form10-k.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

T Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended July 31, 2009

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 0-7928

(Exact name of registrant as specified in its charter)

Delaware		11-2139466
(State or other jurisdiction of incorporation /organization)		(I.R.S. Employer Identification Number)

68 South Service Road, Suite 230 Melville, NY		11747
(Address of principal executive offices)		(Zip Code)

	(631) 962-7000
	(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
Common Stock, par value $.10 per share		NASDAQ Stock Market LLC
Series A Junior Participating Cumulative
Preferred Stock, par value $.10 per share		NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

T Yes o No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 of Section 15(d) of the Act.

o Yes T No

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.

T Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer T Accelerated filer o

Non-accelerated filer o Smaller reporting company o

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes T No

The aggregate market value of the registrant’s voting stock held by non-affiliates of the registrant, computed by reference to the closing sales price as quoted on the NASDAQ National Market on January 30, 2009 was approximately $951,186,000.

The number of shares of the registrant’s common stock outstanding on September 18, 2009 was 28,226,243.

DOCUMENTS INCORPORATED BY REFERENCE.

Certain portions of the document listed below have been incorporated by reference into the indicated Part of this Annual Report on Form 10-K:

Proxy Statement for Annual Meeting of Stockholders to be held December 9, 2009 - Part III

INDEX

PART I



ITEM 1.	BUSINESS	1

	Industry Background	2
	Corporate Strategies	2
	Competitive Strengths	3
	Telecommunications Transmission Segment	4
	Mobile Data Communications Segment	7
	RF Microwave Amplifiers Segment	11
	Summary of Key Products, Systems and Services by Business Segment	13
	Acquisitions	14
	Sales, Marketing and Customer Support	15
	Backlog	15
	Manufacturing and Service	16
	Research and Development	16
	Intellectual Property	17
	Competition	17
	Employees	17
	U.S. Government Contracts	18
	Regulatory Matters	18

ITEM 1A.	RISK FACTORS	19

ITEM 1B.	UNRESOLVED STAFF COMMENTS	34

ITEM 2.	PROPERTIES	34

ITEM 3.	LEGAL PROCEEDINGS	35

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	35


PART II

ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	35

	Stock Performance Graph and Cumulative Total Return	35
	Dividends	36
	Recent Sales of Unregistered Securities	36
	Issuer Purchases of Equity Securities	36
	Approximate Number of Equity Security Holders	36

ITEM 6.	SELECTED CONSOLIDATED FINANCIAL DATA	37

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	38

	Overview	38
	Recent Acquisitions	39
	Critical Accounting Policies	40
	Results of Operations	42
	Business Outlook for Fiscal 2010	43
	Comparison of Fiscal 2009 and 2008	45
	Comparison of Fiscal 2008 and 2007	50
	Liquidity and Capital Resources	53
	Recent Accounting Pronouncements	55

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	57

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	57

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	57

ITEM 9A.	CONTROLS AND PROCEDURES	58

ITEM 9B.	OTHER INFORMATION	59

PART III

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	59

ITEM 11.	EXECUTIVE COMPENSATION	59

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	59

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	59

ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	59

PART IV

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	60

SIGNATURES		62

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE		F-1

Note: As used in this Annual Report on Form 10-K, the terms “Comtech,” “we,” “us,” “our” and “our Company” mean Comtech Telecommunications Corp. and Comtech’s subsidiaries.

PART I

ITEM 1. BUSINESS

We design, develop, produce and market innovative products, systems and services for advanced communications solutions. We believe many of our solutions play a vital role in providing or enhancing communication capabilities when terrestrial communications infrastructure is unavailable, inefficient or too expensive. We conduct our business through three complementary segments: telecommunications transmission, mobile data communications and RF microwave amplifiers. We sell our products to a diverse customer base in the global commercial and government communications markets. We believe we are a leader in the market segments that we serve.

Over the past several years, we have benefited from the increased reliance on our products by the U.S. Army and have expanded our product lines through increased research and development and small tactical product line acquisitions. From fiscal years 2002 through fiscal 2008, we experienced six straight years of both record sales and net income.

On August 1, 2008 (the beginning of our fiscal year 2009), we acquired Radyne Corporation (“Radyne”), the largest acquisition in our history. We believe our acquisition of Radyne resulted in the following strategic benefits:

-	Strengthened our leadership position in our satellite earth station product lines in our telecommunications transmission segment;

-	More than doubled the size of our RF microwave amplifiers segment by expanding our amplifier product portfolio which immediately made us as a leader, not only in the solid-state amplifier market but also in the satellite earth station traveling wave tube amplifier market;

-	Broadened the number of products and services that our mobile data communications segment offered and allowed us to market additional mobile tracking products as well as the design and manufacture of microsatellites and related components; and

-	Further diversified our overall global customer base and expanded our addressable markets.

As more fully described throughout this Form 10-K, amidst the most challenging global economic environment in decades, in fiscal 2009 we delivered record sales of $586.4 million, successfully integrated Radyne into our business, and undertook a number of cost-reduction activities. We achieved net income of $49.6 million despite the fact that our operating results were negatively impacted by a significant delay in shipments to the U.S. Army, pursuant to their request. During fiscal 2009, we received multiple large orders from the U.S. Army, including a $281.5 million order, the single largest order that we received in our history. The U.S. Army requested that the substantial majority of these orders be shipped in our fiscal 2010.

Despite difficult economic conditions that we expect to persist throughout most of fiscal 2010, we believe that fiscal 2010 is positioned to be another year of record sales. We have approximately $549.8 million in backlog as of July 31, 2009 of which a substantial portion is expected to ship in fiscal 2010. We also expect that operating income will significantly increase as compared to the levels we achieved in fiscal 2009. In addition, as of July 31, 2009, we had $485.5 million of cash and cash equivalents and are planning to continue our efforts to supplement our organic growth and diversify our business by making one or more acquisitions.

Our Internet website is www.comtechtel.com and we make available free of charge, on our website, our annual reports, quarterly reports, current reports and any related amendments. Unless specifically noted, the reference to our website address does not constitute incorporation by reference of the information contained therein into this Annual Report on Form 10-K. In addition, any materials filed with the SEC may be read and copied by the public at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549.

The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We are incorporated in the state of Delaware and were founded in 1967.

Industry Background

The global commercial and government communications markets are characterized by rapid technological advances and constant changes. Over the course of many years, we believe the markets that we directly operate in are expected to grow due to many factors, including the following:

Increased Reliance on Communication Systems and Demand for Increased Cost Efficiencies. Businesses, governments and consumers around the world have become increasingly reliant upon communications systems to communicate with their customers, suppliers, and employees. In particular, there has been a significant increase in global demand for products and services that are utilized for wireless and cellular-based communications, broadcasting (including high definition television (“HDTV”) for cable and over-the-air broadcast), Internet Protocol (“IP”)-based communications (including voice, broadband video and data), long distance telephony and highly secure defense applications. Communications network providers have been forced to increase their investments in new and updated transmission systems in order to maintain the quality and availability of their services. Because of this increased global demand, satellite transponder utilization and transponder costs are expected to increase in many areas of the world. As a result, communications network providers and end-users are continually seeking solutions that increase the efficiency of their networks in order to reduce operating costs. In light of the relatively high cost of satellite transmission versus other transmission channels, we believe that communications network providers will make their vendor selections based upon the operating efficiency and quality of the products and solutions they offer.

The Emergence of Information-Based, Network-Centric Warfare. Militaries around the world, including the United States (“U.S.”) military, have become increasingly reliant on information and communications technology to provide critical advantages in battlefield, support and logistics operations. Situational awareness, defined as knowledge of the location and strength of friendly and unfriendly forces during battle, can increase the likelihood of success during a conflict. As evidenced by the ongoing Iraq and Afghanistan conflicts, stretched battle and supply lines have used satellite-based (including mobile satellite-based) and over-the-horizon microwave communications solutions to span distances that normal radio communications, such as terrestrial-based systems, are unable to cover. We believe that our satellite-based and over-the-horizon microwave technologies are critical due to the lack of terrestrial-based communications infrastructure in many parts of the world where the U.S. and other militaries operate.

The Need for Developing Countries to Upgrade Their Commercial and Defense Communication Systems. We believe many developing countries are committing greater resources and are now placing a higher priority on developing and upgrading their communications systems than in the past. Many of these countries lack the financial resources to install extensive land-based networks, particularly where they have large geographic areas or unfriendly terrain that make the installation of land-based networks more costly. We believe satellite-based and over-the-horizon microwave technologies often provide affordable and effective solutions to meet the requirements for communications services in these countries.

Although the speed at which industry advances and changes are directly impacted by the health of the global economy, we expect to participate in the industry’s overall expected growth by focusing research and development resources across all three of our business segments to produce secure, scalable and reliable technologies to meet these evolving market needs.

Corporate Strategies

We manage our business with the following principal corporate business strategies:

· Seek leadership positions in markets where we can provide specialized products and services;

· Identify and participate in emerging technologies that enhance or expand our product portfolio;

· Operate business segments flexibly to maximize responsiveness to our customers;

· Strengthen our diversified and balanced customer base; and

· Pursue acquisitions of businesses and technologies.

We believe that, as a result of these business strategies, we are well positioned to continue to capitalize on growth opportunities in the global commercial and government communications markets.

Competitive Strengths

The successful execution of our principal corporate strategies is based on our competitive strengths, which are briefly described below:

Leadership Positions in All Three Business Segments – In our telecommunications transmission segment, we believe we are the leading provider of satellite earth station modems and over-the-horizon microwave systems. Many of our products incorporate Turbo Product Code (“TPC”) forward error correction technology and DoubleTalk® Carrier-in-Carrier® bandwidth compression which enable our customers to optimize their satellite network by either reducing their satellite transponder lease costs or increasing data throughput. In our mobile data communications segment, we believe we are a critical product and technology supplier for the U.S. Army’s logistics community’s Movement Tracking System (“MTS”) and the U.S. Army’s war-fighter orientated satellite-based, tracking and communications system known as the Force XXI Battle Command, Brigade and Below (“FBCB2”) command and control system, also referred to as Blue Force Tracking (“BFT”). In our RF microwave amplifiers segment, we believe we are one of the largest independent suppliers of broadband, high-power, high-performance RF microwave amplifiers and a leader in the satellite earth station traveling wave tube amplifier market.

Innovative Leader with Emphasis on Research and Development – We have established a leading technology position in our fields through internal and customer funded research and development activities. We believe we were the first company to begin full-scale deployment of TPC forward error correction technology and DoubleTalk® Carrier-in-Carrier® bandwidth compression in digital satellite earth station modems. Our field-proven over-the-horizon microwave systems utilize a proprietary 16 megabits per second (“Mbps”) adaptive digital modem and we have recently developed a troposcatter modem that can exceed 20 Mbps. We believe our existing MTS and BFT technologies are critical components of the U.S. Army’s satellite communications network and we have and continue to develop backward compatible next-generation MTS and BFT solutions. We have formally introduced our new Blue Force Tracking High Capacity (“BFT-HC”) transceiver and are currently upgrading our BFT network to incorporate our new patent-pending Adaptive Multiple-User Detection (“AMD”) technology which enables a significant increase in both the overall system performance and number of possible concurrent network users. In our RF microwave amplifiers segment we are incorporating Gallium Nitride technology into our products which allows us to offer customers more powerful and higher efficiency RF microwave amplifiers. In addition, our traveling wave tube amplifiers have built-in block up converters (“BUCs”) that significantly reduce operating costs for domestic and international broadcasters.

Diverse Customer Base with Long-Standing Relationships – We have established long-standing relationships with leading domestic and international system and network suppliers in the satellite, defense, broadcast and aerospace industries, as well as the U.S. government and foreign governments. Our products are in service around the globe and we continue to expand our geographic distribution. We believe that our customers recognize our ability to develop new technologies and to meet stringent program requirements.

Core Manufacturing Expertise That Supports All Three Business Segments – Our high-volume technology manufacturing center located in Tempe, Arizona utilizes state-of-the-art design and production techniques, including analog, digital and RF microwave production, hardware assembly and full-service engineering. All three of our business segments utilize this manufacturing center for certain high-volume production which allows us to secure volume discounts on key components, control the quality of our manufacturing process and maximize the utilization of our manufacturing capacity.

Successful Acquisition Track Record – We have demonstrated that we can successfully integrate acquired businesses, achieve increased efficiencies and capitalize on market and technological synergies. We believe that our disciplined approach in identifying, integrating and capitalizing on acquisitions provides us with a proven platform for additional growth. The Radyne acquisition that we completed in fiscal 2009 was the largest acquisition in our history and we achieved all of the strategic goals and operating efficiency targets that we originally established when we announced the acquisition.

Our Three Business Segments

We conduct our business through three complementary business segments: telecommunications transmission, mobile data communications and RF microwave amplifiers. By operating independently, our business segments are able to maintain a high level of focus on their respective businesses, activities and customers. Our corporate senior management team supports the business segments by, among other things, actively seeking to exploit synergies that exist between the segments, including areas such as manufacturing, technology, sales, marketing and customer support. Financial information about our business segments is provided in “Notes to Consolidated Financial Statements – Note (14) Segment Information” included in “Part II — Item 8 — Financial Statements and Supplementary Data.”

Telecommunications Transmission Segment

Overview

Our telecommunications transmission segment provides equipment and systems that are used to enhance satellite transmission efficiency and that enable wireless communications in environments where terrestrial communications are unavailable, inefficient or too expensive. These products and systems are used in a wide variety of commercial and government applications including the backhaul of wireless and cellular traffic, broadcasting (including HDTV), IP-based communications traffic, long distance telephony and highly secure defense applications.

Products, Services and Applications

The following are the key products and systems, along with related markets and applications, for our telecommunications transmission segment:

Satellite Earth Station Equipment and Systems – We provide customers a one-stop shopping approach by offering a broad range of satellite earth station equipment. Our product offerings include satellite earth station modems, BUCs, power amplifiers, transceivers, access devices, voice gateways, IP encapsulators and media routers. We market our products under a variety of brand names including Comtech EF Data, Radyne, Vipersat, Memotec and Verso. Over the past several years, we have introduced a new line of satellite earth station modems that allow for greater data transmission than ever before. Our satellite earth station modems include:

CDM-600 – One of our all-time best selling modems, the CDM-600 includes an option that allows end-users to incorporate our patented TPC, a forward error correction technology which can significantly reduce satellite transponder lease costs or increase satellite earth station modem data throughput. The CDM-600 provides connectivity up to 20 Mbps.

CDM-625 – First launched in fiscal 2008, the CDM-625 was our first modem to combine low density parity check (“LDPC”), a forward error correction technology, as well as DoubleTalk® Carrier-in-Carrier® bandwidth compression, a technique that allows satellite earth stations to transmit and receive at the same frequency, effectively reducing transponder bandwidth requirements by 50%. The CDM-625 is marketed toward users who require connectivity up to 25 Mbps.

·	DMD20 – Because it has been designed to minimize configuration changes, the DMD20 can be used by virtually our entire global customer base. The DMD20 is compatible with our CDM-600 and, with an optional communication link, allows network operators to monitor and control their BUCs.

·	SLM-5650A – Ideally suited for many government and military applications, our SLM-5650A can be integrated with our Vipersat Management System to provide fully automated network and capacity management.

·	DMD2050 – Based on military standards, the DMD2050 is designed for the U.S. Department of Defense (“DoD”) but also includes commercial industry functionality while transmitting data up to 52 Mbps. This modem is compatible with many of our modems, including the SLM-5650A.

·	CDM-570 – An entry level modem that provides performance and flexibility at a lower price point; it is marketed toward users who require connectivity up to 5 Mbps.

Many of our modems are available with customer selectable features including LDPC, DoubleTalk® Carrier-in-Carrier® bandwidth compression, VersaFEC® (a next-generation forward error correction technology) and optional IP modules which can provide advanced features and bandwidth efficiencies.

Over-the-Horizon Microwave Equipment and Systems – We design, develop, produce and market over-the-horizon microwave (also known as troposcatter) communications equipment and systems that can transmit voice, video and data over unfriendly or inaccessible terrain from 20 to 600 miles by reflecting transmitted signals off of the troposphere, an atmospheric layer located approximately seven miles above the earth’s surface. Over-the-horizon microwave communication is a cost-effective, secure alternative to satellite communication as it does not require the leasing of satellite transponder space. Traditional end-users of our equipment have included the U.S. government, foreign governments who have used our over-the-horizon microwave systems to, among other things, transmit radar tracking information from remote border locations and energy companies, who use our systems to enable communication links for offshore oil rigs and other remote exploration activities. Over the past several years, we have introduced the following new digital troposcatter modems:

CS6716 – With speeds up to 16 Mbps, our CS6716 modem includes advanced features such as forward error correction technology and embedded TPC. Our digital troposcatter modem upgrade kit is based on the CS6716 and has been purchased by the U.S. military to enhance the capability of its AN/TRC-170 digital troposcatter terminals which are used to transmit Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance information (also known as “C4ISR”).

CS67200 – Our recently introduced 20 Mbps digital troposcatter modem is a state-of-the-art modem whose performance, we believe, exceeds any digital troposcatter modem on the market. It is IP-ready and supports voice, data and video transmission. Under certain conditions, because it has built-in redundancy, it can be configured to reach transmission speeds of up to 40 Mbps. This modem offers a more compact design, lighter weight and 70% less power consumption than our earlier S575 modem.

Our telecommunications transmission segment operates our high-volume technology manufacturing center located in Tempe, Arizona that is utilized by all three of our business segments and, to a much lesser extent, by third-party commercial customers who outsource a portion of their manufacturing to us. This allows us to secure volume discounts on key components, better control the quality of our manufacturing process and maximize the utilization of our manufacturing capacity. Accordingly, our telecommunications transmission segment’s operating results are impacted positively or negatively by the level of utilization of our high-volume technology manufacturing center. Our telecommunications transmission segment also markets data compression integrated circuits based, in part, on our forward error correction technology.

Business Strategies

Our telecommunications transmission segment business strategies are as follows:

Expand Leadership Position in Satellite Earth Station Market – Our satellite earth station modems, which incorporate leading technologies and standards such as TPC, LDPC, Digital Video Broadcasting Standard 2 (“DVB-S2”) and DoubleTalk® Carrier-in-Carrier® bandwidth compression have established us as a leading provider to domestic and international commercial satellite systems and network customers, as well as U.S. and foreign governments. A majority of our satellite earth station products have been historically deployed by our customers for use with applications that require a single channel per carrier (“SCPC”) transmission mode which, in non-technical terms, refers to using satellite bandwidth in a dedicated manner. Because information is being transmitted continuously, the backhauling of wireless and cellular traffic and the broadcasting of HDTV and satellite radio are ideal applications for SCPC-based transmission. Our bandwidth compression technologies allow customers to reduce these recurring satellite transponder costs. Over time, because packet-based data (such as IP traffic) is expected to grow, time division multiple access (“TDMA”) based solutions are becoming important. Thus, we are increasingly developing products to compress and optimize IP-based traffic to provide increased value to our customers and facilitate ongoing and incremental demand for our products. We continue to share forward error correction and licensed technology across all of our branded product lines, and over time, we expect our individual brands to become less distinguishable from each other. We are continuing to market product offerings that include access devices and voice gateways which allow our customers to consolidate multi-service network traffic such as voice, video and data. When combined with our satellite earth station modems, the solution is ideal for backhauling cellular traffic using satellites, which can significantly reduce their bandwidth requirements. We expect to continue expanding our leadership position by offering new products and solutions to meet the expected increased demand from commercial, government and defense customers.

Participate in the Anticipated Growth of Wireless and Cellular Backhaul Applications – Our satellite earth station equipment enables mobile cellular network providers to cost-effectively backhaul wireless and cellular traffic from main cities to more remote cities via satellite. We believe that demand for our satellite earth station equipment will continue to grow for many years because of the important role it plays in facilitating increasing wireless and mobile phone usage, particularly in developing areas of the world such as China, Russia, Latin America, the Middle East and Africa, where fiber or terrestrial-based systems are generally more expensive to deploy. Our marketing in this area focuses on our CDM-625 modem and our other modems which incorporate DoubleTalk® Carrier-in-Carrier® bandwidth compression.

Continue our Marketing and Sales Efforts to the U.S. Government – We believe that long-term demand by the U.S. government for our equipment will continue to increase due to a number of factors, including the ever increasing amount of C4ISR information that is being generated. In addition, our TDMA and SCPC-based communication products, including our Vipersat-branded network management software, enable the U.S. government to utilize satellite network bandwidth management techniques to more cost-effectively enable, among others, applications such as video teleconferencing, distance learning, telemedicine and Internet content delivery. Our marketing in this area focuses on our SLM-5650A and DMD2050 modems.

Capitalize on Increased Demand for Over-the-Horizon Microwave Systems and Upgrades – We have designed, manufactured and sold over-the-horizon microwave products and systems for over thirty-years and believe we are the leading supplier in this specialized product line. Over-the-horizon microwave systems are sometimes referred to as troposcatter systems and are extremely reliable and secure when compared to satellite-based systems. Although these products have an extremely long sales cycle due to the complexity of the overall network that it must operate with, we believe that overall demand, particularly by the U.S. military, is in a period of resurgence. Our over-the-horizon microwave systems, which include our patented TPC forward error correction technology, are able to transmit video and other broadband applications at throughput speeds in excess of 20 Mbps (and when deployed in dual-mode, can reach speeds in excess of 40 Mbps). To date, the largest single end-customer for our over-the-horizon microwave systems has been Algeria, our North African end-customer, which we believe is between major phases of a multi-year roll-out of a large project. In the past few years, the DoD purchased our 16 Mbps adaptive digital modem upgrade kits to be used on a portion of the DoD’s inventory of AN/TRC-170 digital troposcatter terminals. In fiscal 2009, we demonstrated how some of our new troposcatter products, including our transportable fast link antenna, could work with the AN/TRC-170 and we are in continuous discussions with the DoD for further upgrades. As a result of our historical success with Algeria and the DoD in Iraq and Afghanistan, other foreign countries and militaries are showing interest in our over-the-horizon microwave systems technology and we believe the overall market for these products and systems is expanding.

Continue to Develop, License or Acquire Technology for Efficient Bandwidth Utilization – Because we expect overall demand for satellite bandwidth to increase, we intend to develop, license or acquire technology (including complementary products) to provide affordable bandwidth solutions for our customers. Specifically, we expect to develop next-generation advances of our forward error correction technology and believe this will have important utility in responding to the increasing demand for satellite bandwidth utilization, particularly by the U.S. military, security and intelligence agencies. We intend to continue to enhance our Internet, TDMA and SCPC-based software and products which enable customers to utilize bandwidth management techniques to facilitate, among others, applications such as video teleconferencing, distance learning, telemedicine and Internet content delivery. We have incorporated our licensed DoubleTalk® Carrier-in-Carrier® technology into many of our products and are combining it with other technologies such as VersaFEC®, a next-generation forward error correction technology. In recent years, we have expanded our satellite earth station product offerings and began selling IP encapsulators and media routers, that, when combined with our bandwidth efficient satellite earth station modems, can reduce operating expenses for service providers delivering IP-based broadcast connectivity. We also expect to continue to offer NetPerformer products which combine the functionality of voice gateway and data routers and provide data compression over a single wide area network, thereby enabling our customers to potentially bypass toll costs on public networks. Through our large distribution channel, we also continue to market Skywire™ products that combine SCPC-based systems with TDMA-like bandwidth efficiency.

Mobile Data Communications Segment

Overview

Our mobile data communications segment provides customers with integrated solutions to enable global satellite-based communications when mobile, real-time, secure transmission is required. We also offer our customers the design and production of microsatellite systems and related components.

We provide our mobile data communications solutions to both government and commercial customers; however, the majority of sales in our mobile data communications segment have historically come from, and are expected to be derived in the future from sales relating to the following two U.S. military programs:

U.S. Army’s Movement Tracking System (“MTS”) program – Since 1999, we have provided the MTS program with a turn-key logistics orientated system that allows the U.S. Army and other services such as the Army National Guard to utilize our L-band satellite-based mobile data communication system and related products for near real-time messaging and location tracking of mobile assets. Pursuant to our existing $605.1 million contract awarded to us in September 2007 (which currently expires on July 12, 2010), we supply our customers with mobile satellite transceivers, vehicle and command center application software, third-party produced ruggedized computers and satellite earth station network gateways and associated installation, training and maintenance. Our services also include the operation of satellite packet data networks (including arranging and providing for third-party satellite capacity). Through July 31, 2009, we have received total orders under our current MTS contract of $546.3 million and since 1999 we have shipped approximately 38,000 transceivers (including upgrades and replacements) to the MTS program.

Blue Force Tracking (“BFT”) program – As a result of a number of contracts that we have previously received (including prior MTS contracts), our technology has been integrated into a U.S. Army war-fighter orientated satellite-based, tracking and communications system known as the Force XXI Battle Command, Brigade and Below (“FBCB2”) command and control system, also known as BFT. Pursuant to our existing $216.0 million contract awarded to us in September 2007 (which currently expires on December 31, 2011), we supply mobile satellite transceivers, arrange and provide for third-party satellite capacity, supply and operate the satellite packet data network and network gateways, and provide the associated systems support and maintenance. Through July 31, 2009, we have received total orders under our current BFT contract of $211.3 million and since 2003 we have shipped approximately 122,000 transceivers to the BFT program (including upgrades, replacements and units purchased via the MTS program).

Since 1999 and through July 31, 2009, cumulative orders from the U.S. government for our MTS and BFT solutions have exceeded $1.2 billion (including over $400.0 million of orders that are currently in our backlog). We consider the U.S. Army’s significant investment in our products and its large installed base of equipment to be important competitive advantages for us as these and potentially other programs move forward.

Our MTS and BFT solutions have been installed on a variety of U.S. military vehicles (both logistics-centric and war-fighter-centric) including Abrams tanks, Bradley Fighting Vehicles, helicopters such as the Apache, Black Hawk and Chinook and High Mobility Multipurpose Wheeled Vehicles (“HMMWV”). When equipped with this technology, soldiers operating these vehicles are able to be continually tracked and, at the same time are able to maintain communications with a command center as well as fellow soldiers in the field.

Our extremely reliable proprietary network service employs full end-to-end path redundancy as well as back-up capability in the event of a major catastrophe or service interruption, and we maintain a 24 x 7 network operations and customer care center that provides customers with ongoing support any time, day and night. We also offer a network and mobile tracking solution that is certified as a Defense Transportation Tracking System (“DTTS”), a capability targeted for sale to commercial carriers hauling sensitive, high interest cargo such as arms, ammunition, and explosives where secure, assured communications are required.

Our current sole-source contracts with the MTS and BFT programs are known as indefinite delivery/indefinite quantity (“IDIQ”) contracts which can be terminated by the government at any time and are not subject to automatic renewal. As such, business volatility is an inherent part of participation in the MTS and BFT programs and these contracts are subject to contract ceilings, unpredictable funding as well as deployment and technology decisions by the U.S. government.

Given the current contract ceiling levels of $605.1 million and $216.0 million for our current MTS and BFT contracts, respectively, we can only receive $58.8 million of additional MTS orders and only $4.7 million of additional BFT orders under these contracts unless the U.S. government authorizes contract ceiling increases or awards us new contracts. During fiscal 2007, we experienced a similar situation when the ceiling on our then existing $418.2 million MTS contract was increased by $45.0 million and the U.S. Army extended our performance period while we negotiated our current $605.1 million MTS contract. Although we cannot be certain that the contract ceilings for our current MTS and BFT contracts will be increased or if we will be awarded new MTS and BFT contracts, the U.S. Army has undertaken a number of initiatives relating to both programs which indicate, we believe, that long-term demand for mobile data communication products, similar to those we currently provide (and are developing), will remain strong for the foreseeable future.

For example, in February 2009, the U.S. Army issued a Request for Information or “RFI” which seeks information regarding potential strategies for the design, development, installation, operation and maintenance of a follow-on contract to the current MTS contract. Among other items, the MTS RFI states that the U.S. Army’s objectives include providing an interoperable, scalable and upgraded solution for the MTS program that focuses on a user-friendly interface with a network architecture that is scalable to over 100,000 users. We also believe that the recent $281.5 million order we received to supply a new third-party ruggedized computer upgrade for 20,000 deployed MTS systems is an acknowledgment of the long-term importance that our MTS systems have to the U.S. military.

Separately, in April 2009, the U.S. Army released a Market Survey seeking sources for Blue Force Tracking-2 or (“BFT2”), the U.S. Army’s next-generation BFT system. Among other items, the Market Survey states that the U.S. Army’s objectives include, starting in calendar year 2010 and through 2015, replacing existing BFT equipment with improved mobile satellite transceivers and satellite ground station hub and network operations center equipment that will provide for “magnitude improvement” in data throughput. The U.S. Army has indicated that it may issue multiple IDIQ contract awards and that it desires government-purpose rights upon a contract award. Government-purpose rights generally provide the government with ownership-type rights including the right to allow competitors to use a vendor’s technology or designs to produce comparable equipment solely for use by the U.S. government. The Market Survey indicates the U.S. Army intends to procure 100,000 BFT2 transceivers during the 2010-2015 timeframe.

In order to maintain a competitive procurement process, the U.S. Army provides interested companies with information about its MTS and BFT program plans; however, detailed program requirements and related strategic funding decisions are subject to daily, if not constant, changes. We have responded and will continue to respond to the U.S. Army’s requests for input concerning these programs in a way that we believe best meets the U.S. Army’s requirements and we believe that we will continue to generate future revenues from both of these programs.

In the past several years, we have committed considerable research and development resources with a focus on designing and delivering backward compatible next-generation MTS and BFT products and technology. Over the past three fiscal years, our mobile data communications segment has invested approximately $27.6 million in research and development activities, the substantial majority of which has been for development of new MTS and BFT solutions.

Our next-generation MTS and BFT solutions are based on our internally developed Advanced Software Defined Radio (“ASDR”) which is designed to provide increased operational flexibility with multiple data rates, allowing the U.S. Army and other customers to choose a cost-effective satellite service for each mission or operating theater. Our next-generation transceivers incorporate a new advanced design antenna that can enable higher message completion rates at almost all elevation angles and in environments where conventional communications are unavailable or unreliable. Our ASDR-based transceivers can operate on all L-band satellites and support broadband-like data rate transfer speeds. In addition, our transceivers have been designed using a modular approach which provides additional flexibility for installation and field maintenance. In addition to hardware product upgrades, we are upgrading our BFT network to incorporate our new patent-pending AMD technology which enables a significant increase in both the overall system performance and an increase in the number of possible concurrent network users. We are currently in the process of deploying our AMD technology within our BFT network which is enabling our BFT customer to experience improved performance today.

We believe our next-generation solutions not only meet the future operational needs of the U.S. Army, but also provide significant advantages relative to other sources. Because they are backward compatible, we believe our solutions provide the U.S. Army the unique ability to leverage its existing technology investment by continuing to use the existing deployed units and world-wide support infrastructure while ultimately and seamlessly transitioning to the next-generation MTS and BFT systems. We have shared our technology plans and product roadmaps with the U.S. Army and are incorporating suggestions and other improvements at their request. Additional information regarding our products (including our next-generation products) follows in the next section.

Products, Services and Applications

Our government and commercial customers can choose from a number of products, services and related technology (including our next-generation products) for mobile tracking and communications needs, including the following:

MT-2011 – A single sealed mobile satellite transceiver with no moving parts, the MT-2011 is used by customers to transmit and receive near real-time packet data and is proven to operate under rugged environmental and operating conditions on land, in the air, and on the water. It has a single interface port for connecting the terminal to power and to devices such as mobile and handheld computers. The MT-2011 can operate anywhere in the world over any available L-band satellite system. Our MT-2011 transceiver is currently deployed by the BFT program and other government customers, and is part of our certified DTTS system configuration.

MT-2012 – Incorporating all of the features of our field-proven MT-2011 mobile satellite transceiver, this enhanced logistics-centric transceiver features embedded radio frequency identification devices (“RFID”) and selected availability anti-spoofing modules (“SAASM”). The built-in RFID interrogator provides total asset visibility by communicating with RFID tags attached to inventory, such as cargo containers, and transmits data back to the requesting user. The transceiver also contains an expanded memory buffer which allows the MT-2012 to accept larger data files for transmission over satellite. Our MT-2012 transceiver is currently deployed by the MTS program.

Blue Force Tracking – High Capacity (“BFT-HC”) Transceiver – Introduced in fiscal 2009, this evolutionary mobile satellite transceiver is designed to eventually replace or be deployed side-by-side with our MT-2011 transceiver. Our backward compatible BFT-HC transceiver incorporates our new internally developed ASDR technology which is designed to provide customers with operational flexibility by allowing them to choose from multiple satellite services and data rates with the objective of achieving optimal performance with substantial operational cost savings. Our BFT-HC transceiver utilizes a field replaceable phased array tracking antenna and can operate over a broad range of satellite networks that allow for data speeds up to 230 kilobits per second (“Kbps”). Our BFT-HC transceiver is a critical part of our strategy to deliver the next-generation of systems and solutions required by the BFT program. In April 2009, we received an $8.0 million order from the U.S. Army to build, test and deliver our BFT-HC transceiver including incorporating required network changes to make our solution fully compliant with software called FBCB2-Joint Capabilities Release (“JCR”) which is intended to provide the foundation to converge on a single mobile system configuration known as the Joint Battle Command-Platform (“JBC-P”).

Movement Tracking System – High Capacity (“MTS-HC”) Transceiver – Our MTS-HC mobile satellite transceiver is currently being designed to eventually replace or be deployed side-by-side with our MT-2012 transceiver. Our backward compatible MTS-HC transceiver incorporates the same ASDR technology and performance enhancing features as our BFT-HC transceiver but also includes logistics-centric functionality such as RFID tracking capability. Our MTS-HC transceiver is intended to be fully compliant with JBC-P system specifications.

MTM-203 – This miniaturized mobile satellite transceiver incorporates the key features of our MT-2011. It also incorporates state-of-the-art technology created for users where both restrictions in size and weight are critical. In fiscal 2008, we received a Federal Information Processing Standard (“FIPS”) 140-2 validation certification from the National Institute for Standards and Technology for the MTM-203 Miniature Satellite Transceiver Module. We believe this certification will allow for increased sales of the MTM-203 to users who must operate on certain secure military networks.

CMT-500 – A rugged, low profile mobile satellite transceiver focused on the non-military market, the CMT-500 comes in several variants, one of which incorporates our miniaturized transceiver module, the MTM-203, and others that feature a seamlessly integrated, commercially available satellite-based data module. The CMT-500 improves on the many features available with our MT-2011 mobile satellite transceiver, including enhanced encryption and higher data rates. The CMT-500 is undergoing certifications and is expected to be added to our certified DTTS system.

geoOps™ Enterprise Location Management System – The geoOps™ Enterprise Location Management System (“geoOps™”) is a configurable network and web-based software platform that provides an integrated capability to command, control and manage mobile ground vehicles. The software integrates the functions of route planning, transportation control, dispatching, travel and road condition monitoring and is updated via an easy to use electronic map. Our geoOps™ software baseline is incorporated into the North Atlantic Treaty Organization’s (“NATO”) International Security Assistance Force Tracking System (“NATO IFTS”), a multi-national satellite-based friendly force tracking system, and our DTTS system. Using our geoOps™ software platform code baseline, we have developed an upgraded MTS mobile software application that we refer to as MTS 5.16. We are promoting this application to the MTS program office and are working with them as they consider upgrading their current MTS software (which we previously developed). This upgrade is an important part of our overall strategy to continue to promote MTS as a logistics orientated program. Our new MTS software application is field-tested and is backward compatible with the U.S. Army’s installed MT-2012 transceiver base, and when combined with our AMD technology, can provide for a significant increase in the total number of users able to simultaneously operate in a satellite channel. Over-time, we expect that our new MTS software application, if adopted by the U.S. Army, will need to be fully interoperable with FBCB2-JCR and the JBC-P.

Sensor Enabled Notification System (“SENS”) Technology – Our SENS technology-based solutions offer both government and commercial customers a low-cost, spread-spectrum technology-based system which can remotely track a large number of simultaneous transmissions via low earth-orbit satellites and miniaturized satellite transmitters. The information received is processed and distributed to users through an Internet Portal at www.sensservice.com. Messages can be retrieved via several methods including the Internet, email, voice or fax and can be forwarded to a user-designated site. Our SENS technology is integrated with a variety of mapping solutions and can provide our customers with features such as GeoFencing which allows customers to track whether or not their assets or vehicles stay within pre-defined boundaries.

In addition to the MTS and BFT applications, our products and services can be used on a number of other applications including the following:

Homeland Security and Multi-National Applications – Our products and services can also be used to facilitate communications in the event that natural disasters or other situations, such as a terrorist attack, disable or limit existing terrestrial communications. For example, the Army National Guard has purchased our mobile data communication products to better prepare for and react to disaster recovery operations at the local, state and national levels. Through the U.S. Department of State, private security forces located in Iraq use our Quick Deploy Satellite System (or commonly known as “QDSS”), a portable briefcase communications platform utilizing components similar to those used in the MTS system. In addition, NATO has incorporated our geoOps™ into their multi-national satellite-based friendly force tracking system known as NATO IFTS. The geoOps™ software can be used to share, amongst friendly forces, near real-time operational data allowing the same view of unfolding operations or emergency scenarios.

Commercial Satellite-Based Mobile Data Applications – We believe that there may be opportunities to leverage our core strengths and expertise in satellite-based mobile tracking and messaging services into commercial market applications. We believe that fleet operators whose vehicles transport dangerous or hazardous materials, such as armaments, explosives, or flammable materials (e.g., oil or industrial chemicals) are ideal customers for our services. We will continue to market our solutions in a methodical way and target them to those potential customers whose needs would be well met by our technology offerings.

Microsatellite Space Applications – As a result of our Radyne acquisition, we offer both government and commercial customers the design and production of microsatellites that provide a portion of the functionality of expensive large satellites but at a fraction of the cost. In recent years, the market for faster, smaller and more inexpensive microsatellites (which we define as less than 400 kilograms) has been emerging as end-users seek to enhance the ability to launch mission specific inexpensive systems for imaging, communications, replenishment, repair and enhancement of existing space assets as well as provide low cost platforms for space technology development and experiments. Our microsatellites and related components are used on space missions primarily sponsored by the DoD and National Aeronautics and Space Administration (“NASA”). Our position in this marketplace is modest; however, because we believe this market is growing, we currently continue to plan to invest in marketing, sales and internal research and development efforts to establish a leadership position in this marketplace.

Business Strategies

Our mobile data communications segment business strategies are as follows:

Continue to Capitalize on Opportunities with the U.S. Army – It is critical that we secure contract ceiling increases, and/or contract extensions, and/or new contract awards for the MTS and BFT programs. We believe that the reliable and effective performance of our MTS and BFT solutions has demonstrated to the U.S. Army the value of our mobile, global satellite-based communications network when near real-time, secure transmissions are required. We are currently working with the U.S. Army to provide additional enhancements to both our network capabilities and communications performance and we expect to continue to develop our next-generation MTS-HC and BFT-HC technologies. We believe our next-generation products represent compelling technological advancements and that they are, most importantly, backward compatible with the large number of existing MTS and BFT systems in active deployment today. We believe that our current strategy has been validated by the April 2009 receipt of an $8.0 million order from the U.S. Army to build, test and deliver our BFT-HC transceiver including incorporating required network changes to make our solution fully compliant with FBCB2-JCR software requirements. We also expect to continue to develop new products featuring customer driven enhancements and solutions. Ultimately, we believe that by seeking to work collaboratively with the U.S. Army to ensure that its short-term and long-term needs are addressed, we will enhance our competitive positioning for a potential new award, re-compete, renewal or extension of both our MTS and BFT contracts.

Leverage our Current Installed Base into Other Military Commands – In light of the integration of our mobile satellite transceivers into the U.S. Army’s MTS and BFT systems used in Iraq, Afghanistan and elsewhere around the world, we believe, and have demonstrated that, there are a number of opportunities for us to market our products and solutions to other military commands, both in the U.S. and internationally. The Army National Guard and the First Marine Expeditionary Forces each received funding in the past to purchase our products and services. Additionally, both the Republic of Georgia and the Australian Defense Force have deployed our products. Our geoOps™ software platform has been incorporated into NATO’s IFTS, a satellite-based friendly force tracking system. We continue to work with a number of other partners to increase our international brand and product awareness. Although the sales cycle relating to these other military commands is long and difficult to predict, we believe that our products and technologies can meet other potential customer and country requirements.

Market and Develop New Commercial Satellite-Enhanced Mobile Data Applications – Although the market for commercial satellite-based mobile data applications is extremely competitive, we believe the performance of our system in the military setting may distinguish our system as an attractive choice for users in certain commercial markets. Satellite-enhanced or multi-mode applications allow customers to obtain the benefit of lower terrestrial communication costs while, at the same time, having access to a satellite network for secure and time-sensitive traffic. We are certified by the U.S. Department of the Army, Military Surface Deployment and Distribution Command, Defense Transportation Tracking System Program Office which allows us to offer DTTS solutions to track and monitor hazardous cargo shipments, including arms, ammunition and explosives and other sensitive items, being transported by commercial carriers. We believe we are only the second company since the start of the DTTS program to receive this certification. We also intend to continue to enhance and market our SENS technology to expand its market potential. We will continue to market our solutions in a methodical way and target them to those potential customers whose needs would be well met by our technology offerings. We do not, however, expect a significant amount of commercial sales in these markets in fiscal 2010.

RF Microwave Amplifiers Segment

Overview

We believe we are one of the leading companies designing, developing, manufacturing and marketing satellite earth station traveling wave tube amplifiers (“TWTA”) and solid-state, high-power, broadband amplifiers (“SSPA”). All of our amplifiers reproduce signals with high power and are extremely complex and critical to the performance of the systems into which they are incorporated. Our TWTA products can boost the strength of a signal prior to transmission to satellites, which are often more than 22,000 miles from the surface of the earth. Our broadband SSPA products can efficiently increase the power of broadband radio frequency signals with high degrees of clarity to provide for effective jamming and communication power capability required by sophisticated defense programs including those used to counter remote controlled improvised explosive devices.

We sell our amplifiers to domestic and foreign commercial and government users.

Products, Services and Applications

Our RF microwave amplifiers are generally built-to-order and are used in the following markets and applications:

Broadcast and Broadband Satellite Communication Applications – We offer our customers TWTA amplifiers used to amplify signals from satellite earth stations throughout the world. Our amplifiers can provide power levels that are vital to satellite communication applications including traditional broadcast, direct-to-home broadcast, satellite newsgathering and the emerging broadband communications markets, specifically IP-based satellite communications. Through programs such as the Light Multi-Band Satellite Terminal and Ground Multi-Band Terminal, our amplifiers support high capacity U.S. military satellite systems such as the Wideband Global Satellite Constellation and the Milstar system.

Defense Applications – U.S. and foreign military customers use our amplifiers in a variety of telecommunications systems (such as transmitting and boosting signals) and electronic warfare systems (such as simulation, communications, radar, jamming and in identification friend or foe (“IFF”) systems). The U.S. military also uses our amplifiers in systems designed to help protect U.S. troops from radio-controlled roadside bombs. Our integrated radio frequency assemblies, which consist of one of our high-power Ultra High Frequency (“UHF”) radio frequency amplifiers and a receiver assembly integrated into a single module, are used in the Enhanced Position Location Reporting System (“EPLRS”). The EPLRS radio network is a highly reliable communication system used by the DoD that automatically reconfigures itself to overcome the line-of-sight limitations of UHF communications, as well as jamming threats. Our TWTA and SSPA amplifiers are used by military customers throughout the world for mobile applications, including those on helicopters and ships. We believe that ongoing military activities and heightened homeland security concerns are resulting in increased interest in our amplifier products.

Sophisticated Commercial Applications – Our amplifiers are key components in sophisticated commercial applications. For example, our amplifiers are used in oncology treatment systems that allow doctors to give patients, who are suffering from cancer, higher doses of radiation while focusing more closely on the tumors, thereby avoiding damage to healthy tissue. In addition, our amplifiers are used to amplify signals carrying voice, video or data for air-to-satellite-to-ground communications. For example, our amplifiers, when incorporated into an aircraft satellite communication system, can provide passengers with email, Internet access and video conferencing.

Business Strategies

We manage our RF microwave amplifiers segment with the following principal strategies:

Continue to Develop a One-Stop Shopping Approach for RF Microwave Amplifiers – In recent years, we have expanded our product line of RF microwave amplifiers and intend to continue to do so. Over time, we believe that we can offer customers a one-stop shopping approach by offering a broad range of RF microwave amplifier equipment for use in commercial and government applications. This strategy will include maintaining our internal research and development activities as well as pursuing customer funded research and development to fuel new product development. We expect this emphasis on research and development to enable us to enhance our existing product lines, develop new capabilities and solidify and strengthen our position in our principal markets.

Continue to Penetrate the Market for Outsourced Amplifier Production – Because solid-state, high-power, broadband amplifiers are important to the performance and quality of the larger systems into which they are incorporated, many large systems companies often prefer to manufacture these amplifiers in-house. We believe that our focus on and expertise in designing and manufacturing solid-state, high-power, broadband amplifiers, as well as our high-volume manufacturing capability, often makes us a cost-effective and technologically superior alternative to such in-house manufacturing. Some of the companies who have outsourced amplifier production to us include Rockwell Collins, Inc., Thales Group, European Aeronautic Defense and Space Company (“EADS”), Telephonics Corporation, Northrop Grumman Corporation, BAE Systems PLC, ITT Corporation and Raytheon Company.

Expand Marketing and Sales Efforts in the Defense Market – Prior to the acquisition of Radyne, a large majority of our organic growth in our RF microwave amplifiers segment had come from our participation in defense programs, primarily the Counter Remote Controlled Improvised Explosive Device Electronic Warfare 2.1 (“CREW 2.1”) program which uses our broadband, solid-state high-power radio signal jamming amplifiers and switches in systems to help protect U.S. troops from the ever-evolving threat of radio-controlled roadside bombs. We are participating in proposals for multiple next-generation CREW programs and our future growth in this market will ultimately be dependent on our success in meeting future CREW program needs. We believe there are a number of other long-term opportunities in the defense markets, particularly electronic warfare applications, and that we can increase our share of this market by pursuing acquisitions and partnering arrangements with prime contractors.

Business Segment	Products/Systems and Services	Representative Customers	End-User Applications
Telecommunications transmission	Satellite earth station equipment and systems including: modems, frequency converters, power amplifiers, transceivers, access devices, voice gateways and network management systems	Satellite systems integrators, wireless and other communication service providers, broadcasters and defense contractors as well as U.S. and foreign governments. End-customers include AT&T Inc., BT Group plc, China Mobile Limited, Embratel Participações S.A, Intelsat, Ltd. and Globecomm Systems, Inc.	Commercial and defense applications including the transmission of voice, video and data over the Internet, broadband, long distance telephone, broadcast (including high-definition television) and cable, distance learning and telemedicine
	Over-the-horizon microwave systems and adaptive modems	U.S. government customers, foreign governments such as Algeria and related prime systems integrators/manufacturers, as well as oil companies such as BP and Shell Oil Company	Secure defense applications, such as transmission of U.S. military digital voice and data, and commercial applications such as the transmission of IP-based communications to and from oil platforms
Mobile data communications	Mobile satellite transceivers, satellite network services, installation, training and maintenance and SENS technology-based products	U.S. Army logistics community, the U.S. Army war-fighter community, foreign governments, and prime contractors to the U.S. Armed Forces, NATO and commercial customers	Two-way satellite-based mobile tracking, messaging services (U.S. Army’s MTS), battlefield command and control applications (BFT), RFID applications and commercial applications such as fleet tracking
	Microsatellites and related components	U.S. government including military agencies, NASA and foreign customers (both government and scientific)	Mission specific, lower cost satellite applications (both military and scientific)
RF microwave amplifiers	Traveling wave tube amplifiers and solid-state amplifiers	Domestic and international defense customers, prime contractors and system suppliers such as L-3, Harris Corporation and General Dynamics Corporation and satellite broadcasters such as The DIRECTV Group and EchoStar Corporation	Satellite broadcast and broadband satellite communications and defense applications
	Solid-state, high-power, broadband RF microwave amplifiers	Domestic and international defense customers, prime contractors and system suppliers such as Raytheon Company, ITT Corporation, EADS and Thales Group, medical equipment companies such as Varian Medical Systems, Inc., and aviation industry system integrators such as Rockwell Collins, Inc.	Defense applications including communications, radar, jamming and IFF and commercial applications such as medical applications (oncology treatment systems) and satellite communications (including air-to-satellite-to-ground communications)

	Fiscal Years Ended July 31,
	2009		2008		2007
United States
U.S. government		56.4%		66.4%		61.3%
Commercial customers		11.5%		6.9%		12.5%
Total United States		67.9%		73.3%		73.8%

International		32.1%		26.7%		26.2%

	Common Stock
	High		Low
Fiscal Year Ended July 31, 2008
First Quarter	$	58.00		35.45
Second Quarter		56.07		43.01
Third Quarter		48.41		37.59
Fourth Quarter		51.21		38.63

Fiscal Year Ended July 31, 2009
First Quarter		50.55		40.00
Second Quarter		50.34		38.62
Third Quarter		41.91		19.56
Fourth Quarter		34.24		26.40

	Fiscal Years Ended July 31, (In thousands, except per share amounts)
	2009			2008			2007			2006			2005
Consolidated Statement of Operations Data:

Net sales	$	586,372			531,627			445,684			391,511			307,890
Cost of sales		345,472			296,687			252,389			232,210			180,524
Gross profit		240,900			234,940			193,295			159,301			127,366

Expenses:
Selling, general and administrative		100,171			85,967			73,312			67,071			51,819
Research and development		50,010			40,472			32,469			25,834			21,155
In-process research and development		6,200			-			-			-			-
Amortization of intangibles		7,592			1,710			2,592			2,465			2,328
		163,973			128,149			108,373			95,370			75,302

Operating income		76,927			106,791			84,922			63,931			52,064

Other expenses (income):
Interest expense		3,167			2,683			2,731			2,687			2,679
Interest income and other		(2,738	)		(14,065	)		(14,208	)		(9,243	)		(4,072	)

Income before provision for income taxes		76,498			118,173			96,399			70,487			53,457

Provision for income taxes		26,940			41,740			31,186			25,218			16,802

Net income	$	49,558			76,433			65,213			45,269			36,655

Net income per share:
Basic	$	1.88			3.17			2.81			1.99			1.69
Diluted	$	1.73			2.76			2.42			1.72			1.42


Weighted average number of common shares outstanding - basic		26,321			24,138			23,178			22,753			21,673


Weighted average number of common and common equivalent shares outstanding – diluted		29,793			28,278			27,603			27,324			27,064

	Fiscal Years Ended July 31, (In thousands)
	2009		2008		2007		2006		2005
Other Consolidated Operating Data:
Backlog at period-end	$	549,833		201,122		129,044		186,007		153,314
New orders		883,750		603,705		388,721		424,204		377,655
Research and development expenditures - internal and customer funded		64,955		48,224		36,639		30,243		24,156

	As of July 31, (In thousands)
	2009		2008		2007		2006		2005
Consolidated Balance Sheet Data:
Total assets	$	938,671		653,120		556,342		455,266		382,403
Working capital		596,525		484,451		397,083		308,986		254,690
Convertible senior notes		200,000		105,000		105,000		105,000		105,000
Other long-term obligations		2,283		-		108		243		396
Stockholders’ equity		629,129		442,802		345,768		254,242		196,629

	Obligations Due by Fiscal Years (in thousands)
	Total			2010			2011 and 2012			2013 and 2014			After 2015
MTS purchase orders	$	216,626			216,626			-			-			-

Operating lease commitments		51,064			26,151			10,844			4,439			9,630

3.0% convertible senior notes		200,000			-			-			-			200,000

Total contractual cash obligations		467,690			242,777			10,844			4,439			209,630
Less contractual sublease payments		(7,712	)		(1,193	)		(2,416	)		(2,488	)		(1,615	)
Net contractual cash obligations	$	459,978			241,584			8,428			1,951			208,015

Exhibit Number	Description of Exhibit	Incorporated By Reference to Exhibit
3(a)(i)	Restated Certificate of Incorporation of the Registrant	Exhibit 3(a)(i) to the Registrant’s 2006 Form 10-K
3(a)(ii)	Amended and Restated By-Laws of the Registrant	Exhibit 3(ii) to the Registrant’s Form 8-K dated December 6, 2007
4(a)	Rights Agreement dated as of December 15, 1998 between the Registrant and American Stock Transfer and Trust Company, as Rights Agent	Exhibit 4(1) to the Registrant’s Form 8-A/A dated December 23, 1998
4(b)	Amendment to Rights Agreement dated as of December 12, 2008 between the Registrant and American Stock Transfer and Trust Company, as Rights Agent	Exhibit 10 to the Registrant’s Form 10-Q for the quarter ended January 31, 2009
4(c)	Indenture, dated May 8, 2009, between Comtech Telecommunications Corp. and The Bank of New York Mellon, as trustee	Exhibit 4.1 to the Registrant’s Form 8-K dated May 13, 2009
10(a)*	Second Amended and Restated Employment Agreement dated September 16, 2008, between the Registrant and Fred Kornberg	Exhibit 10(a) to the Registrant’s 2008 Form 10-K
10(b)(1)*	Amended and Restated Form of Change in Control Agreement (Tier 2) between the Registrant and Named Executive Officers (other than the CEO) and Certain Other Executive Officers	Exhibit 10(b)(1) to the Registrant’s 2008 Form 10-K
10(b)(2)*	Amended and Restated Form of Change in Control Agreement (Tier 3) between the Registrant and Certain Non-Executive Officers	Exhibit 10(b)(2) to the Registrant’s 2008 Form 10-K
10(c)*	Amended and Restated 1993 Incentive Stock Option Plan	Appendix A to the Registrant’s Proxy Statement dated November 3, 1997
10(d)*	2000 Stock Incentive Plan, Amended and Restated, Effective June 2, 2009
10(e)*	Form of Stock Option Agreement pursuant to the 2000 Stock Incentive Plan	Exhibit 10(f)(7) to the Registrant’s 2005 Form 10-K
10(f)*	Form of Stock Option Agreement for Non-employee Directors pursuant to the 2000 Stock Incentive Plan	Exhibit 10(f)(8) to the Registrant’s 2006 Form 10-K
10(g)*	2001 Employee Stock Purchase Plan	Appendix B to the Registrant’s Proxy Statement dated November 6, 2000
10(h)*	Lease and amendment thereto on the Melville, New York Facility	Exhibit 10(k) to the Registrant’s 1992 Form 10-K
10(i)	Movement Tracking System Contract between Comtech Mobile Datacom Corporation and the U.S. Army’s Contract Agency dated August 31, 2007…	Exhibit 10(j) to the Registrant’s 2007 Form 10-K

		COMTECH TELECOMMUNICATIONS CORP.

September 23, 2009		By: /s/Fred Kornberg
(Date)		Fred Kornberg, Chairman of the Board
		and Chief Executive Officer

	Signature	Title

September 23, 2009	/s/Fred Kornberg	Chairman of the Board
(Date)	Fred Kornberg	Chief Executive Officer and President (Principal Executive Officer)


September 23, 2009	/s/Michael D. Porcelain	Senior Vice President and
(Date)	Michael D. Porcelain	Chief Financial Officer (Principal Financial and Accounting Officer)

September 23, 2009	/s/Richard L. Goldberg	Director
(Date)	Richard L. Goldberg


September 23, 2009	/s/Edwin Kantor	Director
(Date)	Edwin Kantor


September 23, 2009	/s/Ira Kaplan	Director
(Date)	Ira Kaplan


September 23, 2009	/s/Gerard R. Nocita	Director
(Date)	Gerard R. Nocita


September 23, 2009	/s/Robert G. Paul	Director
(Date)	Robert G. Paul

		Page
Reports of Independent Registered Public Accounting Firm		F-2, F-3
Consolidated Financial Statements:
	Balance Sheets as of July 31, 2009 and 2008	F-4
	Statements of Operations for each of the years in the three-year period ended July 31, 2009	F-5
	Statements of Stockholders’ Equity and Comprehensive Income for each of the years in the three-year period ended July 31, 2009	F-6
	Statements of Cash Flows for each of the years in the three-year period ended July 31, 2009	F-7, F-8
	Notes to Consolidated Financial Statements	F-9 to F-34
Additional Financial Information Pursuant to the Requirements of Form 10-K:
	Schedule II – Valuation and Qualifying Accounts and Reserves	S-1

Schedules not listed above have been omitted because they are either not applicable or the required information has been provided elsewhere in the consolidated financial statements or notes thereto.

Assets	2009			2008
Current assets:
Cash and cash equivalents	$	485,450,000			410,067,000
Accounts receivable, net		79,477,000			70,040,000
Inventories, net		95,597,000			85,966,000
Prepaid expenses and other current assets		13,398,000			5,891,000
Deferred tax asset		15,129,000			10,026,000
Total current assets		689,051,000			581,990,000

Property, plant and equipment, net		38,486,000			34,269,000
Goodwill		149,253,000			24,363,000
Intangibles with finite lives, net		55,272,000			7,505,000
Deferred financing costs, net		6,053,000			1,357,000
Other assets, net		556,000			3,636,000
Total assets	$	938,671,000			653,120,000

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	19,233,000			31,423,000
Accrued expenses and other current liabilities		51,741,000			49,671,000
Customer advances and deposits		19,571,000			15,287,000
Current installments of other obligations		-			108,000
Interest payable		1,418,000			1,050,000
Income taxes payable		563,000			-
Total current liabilities		92,526,000			97,539,000

Convertible senior notes		200,000,000			105,000,000
Other liabilities		2,283,000			-
Income taxes payable		4,267,000			1,909,000
Deferred tax liability		10,466,000			5,870,000
Total liabilities		309,542,000			210,318,000

Commitments and contingencies (See Note 15)

Stockholders’ equity:
Preferred stock, par value $.10 per share; shares authorized and unissued 2,000,000		-			-
Common stock, par value $.10 per share; authorized 100,000,000 shares; issued 28,390,855 shares and 24,600,166 shares at July 31, 2009 and 2008, respectively		2,839,000			2,460,000
Additional paid-in capital		322,636,000			186,246,000
Retained earnings		303,839,000			254,281,000
		629,314,000			442,987,000
Less:
Treasury stock (210,937 shares)		(185,000	)		(185,000	)
Total stockholders’ equity		629,129,000			442,802,000
Total liabilities and stockholders’ equity	$	938,671,000			653,120,000

	Common Stock				Additional Paid-in		Retained		Treasury Stock					Stockholders’		Comprehensive
	Shares		Amount		Capital		Earnings		Shares		Amount			Equity		Income

Balance July 31, 2006		23,052,593	$	2,305,000	$	139,487,000	$	112,635,000		210,937	$	(185,000	)	$	254,242,000

Equity-classified stock award compensation		-		-		7,408,000		-		-		-			7,408,000
Proceeds from exercise of options		938,000		94,000		9,441,000		-		-		-			9,535,000
Proceeds from issuance of employee stock purchase plan shares		25,736		3,000		755,000		-		-		-			758,000
Excess income tax benefit from stock award exercises		-		-		8,612,000		-		-		-			8,612,000
Net income		-		-		-		65,213,000		-		-			65,213,000	$	65,213,000

Balance July 31, 2007		24,016,329		2,402,000		165,703,000		177,848,000		210,937		(185,000	)		345,768,000		65,213,000

Equity-classified stock award compensation		-		-		10,595,000		-		-		-			10,595,000
Proceeds from exercise of options		559,681		56,000		6,640,000		-		-		-			6,696,000
Proceeds from issuance of employee stock purchase plan shares		24,156		2,000		902,000		-		-		-			904,000
Excess income tax benefit from stock award exercises		-		-		2,406,000		-		-		-			2,406,000
Net income		-		-		-		76,433,000		-		-			76,433,000		76,433,000

Balance July 31, 2008		24,600,166		2,460,000		186,246,000		254,281,000		210,937		(185,000	)		442,802,000		76,433,000

Equity-classified stock award compensation		-		-		9,712,000		-		-		-			9,712,000
Proceeds from exercise of options		410,403		41,000		8,243,000		-		-		-			8,284,000
Proceeds from issuance of employee stock purchase plan shares		46,959		5,000		1,301,000		-		-		-			1,306,000
Excess income tax benefit from stock award exercises		-		-		2,530,000		-		-		-			2,530,000
Debt converted to shares of common stock		3,333,327		333,000		114,604,000		-		-		-			114,937,000
Net income		-		-		-		49,558,000		-		-			49,558,000		49,558,000

Balance July 31, 2009		28,390,855	$	2,839,000	$	322,636,000	$	303,839,000		210,937	$	(185,000	)	$	629,129,000	$	49,558,000

	Fiscal Year Ended
	July 31, 2008
Total revenues	$	682,434,000
Net income		69,768,000
Net income per share - Basic		2.89
Net income per share - Diluted		2.53

Fair value of Radyne net tangible assets acquired	$	66,296,000

Fair value adjustments to net tangible assets:
Acquisition-related restructuring liabilities (See Note 8)		(2,713,000	)
Inventory step-up		1,520,000
Deferred tax assets, net		441,000
Fair value of net tangible assets acquired		65,544,000

Adjustments to record intangible assets at fair value:				Estimated Useful Lives
In-process research and development		6,200,000		Expensed immediately
Customer relationships		29,600,000		10 years
Technologies		19,900,000		7 to 15 years
Trademarks and other		5,700,000		2 to 20 years
Goodwill		124,873,000		Indefinite
Deferred tax liabilities, net		(20,424,000	)
		165,849,000
Aggregate purchase price	$	231,393,000

	As of the Acquisition Date of August 1, 2008
Specific Nature of In-Process Research and Development Projects	Fair Market Value Allocated		% of Estimated Efforts Complete		Original Anticipated Completion Date	Discount Rate		Fiscal Year Cash Flows Projected To Commence		Project Status as of July 31, 2009

RF Microwave Amplifiers Segment
Technology #1	$	1,553,000		61%	November 2008		14%		2009	Complete
Technology #2		971,000		54%	January 2009		14%		2009	In-process
Technology #3		776,000		76%	October 2008		14%		2009	Complete
Telecommunications Transmission Segment
Technology #4		2,900,000		75%	October 2008		14%		2009	Complete
Total	$	6,200,000

	2009		2008
Billed receivables from commercial customers	$	43,813,000		31,758,000
Billed receivables from the U.S. government and its agencies		33,125,000		34,911,000
Unbilled receivables on contracts-in-progress		3,791,000		4,672,000
		80,729,000		71,341,000
Less allowance for doubtful accounts		1,252,000		1,301,000
Accounts receivable, net	$	79,477,000		70,040,000

	2009		2008
Raw materials and components	$	64,209,000		41,047,000
Work-in-process and finished goods		43,132,000		53,120,000
		107,341,000		94,167,000
Less reserve for excess and obsolete inventories		11,744,000		8,201,000
Inventories, net	$	95,597,000		85,966,000

	2009		2008
Machinery and equipment	$	89,420,000		75,800,000
Leasehold improvements		8,699,000		6,275,000
Equipment financed by capital lease		6,000		52,000
		98,125,000		82,127,000
Less accumulated depreciation and amortization		59,639,000		47,858,000
Property, plant and equipment, net	$	38,486,000		34,269,000

	2009		2008
Accrued wages and benefits	$	20,411,000		23,680,000
Accrued warranty obligations		14,500,000		12,308,000
Accrued commissions and royalties		3,603,000		4,882,000
Accrued business acquisition payments		-		1,169,000
Accrued acquisition-related restructuring liabilities (See Note 8)		161,000		-
Other		13,066,000		7,632,000
Accrued expenses and other current liabilities	$	51,741,000		49,671,000

	2009			2008
Balance at beginning of period	$	12,308,000			9,685,000
Provision for warranty obligations		7,985,000			8,131,000
Warranty obligations acquired from Radyne		1,975,000			-
Reversal of warranty liability		(62,000	)		(1,026,000	)
Charges incurred		(7,706,000	)		(4,482,000	)
Balance at end of period	$	14,500,000			12,308,000

	Accrued July 31, 2008		Estimated Costs (1)		Net Cash Inflow (Outflow)			Accretion of Interest to Date		Accrued July 31, 2009		Total Costs Accrued to Date		Total Net Expected Costs (2)
Facilities	$	-		2,100,000		225,000			119,000		2,444,000		2,444,000	$	4,141,000
Severance		-		613,000		(613,000	)		-		-		613,000		613,000
Total restructuring costs	$	-		2,713,000		(388,000	)		119,000		2,444,000		3,057,000	$	4,754,000

	2009			2008
Deferred tax assets:
Allowance for doubtful accounts receivable	$	385,000			484,000
Intangibles		-			329,000
Inventory and warranty reserves		9,056,000			6,922,000
Compensation and commissions		2,149,000			1,558,000
State research and experimentation credits		1,285,000			1,162,000
Stock-based compensation		7,629,000			5,623,000
Net operating losses related to the acquisition of Radyne		1,580,000			-
Other		4,923,000			1,963,000
Less valuation allowance		(1,212,000	)		(1,262,000	)
Total deferred tax assets		25,795,000			16,779,000
Deferred tax liabilities:
Convertible senior notes		-			(9,672,000	)
Plant and equipment		(2,466,000	)		(2,951,000	)
Intangibles		(18,666,000	)		-
Total deferred tax liabilities		(21,132,000	)		(12,623,000	)
Net deferred tax assets	$	4,663,000			4,156,000

Balance as of July 31, 2008	$	4,467,000
Increase related to the acquisition of Radyne		3,566,000
Increase related to fiscal 2009		779,000
Increase related to prior periods		315,000
Expiration of statute of limitations		(19,000	)
Decrease related to prior periods		(421,000	)
Settlements with taxing authorities		(2,074,000	)
Balance as of July 31, 2009	$	6,613,000

	Number of Shares Underlying Stock-Based Awards			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at July 31, 2006		2,919,242		$	15.99
Granted		716,600			27.91
Expired/canceled		(197,825	)		14.90
Exercised		(938,000	)		10.17
Outstanding at July 31, 2007		2,500,017			21.67
Granted		622,000			42.47
Expired/canceled		(42,663	)		27.38
Exercised		(559,681	)		11.96
Outstanding at July 31, 2008		2,519,673			28.87
Granted		1,066,900			38.67
Expired/canceled		(110,175	)		33.88
Exercised		(411,153	)		20.21
Outstanding at July 31, 2009		3,065,245		$	33.26	3.27	$	11,951,000
Exercisable at July 31, 2009		1,193,170		$	28.03	2.51	$	7,968,000
Expected to vest at July 31, 2009		1,750,429		$	36.80	3.76	$	3,535,000

	Fiscal Year Ended July 31, 2009
(in thousands)	Telecommunications Transmission		Mobile Data Communications		RF Microwave Amplifiers		Unallocated			Total
Net sales	$	254,266		177,007		155,099		-		$	586,372
Operating income (loss)		55,489		31,348		14,266		(24,176	)		76,927
Interest income and other		104		1		68		2,565			2,738
Interest expense		141		-		-		3,026			3,167
Depreciation and amortization		15,684		3,352		8,567		9,789			37,392
Expenditure for long-lived assets, including intangibles		133,955		10,923		52,282		78			197,238
Total assets at July 31, 2009		270,596		53,105		112,709		502,261			938,671

	Fiscal Year Ended July 31, 2007
(in thousands)	Telecommunications Transmission			Mobile Data Communications		RF Microwave Amplifiers		Unallocated			Total
Net sales	$	219,935			189,575		36,174		-		$	445,684
Operating income (loss)		59,205			45,403		3,658		(23,344	)		84,922
Interest income and other		(59	)		22		-		14,245			14,208
Interest expense		48			37		-		2,646			2,731
Depreciation and amortization		6,995			1,556		1,392		7,586			17,529
Expenditure for long-lived assets, including intangibles		8,616			5,858		1,298		114			15,886
Total assets at July 31, 2007		118,300			48,275		34,993		354,774			556,342

2010	$	24,958,000
2011		5,289,000
2012		3,139,000
2013		1,197,000
2014		754,000
Thereafter		8,015,000
Total	$	43,352,000

	July 31, 2009
	Weighted Average Amortization Period		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Technologies		10.5	$	42,311,000		18,944,000	$	23,367,000
Customer relationships		10.0		29,931,000		3,176,000		26,755,000
Trademarks and other		17.5		6,344,000		1,194,000		5,150,000
Total			$	78,586,000		23,314,000	$	55,272,000

	July 31, 2008
	Weighted Average Amortization Period		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Technologies		7.3	$	22,252,000		15,086,000	$	7,166,000
Customer relationships		7.6		331,000		172,000		159,000
Trademarks and other		4.6		644,000		464,000		180,000
Total			$	23,227,000		15,722,000	$	7,505,000

	Telecommunications		Mobile Data			RF Microwave
	Transmission		Communications			Amplifiers		Total
Balance at July 31, 2007	$	8,817,000		7,148,000			8,422,000	$	24,387,000
Acquisition of Insite		-		(24,000	)		-		(24,000	)
Balance at July 31, 2008		8,817,000		7,124,000			8,422,000		24,363,000
Acquisition of Radyne (See Note 2)		98,962,000		4,758,000			21,153,000		124,873,000
Payment of Insite Earn-out		-		17,000			-		17,000
Balance at July 31, 2009	$	107,779,000		11,899,000			29,575,000	$	149,253,000

Fiscal 2009	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
Net sales	$	191,915		143,886		128,545		122,026		586,372
Gross profit		86,979		59,477		47,505		46,939		240,900
Net income		22,371		12,840		8,169		6,178		49,558
Diluted income per share		0.80		0.46		0.29		0.21		1.73	*

Fiscal 2008	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
Net sales	$	115,055		152,030		138,068		126,474		531,627
Gross profit		50,478		66,325		60,532		57,605		234,940
Net income		14,694		25,469		19,305		16,965		76,433
Diluted income per share		0.54		0.91		0.70		0.61		2.76

Fiscal 2007	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
Net sales	$	97,070		111,383		119,417		117,814		445,684
Gross profit		39,375		49,850		51,575		52,495		193,295
Net income		10,827		18,171		19,128		17,087		65,213
Diluted income per share		0.41		0.68		0.71		0.63		2.42	*

Column A	Column B		Column C Additions						Column D				Column E
Description	Balance at beginning of period		Charged to cost and expenses				Charged to other accounts - describe		Transfers (deductions) - describe				Balance at end of period
Allowance for doubtful accounts - accounts receivable:
Year ended July 31,
2009	$	1,301,000		(864,000	)	(A)		-		815,000		(B)	$	1,252,000
2008		685,000		723,000		(A)		-		(107,000	)	(B)		1,301,000
2007		1,376,000		(375,000	)	(A)		-		(316,000	)	(B)		685,000

Inventory reserves:
Year ended July 31,
2009	$	8,201,000		5,692,000		(C)		-		(2,149,000	)	(D)	$	11,744,000
2008		8,504,000		2,414,000		(C)		-		(2,717,000	)	(D)		8,201,000
2007		6,123,000		4,491,000		(C)		-		(2,110,000	)	(D)		8,504,000

Valuation allowance for deferred tax assets:
Year ended July 31,
2009	$	1,262,000		-				-		(50,000	)	(E)	$	1,212,000
2008		1,312,000		-				-		(50,000	)	(E)		1,262,000
2007		1,362,000		-				-		(50,000	)	(E)		1,312,000