Edgar Filing: COMTECH TELECOMMUNICATIONS CORP /DE/

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



	FORM 10-Q

(Mark One)


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

For the quarterly period ended January 31, 2008

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

Commission File Number: 0-7928

(COMTECH LOGO)

(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)

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.
x Yes o No

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


Large accelerated filer x	Accelerated filer o	Non-accelerated filer o

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o Yes x No

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of February 29, 2008, the number of outstanding shares of Common Stock, par value $.10 per share, of the registrant was 24,213,640 shares.

COMTECH TELECOMMUNICATIONS CORP.
INDEX


		Page

PART I.	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets – January 31, 2008 (Unaudited) and July 31, 2007	2

	Condensed Consolidated Statements of Operations – Three and Six Months Ended January 31, 2008 and 2007 (Unaudited)	3

	Condensed Consolidated Statements of Cash Flows – Six Months Ended January 31, 2008 and 2007 (Unaudited)	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35

Item 4.	Controls and Procedures	35

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 6.	Exhibits	36

Signature Page		37

PART I
FINANCIAL INFORMATION
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS


Item 1.	January 31, 2008			July 31, 2007

	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	340,938,000			342,903,000
Accounts receivable, net		112,376,000			73,585,000
Inventories, net		77,743,000			61,987,000
Prepaid expenses and other current assets		7,246,000			6,734,000
Deferred tax asset – current		9,657,000			9,380,000

Total current assets		547,960,000			494,589,000

Property, plant and equipment, net		31,297,000			29,282,000
Goodwill		24,363,000			24,387,000
Intangibles with finite lives, net		5,823,000			5,717,000
Deferred financing costs, net		1,630,000			1,903,000
Other assets, net		395,000			464,000

Total assets	$	611,468,000			556,342,000


Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	27,920,000			26,137,000
Accrued expenses and other current liabilities		43,142,000			47,332,000
Customer advances and deposits		24,066,000			20,056,000
Current installments of other obligations		140,000			135,000
Interest payable		1,050,000			1,050,000
Income taxes payable – current		1,819,000			2,796,000

Total current liabilities		98,137,000			97,506,000

Convertible senior notes		105,000,000			105,000,000
Other obligations, less current installments		37,000			108,000
Income taxes payable – non-current		3,018,000			—
Deferred tax liability – non-current		8,140,000			7,960,000

Total liabilities		214,332,000			210,574,000

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 24,424,127 shares and 24,016,329 shares at January 31, 2008 and July 31, 2007, respectively		2,442,000			2,402,000
Additional paid-in capital		176,868,000			165,703,000
Retained earnings		218,011,000			177,848,000

		397,321,000			345,953,000
Less:
Treasury stock (210,937 shares)		(185,000	)		(185,000	)

Total stockholders’ equity		397,136,000			345,768,000

Total liabilities and stockholders’ equity	$	611,468,000			556,342,000

See accompanying notes to condensed consolidated financial statements.

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)


	Three months ended January 31,						Six months ended January 31,

	2008			2007			2008			2007


Net sales	$	152,030,000			111,383,000			267,085,000			208,453,000
Cost of sales		85,705,000			61,533,000			150,282,000			119,228,000

Gross profit		66,325,000			49,850,000			116,803,000			89,225,000


Expenses:
Selling, general and administrative		21,304,000			18,257,000			41,703,000			34,844,000
Research and development		9,140,000			7,616,000			20,181,000			14,773,000
Amortization of intangibles		434,000			679,000			813,000			1,328,000

		30,878,000			26,552,000			62,697,000			50,945,000


Operating income		35,447,000			23,298,000			54,106,000			38,280,000

Other expenses (income):
Interest expense		670,000			672,000			1,347,000			1,367,000
Interest income and other		(4,095,000	)		(3,315,000	)		(8,542,000	)		(6,490,000	)


Income before provision for income taxes		38,872,000			25,941,000			61,301,000			43,403,000
Provision for income taxes		13,403,000			7,770,000			21,138,000			14,405,000


Net income	$	25,469,000			18,171,000			40,163,000			28,998,000


Net income per share (See Note 4):
Basic	$	1.06			0.79			1.67			1.26

Diluted	$	0.91			0.68			1.45			1.09


Weighted average number of common shares outstanding – basic		24,099,000			23,095,000			24,012,000			23,022,000


Weighted average number of common and common equivalent shares outstanding assuming dilution – diluted		28,303,000			27,491,000			28,256,000			27,440,000

See accompanying notes to condensed consolidated financial statements.

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	Six months ended January 31,

	2008			2007

Cash flows from operating activities:
Net income	$	40,163,000			28,998,000
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization of property, plant and equipment		4,371,000			3,558,000
Amortization of intangible assets with finite lives		813,000			1,328,000
Amortization of stock-based compensation		5,271,000			3,347,000
Amortization of deferred financing costs		273,000			273,000
Gain on disposal of property, plant and equipment		—			(2,000	)
(Benefit from) provision for allowance for doubtful accounts		(5,000	)		18,000
Provision for excess and obsolete inventory		1,236,000			1,549,000
Excess income tax benefit from stock award exercises		(1,523,000	)		(1,855,000	)
Deferred income tax benefit		(97,000	)		(340,000	)
Changes in assets and liabilities, net of effects of acquisitions:
Restricted cash securing letter of credit obligations		—			1,003,000
Accounts receivable		(38,786,000	)		1,329,000
Inventories		(16,883,000	)		(14,004,000	)
Prepaid expenses and other current assets		(1,313,000	)		1,502,000
Other assets		69,000			106,000
Accounts payable		1,858,000			(8,784,000	)
Accrued expenses and other current liabilities		(3,986,000	)		(3,717,000	)
Customer advances and deposits		4,010,000			5,603,000
Deferred service revenue		—			(4,990,000	)
Income taxes payable		3,564,000			2,292,000

Net cash (used in) provided by operating activities		(965,000	)		17,214,000


Cash flows from investing activities:
Purchases of property, plant and equipment		(6,386,000	)		(4,870,000	)
Purchases of other intangibles with finite lives		(193,000	)		—
Payments for business acquisition		(265,000	)		(2,614,000	)

Net cash used in investing activities		(6,844,000	)		(7,484,000	)


Cash flows from financing activities:
Principal payments on other obligations		(66,000	)		(91,000	)
Excess income tax benefit from stock award exercises		1,523,000			1,855,000
Proceeds from exercises of stock options		3,939,000			2,770,000
Proceeds from issuance of employee stock purchase plan shares		448,000			363,000

Net cash provided by financing activities		5,844,000			4,897,000


Net (decrease) increase in cash and cash equivalents		(1,965,000	)		14,627,000
Cash and cash equivalents at beginning of period		342,903,000			251,587,000

Cash and cash equivalents at end of period	$	340,938,000			266,214,000


Supplemental cash flow disclosures:
Cash paid during the period for:
Interest	$	1,068,000			1,073,000

Income taxes	$	17,881,000			12,055,000


Noncash investing activities:
Accrued business acquisition payments	$	—			613,000

See accompanying notes to condensed consolidated financial statements.

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


(1)	General

	The accompanying condensed consolidated financial statements of Comtech Telecommunications Corp. and Subsidiaries (the “Company”) as of and for the three and six months ended January 31, 2008 and 2007 are unaudited. In the opinion of management, the information furnished reflects all material adjustments (which include normal recurring adjustments) necessary for a fair presentation of the results for the unaudited interim periods. The results of operations for such periods are not necessarily indicative of the results of operations to be expected for the full fiscal year. For the three and six months ended January 31, 2008 and 2007, comprehensive income was equal to net income.

	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 amount 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 reported period. Actual results may differ from those estimates.

	These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the fiscal year ended July 31, 2007 and the notes thereto contained in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”), and all of the Company’s other filings with the SEC.

(2)	Reclassifications

	Certain reclassifications have been made to previously reported financial statements to conform to the Company’s current financial statement format.

(3)	Stock-Based Compensation

	The Company applies the provisions of Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment,” which establishes the accounting for employee stock-based awards. Under the provisions of SFAS No. 123(R), stock-based compensation for both equity and liability-classified awards is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite employee service period (generally the vesting period of the grant). The fair value of liability-classified awards is remeasured at the end of each reporting period until the award is settled, with changes in fair value recognized pro-rata for the portion of the requisite service period rendered. The Company used the modified prospective method upon adopting SFAS No. 123(R).

	The Company recognized stock-based compensation for awards issued under the Company’s Stock Option Plans and the Company’s 2001 Employee Stock Purchase Plan (the “ESPP”) in the following line items in the Condensed Consolidated Statements of Operations:



	Three months ended January 31,						Six months ended January 31,

	2008			2007			2008			2007

Cost of sales	$	106,000			122,000			327,000			262,000
Selling, general and administrative expenses		2,023,000			1,188,000			4,043,000			2,609,000
Research and development expenses		423,000			227,000			901,000			476,000

Stock-based compensation expense before income tax benefit		2,552,000			1,537,000			5,271,000			3,347,000
Income tax benefit		(888,000	)		(579,000	)		(1,829,000	)		(1,074,000	)

Net stock-based compensation expense	$	1,664,000			958,000			3,442,000			2,273,000


	Of the total stock-based compensation expense before income tax benefit recognized in the three months ended January 31, 2008 and 2007, $54,000 and $41,000, respectively, related to awards issued pursuant to the ESPP. Of the total stock-based compensation expense before income tax benefit recognized in the six months ended January 31, 2008 and 2007, $105,000 and $83,000, respectively, related to awards issued pursuant to the ESPP.

	Included in total stock-based compensation expense before income tax benefit recognized in the three months ended January 31, 2008 is a benefit of $4,000 as a result of the required fair value remeasurement of the Company’s liability-classified stock appreciation rights (“SARs”) at the end of the reporting period. Of the total stock-based compensation expense before income tax benefit recognized in the six months ended January 31, 2008, $85,000 related to awards of SARs. There were no SARs outstanding in the three or six month periods ended January 31, 2007.

	Stock-based compensation that was capitalized and included in ending inventory at January 31, 2008 and July 31, 2007 was $215,000 and $106,000, respectively.

	The Company estimates the fair value of stock-based awards using the Black-Scholes option pricing model. The Black-Scholes option pricing model includes assumptions regarding dividend yield, expected volatility, expected option term and risk-free interest rates. The assumptions used in computing the fair value of stock-based awards reflect the Company’s best estimates, but involve uncertainties relating to market and other conditions, many of which are outside of its control. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the employee who receives stock-based awards.

	The per share weighted average grant-date fair value of stock-based awards granted during the three months ended January 31, 2008 and 2007 approximated $17.43 and $13.79, respectively. The per share weighted average grant-date fair value of stock-based awards granted during the six months ended January 31, 2008 and 2007 approximated $15.73 and $10.68, respectively. In addition to the exercise and grant-date prices of the awards, certain weighted average assumptions that were used to estimate the initial fair value of stock-based awards in the respective periods are listed in the table below:



	Three months ended January 31,				Six months ended January 31,

	2008		2007		2008		2007

Expected dividend yield	0	%	0	%	0	%	0	%
Expected volatility	42.43	%	45.47	%	43.11	%	45.47	%
Risk-free interest rate	2.91	%	4.48	%	4.54	%	4.89	%
Expected life (years)	3.41		3.63		3.55		3.63


	Stock-based awards granted during the three and six months ended January 31, 2008 and 2007 have exercise prices equal to the fair market value of the stock on the date of grant, a contractual term of five years and a vesting period of three years. All stock-based awards granted through July 31, 2005 had exercise prices equal to the fair market value of the stock on the date of grant and a contractual term of ten years and generally a vesting period of five years. The Company settles employee stock option exercises with new shares. All SARs granted through January 31, 2008 may only be settled with cash.

	The Company estimates expected volatility by considering the historical volatility of the Company’s stock, the implied volatility of publicly traded stock options in the Company’s stock and the Company’s expectations of volatility for the expected term of stock-based compensation awards. The risk-free interest rate is based on the United States (“U.S.”) treasury yield curve in effect at the time of grant. The expected life is the number of years that the Company estimates awards will be outstanding prior to exercise. The expected life of the awards issued after July 31, 2005 and through July 31, 2007 was determined using the “simplified method” prescribed in SEC Staff Accounting Bulletin (“SAB”) No. 107. Effective August 1, 2007, and in accordance with SAB No. 107, the Company values awards based on the expected life of the total award with the expected life determined by employee groups with sufficiently distinct behavior patterns.


	The following table provides the components of the actual income tax benefit recognized for tax deductions relating to the exercise of stock-based awards:



	Six months ended January 31,

	2008			2007

Actual income tax benefit recorded for the tax deductions relating to the exercise of stock-based awards	$	2,088,000			2,098,000
Less: Tax benefit initially recognized on exercised stock-based awards vesting subsequent to the adoption of SFAS No. 123(R)		(565,000	)		(139,000	)

Excess income tax benefit recorded as an increase to additional paid-in capital		1,523,000			1,959,000
Less: Tax benefit initially disclosed but not previously recognized on exercised equity-classified stock-based awards vesting prior to the adoption of SFAS No. 123(R)		—			(104,000	)

Excess income tax benefit from exercised equity-classified stock-based awards reported as a cash flow from financing activities in the Company’s Condensed Consolidated Statements of Cash Flows	$	1,523,000			1,855,000


	At January 31, 2008, total remaining unrecognized compensation cost related to unvested stock-based awards was $15,466,000, net of estimated forfeitures of $1,099,000. The net cost is expected to be recognized over a weighted average period of 1.9 years.

(4)	Earnings Per Share

	The Company calculates earnings per share (“EPS”) in accordance with SFAS No. 128, “Earnings per Share.” Basic EPS is computed based on the weighted average number of shares outstanding. Diluted EPS reflects the dilution from potential common stock issuable pursuant to the exercise of stock-based awards and convertible senior notes, if dilutive, outstanding during each period. Equity-classified stock-based awards to purchase 586,000 and 697,000 shares for the three months ended January 31, 2008 and 2007, respectively, were not included in the EPS calculation because their effect would have been anti-dilutive. Equity-classified stock-based awards to purchase 588,000 and 1,035,000 shares for the six months ended January 31, 2008 and 2007, respectively, were not included in the EPS calculation because their effect would have been anti-dilutive.

	Liability-classified stock-based awards do not impact, and are not included in, the denominator for EPS calculations.

	In accordance with Emerging Issues Task Force (“EITF”) Issue No. 04-8, “The Effect of Contingently Convertible Instruments on Diluted Earnings per Share,” the Company includes the impact of the assumed conversion of its 2.0% convertible senior notes in calculating diluted EPS.


	The following table reconciles the numerators and denominators used in the basic and diluted EPS calculations:



	Three months ended January 31,				Six months ended January 31,

	2008		2007		2008		2007

Numerator:
Net income for basic calculation	$	25,469,000		18,171,000		40,163,000		28,998,000
Effect of dilutive securities:
Interest expense (net of tax) on convertible senior notes		417,000		417,000		833,000		833,000

Numerator for diluted calculation	$	25,886,000		18,588,000		40,996,000		29,831,000


Denominator:
Denominator for basic calculation		24,099,000		23,095,000		24,012,000		23,022,000
Effect of dilutive securities:
Stock options		871,000		1,063,000		911,000		1,085,000
Conversion of convertible senior notes		3,333,000		3,333,000		3,333,000		3,333,000

Denominator for diluted calculation		28,303,000		27,491,000		28,256,000		27,440,000


(5)	Acquisitions

	In August 2006, the Company acquired certain assets and assumed certain liabilities of Insite Consulting, Inc. (“Insite”), a logistics application software company, for $3,203,000, including final transaction costs of $232,000. In addition to the guaranteed purchase price, the Company might be required to make certain earn-out payments based on the achievement of future sales targets. The first part of the earn-out cannot exceed $1,350,000 and is limited to a five-year period. The second part of the earn-out, which is for a ten-year period, is unlimited and based on a per unit future sales target primarily relating to new commercial satellite-based mobile data communication markets. Insite has developed the geoOps™ Enterprise Location Monitoring System, a software-based solution that allows customers to integrate legacy data systems with near-real time logistics and operational data systems. Sales and income relating to the Insite assets acquired have not been material to the Company’s results of operations. This operation was combined, in August 2006, with the Company’s existing business and is part of the mobile data communications segment.

	In February 2007, the Company acquired certain assets and assumed certain liabilities of Digicast Networks, Inc. (“Digicast”), a manufacturer of digital video broadcasting equipment, for $1,000,000. Sales and income related to the Digicast assets acquired have not been material to the Company’s results of operations. This operation was combined, in February 2007, with the Company’s existing business and is part of the telecommunications transmission segment.

	The Company allocated the purchase price of these acquisitions as follows:


	Insite		Digicast		Estimated Useful Lives


Fair value of net tangible assets acquired	$	335,000		408,000

Adjustments to record intangible assets at fair value:
Existing technology		447,000		—		7 years
Other intangibles		302,000		592,000		1 to 10 years
Goodwill		2,119,000		—		Indefinite

		2,868,000		592,000

Aggregate purchase price	$	3,203,000		1,000,000


	The valuation of existing technology was based primarily on the discounted capitalization of royalty expense saved because the Company now owns the asset. The valuation of other intangibles was primarily based on the value of the discounted cash flows that the related assets could be expected to generate in the future.


(6)	Accounts Receivable

	Accounts receivable consist of the following:


	January 31, 2008			July 31, 2007

Amounts receivable from the U.S. government and its agencies		$	74,827,000	38,773,000
Accounts receivable from commercial customers			32,319,000	33,859,000
Unbilled receivables on contracts-in-progress			5,863,000	1,638,000

			113,009,000	74,270,000
Less allowance for doubtful accounts			633,000	685,000

Accounts receivable, net		$	112,376,000	73,585,000


	Unbilled receivables on contracts-in-progress include $4,326,000 and $1,308,000 at January 31, 2008 and July 31, 2007, respectively, due from the U.S. government and its agencies. There was no retainage included in unbilled receivables at January 31, 2008 or July 31, 2007. In the opinion of management, substantially all of the unbilled balances will be billed and collected within one year.

(7)	Inventories

	Inventories consist of the following:


	January 31, 2008			July 31, 2007

Raw materials and components		$	39,996,000	32,669,000
Work-in-process and finished goods			46,267,000	37,822,000

			86,263,000	70,491,000
Less reserve for excess and obsolete inventories			8,520,000	8,504,000

Inventories, net		$	77,743,000	61,987,000


	Inventories directly related to long-term contracts, including the Company’s contracts for the U.S. Army’s Movement Tracking System (“MTS”) and the U.S. Army’s Force XXI Battle Command, Brigade and Below command and control systems (also known as Blue Force Tracking (“BFT”)), were $23,651,000 and $6,547,000 at January 31, 2008 and July 31, 2007, respectively. At January 31, 2008 and July 31, 2007, $1,461,000 and $2,286,000, respectively, of the inventory balance above related to contracts from third party commercial customers to outsource their manufacturing.

(8)	Accrued Expenses

	Accrued expenses and other current liabilities consist of the following:


	January 31, 2008			July 31, 2007

Accrued wages and benefits		$	15,596,000	20,695,000
Accrued warranty obligations			11,503,000	9,685,000
Accrued commissions and royalties			8,415,000	6,751,000
Accrued business acquisition payments			—	290,000
Other			7,628,000	9,911,000

Accrued expenses and other current liabilities		$	43,142,000	47,332,000

The Company provides warranty coverage for most of its products for a period of at least one year from the date of shipment. The Company records a liability for estimated warranty expense based on historical claims, product failure rates and other factors. Some of the Company’s product warranties are provided under long-term contracts, the costs of which are incorporated into the Company’s estimates of total contract costs. Changes in the Company’s product warranty liability during the six months ended January 31, 2008 and 2007 were as follows:



	Six months ended January 31,

	2008				2007

Balance at beginning of period		$	9,685,000		10,468,000
Provision for warranty obligations			4,286,000		3,549,000
Reversal of warranty liability			(156,000	)	(667,000	)
Charges incurred			(2,312,000	)	(2,786,000	)

Balance at end of period		$	11,503,000		10,564,000


(9)	2.0% Convertible Senior Notes due 2024

	On January 27, 2004, the Company issued $105,000,000 of its 2.0% convertible senior notes in a private offering pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds from this transaction were $101,179,000 after deducting the initial purchaser’s discount and other transaction costs of $3,821,000.

	The notes bear interest at an annual rate of 2.0% and, during certain periods, the notes are convertible into shares of the Company’s common stock at an initial conversion price of $31.50 per share (a conversion rate of 31.7460 shares per $1,000 original principal amount of notes), subject to adjustment in certain circumstances. The notes may be converted if, during a conversion period on each of at least 20 trading days, the closing sale price of the Company’s common stock exceeds 120% of the conversion price in effect. Upon conversion of the notes, in lieu of delivering common stock, the Company may, in its discretion, deliver cash or a combination of cash and common stock. The notes can be converted, at the option of the noteholders, during the conversion period of December 17, 2007 through March 14, 2008. On the basis of the closing sale prices of the Company’s common stock through March 3, 2008, the Company also anticipates that the notes will be convertible during the conversion period of March 17, 2008 through June 16, 2008. Upon receiving notification of a noteholder’s intent to convert, the Company, in accordance with the provisions of the indenture, will inform the noteholder of its intention to deliver shares of common stock or cash, or a combination thereof. The Company may, at its option, redeem some or all of the notes on or after February 4, 2009. Holders of the notes will have the right to require the Company to repurchase some or all of the outstanding notes on February 1, 2011, February 1, 2014 and February 1, 2019 and upon certain events, including a change in control. If not redeemed by the Company or repaid pursuant to the holders’ right to require repurchase, the notes mature on February 1, 2024. The notes have substantive conversion features as defined by EITF No. 05-1, “Accounting for the Conversion of an Instrument that Becomes Convertible Upon the Issuer’s Exercise of a Call Option.” Accordingly, the Company will not recognize a gain or loss if it issues common stock upon the conversion and settlement of these notes.

	The 2.0% interest is payable in cash, semi-annually, through February 1, 2011. After such date, the 2.0% interest will be accreted into the principal amount of the notes. Also, commencing with the six-month period beginning February 1, 2009, if the average note price for the applicable trading period equals 120% or more of the accreted principal amount of such notes, the Company will pay contingent interest at an annual rate of 0.25%.

	The notes are general unsecured obligations of the Company, ranking equally in right of payment with all of its other existing and future unsecured senior indebtedness and senior in right of payment to any of its future subordinated indebtedness. All of Comtech Telecommunications Corp.’s (the “Parent”) wholly-owned subsidiaries have issued full and unconditional guarantees in favor of the holders of the Company’s 2.0% convertible senior notes (the “Guarantor Subsidiaries”), except for the subsidiary that purchased Memotec, Inc. in fiscal 2004 (the “Non-Guarantor Subsidiary”). These full and unconditional guarantees are joint and several. Other than supporting the operations of its subsidiaries, the Parent has no independent assets or operations and there are currently no significant restrictions on its ability, or the ability of the guarantors, to obtain funds from each other by dividend or loan. Consolidating financial information regarding the Parent, the Guarantor Subsidiaries and the Non-Guarantor Subsidiary can be found in Note (16) to the Condensed Consolidated Financial Statements.

	The net proceeds of the offering are being used for working capital and general corporate purposes and potentially may be used for future acquisitions of businesses or technologies or repurchases of the Company’s common stock. The Company filed a registration statement with the SEC, which has become effective, for the resale of the notes and the shares of common stock issuable upon conversion of the notes.

(10)	Income Taxes

	Effective August 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN No. 48”). Except for additional disclosures as noted below, there was no material impact on the Company’s financial statements and the Company did not record any cumulative-effect adjustment to the opening balance in retained earnings. In accordance with FIN No. 48, there was no retrospective application to any prior financial statement periods.


	At August 1, 2007 (the date of adoption of FIN No. 48) and January 31, 2008, the total unrecognized tax benefits, excluding interest, was $3,955,000 and $4,131,000, respectively, all of which would impact the Company’s effective tax rate, if recognized. Unrecognized tax benefits result from income tax positions taken or expected to be taken on the Company’s income tax returns for which a tax benefit has not been recorded in the Company’s financial statements. Of the total unrecognized tax benefits, $3,018,000 and $2,801,000, were recorded as non-current income taxes payable in the Condensed Consolidated Balance Sheets of the Company at January 31, 2008 and August 1, 2007, respectively.

	The Company’s policy is to recognize interest and penalties relating to uncertain tax positions in income tax expense. At August 1, 2007 and January 31, 2008, interest accrued relating to income taxes was $462,000 and $539,000, respectively, net of the related income tax benefit.

	The tax years that remain open to examination by the U.S. Federal tax authorities are fiscal 2004 and forward. In addition, the Company is subject to tax in various states and its Canadian subsidiary is subject to Canadian federal and provincial taxes. In general, these tax returns are open for examination by the applicable tax authorities for fiscal 2004 and forward.

(11)	Stock Option Plans and Employee Stock Purchase Plan

	The Company issues stock-based awards pursuant to the following plans:

	1993 Incentive Stock Option Plan – The 1993 Incentive Stock Option Plan, as amended, provided for the granting to key employees and officers of incentive and non-qualified stock options to purchase up to 2,345,625 shares of the Company’s common stock at prices generally not less than the fair market value at the date of grant with the exception of anyone who, prior to the grant, owns more than 10% of the voting power, in which case the exercise price cannot be less than 110% of the fair market value. In addition, it provided formula grants to non-employee members of the Company’s Board of Directors. The term of the options could be no more than ten years. However, for incentive stock options granted to any employee who, prior to the granting of the option, owns stock representing more than 10% of the voting power, the option term could be no more than five years.

	As of January 31, 2008, the Company had granted stock-based awards representing the right to purchase an aggregate of 2,016,218 shares (net of 428,441 canceled awards) at prices ranging between $0.67-5.31 per share, of which 675 are outstanding at January 31, 2008. To date, 2,015,543 shares have been exercised. Outstanding awards have been transferred to the 2000 Stock Incentive Plan. The terms applicable to these awards prior to the transfer continue to apply. The plan was terminated by the Company’s Board of Directors in December 1999 due to the approval by the shareholders of the 2000 Stock Incentive Plan.

	2000 Stock Incentive Plan – The 2000 Stock Incentive Plan, as amended, provides for the granting to all employees and consultants of the Company (including prospective employees and consultants) non-qualified stock options, SARs, restricted stock, performance shares, performance units and other stock-based awards. In addition, employees of the Company are eligible to be granted incentive stock options. Non-employee directors of the Company are eligible to receive non-discretionary grants of nonqualified stock options subject to certain limitations. The aggregate number of shares of common stock which may be issued may not exceed 6,587,500 plus the shares that were transferred to the Plan relating to outstanding awards that were previously granted, or available for grant, under the 1982 Incentive Stock Option Plan and the 1993 Incentive Stock Option Plan. The Stock Option Committee of the Company’s Board of Directors, consistent with the terms of the Plan, will determine the types of awards to be granted, the terms and conditions of each award and the number of shares of common stock to be covered by each award. Grants of incentive and non-qualified stock awards may not have a term exceeding ten years or no more than five years in the case of an incentive stock award granted to a stockholder who owns stock representing more than 10% of the voting power.

	As of January 31, 2008, the Company had granted stock-based awards representing the right to purchase an aggregate of 5,418,935 shares (net of 581,365 canceled awards) at prices ranging between $3.13-51.65, of which 2,659,073 are outstanding at January 31, 2008. As of January 31, 2008, 2,759,862 stock-based awards have been exercised. All stock-based awards granted through January 31, 2008 had exercise prices equal to the fair market value of the common stock on the date of grant. All stock-based awards granted through July 31, 2005 have a term of ten years. All stock-based awards granted since August 1, 2005 have a term of five years.


	The following table summarizes certain stock option plan activity during the three and six months ended January 31, 2008:


	Number of Shares Underlying Stock-Based Awards		Weighted Average Exercise Price			Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value


Outstanding at July 31, 2007	2,500,017			$	21.67
Granted	590,000				42.58
Expired/canceled	(28,450	)			26.11
Exercised	(214,794	)			14.74

Outstanding at October 31, 2007	2,846,773				26.49
Granted	1,000				51.65
Expired/canceled	(5,500	)			26.14
Exercised	(182,525	)			4.24

Outstanding at January 31, 2008	2,659,748			$	28.02		4.29	$	44,635,000

Exercisable at January 31, 2008	809,823			$	21.17		4.33	$	19,140,000

Expected to vest at January 31, 2008	1,792,835			$	30.97		4.27	$	24,789,000


	Included in the number of shares underlying stock-based awards outstanding at January 31, 2008, in the above table, are 26,000 SARs with an aggregate intrinsic value of $180,000.

	The total intrinsic value of stock-based awards exercised during the three months ended January 31, 2008 and 2007 was $8,862,000 and $1,454,000, respectively. The total intrinsic value of stock-based awards exercised during the six months ended January 31, 2008 and 2007 was $16,214,000 and $6,677,000, respectively.

	2001 Employee Stock Purchase Plan – The ESPP was approved by the shareholders on December 12, 2000 and 675,000 shares of the Company’s common stock were reserved for issuance. The ESPP is intended to provide eligible employees of the Company the opportunity to acquire common stock in the Company at 85% of fair market value at the date of issuance through participation in the payroll-deduction based ESPP. Through the second quarter of fiscal 2008, the Company issued 271,066 shares of its common stock to participating employees in connection with the ESPP.

(12)	Customer and Geographic Information

	Sales by geography and customer type, as a percentage of consolidated net sales, are as follows:



	Three months ended January 31,				Six months ended January 31,

	2008		2007		2008		2007

United States
U.S. government		70.6%		58.5%		66.3%		57.5%
Commercial customers		6.0%		12.9%		7.2%		13.5%

Total United States		76.6%		71.4%		73.5%		71.0%

International		23.4%		28.6%		26.5%		29.0%


	International sales include sales to U.S. domestic companies for inclusion in products that will be sold to international customers. For the three and six months ended January 31, 2008 and 2007, except for sales to the U.S. government, no other customer represented more than 10% of consolidated net sales.


(13)	Segment Information

	Reportable operating segments are determined based on the Company’s management approach. The management approach, as defined by SFAS No. 131, is based on the way that the chief operating decision-maker organizes the segments within an enterprise for making decisions about resources to be allocated and assessing their performance.

	While the Company’s results of operations are primarily reviewed on a consolidated basis, the chief operating decision-maker also manages the enterprise in three operating segments: (i) telecommunications transmission, (ii) mobile data communications and (iii) RF microwave amplifiers.

	The telecommunications transmission segment provides sophisticated equipment and systems, such as satellite earth station equipment (including analog and digital modems, frequency converters, power amplifiers, and voice gateways) and over-the-horizon microwave communications products 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. The telecommunications transmission segment also operates a high-volume technology manufacturing center that is utilized, in part by the Company’s two other segments as well as third party commercial customers who outsource a portion of their manufacturing to the Company. As such, the telecommunications transmission segment benefits from the related increased operating efficiencies.

	The mobile data communications segment provides customers with an integrated solution, including mobile satellite transceivers and satellite network support, to enable global satellite-based communications when mobile, real-time secure transmission is required for applications including logistics, support and battlefield command and control.

	The RF microwave amplifier segment designs, manufactures, and markets solid-state, high-power broadband amplifier products and high-power switches.

	Unallocated expenses result from such corporate expenses as legal, accounting and executive compensation. In addition, for the three and six months ended January 31, 2008, unallocated expenses include $2,552,000 and $5,271,000, respectively, of stock-based compensation expense and for the three and six months ended January 31, 2007, unallocated expenses include $1,537,000 and $3,347,000, respectively, of stock-based compensation expense. Interest expense (which includes amortization of deferred financing costs) associated with the Company’s 2.0% convertible senior notes is not allocated to the operating segments. Depreciation and amortization includes amortization of stock-based compensation. Unallocated assets consist principally of cash, deferred financing costs and deferred tax assets. Substantially all of the Company’s long-lived assets are located in the U.S. Corporate management defines and reviews segment profitability based on the same allocation methodology as presented in the segment data tables below.



	Three months ended January 31, 2008

(in thousands)	Telecommunications Transmission		Mobile Data Communications	RF Microwave Amplifiers	Unallocated		Total

Net sales	$	50,209	87,672	14,149	—		$	152,030
Operating income (expense)		13,228	28,313	1,048	(7,142	)		35,447
Interest income and other		47	11	—	4,037			4,095
Interest expense		7	2	—	661			670
Depreciation and amortization		1,821	534	286	2,604			5,245
Expenditure for long-lived assets, including intangibles		2,402	278	514	13			3,207
Total assets at January 31, 2008		130,501	84,483	43,165	353,319			611,468



	Three months ended January 31, 2007


(in thousands)	Telecommunications Transmission		Mobile Data Communications	RF Microwave Amplifiers	Unallocated		Total

Net sales	$	62,569	39,728	9,086	—		$	111,383
Operating income (expense)		19,439	8,200	817	(5,158	)		23,298
Interest income and other		23	7	—	3,285			3,315
Interest expense		9	2	—	661			672
Depreciation and amortization		1,718	353	352	1,583			4,006
Expenditure for long-lived assets, including intangibles		1,344	569	173	11			2,097
Total assets at January 31, 2007		138,273	39,914	29,750	274,004			481,941


	Six months ended January 31, 2008


(in thousands)	Telecommunications Transmission		Mobile Data Communications	RF Microwave Amplifiers	Unallocated		Total

Net sales	$	99,061	140,718	27,306	—		$	267,085
Operating income (expense)		24,119	41,066	2,083	(13,162	)		54,106
Interest income and other		96	12	—	8,434			8,542
Interest expense		13	11	—	1,323			1,347
Depreciation and amortization		3,488	1,050	545	5,372			10,455
Expenditure for long-lived assets, including intangibles		5,286	753	753	52			6,844
Total assets at January 31, 2008		130,501	84,483	43,165	353,319			611,468


	Six months ended January 31, 2007


(in thousands)	Telecommunications Transmission		Mobile Data Communications	RF Microwave Amplifiers	Unallocated		Total

Net sales	$	114,599	75,383	18,471	—		$	208,453
Operating income (expense)		32,339	14,309	1,666	(10,034	)		38,280
Interest income and other		49	12	—	6,429			6,490
Interest expense		21	24	—	1,322			1,367
Depreciation and amortization		3,408	695	691	3,439			8,233
Expenditure for long-lived assets, including intangibles		3,389	3,855	489	43			7,776
Total assets at January 31, 2007		138,273	39,914	29,750	274,004			481,941


	Intersegment sales for the three months ended January 31, 2008 and 2007 by the telecommunications transmission segment to the mobile data communications segment were $45,924,000 and $16,331,000, respectively. For the six months ended January 31, 2008 and 2007, intersegment sales by the telecommunications transmission segment to the mobile data communications segment were $66,943,000 and $33,736,000, respectively. Intersegment sales have been eliminated from the tables above.

	For the three months ended January 31, 2008 and 2007, intersegment sales by the telecommunications transmission segment to the RF microwave amplifiers segment were $4,039,000 and $1,727,000, respectively. Intersegment sales for the six months ended January 31, 2008 and 2007 by the telecommunications transmission segment to the RF microwave amplifiers segment were $6,207,000 and $3,568,000, respectively.


(14)	Intangible Assets

	Intangible assets with finite lives as of January 31, 2008 and July 31, 2007 are as follows:


	January 31, 2008

	Weighted Average Amortization Period	Gross Carrying Amount			Accumulated Amortization	Net Carrying Amount

Existing technology	6.94		$	13,822,000	11,491,000	$	2,331,000
Proprietary, core and licensed technology	8.31			5,851,000	2,755,000		3,096,000
Other	5.61			975,000	579,000		396,000

Total			$	20,648,000	14,825,000	$	5,823,000


	July 31, 2007

	Weighted Average Amortization Period	Gross Carrying Amount			Accumulated Amortization	Net Carrying Amount

Existing technology	7.22		$	12,903,000	11,168,000	$	1,735,000
Proprietary, core and licensed technology	8.31			5,851,000	2,326,000		3,525,000
Other	5.61			975,000	518,000		457,000

Total			$	19,729,000	14,012,000	$	5,717,000


	Amortization expense for the three months ended January 31, 2008 and 2007 was $434,000 and $679,000, respectively. Amortization expense for the six months ended January 31, 2008 and 2007 was $813,000 and $1,328,000, respectively. The estimated amortization expense for the twelve months ending January 31, 2009, 2010, 2011, 2012 and 2013 is $1,732,000, $1,660,000, $1,395,000, $708,000 and $181,000, respectively.

	The changes in carrying amount of goodwill by segment for the six months ended January 31, 2008 are as follows:


	Telecommunications Transmission		Mobile Data Communications		RF Microwave 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 January 31, 2008	$	8,817,000	7,124,000		8,422,000	$	24,363,000


(15)	Legal Proceedings

	Brazil Subpoena
	In October 2007, the Company’s Florida-based subsidiary, Comtech Systems, Inc. (“CSI”), received a customs export enforcement subpoena from the U.S. Immigration and Customs Enforcement (“ICE”) branch of the Department of Homeland Security. The subpoena relates to CSI’s $1,982,000 contract with the Brazilian Naval Commission (“the Brazil contract”) and it required the production of all books, records and documents, including copies of contracts, invoices and payments related to agreements between CSI, its agent, its subcontractor and the Brazilian government. The Company believes that the ICE investigation is focused primarily on whether or not CSI was in compliance with export-related laws and regulations, including the International Traffic in Arms Regulations (“ITAR”) and the Export Administration Regulations. CSI has produced documents in response to the subpoena request and intends to continue to provide related information to ICE. Customs officials have detained certain inventory related to the Brazil contract pending resolution of this matter.

	Based on its ongoing investigation into this matter, the Company believes that the detained inventory, which consists of commercial satellite equipment, was not modified or adapted in any way to meet Brazilian military requirements and was only subject to the jurisdiction of the Department of Commerce and not the jurisdiction of the U.S. Department of State. In addition, in order to provide certain defense services, including conducting factory acceptance testing at CSI’s Florida facility, the Company also believes that CSI was required to obtain a license (referred to as a Technical Assistance Agreement (“TAA”)) from the U.S. Department of State. The Company believes the TAA authorized all activities under the Brazil contract that were subject to the jurisdiction of the U.S. Department of State.

	The Company believes that CSI made a good faith effort to comply with applicable regulations; however, the Company believes that CSI made inadvertent administrative errors resulting in a TAA that did not become effective on a timely basis. The administrative errors relate primarily to the execution of non-disclosure agreements (“NDA”) with certain third country national employees of CSI’s agent. These individuals have now signed appropriate NDAs, and, in December 2007, CSI filed an amended TAA with the U.S. Department of State. CSI has also requested that the U.S. Department of State confirm the Company and CSI’s view that the Brazil contract does not require any other State Department license.

	The Company has not recorded any revenue associated with this contract and the related inventory (including inventory that has been detained) had a net book value of $1,110,000 as of January 31, 2008. The Company believes that all of the inventory can be sold to other customers if the Brazilian government cancels the contract due to the delays resulting from the detention of the inventory and the inventory is ultimately returned to the Company in saleable condition.

	The Company is cooperating with the ICE investigation and intends to continue to do so. Because the ICE investigation and the Company’s investigation are ongoing, the Company cannot predict the ultimate outcome of this matter at this time. Violations of U.S. export control laws and regulations that are identified by the U.S. government could result in civil or criminal fines and/or penalties, and/or result in an injunction against CSI, all of which could, in the aggregate, materially impact the Company’s business, results of operations and cash flows.

	Other Legal Proceedings
	Since March 2007, the Company has been a party to litigation with a company that claimed it was a consultant and a reseller of certain of the Company’s products and that it was owed damages for alleged lost profits, as well as punitive damages, costs and attorney’s fees. In January 2008, the Company settled the matter. The settlement did not have a material impact on the Company’s consolidated financial condition or results of operation for the three or six months ended January 31, 2008.

	The Company is party to certain other legal actions, which arise in the normal course of business. Although the ultimate outcome of litigation is difficult to accurately predict, the Company believes that the outcome of these actions will not have a material effect on its consolidated financial condition or results of operations.


(16)	Condensed Consolidating Financial Information

	The consolidating financial information presented below reflects information regarding the Parent, the Guarantor Subsidiaries and the Non-Guarantor Subsidiary of the Company’s 2.0% convertible senior notes. The Parent’s expenses associated with supporting the operations of its subsidiaries are allocated to the respective Guarantor Subsidiaries and the Non-Guarantor Subsidiary. The consolidating financial information presented herein is not utilized by the chief operating decision-maker in making operating decisions and assessing performance.

	The following reflects the condensed consolidating balance sheet as of January 31, 2008:


	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiary			Consolidating Entries			Consolidated Total

Assets
Current assets:
Cash and cash equivalents	$	339,684,000			—		4,445,000			(3,191,000	)	$	340,938,000
Accounts receivable, net		—			109,269,000		3,107,000			—			112,376,000
Inventories, net		—			76,710,000		1,033,000			—			77,743,000
Prepaid expenses and other current assets		1,282,000			2,691,000		4,076,000			(803,000	)		7,246,000
Deferred tax asset – current		686,000			8,971,000		—			—			9,657,000

Total current assets		341,652,000			197,641,000		12,661,000			(3,994,000	)		547,960,000

Property, plant and equipment, net		795,000			29,805,000		697,000			—			31,297,000
Investment in subsidiaries		284,634,000			4,423,000		—			(289,057,000	)		—
Goodwill		—			23,416,000		947,000			—			24,363,000
Intangibles with finite lives, net		—			5,166,000		657,000			—			5,823,000
Deferred tax asset – non-current		—			—		190,000			(190,000	)		—
Deferred financing costs, net		1,630,000			—		—			—			1,630,000
Other assets, net		56,000			321,000		18,000			—			395,000
Intercompany receivables		—			107,962,000		—			(107,962,000	)		—

Total assets	$	628,767,000			368,734,000		15,170,000			(401,203,000	)	$	611,468,000

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	359,000			29,012,000		1,740,000			(3,191,000	)	$	27,920,000
Accrued expenses and other current liabilities		6,474,000			35,765,000		903,000			—			43,142,000
Customer advances and deposits		—			16,114,000		7,952,000			—			24,066,000
Current installments of other obligations		—			140,000		—			—			140,000
Interest payable		1,050,000			—		—			—			1,050,000
Income taxes payable – current		2,622,000			—		—			(803,000	)		1,819,000

Total current liabilities		10,505,000			81,031,000		10,595,000			(3,994,000	)		98,137,000

Convertible senior notes		105,000,000			—		—			—			105,000,000
Other obligations, less current installments		—			37,000		—			—			37,000
Income taxes payable – non-current		3,018,000			—		—			—			3,018,000
Deferred tax liability – non-current		5,298,000			3,032,000		—			(190,000	)		8,140,000
Intercompany payables		107,810,000			—		152,000			(107,962,000	)		—

Total liabilities		231,631,000			84,100,000		10,747,000			(112,146,000	)		214,332,000

Commitments and contingencies

Stockholders’ equity:
Preferred stock		—			—		—			—			—
Common stock		2,442,000			4,000		—			(4,000	)		2,442,000
Additional paid-in capital		176,868,000			81,410,000		5,187,000			(86,597,000	)		176,868,000
Retained earnings (deficit)		218,011,000			203,220,000		(764,000	)		(202,456,000	)		218,011,000

		397,321,000			284,634,000		4,423,000			(289,057,000	)		397,321,000
Less:
Treasury stock		(185,000	)		—		—			—			(185,000	)

Total stockholders’ equity		397,136,000			284,634,000		4,423,000			(289,057,000	)		397,136,000

Total liabilities and stockholders’ equity	$	628,767,000			368,734,000		15,170,000			(401,203,000	)	$	611,468,000


(16)	Condensed Consolidating Financial Information (continued)

	The following reflects the condensed consolidating balance sheet as of July 31, 2007:


	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiary			Consolidating Entries			Consolidated Total

Assets
Current assets:
Cash and cash equivalents	$	340,617,000		983,000		1,303,000			—		$	342,903,000
Accounts receivable, net		—		66,240,000		7,345,000			—			73,585,000
Inventories, net		—		61,337,000		650,000			—			61,987,000
Prepaid expenses and other current assets		1,868,000		4,311,000		555,000			—			6,734,000
Deferred tax asset – current		645,000		8,735,000		—			—			9,380,000

Total current assets		343,130,000		141,606,000		9,853,000			—			494,589,000

Property, plant and equipment, net		844,000		27,796,000		642,000			—			29,282,000
Investment in subsidiaries		248,952,000		4,755,000		—			(253,707,000	)		—
Goodwill		—		23,440,000		947,000			—			24,387,000
Intangibles with finite lives, net		—		4,972,000		745,000			—			5,717,000
Deferred tax asset – non-current		—		—		190,000			(190,000	)		—
Deferred financing costs, net		1,903,000		—		—			—			1,903,000
Other assets, net		56,000		386,000		22,000			—			464,000
Intercompany receivables		—		126,210,000		—			(126,210,000	)		—

Total assets	$	594,885,000		329,165,000		12,399,000			(380,107,000	)	$	556,342,000


Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	374,000		25,616,000		147,000			—		$	26,137,000
Accrued expenses and other current liabilities		10,340,000		36,378,000		614,000			—			47,332,000
Customer advances and deposits		—		15,189,000		4,867,000			—			20,056,000
Current installments of other obligations		—		135,000		—			—			135,000
Interest payable		1,050,000		—		—			—			1,050,000
Income taxes payable		3,283,000		—		(487,000	)		—			2,796,000

Total current liabilities		15,047,000		77,318,000		5,141,000			—			97,506,000

Convertible senior notes		105,000,000		—		—			—			105,000,000
Other obligations, less current installments		—		108,000		—			—			108,000
Deferred tax liability – non-current		5,363,000		2,787,000		—			(190,000	)