BLACK BOX 10-K

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

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, 2006

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

For the transition period from to

Commission file number: 0-18706

Black Box Corporation

(Exact name of registrant as specified in its charter)


Delaware		95-3086563
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1000 Park Drive, Lawrence Pennsylvania		15055
(Address of principal executive offices)		(Zip Code)

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

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

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES þ NO o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO þ

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 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). YES o NO þ

The aggregate market value of the voting stock held by non-affiliates of the registrant as of September 30, 2005 (based on closing price of such stock as reported by NASDAQ on such date) was $718,831,026. 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 7, 2006, there were 17,676,970 shares of Common Stock, par value $.001, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for 2006 Annual Meeting of Stockholders – Parts II and III

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 168 offices, Black Box serves more than 175,000 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 exceptional 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.

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.

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:

Expert Technical Support Deployed Three Ways.
Locally at Client Sites: Black Box provides complete data and voice solutions – including design, installation, remote monitoring 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. Additionally, the Company maintains certifications from all major data and voice system manufacturers.

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 2006, the Company’s technical experts responded to approximately 908,000 client calls. Black Box specialists receive continuous training to stay up-to-date on the latest technologies.

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 168 offices serving 141 countries, Black Box has the largest footprint in the industry, serving every major industry sector. This worldwide coverage and 30 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 “International operations” in Part I, Item 1A, “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, Brazil, Canada, Chile, France, Germany, Ireland, Italy, Japan, Mexico, Netherlands, Puerto Rico, Singapore, Spain, the United Kingdom and the United States. Rigorous quality control processes must be documented and practiced to earn and maintain ISO 9001:2000 certification.

Proprietary Client List. For 30 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 most standard product 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) cross-selling marketing activities around its one-source solution of DVH^tm (Data, Voice, Hotline) Services, (ii) expanded product offerings and (iii) expanded global technical support services primarily through mergers and acquisitions.

Mergers and Acquisitions. As part of the growth strategy through mergers and acquisitions, the Company has completed the following transactions:

Fiscal 2006
During Fiscal 2006, the Company completed six acquisitions. During the first quarter of Fiscal 2006, the Company acquired Telecommunication Systems Management, Inc. (“TSM”), GTC Technology Group, Inc. and Technology Supply, Inc. (collectively referred to as “GTC”) and Business Communications, Inc., Bainbridge Communication, Inc., BCI of Tampa, LLC and Networx, L.L.C. (collectively referred to as “BCI”). These companies provide full-service voice communication solutions and services in the Florida and Virginia markets. During the second quarter of Fiscal 2006, the Company acquired substantially all of the assets and certain liabilities of Universal Solutions of North America, L.L.C. and related entities (“Universal”). Universal primarily provides planning, installation, monitoring and maintenance services for voice and data network systems in 14 states.

During the third quarter of Fiscal 2006, the Company purchased 100% of the issued and outstanding equity interests in Communication is World InterActive Networking, Inc. (“C=WIN”) and Converged Solutions Group, LLC (“CSG”). Both C=WIN and CSG primarily provide planning, installation and maintenance services for voice and data network systems in 15 states. The results of operations of TSM, GTC, BCI, Universal, C=WIN and CSG are included in the Company’s Consolidated Statements of Income beginning on their individual acquisition dates during Fiscal 2006.

Fiscal 2005
In January 2005, the Company acquired 100% of the outstanding shares of Norstan, Inc. (“Norstan”) common stock for a purchase price of $102.6 million, net of cash acquired of $4.9 million. Norstan primarily provided full-service communications solutions and services, delivering voice and data technology solutions and remanufactured equipment to corporate end-users and public sector companies. Norstan had offices throughout the U.S. and Canada. The Norstan solution was complementary to Black Box’s existing service solutions and allowed 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.

Subsequent Events – Black Box completed two acquisitions subsequent to the fiscal year ended March 31, 2006:

On April 30, 2006, Black Box acquired the USA Commercial and Government and Canadian operations of NextiraOne, LLC (“NextiraOne”) from Platinum Equity, LLC. The acquired operations service commercial and various government agency clients and represent approximately $270 million to $280 million of projected annualized voice services revenues. Black Box and NextiraOne have begun the integration process, including the immediate re-branding of the NextiraOne business as Black Box. As a result of an estimate of the equity book value of these entities (total assets less total liabilities, as adjusted by the parties for certain items) as of the closing date, the total net purchase price for the acquisition paid at closing was $97.3 million. The actual equity book value adjustment will be confirmed post-closing at which time the final purchase price will be determined.

On May 1, 2006, Black Box acquired Nu-Vision Technologies, Inc. and Nu-Vision Technologies, LLC (collectively referred to as “NUVT”), privately held companies, which 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 and is expected to provide annual revenues of approximately $55 million.

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 sales, direct marketing materials 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’s catalogs have earned numerous awards in recent years. In 2005, the Black Box Catalog won Multichannel Merchant magazine’s top award, Catalog of the Year, for the second consecutive year. The catalog also took top honors in the Computer Equipment and Software category for the tenth year in a row.

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.

Manufacturers and Suppliers. Black Box utilizes a network of original equipment manufacturers (“OEM”) 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 $96 million at March 31, 2006 compared to $97 million at March 31, 2005.

Team Members. As of March 31, 2006, the Company had approximately 3,300 team members worldwide of which approximately 430 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 $157 million, or 22% of total revenues, for Fiscal 2006 comparable to $180 million, or 34% of total revenues, for Fiscal 2005.

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.

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.

Item 1A. Risk Factors.

The following are some of the potential risk factors that could cause our actual results to differ materially from those projected in any forward-looking statements. You should carefully consider these factors, as well as the other information contained in this document, when evaluating your investment in our securities. The below list of important factors is not all-inclusive or necessarily in order of importance.

Competition — we operate in a highly competitive industry. Our competitors may be able to deliver products and services at better prices or more quickly due to factors beyond our control. New competitors may also arise in the future, which threaten our ability to sustain or grow our market share. We cannot guarantee that we can continue to compete effectively in the future and still be able to sustain our historical levels of profit margin.

Economic environments — we, our customers or our vendors may experience economic hardships due to inflation or recession, changes in laws and regulations, business disruptions due to natural disasters, acts of terrorism or war or other factors that are beyond our control and that could negatively impact our financial condition or our ability to meet our future financial goals.

Successful integration of acquired businesses — we have completed several acquisitions in recent years. Our future financial results are dependent on the successful integration of those acquisitions within the projected timeframes and cost parameters. We also face pressure to adequately conduct our ongoing operations while working toward the integration of these businesses. We cannot guarantee that we will successfully integrate our acquisitions as projected or without disruption to other areas of our business that could have a negative impact on our financial results.

International operations — we operate in several countries outside of the United States. Our operations or our financial condition may be negatively affected by events surrounding our international operations such as changes in laws and regulations, political or economic instability, currency fluctuations, supply chain disruptions, acts of terrorism, natural disasters or other political, economic or environmental factors. We cannot rely on the past results of our international operations as an indicator of future results or assure you that we will not be adversely affected by those factors inherent with international operations.

Retention of key personnel — the success of our business depends on our ability to attract and retain quality employees, executives and directors. We offer comprehensive salary and benefit packages including stock options as a means of attracting and retaining personnel. We face pressure to maintain our profit margins and remain competitive in our industry while we compete for personnel in our local markets with a variety of different businesses that may be able to offer more attractive incentives due to their individual financial situations. We cannot guarantee that we will continue to attract and retain personnel with our current incentives and at costs that are acceptable for our projected profit margins.

Demand for products and services — we and our competitors in the industry are dependent on the demand for the products and services that we deliver. Changes in technology or other unforeseen developments within our industry could result in decreased demand for our products and services. We cannot guarantee that historical levels of demand will continue or increase in the future.

Supply chain — through our recent acquisitions, we anticipate significant arrangements with a small number of suppliers in the future. If we experience disruptions in our supply chain with these vendors for any reason, we may not be able to fulfill customer commitments with an acceptable alternative or we may not be able to obtain alternatives at similar costs.

Future mergers and acquisitions — a key part of our growth strategy is through mergers and acquisitions. We may not continue to be successful in our search for potential acquisitions that are acceptable for our business model or we may not be successful in our attempts to acquire new businesses that we have identified as attractive situations. We cannot guarantee that we will meet our projected growth targets in the future if we are unsuccessful in our efforts to acquire additional businesses.

Public sector business — our revenues from sales to the public sector, including sales to federal, state and local governments and governmental agencies, has grown in recent years. These sales are made through various direct contracts, through reseller agreements with government contractors and through open market sales. Government contracting is a highly regulated area. Failure to comply with the technical requirements of regulations or contracts could subject us to fines, penalties, suspension or debarment from doing business with such customers, which could have a material adverse effect on our business.

Revenue growth — our revenue is primarily generated through individual sales of products and services and the nature of our business provides us with very little guaranteed or contractual revenue beyond a relatively short time horizon. We depend on repeat customer business as well as our ability to develop new customer business to sustain and grow our revenue. Although our focus on delivering high-quality sales and service has proven to be successful in the past, we cannot guarantee that we will be able to grow or even sustain our current amount of revenue in the future.

Liquidity— although we generate positive cash flow and have access to a significant amount of additional credit, we cannot be sure that our current liquidity situation will be adequate in future periods. We cannot guarantee that we will be able to maintain our positive cash flow position or to obtain additional credit or raise additional capital which may restrict our ability to operate or to pursue new business opportunities in the future.

Stock price — our stock price is affected by a number of factors, including quarterly variations in our financial results. As a result, our stock price is subject to volatility.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

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

The Company owns or leases 167 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 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 has not received any communication on this matter from the GSA since June 2005.

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.

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.

Executive Officers of the Registrant

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


Name	Age		Position with the Company

Fred C. Young		50	Chief Executive Officer

Michael McAndrew		46	Vice President, Chief Financial Officer, Treasurer, Secretary and Principal Accounting Officer

Roger E. M. Croft		57	Senior Vice President – Europe and Latin America

Francis W. Wertheimber		53	Senior Vice President – Pacific Rim/Far East

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

FRED C. YOUNG, 50, was elected 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 14 years.

MICHAEL MCANDREW, 46, 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 16 years.

ROGER E. M. CROFT, 57, 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 21 years.

FRANCIS W. WERTHEIMBER, 53, 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 13 years.

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, 2006, 24,528,437 shares of the Common Stock were issued, of which 6,935,399 are held in treasury. On June 7, 2006, the last reported sale price of the Common Stock was $41.39 per share. As of March 31, 2006, there were approximately 2,242 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.


	High		Low

*Fiscal 2005*
1st Quarter	$	58.18	$	40.20
2nd Quarter		44.88		33.13
3rd Quarter		48.67		35.07
4th Quarter		48.00		33.70

*Fiscal 2006*
1st Quarter	$	37.93	$	31.83
2nd Quarter		45.94		34.93
3rd Quarter		50.45		37.82
4th Quarter		55.37		45.12

Cash dividends of $0.05 per share of Common Stock were paid each of the first two quarters of Fiscal 2005 on April 15, 2004 and July 15, 2004, respectively. Cash dividends were increased to $0.06 per share for each of the final two quarters of Fiscal 2005 and each of the four quarters of Fiscal 2006. These dividends were paid on October 15, 2004, January 14, 2005, April 15, 2005, July 15, 2005, October 14, 2005 and January 13, 2006. A cash dividend of $0.06 per share of Common Stock also was paid during Fiscal 2007 on April 14, 2006. While the Company expects to continue to declare quarterly dividends, the payment of future dividends is at the discretion of the Company’s Board of Directors 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.

Issuer Purchases of Equity Securities


	(a) Total				(c) Total Number of		(d) Maximum Number (or
	Number of				Shares (or Units)		Approximate Dollar Value) of
	Shares (or		(b) Average		Purchased as Part of		Shares (or Units) that May
	Units)		Price Paid per		Publicly Announced		Yet Be Purchased Under the
Period	Purchased		Share (or Unit)		Plans or Programs		Plans or Programs ⁽¹⁾


January 1, 2006 to January 28, 2006		--		--		--		564,853

January 29, 2006 to February 25, 2006		252	$	52.06		252		564,601

February 26, 2006 to March 31, 2006		--		--		--		564,601

Total		252	$	52.06		252		564,601	⁽²⁾

⁽¹⁾As of January 2006, 564,853 shares were available for repurchase under repurchase programs approved by the Board of Directors and announced on November 20, 2003 and August 12, 2004.

⁽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 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.

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 2002 through 2006 were derived from the Consolidated Financial Statements of the Company.


	Fiscal Year Ended March 31,
In thousands, except per share
amounts	2006		2005		2004		2003		2002

Income Statement Data:
Revenues:
Hotline products	$	213,946	$	227,601	$	237,872	$	252,105	$	309,744
On-site services⁽¹⁾		507,389		307,475		282,540		352,912		433,937

Total		721,335		535,076		520,412		605,017		743,681
Cost of sales:
Hotline products		108,220		108,281		112,949		123,470		159,063
On-site services⁽¹⁾		330,765		211,866		191,212		242,700		294,068

Total		438,985		320,147		304,161		366,170		453,131


Gross profit		282,350		214,929		216,251		238,847		290,550

Selling, general & administrative expenses		205,866		160,002		140,805		152,808		181,867

Restructuring and other charges⁽²⁾		5,290		5,059		--		6,536		3,500

Intangibles amortization ⁽³⁾		4,999		1,332		246		377		170


Operating income		66,195		48,536		75,200		79,126		105,013

Interest expense, net		9,123		2,755		1,808		2,826		6,268

Income tax expense		19,678		15,754		26,002		27,386		36,428

Net income	$	37,358	$	29,912	$	47,243	$	48,685	$	62,042

Basic earnings per share	$	2.18	$	1.72	$	2.60	$	2.46	$	3.11

Diluted earnings per share	$	2.13	$	1.68	$	2.52	$	2.39	$	2.97

Dividends declared per common share	$	0.24	$	0.22	$	0.20	$	0.10	$	--

Balance Sheet Data (at end of period):

Working capital ⁽⁴⁾	$	103,256	$	112,536	$	109,431	$	118,592	$	143,464
Total assets		799,734		772,890		617,302		626,729		650,787
Long-term debt		122,673		147,196		35,177		49,453		75,497
Total debt		123,722		147,888		36,238		50,379		78,676
Stockholders’ equity		540,900		490,701		504,904		494,422		490,098

⁽¹⁾ Represents combined Data Services and Voice Services.

⁽²⁾ See Note 17 of the Notes to Consolidated Financial Statements.

⁽³⁾ See Note 5 of the Notes to Consolidated Financial Statements.

⁽⁴⁾ Represents Current Assets minus Current Liabilities.

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 fourth quarter of Fiscal 2006, the Company incurred a pre-tax charge of $7.1 million related to an adjustment of earnings over multiple years, from Fiscal 2003 through Fiscal 2006, from the Company’s Italian Operations (“Italian Operations Adjustment”). The Italian Operations Adjustment resulted from intentional misconduct by certain local operational and financial managers of the Company’s Italian Operations acting in collusion with one another for the purpose of overstating local financial results. All involved team members have been terminated and the Company intends to pursue all available legal remedies against these individuals. The misconduct was brought to the Company management’s attention by a team member of the Italian Operations pursuant to the Company’s “Open Door” Policy. Company management responded by immediately suspending the management team of the Italian Operations and conducting a full investigation of the matter. The Company believes that all accounting irregularities have been identified, corrective action taken and that the Italian Operations Adjustment captures all necessary corrections.

The Company’s management concluded, with the concurrence of the Audit Committee of the Board of Directors, that the impact of the Italian Operations Adjustment was not material to the Company’s consolidated financial statements for any interim or annual period between Fiscal 2003 through Fiscal 2006. In reaching this conclusion, the Company reviewed and analyzed the SEC’s Staff Accounting Bulletin (“SAB”) No. 99, “Materiality,” in order to determine that the impact was not material on a quantitative or qualitative basis to any one period. As a result, the Company recorded a cumulative adjustment in the fourth quarter of Fiscal 2006.

During the first quarter of Fiscal 2006 and fourth quarter of Fiscal 2005, the Company recorded pre-tax restructuring charges of $5.3 million and $5.1 million, respectively, related to staffing level adjustments and real estate consolidations in Europe and North America. These restructuring charges completed the Company’s previously announced restructuring plans that were initiated during the fourth quarter of Fiscal 2005.

On January 25, 2005, the Company completed the acquisition of Norstan. Norstan’s revenues are included in North America and Voice Services revenues.

The following table has been included to provide the allocation of Fiscal 2006 and Fiscal 2005 actual acquisition related expenses and the estimated allocation of such expenses in Fiscal 2007 and Fiscal 2008 to Fiscal 2025, directly related to the acquisition of Norstan:


	FY05		FY06		FY07		FY08 to
P&L Impact:	Total		Total		Total		FY25

Gross Profit	$	1,028	$	1,543	$	--	$	--
SG&A		913		490		--		--
Intangibles amortization		759		3,821		672		10,356

Total	$	2,700	$	5,854	$	672	$	10,356

During Fiscal 2006 and Fiscal 2005, the Company incurred pre-tax, non-cash charges of $5.9 million and $2.7 million, respectively, in connection with the acquisition of Norstan.

During Fiscal 2005, the Company incurred $4.4 million of costs associated with establishment of certain internal monitoring processes in accordance with the compliance requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”).

On April 30, 2006, the Company acquired NextiraOne from Platinum Equity, LLC. The acquired operations service commercial and various government agency clients and represent approximately $270 million to $280 million of projected annualized Voice Services revenues.

On May 1, 2006, the Company acquired NUVT, a privately held company, which provides 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 and is expected to provide annual revenues of approximately $55 million.

Dollars in Thousands, unless Otherwise Indicated

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


	Year Ended March 31,
	2006				2005				2004

			% of total				% of total				% of total
		$	revenues			$	revenues			$	revenues
By Geography
Revenues:
North America	$	564,700		78%	$	355,013		66%	$	341,299		66%
Europe		120,051		17%		142,838		27%		142,158		27%
All Other		36,584		5%		37,225		7%		36,955		7%

Total	$	721,335		100%	$	535,076		100%	$	520,412		100%


Operating Income:
North America	$	53,550			$	26,798			$	44,281
% of North America revenues		9.5%				7.5%				13.0%
Europe		5,518				13,639				21,812
% of Europe revenues		4.6%				9.5%				15.3%
All Other		7,127				8,099				9,107
% of All Other revenues		19.5%				21.8%				24.6%

Total	$	66,195			$	48,536			$	75,200
% of Total revenue		9.2%				9.1%				14.5%


Restructuring and other charges and reconciling items:
North America	$	7,358			$	11,156			$	--
Europe		10,807				1,003				--
All Other		--				--				--

Total	$	18,165			$	12,159			$	--
% of Total revenue		2.5%				2.2%

Information on revenues and gross profit for Data Services, Voice Services and Hotline Services is presented below:


	Year Ended March 31,
	2006				2005				2004

			% of total				% of total				% of total
		$	revenues			$	revenues			$	revenues
By Service Type
Revenues:
Data Services ⁽¹⁾	$	196,585		27%	$	200,935		38%	$	214,299		41%
Voice Services ⁽¹⁾		310,804		43%		106,540		20%		68,241		13%
Hotline Services		213,946		30%		227,601		42%		237,872		46%

Total	$	721,335		100%	$	535,076		100%	$	520,412		100%


Gross Profit:
Data Services	$	57,068			$	59,354			$	67,329
% of Data Services revenues		29.0%				29.5%				31.4%
Voice Services		119,556				36,255				23,999
% of Voice Services revenues		38.5%				34.0%				35.2%
Hotline Services		105,726				119,320				124,923
% of Hotline Services revenues		49.4%				52.4%				52.5%

Total	$	282,350			$	214,929			$	216,251
% of Total revenues		39.1%				40.2%				41.6%


Reconciling items:
Data Services		$2,071				—				—
Voice Services		—				—				—
Hotline Services		1,517				—				—

Total	$	3,588				—				—
% of Total revenues		0.5%


⁽¹⁾		Data Services and Voice Services may also be collectively referred to as “On-Site Services”

Fiscal 2006 Compared To Fiscal 2005

Total Revenues

Total revenues for Fiscal 2006 were $721,335, an increase of 35% compared to Fiscal 2005 total revenues of $535,076. The increase was due to the acquisitions of TSM, GTC, BCI, Universal, C=Win and CSG during Fiscal 2006, and a full twelve months of revenue from the acquisition of Norstan (collectively referred to as the “Acquired Companies”) during the fourth quarter of Fiscal 2005. The Acquired Companies added revenue of $227,313 and $35,208 for Fiscal 2006 and Fiscal 2005, respectively. Excluding the Acquired Companies, revenues decreased by 1%. The decrease included $4,321 negative impact of exchange rates relative to the U.S. dollar. If exchange rates relative to the U.S. dollar had remained unchanged from Fiscal 2005, and excluding the Acquired Companies, total Fiscal 2006 revenues would have increased a total of 1% compared to Fiscal 2005.

Revenues by Geography

North America Revenues
Revenues in North America were $564,700 for Fiscal 2006, an increase of 59% compared to $355,013 for Fiscal 2005. The North America revenue increase was primarily due to the acquisition of the Acquired Companies. The Acquired Companies added North America

revenue of $227,313 and $35,208 for Fiscal 2006 and Fiscal 2005, respectively. Excluding the Acquired Companies, revenues would have increased 5%. The Company believes this overall increase was generally due to the increased demand for Data Services and Voice Services and success in the Company’s DVH (Data, Voice and Hotline) Services cross-selling initiatives, offset in part by $281 negative impact of exchange rates relative to the U.S. dollar. If exchange rates relative to the U.S. dollar had remained unchanged from Fiscal 2005, and excluding the impact of the Acquired Companies, total Fiscal 2006 revenues would have increased a total of $17,865 or 5%.

Europe Revenues
Revenues in Europe were $120,051 for Fiscal 2006, a decrease of 16% from Fiscal 2005 revenues of $142,838. If exchange rates relative to the U.S. dollar had remained unchanged from Fiscal 2005, Europe revenues would have increased by $4,046 for a decrease of 13%. The Company believes the Europe revenues decrease was due to the weak general economic conditions that affected client demand and the Italian Operations Adjustment.

All Other Revenues
Revenues for All Other were $36,584 for Fiscal 2006, a slight decrease compared to $37,225 for Fiscal 2005. If exchange rates relative to the U.S. dollar had remained unchanged from Fiscal 2005, All Other revenues would have increased by $556 for a decrease of less than 1%.

Revenue by Service Type

Data Services
Revenues from Data Services were $196,585 for Fiscal 2006, a decrease of 2% compared to $200,935 for Fiscal 2005. The Company believes the overall decline in Data Services revenue was driven by weak general economic conditions in the European market, the Italian Operations Adjustment and by $1,357 negative 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 2005, Data Services revenues would have decreased 1%.

Voice Services
Revenues from Voice Services were $310,804 for Fiscal 2006, an increase of 192% compared to $106,540 for Fiscal 2005. The increase is primarily due to the Acquired Companies, which added $227,313 and $35,208 revenues to total Fiscal 2006 and Fiscal 2005, respectively. Excluding the effects of the Acquired Companies, Voice Services revenues increased 17% over Fiscal 2005. The Company believes the overall increase in Voice Services revenues was driven by increased client demands and the Company’s ability to successfully cross-sell the DVH services to its existing customers. 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 $213,946 for Fiscal 2006, a decrease of 6% compared to $227,601 for Fiscal 2005. The Company believes the overall decline in Hotline Services revenues was driven by weak general economic conditions in the European market, the Italian Operations Adjustment and by $2,966 negative 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 2005, Hotline Services revenues would have decreased 5%.

Gross Profit

Gross profit dollars for Fiscal 2006 increased to $282,350 from $214,929 for Fiscal 2005. The Company believes the increase in gross profit dollars over the prior year was primarily due to the acquisition of the Acquired Companies, offset in part by the Italian Operations Adjustment. Gross profit as a percent of revenues for Fiscal 2006 decreased to 39.1% of revenues from 40.2% of revenues for Fiscal 2005. The Company believes the percent decrease was primarily related to a lower gross profit percent in Hotline Services and the Italian Operations Adjustment.

Gross profit dollars for Data Services were $57,068 or 29.0% of revenues, for Fiscal 2006 compared to $59,354, or 29.5% of revenues, for Fiscal 2005. Gross profit dollars for Voice Services were $119,556, or 38.5% of revenues, for Fiscal 2006 compared to $36,255, or 34.0% of revenues, for Fiscal 2005. Gross profit dollars for Hotline Services were $105,726 or 49.4% of revenues, for Fiscal 2006 compared to $119,320 or 52.4% of revenues, for Fiscal 2005.

SG&A Expenses

Selling, general and administrative (“SG&A”) expenses for Fiscal 2006 were $205,866, an increase of $45,864 over SG&A expenses of $160,002 for Fiscal 2005. SG&A expenses as a percent of revenue for Fiscal 2006 were 28.5% of revenues compared to 29.9% of revenues for Fiscal 2005. The dollar increase is primarily due to the acquisition of the Acquired Companies and lower expenses as a result of execution of a previously announced restructuring plan.

Restructuring and Other Charges

In the first quarter of Fiscal 2006, the Company recorded a restructuring charge of $5,290 to complete its staffing level adjustments in Europe and North America and for real estate consolidations initiated in the fourth quarter of Fiscal 2005. Of this charge, $1,548 and $3,742 related to North America and Europe, respectively. See Notes to Consolidated Financial Statements for further details related to the 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 satisfaction of a previously disclosed litigation judgment. 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.

Intangibles Amortization

Intangibles amortization for Fiscal 2006 increased to $4,999 from $1,332 for Fiscal 2005. The increase was primarily attributable to the addition of $16,306 and $15,971 of intangible assets acquired through the acquisition of the Acquired Companies in Fiscal 2006 and Fiscal 2005, respectively. 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 expects to incur additional amortization expense relative to these newly acquired intangibles of $2,135 in Fiscal 2007 and approximately $25,566 in the aggregate thereafter through Fiscal 2026. In addition, the Company paid $180 of deferred financing costs related to the Credit Agreement. These costs will be amortized through the Fiscal 2011 maturity date of the Credit Agreement.

Operating Income

Operating income for Fiscal 2006 was $66,195, or 9.2% of revenues, compared to $48,536, or 9.1% of revenues, for Fiscal 2005.

Interest Expense, Net

Net interest expense for Fiscal 2006 increased to $9,123 from $2,755 for Fiscal 2005 due to an increase in the weighted average outstanding debt of approximately $155,898 for Fiscal 2006 compared to approximately $74,977 for Fiscal 2005. The increase in debt relates primarily to the acquired companies during Fiscal 2006 and Fiscal 2005. In addition, the weighted average interest rate outstanding for Fiscal 2006 was 5.10% compared to the Fiscal 2005 rate of 2.98%.

Provision for Income Taxes

The tax provision for Fiscal 2006 was $19,678, an effective tax rate of 34.5%. This compares to the tax provision for Fiscal 2005 of $15,754, an effective tax rate of 34.5%.

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 2006 was $37,358, or 5.2% of revenues, compared to $29,912, or 5.6% of revenues, for Fiscal 2005.

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 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 or 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 or 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 through purchase accounting (see Notes to Consolidated Financial Statements).

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.

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 in the aggregate thereafter through 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 the Credit Agreement maturity date in Fiscal 2011.

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.

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% 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.

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.

Liquidity and Capital Resources

Cash Flows from Operating Activities

Net cash provided by operating activities for Fiscal 2006 was $51,797. Significant factors contributing to a source of cash were: Net Income of $37,358; a decrease in accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts of $9,369 and $3,573, respectively; and a decrease in net inventory consistent with efforts to increase inventory turns. Significant factors contributing to a use of cash were: a decrease in the short and long term restructuring reserve of $5,948; a decrease of deferred revenue and billings in excess of costs and estimated earnings on uncompleted contracts of $3,267; and an offset of $5,825 related to accrued acquisition costs, which have not been recognized as Investing Activities at year-end. Changes in the above accounts are based on an average Fiscal 2006 exchange rate.

Net cash provided by operating activities for Fiscal 2005 was $52,206. Significant factors contributing to a source of cash were: Net Income of $29,912; a decrease in accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts of $8,878 and $7,635, respectively, consistent with the decrease in revenue; and an increase in overall billings/collections efforts. Changes in the above accounts are based on an average Fiscal 2005 exchange rate.

Net cash provided by operating activities for Fiscal 2004 was $74,955. Significant factors contributing to a source of cash were: Net Income of $47,243; a decrease in accounts receivable of $7,486, consistent with the decrease in revenue and an increase in overall collection efforts; decrease in inventory of $1,144, primarily a result of the decrease in revenue; a decrease in other current assets primarily related to the reduction of costs and estimated earnings in excess of billings on uncompleted contracts of $4,498; and other assets of $1,294, related to normal business activities. Changes in the above accounts are based on an average Fiscal 2004 exchange rate.

At March 31, 2006, the Company had cash and cash equivalents of $11,207, working capital of $103,256 and long-term debt of $122,673.

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

Cash used by investing activities for all periods primarily represented acquisition of businesses and capital expenditures. Net cash used in investing activities during Fiscal 2006, 2005 and 2004 was $43,730, $104,765 and $2,832, respectively.

During Fiscal 2006, gross capital expenditures were $4,115, while capital disposals were $1,445. Gross capital expenditures were $3,506, while capital disposals were $1,187 in Fiscal 2005. Gross capital expenditures for Fiscal 2007 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 2006, 2005 and 2004 was $40,682, $102,553 and $0, respectively. See Note 18 of the Notes to Consolidated Financial Statements for additional detail on acquisitions made during Fiscal 2006. The cash impact of prior merger-related (recoveries)/payments, such as earn-outs, made during Fiscal 2006, 2005 and 2004 was $378, ($107) and $3,010, respectively.

Financing Activities

Net cash provided by/(used) in financing activities during Fiscal 2006, 2005 and 2004 was ($7,978), $55,800 and ($76,875), respectively. Cash used by financing activities in Fiscal 2006 primarily represents the net decrease in debt obligations combined with dividend payments to shareholders offset by cash received from the exercise of stock options. 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 used by financing activities in Fiscal 2004 primarily represents the net reduction of debt obligations combined with dividend payments to shareholders and purchases of treasury stock, offset by cash received from the exercise of stock options.

Total Debt

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 were permitted up to a maximum amount of $240,000, including up to $15,000 of swingline loans and $25,000 of letters of credit. Interest on outstanding indebtedness under the Second Amended and Restated Credit Facility accrued, 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). The other terms and conditions of the Second Amended and Restated Credit Facility were substantially the same as the Amended and Restated Credit Facility.

On March 28, 2006, the Company amended 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, as amended (the “Credit Agreement”), are permitted up to a maximum amount of $310,000, including up to $15,000 of swingline 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 expires on March 28, 2011.

The Company’s total debt as of March 31, 2006 of $123,722 was comprised of $121,303 under the Credit Agreement, $1,891 of obligations under capital leases and $528 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, 2006 and March 31, 2005 was approximately 5.89% and 3.61%, respectively, and the weighted average interest rate on all indebtedness of the Company during the fiscal year ended March 31, 2006 and March 31, 2005 was 5.10% and 2.98%, respectively. In addition, as of March 31, 2006, the Company had $3,065 of letters of credit outstanding and $185,632 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 2006, 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 2006 totaled $1,055 and was paid on April 14, 2006 to stockholders of record at the close of business on March 31, 2006. The dividend declared in the first quarter of Fiscal 2007 will be paid on July 14, 2006 to stockholders of record at the close of business on June 30, 2006. 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
The Company initiated a stock repurchase program in 1999. Since inception of the repurchase program in April 1999 through March 31, 2006, the Company has repurchased in aggregate approximately 6.9 million shares for approximately $297,000. During Fiscal 2006, the Company repurchased 565 shares for $27. Repurchases for the year ended March 31, 2005 totaled approximately 1,400,000 shares of the Common Stock for $56,912. Funding for the stock repurchases came primarily from cash flow from operations. Repurchases of stock during Fiscal 2007 and future periods 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 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 may not repurchase stock if it is not in compliance with a leverage ratio.

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, 2006, 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 0.7850 to 0.8460 Euro, 0.5365 to 0.5816 Pound sterling, 1.1751 to 1.1774 Canadian dollar, 1.2149 to 1.3015 Swiss franc, 105.47 to 110.1 Japanese yen, 7.3773 to 8.0267 Swedish krona, 5.9275 to 6.3445 Danish krone, 6.2087 to 6.8514 Norwegian kroner and 1.3077 to 1.4194 Australian dollar, all per U.S. dollar.

The total open contracts, with a notional amount of approximately $66,870, have a fair value of $64,411 and will expire within 36 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.

The following table summarizes significant contractual obligations and commitments of the Company as of March 31, 2006. 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, 2006:


	Payments Due by Period
			Less than 1						More than 5
	Total		year		1-3 years		3-5 years		years

Long-term debt obligations	$	121,831	$	528	$	--	$	121,303	$	--
Interest expense on long-term debt		31,331		6,293		12,545		12,493		--
Capital lease obligations		1,891		521		1,123		247		--
Operating lease obligations		53,850		13,746		20,213		12,871		7,019
Discounted lease rentals		30		30		--		--		--

Total contractual obligations	$	208,933	$	21,118	$	33,881	$	146,914	$	7,019

The following table summarizes significant commercial commitments of the Company as of March 31, 2006 and the related expiration per period:


	Amount of Commitment Expiration Per Period
			Less than 1
	Total		year		1-3 years		3-5 years		More than 5 years

Letters of credit	$	3,065	$	3,065		--		--		--


Total commercial commitments	$	3,065	$	3,065		--		--		--

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

Accounting for Conditional Asset Retirement Obligations
In March 2005, the Financial Accounting Standards Board (the “FASB”) issued Financial Interpretation Number (“FIN”) 47, “Accounting for Conditional Asset Retirement Obligations” (“FIN 47”). FIN 47 clarifies the term “conditional asset retirement obligation” as used in Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement

Obligations” (“SFAS No. 143”) which refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event. Uncertainty about the timing and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. There was no impact to the Company upon adoption of FIN 47.

Consolidation of Variable Interest Entities

In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.” 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 46 (“FIN 46R”) that modified some of the provisions and effective dates of FIN 46, and provided exemptions to certain entities from the original guidance. FIN 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 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 46 and FIN 46R.

Stock-Based Compensation

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”). SFAS No. 123(R) is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” (“FASB No. 123”), supersedes Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”) and amends SFAS 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 SFAS 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 $3,200, $3,472 and $6,789 during Fiscal 2006, 2005 and 2004, 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.

Foreign Earnings Repatriation

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 SFAS No. 109, “Accounting for Income Taxes.”

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 No. 109. The Company believes that this treatment does not have an effect 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”). 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 has evaluated the effects of the law and recent regulations on its plan for reinvestment or repatriation of international earnings. The Company believes that the temporary incentive to repatriate international earnings does not provide any tax benefit to the Company.

Segments

In February 2005, the FASB issued Emerging Issues Task Force (“EITF”) No. 04-10, “Determining Whether to Aggregate Segments That Do Not Meet the Quantitative Thresholds” (“EITF No. 04-10”). This statement clarifies the aggregation criteria of operating segments as defined in SFAS No. 131 (as defined below in Note 19 of the Notes to Consolidated Financial Statements). The effective date of this statement is for fiscal years ending after September 15, 2005. The Company believes that its current segment reporting complies with EITF No. 04-10.

Accounting Changes and Error Corrections

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”. This statement replaces APB No. 20 “Accounting Changes” cumulative effect accounting with accounting treatment based on retroactive restatement of comparative financial statements. It applies to all voluntary changes in accounting principles and defines “retrospective application” to differentiate it from restatements due to incorrect accounting. The provisions of this statement are effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company’s adoption of SFAS No. 154 had no impact on its financial position, results of operations or cash flows.

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 Services and Voice Services segments, 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.

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.

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 used 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.

Forward Looking Statements

When included in this Annual Report on Form 10-K 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, including those discussed in Part I, Item 1A, “Risk Factors,” 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 on Form 10-K. 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, 2006, the Company had total long-term obligations, including the current portion of those obligations, of $123,722. Of that amount, $2,121 was in fixed rate obligations and $121,601 was in variable rate obligations. For the amounts in variable rate debt at March 31, 2006, an instantaneous 100 basis point increase in the interest rate would reduce the Company’s expected net income in the subsequent fiscal year by $808, assuming the Company employed no intervention strategies. The Company had no interest rate hedging agreements in effect during the fiscal year ended March 31, 2006. Subsequent to March 31, 2006, the Company entered into an interest rate swap agreement with a notional value of $100,000, the effect of which will be to effectively convert a portion of the variable rate based debt to a fixed rate portion.

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. At March 31, 2006, the Company had total open contracts valued at approximately $66,870 with a fair value of approximately $64,411.

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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Black Box Corporation
Lawrence, Pennsylvania

We have audited the accompanying consolidated balance sheets of Black Box Corporation as of March 31, 2006 and 2005 and the related consolidated statements of income, stockholders’ equity, and cash flows for the years then ended. We have also audited the schedules listed in the accompanying index. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

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, 2006 and 2005 and the results of their operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the 2006 and 2005 schedules present 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, 2006, 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 26, 2006 expressed an unqualified opinion thereon.

/s/ BDO Seidman, LLP

Chicago, Illinois
May 26, 2006

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the consolidated statements of income, shareholders’ equity and cash flows of Black Box Corporation and subsidiaries for the year ended March 31, 2004. Our audit also included the financial statement schedule listed in the index at Item 15 for the year ended March 31, 2004. 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 audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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 results of operations and cash flows of Black Box Corporation and subsidiaries as of March 31, 2004 in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the financial statement schedule for the year ended March 31, 2004 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

BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME


	Year Ended March 31,
In thousands, except per share amounts	2006		2005		2004

Revenues
Hotline products	$	213,946	$	227,601	$	237,872
On-site services		507,389		307,475		282,540

Total		721,335		535,076		520,412
Cost of sales
Hotline products		108,220		108,281		112,949
On-site services		330,765		211,866		191,212

Total		438,985		320,147		304,161


Gross profit		282,350		214,929		216,251

Selling, general and administrative expenses		205,866		160,002		140,805
Restructuring and other charges		5,290		5,059		--
Intangibles amortization		4,999		1,332		246


Operating income		66,195		48,536		75,200

Interest expense, net		9,123		2,755		1,808
Other expense, net		36		115		147


Income before provision for income taxes		57,036		45,666		73,245

Provision for income taxes		19,678		15,754		26,002


Net income	$	37,358	$	29,912	$	47,243


Earnings per common share
Basic	$	2.18	$	1.72	$	2.60
Diluted	$	2.13	$	1.68	$	2.52

Weighted average common shares outstanding
Basic		17,164		17,411		18,173
Diluted		17,544		17,845		18,766


Dividends per share	$	0.24	$	0.22	$	0.20

See Notes to Consolidated Financial Statements

BLACK BOX CORPORATION
CONSOLIDATED BALANCE SHEETS


	March 31,
In thousands, except par value	2006			2005

*Assets*
Cash and cash equivalents	$	11,207		$	11,592
Trade accounts receivable, net of allowance for doubtful accounts of $9,517 and $7,342		116,713			116,865
Lease receivables (Note 2)		512			1,697
Inventories, net (Note 3)		53,926			57,176
Costs and estimated earnings in excess of billings on uncompleted contracts		23,803			25,695
Deferred tax asset		8,973			9,236
Net current assets of discontinued operations		467			549
Other current assets		15,523			14,724

Total current assets		231,124			237,534
Property, plant and equipment, net (Note 4)		35,124			38,268
Goodwill, net (Note 5)		468,724			444,567
Other intangibles, net (Note 5)		55,440			44,157
Lease receivables, net of current portion		--			473
Deferred tax asset		4,231			3,793
Discontinued operations, net of current portion		--			373
Other assets		5,091			3,725

Total assets	$	799,734		$	772,890

*Liabilities*
Current maturities of long-term debt (Note 6)	$	1,049		$	692
Current maturities of discounted lease rentals (Note 7)		30			890
Accounts payable		44,943			36,032
Billings in excess of costs and estimated earnings on uncompleted contracts		8,648			8,947
Deferred revenue		22,211			21,456
Accrued liabilities:
Compensation and benefits		13,954			14,270
Restructuring reserve (Note 17)		3,292			6,709
Other liabilities		27,817			32,708
Income taxes		5,924			3,295

Total current liabilities		127,868			124,999
Long-term debt (Note 6)		122,673			147,196
Discounted lease rentals		--			30
Other liabilities		887			75
Restructuring reserve (Note 17)		7,406			9,889
*Stockholders’ Equity*
Preferred stock authorized 5,000, par value $1.00, none issued		--			--
Common stock authorized 100,000, par value $.001, 17,593 and 16,840 shares outstanding		25			24
Additional paid-in capital		362,810			336,290
Retained earnings		461,853			428,632
Treasury stock, at cost, 6,935 and 6,935 shares		(296,824	)		(296,797	)
Accumulated other comprehensive income		13,036			22,552

Total stockholders’ equity		540,900			490,701

Total liabilities and stockholders’ equity	$	799,734		$	772,890

See Notes to Consolidated Financial Statements

BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


													Accumulated
	Common Stock				Additional								Other
In thousands, except share					Paid-in		Retained			Treasury			Comprehensive
amounts	Shares		Amount		Capital		Earnings			Stock			Income			Total


*Balance at March 31, 2003*		22,594,034	$	23	$	295,271	$	359,037		$	(163,547	)	$	3,638		$	494,422
Comprehensive income:
Net income								47,243									47,243
Foreign currency translation adjustment														14,013			14,013
Unrealized gains on derivatives designated and qualified as cash flow hedges, net of tax														454			454
Reclassification of unrealized gains on expired derivatives														(233	)		(233	)

Comprehensive income																	61,477
Dividends declared								(3,605	)								(3,605	)
Purchase of treasury stock											(76,338	)					(76,338	)
Exercise of options, net of tax		799,644				22,159											22,159
Tax benefit from exercised options						6,789											6,789


*Balance at March 31, 2004*		23,393,678		23		324,219		402,675			(239,885	)		17,872			504,904
Comprehensive income:
Net income								29,912									29,912
Foreign currency translation adjustment														5,281			5,281
Unrealized losses on derivatives designated and qualified as cash flow hedges, net of tax														(147	)		(147	)
Reclassification of unrealized gains on expired derivatives														(454	)		(454	)

Comprehensive income																	34,592
Stock compensation expense						680											680
Dividends declared								(3,955	)								(3,955	)
Purchase of treasury stock											(56,912	)					(56,912	)
Exercise of options, net of tax		381,272		1		7,919											7,920
Tax benefit from exercised options						3,472											3,472


*Balance at March 31, 2005*		23,774,950		24		336,290		428,632			(296,797	)		22,552			490,701
Comprehensive income:
Net income								37,358									37,358
Foreign currency translation adjustment														(10,511	)		(10,511	)
Unrealized gains on derivatives designated and qualified as cash flow hedges, net of tax														1,142			1,142
Reclassification of unrealized gains on expired derivatives														(147	)		(147	)

Comprehensive income																	27,842
Dividends declared								(4,137	)								(4,137	)
Purchase of treasury stock											(27	)					(27	)
Exercise of options, net of tax		753,487		1		23,320											23,321
Tax benefit from exercised options						3,200											3,200


Balance at March 31, 2006		24,528,437	$	25	$	362,810	$	461,853		$	(296,824	)	$	13,036		$	540,900

See Notes to Consolidated Financial Statements

BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended March 31,
In thousands	2006			2005			2004

*Operating Activities*
Net income	$	37,358		$	29,912		$	47,243
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		13,930			7,955			6,765
Gain on disposal of assets		--			--			(531	)
Deferred tax (benefit)/provision		(212	)		(77	)		2,386
Stock compensation expense		--			680			--
Tax benefit from exercised options		(3,200	)		(3,472	)		(6,789	)
Changes in operating assets and liabilities (net of acquisitions):
Accounts receivable, net		9,369			8,878			7,486
Inventories, net		5,000			(76	)		1,144
Other current assets		7,541			3,307			16,455
Proceeds from lease contracts		1,658			504			--
Accounts payable and accrued liabilities		(19,647	)		4,595			796

Net cash provided by operating activities		51,797			52,206			74,955

*Investing Activities*
Capital expenditures		(4,115	)		(3,506	)		(1,673	)
Capital disposals		1,445			1,187			1,851
Acquisition of businesses, net of cash acquired		(40,682	)		(102,553	)		--
Prior merger-related recovery/(payments)		(378	)		107			(3,010	)

Net cash used in investing activities		(43,730	)		(104,765	)		(2,832	)

*Financing Activities*
Repayment of borrowings		(218,989	)		(127,959	)		(229,914	)
Proceeds from borrowings		192,882			238,409			215,600
Repayments on discounted lease rentals		(890	)		(458	)		--
Proceeds from the exercise of options		23,320			7,919			22,159
Payment of dividends		(4,094	)		(3,847	)		(3,663	)
Deferred financing costs		(180	)		(1,352	)		--
Purchase of treasury stock		(27	)		(56,912	)		(81,057	)

Net cash (used)/provided by financing activities		(7,978	)		55,800			(76,875	)


Foreign currency exchange impact on cash		(474	)		(955	)		15


(Decrease)/increase in cash and cash equivalents		(385	)		2,286			(4,737	)
Cash and cash equivalents at beginning of year		11,592			9,306			14,043

Cash and cash equivalents at end of year	$	11,207		$	11,592		$	9,306

*Supplemental Cash Flow:*
Cash paid for interest	$	8,336		$	3,045		$	1,808
Cash paid for income taxes		17,223			17,064			25,176
Non-cash financing activities:
Dividends payable		1,055			1,011			903
Capital leases		1,214			714			--

See Notes to Consolidated Financial Statements

BLACK BOX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

Note 1: Significant Accounting Policies

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

Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates in these financial statements include allowances for doubtful accounts receivable, sales returns, net realizable value of inventories, loss contingencies, warranty reserves and intangible assets. Actual results could differ from those estimates.

Allowance for doubtful accounts receivable: Allowances for doubtful accounts are maintained for estimated losses resulting from the inability of clients to make required payments. These allowances are based on both recent trends of clients estimated to be a greater credit risk as well as general trends of the entire client pool. Specific accounts are evaluated on a case-by-case basis before they are written off.

Sales returns: At the time of sale, an estimate for sales returns is recorded based on historical experience.

Inventory valuation: The Company records an estimate for slow moving and obsolete inventory based upon product knowledge, physical inventory observation and an aging analysis of the inventory on hand.

Loss Contingencies: The Company accrues for contingent obligations when a loss is probable and the amount can be reasonably estimated.

Warranties: Estimated future warranty costs related to certain products are charged to operations in the period the related revenue is recognized based on historical experience.

Intangible Assets: The Company has purchased intangible assets, such as customer relationships, non-compete agreements and backlog, which have finite lives. These intangible assets are amortized over the estimated economic lives.

Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with maturity of three months or less to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates market.

Inventories
Inventories are valued at the lower of cost or market. The first-in, first-out average cost method is used to value the majority of the inventory. However, some locations of the Company use other methods, including first-in first-out and actual current costs.

Property, Plant and Equipment
Property, plant and equipment are stated at cost. Maintenance, repairs and minor renewals are charged to operations as incurred. Major renewals and betterments, which substantially extend the useful life of the property, are capitalized at cost. Upon sale or

other disposition of assets, the costs and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is reflected in income.

Depreciation is computed using the straight-line method based on the estimated useful lives of 30 years for buildings and improvements and 3 to 5 years for machinery and equipment. Leasehold improvements are depreciated over their lease terms, or useful lives if shorter. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Goodwill and Other Intangible Assets
Goodwill is the excess of purchase price over the value of the net assets acquired. The Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), on April 1, 2001. Under SFAS No. 142, goodwill and intangible assets with indefinite useful lives are no longer amortized but are subject to, at a minimum, an annual impairment assessment of their carrying value. Under SFAS No. 142, goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. Estimated fair values of the reporting units were 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 used to discount those estimated cash flows. See Note 5 for further discussion regarding goodwill and intangibles.

The cost of other acquired intangibles is amortized on a straight-line basis over their estimated useful lives of 3-10 years for non-compete agreements, one year for backlog and 20 years for customer relationships.

The Company assesses the carrying value of its long-lived assets, including land, building, equipment and leasehold improvement and amortizable intangible assets, whenever economic events or changes in circumstances indicate that the carrying values of the assets may not be recoverable. Long-lived assets are considered to be impaired when the sum of the undiscounted expected future net operating cash flows is less than the carrying values of the related assets.

Income Taxes
Deferred income taxes are recognized for all temporary differences between the tax and financial bases of the Company’s assets and liabilities, using the enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.

Risk Management and Financial Derivatives
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, Mexico and Singapore are denominated in U.S. dollars.

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

Foreign Currency Translation
The financial statements of the Company’s foreign subsidiaries, except for the subsidiaries located in Brazil and Mexico, are recorded in the local currency, which is the functional currency. Foreign currency assets and liabilities are translated into U.S. dollars at the rate of exchange existing at the statement date. Income and expense amounts are translated at the average of the monthly exchange rates. Adjustments resulting from these translations are credited or charged directly to accumulated comprehensive income (loss) and will be included in income upon sale or liquidation of the foreign investment. Gains and losses from foreign currency transactions, denominated in a currency other than the functional currency, are credited or charged directly to income. For the subsidiaries located in Brazil and Mexico, the U.S. dollar is the functional currency.

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 Services and Voice Services segments, revenues are recognized from maintenance service contracts, moves, adds and changes and network integration services, when the services are provided. Service contracts are generally pre-billed and are reflected on the balance sheet as deferred revenue and are generally recognized over the service period on a straight-line basis. Revenues from the sale and installation of products and systems are recognized using the percentage-of-completion method based upon the proportion of actual costs incurred to estimated total costs. At the time a loss on a contract becomes known, the entire amount of the estimated loss is recognized immediately in the financial statements. The Company has historically made reasonably accurate estimates of the extent of progress towards completion, contract revenues and contract costs on its long-term contracts. However, due to uncertainties inherent in the estimation process, actual results could differ materially from those estimates.

Billings in excess of costs and estimated earnings are classified as current liabilities and any costs and estimated earnings in excess of billings are classified as current assets.

Shipping and Handling Fees and Costs
All fees billed to clients for shipping and handling are classified as a component of net revenues. All costs associated with shipping and handling are classified as a component of cost of sales.

Advertising Costs
Catalogs and other direct mail costs are expensed over their useful life. All other advertising costs are expensed as incurred. The Company recognized $9,414, $11,649 and $9,550 in advertising expenses during Fiscal 2006, 2005 and 2004, respectively.

Stock-Based Compensation
Stock options are granted to certain employees and members of the Company’s Board of Directors at the fair market value of the Company’s stock on the date of the grant. For the periods covered by these financial statements, the Company accounted for its stock-based compensation plans under the provisions of Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), as amended and related guidance. Under this guidance there are no charges or credits to income with respect to stock options. The pro forma information below is based on provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” issued in December 2002. SFAS No. 148 requires that the pro forma information regarding net income and earnings per share are determined as if the Company had accounted for its employee stock options under the fair value method as prescribed by SFAS No. 123.

The following table shows the effects on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, as amended, to the stock-based awards:


		2006			2005			2004

Net income:	As reported	$	37,358		$	29,912		$	47,243
Plus:	Stock-based compensation expense included in reported net income, net of related tax		--			445			--
Less:	Stock-based compensation expense determined by the fair value method for all awards, net of related tax		(23,972	)		(9,492	)		(9,881	)

	Pro forma	$	13,386		$	20,865		$	37,362

Earnings per share:	Basic – as reported	$	2.18		$	1.72		$	2.60
	Basic – pro forma	$	0.78		$	1.20		$	2.06

	Diluted – as reported	$	2.13		$	1.68		$	2.52
	Diluted – pro forma	$	0.76		$	1.17		$	1.99

For options with a vesting period, compensation expense is recognized on a ratable basis over the service period which corresponds to the vesting period. Compensation expense is recognized immediately for options that are granted fully vested on the date of the grant. The incremental fair value of each option grant is estimated on the date of grant using the Black-Scholes options pricing model. The model requires the use of various assumptions. The following assumptions were used in Fiscal 2006, 2005 and 2004:


	2006		2005		2004

Expected life (in years)		5.6		5.1		5.1
Risk free interest rate		4.2%		3.5%		3.0%
Volatility		49%		60%		61%
Dividend yield		0.6%		0.6%		0.5%

On October 31, 2005, in response to the issuance of SFAS No. 123(R) (as defined below), the Compensation Committee of the Board of Directors of the Company authorized the acceleration of the vesting of all of the Company’s outstanding out-of-the-money unvested stock options held by current employees, including officers, and directors. Approximately 405,224 options that would have otherwise vested from time to time over the next three years became immediately exercisable. The Company also granted on October 31, 2005 fully vested options to purchase approximately 984,000 additional shares of Common stock. The combined options had an exercise price greater than $39.77, the approximate fair value of the Company’s common stock, par value $.001 per share (the “Common Stock”) on October 31, 2005. The accelerated vesting of these options increased pro-forma compensation expense for the three months ended December 31, 2005 by approximately $15,483, net of tax.

During the second quarter of Fiscal 2005, the Company recorded compensation expense, as a result of a modification to a retiring director’s stock option agreements. Based on the guidance under Financial Interpretation Number (“FIN”) 44, “Accounting for Certain Transactions Involving Stock Compensation” (“FIN 44”), the Company recorded compensation expense in the amount of $680. The expense was recorded as a component of Selling, General and Administrative expense.

Earnings Per Share
Basic earnings per share are calculated by dividing net income (loss) by the weighted average of common shares outstanding during the year. Diluted earnings per share is calculated by using the weighted average of common shares outstanding adjusted to include the potentially dilutive effect of outstanding stock options utilizing the treasury stock method.

Reclassification
Certain reclassifications have been made to the Consolidated Financial Statements for prior periods in order to conform to the Fiscal 2006 presentation.

Recent Accounting Pronouncements

Accounting for Conditional Asset Retirement Obligations
In March 2005, the Financial Accounting Standards Board (the “FASB”) issued FIN 47, “Accounting for Conditional Asset Retirement Obligations”. FIN 47 clarifies the term “conditional asset retirement obligation” as used in SFAS No. 143, “Accounting for Asset Retirement Obligations,” which refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event. Uncertainty about the timing and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. There was no impact to the Company upon adoption of FIN 47.

Consolidation of Variable Interest Entities
In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51”. 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 46 (“FIN 46R”) that modified some of the provisions and effective dates of FIN 46, and provided exemptions to certain entities from the original guidance. FIN 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 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 46 and FIN 46R.

Stock-Based Compensation
In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”). SFAS No. 123(R) is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” (“FASB No. 123”), supersedes APB No. 25, and amends SFAS 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.

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.

Foreign Earnings Repatriation
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 SFAS No. 109, “Accounting for Income Taxes.”

Segments
In February 2005, the FASB issued Emerging Issues Task Force (“EITF”) No. 04-10, “Determining Whether to Aggregate Segments That Do Not Meet the Quantitative Thresholds” (“EITF No. 04-10”). This statement clarifies the aggregation criteria of operating segments as defined in SFAS No. 131 (as defined below in Note 19 of the Notes to Consolidated Financial Statements). The effective date of this statement is for fiscal years ending after September 15, 2005. The Company believes that its current segment reporting complies with EITF No. 04-10.

Accounting Changes and Error Corrections
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”. This statement replaces APB No. 20 “Accounting Changes” cumulative effect accounting with accounting treatment based on retroactive restatement of comparative financials statements. It applies to all voluntary changes in accounting principle and defines “retrospective application” to differentiate it from restatements due to incorrect accounting. The provisions of this statement are effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company’s adoption of SFAS No. 154 had no impact on its financial position, results of operations or cash flows.

Note 2: Lease Receivables

The acquisition of Norstan (see Note 18) included outstanding lease receivables, which were primarily accounted for as sales-type leases for financial reporting purposes. Prior to the Company’s acquisition, Norstan had made a strategic decision to discontinue offering financing directly to their customers. The Company concurs with this decision and will continue to not offer financing to customers in the future.

The components of lease receivables outstanding are as follows:


	March
	2006			2005

Gross lease receivables	$	730		$	2,697
Residual values		94			219
Less:
Unearned income		(236	)		(553	)
Allowance for financing losses		(76	)		(193	)

Total lease receivables, net		512			2,170
Less – current maturities		512			1,697

Long-term lease receivables	$	--		$	473

The aggregate amounts of gross lease receivables maturing in each of the two years following March 31, 2006 are as follows:


Years Ending March 31,

2007	$	636
2008		94

	$	730

Note 3: Inventories

Inventory balances, net of reserves for excess and obsolete inventories:


	March 31
	2006			2005

Raw materials	$	1,426		$	1,447
Finished goods		66,787			68,275

Subtotal		68,213			69,722
Excess and obsolete inventory reserves		(14,287	)		(12,546	)

Inventory, net	$	53,926		$	57,176

Note 4: Property, Plant And Equipment

Property, plant and equipment balances, net of accumulated depreciation:


	March 31
	2006			2005

Land	$	2,369		$	2,554
Building and improvements		26,052			26,019
Machinery		58,562			58,238

Subtotal		86,983			86,811
Accumulated depreciation		(51,859	)		(48,543	)

Property, plant and equipment, net	$	35,124		$	38,268

Depreciation expense for Fiscal 2006, 2005 and 2004 was $8,931, $6,623 and $6,519, respectively.

Note 5: Goodwill and Other Intangible Assets

On April 1, 2001, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” Under this statement, goodwill and intangible assets with indefinite useful lives are not amortized. The Company was required to perform an impairment test upon adoption. In addition, the Company is required to perform an impairment test annually, or as often as impairment indicators are present.

At the time of adoption, the Company performed the required impairment test by comparing the fair value of each reporting unit to its carrying value. The Company concluded that no impairment existed. Based on the policy, the Company has performed the annual test for Fiscal 2005 and Fiscal 2006, with the most recent test having been conducted during the third quarter of Fiscal 2006, and concluded that no impairment existed. During the third quarter of each future fiscal year, the Company will evaluate its non-amortizable intangible assets for impairment with any resulting impairment reflected as an operating expense. The Company’s only intangibles, as identified in SFAS No. 141, “Business Combinations,” other than goodwill, are its trademarks, non-compete agreements, customer relationships and acquired backlog.

Changes in the carrying amount of goodwill in Fiscal 2006 and Fiscal 2005 by reporting segment:


	North
	America			Europe			All Other		Total

Balance as of March 31, 2004	$	311,540		$	67,358		$	1,871	$	380,769
Currency translation		45			3,099			15		3,159
Goodwill on businesses acquired		60,416			--			--		60,416
Actual earnout payments		--			277			82		359
Other		(136	)		--			--		(136	)

Balance as of March 31, 2005		371,865			70,734			1,968		444,567
Currency translation		24			(5,271	)		33		(5,214	)
Goodwill on businesses acquired		28,993			--			--		28,993
Actual earnout payments		--			--			41		41
Other		116			221			--		337

Balance as of March 31, 2006	$	400,998		$	65,684		$	2,042	$	468,724

At March 31, 2006, certain merger agreements provided for contingent payments of up to $4,588. If future operating performance goals are met, goodwill will be adjusted for the amount of the contingent payments.

The Company’s intangible assets are comprised of the appraised fair market values of employee non-compete contracts, backlog and customer relationships obtained through business acquisitions. The Company has the following definite-lived intangibles:


	March 31, 2006						March 31, 2005
	Gross				Net		Gross				Net
	Carrying		Accum.		Carrying		Carrying		Accum.		Carrying
	Amount		Amort.		Amount		Amount		Amort.		Amount

Non-compete agreements	$	4,894	$	1,851	$	3,043	$	2,676	$	1,105	$	1,571
Customer relationships		25,654		997		24,657		11,699		114		11,585
Acquired backlog		3,935		3,934		1		3,930		668		3,262

Total	$	34,483	$	6,782	$	27,701	$	18,305	$	1,887	$	16,418

Intangible asset amortization is computed using the straight-line method based upon the estimated useful lives of the respective assets, which range from one to 20 years.

Intangible asset amortization expense for Fiscal 2006, 2005 and 2004 was $4,999, $1,332 and $246, respectively. The estimated intangible amortization expenses for the next five years are as follows:



Years Ending March 31,

2007	$	2,135
2008		2,097
2009		1,953
2010		1,903
2011		995
Thereafter		18,618

	$	27,701

Intangible assets not subject to amortization consist solely of the Company’s trademark portfolio. The net carrying amount was $27,739 at March 31, 2006 and 2005.

The changes in the carrying amount of goodwill and intangible assets, net of accumulated amortization:


			Non-
			Competes and			Customer
	Trademarks		Backlog			Relationships			Goodwill			Total

Balance as of March 31, 2005	$	27,739	$	4,833		$	11,585		$	444,567		$	488,724
Change in net intangible assets during the period related to:
Amortization expense		--		(4,116	)		(883	)		--			(4,999	)
Currency translation		--		(24	)		--			(5,214	)		(5,238	)
Acquisitions		--		2,351			13,955			30,668			46,974
Adjustment on previous acquisitions		--		--			--			(1,675	)		(1,675	)
Other		--		--			--			378			378

Balance as of March 31, 2006	$	27,739	$	3,044		$	24,657		$	468,724		$	524,164

Note 6: Indebtedness

Long-term debt consisted of the following:


	March 31,
	2006			2005

Revolving credit agreement	$	121,303		$	146,560
Capital lease obligations		1,891			772
Other		528			556

Total debt		123,722			147,888
Less: current portion		(1,049	)		(692	)

Long-term debt	$	122,673		$	147,196

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. Other borrowings under the Amended and Restated Credit Facility bore interest, at the Company’s option, at either the banks’ base rate or the LIBOR rate, in each case plus a margin. The applicable margins were adjusted each quarter based on the consolidated leverage ratio and ranged from 0.00% to 0.75% for the base rate and 0.75% to 1.75% for the LIBOR rate. The Company was also subject, under the Amended and Restated Credit Facility, to various financial and non-financial covenants. The Amended and Restated Credit Facility was scheduled to expire on August 31, 2008.

On January 24, 2005, in connection with the acquisition of Norstan (see Note 18), 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 were permitted up to a maximum amount of $240,000, including up to $15,000 of swingline loans and $25,000 of letters of credit. Interest on outstanding indebtedness under the Second Amended and Restated Credit Facility accrued, 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). The other terms and conditions of the Second Amended and Restated Credit Facility were substantially the same as the Amended and Restated Credit Facility.

(the “Credit Agreement”), are permitted up to a maximum amount of $310,000, including up to $15,000 of swingline 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 expires on March 28, 2011.

During the year ended March 31, 2006, the maximum amount and weighted average balance outstanding under the Credit Agreement was $173,535 and $155,898, respectively. As of March 31, 2006, the Company had $3,065 outstanding in letters of credit and $185,632 available under the Credit Agreement. The weighted average interest rate on all outstanding debt during the year ended March 31, 2006 was approximately 5.10%. At March 31, 2006, the Company is in compliance with all required covenants under the Credit Agreement.

During the year ended March 31, 2006, the Company has incurred an aggregate of $180 in financing costs associated with the execution of the Second Amended and Restated Credit Facility and the amendment to the Second Amended and Restated Credit Facility on March 28, 2006. These costs are being amortized over the life of the Credit Agreement and are recognized as a component of interest expense. For the year ended March 31, 2006, the Company recognized $15 in interest expense related to these costs.

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

Other debt is composed 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 five years with interest rates ranging from 0% to 7.1%.

Aggregate maturities of long-term debt for the next five years are as follows:


Years Ending March 31,

2007	$	1,049
2008		596
2009		527
2010		247
2011		121,303
Thereafter		--

	$	123,722

Note 7: Discounted Lease Rentals

Through the acquisition of Norstan (see Note 18), the Company has recorded discounted lease rentals. Norstan historically utilized the lease receivables (see Note 2) and corresponding underlying equipment to borrow funds from financial institutions at fixed rates on a nonrecourse basis by discounting the stream of future lease payments. Proceeds from discounting are recorded on the Consolidated Balance Sheet as discounted lease rentals. Interest rates on these credit agreements range from 6.0% to 8.0% and payments are generally due in varying monthly installments through March 2007.

Discounted lease rentals consisted of the following:


	March
	2006			2005

Total discounted lease rentals	$	30		$	920
Less – current maturities		(30	)		(890	)

Long-term discounted lease rentals	$	--		$	30

Note 8: Derivative Instruments and Hedging Activities

The Company enters into derivative instruments to hedge exposure to variability in expected fluctuations in foreign currencies. All of the Company’s derivatives have been designated and qualify as cash flow hedges. There was no hedge ineffectiveness during the year ended March 31, 2006.

At March 31, 2006, the Company had open contracts in Australian and Canadian dollar, Danish krone, Euro, Japanese yen, Norwegian kroner, Pound sterling, Swedish krona and Swiss franc. These contracts had a notional amount of approximately $66,870 and a fair value of $64,411 and mature within the next 36 months.

For the year ended March 31, 2006, the Company recognized in earnings approximately $865 in net gains on matured contracts. As of March 31, 2006, a gain of $1,142 was included in OCI. This gain is expected to be included in earnings over the life of the maturing contracts as the hedged transactions occur and it is expected that the gain will be offset by currency losses on the items being hedged.

Note 9: Operating Leases

The Company is obligated under various operating lease agreements for certain office facilities and equipment. Certain of these leases contain renewal options and rent escalation clauses.

Future minimum lease payments under noncancelable operating leases with initial or remaining terms of one year or more as of March 31, 2006 are as follows:


Years Ending March, 31

2007	$	13,746
2008		11,306
2009		8,908
2010		7,102
2011		5,769
Thereafter		7,019

	$	53,850

For the years ended March 31, 2006, 2005 and 2004, rent expense was $16,059, $12,484 and $9,395, respectively.

Included in the above amounts is approximately $10,438 related to restructuring and other charges (see Note 17).

Note 10: Discontinued Operations

The Company has recorded net assets and liabilities of discontinued operations from the acquisition of Norstan (see Note 18). These discontinued operations were related to the divestiture of Norstan’s IT consulting business in 2001 and the sale of their Network Services business in 2002.

Net assets (liabilities) of discontinued operations included the following:


	March
	2006			2005

Assets:
Cash, accounts receivable and inventories	$	81		$	125
Notes receivable and property		386			826
Liabilities:
Other liabilities		--			(29	)

Net assets of discontinued operations		467			922
Less: current portion liabilities (assets)		(467	)		(549	)

Net non-current assets (liabilities) of discontinued operations	$	--		$	373

Note 11: Income Taxes

The domestic and foreign components of pretax income from continuing operations for the years ended March 31 are as follows:


	2006		2005		2004

Domestic	$	40,231	$	35,773	$	59,516
Foreign		16,805		9,893		13,729

Consolidated	$	57,036	$	45,666	$	73,245

The provision/(benefit) for income tax charged to continuing operations for the years ended March 31 are as follows:


	2006		2005			2004

Current:
Federal	$	11,506	$	12,784		$	20,356
State		1,230		1,118			1,151
Foreign		5,038		3,449			4,629

Total current		17,774		17,351			26,136
Deferred		1,904		(1,597	)		(134	)

Total provision for income taxes	$	19,678	$	15,754		$	26,002

Reconciliations between income taxes from continuing operations computed using the federal statutory income tax rate and the Company’s effective tax rate for the years ended March 31 are as follows:


	2006			2005			2004

Federal statutory tax rate		35.0	%		35.0	%		35.0	%
Foreign taxes, net of foreign tax credits		--			0.6			1.0
Effect of permanent book/tax differences		2.2			1.0			(0.9	)
State income taxes, net of federal benefit		0.8			(0.2	)		0.6
Valuation allowance		(2.5	)		(2.7	)		--
Other, net		(1.0	)		0.8			(0.2	)

Effective tax rate		34.5	%		34.5	%		35.5	%

The components of current and long-term deferred tax liabilities/assets at March 31 are as follows:


	2006			2005

*Deferred Tax Liabilities:*
Tradename and trademarks	$	9,684		$	9,685
Amortization of intangibles		8,940			7,385
Unrequited earnings of Japanese subsidiary		2,109			1,283
Basis of fixed assets		4,586			4,089
Other		22			--

Gross deferred tax liabilities		25,341			22,442

*Deferred Tax Assets:*
Net operating losses		16,519			15,752
Restructuring reserves		6,462			6,090
Outsourced leases		6,403			6,403
Basis of finished goods inventory		3,166			2,541
Reserve for bad debts		2,796			2,704
Miscellaneous accrued expenses		230			1,372
Foreign tax credit carryforwards		2,109			1,283
Accrued employee costs		1,093			912
Foreign exchange		719			719
Other		--			62

Gross deferred tax assets		39,497			37,838
Valuation allowance		(952	)		(2,367	)

Net deferred tax assets		38,545			35,471

Net deferred tax assets/(liabilities)	$	13,204		$	13,029

At March 31, 2006, the Company had $12,083, $36,834 and $27,543 of federal, state and foreign net operating loss carryforwards, respectively. As a result of the Company’s reorganization in 1992 and concurrent ownership change and the Company’s acquisition of Norstan, Section 382 of the Internal Revenue Code limits the amount of net operating losses available to the Company to approximately $4,148 per year. The federal net operating loss carryforwards expire in Fiscal 2021. The state net operating loss carryforwards expire at various times through Fiscal 2026 and the foreign net operating loss carryforwards expire at various times through Fiscal 2016, with the exception of $939 for Belgium and $8,420 for Brazil, which have no expirations.

A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has recorded a valuation allowance of $952 for certain foreign net operating loss carryforwards anticipated to produce no tax benefit. The valuation allowance was decreased in Fiscal 2006 by $1,415 in order to recognize the ability to use certain foreign net operating loss carryforwards.

In general, except for certain earnings in Japan, it is management’s intention to reinvest undistributed earnings of foreign subsidiaries, which aggregate approximately $14,954 based on exchange rates at March 31, 2006. However, from time to time, the foreign subsidiaries declare dividends to the U.S. parent, at which time the appropriate amount of tax is determined. Also, additional taxes could be necessary if foreign earnings were loaned to the parent or if the Company should sell its stock in the subsidiaries. It is not practicable to estimate the amount of additional tax that might be payable on undistributed foreign earnings.

Note 12: Incentive Compensation Plans

Performance Bonus
The Company has a variable compensation plan covering certain team members. This plan provides for the payment of a bonus based on the attainment of certain annual or quarterly performance targets. The amount expensed under this variable compensation plan for the years ended March 31, 2006, 2005 and 2004 was $5,431, $1,123 and $2,523, respectively.

Profit Sharing And Savings Plan
The Company has various profit sharing and savings plans (“Plans”) which qualify as deferred salary arrangements under Section 401(k) of the Internal Revenue Code. Under the Plans, participants are permitted to contribute various percentages of their compensation, as defined, and the Company matches a percentage of the participant’s contributions. The total Company contribution for the years ended March 31, 2006, 2005 and 2004 was $3,532, $2,243 and $2,992, respectively.

Stock Option Plans
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 March 31, 2006, the Employee Plan authorized the issuance of options and stock appreciation rights (“SARs”) for up to 9,200,000 shares of the Common Stock. Options are issued by the Board of Directors or a Board committee to key employees of the Company and generally become exercisable in equal amounts over a three-year period. Option prices are equal to the fair market value of the stock on the date of the grant. No SARs have been issued.

The Director Plan authorizes the issuance of options and SARs for up to 250,000 shares of the Common Stock. Options are issued by the Board of Directors or a Board designee and generally become exercisable in equal amounts over a three-year period. Option prices are equal to the fair market value of the Common Stock on the date of the grant. No SARs have been issued.

The following is a summary of the Company’s stock option plans for the years ended March 31:


	2006					2005					2004
				Weighted					Weighted					Weighted
				Average					Average					Average
				Exercise					Exercise					Exercise
Shares in thousands	Shares			Price		Shares			Price		Shares			Price

Outstanding at beginning of year		4,780		$	37.14		4,414		$	36.40		4,487		$	34.30
Granted		1,256			38.51		924			34.86		911			39.68
Exercised		(753	)		30.95		(381	)		20.78		(799	)		27.71
Forfeited		(228	)		39.84		(177	)		42.01		(185	)		39.01
Outstanding at end of year		5,055		$	38.28		4,780		$	37.14		4,414		$	36.40

Exercisable at end of year		4,247		$	39.07		3,143		$	37.33		2,935		$	34.93

Weighted average incremental fair value of options granted during the year using Black-Scholes option pricing model				$	18.33				$	18.19				$	20.00

The following table summarizes information about the stock options outstanding at March 31, 2006:


			Options Outstanding			Options Exercisable
			Weighted
			Average	Weighted				Weighted
			Remaining	Average				Average
Range of	Shares		Contractual	Exercise		Shares		Exercise
Exercise Prices	Outstanding		Life	Price		Exercisable		Price

$19.9500 - $26.60		328,335	1.9 years		$22.47		328,335		$22.47
$26.6001 - $33.25		367,329	3.1 years		30.07		364,528		30.07
$33.2501 - $39.90		1,985,052	9.0 years		36.93		1,179,109		38.82
$39.9001 - $46.55		2,215,840	5.7 years		42.38		2,215,840		42.38
$46.5501 - $53.20		155,120	3.6 years		49.39		155,120		49.39
$53.2001 - $59.85		1,668	3.8 years		55.88		1,668		55.88
$59.8501 - $66.50		2,000	3.7 years		63.22		2,000		63.22

$19.95 - $66.50		5,055,344	6.5 years		$38.28		4,246,600		$39.07

Note 13: Earnings Per Share

The following table details this calculation for the years ended March 31:


	2006		2005		2004


Net income, as reported	$	37,358	$	29,912	$	47,243


Weighted average shares outstanding		17,164		17,411		18,173

Effect of dilutive securities from employee stock options, net of tax savings		380		434		593


Weighted average diluted shares outstanding		17,544		17,845		18,766


Basic earnings per share	$	2.18	$	1.72	$	2.60
Dilutive earnings per share	$	2.13	$	1.68	$	2.52

There is no impact to the weighted average share calculations during any period where the exercise price of a stock option is greater than the average market price during the same period. There were 1,287,219, 875,060 and 941,749 non-dilutive options outstanding during the years ended March 31, 2006, 2005 and 2004, respectively, that are not included in the above calculation.

Note 14: Repurchase of Common Stock

In April 1999, the Board of Directors of the Company initiated a plan to repurchase shares of the Common Stock. During Fiscal 2006, the Company repurchased approximately 565 shares for an aggregate purchase price of $27. During Fiscal 2005, the Company repurchased approximately 1,400,000 shares for an aggregate purchase price of $56,912. During Fiscal 2004, the Company repurchased approximately 1,700,000 shares for an aggregate purchase price of $76,338 and paid $4,719 for treasury share repurchases payable in relation to Fiscal 2003 repurchases. Since inception of the repurchase program, approximately 6,935,000 shares have been repurchased at a total cost of approximately $297,000. Funding for the stock repurchases came primarily from cash flow from operations.

The Company expects to continue to repurchase shares of the Common Stock; however, no assurance can be given as to the timing or amount of future repurchases. The Credit Agreement (see Note 6) provides that the Company is not permitted to repurchase 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.

Note 15: Comprehensive Income

The components of accumulated other comprehensive income as of March 31:


	2006		2005

Foreign currency translation adjustment	$	12,041	$	22,699
Unrealized (losses)/gains on derivatives designated and qualified as cash flow hedges, net of reclassification of unrealized losses on expired derivatives, net of tax		995		(147	)

Total accumulated other comprehensive income	$	13,036	$	22,552

Note 16: Commitments and Contingencies

Litigation
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, management believes legal matters are adequately provided for, covered by insurance, without merit or not probable that an unfavorable outcome will result.

Product Warranties

Changes in the liability for product warranties are as follows:


	March 31,
	2006			2005			2004

Beginning balance	$	1,895		$	422		$	184
Increases to warranty reserve		62			233			360
Increases to reserve from acquisitions		--			1,683			--
Decreases for service costs		(574	)		(443	)		(122	)

Ending balance	$	1,383		$	1,895		$	422

The accrual for product warranties is classified with other accrued expenses in the Consolidated Balance Sheets. The expense for product warranties is classified with cost of sales in the Consolidated Statements of Income.

Note 17: Restructuring and Other Charges

During the first quarter of Fiscal 2006, the Company recorded a restructuring charge of $5,290 related to staffing level adjustments and real estate consolidation in Europe and North America. This charge was in connection with the restructuring initiated in the fourth quarter of Fiscal 2005 and discussed below. The majority of restructuring costs have now been recognized with the exception of certain facility costs, which will extend through Fiscal 2012.

During the fourth quarter of Fiscal 2005, the Company recorded restructuring and other charges of $5,059. This amount was comprised of restructuring expense of $3,019 related to staffing level adjustments and real estate consolidations, as well as other charges of $2,040 related to the satisfaction of a previously disclosed litigation judgment. These charges are discussed in further detail below.

In the fourth quarter of Fiscal 2005, the Company recorded a restructuring charge of $3,019 primarily related to staffing level adjustments and real estate consolidations in its Europe and North America segments. The restructuring was initiated as the Company continued to right-size the organization and bring its expense structure in-line with anticipated revenues and changing market demand for its solutions and services. As a result of the restructuring actions, approximately 28 employees were involuntarily terminated in its Europe segment resulting in a restructuring charge of $613. The Company also recorded a charge of $2,406 related to idle facility rent obligations and the write-off of leasehold improvements related to these facilities. $2,016 and $390 related to real estate consolidations in North America and Europe, respectively.

Upon completion of the acquisition of Norstan, Company management committed to a plan of reorganization of the Norstan operations. Restructuring accruals under SFAS No. 141 of approximately $14,761 have been recorded in both short and long term liabilities. See Note 18 for additional information on the restructuring charges related to the acquisition of Norstan.

As a result of the second quarter Fiscal 2006 acquisition of substantially all of the assets and certain liabilities of Universal Solutions of North America, L.L.C. and related entities (“Universal”), the Company’s management committed to a plan of reorganization of Universal’s operations. In connection with these integration actions, the Company incurred integration costs for facility consolidations of $364. These costs were included in the purchase price allocation for Universal in accordance with SFAS No. 141. Facility costs to be paid are anticipated to extend through Fiscal 2008.

The following table summarizes the restructuring and other charges and the remaining reserves reflected on the Consolidated Balance Sheet:


	Employee Severance			Facility Closures			Total

Accrued March 31, 2004		$ 352			$ 241			$ 593
Restructuring charge		613			2,406			3,019
Acquisition restructuring		2,887			11,874			14,761
Asset write-downs		--			(122	)		(122	)
Cash expenditures		(1,063	)		(590	)		(1,653	)

Accrued at March 31, 2005		2,789			13,809			16,598
Restructuring charge		3,473			1,817			5,290
Acquisition restructuring		66			298			364
Asset write-downs		--			(636	)		(636	)
Cash expenditures		(6,068	)		(4,850	)		(10,918	)

Accrued at March 31, 2006		$ 260			$ 10,438			$ 10,698

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 confirming the award. The Company recorded a charge of $2,040 that is classified with restructuring and other charges on the Consolidated Statements of Income. This charge was comprised of $1,778 awarded to the plaintiff, which included interest, fees and costs as well as $262 of legal fees incurred by the Company previously capitalized in Goodwill. The Company accrued the award of $1,800 within accrued liabilities on the Consolidated Balance Sheet. On May 6, 2005, the Company paid the award of $1,800 in satisfaction of this judgment in full.

Note 18: Acquisitions

Fiscal 2006
During the first quarter of Fiscal 2006, the Company acquired 100% of the issued and outstanding equity interests of Telecommunication Systems Management, Inc. (“TSM”), GTC Technology Group, Inc. and Technology Supply, Inc. (collectively referred to as “GTC”) and Business Communications, Inc., Bainbridge Communication, Inc., BCI of Tampa, LLC and Networx, L.L.C. (collectively referred to as “BCI”). These companies primarily provide full-service voice communication solutions and services in the Florida and Virginia markets. In connection with the acquisitions, the Company has allocated goodwill and definite-lived intangible assets of $9,950 and $4,263, respectively. The definite-lived intangible assets recorded represent the fair market value of acquired customer relationships and non-compete agreements. The definite-lived intangibles are to be amortized over a period of five to twenty years.

During the second quarter of Fiscal 2006, the Company acquired substantially all of the assets and certain liabilities of Universal Solutions of North America, L.L.C and related entities (“Universal”). Universal primarily provides planning, installation and maintenance services for voice and data network systems in 14 states. In connection with the acquisition, the Company has prepared preliminary allocations of goodwill and definite-lived intangible assets of $11,971 and $4,899, respectively. The definite-lived intangible assets recorded represent the estimated fair market value of acquired customer relationships and non-compete agreements. The Company estimates that the definite-lived intangibles are to be amortized over a period of four to twenty years.

During the third quarter of Fiscal 2006, the Company purchased 100% of the issued and outstanding equity interests of Communication is World InterActive Networking, Inc. (“C=WIN”) and Converged Solutions Group, LLC (“CSG”). C=WIN has an active customer base which includes commercial and various government agency accounts. CSG has an active customer base which includes commercial, education, health care and various government agency accounts. The C=WIN and CSG acquisitions primarily provide planning, installation and maintenance services for voice and data network systems in 15 states. In connection with the acquisitions, the Company has prepared preliminary allocations of goodwill and definite-lived intangible assets of $10,328 and $5,561, respectively. The definite-lived intangible assets recorded represent the estimated fair market value of acquired customer relationships and non-compete agreements. The Company estimates that the definite-lived intangibles are to be amortized over a period of four to twenty years.

The results of operations of TSM, GTC, BCI, Universal, C=WIN and CSG are included in the Company’s Consolidated Statements of Income beginning on their individual acquisition dates during Fiscal 2006. The acquisitions taken individually did not have a material impact on the Company’s results of operations. The costs of the acquisitions were funded with borrowings under the Credit Agreement described in Note 6.

Fiscal 2005
On December 20, 2004, the Company signed a definitive agreement to acquire all of the outstanding shares of Norstan common stock for $5.60 per share in cash via a tender offer and merger. On January 25, 2005, the Company completed its cash tender offer and purchased approximately 86% of the outstanding shares of Norstan common stock. Also, on January 25, 2005, the Company acquired 6,000,000 Norstan shares through the exercise of a stock option granted by Norstan. The Company’s exercise of the option resulted in the Company owning in excess of 90% of the outstanding shares of Norstan and qualified the Company to complete a short-form merger under Minnesota law. The remaining Norstan shares not acquired in the tender offer were then acquired through the short-form merger, also effected on January 25, 2005. In the merger, each share of Norstan common stock was converted into the right to receive $5.60 per share in cash, the same consideration paid for shares in the tender offer. As a result of the tender offer and merger, Norstan is now a wholly-owned subsidiary of the Company.

The Company paid a total of $77,717 for all outstanding shares through the cash tender offer and subsequent merger. The Company also paid $5,764 for all vested and unvested options and warrants outstanding at the date of the merger. In addition, the Company repaid Norstan’s credit facility outstanding at the date of the merger of $17,500 and incurred transaction costs of $6,428 directly related to the acquisition (consisting primarily of banking, key-employee change of control payments and other professional fees), bringing the total acquisition cost to approximately $102,553, net of cash acquired of $4,856. The cost of the Norstan acquisition was funded with borrowings under the Credit Agreement described in Note 6.

The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition. The allocation of the purchase price was final as of March 31, 2005.


	At January 25, 2005

Current assets, primarily consisting of accounts receivable and inventories		$ 71,141
Property, plant and equipment		12,649
Other non-current assets, primarily consisting of deferred taxes		18,779
Intangible assets		15,971
Goodwill		58,741

Total assets acquired		177,281
Current liabilities, primarily consisting of deferred revenue and accrued expenses		61,128
Other non-current liabilities, primarily consisting of restructuring accrual		8,744

Net assets acquired		$ 107,409

The amounts assigned to intangible assets are shown below:



Non-compete agreements	$	342
Backlog		3,930
Customer relationships		11,699

Total intangible assets	$	15,971

The amortization period is three years for non-compete agreements, one year for backlog and 20 years for customer relationships.

The transaction resulted in $58,742 of goodwill, none of which is deductible for tax purposes. The Company paid a premium for Norstan in order to further expand its operational footprint in the voice and data technology markets. In addition, the purchase increased the Company’s solutions offerings and customer market, providing for a stronger worldwide technical services partner for its collective clients.

After consummation of the acquisition, the Company began to integrate Norstan’s products, employees and facilities with its own. In connection with these integration actions, the Company incurred severance costs of $2,887 for the separation of approximately 150 employees. In addition, the Company incurred integration costs for facility consolidations of $11,874. These costs were properly included in the purchase price allocation for Norstan, in accordance with the SFAS No. 141. The majority of the severance costs were paid in Fiscal 2006 with certain facility costs extending through Fiscal 2012.

The following unaudited pro forma summary presents the Company’s results of operations as if the acquisition had occurred at the beginning of the period indicated and does not purport to represent what the Company’s results of operations would have been had the acquisition occurred on such date or at the beginning of the period indicated, or to project the Company’s results of operations for any future date or period. The pro forma results of operations include adjustments to give effect to amortization of intangibles and other adjustments, together with related income tax effects. These pro forma results of operations do not include the effects of cost synergies and one-time nonrecurring transactions associated with the acquisition.


	Year Ended
	March 31, 2005		March 31, 2004

Pro forma revenue	$	716,853	$	746,261
Pro forma net income from continuing operations		22,451		32,732
Pro forma earnings per share:
Basic	$	1.29	$	1.80
Diluted	$	1.26	$	1.74

Norstan had an April fiscal year-end, which differed from the Company’s March year-end. However, as the difference was less than 93 days, the pro forma information compiled for the fiscal year ended March 31, 2004 was not required to be adjusted to account for the different year-ends. For the fiscal year ended 2005 pro forma information, the Company’s audited income statement for the year ended March 31, 2005 (which included Norstan’s results of operations effective January 25, 2005) was combined with Norstan’s unaudited income statement for the period April 1, 2004 through January 25, 2005.

Note 19: Segment Reporting

As required by SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” the Company reports the results of its operating segments. During the fourth quarter of Fiscal 2003, the Company changed its primary segments to be on a geographic basis. This is consistent with how the Company is organized and how the business is managed on a day-to-day basis. The primary reportable segments are comprised of North America, Europe and All Other. Consistent with SFAS No. 131, the Company aggregates similar operating segments into reportable segments.

The accounting policies of the various segments are the same as those described in “Summary of Significant Accounting Principles” in Note 1. The Company evaluates the performance of each segment based on operating income. Inter-segment sales and segment interest income or expense and expenditures for segment assets are not presented to or reviewed by management and therefore, are not presented below.

Summary information by reportable segment is as follows for the years ended March 31:


	2006		2005		2004

North America
Revenues	$	564,700	$	355,013	$	341,299
Operating income		53,550		26,798		44,281
Depreciation		8,012		5,144		4,515
Amortization		4,472		878		46
Segment assets		745,746		705,762		557,239

Europe
Revenues	$	120,051	$	142,838	$	142,158
Operating income		5,518		13,639		21,812
Depreciation		671		1,213		1,670
Amortization		491		398		177
Segment assets		116,717		134,982		131,302

All Other
Revenues	$	36,584	$	37,225	$	36,955
Operating income		7,127		8,099		9,107
Depreciation		248		266		334
Amortization		36		56		23
Segment assets		16,416		15,357		15,981

Operating income for Fiscal 2006 for North America and Europe was reduced by $1,548 and $3,742, respectively, for restructuring charges incurred during that year.

Operating income for Fiscal 2005 for North America and Europe was reduced by $4,056 and $1,003, respectively, for restructuring and other charges incurred during that year.

Note 20: Quarterly Data (Unaudited)


	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter		Year

*Fiscal 2006*

Revenues

Hotline products	$	53,452	$	54,056	$	52,771	$	53,667	$	213,946

On-site services		125,830		130,994		129,364		121,201		507,389


Total		179,282		185,050		182,135		174,868		721,335

Gross profit

Hotline products		27,578		27,227		26,463		24,458		105,726

On-site services		43,362		46,655		46,939		39,668		176,624


Total		70,940		73,882		73,402		64,126		282,350

Net income	$	7,394	$	12,797	$	12,511	$	4,656	$	37,358
Basic earnings per common share		0.44		0.75		0.72		0.26		2.18	⁽¹⁾
Diluted earnings per common share		0.43		0.74		0.70		0.26		2.13	⁽¹⁾

*Fiscal 2005*

Revenues

Hotline products	$	57,852	$	56,972	$	57,267	$	55,510	$	227,601

On-site services		66,503		69,623		69,629		101,720		307,475


Total		124,355		126,595		126,896		157,230		535,076

Gross profit

Hotline products		30,978		30,217		29,400		28,725		119,320

On-site services		20,902		22,098		21,618		30,991		95,609


Total		51,880		52,315		51,018		59,716		214,929

Net income	$	10,003	$	10,623	$	9,249	$	37	$	29,912
Basic earnings per common share		0.56		0.61		0.54		0.00		1.72	⁽¹⁾
Diluted earnings per common share		0.54		0.60		0.52		0.00		1.68	⁽¹⁾

⁽¹⁾ Earnings per share for the year is different than the sum of the quarterly earnings per share due to rounding and average share prices.

The Company’s management concluded, with the concurrence of the Audit Committee of the Board of Directors, that the impact of the Italian Operations Adjustment was not material to the Company’s consolidated financial statements for any interim or annual period between Fiscal 2003 through Fiscal 2006. In reaching this conclusion, the Company reviewed and analyzed the SEC’s Staff Accounting Bulletin No. 99, “Materiality,” in order to determine that the impact was not material on a quantitative or qualitative basis to any one period. As a result, the Company recorded a cumulative adjustment in the fourth quarter of Fiscal 2006.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

An evaluation was performed, under the supervision and with the participation of Company management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Act”)). There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including cost limitations, judgments used in decision making, assumptions regarding the likelihood of future events, soundness of internal controls, fraud, the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable, and not absolute, assurance of achieving their control objectives. Based on that evaluation, management, including the CEO and CFO, has concluded that, as of March 31, 2006, the Company’s disclosure controls and procedures were effective in all material respects at the reasonable assurance level to ensure that information required to be disclosed in reports that the Company files or submits under the Act is recorded, processed, summarized and timely reported in accordance with the rules and forms of the SEC.

Management’s Report on Internal Control Over Financial Reporting

Company management is responsible for establishing and maintaining adequate internal control over financial reporting; as such term is defined in Rule 13a-15(f) under the Act. Under the supervision and with the participation of Company management, including the CEO and CFO, an evaluation was performed of the effectiveness of the Company’s internal control over financial reporting. The evaluation was based on the framework in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time. Based on the evaluation under the framework in “Internal Control — Integrated Framework” issued by COSO, Company management concluded that the Company’s internal control over financial reporting was effective at the reasonable assurance level as of March 31, 2006.

The scope of management’s assessment of the effectiveness of internal controls over financial reporting includes all of the Company’s businesses except for Universal, C=Win and CSG. The businesses represented approximately 6% and 3% of total assets and revenues, respectively, as of March 31, 2006.

Attestation Report of the Registered Public Accounting Firm

Company management’s assessment of the effectiveness of its internal control over financial reporting as of March 31, 2006 has been audited by BDO Seidman, LLP, an independent registered public accounting firm, as stated in its report which appears below.

Changes in Internal Control Over Financial Reporting

In the fourth fiscal quarter ended March 31, 2006, there had been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Report of Independent Registered Public Accounting Firm on
Internal Control over Financial Reporting

Board of Directors
Black Box Corporation
Lawrence, Pennsylvania

We have audited management’s assessment, included in the accompanying Management’s Report that Black Box Corporation maintained effective internal control over financial reporting as of March 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of three locations, which the Company acquired on various dates throughout fiscal year 2006, and whose financial statements reflect total assets and total revenues constituting 6% and 3%, respectively, of the related consolidated financial statements as of and for the year ended March 31, 2006. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of these three locations.

Item 9B. Other Information.

None.

PART III

Item 10. Directors and Executive Officers of the Registrant.

Certain of the information required by this item is incorporated herein by reference to the information set forth under the caption “Executive Officers of the Registrant” included under Part I of this Annual Report on Form 10-K.

The other information required by this item is incorporated herein by reference to the information set forth under the captions “Annual Meeting Matters, Proposal 1 – Election of Directors” and “Board of Directors and Certain Board Committees” in the Company’s definitive proxy statement for the 2006 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended (the “Proxy Statement”).

Item 11. Executive Compensation.

The information required by this item is incorporated herein by reference to the information set forth under the captions “Executive Compensation and Other Information” and “Report of the Compensation Committee of the Board of Directors” in the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners And Management And Related Stockholder Matters.

The information required by this item is incorporated herein by reference to the information set forth under the captions “Equity Plan Compensation Information,” “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management” in the Proxy Statement.

Item 13. Certain Relationships and Related Transactions.

None.

Item 14. Principal Accounting Fees and Services.

The information required by this item is incorporated herein by reference to the information set forth under the caption “BDO Seidman and Ernst & Young as Independent Accountants” in the Proxy Statement.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

Financial statements, financial statement schedules and exhibits not listed below have been omitted where the required information is included in the consolidated financial statements or notes thereto, or is not applicable or required.

(a) Documents filed as part of this report

(1) Financial Statements – no financial statements have been filed in this Annual Report on Form 10-K other than those in Item 8

(2) Financial Statement Schedule

Schedule II – Valuation and Qualifying Accounts

(3) Exhibits


Exhibit
Number		Description

2.1		Agreement and Plan of Merger, dated as of December 20, 2004, by and among the Company, SF Acquisition Co. and Norstan, Inc. ⁽¹⁾

2.2		Tender and Voting Agreement, dated as of December 20, 2004, by and among the Company, SF Acquisition Co. and Norstan, Inc. ⁽¹⁾

2.3		Stock Option Agreement, dated as of December 20, 2004, by and among the Company, SF Acquisition Co. and Norstan, Inc. ⁽¹⁾

2.4		Interest Purchase Agreement by and between Platinum Equity, LLC and the Company dated as of April 10, 2006 ⁽²⁾

2.5		Amendment to the Interest Purchase Agreement by and between Platinum Equity, LLC and the Company dated as of April 30, 2006 ⁽³⁾

3(i)		Second Restated Certificate of Incorporation of the Company, as amended ⁽⁴⁾

3(ii)		Amended and Restated By-laws of the Company, as amended ⁽⁵⁾

10.1		Amended and Restated Credit Agreement, dated as of June 30, 2004, by and among Black Box Corporation of Pennsylvania, as Borrower, the Company, the Guarantors parties thereto, the Lenders parties thereto and Citizens Bank of Pennsylvania ⁽⁶⁾

10.2		Guaranty and Suretyship Agreement, dated as of June 30, 2004, by and among the Company, the Lenders and Citizens Bank of Pennsylvania ⁽⁶⁾

10.3		Guaranty and Suretyship Agreement, dated as of June 30, 2004, by and among the Guarantors, the Lenders and Citizens Bank of Pennsylvania ⁽⁶⁾

10.4		Second Amended and Restated Credit Agreement, dated as of January 24, 2005, by and among Black Box Corporation of Pennsylvania and SF Acquisition Co., as Borrowers, the Company, the Guarantors parties thereto, the Lenders parties thereto and Citizens Bank of Pennsylvania ⁽⁷⁾


10.5		Guaranty and Suretyship Agreement, dated as of January 24, 2005, by and among the Company, the Lenders and Citizens Bank of Pennsylvania ⁽⁸⁾

10.6		Guaranty and Suretyship Agreement, dated as of January 24, 2005, by and among the Guarantors, the Lenders and Citizens Bank of Pennsylvania ⁽⁸⁾

10.7		First Amendment to the Second Amended and Restated Credit Agreement, dated as of February 17, 2005, by and among Black Box Corporation of Pennsylvania and Norstan, Inc., as Borrowers, the Company, the Guarantors parties thereto, the Lenders parties thereto and Citizens Bank of Pennsylvania ⁽⁹⁾

10.8		Second Amendment to the Second Amended and Restated Credit Agreement dated as of March 28, 2006 by and among Black Box Corporation of Pennsylvania and Norstan, Inc., as Borrowers, the Company, the Guarantors parties thereto, the Lenders parties thereto and Citizens Bank of Pennsylvania ⁽³⁾

10.9		Agreement between the Company and Fred C. Young ⁽⁵⁾

10.10		Agreement between the Company and Roger E. M. Croft ⁽¹⁰⁾

10.11		Agreement between the Company and Francis W. Wertheimber ⁽¹⁰⁾

10.12		1992 Stock Option Plan, as amended through August 9, 2005 ⁽¹¹⁾

10.13		1992 Director Stock Option Plan, as amended through March 15, 2005 ⁽¹²⁾

10.14		Form of Black Box Corporation Non-Qualified Stock Option Agreement (pursuant to the 1992 Director Stock Option Plan; form of agreement in effect prior to August 10, 2004) ⁽¹⁰⁾

10.15		Form of Black Box Corporation Non-Qualified Stock Option Agreement (pursuant to the 1992 Director Stock Option Plan; form of agreement in effect as of August 10, 2004) ⁽¹⁰⁾

10.16		Form of Black Box Corporation Non-Qualified Stock Option Agreement (pursuant to the 1992 Director Stock Option Plan; form of agreement in effect as of October 31, 2005) ⁽¹¹⁾

10.17		Form of Black Box Corporation Non-Qualified Stock Option Agreement (pursuant to the 1992 Stock Option Plan) ⁽¹⁰⁾

10.18		Form of Black Box Corporation Non-Qualified Stock Option Agreement (pursuant to the 1992 Stock Option Plan; form of agreement in effect as of October 31, 2005) ⁽¹¹⁾

10.19		Description of Executive Incentive Bonus Plan for Fiscal 2006 ⁽¹¹⁾

10.20		Summary of Director Compensation ⁽¹³⁾

21.1		Subsidiaries of the Registrant ⁽¹³⁾

23.1		Consent of Independent Registered Public Accounting Firm ⁽¹³⁾

23.2		Consent of Independent Registered Public Accounting Firm ⁽¹³⁾

31.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities and Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 ⁽¹³⁾

31.2		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities and Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 ⁽¹³⁾


32.1		Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities and Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ⁽¹⁴⁾

	⁽¹⁾		Filed as an exhibit to the Current Report on Form 8-K of the Company, file number 0-18706, filed with the SEC on December 23, 2004, and incorporated herein by reference.

	⁽²⁾		Filed as Exhibit 2.1 to the Current Report on Form 8-K of the Company, file number 0-18706, filed with the SEC on April 13, 2006, and incorporated herein by reference.

	⁽³⁾		Filed as an exhibit to the Current Report on Form 8-K of the Company, file number 0-18706, filed with the SEC on May 4, 2006, and incorporated herein by reference.

	⁽⁴⁾		Filed as Exhibit 3(i) to the Quarterly Report on Form 10-Q of the Company, file number 0-18706, filed with the SEC on November 14, 2000, and incorporated herein by reference.

	⁽⁵⁾		Filed as an exhibit to the Annual Report on Form 10-K of the Company, file number 0-18706, filed with the SEC on June 14, 2004, and incorporated herein by reference.

	⁽⁶⁾		Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number 0-18706, filed with the SEC on August 12, 2004, and incorporated herein by reference.

	⁽⁷⁾		Filed as Exhibit (b)(2) to Amendment No. 4 to the Schedule TO filed by the Company and SF Acquisition Co. on January 26, 2005, and incorporated herein by reference.

	⁽⁸⁾		Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number 0-18706, filed with the SEC on February 10, 2005, and incorporated herein by reference.

	⁽⁹⁾		Filed as Exhibit 10.1 to the Current Report on Form 8-K of the Company, file number 0-18706, filed with the SEC on February 23, 2005, and incorporated herein by reference.

	⁽¹⁰⁾		Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number 0-18706, filed with the SEC on November 12, 2004, and incorporated herein by reference.

	⁽¹¹⁾		Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number 0-18706, filed with the SEC on November 10, 2005, and incorporated herein by reference.

	⁽¹²⁾		Filed as Exhibit 10.2 to the Current Report on Form 8-K of the Company, file number 0-18706, filed with the SEC on March 18, 2005, and incorporated herein by reference.

	⁽¹³⁾		Filed herewith.

(b) The Company hereby files as exhibits to the Annual Report on Form 10-K the exhibits set forth in Item 15 (a)(3) hereof which are not incorporated by reference.

(c) The Company hereby files as a financial statement schedule to this Annual Report on Form 10-K the financial statement schedule which is set forth in Item 15 (a)(2) hereof.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


BLACK BOX CORPORATION

Dated: June 14, 2006
		/s/ Michael McAndrew

		Michael McAndrew, Vice President, Chief Financial Officer, Treasurer, Secretary and Principal Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signatures	Capacity	Date

/s/ WILLIAM F. ANDREWS	Director	June 14, 2006
William F. Andrews

/s/ RICHARD L. CROUCH	Director	June 14, 2006
Richard L. Crouch

/s/ THOMAS W. GOLONSKI	Director	June 14, 2006
Thomas W. Golonski

/s/ THOMAS G. GREIG	Director and Chairman	June 14, 2006
Thomas G. Greig	of the Board

/s/ EDWARD A. NICHOLSON	Director	June 14, 2006
Edward A. Nicholson

/s/ FRED C. YOUNG	Director and	June 14, 2006
Fred C. Young	Chief Executive Officer

/s/ MICHAEL MCANDREW	Vice President,	June 14, 2006
Michael McAndrew	Chief Financial Officer, Secretary, Treasurer and Principal Accounting Officer

SCHEDULE II

BLACK BOX CORPORATION

Valuation and Qualifying Accounts
(Dollars in thousands)


			Additions		Additions
	Balance at		Charged to		Resulting		Reductions			Balance
	Beginning of		Costs and		from		from			at End of
Description	Period		Expenses		Acquisitions		Reserves			Period

Year Ended March 31, 2006
Inventory reserves	$	12,546	$	4,136	$	43	($	2,438	)	$	14,287
Allowance for unrealizable accounts/sales returns		7,342		9,182		49	(	7,056	)		9,517
Restructuring reserve		16,598		5,290		364	(	11,554	)		10,698

Year Ended March 31, 2005
Inventory reserves	$	4,840	$	2,106	$	9,335	($	3,735	)	$	12,546
Allowance for unrealizable accounts/sales returns		10,426		7,097		1,042	(	11,223	)		7,342
Restructuring reserve		593		3,019		14,761	(	1,775	)		16,598

Year Ended March 31, 2004
Inventory reserves	$	3,981	$	3,697	$	--	($	2,838	)	$	4,840
Allowance for unrealizable accounts/sales returns		11,710		2,502		--	(	3,786	)		10,426
Restructuring reserve		6,181		--		--	(	5,588	)		593


	2006			2005			2004

Assets for North America, Europe and All Other segments	$	878,879		$	856,101		$	704,522
Corporate eliminations		(79,145	)		(83,211	)		(88,233	)

Total consolidated assets	$	799,734		$	772,890		$	616,289


	PART I	Page

Item 1.	Business		3

Item 1A.	Risk Factors		7

Item 1B.	Unresolved Staff Comments		8

Item 2.	Properties		8

Item 3.	Legal Proceedings		8

Item 4.	Submission of Matters to a Vote of Security Holders		9

	PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		10

Item 6.	Selected Financial Data		12

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13

Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		30

Item 8.	Financial Statements and Supplementary Data		31

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		61

Item 9A.	Controls and Procedures		62

Item 9B.	Other Information		65

	PART III

Item 10.	Directors and Executive Officers of the Registrant		65

Item 11.	Executive Compensation		65

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		65

Item 13.	Certain Relationships and Related Transactions		65

Item 14.	Principal Accounting Fees and Services		65

	PART IV

Item 15.	Exhibits and Financial Statement Schedules		66

	Signatures		69


	Page

Reports of Independent Registered Public Accounting Firms		32

Consolidated Statements of Income for the years ended March 31, 2006, 2005 and 2004		34

Consolidated Balance Sheets as of March 31, 2006 and 2005		35

Consolidated Statements of Changes in Stockholders’ Equity for the years ended March 31, 2006, 2005 and 2004		36

Consolidated Statements of Cash Flows for the years ended March 31, 2006, 2005 and 2004		37

Notes to Consolidated Financial Statements		38


Revenues	2006		2005		2004

Data Services (1)	$	196,585	$	200,935	$	214,299
Voice Services (1)		310,804		106,540		68,241
Hotline Products		213,946		227,601		237,872

Total revenues	$	721,335	$	535,076	$	520,412


(1)		Data Services and Voice Services are also collectively referred to as “On-Site Services.”