2004, the “American Jobs Creation Act of 2004” was signed into law. The law creates a temporary incentive for U.S. multinational companies to repatriate a portion of accumulated income earned outside of the U.S. at an effective tax rate of 5.25%. The law also includes a tax deduction of up to 9 percent of the lesser of (a) “qualified production activities income” or (b) taxable income. An issue arose as to whether that deduction should be accounted for as a special deduction or a tax rate reduction under FASB Statement No. 109.

In December 2004, the FASB issued Staff Position No. FAS 109-1, “Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004.” The FASB staff believes that the deduction should be accounted for as a special deduction in accordance with SFAS 109. The Company is currently assessing the impact of this special deduction on its deferred taxes.

In December 2004, the FASB issued Staff Position No. FAS 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004.” FSP 109-2 allows additional time to assess the effect of repatriating international earnings under the law, and requires explanatory disclosures from those who need the additional time.

The Company is evaluating the effects of the law, and recent regulations, on its plan for reinvestment or repatriation of international earnings. The possible amounts of unremitted earnings available for repatriation under the law, and the potential range of income tax effects of such repatriation, cannot be reasonably estimated as of the time of this filing.

Critical Accounting Policies

The Company’s Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Company to make estimates and assumptions that may affect the reported financial condition and results of operations should actual results differ. The Company bases its estimates and assumptions on the best available information and believes them to be reasonable for the circumstances. The Company believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity. See also Note 1 of the Notes to Consolidated Financial Statements for a summary of the Company’s significant accounting policies.

Revenue Recognition

Within the Company’s hotline services, revenues are recognized when title to products sold passes to the customer, which generally occurs upon shipment from the Company’s location.

Within the Company’s data and voice services, revenues are recognized from maintenance service contracts, moves, adds and changes and network integration services, when the services are provided and revenues generally are recognized from the sale of IP application software upon delivery. Service contracts are generally pre-billed and are reflected on the balance sheet as deferred revenue and are generally recognized as revenue over the service period on a straight-line basis. Revenues from the sale and installation of products and systems are recognized using the percentage-of-completion method based upon the proportion of actual costs incurred to estimated total costs. At the time a loss on a contract becomes known, the entire amount of the estimated loss is recognized immediately in the financial statements.

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The Company has historically made reasonably accurate estimates of the extent of progress towards completion, contract revenues and contract costs on its long-term contracts. However, due to uncertainties inherent in the estimation process, actual results could differ materially from those estimates.

Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its clients to make required payments. These allowances are based on both recent trends of certain clients estimated to be a greater credit risk as well as general trends of the entire client pool. If the financial condition of the Company’s clients were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. In order to calculate the appropriate provision, the Company reviews its accounts receivable aging and calculates an allowance through application of historic reserve factors to specifically identified at risk receivables. In addition to specific reserves, a general reserve is provided based upon the age of the receivables. The Company’s policy is to fully reserve for accounts receivable when an account is determined to be uncollectible.

Inventories and Related Inventory Reserves

The Company’s inventory is valued at the lower of cost or market value and has been reduced by an allowance for excess and obsolete inventories. The Company records an estimate for slow moving and obsolete inventory based upon product knowledge, physical inventory observation, future demand and market conditions and an aging analysis of the inventory on hand. If actual market conditions are less favorable than those projected by management, additional reductions to inventory may be required. Upon a subsequent sale or disposal of the impaired inventory, the corresponding reserve for impaired value is relieved to ensure that the cost basis of the inventory reflects any reductions.

Loss Contingencies

The Company incurs contingencies as a normal part of its business operations, such as future warranty obligations and potential liabilities relating to legal or regulatory matters. The Company accrues for contingent obligations when a loss is probable and the amount can be reasonably estimated.

Deferred Tax Valuation Allowances

Should the Company determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be expensed in the period such determination was made.

Long-Lived Assets

The Company evaluates the recoverability of property, plant and equipment and intangible assets other than goodwill and indefinite life intangibles whenever events or changes in circumstances indicate the carrying amount of any such assets may not be fully recoverable. Changes in circumstances include technological advances, changes in the Company’s business model, capital strategy, economic conditions or operating performance. The Company’s evaluation is based upon, among other things, assumptions about the estimated future undiscounted cash flows these assets are expected to generate. When the sum of the undiscounted cash flows is less than the carrying value, the Company would recognize an impairment loss. The Company continually applies its best judgment when performing these evaluations to determine the timing of the testing, the undiscounted cash flows used to assess recoverability and the fair value of the asset.

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In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” the Company is required to test goodwill and indefinite life intangibles for impairment at least annually. Changes in management’s judgments and estimates could significantly affect the Company’s analysis of the impairment of goodwill. To test goodwill for impairment, the Company is required to estimate the fair value of each of its reporting units. Estimated fair values of reporting units are estimated using an earnings model and a discounted cash flow valuation model. The discounted cash flow model incorporates the Company’s estimates of future cash flows, allocations of certain assets and cash flows among reporting units, future growth rates and management’s judgment regarding the applicable discount rates to use to discount those estimated cash flows. Significant changes to the judgments and estimates used in the models could result in a significantly different estimate of the fair value of the reporting units, which could result in an impairment of goodwill.

Restructuring

The Company accrues the cost of restructuring activities in accordance with the appropriate accounting guidance depending upon the facts and circumstances surrounding the situation. The Company exercises its judgment in estimating the total costs of each of these activities. As these activities are implemented, the actual costs may differ from the estimated costs due to changes in the facts and circumstances that were not foreseen at the time of the initial cost accrual.

Inflation

The overall effects of inflation on the Company have been nominal. Although long-term inflation rates are difficult to predict, the Company continues to strive to minimize the effect of inflation through improved productivity and cost reduction programs as well as price adjustments within the constraints of market competition.

Risk Factors

The Company operates in a highly competitive industry:

•

The Company has a variety of competitors. There can be no assurance that the Company will be able to continue to compete effectively against existing competitors or new competitors that may enter the market in the future.

The Company is subject to the risks of doing business internationally:

	•	The Company’s operations in foreign countries are subject to the risks normally associated with foreign operations, including, but not limited to, possible changes in export or import restrictions, the inability to effect currency exchanges, the impact of inflation and the modification or introduction of other governmental policies with potentially adverse effects.
	•	In addition, the Company may be exposed to gains or losses attributable to fluctuations in currency value. In an effort to reduce the Company’s exposure, the Company has in the past, and may in the future, enter into forward exchange contracts to reduce the impact of currency fluctuations in intercompany transactions denominated in foreign currencies.

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Business is dependent upon the Company’s key personnel:

•

The Company’s success depends to a significant degree upon the continued contributions of key personnel around the world. Most key personnel have executed non-competition agreements. If certain key personnel were to leave Black Box, the Company’s business could be adversely affected.

Forward Looking Statements

When included in this Annual Report or in documents incorporated herein by reference, the words “expects,” “intends,” “anticipates,” “believes,” “estimates,” and analogous expressions are intended to identify forward-looking statements. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, among others, general economic and business conditions, competition, changes in foreign, political and economic conditions, fluctuating foreign currencies compared to the U.S. dollar, rapid changes in technologies, client preferences, the ability of the Company to identify, acquire and operate additional technical service companies and various other matters, many of which are beyond the Company’s control. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and speak only as of the date of this Annual Report. The Company expressly disclaims any obligation or undertaking to release publicly any updates or any changes in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The Company is exposed to market risks in the ordinary course of business that include interest rates and foreign currency exchange rates. Market risk is measured as the potential negative impact on earnings, cash flows or fair values resulting from a hypothetical change in interest rates or foreign currency exchange rates over the next year.

Interest Rate Risk

The Company’s primary interest rate risk relates to its long-term debt obligations. At March 31, 2005, the Company had total long-term obligations, including the current portion of those obligations, of $147,888. Of that amount, $1,328 was in fixed rate obligations and $146,560 was in variable rate obligations. For the amounts in variable rate debt at March 31, 2005, an instantaneous 100 basis point increase in the interest rate would reduce the Company’s expected net income in the subsequent year by $1,017, assuming the Company employed no intervention strategies. The Company has no interest rate hedging agreements.

Foreign Exchange Rate Risk

The Company has operations, clients and suppliers worldwide, thereby exposing the Company’s financial results to foreign currency fluctuations. In an effort to reduce this risk, the Company generally sells and purchases inventory based on prices denominated in U.S. dollars. Intercompany sales to subsidiaries are generally denominated in the subsidiaries’ local currency. To mitigate this risk, the Company has entered and will continue in the future, on a selective basis, to enter into foreign currency forward contracts to reduce the foreign currency exposure related to certain intercompany transactions. See Note 1 of the Notes to Consolidated Financial Statements for additional information about the Company’s foreign currency hedging activities.

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At March 31, 2005, the Company had total open contracts valued at approximately $30,413 with a fair value of approximately $29,777.

The Company does not hold or issue any other financial derivative instruments nor does it engage in speculative trading of financial derivatives.

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Item 8. Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Black Box Corporation
Lawrence, Pennsylvania

We have audited the accompanying consolidated balance sheet of Black Box Corporation as of March 31, 2005 and the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for the year then ended. We have also audited the schedule listed in the accompanying index. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedule are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedule, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Black Box Corporation at March 31, 2005 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the 2005 schedule presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Black Box Corporation’s internal control over financial reporting as of March 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated May 25, 2005 expressed an unqualified opinion thereon.

/s/ BDO Seidman, LLP

Chicago, Illinois
May 25, 2005

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Black Box Corporation:

We have audited the accompanying consolidated balance sheet of Black Box Corporation and subsidiaries as of March 31, 2004, and the related consolidated statements of income, shareholders’ equity and cash flows in each of the two years in the period ended March 31, 2004. Our audit also included the financial statement schedule listed in the index at Item 15(a)2 for the years ended March 31, 2004 and 2003. These financial statements and supplemental schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and supplemental schedule based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedule are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedule, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Black Box Corporation and subsidiaries as of March 31, 2004, and the consolidated results of their operations and their cash flows in each of the two years in the period ended March 31, 2004 in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the financial statement schedule for the years ended March 31, 2004 and 2003 referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ ERNST & YOUNG LLP

Pittsburgh, Pennsylvania
June 10, 2004

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BLACK BOX CORPORATION

See Notes To Consolidated Financial Statements

36

BLACK BOX CORPORATION

See Notes To Consolidated Financial Statements

37

BLACK BOX CORPORATION

See Notes To Consolidated Financial Statements

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BLACK BOX CORPORATION