Comtech Telecommunications Corp. Annual Report 2012

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FY2012 Annual Report · Comtech Telecommunications Corp.

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COMTECH TELECOMMUNICATIONS CORP.
A d v a n c e d C o m m u n i c a t i o n s S o l u t i o n s

A N N U A L R E P O R T 2 0 1 2

WE DESIGN, DEVELOP,
PRODUCE AND MARKET
INNOVATIVE PRODUCTS,
SYSTEMS AND SERVICES
FOR ADVANCED
COMMUNICATIONS
SOLUTIONS.

Leading Market Share Of Satellite
Earth Station Modems

Largest Supplier Of Over-The-Horizon
Microwave Systems

Leading Independent Manufacturer of
Solid-State High-Power, Broadband Amplifiers

Leading Independent Manufacturer of
Traveling Wave Tube Amplifiers

TELECOMMUNICATIONS
TRANSMISSION

RF MICROWAVE
AMPLIFIERS

MOBILE DATA
COMMUNICATIONS

telecommunications

Our
transmission
segment provides equipment and systems
that are used to enhance satellite trans-
mission efficiency and that enable wireless
communications in environments where
terrestrial communications are unavail-
able, inefficient or too expensive. We are
a leading supplier of over-the-horizon
microwave
systems,
sometimes referred to as troposcatter
systems. Our 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

and

tube amplifiers

We are one of the leading companies
designing, developing, manufacturing and
marketing satellite earth station traveling
wave
(“TWTA”) and
solid-state, high-power, narrow and
broadband amplifiers (“SSPA”). Our TWTA
and SSPA products can boost the strength
of a signal prior to transmission to
satellites and can efficiently increase the
power of broadband radio frequency
signals with high degrees of clarity to
provide
jamming and
communication power capability required
by sophisticated defense programs.

for effective

Our mobile data communications segment
provides government and commercial
customers with integrated solutions to
enable global satellite-based communica-
tions when mobile, real-time, secure
transmission is required. Our extremely
service
reliable proprietary network
employs full end-to-end path redundancy
as well as back-up capability in the event
of a major catastrophe or service interrup-
tion, and we can maintain and/or operate a
24 x 7 network operations and customer
care center that provides customers with
ongoing support any time, day and night.

FISCAL 2012
REVENUE BY SEGMENT

49.4%

26.5%

24.1%

Telecommunications
Transmission

RF Microwave
Amplifiers

Mobile Data
Communications

FISCAL 2012
REVENUE BY CUSTOMER

48.9%

12.4%

38.7%

U.S.
Government

Domestic
Commercial

International

T O

O U R

F E L L O W S H A R E H O L D E R S :

Fiscal 2012 was a year of big challenges and important
accomplishments for Comtech. We navigated our way
through very difficult economic and government budgetary
conditions in our end markets, while posting solid operating
results in line with our guidance from a year ago.

be used by Harris CapRock’s maritime customers, including
Royal Caribbean Cruise Lines. This was a significant win
as it enters us into the large market for maritime
communications solutions and positions us to take market
share from some of the entrenched players in that market.

Even more importantly, we have honored our commitment
to the Company’s future success by maintaining our
technology leadership positions in our core businesses.
Doing so has been made possible by the hard work of our
employees and the significant investments we continue to
make in research and development.

During fiscal 2012, we also continued to return
significant capital to our stockholders. We repurchased more
than seven million shares of our common stock for an
aggregate cost of $217.4 million and paid $22.6 million in
cash dividends to our stockholders.

We believe we have struck the right balance between
returning cash to our stockholders and retaining the ability
to be opportunistic in pursuing acquisitions which will
create stockholder value. Our focus has always been, and
will continue to be, on doing the right acquisitions, not the
best ones that might be available at any given point in time.

Our organizational structure has allowed our individual
business leaders to continue to adjust quickly to ever-
changing economic and technology conditions and
developments in their respective markets. With that in
mind, let me review our team’s accomplishments in fiscal
2012 in each of our three business segments:

TELECOMMUNICATIONS TRANSMISSION SEGMENT

Let me start with our telecommunications transmission
segment which is the backbone of our current business.
We remain the undisputed leader in both the satellite
earth station equipment and over-the-horizon microwave
system markets.

Strength in the international side of our satellite earth
station product line was more than offset by lower U.S.
government activity resulting from the uncertain budget
environment and looming fiscal cliff. Accordingly, sales and
bookings in this area were lower in fiscal 2012 as compared
to fiscal 2011.

On the international front, when new cellular networks are
being rolled out in less-developed parts of the world, using
satellite for backhaul is the preferred solution for moving
voice, video and data back to central switching stations. And
we are the supplier of choice in providing the most
bandwidth-efficient solutions.

Despite challenging economic conditions, we continue
to invest heavily in R&D, resulting in new product
introductions, such as our Advanced VSAT product line. In
fiscal 2012, we were awarded a $3.5 million order from
Harris CapRock for our Advanced VSAT products which will

On the U.S. government side of the satellite earth station
product line, the current paralysis in Washington and the
threat of sequestration early next calendar year continue to
challenge order flow. However, in fiscal 2012, we received
our first U.S. government order for modems containing
our DoubleTalk® Carrier-in-Carrier® technology. This is
important since it allows us to sell our most attractive
product feature to the various potential buyers within the
U.S. government. We are hopeful that we can displace some
of our competitors on the government side of this business
by offering this industry-leading feature.

Turning to the other component of our telecommunica-
tions transmission segment, we remain bullish about
our over-the-horizon microwave product line. On the
international front, after many months of waiting, in the
fourth quarter of fiscal 2012, we received a $55.0 million
contract from a U.S. prime contractor relating to the next
phase of a major communications project with a North
African country end-customer. Just as important, the end
customer has already asked our prime contractor for a
proposal on the next phase of the same project. There are
also other substantial opportunities with this end-customer
relating to separate projects, which we are also engaged
with the end-customer on directly, as well as through
prime contractors.

We have re-focused on marketing our products and
systems to other foreign countries that have challenges in
communicating over difficult terrain, similar to our North
African country end-customer. For example, we have made
headway with various new potential customers in the Middle
East, Northern Europe, South America, Africa, and Asia.
And although we understand that political unrest in certain
regions may result in lead times longer than usual, we are
cautiously optimistic about these opportunities in the
intermediate to long-term as all of these potential
customers have a requirement for over-the-horizon
microwave system products and are
(i) preparing
specifications, (ii) negotiating with us, or (iii) waiting for
government approval for their projects.

On the U.S. government front, we continue to supply a
prime contractor that is using its antennas and our radios to
offer the U.S. military a troposcatter system in a
transportable fly-way configuration, which is capable of
providing seamless compatibility with legacy-fielded over-
the-horizon microwave systems. We believe that additional
orders for this product may be forthcoming as there are
hundreds of potential units to be deployed. Over the past 5
years, our over-the-horizon microwave systems, including
upgraded AN/TRC-170’s, have been fielded by the U.S.
military throughout the world and have proven to be an
important link in critical communications channels.

Overall, we believe that our telecommunications
transmission product lines are weathering the current
adverse economic, geopolitical, and government spending
environments admirably well and are poised for growth as
conditions improve and government funding frees up.

RF MICROWAVE AMPLIFIERS SEGMENT

Our traveling wave tube amplifiers (“TWTAs”) and solid
state power amplifiers (“SSPAs”) serve critical needs in
both the commercial and defense markets.

Our TWTAs are used extensively in the satellite
communications market, enabling vital services such as
traditional broadcast, direct-to-home broadcast and satellite
newsgathering, and in the emerging satellite broadband
communications area. Among our more recent commercial
TWTA wins are contracts for our industry-leading 500 watt
Ka-band amplifiers, which are key components in the vast
majority of North American and European high-throughput
broadband Ka-band satellite systems.

On the defense side, our TWTA products are used
to support high capacity U.S. military satellite
communications systems, such as the Wideband Global
Satellite (“WGS”) constellation and the Milstar system.
We also have products qualified for both the future FAB-T
and WIN-T programs.

In addition to commercial applications, such as aero-
space, medical and instrumentation testing, our SSPAs are
used in a number of electronic warfare applications,
including counter-IED systems. We have completed work on
development contracts in support of the U.S. Department of
Defense’s next-generation counter-IED programs, most
notably CREW 3.3, and believe that we will receive the lion’s
share of the related production orders. Based on recent
discussions with our customer, a U.S. government prime
contractor, it appears that orders relating to CREW 3.3 will
slip further to the right than we were initially anticipating.
Currently, we see CREW 3.3 as a fiscal 2014 revenue
generator.

MOBILE DATA COMMUNICATIONS SEGMENT

In our mobile data communications segment, as
predicted in last year’s letter to stockholders, revenues in
fiscal 2012 relating to BFT-1 and MTS were substantially
lower than those reported in the past few years. And that
trend is expected to continue into fiscal 2013.

On a positive note, some of the short-term uncertainty
relating to BFT-1 and MTS was resolved in connection with
the sustainment contract that we received in March 2012.
We are currently providing both MTS and BFT-1 sustainment
services pursuant to a three-year IDIQ contract which has
a not-to-exceed value of $80.7 million and a base
performance period that began on April 1, 2012 and ends
on March 31, 2013. Payments of annual intellectual
property license fees of $10.0 million beyond the base year
are contingent upon the U.S. Army’s exercise of one, or
both, of its two optional annual performance periods.
We believe that the U.S. Army will exercise the first option
period before the end of March 2013.

The rest of this segment, which is primarily comprised of
our microsatellite product line, continued to be impacted by
U.S. government budget pressures in fiscal 2012; and we
saw no signs of such pressures moderating anytime soon. As
a result, we adopted a restructuring plan to wind-down
our microsatellite product line and recorded $2.6 million
of pre-tax charges in fiscal 2012 and expect to
record additional charges of approximately $1.0 million
in fiscal 2013.

As of today, we have substantially completed the
repositioning of our mobile data communications segment
and are now solely focused on (i) providing BFT-1 related
services to our legacy U.S. Army customer and (ii)
seeking other government opportunities and international
opportunities that our technology can be readily adapted to.

CONCLUSION

We believe that the challenges that we faced in fiscal
2012 have made Comtech an even stronger company. We
expect our continued commitment to innovation to pay off
in the future as our products remain differentiated from the
competition.

As we look to fiscal 2013, conditions remain challenging.
However, I am confident that we are well-positioned for
strong growth when the macroeconomic environment
improves and that we will continue to remain a leader in
advanced communications solutions for the technology and
defense sectors. In addition, the cost cutting measures that
we have taken over the past few years have resulted in
a leaner, more leverageable business model when future
revenue growth occurs.

I’d like to take this opportunity to thank all of our
employees for their tremendous efforts during the past year,
and also to thank our customers, business partners and
stockholders for their continued support. The Comtech
Board of Directors and management remain dedicated to
creating long-term value for all of our stockholders.

Respectfully yours,

Fred Kornberg
Chairman, CEO and President

November 2012

T E L E C O M M U N I C A T I O N S T R A N S M I S S I O N

Our latest modem, the CDM-760 Advanced
High-Speed Trunking Modem, is software
upgradeable to support future standards
including DVB-S2 Efficiency Boost, DVB-Sx
and DVB-S3. Our satellite earth station
equipment and systems also include frequen-
cy conversion and amplifier solutions for
indoor and outdoor environments.

The

applications.

Our products are deployed in 160+ countries
by commercial and government users,
supporting a variety of fixed and mobile/trans-
advanced
portable
communication solutions enable users to
reduce both operating expenses and capital
expenditures and to increase satellite link
throughput. We offer Low Power Outdoor
(“LPOD”) and High Power Outdoor (“HPOD”)
amplifiers which feature a versatile chassis,
field replaceable supplies and phase combin-
ing for higher power. Our global commercial
and government customers are increasingly
looking for integrated solutions to meet their
operational needs.

and

Our Advanced VSAT Solutions incorporate
products
technologies
advanced
developed by Comtech EF Data, AHA
Products Group and Memotec. The portfolio is
designed to provide unmatched performance,
market-leading bandwidth efficiencies and
network optimization.

SATELLITE EARTH STATIONS

communications

We are the recognized global leader in
satellite bandwidth efficiency and
link
optimization, and the “vendor of choice” for
satellite
infrastructure
equipment. Our product offerings include
satellite earth station modems, block up
converters, power amplifiers,
frequency
converters, 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, AHA, Verso
and Stampede.

Many of our satellite earth station modems
are available with customer selectable
features including low density parity check
(‘LDPC”), DoubleTalk® Carrier-in-Carrier®,
VersaFEC®, DVB-S2 and optional IP modules
which can provide advanced features and
bandwidth efficiencies. The DoubleTalk®
Carrier-in-Carrier® technology allows transmit
and receive carriers of a duplex link to share
the same transponder space, which can
reduce bandwidth utilization by 50%.

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 readily transmit digitized
voice, video and data over unfriendly or
inaccessible terrain from 20 to 200 miles by
reflecting transmitted signals off of the tropo-
sphere, an atmospheric layer located approxi-
mately seven miles above the earth’s surface.
Over-the-horizon microwave communication
is a cost-effective, secure alternative to satel-
lite communication as it does not require the
leasing of expensive satellite transponder
space with its attendant recurring costs.

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).

Traditional end-users of our equipment have
included the U.S. government and foreign
governments and militaries who use our
to,
over-the-horizon microwave systems
among other things, transmit radar tracking,
Command,
Communications,
Intelligence, Surveillance and
Computer,
Reconnaissance information (also known as
“C4ISR”) and air defense information as well
as connecting remote border locations.

Control,

Additionally, energy companies use our
systems to enable communication links for
offshore oil rigs and other remote locations as
well as exploration activities.

R F M I C R O W A V E A M P L I F I E R S

ELECTRONIC WARFARE
AND OTHER 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). We have delivered thou-
sands of amplifiers and switches in support of
the Counter Remote Controlled Improvised
Explosive Device Electronic Warfare
(“CREW”) 2.1 program as well as engineering
development model amplifiers and switches
for the CREW 3.3 program. Our amplifiers are
also
the U.S. military’s
Communications Electronic Attack with
Surveillance and Reconnaissance (“CEASAR”)
system.

used

SOPHISTICATED COMMERCIAL
APPLICATIONS
Our amplifiers are key components in sophis-
ticated 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 incorporat-
ed into an aircraft satellite communication
system, can provide passengers with email,
Internet access and video conferencing.

BROADCAST AND BROADBAND
SATELLITE COMMUNICATION
APPLICATIONS

We offer our customers TWTA products for
use in a variety of telecommunications appli-
cations used to transmit and amplify signals
from satellite earth stations throughout the
world. Our amplifiers can provide power levels
that are vital to satellite communication appli-
cations including traditional broadcast, direct-
to-home broadcast, satellite newsgathering
and the broadband communications markets,
specifically in the emerging High Throughput
Satellite systems. 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. Our narrow-band SSPA
products are a key component in communica-
tions systems used to support U.S. special
operations forces around the world.

M O B I L E D A T A C O M M U N I C A T I O N S

LOGISTICS AND BATTLEFIELD
COMMAND AND CONTROL
APPLICATIONS
Our mobile data satellite transceivers and
related proprietary technology 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 contin-
ually 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 redun-
dancy as well as back-up capability in the
event of a major catastrophe or service inter-
ruption, and we can maintain and/or operate a
24 x 7 network operations and customer care
center that provides customers with ongoing
support any time, day and night.

HOMELAND SECURITY
AND MULTI-NATIONAL
APPLICATIONS
Our mobile data satellite transceiver products
and related proprietary technology can 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. In the past, 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. Our geoOps™ Enterprise Location
Management System (“geoOps™”) is a con-
figurable network and web-based software
platform that provides an integrated capability
to command, control and manage mobile
ground vehicles. Our geoOps™ software
baseline is incorporated into the North Atlantic
Treaty Organization’s International Security
Assistance Force Tracking System (“NATO
IFTS”), a multi-national satellite-based friendly
force tracking system.

SELECTED FINANCIAL DATA

Net Sales
$ in thousands

$778,205

$586,372

$531,627

$612,379

Net Income1,2,3,4
$ in thousands

$73,650

$67,895

$60,630

$425,070

$47,525

$32,416

Diluted Earnings
per Share1,2,3,4

$2.76

$2.22

$1.91

$1.73

$1.42

2008 2009 2010 2011 2012

REVENUES BY SEGMENT ($ IN THOUSANDS)

TELECOMMUNICATIONS
TRANSMISSIONS

RF MICROWAVE
AMPLIFIERS

MOBILE DATA
COMMUNICATIONS

$254,266

$208,994

$219,701

$210,006

$231,957

$446,545

$155,099

$111,959

$102,497

$91,973

$288,449

$261,057

$177,007

$61,576

$112,567

2008 2009 2010 2011 2012

(1) On August 1, 2009, we adopted ASC 470-20, which changed the historical accounting and reporting relating to our 2.0% convertible senior notes. As a result, our historical financial data has been retroactively adjusted.
(2) 2009 includes a charge of $6.2 million ($0.21 diluted EPS) related to the immediate amortization of acquired in-process research and development associated with the Radyne acquisition and a pre-tax charge of $2.0 million ($0.04 diluted EPS)

related to cost reduction actions related to two small product lines.

(3) 2010 includes a pre-tax charge of $13.2 million ($0.30 diluted EPS) related to a goodwill impairment charge.
(4) 2012 includes a charge of $2.6 million ($0.06 diluted EPS) related to the wind-down of the microsatellite product line and $2.6 million ($0.07 diluted EPS) of costs related to a withdrawn fiscal 2011 contested proxy solicitation

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 (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes

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

incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

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

Accelerated filer

Non-accelerated filer

Smaller reporting company

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

Yes

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 31, 2012 was approximately $583,157,000.

The number of shares of the registrant’s common stock outstanding on September 21, 2012 was 17,369,120.

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 2012 Annual Meeting of Stockholders - Part III

ITEM 1.

BUSINESS

INDEX

PART I

Business Conditions and Industry Background
Corporate Strategies
Competitive Strengths
Telecommunications Transmission Segment
RF Microwave Amplifiers Segment
Mobile Data Communications Segment
Summary of Key Products, Systems and Services by Business Segment
Acquisitions
Sales, Marketing and Customer Support
Backlog
Manufacturing and Service
Research and Development
Intellectual Property
Competition
Employees
U.S. Government Contracts and Security Clearances
Regulatory Matters

ITEM 1A.

RISK FACTORS

ITEM 1B.

UNRESOLVED STAFF COMMENTS

ITEM 2.

PROPERTIES

ITEM 3.

LEGAL PROCEEDINGS

ITEM 4.

MINE SAFETY DISCLOSURES

ITEM 5.

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

PART II

Stock Performance Graph and Cumulative Total Return
Dividends
Recent Sales of Unregistered Securities
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Approximate Number of Equity Security Holders

ITEM 6.

SELECTED CONSOLIDATED FINANCIAL DATA

1
2
3
4
7
9
12
13
13
14
14
15
15
15
16
17
17

32
33
33
34
34

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Overview
BFT-1 Sustainment Activities
Critical Accounting Policies
Results of Operations

Business Outlook for Fiscal 2013
Comparison of Fiscal 2012 and 2011
Comparison of Fiscal 2011 and 2010

Liquidity and Capital Resources
Recent Accounting Pronouncements

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

ITEM 9A.

CONTROLS AND PROCEDURES

ITEM 9B.

OTHER INFORMATION

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11.

EXECUTIVE COMPENSATION

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

PART IV

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

SIGNATURES

36
37
38
41
41
42
47
50
54

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, RF microwave amplifiers and mobile data communications. 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.

For the past several years, we have operated our business in extremely challenging adverse macroeconomic and political
environments. During this time, we have focused on long-term organic growth opportunities that we believe exist in each of our
three business segments.

During fiscal 2012, we reported consolidated net sales of $425.1 million and consolidated operating income of $51.3 million. In
addition, during fiscal 2012, we completed the repositioning of our mobile data communications segment to align with our
expectations of materially lower levels of future net sales and operating income in this segment. This repositioning included
targeted actions to adjust our cost structure and eliminate certain product lines, including our microsatellite product line. In
connection with this repositioning, we recorded a restructuring charge of $2.6 million and anticipate additional charges of
approximately $1.0 million in fiscal 2013.

As of July 31, 2012, we had cash and cash equivalents of $367.9 million. We expect to supplement organic growth opportunities
by making one or more acquisitions.

Our Internet website is www.comtechtel.com and we make available 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 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.

Business Conditions and Industry Background

We participate in the global commercial and government communications markets which are characterized by rapid technological
advances and constant changes.

For the past several years, our customers and the end-markets that we serve have been significantly impacted by adverse global
economic conditions. In the past few years, European monetary issues and concerns have intensified, raising concern of another
possible worldwide credit crisis. Although the impact, severity and duration of these conditions are impossible to predict with
precision, we believe the current economic environment has resulted, and may continue to result, in: (i) changes to our commercial
and government customers’ historical spending priorities, (ii) reduced military budgets and (iii) extreme pressures on government
budgets throughout the world.

In addition to operating in a difficult global economic environment, some of our end customers are located in emerging countries
that are currently undergoing sweeping political changes. We believe that the aggregation of these conditions has resulted in the
current suppression of end-market demand for many of the products that we sell and services that we provide.

Although it is uncertain how long the current adverse global economic conditions will last, we believe that both we and our end-
markets will ultimately experience long-term growth due to many factors, including the following:

• Continued Reliance on Communications Systems. Businesses, governments and consumers around the world have
become increasingly reliant upon advanced 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. Because of the continued reliance on
communications systems and increased utilization of satellite transponders, communications network providers have
been forced to increase their investments in new and updated satellite-based transmission systems in order to maintain
the quality and availability of their services.

• Growing Demand for Increased Cost Efficiencies. We expect that the insatiable global demand for voice, broadband
video and data communications will cause increased satellite transponder utilization that will, over time, result in increased
transponder costs in many areas of the world. Particularly in light of current adverse global economic conditions, we
believe that communications network providers and end-users will seek 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 Shift to 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 conflicts in Iraq and Afghanistan, 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.

The Need for Developing Countries to Upgrade Their Commercial and Defense Communication Systems. We believe
many developing countries will be required to further develop and upgrade their commercial and defense communications
systems. 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 health of the global economy and political stability directly impacts the speed at which industry advances and changes,
we expect that we will be able to participate in the industry’s expected long-term 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 single channel per carrier (“SCPC”) satellite earth station modems and over-the-horizon
microwave systems. Many of our products incorporate Turbo Product Code (“TPC”) forward error correction technology
and our licensed DoubleTalk® Carrier-in-Carrier® bandwidth compression technology which enable our customers to
optimize their satellite network by either reducing their satellite transponder lease costs or increasing data throughput.
In our RF microwave amplifiers segment, we believe we are a leader in the satellite earth station traveling wave tube
amplifier market and one of the largest independent suppliers of broadband, high-power, high-performance RF microwave
amplifiers. In our mobile data communications segment, we are a key legacy supplier to the U.S. Army’s war-fighter
orientated satellite-based, tracking and communications system known as Blue-Force Tracking-1 (“BFT-1”).

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 licensed DoubleTalk® Carrier-
in-Carrier® bandwidth compression technology 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 developed
a troposcatter modem that can exceed 22 Mbps. 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. In our mobile data communications
segment, we believe that our internally developed BFT-1 technologies are critical components of the U.S. Army’s satellite
communications network.

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. For instance, our satellite earth station products and our high-power
amplifiers are used by hundreds of mobile cellular network providers and governments around the world. We believe
that our customers recognize our ability to develop new technologies and to meet stringent program requirements. In
recent years, we have expanded our relationships with several agencies of the U.S. government. For instance, our high-
power amplifiers will be used in a major network expansion for the U.S. Air Force.

Core Manufacturing Expertise That Can Support 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 have utilized this manufacturing center for certain high-volume production which allows us to secure volume
discounts on key components, control the quality of our manufacturing processes and maximize the utilization of our
manufacturing capacity. Because of our expert capability and quality reputation, several prime contractors to the U.S.
government have outsourced a portion of their manufacturing to us. Although revenue from outsourced manufacturing
has historically been modest, we are actively seeking appropriate opportunities to expand this part of our business.

Successful and Disciplined 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, RF microwave
amplifiers and mobile data communications. 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 (13) 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, frequency
converters, 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, AHA, Verso and Stampede. Our satellite earth
station modems and products 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 – The CDM-625 was our first modem to combine advanced forward error correction (“FEC”), such as
VersaFEC® and low density parity check (“LDPC”) codes with 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 packet processor enables efficient IP networking and transport over
satellite by adding routing capability with very low overhead encapsulation, header compression, payload compression
and Quality of Service ("QoS") to the CDM-625. The advanced QoS combined with header and payload compression
ensures the highest quality of service with minimal jitter and latency for real-time traffic, priority treatment of mission
critical applications and maximum bandwidth efficiency. The CDM-625 is marketed to users who require connectivity
up to 25 Mbps and we continue to add new features to meet customer needs.

• CDM-750 Advanced High-Speed Trunking Modem – The CDM-750, which received the 2011 Next Generation Networks
(“NGN”) Magazine Leadership award, accommodates the most demanding Internet Service Provider (“ISP”) and
telecommunications backhaul links by offering users an advanced combination of space segment saving capabilities while
minimizing the need for unnecessary overhead.

• Advanced Very Small Aperture Terminal ("VSAT") Series of Products – Launched in March 2010, this growing product
suite includes our CDM-800 Gateway Router, CDM-840 Remote Router, the CDD-880 Multi-Receiver Router, the
CXU-810 RAN Optimizer and our Stampede FX series and is ideally suited for cellular backhaul, universal service
obligation networks and other applications which require high performance in a hub-spoke environment. These products
incorporate Radio Access Network Optimization and other advanced FEC and modulation techniques. Our Stampede
FX series includes WAN optimization that uses content reduction techniques and acceleration techniques that can
significantly reduce access time to data.

• DMD20 – Because it has been designed to minimize configuration changes, the DMD20 modem 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. The DMD now offers DoubleTalk® Carrier-in-Carrier®
bandwidth compression.

•

SLM-5650A – Fully compliant with key U.S. military standards, our SLM-5650A can transmit data up to 155 Mbps and
can also be integrated with our Vipersat Management System ("VMS") to provide fully automated network and capacity
management. An AES-256 TRANSEC module, compliant with the FIPS-140-2 NIST standard is also available as an
option. All traffic (including overhead and all VMS control traffic) is encrypted when using the TRANSEC module.

• DMD2050E – Designed for the U.S. Department of Defense ("DoD") and compliant with a wide range of U.S. government
and commercial standards, this modem also offers DoubleTalk® Carrier-in-Carrier® bandwidth compression, which can
reduce the DoD's transponder bandwidth requirements by 50%.

• CDM-570 – An entry level modem that provides performance and flexibility at a lower price point; it is marketed to users

who require connectivity up to 5 Mbps.

Many of our satellite earth station modems are available with customer selectable features including LDPC, DoubleTalk® Carrier-
in-Carrier®, VersaFEC® and optional IP modules which can provide advanced features and bandwidth efficiencies. Our satellite
earth station equipment and systems also include frequency conversion and amplifier solutions for indoor and outdoor environments.
Our products are deployed globally by commercial and government users, supporting a variety of fixed and mobile/transportable
applications. We offer new Low Power Outdoor (“LPOD”) and High Power Outdoor (“HPOD”) amplifiers which feature a versatile
chassis, field replaceable supplies and phase combining for higher power.

Our global commercial and government customers are increasingly looking for integrated solutions to meet their operational needs.
In recent years we have expanded our product offerings. We offer our customers pre-integrated network management systems
which allow them to locally or remotely manage our Advanced VSAT series of network products using a single graphical user
interface and which incorporates industry-leading optimization. For instance, in fiscal 2012, we were awarded a contract to deploy
our Advanced VSAT solution to Harris CapRock Communications in five of their operational hubs and onboard its maritime
customer's vessels. We also offer customers our Vipersat and SkyWire™ managed bandwidth products.

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 readily transmit digitized voice, video and data over
unfriendly or inaccessible terrain from 20 to 200 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 expensive satellite transponder space with its
attendant recurring costs. Traditional end-users of our equipment have included the U.S. government and foreign governments
and militaries who use our over-the-horizon microwave systems to, among other things, transmit radar tracking, Command, Control,
Communications, Computers, Intelligence, Surveillance and Reconnaissance information (also known as “C4ISR”) and air defense
information as well as connecting remote border locations. Additionally, energy companies use our systems to enable
communication links for offshore oil rigs and other remote locations as well as exploration activities. Over the past several years,
we have introduced the following 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
C4ISR information.

• CS6716A – A more advanced 22 Mbps version of the CS6716, incorporating most of the capabilities of the CS67200

modem with the addition of backward compatibility to existing U.S. military troposcatter assets.

• CS67200i – Our 22 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 over Internet Protocol ("VoIP"), data and
video transmission. Under certain conditions, because it has built-in redundancy, it can be configured to reach transmission
capacities of up to 40 Mbps. This modem offers a more compact design, lighter weight and 70% less power consumption
than our earlier S575 modem. Additionally, its powerful forward error correction capabilities enhance efficiency and its
built in transmit power control system monitors and maintains the power of a troposcatter terminal to reduce the possibility
of interception and interference.

Recently, we introduced our Modular Tactical Transmission System ("MTTS"), a high capacity, beyond line of sight modular
communications system designed for easy and rapid deployment. The MTTS solution delivers high-throughput capacity to enable
mission-critical surveillance, situational awareness and real-time data to remote, infrastructure-challenged locations. Our MTTS
allows direct transmission between sites, eliminates recurring costs, and reduces the complexity and delay in satellite
communications currently used today. The MTTS solution enhances communications capabilities with seamless compatibility and
interoperability with legacy-fielded troposcatter systems used currently by the U.S. military, including the AN/TRC-170. MTTS,
the first truly modular, rapidly deployable, transit case-based troposcatter system, represents a major advancement in rapidly
deployable troposcatter systems. The MTTS cases are designed to be used in line-of-sight ("LOS"), beyond-line-of-sight ("BLOS")
dual diversity, and full over-the-horizon microwave quad diversity applications. The U.S. Army has recently deployed Secret
Internet Protocol Router and Non-secure Internet Protocol Router Access Point ("SNAP") Tactical Transportable TROPO ("3T")
and deployable communication equipment that incorporates our MTTS systems.

Our telecommunications transmission segment operates our high-volume technology manufacturing center located in Tempe,
Arizona which has been utilized by all three of our business segments and, to a much lesser extent, by third-party commercial
customers, including prime contractors to the U.S. government, who have outsourced 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 and Adaptive Coding and Modulation (“ACM”) 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 historically been deployed by our customers for use with applications that
require a 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 recurring satellite transponder costs. 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 integrated 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 bandwidth requirements. We expect to continue expanding our leadership position by
offering new products and integrated 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 modems which incorporate DoubleTalk® Carrier-in-Carrier®
bandwidth compression.

Continue our Marketing and Sales Efforts to the U.S. Government – Although the U.S. government budget is under extreme
spending pressures, we believe that long-term demand by the U.S. government for our equipment will be strong due to a number
of factors, including the ever increasing amount of C4ISR information that is being generated. For instance, in fiscal 2012, we
were awarded a $1.8 million contract by the U.S. military for our DMD2050 MIL-STD-188-165A modem, our first order with
the U.S. government that includes our DoubleTalk® Carrier-in-Carrier® bandwidth compression technology. The DoubleTalk®
Carrier-in-Carrier® technology allows transmit and receive carriers of a duplex link to share the same transponder space, which can
reduce bandwidth utilization by 50%. The modems purchased on this contract will be utilized in deployable terminals to support
a satellite-based network expansion for battlefield communications.

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 approximately forty 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. These products have an extremely long sales cycle due
to the complexity of the overall network that they must operate with. 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). In connection with these
large troposcatter system deployments, we offer related equipment and systems to our customers for their network needs. To date,
the largest single end-customer for our over-the-horizon microwave systems has been a North African country. In fiscal 2012, we
were awarded a $55.0 million contract to design and furnish a telecommunications system for use in this country's communications
network and we expect to record related revenue over the next three years. We believe that, over time, we will be able to obtain
additional large contracts to support the U.S. and other militaries. 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. We
recently entered into a teaming agreement with TeleCommunication Systems, Inc. to offer the U.S. military a troposcatter system
in a transportable flyaway configuration (known as "SNAP-3T") which is capable of providing seamless compatibility and
interoperability with legacy-fielded over-the-horizon microwave systems. To date, we have shipped forty-eight of our MTTS
systems for deployment by the U.S. Army in its SNAP-3T communication equipment. As a result of our historical successes in
North Africa and with the U.S. DoD in Iraq and Afghanistan, other foreign countries and militaries have shown 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 long-term 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 distribution channel, we also continue to market Skywire™ products
that combine SCPC-based systems with TDMA-like bandwidth efficiency.

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, narrow and 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 and narrow-band SSPA 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 and market our products under a variety of brand
names including Comtech XICOM Technology, Comtech PST and Hill Engineering.

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 products for use in a variety
of telecommunications applications used to transmit and 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 broadband communications markets, specifically in the emerging High
Throughput Satellite systems. 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. Our
narrow-band SSPA products are a key component in communications systems used to support U.S. special operations forces around
the world.

Electronic Warfare and Other 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. We have delivered thousands of amplifiers
and switches in support of the Counter Remote Controlled Improvised Explosive Device Electronic Warfare (“CREW”) Program
as well as low rate production and engineering development model amplifiers and switches for the CREW 3.2 and 3.3 programs,
respectively. Our amplifiers are also used in the U.S. military's Communications Electronic Attack with Surveillance and
Reconnaissance ("CEASAR") system. CEASAR is a pod-mounted electronic attack system which provides U.S. troops with a
"jammer-on-demand" capability. Our TWTA and SSPA amplifiers are used by military customers throughout the world for mobile
applications, including those on helicopters and ships and in support of U.S. Special Forces. We believe that the recent focus on
mobile and special operations by the U.S. military and heightened homeland security concerns should result in continuing demand
for 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 to include both TWTA and SSPA technologies, and today we are one of only a few companies
to offer both technologies. We intend to continue this effort and 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. In order to fully develop a global one-stop shop approach, we may also seek to expand our product line through acquisitions.

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
have historically preferred 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, Exelis Inc. (formerly part
of ITT Corporation) and Raytheon Company.

Secure Additional Business Related to Next Generation CREW Programs – In the past few years, a significant portion of our sales
in our RF microwave amplifiers segment had come from our participation in the CREW 2.1 program. The CREW 2.1 program
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 expect to ship the remaining CREW 2.1 backlog we had as
of July 31, 2012 in early fiscal 2013.

Although the U.S. government budget remains under significant pressure and the U.S. government has initiated and continues to
plan on troop withdrawals from Iraq and Afghanistan, we believe the remaining troops, as well as troops deployed in other areas
in the future, will ultimately require upgraded systems that will need to be purchased. We expect that the CREW 3.3 program will
be the program of choice to address the ongoing threat of improvised explosive devices. We have delivered on design and
development contracts from a prime contractor to the U.S. military in support of the CREW 3.3 program and have been selected
as the sole source and/or primary amplifier supplier for a variety of different CREW 3.3 amplifier configurations. Although we
initially believed CREW 3.3 production would commence in fiscal 2013, for reasons unrelated to our product offerings, we now
expect CREW 3.3 sales to begin to ramp up in fiscal 2014.

Continue our Marketing and Sales Efforts in the Defense Market – In addition to the CREW program, 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 through partnering arrangements with prime contractors. For instance, in fiscal 2011, we received
a multi-year award to provide certain of our high-power satellite amplifiers which will be used in a major network expansion for
the U.S. Air Force. We believe this award represents a testament to the quality and high reliability of our amplifiers and we intend
to seek additional sales in the market.

Continue to Expand our Presence in the Mobile Military Satellite Communications Market – Over the last decade, the military
satellite communications (“Milsatcom”) market for mobile systems has increased significantly. While programs we've historically
participated in , such as the Lightweight Multi-Band Satellite Terminal (used by the U.S. Air Force, Army and Marines) and Ground
Multi-Band Terminal (used by the U.S. Air Force), have now been largely completed, we expect to continue our strong presence
in the mobile military communications market by participating in new programs such as the U.S. Army's Warfighter Information
Network-Tactical Program ("WIN-T") and the Family of Terminals program (used by the U.S. Special Operations Command
("SOCOM")). We intend to increase our focus on these types of programs and believe that we can increase our penetration into
both mobile ground and airborne Milsatcom markets.

Mobile Data Communications Segment

Overview

Our mobile data communications segment provides government and commercial customers with integrated solutions to enable
global satellite-based communications when mobile, real-time, secure transmission is required.

The vast majority of sales in this segment have historically come from sales relating to two U.S. military programs known as the
U.S. Army’s Movement Tracking System (“MTS”) program and the Force XXI Battle Command, Brigade and Below (“FBCB2”)
command and control system's Blue Force Tracking (“BFT-1”) program. Our combined MTS and BFT-1 sales for fiscal 2010
through 2012 were as follows:

Net
Sales
(in millions)

87.8
248.6
423.2

2012
2011
2010

Percentage of
Mobile Data
Communications
Segment Net Sales

Percentage of
Consolidated
Net Sales

78.0%
86.2%
94.8%

20.6%
40.6%
54.4%

We have supplied 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 to the MTS program
which now operates under the auspices of the BFT-1 program under the direction of the FBCB2-BFT program office. Our MTS-
related services also included the monitoring of satellite packet data networks.

In July 2010, a third party vendor was selected by the U.S. Army to develop a next generation BFT program known as BFT-2.
The U.S. Army has stated that it expects to transition to BFT-2 as quickly as possible. We expect that future MTS and BFT-1 orders
and related sales will largely be dependent on the ability and speed of the U.S. Army to transition to the BFT-2 system.

Products, Services and Applications

Our mobile data satellite transceivers and related proprietary technology 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 can
maintain and/or operate a 24 x 7 network operations and customer care center that provides customers with ongoing support any
time, day and night.

Our mobile data satellite transceiver products and related proprietary technology 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.
In the past, 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.

Our Sensor Enabled Notification System ("SENS") technology-based solutions offer customers a low-cost, spread-spectrum
technology-based system which can remotely track a large number of remote assets via low earth-orbit satellites and miniaturized
satellite transmitters. The information received is processed and distributed to users through an Internet Portal at
www.assetview.comtechmobile.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 geo-fencing which allows customers to track whether or not their assets or vehicles
stay within pre-defined boundaries.

Our 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. 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.

BFT-1 Sustainment Activities

We are currently providing BFT-1 sustainment services pursuant to a three-year indefinite delivery/indefinite quantity (“IDIQ”)
BFT-1 sustainment contract that we were awarded in March 2012. This three-year contract has a not-to-exceed value of $80.7
million and a base performance period that began April 1, 2012 and ends March 31, 2013. The contract provides for two twelve-
month option periods exercisable by the U.S. Army and, except for a fixed annual intellectual property license ("IP license") fee
of $10.0 million, the three-year $80.7 million contract value is subject to finalization and downward negotiation. Effective July
1, 2012, we are no longer procuring satellite bandwidth for the U.S. Army.

Under the terms of the BFT-1 sustainment contract, we agreed to perform certain satellite network and related engineering services
(including program management) on a cost-plus-fixed-fee basis. In addition, the contract allows the U.S. Army to purchase certain
mobile satellite transceivers on a firm fixed-price basis. Specific terms and conditions related to the IP license are covered by a
separate licensing agreement that provides for annual renewals, at the U.S. Army's option, for up to a five-year period, after which
time the U.S. Army will have a limited non-exclusive right to use certain of our IP for no additional IP licensing fee. Payments of
annual IP license fees beyond the base year are contingent upon the U.S. Army's exercise of optional performance periods.

In connection with the initial three-year $80.7 million IDIQ BFT-1 sustainment contract award, we received a funded order for
the initial base year of $17.0 million, of which $10.0 million was designated for payment of the first year IP license fee and $7.0
million was designated for engineering services, program management and satellite network operations. Pricing for the engineering
services, program management and satellite network operations has not yet been finalized and it is possible that we can receive
incremental funding of up to $8.6 million upon finalization.

Our BFT-1 sustainment contract can be terminated by the government at any time and is not subject to automatic renewal. Except
for orders received to date, the U.S. Army is not obligated to purchase any additional equipment or services under this IDIQ
contract. We believe that any future MTS and BFT-1 orders and related sales will largely be dependent on the ability and speed
of the U.S. Army to transition to the BFT-2 system and we expect future annual sales (and related operating income) from both
of these programs to materially decline from current levels.

Business Strategies

Although we expect materially lower annual BFT-1 and MTS revenues in future years and have discontinued sales of our
microsatellite products (which, in fiscal 2012 accounted for $17.7 million or 4.2% of consolidated net sales), we are focusing on
long-term growth opportunities and will:

Work Cooperatively with the U.S. Army to Support Its Planned Transition to BFT-2 – We believe that the reliable and effective
performance of our MTS and BFT-1 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. Although we do not have specific visibility into
the U.S. Army’s BFT-2 transition plan, the U.S. Army has indicated to us that it may require certain sustaining network engineering
related services and our intellectual property for several years. We intend to support the U.S. Army through our existing three-
year BFT-1 contract.

Leverage our Current Installed Base into Other Military Commands and the Civil Government Market – In the past, we 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. For example, the Army National Guard has received funding in the past to purchase our
products and services. Our geoOps™ software platform has also been incorporated into NATO’s IFTS, a satellite-based friendly
force tracking system. We currently provide mobile tracking solutions to the U.S. Department of State and U.S. Department of
Homeland Security. During fiscal 2013, we intend to invest modest amounts in research and development and sales and marketing
to develop and market new 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 sales in new markets or to new customers
in fiscal 2013.

Summary of Key Products, Systems and Services by Business Segment

Business
Segment

Telecommunications
transmission

Products/Systems
and Services
Satellite earth station
equipment and systems
including: modems,
frequency converters, power
amplifiers, transceivers,
access devices, voice
gateways and network
management systems

Over-the-horizon microwave
systems and adaptive
modems

RF microwave amplifiers

Traveling wave tube
amplifiers and solid-state
amplifiers

Solid-state, high-power,
broadband RF microwave
amplifiers

Mobile data communications Mobile satellite transceivers,

satellite network services,
installation, training and
maintenance and SENS
technology-based products

Representative
Customers
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., Harris
Corporation, Intelsat, Ltd.,
Globecomm Systems, Inc.,
L-3 Communications and
Rockwell Collins, Inc.

U.S. government
customers, foreign
governments such as Middle
Eastern and North African
customers and related prime
contractors, systems
integrators, as well as oil
companies such as Shell Oil
Company

Domestic and international
defense customers, prime
contractors and system
suppliers such as L-3
Communications, Harris
Corporation, General
Dynamics Corporation,
ViaSat Inc. and satellite
broadcasters such as The
DIRECTV Group and
EchoStar Corporation

Domestic and international
defense customers, prime
contractors and system
suppliers such as Raytheon
Company, Exelis Inc., EADS
and Thales Group, medical
equipment companies such
as Varian Medical Systems,
Inc., and aviation industry
system integrators such as
Rockwell Collins, Inc.

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

End-User
Applications

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

Secure defense applications,
such as transmission of U.S.
military digital voice and
data, modular tactical
transmission systems
("MTTS") which have been
incorporated into the U.S
military's SNAP
communication equipment,
and commercial applications
such as the transmission of
IP-based communications to
and from oil platforms

Satellite broadcast and
broadband satellite
communications and defense
applications

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)

Two-way satellite-based
mobile tracking, messaging
services (U.S. Army’s MTS),
battlefield command and
control applications (BFT-1)
and RFID applications

Acquisitions

We have made acquisitions of businesses and enabling technologies over the past several years and have followed a disciplined
approach in identifying, executing and capitalizing on these acquisitions.

On August 1, 2008 (the beginning of our fiscal 2009), we acquired Radyne, the largest acquisition in our history which we believe
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 and further diversified our overall global customer base and
expanded our addressable markets.

None of our other recent tactical and product line acquisitions, either individually, or in the aggregate, were material to our results
of operations and the effects of those acquisitions, either individually, or in the aggregate, were not material to our historical
consolidated financial statements.

Sales, Marketing and Customer Support

Sales and marketing strategies vary with particular markets served and include direct sales through sales, marketing and engineering
personnel and indirect sales through independent representatives, value-added resellers or a combination of the foregoing. We
devote time to evaluating and responding to requests for proposals by governmental agencies around the world, and as needed,
we employ the use of specialized consultants to develop our proposals and bids.

We intend to continue to expand international marketing efforts by engaging additional independent sales representatives,
distributors and value-added resellers and by establishing additional foreign sales offices.

Our management, technical and marketing personnel establish and maintain relationships with customers. Our strategy includes
a commitment to provide ongoing customer support for our systems and equipment. This support involves providing direct access
to engineering staff or trained technical representatives to resolve technical or operational issues. As appropriate and as guided by
corporate senior management, our three business segments capitalize on manufacturing, technology, sales, marketing and customer
support synergies between them.

Our over-the-horizon microwave systems, amplifier product lines, satellite earth station products and mobile data communications
products and services that use relatively new technology have long sales cycles. Once a product is designed into a system, customers
may be reluctant to change the incumbent supplier due to the extensive qualification process and potential redesign required in
using alternative sources. Accordingly, management is actively involved in key aspects of relations with our major customers.

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

Fiscal Years Ended July 31,
2011

2010

2012

United States
U.S. government
Commercial customers
Total United States

International

48.9%
12.4%
61.3%

61.7%
8.1%
69.8%

71.1%
6.0%
77.1%

38.7%

30.2%

22.9%

Sales to U.S. government customers include sales to the DoD and intelligence and civilian agencies, as well as sales directly to
or through prime contractors. International sales for fiscal 2012, 2011 and 2010, which include sales to U.S. domestic companies
for inclusion in products that will be sold to international customers, were $164.5 million, $184.8 million and $178.5 million,
respectively. When we sell internationally, we primarily price our contracts in U.S. dollars. Some of our exports are paid for by
letters of credit, with the balance carried either on an open account or on an installment note basis. Significant international contracts
generally require us to provide performance guarantees. For fiscal 2012, 2011 and 2010, except for sales to the U.S. government
which include sales to prime contractors of the U.S. government, no other customer or individual country, including sales to U.S.
domestic companies for inclusion in products that will be sold to a foreign country, represented more than 10% of consolidated
net sales.

Backlog

Our backlog as of July 31, 2012 and 2011 was $153.9 million and $145.0 million, respectively. Included in these amounts, as of
July 31, 2012 and 2011, is approximately $16.6 million and $38.9 million, respectively, related to our BFT-1 sustainment activities.
We expect that a majority of the backlog as of July 31, 2012 will be recognized as sales during fiscal 2013.

At July 31, 2012, 36.2% of the backlog consisted of U.S. government contracts, subcontracts and government funded programs,
53.0% consisted of orders for use by international customers (including sales to U.S. companies for inclusion in products that will
be sold to international customers) and 10.8% consisted of orders for use by U.S. commercial customers.

Our backlog consists solely of orders that we believe to be firm; however, almost all of the contracts in our backlog are subject to
cancellation at the convenience of the customer or for default in the event that we are unable to perform under the contract. Backlog
that is derived from U.S. government orders relates to U.S. government contracts that have been awarded, signed and funded.
Backlog for our U.S. government customers includes amounts appropriated by Congress and allotted to the contract by the procuring
government agency. Our backlog does not include the value of options that may be exercised in the future on multi-year contracts,
nor does it include the value of additional purchase orders that we may receive under IDIQ contracts or basic ordering agreements.

In fiscal 2012, 86.2% of our consolidated U.S. government net sales were derived from firm fixed-price contracts. Under these
types of contracts, we perform for an agreed-upon price and we can derive benefits from cost savings, but bear the risk of cost
overruns. Our cost-plus-fixed-fee contracts, which to date have not been a significant percentage of our consolidated net sales,
typically provide for reimbursement of allowable costs incurred plus a negotiated fee.

Variations in backlog from time to time are attributable, in part, to changes in product mix, the timing of contract proposals, and
the timing of contract awards and delivery schedules on specific contracts. Our satellite earth station equipment and our traveling
wave tube amplifier product lines operate under short lead times and usually generate sales out of inventory. Our mobile data
communications backlog is highly influenced by the nature and timing of orders received from the U.S. government which is
subject to unpredictable funding, deployment and technology decisions. As a result, we believe our backlog at any point in the
fiscal year is not necessarily indicative of the total sales anticipated for any particular future period.

Manufacturing and Service

Our manufacturing operations consist principally of the assembly and testing of electronic products that we design and build from
purchased fabricated parts, printed circuits and electronic components.

We operate a high-volume technology manufacturing center located in Tempe, Arizona, which has been utilized by all three of
our business segments for certain high-volume production. Use of our high-volume technology manufacturing center 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.

We consider our facilities to be well maintained and adequate for current and planned production requirements. All of our
manufacturing facilities, including those that serve the military market, must comply with stringent customer specifications. We
employ formal quality management programs and other training programs, including the International Standard Organization’s
(“ISO’s”) quality procedure registration programs.

Our ability to deliver products to customers on a timely basis is dependent, in part, upon the availability and timely delivery by
subcontractors and suppliers (including the U.S. government) of the components and subsystems that we use in manufacturing
our products. Electronic components and raw materials used in our products are generally obtained from independent suppliers.
Some components are standard items and are available from a number of suppliers. Others are manufactured to our specifications
by subcontractors. Although we obtain certain components and subsystems from a single source or a limited number of sources,
we believe that most components and equipment are available from multiple sources. Certain U.S. government contracts may
require us to incorporate government furnished parts into our products. Delays in receipt of such parts can adversely impact the
timing of our performance on the related contracts.

Research and Development

We reported research and development expenses for financial reporting purposes of $38.5 million, $43.5 million and $46.2 million
in fiscal 2012, 2011 and 2010, respectively, representing 9.1%, 7.1% and 5.9% of total consolidated net sales, respectively, for
these periods. A portion of our research and development efforts relate to the adaptation of our basic technology to specialized
customer requirements and is recoverable under contracts, and such expenditures are not reflected in our research and development
expenses for financial reporting purposes, but are included in net sales with the related costs included in cost of sales. During
fiscal 2012, 2011 and 2010, we were reimbursed by customers for such activities in the amounts of $5.7 million, $10.7 million
and $12.6 million, respectively.

Our aggregate research and development expenditures (internal and customer funded) were $44.2 million, $54.2 million and $58.8
million or 10.4%, 8.9% and 7.6% of total consolidated net sales in fiscal 2012, 2011 and 2010, respectively.

Intellectual Property

We rely upon trade secrets, technical know-how and continuing technological innovation to develop and maintain our competitive
position. The products we sell require significant engineering design and manufacturing expertise. The majority of these
technological capabilities, however, are not protected by patents and licenses. We rely on the expertise of our employees and our
learned experiences in both the design and manufacture of our products and the delivery of our services.

Some of our key telecommunications transmission technology is protected by patents, which are significant to protecting our
proprietary technology. We have been issued several U.S. patents relating to forward error correction technology that is utilized
in our TPC-enabled satellite modems. Due to our market leadership position, we do not expect that upon expiration of these patents,
our future results will be negatively impacted. Our DoubleTalk® Carrier-in-Carrier® bandwidth compression technology is licensed
by us from a third party.

Almost all of the products and services we sell to the U.S. government include technology and other technical know-how that we
have internally developed. Historically, almost all of our U.S. government contracts have not provided for government-purpose
rights which generally include the right to permit other companies, including our competitors, to use our technology to develop
products for the U.S. government.

In past instances where we have provided government-purpose rights, to our knowledge, the U.S. government has not exercised
any of these rights. To the extent that we have provided or will provide government-purpose rights in the future, we believe that
given the rapidly changing nature of our technology, our future success will depend primarily on the technical competence and
creative skill of our personnel, rather than any contractual protection.

Competition

Our businesses are highly competitive and are characterized by rapid technological change. Some of our competitors are
substantially larger, have significantly greater financial, marketing, research and development, technological and operating
resources and broader product lines than us. A significant technological breakthrough by others, including new companies, our
existing competitors and our customers, could have a material adverse effect on our business. Our growth and financial condition
depends on, among other things, our ability to keep pace with such changes and developments and to respond to the increasing
variety of electronic equipment users and transmission technologies.

Some large defense-based companies such as Raytheon Company and Northrop Grumman Corporation have subsidiaries or
divisions that compete against us in one or more business segments. In addition, new and potential competitors are always emerging.
Certain of our customers, such as prime contractors who currently outsource their engineering and manufacturing requirements
to us, have technological capabilities in our product areas and could choose to replace our products with their own. In some cases,
we partner or team with companies (both large and mid-tier) to compete against other teams for large defense programs. In some
cases, these same companies may be competitors.

Listed, in alphabetical order below, are some of our competitors in each of our three business segments:

Telecommunications transmission – Advantech AMT, Datum Systems, Inc., Gilat Satellite Networks Ltd., Harris
Corporation, iDirect, Inc., Paradise Datacom LLC (a subsidiary of Teledyne Corporation), Telefonaktiebolaget LM
Ericsson and ViaSat, Inc.

RF microwave amplifiers – Aethercomm, Inc., CPI International, Inc., E2V Technologies Ltd., Empower RF Systems,
Inc., Herley Industries, Inc. (a subsidiary of Kratos Defense & Security Solutions, Inc.) and Miteq, Inc.

Mobile data communications – Alico Systems, Inc., Globalstar, Inc., Northrop Grumman Corporation, Orbital Sciences
Corporation, Qualcomm, Inc. and ViaSat, Inc.

We believe that competition in all of our markets is based primarily on technology innovation, product performance, reputation,
delivery times, customer support and price. Due to our flexible organizational structure and proprietary know-how, we believe we
have the ability to develop, produce and deliver products on a cost-effective basis faster than many of our competitors.

Employees

At July 31, 2012, we had 1,244 employees (including temporary employees and contractors), 592 of whom were engaged in
production and production support, 381 in research and development and other engineering support and 271 in marketing and
administrative functions. Through the date of this filing, we have reduced our workforce by approximately 76 employees, due to
cost reduction actions that we took, including the wind-down of our mobile data communications segment's microsatellite product
line.

None of our U.S. based employees are represented by a labor union. We believe that our employee relations are good.

U.S. Government Contracts and Security Clearances

The U.S. government operates on an October-to-September fiscal year. Generally, in February of each year, the President of the
United States presents to the U.S. Congress (“Congress”) the proposed budget for the upcoming fiscal year and from February
through September of each year, the appropriations and authorization committees of Congress review the President’s budget
proposals and establish the funding levels for the upcoming fiscal year. Once these levels are enacted into law, the Executive Office
of the President administers the funds to the agencies. Thereafter, we can receive orders pursuant to sole-source or competitively
awarded contracts.

The U.S. government may be unable to complete its budget process before the end of any given government fiscal year and when
the fiscal budget is not approved in a timely manner, the U.S. government is required either to shut down or be funded pursuant
to a “continuing resolution” that authorizes agencies of the U.S. government to continue operations but does not authorize new
spending initiatives, either of which could result in reduced or delayed orders or payments for products and services we provide.
If the U.S. government budget process results in a shutdown or prolonged operation under a continuing resolution, it may have a
material adverse effect on our business, operating results or financial condition.

Sole-source contracts are generally awarded to a single contractor without a formal competition when a single contractor is deemed
to have an expertise or technology superior to that of competing contractors or when there is an urgent need by the U.S. government
that cannot wait for a full competitive process. Potential suppliers compete informally through research and development and
marketing efforts. Competitively-bid contracts are awarded based on a formal proposal evaluation established by the procuring
agency and interested contractors prepare a bid. Competitively-bid contracts are awarded after a formal bid and proposal competition
among suppliers.

The U.S. government has a stated policy direction to reduce the number of sole-source contract awards across all procuring
agencies. In addition, the U.S. government is increasing the use of a strategy to award multiple-award IDIQ contracts to increase
their procurement options. IDIQ contracts allow the U.S. government to select a group of eligible contractors for the same program.
When the government awards IDIQ contracts to multiple bidders under the same program, a company must compete to be selected
as a participant in the program and subsequently compete for individual delivery orders. As a result of the aforementioned changes,
although we expect competition for all future U.S. government contracts to increase, at the same time, we may be able to participate
in other program areas that we do not currently participate in.

As a U.S. government contractor and subcontractor, we are subject to a variety of rules and regulations, such as the Federal
Acquisition Regulations (“FAR”). Individual agencies can also have acquisition regulations. For example, the Department of
Defense implements the FAR through the Defense Federal Acquisition Regulation supplement (commonly known as DFARs).
For all federal government entities, the FAR regulates the phases of any product or service acquisition, including: acquisition
planning, competition requirements, contractor qualifications, protection of source selection and vendor information, and
acquisition procedures. In addition, the FAR addresses the allowability of our costs, while Cost Accounting Standards address
how those costs can be allocated to contracts. The FAR also subjects us to audits and other government reviews. These reviews
cover issues such as cost, performance and accounting practices relating to our contracts. The government may challenge our costs
and fees. We are also required to comply with the National Industrial Security Program Operating Manual ("NISPOM") which
relates to rules and requirements regarding classified materials and programs. If we do not comply with the various regulations,
we may lose and/or be ineligible for facility security clearances and/or classified programs.

Regulatory Matters

In addition to the rules and regulations that pertain to us as a U.S. government contractor and subcontractor, we are also subject
to a variety of local, state and federal governmental regulations. Our products that are incorporated into wireless communications
systems must comply with various governmental regulations, including those of the Federal Communications Commission
(“FCC”). Our manufacturing facilities, which may store, handle, emit, generate and dispose of hazardous substances that are used
in the manufacture of our products, are subject to a variety of local, state and federal regulations, including those issued by the
Environmental Protection Agency. Our financial reporting, corporate governance, public disclosure and compliance practices are
governed by laws such as the Sarbanes-Oxley Act of 2002 and rules and regulations issued by the Securities and Exchange
Commission (“SEC”). In addition, we are subject to European Union (“EU”) directives related to the recycling of electrical and
electronic equipment. Our international sales are subject to U.S. and foreign regulations such as the International Traffic in Arms
Regulations (“ITAR”) and Export Administration Regulations (“EAR”) and may require licenses from U.S. government agencies,
including the payment of certain tariffs. Our ability to export in the future is dependent upon our ability to obtain the export
authorization from the appropriate U.S. government agency. If we are unable to receive the appropriate export authorization, we
may be prohibited from selling our products and services internationally which may limit our sales and may have a material adverse
effect on our business, results of operations and financial condition.

Forward-Looking Statements

ITEM 1A. RISK FACTORS

This Form 10-K contains “forward-looking statements” including statements concerning the future of our industry, product
development, business strategy, continued acceptance of our products, market growth, and dependence on significant customers.
These statements can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “could,” “would,”
“expect,” “plan,” “anticipate,” “believe”, “estimate,” “predict,” “potential,” “continue,” the negative of these terms, or other similar
words or comparable terminology. All statements in this report, other than statements of historical fact, are forward-looking
information. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary
statements in this Form 10-K. However, the risks described in this Form 10-K are not the only risks that we face. Additional risks
and uncertainties, not currently known to us or that do not currently appear to be material, may also materially adversely affect
our business, financial condition and/or operating results in the future. The risk factors noted below and other factors noted
throughout this Form 10-K could cause our business outlook, actual financial condition or results to differ significantly from those
contained in any forward-looking statement.

The continued effects of the adverse global economic climate could have a material adverse impact on our business outlook,
our business, operating results and financial condition.

We participate in the global commercial and government communications markets, which are characterized by rapid technological
advances and constant changes. For the past several years, our customers and the end-markets that we serve have been significantly
impacted by adverse global economic conditions. The impact, severity and duration of these conditions are impossible to predict
with precision. These conditions have already resulted in: (i) changes to our commercial and government customers’ historical
spending priorities, (ii) reduced military budgets, and (iii) extreme pressures on government budgets throughout the world. In
addition to operating in a difficult global economic environment, some of our end customers are located in emerging countries
that are currently undergoing sweeping political changes. Global international monetary issues and concerns continue to be unsettled
and it is possible that a worldwide credit crisis could occur. We believe that the aggregation of these conditions has resulted in the
current suppression of end-market demand for many of the products that we sell and services that we provide. Although we believe
that we will ultimately experience long-term growth, these adverse conditions could last for many years.

We believe that nearly all of our customers will continue to face capital and operating budget constraints and a much tighter credit
environment. None of our three operating segments have been immune to these adverse conditions and each continues to face an
uncertain economic environment. These adverse conditions have impacted, and may continue to impact, our businesses in a number
of ways, including:

• Difficulty in forecasting our results of operations – It is difficult to accurately forecast our results of operations as we
cannot predict the severity, or the duration, of the current adverse economic environment or the impact it will have on
our current and prospective customers. If our current or prospective customers materially postpone, reduce or even forgo
purchases of our products and services to a greater extent than we anticipate, our business outlook will prove to be
inaccurate.

• Additional reductions in telecommunications equipment and systems spending may occur – Our businesses have been
negatively affected, both currently and in the past, by uncertain economic environments both in the overall market and,
more specifically, in the telecommunications sector. Our customers have reduced their budgets for spending on
telecommunications equipment and systems and in some cases postponed or reduced the purchase of our products and
systems. These reductions have impacted all three of our business segments. The overall business environment remains
challenging. As a result of the ongoing difficult global economic environment, our customers may further reduce their
spending on telecommunications equipment and systems which would negatively impact all three of our business
segments. If this occurs, it would adversely affect our business outlook, revenues, profitability and the recoverability of
our assets, including intangible assets such as goodwill.

• Our customers may not be able to obtain financing – Although many of our products are relatively inexpensive when
compared to the total systems or networks that they are incorporated into, our sales are affected by our customers’ ability
to obtain the sufficient financing they may require to build out their networks, fund operations and ultimately make
purchases from us. Our customers’ inability to obtain sufficient financing would adversely affect our revenues. In addition,
if the current economic environment and lack of financing results in insolvencies for our customers, it would adversely
impact the recoverability of our accounts receivable which would, in turn, adversely impact our results of operations.

• Our ability to maintain affordable credit insurance may become more difficult – In the normal course of our business,
we purchase credit insurance to mitigate some of our domestic and international credit risk. Although credit insurance
remains generally available, upon renewal, it may become more expensive to obtain and might require higher deductibles
than in the past. There can be no assurance that, in the future, we will be able to obtain adequate credit insurance consistent
with our past practices.

Our 2013 business outlook and operating results are difficult to forecast, as operating results are subject to significant
fluctuations and are likely to be volatile.

We have experienced, and will experience in the future, significant fluctuations in new orders, net sales and operating results,
including our net income and earnings per share from period-to-period. For instance, a large portion of our telecommunications
transmission and RF microwave amplifiers segments’ net sales are derived from products such as satellite earth station equipment
and satellite earth station traveling wave tube amplifiers, respectively, that generally have short-lead times. As a result, bookings
and backlog related to these products are extremely sensitive to short-term fluctuations in customer demand. The remaining portion
of our telecommunications transmission and our RF microwave amplifiers segments’ net sales are generally derived from large
contracts or military program opportunities that are subject to lengthy sales cycles and therefore difficult to predict. As discussed
elsewhere in this Form 10-K, our mobile data communications segment is expected to experience a material decline in revenues
and related operating income in fiscal 2013 as compared to fiscal 2012.

Our new orders, net sales and operating results, including our net income and earnings per share, may vary significantly from
period-to-period because of other factors including: the financial performance of acquisitions; new accounting standards relating
to acquisitions and revenue recognition; product mix sold; fluctuating market demand; price competition; new product introductions
by our competitors; fluctuations in foreign currency exchange rates; unexpected changes in the timing of delivery of components
or subsystems; political instability; regulatory developments; changes in income tax rates or tax credits; the price and expected
volatility of our stock (which will impact, among other items, the amount of stock-based compensation expense we may record);
and general global economic conditions.

Changes in government policy could have a material adverse effect on us.

In past years, we benefited from increased Department of Defense (“DoD”) spending relating to the ongoing military conflicts in
Iraq and Afghanistan. This trend is not expected to continue. We believe the U.S. government policies related to troop withdrawals
and reductions in Iraq and Afghanistan will result in a reduction of future orders for our products and services. Historical spending
patterns, for the types of communication products that we sell, are therefore not meaningful when estimating future product demand.
These policies or future changes in these or other policies or priorities could have a negative impact on our business and results
of operations. A shifting political environment makes it more difficult than usual to estimate our future income and expenses. The
future direction of the political environment, including potential changes in policies relating to the ongoing military conflict in
Afghanistan, could have a material adverse effect on our business, results of operations and financial condition.

Our business, results of operations, liquidity and financial condition depend on our ability to obtain future business with
the U.S. government.

In past years, our business has depended, in large part, on U.S. government business. Our sales to the U.S. government (including
sales to prime contractors to the U.S. government) accounted for approximately 48.9%, 61.7%, and 71.1% of our consolidated
net sales for the fiscal years ended July 31, 2012, 2011 and 2010, respectively. Approximately 36.2% of our backlog at July 31,
2012 consisted of orders from U.S. government contracts, U.S. government subcontracts and U.S. government funded programs.
Our U.S. government business exposes us to various risks, including:

•

unexpected contract or project terminations or suspensions;

unpredictable order placements, reductions, delays or cancellations;

reductions in government funds available for our projects due to government policy changes, budget cuts and other
spending priorities;

higher than expected final costs, particularly relating to software and hardware development, for work performed under
contracts where we commit to specified deliveries for a fixed price; and

unpredictable cash collections of unbilled receivables that may be subject to acceptance of contract deliverables by the
customer and contract close out procedures, including government audit and approval of final indirect rates.
19

All of our U.S. government contracts can be terminated by the U.S. government for its convenience. Termination for convenience
provisions provide only for our recovery of costs incurred or costs committed, settlement expenses and profit on work completed
prior to termination. In addition to the U.S. government’s right to terminate, U.S. government contracts are conditioned upon the
continuing approval by Congress of the necessary funding. Congress usually appropriates funds for a given program on a fiscal
year basis even though contract performance may take more than one year. Consequently, at the beginning of a major program,
the contract may not be fully funded, and additional monies are normally committed to the contract only if, and when, appropriations
are made by Congress for future fiscal years.

Delays or changes in funding can impact the timing of awards or lead to changes in program content. Also, we obtain certain of
our U.S. government contracts through a competitive bidding process. There can be no assurance that we will win additional
contracts or that actual contracts that are awarded will ultimately be profitable.

The outcome of ongoing U.S. government investigations are difficult to predict.

In June 2012, certain officers and employees of the Company received subpoenas issued by the United States District Court for
the Eastern District of New York (“EDNY”) seeking certain documents and records relating to our Chief Executive Officer (“CEO”).
Although the EDNY subpoenas make no specific allegations, we believe the subpoenas relate to a grand jury investigation stemming
from our CEO's contacts with a scientific attaché to the Israeli Purchasing Mission in the United States who our CEO met in
connection with the sale of our equipment to the State of Israel during the 1980's. This scientific attaché was later alleged to have
conducted intelligence operations in the U.S. In August 2012, we were informed by the U.S. government that our CEO's security
clearance was suspended. In order to maintain our qualification for government contracts requiring facility security clearance, we
have made certain internal organizational realignments. These changes restrict access to classified information to other Comtech
senior executives, management and other employees who maintain the required level of clearance.

Separately, in connection with an investigation by the Securities and Exchange Commission (“SEC”) into trading in securities of
CPI International, Inc. (“CPI”), we and our CEO, among others, have received subpoenas for documents from the SEC concerning
transactions in CPI stock by our CEO and other persons (including one subsidiary employee). Our CEO purchased CPI stock in
November 2010, after the September 2010 termination of our May 2010 agreement to acquire CPI.

We and our CEO are cooperating with the U.S. government regarding the above matters. The independent members of our Board
of Directors are monitoring these matters with the assistance of independent counsel.

The outcome of any investigation is inherently difficult, if not impossible, to predict. However, based on our work to date in respect
of the subpoenas in each matter, we do not believe that it is likely that either investigation will result in a legal proceeding against
our CEO or the Company. If either of these investigations results in a legal proceeding, it could have a material adverse effect on
our business and results of operations.

Government contract audits could have an adverse financial impact on us.

All of our U.S. government contracts can be audited by the Defense Contract Audit Agency (“DCAA”) and we can be subject to
penalties arising from post-award contract audits or cost audits in which the value of our contracts may be reduced. As discussed
in “Notes to Consolidated Financial Statements - Note (14)(b) Legal Proceedings and Other Matters” included in “Part II - Item
8. - Financial Statements and Supplementary Data,” in May 2011, we were informed by the DCAA that it selected our BFT-1
contract for a post-award audit. We had previously been informed that the DCAA would issue its report by September 2012. The
DCAA has not yet rendered its report and we do not currently know the timing of the issuance of this report. Through July 31,
2012, we received $377.0 million in total funded orders under our $384.0 million BFT-1 contract that expired December 31, 2011.
Ultimately, if the DCAA issues a report and the U.S. government determines that a cost or price adjustment for our BFT-1 contract
is appropriate, we may be required to refund certain monies to the U.S. government, with interest. These amounts could have a
material adverse effect on our results of operations and financial condition.

We could be negatively impacted by a security breach, through cyber-attack, cyber intrusion or otherwise, other significant
disruption of our IT networks and related systems or of those we operate for certain customers.

We face the risk of a security breach, whether through cyber-attack or cyber intrusion via the Internet, malware, computer viruses,
attachments to e-mails, or other significant disruption of our IT networks and related systems. Our IT network and systems are
constantly under attack and we face an added risk of a security breach or other significant disruption of the IT networks and related
systems that we operate and maintain for certain of our customers, which may involve managing and protecting information
relating to national security and other sensitive government functions. Our customers' systems are also frequently under attack.

The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers,
foreign governments and cyber terrorists, has increased as the number, intensity and sophistication of attempted attacks and
intrusions from around the world have increased.

As a communications company, and particularly as a government contractor, we face a heightened risk of a security breach or
disruption from threats to gain unauthorized access to our and our customers’ proprietary or classified information on our IT
networks and related systems and to the IT networks and related systems that we operate and maintain for certain of our customers.
These types of information and IT networks and related systems are critical to the operation of our business and essential to our
ability to perform day-to-day operations, and, in some cases, are critical to the operations of certain of our customers. Although
we make significant efforts to maintain the security and integrity of these types of information and IT networks and related systems,
and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that
our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or
damaging. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because
attempted security breaches, particularly cyber-attacks and intrusions, or disruptions will occur in the future, and because the
techniques used in such attempts are constantly evolving and generally are not recognized until launched against a target, and in
some cases are designed not to be detected and, in fact, may not be detected. In some cases, the resources of foreign governments
may be behind such attacks. Accordingly, we may be unable to anticipate these techniques or to implement adequate security
barriers or other preventative measures, and thus it is virtually impossible for us to entirely mitigate this risk. A security breach
or other significant disruption involving these types of information and IT networks and related systems could:

• Disrupt the proper functioning of these networks and systems and therefore our operations and/or those of certain of our

customers;

• Result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential,
sensitive or otherwise valuable information of ours or our customers, including trade secrets, which others could use to
compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes;

• Compromise national security and other sensitive government functions;
• Require significant management attention and resources to remedy the damages that result;
•
Subject us to claims for contract breach, damages, credits, penalties or termination; and
• Damage our reputation with our customers (particularly agencies of the U.S. government) and the public generally.

In addition, the cost of continually defending against cyber-attacks and breaches may significantly increase and any or all of the
foregoing could have a material adverse effect on our business and results of operations.

Terrorist attacks and threats, and government responses thereto, and threats of war could have a material adverse effect
on us.

Terrorist attacks, the U.S. and other governments’ responses thereto, and threats of war could also adversely impact our business,
results of operations and financial condition. Any escalation in these events or similar or future events may disrupt our operations
or those of our customers or suppliers and may affect the availability of materials needed to manufacture our products or the means
to transport those materials to manufacturing facilities and finished products to customers.

Reductions in spending or changes in spending priorities to reduce the U.S. Department of Defense (“DoD”) budget and
the U.S. Government’s debt could have a material adverse effect on us.

We believe that the budget for the U.S. DoD will be reduced from current levels over the next decade. In addition to debt reduction
efforts already authorized, it is possible that the U.S. government could reduce or further delay its spending on, or reprioritize its
spending away from, government programs which we participate in.

Debt-ceiling reduction legislation that was enacted in 2011 requires reductions of approximately $487.0 billion in Pentagon and
national security agency budgets over the next ten years. On November 23, 2011, the Joint Select Committee on Deficit Reduction
(commonly referred to as the Super Committee which was established as part of the Budget Control Act of 2011) failed to
recommend legislation that would reduce net U.S. government spending by at least $1.2 trillion over the next 10 years. As of
September 26, 2012, Congress has not yet identified the required spending reductions and as a result, it is possible that there will
be an automatic sequestration of discretionary appropriations for U.S. defense programs. Although the types of communications
products and services we offer appear to be a funding priority over the long term, a significant decline in defense spending or a
shift in funding priorities may have a negative effect on future orders, sales, income and cash flows depending on the platforms
and programs affected by such budget reductions or shifts in funding priorities.

Ultimately, the U.S. government may be unable to timely complete its budget process or fully agree upon spending priorities. If
the U.S. government budget process results in a shutdown or prolonged operation under a continuing resolution, we may experience
delayed orders, delayed payments, declines in revenues, profitability and cash flows. In addition, we may experience related supply
chain delays, disruptions or other problems associated with financial constraints faced by our suppliers and subcontractors. All of
the aforementioned conditions could have a material adverse effect on our fiscal 2013 business and financial outlook, our operating
results or our financial condition.

We may not be able to maintain our expected levels of mobile data communications segment revenues in future years.

As discussed elsewhere in this Form 10-K, we expect revenues and related operating income in our mobile data communications
segment to materially decline in fiscal 2013 as compared to fiscal 2012. As a result, we have initiated and have implemented
targeted actions to align our cost structure and are continuing the process of refining our mobile data communications segment’s
business strategies.

We are currently providing sustainment services to the U.S. Army's MTS and BFT-1 programs under a three-year IDIQ contract.
The base performance period on this contract is April 1, 2012 to March 31, 2013. The contract provides for two twelve-month
option periods exercisable by the U.S. Army and, except for a fixed annual intellectual property (“IP”) license fee of $10.0 million,
the three-year $80.7 million contract value is subject to finalization and downward negotiation. Payments of annual IP license
fees beyond the base year are contingent upon the U.S. Army's exercise of optional performance periods. Because this contract is
an IDIQ contract, it can be terminated at any time and the U.S. Army is not obligated to purchase any additional equipment or
services.

Sales for MTS and BFT-1 products and services in fiscal 2012 were approximately $87.8 million and our business outlook assumes
a material decline in such revenues in fiscal 2013. As further described below, given the various uncertainties related to our BFT-1
sustainment activities, our operating results in fiscal 2013 and beyond are likely to be more volatile and it will be more difficult
than in the past to accurately project gross margins and our related operating income, net income and earnings per share in any
particular future period.

Our ability to accurately predict BFT-1 sustainment activities in fiscal 2013 and beyond is subject to a number of future events,
including new orders, new contracts, contract extensions (including the exercise of optional performance periods), contract ceiling
increases, unpredictable funding, as well as deployment and technology decisions by the U.S. government. We believe that the
U.S. Army may have begun deploying BFT-2 equipment in Korea and according to published reports on the U.S. Army's website,
will also begin deploying BFT-2 equipment in Afghanistan in our fiscal 2013. As such, if the U.S. Army does not exercise the
optional performance periods and we do not receive new orders, new contracts, contract extensions or contract ceiling increases,
our mobile data communications segment's revenues in future periods will decline significantly, which would have a material
adverse effect on our 2013 business outlook, our future business outlook, and our current and future operating results.

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 in the future. Ultimately, we may not be successful
and our business outlook could be negatively impacted.

Noncompliance with numerous domestic and international laws, regulations and restrictions (including those pertaining
to income taxes) could materially impact our business, results of operations and financial condition.

Our business operations are primarily located in the U.S.; however, we must comply with certain international, as well as domestic,
laws, regulations and restrictions. Our products are incorporated into wireless communications systems that must comply with
various U.S. government regulations, including those of the FCC, as well as similar international laws and regulations. Because
the laws and regulations pertaining to our business are relatively complex, our business faces increased risks including the following:

• We could be disqualified as a supplier to the U.S. government – As a supplier to the U.S. government, we must comply
with numerous regulations, including those governing security, contracting practices and classified information. Failure
to comply with these regulations and practices could result in fines being imposed against us or our suspension for a
period of time from eligibility for bidding on, or for award of, new government contracts. If we are disqualified as a
supplier to government agencies, we would lose most, if not all, of our U.S. government customers and revenues from
sales of our products would decline significantly. Among the potential causes for disqualification are violations of various
statutes, including those related to procurement integrity, export control, U.S. government security regulations,
employment practices, protection of the environment, accuracy of records in the recording of costs, and the Foreign
Corrupt Practices Act.

The government could investigate and make inquiries of our business practices and conduct audits of contract performance
and cost accounting. Based on the results of such audits, the U.S. government could adjust our contract-related costs and
fees. Depending on the results of these audits and investigations, the government could make claims against us and, if it
were to prevail, certain incurred costs would not be recoverable by us.

• Adverse regulatory changes could impair our ability to sell products – Regulatory changes, including changes in the
allocation and availability of frequency spectrum, and in the military standards and specifications that define the current
satellite networking environment, could materially harm our business by: (i) restricting development efforts by us and
our customers, (ii) making our current products less attractive or obsolete, or (iii) increasing the opportunity for additional
competition. The increasing demand for wireless communications has exerted pressure on regulatory bodies worldwide
to adopt new standards and reassign bandwidth for these products and services. The reduced number of available
frequencies for other products and services and the time delays inherent in the government approval process of new
products and services have caused, and may continue to cause, our customers to cancel, postpone or reschedule their
installation of communications systems including their satellite, over-the-horizon microwave, or terrestrial line-of-sight
microwave communication systems. This, in turn, could have a material adverse effect on our sales of products to our
customers. Changes in, or our failure to comply with, applicable laws and regulations could materially harm our business.

• We may be subject to environmental liabilities – We engage in manufacturing and are subject to a variety of local, state
and federal governmental regulations relating to the storage, discharge, handling, emission, generation, manufacture and
disposal of toxic or other hazardous substances used to manufacture our products. We are also subject to the Restriction
of Hazardous Substance ("RoHS") directive which restricts the use of lead, mercury and other substances in electrical
and electronic products. The failure to comply with current or future environmental requirements could result in the
imposition of substantial fines, suspension of production, alteration of our manufacturing processes or cessation of
operations that could have a material adverse effect on our business, results of operations and financial condition. In
addition, the handling, treatment or disposal of hazardous substances by us or our predecessors may have resulted, or
could in the future result, in contamination requiring investigation or remediation, or leading to other liabilities, any of
which could have a material adverse effect on our business, results of operations and financial condition.

•

Tax audits could result in a material tax assessment – Our U.S. federal, state and foreign tax returns are subject to audit
and a resulting tax assessment or settlement could have a material adverse effect on our results of operations and financial
condition. Significant judgment is required in determining the provision for income taxes. The final determination of tax
examinations and any related litigation could be materially different than what is reflected in historical income tax
provisions and accruals. Our federal income tax returns for fiscal 2010, fiscal 2011 and fiscal 2012 are subject to potential
future Internal Revenue Service (“IRS”) audit. Although adjustments relating to past audits of our federal tax returns
were immaterial, a resulting tax assessment or settlement for other periods or other jurisdictions that may be selected for
future audit could have a material adverse effect on our results of operations and financial condition.

Our investments in recorded goodwill and other intangible assets could be impaired as a result of future business conditions,
further deterioration of the global economy or if we change our reporting unit structure.

As of July 31, 2012, we have goodwill and intangible assets of $176.2 million recorded on our consolidated balance sheet of which
$129.6 million and $46.6 million relates to our telecommunications transmission and RF microwave amplifiers segments,
respectively.

For purposes of reviewing impairment and the recoverability of goodwill and other intangible assets, each of our three operating
segments constitutes a reporting unit and we must make various assumptions regarding estimated future cash flows and other
factors in determining the fair values of the reporting unit. We perform an annual impairment review in the first quarter of each
fiscal year, unless there are other indicators of impairment. Based on our annual impairment review performed as of August 1,
2012, we concluded that our RF microwave amplifiers and our telecommunications transmission reporting units had an estimated
fair value in excess of total asset book value of approximately 84.0% and 7.0%, respectively.

The annual impairment test is based on several factors requiring judgment and is based on how our President and Chief Executive
Officer manages the business. If these estimates or their related assumptions change in the future, or if we change our future
reporting structure, we may be required to record impairment charges in future periods.

If global conditions continue to deteriorate from current levels, or if the market value of our equity or assets significantly declines,
or we are not successful in achieving our expected sales levels, or if other events or changes in circumstances occur that indicate
that the carrying amount of our assets may not be recoverable, our goodwill and other intangible assets may become impaired.

Although we performed our fiscal 2013 impairment testing on August 1, 2012 and determined that there was no impairment of
our goodwill, changes in our future operating performance or business conditions, in general, could result in an impairment of
goodwill in future operating periods. Any impairment charges that we may record in the future could be material to our results of
operations and financial condition.

All of our business activities are subject to rapid technological change requiring us to continuously develop technology
and/or obtain licensed technology in order to compete successfully.

We are engaged in business activities characterized by rapid technological change, evolving industry standards, frequent new
product announcements and enhancements, and changing customer demands. The introduction of products and services on future
industry standards embodying new technologies such as TDMA-based technologies and the emergence of industry standards such
as WiMAX could render any of our products and services obsolete or non-competitive.

The technology used in our products and services evolves rapidly, and our business position depends, in large part, on the continuous
refinement of our scientific and engineering expertise and the development, either through internal research and development or
acquisitions of businesses or licenses, of new or enhanced products and technologies. We may not have the economic or
technological resources to be successful in such efforts and we may not be able to identify and respond to technological
improvements made by our competitors in a timely or cost-effective fashion.

Our DoubleTalk® Carrier-in-Carrier® bandwidth compression technology is licensed by us from a third party who maintains patents
associated with the technology.

A significant technological breakthrough by others, including smaller competitors or new firms, or an unsuccessful outcome of
defending our rights to licensed technologies, could have a material adverse impact on our business, results of operations and
financial condition.

Ongoing compliance with the provisions of securities laws, related regulations and financial reporting standards could
unexpectedly materially increase our costs and compliance related expenses.

Because we are a publicly traded company, we are required to comply with provisions of securities laws, related regulations and
financial reporting. Because securities laws, related regulations and financial reporting standards pertaining to our business are
relatively complex, our business faces increased risks including the following:

•

If we identify a material weakness in the future, our costs will unexpectedly increase – Pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002 and related SEC rules, we are required to furnish a report of management’s assessment of
the effectiveness of our internal controls as part of our Annual Report on Form 10-K. Our independent registered public
accountants are required to attest to and report on management’s assessment, as well as provide a separate opinion. To
issue our report, we document our internal control design and the testing processes that support our evaluation and
conclusion, and then we test and evaluate the results. There can be no assurance, however, that we will be able to remediate
material weaknesses, if any, that may be identified in future periods, or maintain all of the controls necessary for continued
compliance. There likewise can be no assurance that we will be able to retain sufficient skilled finance and accounting
personnel, especially in light of the increased demand for such personnel among publicly traded companies.

Stock-based compensation accounting standards could negatively impact our stock – Since our inception, we have used
stock-based awards as a fundamental component of our employee compensation packages. We believe that stock-based
awards directly motivate our employees to maximize long-term stockholder value and, through the use of long-term
vesting, encourage employees to remain with us. Since fiscal 2006, we have applied the provisions of Accounting Standards
Codification (“ASC”) 718, “Compensation – Stock Compensation,” which requires us to record compensation expense
in our statement of operations for employee and director stock-based awards using a fair value method. The adoption of
the standard had a significant effect on our reported earnings, and could adversely impact our ability to provide accurate
guidance on our future reported financial results due to the variability of the factors used to estimate the value of stock-
based awards. The ongoing application of this standard could impact the future value of our common stock and may
result in greater stock price volatility. To the extent that this accounting standard makes it less attractive to grant stock-
based awards to employees, we may incur increased compensation costs, change our equity compensation strategy or
find it difficult to attract, retain and motivate employees, each of which could have a material adverse effect on our
business, results of operations and financial condition.

• Changes in securities laws, regulations and financial reporting standards are increasing our costs – The Sarbanes-Oxley
Act of 2002 required changes in some of our corporate governance, public disclosure and compliance practices. These
changes resulted in increased costs and as we grow, we expect to see our costs increase. The SEC has passed, promulgated
and proposed new rules on a variety of subjects including the requirement to use the interactive data format eXtensible
Business Reporting Language (commonly referred to as “XBRL”) in our financial statements, which we began including
in our quarterly reports filed with the SEC in the first quarter of fiscal 2011 and the possibility that we would be required
to adopt International Financial Reporting Standards (“IFRS”). We may have to add additional accounting staff, engage
consultants or change our internal practices, standards and policies which could significantly increase our costs to comply
with IFRS requirements. In addition, the NASDAQ Stock Market LLC (“NASDAQ”) has revised its requirements for
companies, such as us, that are listed on NASDAQ. These changes are increasing our legal and financial compliance
costs including making it more difficult and more expensive for us to obtain director and officer liability insurance or
maintain our current liability coverage. We believe that these new and proposed laws and regulations could make it more
difficult for us to attract and retain qualified members of our Board of Directors, particularly to serve on our Audit
Committee, and qualified executive officers.

• We may incur additional expenses and not be able to comply with SEC reporting requirements related to conflict minerals
– In August 2012, the SEC adopted new rules establishing additional disclosure and reporting requirements regarding a
company's use of conflict minerals. These new SEC rules could result in us incurring additional costs to document and
perform supplier due diligence. As these rules will likely impact our suppliers, the availability of raw materials used in
our operations could be negatively impacted and or raw material prices could increase. We may also have difficulty
verifying the supply of conflict minerals to their source and, therefore, may not be able to comply with the SEC's conflict
minerals reporting requirement.

We could be adversely affected if we violate International Traffic in Arms Regulations (“ITAR”).

In the past, we have self-reported violations of ITAR to the Office of Defense Trade Controls Compliance (“DDTC”) of the U.S.
Department of State and had an ITAR compliance audit performed by an independent auditor at the request of the DDTC. Although
the audit found no violations of ITAR, we committed to the DDTC that we would enhance certain policies and procedures including
establishing a company-wide Office of Trade Compliance.

We continue to implement policies and procedures to ensure that we comply with ITAR and related regulations. We may be
subjected to ITAR compliance audits in the future that may uncover improper or illegal activities that would subject us to material
remediation costs, civil and criminal fines and/or penalties and/or an injunction. In addition, we could suffer serious reputational
harm if allegations of impropriety were made against us. Each of these outcomes could, individually or in the aggregate, have a
material adverse effect on our business, results of operations and financial condition.

Our dependence on sales to international customers exposes us to risks, including U.S. export restrictions.

Sales for use by international customers (including sales to U.S. companies for inclusion in products that will be sold to international
customers) represented approximately 38.7%, 30.2% and 22.9% of our consolidated net sales for the fiscal years ended July 31,
2012, 2011 and 2010, respectively, and we expect that international sales will continue to be a substantial portion of our consolidated
net sales for the foreseeable future. These sales expose us to certain risks, including barriers to trade, fluctuations in foreign currency
exchange rates (which may make our products less price-competitive), political and economic instability, exposure to public health
epidemics, availability of suitable export financing, tariff regulations, and other U.S. and foreign regulations that may apply to
the export of our products. Although we take steps to mitigate our risk with respect to international sales, we may not be able to
do so in every instance for any of the following reasons, among others:

• We may not be able to continue to structure our international contracts to reduce risk – We attempt to reduce the risk of
doing business in foreign countries by seeking subcontracts with large systems suppliers, contracts denominated in U.S.
dollars, advance or milestone payments and irrevocable letters of credit in our favor. However, we may not be able to
reduce the economic risk of doing business in foreign countries in all instances. In such cases, billed and unbilled
receivables relating to international sales are subject to increased collectability risk and may result in significant write-
offs, which could have a material adverse effect on our business, results of operations and financial condition. In addition,
foreign defense contracts generally contain provisions relating to termination at the convenience of the government.

• We rely on a limited number of international sales agents – In some countries, we rely upon one or a small number of
sales agents, exposing us to risks relating to our contracts with, and related performance of, those agents. We attempt to
reduce our risk with respect to sales agents by establishing additional foreign sales offices where it is practical and by
engaging, where practicable, more than one independent sales representative in a territory. It is our policy to require all
sales agents to operate in compliance with applicable laws, rules and regulations. Violations of any of these laws, rules
or regulations, and other business practices that are regarded as unethical, could interrupt the sales of our products and
services, result in the cancellation of orders or the termination of customer relationships, and could damage our reputation,
any of which developments could have a material adverse effect on our net sales and results of operations.

• We may not be able to obtain export licenses from the U.S. government – Certain of our products and systems may require
licenses from U.S. government agencies for export from the U.S., and some of our products are not permitted to be
exported. In addition, in certain cases, U.S. export controls also severely limit unlicensed technical discussions, such as
discussions with any persons who are not U.S. citizens or permanent residents. As a result, in cases where we may need
a license, our ability to compete against a non-U.S. domiciled foreign company that may not be subject to the same U.S.
laws may be adversely affected. We cannot be certain that we will be able to obtain necessary export licenses and failure
to obtain required licenses would adversely affect our sales outside the U.S.

We have significant operations in Arizona, Florida, California and other locations which could be materially and adversely
impacted in the event of a natural disaster or other significant disruption.

Our telecommunications transmission segment designs and manufactures our over-the-horizon microwave equipment and systems
in Florida, where major hurricanes have occurred in the past. Our RF microwave amplifiers segment manufactures and designs
traveling wave tube amplifiers in Santa Clara, California, close to major earthquake fault lines and also manufactures amplifiers
in Melville, New York, an area subject to hurricanes.

Our operations in these and other locations (such as in our high-volume technology manufacturing center located in Tempe, Arizona
and our mobile data communication segment’s network operations center located in Germantown, Maryland), could be subject to
natural disasters or other significant disruptions, including hurricanes, tornadoes, typhoons, tsunamis, floods, earthquakes, fires,
water shortages, other extreme weather conditions, medical epidemics, acts of terrorism, power shortages and blackouts,
telecommunications failures, and other natural and man-made disasters or disruptions.

In the event of any such disaster or other disruption, we could experience disruptions or interruptions to our operations or the
operations of our suppliers, distributors, resellers or customers; destruction of facilities; and/or loss of life, all of which could
materially increase our costs and expenses and materially adversely affect our business, results of operations and financial condition.

Our dependence on component availability, government furnished equipment, subcontractors and key suppliers, including
the core manufacturing expertise of our high-volume technology manufacturing center located in Tempe, Arizona, exposes
us to risk.

Although we obtain certain components and subsystems from a single source or a limited number of sources, we believe that most
components and subsystems are available from alternative suppliers and subcontractors. A significant interruption in the delivery
of such items, however, could have a material adverse effect on our business, results of operations and financial condition.

Company-wide, we depend on our high-volume technology manufacturing center located in Tempe, Arizona, which is part of our
telecommunications transmission segment, to manufacture certain products and components for all three of our business segments.
Intersegment sales in fiscal 2012, 2011 and 2010 by the telecommunications transmission segment to the RF microwave amplifiers
segment were $5.4 million, $3.8 million and $7.2 million, respectively. In fiscal 2012, 2011 and 2010, intersegment sales by the
telecommunications transmission segment to the mobile data communications segment were $11.2 million, $37.0 million and
$82.2 million, respectively.

We intend to maximize the use of our high-volume technology manufacturing center by continuing to seek contracts with third
parties to outsource a portion of their manufacturing to us. If a natural disaster or other business interruption occurred with respect
to our high-volume technology manufacturing center, we do not have immediate access to other manufacturing facilities and, as
a result, our business would suffer. In addition, if our high-volume technology manufacturing center is unable to produce sufficient
product or maintain quality, it could have a material adverse effect on all three of our business segments, results of operations and
financial condition.

In the past, the U.S. government experienced delays in the receipt of certain components that are ultimately provided to us for
incorporation into our satellite transceivers that we ship to the U.S. government. If we do not receive these or other government
furnished components in a timely manner, we could experience delays in fulfilling orders from our customers.

Our backlog is subject to customer cancellation or modification and such cancellation could result in a decline in sales and
increased provisions for excess and obsolete inventory.

We currently have a backlog of orders, mostly under contracts that the customer may modify or terminate. Almost all of the
contracts in our backlog (including firm orders previously received from the U.S. government) are subject to cancellation at the
convenience of the customer or for default in the event that we are unable to perform under the contract. We can give no assurance
that our backlog will result in net sales.

We record a provision for excess and obsolete inventory based on historical and future usage trends and other factors including
the consideration of the amount of backlog we have on hand at any particular point in time. If our backlog is canceled or modified,
our estimates of future product demand may prove to be inaccurate, in which case we may have understated the provision required
for excess and obsolete inventory. In the future, if we determine that our inventory is overvalued, we will be required to recognize
such costs in our financial statements at the time of such determination. Any such charges could be materially adverse to our results
of operations and financial condition.

Contract cost growth on our fixed price contracts and other contracts that cannot be justified as an increase in contract
value due from customers exposes us to reduced profitability and the potential loss of future business and other risks.

A substantial portion of our products and services are sold under fixed price contracts. This means that we bear the risk of
unanticipated technological, manufacturing, supply or other problems, price increases or other increases in the cost of performance.
Operating margin is adversely affected when contract costs that cannot be billed to the customer are incurred. This cost growth
can occur if initial estimates used for calculating the contract price were incorrect, or if estimates to complete increase.

The cost estimation process requires significant judgment and expertise. Reasons for cost growth may include unavailability and
productivity of labor, the nature and complexity of the work to be performed, the effect of change orders, the availability of
materials, the effect of any delays in performance, availability and timing of funding from the customer, natural disasters, and the
inability to recover any claims included in the estimates to complete. A significant change in an estimate on one or more programs
could have a material impact on our business, results of operations and financial condition.

We face a number of risks relating to the expected long-term growth of our business. Our business and operating results
may be negatively impacted if we are unable to manage this growth.

These risks include:

•

The loss of key technical or management personnel could adversely affect our business – Our future success depends on
the continued contributions of key technical management personnel, including the key corporate and operating unit
management at each of our subsidiaries. Many of our key personnel, particularly the key engineers at our subsidiaries,
would be difficult to replace, and are not subject to employment or non-competition agreements. Our expected long-term
growth and future success will depend, in large part, upon our ability to attract and retain highly qualified engineering,
sales and marketing personnel. Competition for such personnel from other companies, academic institutions, government
entities and other organizations is intense. Although we believe that we have been successful to date in recruiting and
retaining key personnel, we may not be successful in attracting and retaining the personnel we will need to grow and
operate profitably. Also, the management skills that have been appropriate for us in the past may not continue to be
appropriate if we grow and diversify.

• We may not be able to improve our processes and systems to keep pace with anticipated growth – Certain of our businesses
have experienced periods of rapid growth that have placed, and may continue to place, significant demands on our
managerial, operational and financial resources. In order to manage this growth, we must continue to improve and expand
our management, operational and financial systems and controls. We also need to continue to recruit and retain personnel
and train and manage our employee base. We must carefully manage research and development capabilities and production
and inventory levels to meet product demand, new product introductions and product and technology transitions. If we
are not able to timely and effectively manage our growth and maintain the quality standards required by our existing and
potential customers, we could experience a material adverse effect on our business, results of operations and financial
condition.

• Our markets are highly competitive and there can be no assurance that we can continue our success – The markets for
our products are highly competitive. There can be no assurance that we will be able to continue to compete successfully
or that our competitors will not develop new technologies and products that are more effective than our own. We expect
the DoD’s increased use of commercial off-the-shelf products and components in military equipment will encourage new
competitors to enter the market. Also, although the implementation of advanced telecommunications services is in its
early stages in many developing countries, we believe competition will continue to intensify as businesses and foreign
governments realize the market potential of telecommunications services. Many of our competitors have financial,
technical, marketing, sales and distribution resources greater than ours.

Future acquisitions and investments may divert our resources and management attention, and the benefits from such
acquisitions and investments may fall short of expectations.

We intend to continue pursuing acquisitions or investments in businesses, technologies and product lines. Future acquisitions or
investments may result in the use of significant amounts of cash, potentially dilutive issuances of equity securities, incurrence of
additional debt, increases to amortization expenses and the future write-off of intangibles acquired. Such acquisitions or investments
may also conflict with our $100.0 million secured revolving credit facility (“Credit Facility”), thereby limiting our ability to draw
on the Credit Facility or requiring us to repay the Credit Facility. Acquisitions involve other operational risks, including:

•

difficulties in the integration of the operations, technologies, products and personnel of an acquired business, including
the loss of key employees or customers of any acquired business;

diversion of management’s attention from other business concerns; and

increased expenses associated with acquired businesses including managing the growth of such businesses.

There can be no assurance that our future acquisitions and investments will be successful and will not adversely affect our business,
results of operations or financial condition.

Our revolving credit facility contains restrictions that could limit our ability to implement our business plan.

We have a committed $100.0 million, secured revolving credit facility (“Credit Facility”) with a syndicate of bank lenders that
expires on April 30, 2014 but may be extended by us to December 31, 2016, subject to certain conditions. The Credit Facility
contains certain covenants, including covenants limiting certain debt, certain liens on assets, certain sales of assets and receivables,
certain payments (including dividends), certain repurchases of equity securities, certain sale and leaseback transactions, certain
guaranties and certain investments. The Credit Facility also contains financial condition covenants requiring that we: (i) not exceed
a maximum ratio of consolidated total indebtedness to Consolidated Adjusted EBITDA (each as defined in the Credit Facility);
(ii) not exceed a maximum ratio of consolidated senior secured indebtedness to Consolidated Adjusted EBITDA (each as defined
in the Credit Facility); (iii) maintain a minimum fixed charge ratio (as defined in the Credit Facility); (iv) maintain a minimum
consolidated net worth; in each case measured on the last day of each fiscal quarter, and (v) in the event total consolidated
indebtedness (as defined in the Credit Facility) is less than $200.0 million, we maintain a minimum level of Consolidated Adjusted
EBITDA (as defined in the Credit Facility).

Our Credit Facility, as amended, also contains certain events of default, including: failure to make payments, failure to perform
or observe terms, or a change of control (as defined in the agreement). If an event of default occurs, the lenders may, among other
things, terminate their commitments and declare all outstanding borrowings, if any, to be immediately due and payable together
with accrued interest and fees. These restrictions and covenants may limit our ability to implement our business plan, finance
future operations, respond to changing business and economic conditions, secure additional financing, and engage in certain
strategic transactions. In addition, if we fail to meet the covenants contained in our Credit Facility, our ability to borrow under our
Credit Facility may be restricted.

If we have significant borrowings under the agreement and we violate a covenant or an event of default occurs and the lenders
accelerate the maturity of any outstanding borrowings and terminate their commitment to make future loans, it could have a
material adverse effect on our business, results of operations and financial condition. In addition, an event of default under our
Credit Facility could constitute an event of default under our 3.0% senior convertible notes, requiring us to repay the outstanding
principal amount of the notes and accrued and unpaid interest on the notes. There can be no assurance that we will be able to
comply with our financial or other covenants or that any covenant violations will be waived. In addition, if we fail to comply with
our financial or other covenants, we may need additional financing in order to service or extinguish our indebtedness. In the future,
we may not be able to obtain financing or refinancing on terms acceptable to us, if at all.

If we are unable to pay quarterly dividends at the annual targeted level, our reputation and stock price may be harmed.

In September 2011, our Board of Directors approved an annual targeted dividend of $1.10 per common share. We have paid
quarterly dividends for eight straight quarters and, in fiscal 2012, we paid $22.6 million of cash dividends to our shareholders.

The dividend program requires the use of a portion of our cash flow. Our ability to continue to pay quarterly dividends will depend
on our ability to generate sufficient cash flows from operations in the future. This ability may be subject to certain economic,
financial, competitive and other factors that are beyond our control. Our Board of Directors may, at its discretion, decrease the
targeted annual dividend amount or entirely discontinue the payment of dividends at any time. Any failure to pay dividends after
we have announced our intention to do so may negatively impact our reputation, investor confidence in us and negatively impact
our stock price.

Protection of our intellectual property is limited and we are subject to the risk that third parties may claim our products
or systems infringe their intellectual property rights.

Our businesses rely, in large part, upon our proprietary scientific and engineering know-how and production techniques. Historically,
patents have not been an important part of the protection of our intellectual property rights as competitors routinely develop similar
but non-infringing products. We rely upon the laws of unfair competition and restrictions in licensing agreements and confidentiality
agreements to protect our intellectual property.

The departure of any of our key management and technical personnel, the breach of their confidentiality and non-disclosure
obligations to us or the failure to achieve our intellectual property objectives may have a material adverse effect on our business,
results of operations and financial condition. Our ability to compete successfully and achieve future revenue growth will depend,
in part, on our ability to protect our proprietary technology and operate without infringing upon the rights of others. We may fail
to do so. In addition, the laws of certain countries in which our products are or may be sold may not protect our products or
intellectual property rights to the same extent as the laws of the U.S.

From time to time, we receive correspondence alleging that a product or other part of our business infringes the intellectual property
rights of a third party. We believe that we own or have licensed all intellectual property rights necessary for the operation of our
businesses as currently contemplated.

If any technology we use is found to infringe on protected technology, we could be required to change our business practices,
license the protected technology, and/or pay damages or other compensation to the infringed party and/or our customers who have
incorporated our products into their systems or businesses. If we are unable to license protected technology that we use in our
business or if we are required to change our business practices, we could be prohibited from making and selling some of our
products or providing certain telecommunications services.

Provisions in our corporate documents and Delaware law could delay or prevent a change in control of Comtech.

We have taken a number of actions that could have the effect of discouraging, delaying or preventing a merger or acquisition
involving Comtech that our stockholders may consider favorable.

For example, we have a classified board and the employment contract with our chief executive officer and agreements with other
of our executive officers provide for substantial payments in certain circumstances or in the event of a change of control of Comtech.
In the future, we may adopt a stockholder rights plan which could cause substantial dilution to a stockholder, and substantially
increase the cost paid by a stockholder, who attempts to acquire us on terms not approved by our Board of Directors.

In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, an anti-takeover law. In
general, this statute provides that, except in certain limited circumstances, a corporation shall not engage in any “business
combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in a prescribed manner.

A “business combination” includes mergers, asset sales and other transactions resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, for purposes of Section 203 of the Delaware General Corporation Law, an “interested
stockholder” is a person who, together with affiliates, owns, or within three years did own, 15% or more of the corporation’s voting
stock. This provision could have the effect of delaying or preventing a change in control of Comtech.

Our debt service obligations may adversely affect our cash flow.

Our 3.0% convertible senior notes are convertible into shares of our common stock at any time prior to the close of business on
the second scheduled trading day immediately preceding the maturity date, subject to adjustment in certain circumstances (such
as the declaration of cash dividends on our common stock) and contain certain restrictions and covenants. We can provide no
assurances that we will not default on these or other debt obligations. We may, at our option, redeem some or all of the 3.0%
convertible senior notes on or after May 5, 2014. Holders of the 3.0% convertible senior notes will have the right to require us to
repurchase some or all of the outstanding 3.0% convertible senior notes, solely for cash, on May 1, 2014, May 1, 2019 and May
1, 2024 and upon certain events, including a change in control. If not redeemed by us or repaid pursuant to the holders’ right to
require repurchase, the 3.0% convertible senior notes mature on May 1, 2029. If the holders of our 3.0% convertible senior notes
require us to repurchase some or all of the outstanding notes that they own, there can be no assurance that we will be able to
generate sufficient cash flow to repay the 3.0% convertible senior notes or that future working capital, borrowings or equity
financing will be available to pay or refinance them. The level of our indebtedness, among other things, could: make it difficult
for us to make payments on our debt; make it difficult for us to obtain any necessary financing in the future for working capital,
acquisitions, capital expenditures, debt service requirements or other purposes; limit our flexibility in planning for, or reacting to,
changes in our business and the industry in which we compete; and make us more vulnerable in the event of a downturn in our
business.

Our stock price is volatile.

The stock market in general and the stock prices of technology-based companies, in particular, has experienced extreme volatility
that often has been unrelated to the operating performance of any specific public company. The market price of our common stock
has fluctuated significantly in the past and is likely to fluctuate significantly in the future as well. Factors that could have a
significant impact on the market price of our stock are described throughout the Risk Factors section and include, among others:

•
•
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•
•
•
•
•
•
•
•
•
•
•
•
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strategic transactions, such as acquisitions and divestures;
issuance of potentially dilutive equity or equity-type securities;
future announcements concerning us or our competitors;
receipt or non-receipt of substantial orders for products and services;
quality deficiencies in services or products;
results of technological innovations;
new commercial products;
changes in recommendations of securities analysts;
government regulations;
changes in the status or outcome of government audits;
proprietary rights or product or patent litigation;
changes in U.S. government policies;
changes related to ongoing military conflicts;
changes in economic conditions generally, particularly in the telecommunications sector;
changes in securities market conditions, generally;
changes in the status of litigation and legal matters (including changes in the status of export matters);
changes in the status of U.S government investigations relating to our CEO;
cyber-attacks;
energy blackouts;
acts of terrorism or war;
inflation or deflation; and
rumors or allegations regarding our financial disclosures or practices.

Shortfalls in our sales or earnings in any given period relative to the levels expected by securities analysts could immediately,
significantly and adversely affect the trading price of our common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

Historically, we have not owned any material properties or facilities and have relied upon a strategy of leasing. Our properties and
facilities are noted below:

ITEM 2. PROPERTIES

• Our corporate headquarters are located in an office building complex in Melville, New York. The lease, which is for

9,600 square feet, provides for our use of the premises through August 2013.

• Our RF microwave amplifiers segment manufactures our solid-state, high-power, broadband amplifiers, in a 45,000
square foot engineering and manufacturing facility on more than two acres of land in Melville, New York and a 6,000
square foot facility in Topsfield, Massachusetts. We lease the New York facility from a partnership controlled by our
Chairman, Chief Executive Officer and President. The lease provides for our use of the premises as they exist through
December 2021 with an option for an additional ten-year period. In connection with the lease renewal in September 2011,
our Nominating and Governance Committee of the Board of Directors obtained written reports from three independent
commercial real estate firms regarding prevailing rents for comparable facilities. Based on this assessment, and the
continued suitability of the facility for our current operations, the annual rent of the facility was reduced to $580,000 for
calendar 2012 and is subject to customary adjustments. We have a right of first refusal in the event of a sale of the facility.

• Our RF microwave amplifiers segment also manufactures our amplifiers in a leased manufacturing facility located in
Santa Clara, California. This facility is approximately 47,000 square feet and is subject to a lease agreement that expires
in April 2019. Our RF microwave amplifiers segment also operates a small office in the United Kingdom that expires in
2016.

• Although primarily used for our satellite earth station product lines, which are part of the telecommunications transmission
segment, all three of our business segments utilize our high-volume technology manufacturing facilities located in Tempe,
Arizona. These manufacturing facilities, comprising 195,000 square feet, utilize state-of-the-art design and production
techniques, including analog, digital and RF microwave production, hardware assembly and full service engineering.
Leases comprising 186,000 square feet expire in fiscal 2016 with the remaining 9,000 square feet expiring in fiscal 2014.
We have the option to extend the lease terms for up to an additional five-year period through fiscal 2021 for 170,000
square feet related to these leases. As a result of the August 1, 2008 Radyne acquisition, we also assumed a lease for
approximately 75,000 square feet of building space in Phoenix, Arizona. The lease for this building expires in October
2018. In connection with our Radyne-acquisition restructuring plan we vacated and subleased this building space through
October 2015.

• Our telecommunications transmission segment leases an additional twelve facilities, six of which are located in the U.S.
The U.S. facilities (excluding our Arizona-based facilities) aggregate 105,000 square feet and are primarily utilized for
manufacturing, engineering, and general office use. Our telecommunications transmission segment also operates six
small offices in Canada, China, India, North Africa, Singapore and the United Kingdom, all of which aggregate 22,000
square feet and are primarily utilized for customer support, engineering and sales.

• Our mobile data communications segment operates two main facilities aggregating 51,000 square feet. We lease a 26,000
square foot facility located in Germantown, Maryland which contains our main network operations center. This lease
expires in March 2018. Our mobile data communications segment also maintains a 25,000 square foot facility in Ashburn,
Virginia that expires in October 2013 and was used to support the design, sales and manufacture of our microsatellite
products. We also lease a small office located in Colorado that is primarily used for engineering capabilities. In connection
with the wind-down of our microsatellite product line, we vacated approximately 12,000 square feet of the Ashburn,
Virginia building space as of July 31, 2012 and expect to vacate all of our microsatellite-related facilities during fiscal
2013.

The terms for all of our leased facilities are generally for multi-year periods and we believe that we will be able to renew these
leases or find comparable facilities elsewhere.

ITEM 3. LEGAL PROCEEDINGS

Information regarding legal proceedings is incorporated herein by reference to the “Notes to Consolidated Financial Statements
– Note (14)(b) Commitments and Contingencies – Legal Proceedings and Other Matters” included in “Part II— Item 8.— Financial
Statements and Supplementary Data,” included in this Annual Report on Form 10-K.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

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

Stock Performance Graph and Cumulative Total Return

The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the
S&P’s 500 Index and the NASDAQ Telecommunications Index for each of the last five fiscal years ended July 31, assuming an
investment of $100 at the beginning of such period and the reinvestment of any dividends. The comparisons in the graphs below
are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock.

Our common stock trades on the NASDAQ Stock Market LLC (“NASDAQ”) under the symbol “CMTL.”

The following table shows the quarterly range of the high and low sale prices for our common stock as reported by the NASDAQ.
Such prices do not include retail markups, markdowns or commissions.

Fiscal Year Ended July 31, 2011
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Fiscal Year Ended July 31, 2012
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Dividends

Common Stock

High

Low

31.48
32.00
29.94
29.80

34.08
35.65
34.89
31.75

20.19
25.75
25.46
23.51

24.04
27.88
30.66
26.51

On September 27, 2011, our Board of Directors raised our annual targeted dividend from $1.00 per common share to $1.10 per
common share.

During the fiscal year ended July 31, 2012, we declared four quarterly cash dividends of $0.275 per common share, each of which
was paid to our stockholders on November 22, 2011, February 22, 2012, May 22, 2012 and August 20, 2012.

On September 26, 2012, our Board of Directors declared a dividend of $0.275 per common share, payable on November 20, 2012
to shareholders of record at the close of business on October 19, 2012.

While future dividends will be subject to Board of Directors approval, we currently expect that comparable cash dividends will
continue to be paid to our stockholders in future periods. The declaration and payment of dividends in the future will depend upon
our earnings, capital requirements, financial condition, compliance with our Credit Facility, and other factors considered relevant
by our Board of Directors.

Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The number and average price of shares purchased during the fiscal year ended July 31, 2012 are set forth in the table below:

Total Number
of Shares
Purchased

Average Price
Paid per Share

Total Number
of Shares Purchased as
part of Publicly
Announced
Program

Approximate Dollar
Value
of Shares that May Yet
Be Purchased Under the
Program

August 1 – August 31, 2011

476,866

September 1 – September 30, 2011

October 1 – October 31, 2011

November 1 – November 30, 2011

December 1 – December 31, 2011

January 1 – January 31, 2012

February 1 – February 29, 2012

March 1 – March 31, 2012

April 1 – April 30, 2012

May 1 – May 31, 2012

June 1 – June 30, 2012

July 1 – July 31, 2012

Total

479,492

1,771,035

1,284,625

643,494

420,780

245,363

269,358

473,009

331,199

490,528

179,865

7,065,614

26.23

27.78

31.42

33.69

29.09

29.92

32.62

32.69

32.79

30.19

28.74

29.00

30.81

476,866

479,492

1,761,035

1,284,625

643,494

420,780

245,363

269,358

473,009

331,199

490,528

179,865

7,055,614

116,004,000

202,693,000

147,402,000

104,144,000

85,440,000

72,858,000

64,858,000

56,058,000

40,560,000

30,569,000

16,480,000

11,268,000

In September 2011, our Board of Directors authorized a $250.0 million stock repurchase program. There is no time restriction on
this authorization and repurchases may be made in open-market or privately negotiated transactions and may be made pursuant
to SEC Rule 10b5-1 trading plans.

During the fiscal year ended July 31, 2012, we repurchased 7,055,614 shares in open-market transactions for an aggregate cost
of $217,374,000 (including transaction costs) with an average price per share of $30.81. In addition, during the period October 1,
2011 through October 31, 2011, an “affiliated purchaser,” as defined in Rule 10b-18(a)(3), purchased 10,000 shares at an average
price per share of $31.51. As of July 31, 2012, we are authorized to repurchase up to an additional $11,268,000 of our common
stock, excluding transaction costs.

See “Notes to Consolidated Financial Statements – Note (8) Credit Facility,” included in “Part II - Item 8. - Financial Statements
and Supplementary Data,” for a description of certain restrictions on equity security repurchases.

Approximate Number of Equity Security Holders

As of September 21, 2012, there were approximately 720 holders of our common stock. Such number of record owners was
determined from our shareholder records and does not include beneficial owners of our common stock held in the name of various
security holders, dealers and clearing agencies.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following table shows selected historical consolidated financial data for our Company.

Detailed historical financial information is included in the audited consolidated financial statements for fiscal 2012, 2011 and
2010.

Consolidated Statement of Operations Data:

Net sales

Cost of sales

Gross profit

Expenses:

Fiscal Years Ended July 31,
(In thousands, except per share amounts)

2012

2011

2010

2009

2008

425,070

241,561

183,509

612,379

371,333

241,046

778,205

507,607

270,598

586,372

345,472

240,900

531,627

296,687

234,940

Selling, general and administrative

Research and development

In-process research and development

Amortization of intangibles

Impairment of goodwill

Merger termination fee, net

87,106

38,489

—

6,637

—

132,232

94,141

43,516

—

8,091

—
(12,500)
133,248

99,883

46,192

—

7,294

13,249

—

100,171

50,010

6,200

7,592

—

85,967

40,472

—

1,710

—

166,618

163,973

128,149

Operating income

51,277

107,798

103,980

76,927

106,791

Other expenses (income):

Interest expense

Interest income and other

8,832
(1,595)

8,415
(2,421)

7,888
(1,210)

6,396
(2,738)

7,100
(14,065)

Income before provision for income taxes

44,040

101,804

97,302

73,269

113,756

Provision for income taxes

11,624

33,909

36,672

25,744

40,106

Net income

32,416

67,895

60,630

47,525

73,650

Net income per share:

Basic

Diluted

1.62

1.42

2.53

2.22

2.14

1.91

1.81

1.73

3.05

2.76

Weighted average number of common shares

outstanding – basic

19,995

26,842

28,270

26,321

24,138

Weighted average number of common and

common equivalent shares outstanding – diluted

25,991

32,623

34,074

29,793

28,278

Dividends declared per issued and outstanding
common share as of the applicable dividend
record date

1.10

1.00

—

Fiscal Years Ended July 31,
(In thousands)
2010

2009

2011

2012

2008

Other Consolidated Operating Data:
Backlog at period-end
New orders
Research and development expenditures - internal

and customer funded

153,939
433,980

145,029
419,301

338,107
567,457

549,833
883,750

201,122
603,705

44,153

54,219

58,803

64,955

48,224

Consolidated Balance Sheet Data:
Total assets
Working capital
Convertible senior notes
Other long-term obligations
Stockholders’ equity

2012

2011

As of July 31,
(In thousands)
2010

2009

2008

719,778
434,221
200,000
5,098
429,401

937,509
627,008
200,000
6,360
629,180

1,066,562
686,600
200,000
2,518
701,632

938,671
596,525
200,000
2,283
629,129

652,723
484,454
91,946
—
450,773

On November 13, 2009, we filed a Report on Form 8-K with the SEC which contains our financial statements for the historical
fiscal years ended July 31, 2005 through July 31, 2009, as retroactively adjusted for the adoption of FASB ASC 470-20, “Debt -
Debt With Conversion and Other Options.” The periods presented herein reflect the retroactive adjustment for this adoption.

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

Overview

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
operating segments: telecommunications transmission, RF microwave amplifiers and mobile data communications. 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.

Our telecommunications transmission segment provides sophisticated 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. Our telecommunications transmission segment also operates our high-volume technology
manufacturing center that can be utilized, in part, by our RF microwave amplifiers and mobile data communications segments
and to a much lesser extent by third-party commercial customers who outsource a portion of their manufacturing to us. Accordingly,
our telecommunications transmission segment’s operating results are impacted positively or negatively by the level of utilization
of our high-volume manufacturing center.

Our RF microwave amplifiers segment designs, manufactures and markets traveling wave tube amplifiers and solid-state amplifiers,
including high-power, broadband RF microwave amplifier products.

Our mobile data communications segment provides customers with integrated solutions, 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 vast majority of sales in our mobile
data communications segment have historically been derived from indefinite delivery/indefinite quantity (“IDIQ”) contracts to
support two U.S. military programs known as Movement Tracking System (“MTS”) and Blue Force Tracking (“BFT-1”). As
discussed in this Annual Report on Form 10-K (“Form 10-K”), in fiscal 2013 and beyond, we expect revenues in this segment to
be at materially lower levels than we achieved in fiscal 2012 because the BFT-1 program is in a sustainment mode (See "BFT-1
Sustainment Activities" below). Also, during fiscal 2012, we adopted a plan to wind-down our mobile data communications
segment's microsatellite product line. In connection with this decision, we recorded a $2.6 million restructuring charge, of which
$1.3 million is reflected in cost of sales and $1.3 million is reflected in selling, general and administrative expenses.

Quarterly and period-to-period sales and operating results may be significantly affected by either short-term or long-term contracts
with our customers. In addition, our gross profit is affected by a variety of factors, including the mix of products, systems and
services sold, production efficiencies, estimates of warranty expense, price competition and general economic conditions. Our
gross profit may also be affected by the impact of any cumulative adjustments to contracts that are accounted for under the
percentage-of-completion method.

Our contracts with the U.S. government can be terminated at any time and orders are subject to unpredictable funding, deployment
and technology decisions by the U.S. government. Some of these contracts, such as the BFT-1 sustainment contract, are IDIQ
contracts, and as such, the U.S. government is not obligated to purchase any equipment or services under these contracts. We have
in the past experienced and we continue to expect significant fluctuations in sales and operating results from quarter-to-quarter
and period-to-period. As such, comparisons between periods and our current results may not be indicative of a trend or future
performance.

As further discussed below, under “Critical Accounting Policies,” revenue from the sale of our products is generally recognized
when the earnings process is complete, upon shipment or customer acceptance. Revenue from contracts relating to the design,
development or manufacture of complex electronic equipment to a buyer’s specification or to provide services relating to the
performance of such contracts is generally recognized in accordance with accounting standards that have been codified into
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605-35, “Revenue Recognition -
Construction-Type and Production-Type Contracts” (“ASC 605-35”). Revenue from contracts that contain multiple elements that
are not accounted for under FASB ASC 605-35 is generally accounted for in accordance with FASB ASC 605-25, “Revenue
Recognition - Multiple Element Arrangements,” which, among other things, requires revenue associated with multiple element
arrangements to be allocated to each element based on the relative selling price method.

BFT-1 Sustainment Activities

The vast majority of sales in our mobile data communications segment have historically come from sales relating to U.S. military
programs known as the U.S. Army’s Movement Tracking System (“MTS”) program and the Force XXI Battle Command, Brigade
and Below (“FBCB2”) command and control system's Blue Force Tracking (“BFT-1”) program. Our combined MTS and BFT-1
sales for fiscal 2010 through fiscal 2012 were as follows:

Net
Sales
(in millions)

Percentage of
Mobile Data
Communications
Segment Net Sales

Percentage of
Consolidated
Net Sales

2012

2011

2010

87.8

248.6

423.2

78.0%

86.2%

94.8%

20.6%

40.6%

54.4%

We are currently providing BFT-1 sustainment services pursuant to a three-year IDIQ BFT-1 sustainment contract that we were
awarded in March 2012. This three-year contract has a not-to-exceed value of $80.7 million and a base performance period that
began April 1, 2012 and ends March 31, 2013. The contract provides for two twelve-month option periods exercisable by the U.S.
Army and, except for a fixed annual intellectual property license ("IP license") fee of $10.0 million, the three-year $80.7 million
contract value is subject to finalization and downward negotiation. Effective July 1, 2012, we are no longer procuring satellite
bandwidth for the U.S. Army.

Critical Accounting Policies

We consider certain accounting policies to be critical due to the estimation process involved in each.

Revenue Recognition on Long-Term Contracts. Revenues and related costs from long-term contracts relating to the design,
development or manufacture of complex electronic equipment to a buyer’s specification or to provide services relating to the
performance of such contracts are recognized in accordance with FASB ASC 605, “Revenue Recognition - Construction-Type
and Production-Type Contracts” (“ASC 605-35”). We primarily apply the percentage-of-completion accounting method and
generally recognize revenue based on the relationship of total costs incurred to total projected costs, or, alternatively, based on
output measures, such as units delivered or produced. Profits expected to be realized on such contracts are based on total estimated
sales for the contract compared to total estimated costs, including warranty costs, at completion of the contract.

Direct costs which include materials, labor and overhead are charged to work-in-progress (including our contracts-in-progress)
inventory or cost of sales. Indirect costs relating to long-term contracts, which include expenses such as general and administrative,
are charged to expense as incurred and are not included in our work-in-process (including our contracts-in-progress) inventory or
cost of sales. Total estimates are reviewed and revised periodically throughout the lives of the contracts, and adjustments to profits
resulting from such revisions are made cumulative to the date of the change. Estimated losses on long-term contracts are recorded
in the period in which the losses become evident. Long-term U.S. government cost-reimbursable type contracts are also specifically
covered by FASB ASC 605-35.

We have been engaged in the production and delivery of goods and services on a continual basis under contractual arrangements
for many years. Historically, we have demonstrated an ability to accurately estimate total revenues and total expenses relating to
our long-term contracts. However, there exist inherent risks and uncertainties in estimating revenues, expenses and progress toward
completion, particularly on larger or longer-term contracts. If we do not accurately estimate the total sales, related costs and
progress towards completion on such contracts, the estimated gross margins may be significantly impacted or losses may need to
be recognized in future periods. Any such resulting changes in margins or contract losses could be material to our results of
operations and financial condition.

In addition, most government contracts have termination for convenience clauses that provide the customer with the right to
terminate the contract at any time. Such terminations could impact the assumptions regarding total contract revenues and expenses
utilized in recognizing profit under the percentage-of-completion method of accounting. Changes to these assumptions could
materially impact our results of operations and financial condition. Historically, we have not experienced material terminations
of our long-term contracts. We also address customer acceptance provisions in assessing our ability to perform our contractual
obligations under long-term contracts. Our inability to perform on our long-term contracts could materially impact our results of
operations and financial condition. Historically, we have been able to perform on our long-term contracts.

Accounting for Stock-Based Compensation. As discussed further in “Notes to Consolidated Financial Statements – Note (1)(j)
Accounting for Stock-Based Compensation” included in “Part II — Item 8 — Financial Statements and Supplementary Data,” we
issue stock-based awards to certain of our employees and our Board of Directors and we recognize related stock-based compensation
for both equity and liability-classified stock-based awards in our consolidated financial statements.

We have used and expect to continue to use the Black-Scholes option pricing model to compute the estimated fair value of certain
stock-based awards. 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
our best estimates, but involve uncertainties relating to market and other conditions, many of which are outside of our control.

The expected dividend yield is the expected annual dividend as a percentage of the fair market value of the stock on the date of
grant. We estimate expected volatility by considering the historical volatility of our stock, the implied volatility of publicly traded
call options on our stock, the implied volatility from call options embedded in our 3.0% convertible senior notes and our expectations
of volatility for the expected life of stock options. The expected option term is the number of years that we estimate that stock
options will be outstanding prior to exercise based upon exercise patterns. The risk-free interest rate is based on the U.S. treasury
yield curve in effect at the time of grant for an instrument which closely approximates the expected option term. As a result, if
other assumptions or estimates had been used for stock options granted, stock-based compensation expense that was recorded
could have been materially different. Furthermore, if different assumptions are used in future periods, stock-based compensation
expense could be materially impacted in the future.

Impairment of Goodwill and Other Intangible Assets. As of July 31, 2012, our goodwill and other intangible assets aggregated
$176.2 million (of which $107.8 million relates to goodwill allocated to our telecommunications transmission segment and $29.6
million relates to goodwill allocated to our RF microwave amplifiers segment).

For purposes of reviewing impairment and the recoverability of goodwill and other intangible assets, each of our three operating
segments constitutes a reporting unit and we must make various assumptions regarding estimated future cash flows and other
factors in determining the fair values of the reporting unit. If these estimates or their related assumptions change in the future, or
if we change our reporting structure, we may be required to record impairment charges. If global economic conditions deteriorate
from current levels, or if the market value of our equity or assets declines significantly, or if we are not successful in achieving
our expected sales levels or if other events or changes in circumstances occur that indicate that the carrying amount of our assets
may not be recoverable, our goodwill may become impaired.

We perform an annual impairment review in the first quarter of each fiscal year. On August 1, 2012, we performed our annual
impairment review for fiscal 2013 and determined that none of the goodwill recorded on our Consolidated Balance Sheet was
impaired.

Based on the review performed as of August 1, 2012, we concluded that our telecommunications transmission reporting unit had
an estimated fair value in excess of total asset book value of at least 7.0%. Given current adverse business conditions in our
telecommunications transmission reporting unit’s end-markets, we considered, for sensitivity purposes only, a revenue growth
rate that is below our actual fiscal 2013 expectations. If our telecommunications transmission reporting unit does not ultimately
achieve the expectations of revenues and operating income that we utilized in our sensitivity analysis, a portion or all of the $107.8
million of goodwill in this reporting unit may be impaired in future periods.

Based on the review performed as of August 1, 2012, we concluded that our RF microwave amplifiers reporting unit had an
estimated fair value in excess of total asset book value of approximately 84.0%. For sensitivity purposes only, we assumed a
revenue growth rate for this reporting unit that is below our actual fiscal 2013 expectations. If our RF microwave amplifiers
reporting unit does not ultimately achieve the expectations of revenues and operating income that we utilized in our sensitivity
analysis, a portion or all of the $29.6 million of goodwill in this reporting unit may be impaired in future periods.

Unless there are future indicators of impairment, such as a significant adverse change in our future financial performance, our
next impairment review for goodwill will be performed and completed in the first quarter of fiscal 2014. Any impairment charges
that we may take in the future could be material to our results of operations and financial condition.

Provision for Warranty Obligations. We provide warranty coverage for most of our products, including products under long-
term contracts, for a period of at least one year from the date of shipment. We record a liability for estimated warranty expense
based on historical claims, product failure rates and other factors. Costs associated with some of our warranties that are provided
under long-term contracts are incorporated into our estimates of total contract costs.

There exist inherent risks and uncertainties in estimating warranty expenses, particularly on larger or longer-term contracts. As
such, if we do not accurately estimate our warranty costs, any changes to our original estimates could be material to our results
of operations and financial condition.

Accounting for Income Taxes. Our deferred tax assets and liabilities are determined based on temporary differences between
financial reporting and tax bases of assets and liabilities, and applying enacted tax rates expected to be in effect for the year in
which the differences are expected to reverse. Our provision for income taxes is based on domestic (including federal and state)
and international statutory income tax rates in the tax jurisdictions where we operate, permanent differences between financial
reporting and tax reporting and available credits and incentives. We recognize interest and penalties related to uncertain tax positions
in income tax expense. The U.S. federal government is our most significant income tax jurisdiction.

Significant judgment is required in determining income tax provisions and tax positions. We may be challenged upon review by
the applicable taxing authority and positions taken by us may not be sustained. We recognize all or a portion of the benefit of
income tax positions only when we have made a determination that it is more-likely-than-not that the tax position will be sustained
upon examination, based upon the technical merits of the position and other factors. For tax positions that are determined as more-
likely-than-not to be sustained upon examination, the tax benefit recognized is the largest amount of benefit that is greater than
50% likely of being realized upon ultimate settlement. The development of reserves for income tax positions requires consideration
of timing and judgments about tax issues and potential outcomes, and is a subjective critical estimate. In certain circumstances,
the ultimate outcome of exposures and risks involves significant uncertainties. If actual outcomes differ materially from these
estimates, they could have a material impact on our results of operations and financial condition.

Provisions for Excess and Obsolete Inventory. We record a provision for excess and obsolete inventory based on historical and
future usage trends. Other factors may also influence our provision, including decisions to exit a product line, technological change
and new product development. These factors could result in a change in the amount of excess and obsolete inventory on hand.
Additionally, our estimates of future product demand may prove to be inaccurate, in which case we may have understated or
overstated the provision required for excess and obsolete inventory. In the future, if we determine that our inventory was overvalued,
we would be required to recognize such costs in our financial statements at the time of such determination. Any such charge could
be material to our results of operations and financial condition.

Allowance for Doubtful Accounts. We perform credit evaluations of our customers and adjust credit limits based upon customer
payment history and current creditworthiness, as determined by our review of our customers’ current credit information. Generally,
we will require cash in advance or payment secured by irrevocable letters of credit before an order is accepted from an international
customer that we do not do business with regularly. In addition, we seek to obtain insurance for certain domestic and international
customers.

We monitor collections and payments from our customers and maintain an allowance for doubtful accounts based upon our historical
experience and any specific customer collection issues that we have identified. In light of ongoing tight credit market conditions,
we continue to see requests from our customers for higher credit limits and longer payment terms. Because of our strong cash
position and the nominal amount of interest we are earning on our cash and cash equivalents, we have, on a limited basis, approved
certain customer requests.

We continue to monitor our accounts receivable credit portfolio and have not had any significant negative customer credit
experiences to date. While our credit losses have historically been within our expectations of the allowances established, we cannot
guarantee that we will continue to experience the same credit loss rates that we have in the past, especially in light of the current
global economic conditions and much tighter credit environment. Measurement of credit losses requires consideration of historical
loss experience, including the need to adjust for current conditions, and judgments about the probable effects of relevant observable
data, including present economic conditions such as delinquency rates and the financial health of specific customers. Changes to
the estimated allowance for doubtful accounts could be material to our results of operations and financial condition.

Results of Operations

The following table sets forth, for the periods indicated, certain income and expense items expressed as a percentage of our
consolidated net sales:

Fiscal Years Ended July 31,
2011

2010

2012

Net sales
Gross margin
Selling, general and administrative expenses
Research and development expenses
Amortization of intangibles
Impairment of goodwill
Merger termination fee, net
Operating income
Interest expense (income) and other, net
Income before provision for income taxes
Net income

Business Outlook for Fiscal 2013

100.0%
43.2
20.5
9.1
1.6
—
—
12.1
1.7
10.4
7.6

100.0%
39.4
15.4
7.1
1.3
—
(2.0)
17.6
1.0
16.6
11.1

100.0%
34.8
12.8
5.9
0.9
1.7
—
13.4
0.9
12.5
7.8

Total consolidated net sales in fiscal 2013 are expected to be lower than the $425.1 million we achieved in fiscal 2012, almost
entirely due to lower expected net sales in our mobile data communications segment. We anticipate revenue growth in our
telecommunications transmission segment in fiscal 2013 and believe that sales in our RF microwave amplifiers segment in fiscal
2013 will be comparable to the amount we achieved in fiscal 2012.

During fiscal 2013, we expect a materially lower level of sales in our mobile data communications segment, as compared to fiscal
2012, due to lower expected sales to the U.S. Army for the BFT-1 program and because we are no longer offering microsatellite
products to our customers (which accounted for $17.7 million of revenues in fiscal 2012). Our business outlook for fiscal 2013
assumes that the U.S. Army will exercise the twelve month option period beginning April 2013 pursuant to our existing three-
year BFT-1 sustainment contract. However, if the U.S. Army does not exercise this option, it is possible that we may not generate
any revenues from the BFT-1 program beyond March 31, 2013.

In response to our expectations of lower consolidated net sales in fiscal 2013, we have taken, and continue to take, a number of
cost reduction actions throughout our operating segments and we expect to continue to refine our cost structure going forward.
Our business outlook assumes that we will likely record a $1.0 million restructuring charge during the first quarter of fiscal 2013
in connection with the wind-down of our microsatellite product line.

As of July 31, 2012, we had cash and cash equivalents of $367.9 million. We expect to supplement organic growth opportunities
by making one or more acquisitions.

Our business outlook for fiscal 2013 is difficult to predict as we continue to operate our business in an environment of challenging
global economic conditions and U.S. and foreign government budget constraints.

On November 23, 2011, the Joint Select Committee on Deficit Reduction (commonly referred to as the Super Committee which
was established as part of the Budget Control Act of 2011) failed to recommend legislation that would reduce net U.S. government
spending by at least $1.2 trillion over the next 10 years. As of September 26, 2012, Congress has not yet identified the required
spending reductions and, as a result, it is possible that there will be an automatic sequestration of discretionary appropriations for
U.S. defense programs. Although we believe that the majority of our products and services are well aligned with national defense
and other national priorities, we cannot predict the outcome of final budget deliberations, other actions of Congress, or the extent
to which any reductions in spending may impact total funding and/or individual funding for programs in which we participate and
the resulting impact to our business and financial outlook and actual results.

To date, largely as a result of overall challenging macroeconomic conditions and significant U.S. and foreign government budget
constraints, we have experienced delays in customer orders and reductions in customer spending. If business conditions further
deteriorate or our current or prospective customers materially postpone, reduce or even forgo purchases of our products and services
to a greater extent than we currently anticipate, our business outlook will be adversely affected.

Additional information related to our fiscal 2013 business outlook on certain income statement line items and recent operating
segment booking trends is included in the below section entitled “Comparison of Fiscal 2012 and 2011.”

Comparison of Fiscal 2012 and 2011

Net Sales. Consolidated net sales were $425.1 million and $612.4 million for fiscal 2012 and 2011, respectively, representing a
decrease of $187.3 million, or 30.6%. As further discussed below, the significant period-over-period decrease reflects lower net
sales in our telecommunications transmission segment, and more notably in our mobile data communications segment, partially
offset by higher sales in our RF microwave amplifiers segment.

Telecommunications transmission
Net sales in our telecommunications transmission segment were $210.0 million and $232.0 million for fiscal 2012 and 2011,
respectively, a decrease of $22.0 million, or 9.5%. This decrease reflects significantly lower sales in our over-the-horizon microwave
systems product line and, to a lesser extent, lower sales in our satellite earth station product line.

Sales of our satellite earth station products were lower during fiscal 2012 as compared to fiscal 2011. Although sales related to
international customers were higher in fiscal 2012 as compared to fiscal 2011, sales related to the U.S. government were lower
due to U.S. government budget pressures. Based on our current backlog and the anticipated timing of orders we expect to receive,
we expect annual sales in this product line in fiscal 2013 to be higher than the level we achieved in fiscal 2012. However, if business
conditions deteriorate from current levels and we do not receive expected orders, we may not be able to achieve our expected level
of fiscal 2013 sales.

Sales of our over-the-horizon microwave systems significantly decreased during fiscal 2012 as compared to fiscal 2011, primarily
as a result of lower sales related to a nearly completed $36.3 million contract whose end-user is a North African government, and
a completed $11.0 million contract whose end-user is a Middle Eastern government. These decreases were offset, in part, by
shipments related to orders for our Modular Transportable Troposcatter System ("MTTS") for end-use by the U.S. Army. In fiscal
2012, we began recording revenue related to a $55.0 million contract we received in June 2012 from a domestic prime contractor
to design and furnish a telecommunications system for use in a North African government's communications network. Revenue
from this contract is expected to be recognized over a three-year performance period. Based on our current backlog and the
anticipated receipt of future orders (including additional orders for our MTTS equipment), we expect annual sales in this product
line in fiscal 2013 to be significantly higher than the level we achieved in fiscal 2012. If we do not receive additional MTTS and
other expected orders, we may not be able to achieve our expected level of sales in fiscal 2013.

Our telecommunications transmission segment represented 49.4% of consolidated net sales for fiscal 2012 as compared to 37.9%
for fiscal 2011. Bookings, sales and profitability in our telecommunications transmission segment can fluctuate from period-to-
period due to many factors, including the book and ship nature of our satellite earth station product business, the current adverse
conditions in the global economy and the timing of, and our related performance on, contracts from the U.S. government and
international customers for our over-the-horizon microwave systems.

RF microwave amplifiers
Net sales in our RF microwave amplifiers segment were $102.5 million for fiscal 2012, as compared to $92.0 million for fiscal
2011, an increase of $10.5 million, or 11.4%. This increase primarily reflects higher sales of our traveling wave tube amplifiers.

Bookings in our RF microwave amplifiers segment for fiscal 2012 were significantly higher as compared to fiscal 2011. Although
overall market conditions remain challenging and the ability to predict the timing of additional awards remains difficult, we
continue to see relatively strong demand for both our traveling wave tube and solid-state high-power amplifier product lines. Based
on our current backlog and the anticipated timing of orders we expect to receive, we expect annual net sales in this segment in
fiscal 2013 to be comparable to the level we achieved in fiscal 2012. However, if business conditions further deteriorate and we
do not receive expected orders, we may not be able to achieve our expected level of sales in fiscal 2013.

Our RF microwave amplifiers segment represented 24.1% of consolidated net sales for fiscal 2012 as compared to 15.0% for fiscal
2011. Bookings, sales and profitability in our RF microwave amplifiers segment can fluctuate from period-to-period due to many
factors, including the challenging business conditions and U.S. and international military budget constraints that currently exist,
and the timing of, and our related performance on, contracts from the U.S. government and international customers.

Mobile data communications
Net sales in our mobile data communications segment were $112.6 million for fiscal 2012 as compared to $288.4 million for fiscal
2011, a substantial decrease of $175.8 million, or 61.0%. This decrease is attributable to a substantial anticipated decline in
combined MTS and BFT-1 sales to the U.S. Army and, to a lesser extent, lower sales related to the design and manufacture of
microsatellites.

Sales to the U.S. Army for both the MTS and BFT-1 programs during fiscal 2012 were $87.8 million, or 78.0% of our mobile data
communications segment's sales, as compared to $248.6 million, or 86.2%, during fiscal 2011. MTS and BFT-1 program sales for
fiscal 2012 reflect lower revenues resulting from the U.S. Army's July 2010 decision to award a third party a contract for the next-
generation BFT-2 network and its related decision to combine the MTS program with the BFT-1 program.

Sales related to the design and manufacture of microsatellites for fiscal 2012 were $17.7 million, a significant decrease from the
$30.5 million we achieved in fiscal 2011. This decline is almost entirely attributable to lower revenues related to our large contract
to deliver a spacecraft bus to the U.S. Navy's Naval Research Laboratory. Pursuant to an agreement with our customer, we
substantially ceased work related to this contract in June 2012. As a result of the extreme pressures on our U.S. government
customer to reduce spending, and the lack of bookings and the uncertainty of future orders relating to our microsatellite product
line, in the fourth quarter of fiscal 2012, we adopted a plan to wind-down our microsatellite product line. In connection with this
plan, and as further discussed below, we recorded a $2.6 million restructuring charge in fiscal 2012. As a result, we expect virtually
no revenue to be generated from the sale of microsatellite products in fiscal 2013.

As discussed in the above section entitled “BFT-1 Sustainment Activities,” we currently anticipate that the majority of future sales
in our mobile data communications segment will be generated from sales of MTS and BFT-1 equipment and services pursuant to
our three-year IDIQ contract. Based on the timing of our performance on orders currently in our backlog and additional orders
we expect to receive, and due to the cessation of sales of microsatellite products, we expect sales in our mobile data communications
segment to be materially lower in fiscal 2013 as compared to the level we achieved in fiscal 2012.

Our mobile data communications segment represented 26.5% of consolidated net sales for fiscal 2012 as compared to 47.1% for
fiscal 2011. Bookings, sales and profitability in our mobile data communications segment can fluctuate dramatically from period-
to-period due to many factors, including unpredictable funding, deployment and technology decisions by the U.S. government.
As such, period-to-period comparisons of our results may not be indicative of a trend or future performance.

Geography and Customer Type
Sales to the U.S. government (including sales to prime contractors of the U.S. government) represented 48.9% and 61.7% of
consolidated net sales for fiscal 2012 and 2011, respectively. International sales (which include sales to U.S. companies for inclusion
in products that are sold to international customers) represented 38.7% and 30.2% of consolidated net sales for fiscal 2012 and
2011, respectively. Domestic commercial sales represented 12.4% and 8.1% of consolidated net sales for fiscal 2012 and 2011,
respectively.

The lower percentage of consolidated net sales to the U.S. government during fiscal 2012 reflects substantially lower sales to the
U.S. Army for the MTS and BFT-1 programs. In light of the decline in MTS and BFT-1 program sales that is expected to occur
in fiscal 2013 and our decision to wind-down our microsatellite product line, we expect both our domestic commercial and
international sales in fiscal 2013, as a percentage of consolidated net sales, to increase as compared to fiscal 2012.

Gross Profit. Gross profit was $183.5 million and $241.0 million for fiscal 2012 and 2011, respectively, representing a decrease
of $57.5 million which was primarily driven by the significant decline in consolidated net sales.

Despite the decline in gross profit dollars during fiscal 2012, our gross profit, as a percentage of consolidated net sales, increased
from 39.4% for fiscal 2011 to 43.2% for fiscal 2012. During fiscal 2012, our gross profit benefited by approximately $5.6 million
related to the finalization of pricing for certain previously received MTS and BFT-1 orders, partially offset by a charge of $1.3
million in cost of sales related to our plan to wind-down our microsatellite product line. Excluding this net benefit, gross profit,
as a percentage of consolidated net sales for fiscal 2012, would have been 42.7% as compared to the 39.4% we achieved for fiscal
2011. This increase primarily reflects a significantly higher percentage of consolidated net sales occurring in our
telecommunications transmission segment which generally has a higher gross profit percentage than our other two reportable
operating segments and an overall better mix of products in our RF microwave amplifiers segment. We expect our gross profit,
as a percentage of net sales, in fiscal 2013 to increase from the percentage we achieved in fiscal 2012. Gross profit, as a percentage
of related segment sales is further discussed below.

Our telecommunications transmission segment's gross profit, as a percentage of related net sales, for fiscal 2012, was higher than
the percentage achieved for fiscal 2011. This increase is primarily attributable to better than expected performance related to our
North African government and Middle Eastern government over-the-horizon microwave system contracts and an overall favorable
product mix. Gross margins in our telecommunications transmission segment during fiscal 2012 reflect lower production, as
compared to fiscal 2011, of MTS and BFT-1 products for our mobile data communications segment which, in turn, sells them to
the U.S. Army. Based on the nature and type of orders that are currently in our backlog and anticipated orders we expect to receive,
we expect the gross profit percentage in our telecommunications transmission segment, in fiscal 2013, to be slightly lower than
the level this segment achieved in fiscal 2012.

Our RF microwave amplifiers segment experienced a higher gross profit, both in dollars and as a percentage of related net sales,
for fiscal 2012 as compared to fiscal 2011. This increase is attributable to an improvement in overall product mix, including fewer
developmental projects in fiscal 2012 as compared to fiscal 2011. Based on the nature and type of orders that are currently in our
backlog and anticipated orders we expect to receive, we expect gross profit, both in dollars and as a percentage of related net sales
in this segment in fiscal 2013 to be slightly lower than the level we achieved in fiscal 2012.

Our mobile data communications segment's gross profit, as a percentage of related net sales, for fiscal 2012 was slightly higher
as compared to fiscal 2011. During fiscal 2012, this segment's gross profit benefited by approximately $5.6 million related to the
finalization of pricing for certain previously received MTS and BFT-1 orders. Excluding this benefit, our mobile data
communications segment's gross profit, as a percentage of related net sales, for fiscal 2012 would have been lower than the level
we achieved for fiscal 2011, primarily due to a change in overall product mix and a charge of $1.3 million of the $2.6 million
restructuring charge associated with our decision to wind-down our microsatellite product line. Our fiscal 2012 gross profit in this
segment also reflects the benefit from the four months of revenue we recorded related to our $10.0 million annual intellectual
property license ("IP license") fee that we collected in fiscal 2012 pursuant to a three-year BFT-1 IDIQ sustainment contract with
the U.S. Army. Looking forward, the exact amount of our gross profit percentage expected in this segment in fiscal 2013 is difficult
to quantify because, as discussed in the above section entitled “BFT-1 Sustainment Activities,” the pricing and terms for various
other contracted products and services has not yet been finalized and the U.S. Army is not obligated to order any additional products.
Significant period-to-period fluctuations in our gross profit percentage and gross margins can occur in our mobile data
communications segment as a result of the nature, timing and mix of actual deliveries which are primarily driven by the U.S.
Army's requirements.

Included in consolidated cost of sales for fiscal 2012 and 2011 are provisions for excess and obsolete inventory of $3.9 million
and $4.1 million, respectively. As discussed in our “Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Critical Accounting Policies - Provisions for Excess and Obsolete Inventory,” we regularly review our
inventory and record a provision for excess and obsolete inventory based on historical and projected usage assumptions.

It is always difficult to predict sales and product mix for each individual segment; as such it is difficult to estimate consolidated
gross profit, as a percentage of consolidated net sales in future periods. Nevertheless, based on orders currently in our backlog
and orders we expect to receive, we anticipate that our consolidated gross profit, as a percentage of consolidated net sales will be
higher in fiscal 2013 as compared to fiscal 2012.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $87.1 million and $94.1 million
for fiscal 2012 and 2011, respectively, representing a decrease of $7.0 million, or 7.4%.

In fiscal 2012, our selling, general and administrative expenses reflect $1.3 million of restructuring charges (including $0.7 million
of accelerated depreciation) of the $2.6 million restructuring charge associated with our decision to wind-down our microsatellite
product line. In addition, selling, general and administrative expenses in fiscal 2012 reflect $2.6 million of costs related to a
contested proxy solicitation in connection with our fiscal 2011 annual meeting of stockholders. This contested proxy solicitation
was initiated by a third party who publicly announced, on November 18, 2011, that it would not proceed with its proxy solicitation.
There was no agreement with, consideration paid to, or any accommodation granted to this third party by us.

Excluding the $3.9 million of restructuring and proxy solicitation costs discussed above, our selling, general and administrative
expenses for fiscal 2012 decreased by $10.9 million as compared to fiscal 2011. This decrease was primarily driven by a decrease
in (i) compensation-related expenses associated with a lower level of consolidated net sales during fiscal 2012 and (ii) lower
depreciation expense related to certain mobile data communications segment fixed assets fully depreciated in fiscal 2011 due to
the expiration of our MTS contract. This decrease was partially offset by increased legal costs and professional fees associated
with legal proceedings and other matters, including those specifically discussed in “Notes to Consolidated Financial Statements
- Note (14)(b) Commitments and Contingencies - Legal Proceedings and Other Matters” included in “Part II - Item 8. - Financial
Statements and Supplementary Data.”

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses decreased to $2.7
million in fiscal 2012 from $4.0 million in fiscal 2011.

As a percentage of consolidated net sales, selling, general and administrative expenses were 20.5% and 15.4% for fiscal 2012 and
2011, respectively. This increase is primarily attributable to the significantly lower level of consolidated net sales during fiscal
2012 as compared to fiscal 2011.

Selling, general and administrative expenses, in dollars, are currently expected to decrease in fiscal 2013 as compared to fiscal
2012. As a percentage of consolidated net sales, we expect selling, general and administrative expenses to increase. We also expect
to record approximately $1.0 million of additional microsatellite product line restructuring charges during the first quarter of fiscal
2013, at which time efforts related to this product line are expected to cease. As previously discussed in our earlier SEC filings,
we have taken and continue to take cost reduction actions in all of our reportable operating segments.

Research and Development Expenses. Research and development expenses were $38.5 million and $43.5 million for fiscal 2012
and 2011, respectively, representing a decrease of $5.0 million, or 11.5%.

For fiscal 2012 and 2011, research and development expenses of $28.2 million and $27.6 million, respectively, related to our
telecommunications transmission segment, $8.7 million and $8.8 million, respectively, related to our RF microwave amplifiers
segment, $1.0 million and $6.1 million, respectively, related to our mobile data communications segment, with the remaining
expenses related to the amortization of stock-based compensation expense which is not allocated to our three operating segments.

Amortization of stock-based compensation expense recorded as research and development expenses was $0.6 million and $1.0
million for fiscal 2012 and 2011, respectively.

As a percentage of consolidated net sales, research and development expenses were 9.1% and 7.1% for fiscal 2012 and 2011,
respectively. The increase in research and development expenses, as a percentage of consolidated net sales, is attributable to the
significantly lower level of consolidated net sales during fiscal 2012 as compared to fiscal 2011. We expect research and
development expenses, in dollars, for fiscal 2013 to be comparable to the amount we invested during fiscal 2012 and, as a percentage
of consolidated net sales, to increase.

As an investment for the future, we are continually enhancing our existing products and developing new products and technologies.
Whenever possible, we seek customer funding for research and development to adapt our products to specialized customer
requirements. During fiscal 2012 and 2011, customers reimbursed us $5.7 million and $10.7 million, respectively, which is not
reflected in the reported research and development expenses, but is included in net sales with the related costs included in cost of
sales.

Amortization of Intangibles. Amortization relating to intangible assets with finite lives was $6.6 million and $8.1 million in fiscal
2012 and 2011, respectively. The decrease is primarily attributable to certain intangible assets that were fully amortized in fiscal
2011 and 2012.

Excluding the impact of any acquisitions that we may make in fiscal 2013, amortization of intangibles with finite lives for fiscal
2013 is currently anticipated to approximate $6.3 million.

Merger Termination Fee. During fiscal 2011, we benefited from the receipt of a net merger termination fee of $12.5 million
related to a Termination and Release Agreement dated September 7, 2010, by which we and CPI International, Inc. ("CPI")
terminated a previously announced Merger Agreement dated May 8, 2010.

Operating Income. Operating income for fiscal 2012 and 2011 was $51.3 million, or 12.1% of consolidated net sales, and $107.8
million, or 17.6% of consolidated net sales, respectively.

Excluding the net benefit to operating income during fiscal 2012 associated with the previously discussed finalization of pricing
and increased funding for certain MTS and BFT-1 orders, the $2.6 million of costs associated with the withdrawn contested proxy
solicitation and the $2.6 million of microsatellite product line restructuring charges, operating income approximated $50.9 million,
or 12.1% of consolidated net sales for fiscal 2012. Excluding the net merger termination fee of $12.5 million recorded in the first
quarter of fiscal 2011, operating income approximated $95.3 million or 15.6% of consolidated net sales for fiscal 2011.

The decline in operating income (both in dollars and as a percentage of consolidated net sales) is attributable to the significantly
lower level of consolidated net sales we achieved during fiscal 2012 as compared to fiscal 2011. Operating income, by segment,
is discussed further below.

Operating income in our telecommunications transmission segment was $41.7 million or 19.9% of related net sales for fiscal 2012
as compared to $49.9 million or 21.5% of related net sales for fiscal 2011. This decrease in operating income, both in dollars and
as a percentage of related net sales, is primarily attributable to the decrease in this segment's net sales and slightly higher research
and development expenses, as discussed above. Operating income in this segment, during fiscal 2012, also reflects increased legal
fees and professional costs associated with legal proceedings and other matters, including those discussed in “Notes to Consolidated
Financial Statements - Note (14)(b) Commitments and Contingencies - Legal Proceedings and Other Matters” included in “Part
II - Item 8. - Financial Statements and Supplementary Data.”

Our RF microwave amplifiers segment generated operating income of $7.6 million or 7.4% of related net sales for fiscal 2012 as
compared to $1.1 million or 1.2% of related net sales for fiscal 2011. This increase in operating income, both in dollars and as a
percentage of related net sales, is primarily due to higher net sales and a higher gross profit as a percentage of related net sales,
as discussed above.

Our mobile data communications segment generated operating income of $20.0 million or 17.7% of related net sales for fiscal
2012 as compared to $64.9 million or 22.5% of related net sales for fiscal 2011. The decrease in operating income, both in dollars
and as a percentage of related net sales, was primarily due to this segment's lower net sales, partially offset by the increase in the
gross profit percentage (including the fiscal 2012 benefit associated with the finalization of pricing related to certain MTS and
BFT-1 orders), and lower operating expenses, as discussed above. Operating income in this segment, in fiscal 2012, also reflects
$2.6 million of charges related to our microsatellite product line restructuring plan. A further breakdown of these charges is
discussed in “Notes to Consolidated Financial Statements - Note (7) Cost Reduction Actions” included in “Part II - Item 8. -
Financial Statements and Supplementary Data.”

Unallocated operating expenses were $18.0 million for fiscal 2012 as compared to $8.1 million for fiscal 2011. Excluding the
aforementioned $2.6 million of proxy solicitation costs recorded as selling, general and administrative expenses and the previously
discussed receipt of a $12.5 million net merger termination fee associated with the termination of the CPI acquisition agreement,
unallocated operating expenses were $15.4 million and $20.6 million for fiscal 2012 and 2011, respectively. This $5.2 million
decrease is primarily attributable to a decline in selling, general and administrative expenses associated with the lower level of
consolidated net sales, as discussed above. In addition, unallocated operating expenses in fiscal 2012 reflect legal fees and
professional costs associated with certain legal proceedings and other matters, including those specifically discussed in “Notes to
Consolidated Financial Statements - Note (14)(b) Commitments and Contingencies - Legal Proceedings and Other Matters”
included in “Part II - Item 8. - Financial Statements and Supplementary Data.”

Amortization of stock-based compensation expense, which is included in unallocated operating expenses, was $3.6 million in
fiscal 2012 as compared to $5.4 million in fiscal 2011.

Because the pricing for various products and services we have agreed to provide to the U.S. Army has not yet been finalized and
it remains difficult to predict our overall consolidated sales product mix, it is difficult to precisely estimate future operating margins
as a percentage of related net sales. Nevertheless, based on the orders currently in our backlog and orders we expect to receive,
our consolidated operating income, as a percentage of consolidated net sales, for fiscal 2013 is expected to be in the range of
13.0% to 14.0%.

Interest Expense. Interest expense was $8.8 million and $8.4 million for fiscal 2012 and 2011, respectively. The increase in
interest expense is primarily due to (i) accelerated amortization of deferred financing costs related to lowering our borrowing
capacity on our secured revolving credit facility from $150.0 million to $100.0 million, (ii) higher unused credit facility fees and
(iii) a full year of accretion of interest on the contingent earn-out liability related to our October 2010 acquisition of technology
assets from Stampede.

Interest Income and Other. Interest income and other for fiscal 2012 was $1.6 million as compared to $2.4 million for fiscal
2011. The decrease of $0.8 million is primarily attributable to lower cash balances as a result of repurchases of our common stock
and dividend payments. All of our available cash and cash equivalents are currently invested in bank deposits, money market
mutual funds, certificates of deposit, and short-term U.S. Treasury securities which, at this time, are currently yielding a blended
annual interest rate of approximately 0.38%.

Provision for Income Taxes. The provision for income taxes was $11.6 million and $33.9 million for fiscal 2012 and 2011,
respectively. Our effective tax rate was 26.4% for fiscal 2012 compared to 33.3% for fiscal 2011.

Our effective tax rate for fiscal 2012 reflects a net discrete tax benefit of approximately $3.8 million, of which $2.8 million relates
to the effective settlement of certain federal and state income tax audits with the remaining amount principally relating to the
reversal of previously recorded tax liabilities no longer required due to the expiration of applicable statutes of limitation. Our
effective tax rate for fiscal 2011 reflects net discrete tax benefits of approximately $1.7 million, primarily relating to the reversal
of tax contingencies no longer required due to the expiration of applicable statutes of limitation, the passage of legislation that
included the retroactive extension of the federal research and experimentation credit, and a reduction in expenses that were
previously deemed to be non-deductible for tax purposes. For both fiscal 2012 and 2011, excluding discrete tax items in both
periods, our effective tax rate was approximately 35.0%.

Excluding the impact of discrete tax items, our fiscal 2013 estimated effective tax rate is expected to approximate 34.5%. This
rate reflects anticipated changes in the geographic mix of our earnings and increased domestic manufacturing deductions, offset,
in part, by the expiration of the federal research and experimentation credit on December 31, 2011.

Our federal income tax returns for fiscal 2010, 2011 and 2012 are subject to potential future IRS audit. Future tax assessments or
settlements for other potential later periods, or for other tax jurisdictions, could have a material adverse effect on our consolidated
results of operations and financial condition.

Comparison of Fiscal 2011 and 2010

Net Sales. Consolidated net sales were $612.4 million and $778.2 million for fiscal 2011 and 2010, respectively, representing a
decrease of $165.8 million, or 21.3%. The period-over-period decrease in net sales is attributable to lower net sales in both our
mobile data communications and RF microwave amplifiers segments offset, in part, by higher sales in our telecommunications
transmission segment.

Telecommunications transmission
Net sales in our telecommunications transmission segment were $232.0 million and $219.7 million for fiscal 2011 and 2010,
respectively, an increase of $12.3 million, or 5.6%. Net sales in this segment reflect significantly higher sales of our over-the-
horizon microwave systems, which were partially offset by lower sales of our satellite earth station products.

Sales of our satellite earth station products during fiscal 2011 were lower as compared to fiscal 2010. During fiscal 2011, our sales
and bookings were negatively impacted by adverse global business conditions and volatile political conditions in certain end-
customer markets. In addition, we experienced lower sales and bookings from our U.S. government customers who are under
extreme pressure to reduce overall spending.

Sales of our over-the-horizon microwave systems for fiscal 2011 were significantly higher than sales for fiscal 2010. The increase
was primarily driven by our performance on our $36.3 million contract (including $0.9 million of additional orders received in
fiscal 2011) for our North African country end-customer and our $11.0 million contract whose end-user is a Middle Eastern
government.

Our telecommunications transmission segment represented 37.9% of consolidated net sales for fiscal 2011 as compared to 28.2%
for fiscal 2010.

RF microwave amplifiers
Net sales in our RF microwave amplifiers segment were $92.0 million for fiscal 2011, as compared to $112.0 million for fiscal
2010, a decrease of $20.0 million, or 17.9%. During fiscal 2011, our sales and bookings for both solid-state high-power amplifiers
and traveling wave tube amplifiers were negatively impacted by adverse global business conditions and volatile political conditions
in certain foreign markets. In addition, we experienced lower sales and bookings from our U.S. and international government
customers who are under extreme pressure to reduce overall spending.

Our RF microwave amplifiers segment represented 15.0% of consolidated net sales for fiscal 2011 as compared to 14.4% for fiscal
2010.

Mobile data communications
Net sales in our mobile data communications segment were $288.4 million and $446.5 million for fiscal 2011 and 2010, respectively,
a decrease of $158.1 million, or 35.4%. This decrease is primarily attributable to a significant decline in sales to the U.S. Army
partially offset by increased sales related to the design and manufacture of microsatellites.

Sales to the U.S. Army for both the MTS and BFT-1 program during fiscal 2011 were $248.6 million, or 86.2% of our mobile data
communication’s segment’s sales, as compared to $423.2 million, or 94.8%, during fiscal 2010. Sales to these programs declined
in fiscal 2011 as compared to fiscal 2010 primarily as a result of lower shipments for certain large orders related to MTS ruggedized
computers and related accessories in fiscal 2011 as compared to fiscal 2010. During fiscal 2011, our MTS contract expired and
the program was consolidated into BFT-1.

Sales in our mobile data communications segment include sales related to the design and manufacture of microsatellites. Sales of
this product line were $30.5 million in fiscal 2011 as compared to $12.6 million in fiscal 2010. This increase was primarily driven
by our efforts to deliver a spacecraft bus to the U.S. Navy’s Naval Research Laboratory pursuant to a contract award that we
received in March 2010.

Our mobile data communications segment represented 47.1% of consolidated net sales for fiscal 2011 as compared to 57.4%
for fiscal 2010.

Geography and Customer Type
Sales to the U.S. government (including sales to prime contractors of the U.S. government) represented 61.7% and 71.1% of
consolidated net sales for fiscal 2011 and 2010, respectively. International sales (which include sales to U.S. companies for inclusion
in products that are sold to international customers) represented 30.2% and 22.9% of consolidated net sales for fiscal 2011 and
2010, respectively. Domestic commercial sales represented 8.1% and 6.0% of consolidated net sales for fiscal 2011 and 2010,
respectively.

Gross Profit. Gross profit was $241.0 million and $270.6 million for fiscal 2011 and 2010, respectively, representing a decrease
of $29.6 million. This decrease was driven by lower consolidated net sales that were partially offset by an increase in our gross
profit as a percentage of consolidated net sales. Gross profit as a percentage of consolidated net sales was 39.4% for fiscal 2011
as compared to 34.8% for fiscal 2010. The increase in gross profit as a percentage of consolidated net sales during fiscal 2011 was
primarily attributable to a higher percentage of consolidated net sales occurring in our telecommunications transmission segment.
Our telecommunications transmission segment generally has a higher gross profit percentage than our other two reportable operating
segments. In addition, our gross profit as a percentage of consolidated net sales was impacted by changes in product mix, as further
discussed below.

Our telecommunications transmission segment’s gross profit, as a percentage of related sales, for fiscal 2011 was lower than the
gross profit percentage we achieved in fiscal 2010. This decline was driven by increased sales related to lower gross margins for
certain over-the-horizon microwave system contracts. In addition, our gross profit percentage in fiscal 2011 reflects lower overall
usage of our high-volume technology manufacturing center, located in Tempe, Arizona, that was primarily driven by lower
production of MTS and BFT-1 products for our mobile data communications segment, which in turn, sells them to the U.S. Army.

Our RF microwave amplifiers segment experienced a lower gross profit, as a percentage of related net sales, during fiscal 2011
as compared to fiscal 2010, primarily due to lower overhead absorption associated with the lower RF microwave amplifiers net
sales as discussed above, as well as reserves, primarily related to certain developmental projects.

Our mobile data communications segment experienced a significantly higher gross profit, as a percentage of related net sales,
during fiscal 2011 as compared to fiscal 2010, due to changes in overall product mix. During fiscal 2011, we benefited from the
sale of high gross margin MTS software license seats to the U.S. Army and we also benefited from the finalization and completed
delivery of certain MTS orders.

Included in cost of sales for fiscal 2011 and 2010 are provisions for excess and obsolete inventory of $4.1 million and $7.7 million,
respectively. During fiscal 2010, we recorded a write-down of approximately $2.6 million of older generation MTS computers
that we had in our inventories. As discussed in our Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Critical Accounting Policies – Provisions for Excess and Obsolete Inventory,” we regularly review our
inventory and record a provision for excess and obsolete inventory based on historical and projected usage assumptions.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $94.1 million and $99.9 million
for fiscal 2011 and 2010, respectively, representing a decrease of $5.8 million, or 5.8%. As a percentage of consolidated net sales,
selling, general and administrative expenses were 15.4% and 12.8% for fiscal 2011 and 2010, respectively.

The decrease in selling, general and administrative expenses during fiscal 2011 as compared to fiscal 2010 was driven by (i) lower
overall spending resulting from cost reduction actions, (ii) lower amortization of stock-based compensation and (iii) the reversal
of approximately $2.0 million of certain cost contingencies which were no longer required. This decrease was offset, in part, by
the acceleration of depreciation expense related to certain fixed assets no longer expected to be utilized by our mobile data
communications segment as a result of the expiration of our MTS contract in July 2011.

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses decreased to $4.0
million in fiscal 2011 from $6.3 million in fiscal 2010. Our stock-based compensation expense for fiscal 2010 included incremental
expense associated with the extension of contractual lives for certain previously granted stock-based awards. There was no such
modification in fiscal 2011.

Research and Development Expenses. Research and development expenses were $43.5 million and $46.2 million for fiscal 2011
and 2010, respectively, representing a decrease of $2.7 million, or 5.8%.

For fiscal 2011 and 2010, research and development expenses of $27.6 million and $27.7 million, respectively, related to our
telecommunications transmission segment, $8.8 million and $10.9 million, respectively, related to our RF microwave amplifiers
segment and $6.1 million and $6.0 million, respectively, related to our mobile data communications segment, with the remaining
expenses related to the amortization of stock-based compensation expense which is not allocated to our three reportable operating
segments.

Amortization of stock-based compensation expense recorded as research and development expenses was $1.0 million and $1.6
million for fiscal 2011 and 2010, respectively. Our stock-based compensation expense for fiscal 2010 included the incremental
expense related to the extension of contractual lives for certain previously granted stock-based awards. There was no such
modification in fiscal 2011.

As a percentage of consolidated net sales, research and development expenses were 7.1% and 5.9% for fiscal 2011 and 2010,
respectively. The increase in research and development expenses, as a percentage of consolidated net sales, is attributable to the
significantly lower level of consolidated net sales during fiscal 2011 as compared to fiscal 2010.

During fiscal 2011 and 2010, customers reimbursed us $10.7 million and $12.6 million, respectively, which is not reflected in the
reported research and development expenses, but is included in net sales with the related costs included in cost of sales.

Amortization of Intangibles. Amortization relating to intangible assets with finite lives was $8.1 million and $7.3 million for
fiscal 2011 and 2010, respectively. Amortization for fiscal 2011 includes amortization expense associated with our October 2010
purchase of technology assets from Stampede.

Impairment of Goodwill. In fiscal 2010, we recorded a $13.2 million goodwill impairment charge in our mobile data
communications segment. There was no impairment of goodwill in fiscal 2011.

Merger Termination Fee. During fiscal 2011, we benefited from the receipt of a merger termination fee of $12.5 million (net of
certain directly related expenses) related to a Termination and Release Agreement dated September 7, 2010, by which we and CPI
terminated a previously announced Merger Agreement dated May 8, 2010.

Operating Income. Operating income for fiscal 2011 and 2010 was $107.8 million, or 17.6% of consolidated net sales, and $104.0
million, or 13.4% of consolidated net sales, respectively. As further discussed below, excluding the net merger termination fee of
$12.5 million recorded in fiscal 2011 and the goodwill impairment charge of $13.2 million recorded in fiscal 2010, operating
income would have approximated 15.6% of fiscal 2011 consolidated net sales as compared to 15.1% of fiscal 2010 consolidated
net sales.

Operating income in our telecommunications transmission segment was $49.9 million or 21.5% of related net sales, for fiscal
2011 as compared to $47.5 million or 21.6% of related net sales for fiscal 2010. The slight decrease in operating income, as a
percentage of related net sales is primarily attributed to a lower gross profit percentage, as discussed above.

Our RF microwave amplifiers segment generated operating income of $1.1 million, or 1.2% of related net sales, for fiscal 2011
as compared to $9.8 million or 8.8% of related net sales for fiscal 2010. The decrease in operating income, as a percentage of
related net sales, is primarily due to this segment’s decline in net sales and gross profit percentage, as discussed above, partially
offset by lower operating expenses.

Operating income in our mobile data communications segment was $64.9 million, or 22.5% of related net sales, for fiscal 2011
as compared to $75.5 million or 16.9% of related net sales for fiscal 2010. The increase in operating income, as a percentage of
related net sales, was driven by the significant increase in the gross profit percentage, as discussed above. This increase was
partially offset by additional depreciation expense related to certain fixed assets, as discussed above. Operating income in fiscal
2010 includes an expense of $13.2 million for goodwill impairment.

Unallocated operating expenses were $8.1 million for fiscal 2011 as compared to $28.8 million for fiscal 2010. Excluding the net
merger termination fee of $12.5 million, unallocated operating expenses for fiscal 2011 were $20.6 million, which represents a
decrease of $8.2 million as compared to fiscal 2010. The significant decrease was primarily due to lower overall spending as a
result of our cost reduction efforts and lower stock-based compensation expense and the reversal of approximately $2.0 million
related to certain cost contingencies that were no longer required.

Amortization of stock-based compensation expense, which is included in unallocated operating expenses, was $5.4 million in
fiscal 2011 as compared to $8.7 million in fiscal 2010.

Interest Expense. Interest expense was $8.4 million and $7.9 million for fiscal 2011 and 2010, respectively. The increase in
interest expense is primarily due to the (i) accretion of interest on the contingent earn-out liability related to our October 2010
acquisition of technology assets from Stampede and (ii) incremental interest expense associated with our unsecured revolving
credit facility which was increased in August 2010 from $100.0 million to $150.0 million.

Interest Income and Other. Interest income and other for fiscal 2011 was $2.4 million, as compared to $1.2 million for fiscal
2010. The increase of $1.2 million is primarily attributable to an increase in year-over-year interest rates that we earned.

Provision for Income Taxes. The provision for income taxes was $33.9 million and $36.7 million for fiscal 2011 and 2010,
respectively. Our effective tax rate was 33.3% for fiscal 2011 compared to 37.7% for fiscal 2010.

Our effective tax rate for fiscal 2011 reflects net discrete tax benefits of approximately $1.7 million, primarily relating to the
reversal of tax contingencies no longer required due to the expiration of applicable statutes of limitation, the passage of legislation
which included the retroactive extension of the federal research and experimentation credit, and a reduction in expenses that were
previously deemed to be non-deductible for tax purposes. Our effective tax rate for fiscal 2010 reflects a net discrete tax benefit
of approximately $0.1 million. In addition, our fiscal 2010 effective tax rate reflects the fact that a portion of our $13.2 million
expense for the impairment of our mobile data communications segment’s goodwill was non-deductible for income tax purposes.

Excluding all of the aforementioned items in both periods, our effective tax rate for fiscal 2011 was approximately 35.0% as
compared to 36.0% for fiscal 2010. The decrease is primarily attributable to the retroactive extension of the federal research and
experimentation credit (whose related legislation was extended in December 2010), and the increased benefit of our domestic
production activities deduction (resulting from the scheduled phase-in of the related legislation).

Liquidity and Capital Resources

Our unrestricted cash and cash equivalents decreased to $367.9 million at July 31, 2012 from $558.8 million at July 31, 2011,
representing a decrease of $190.9 million. The decrease in cash and cash equivalents during fiscal 2012 was driven by the following:

• Net cash provided by operating activities was $53.5 million for fiscal 2012 as compared to $97.4 million for fiscal 2011.
The decrease was primarily attributable to lower operating income (due in part to a $12.5 million net merger termination
fee we received during fiscal 2011), offset, in part, by a decrease in net working capital requirements during fiscal 2012.
Although we expect to generate net cash from operating activities for fiscal 2013, we are unable to accurately predict the
amount, which will be impacted by the timing of working capital requirements associated with our overall sales efforts,
including our efforts relating to our $55.0 million over-the-horizon microwave system contract.

• Net cash used in investing activities for fiscal 2012 was $6.4 million as compared to $10.0 million for fiscal 2011. During
fiscal 2012, we spent $6.4 million to purchase property, plant and equipment, including expenditures relating to ongoing
equipment upgrades and enhancements to our high-volume technology manufacturing center in Tempe, Arizona.

• Net cash used in financing activities was $238.0 million for fiscal 2012 as compared to $136.1 million for fiscal 2011.
During fiscal 2012, we used $219.4 million for the repurchase of our common stock pursuant to our current $250.0 million
stock repurchase program. In addition, during fiscal 2012, we paid $22.6 million in cash dividends to our stockholders.

Our investment policy relating to our unrestricted cash and cash equivalents is intended to minimize principal loss while at the
same time maximize the income we receive without significantly increasing risk. To minimize risk, we generally invest our cash
and cash equivalents in money market mutual funds (both government and commercial), certificates of deposit, bank deposits,
and U.S. Treasury securities. Many of our money market mutual funds invest in direct obligations of the U.S. government, bank
securities guaranteed by the Federal Deposit Insurance Corporation, certificates of deposit and commercial paper and other
securities issued by other companies. While we cannot predict future market conditions or market liquidity or the ultimate outcome
of the current European monetary issues and related concerns, we believe our investment policies are appropriate in the current
environment. Ultimately, the availability of our cash and cash equivalents is dependent on a well-functioning liquid market.

At July 31, 2012, we had $367.9 million of cash and cash equivalents. As of July 31, 2012, our material short-term cash requirements
primarily consist of cash necessary to fund: (i) our ongoing working capital needs, including income tax payments, (ii) anticipated
quarterly dividends, (iii) repurchases of our common stock that we may make pursuant to our stock repurchase program, and (iv)
contingent earn-out payments we expect to make through October 2013 related to our acquisition of Stampede. In addition, in
future periods, we may also redeploy a large portion of our cash and cash equivalents for one or more acquisitions.

We are currently authorized by our Board of Directors to repurchase our stock pursuant to a $250.0 million stock repurchase
program. Pursuant to this authorization, during fiscal 2012, we purchased approximately 7.1 million shares of our common stock
in open-market transactions with an average price per share of $30.81 and at an aggregate cost of $217.4 million (including
transaction costs) and in fiscal 2011, we purchased approximately 0.8 million shares with an average price per share of $28.87,
at an aggregate cost of $21.5 million (including transaction costs). As of July 31, 2012, $11.3 million remains available for purchases
from the $250.0 million stock repurchase program authorized by our Board of Directors.

Pursuant to a $100.0 million stock repurchase program established in September 2010, during fiscal 2011 we purchased
approximately 3.5 million shares with an average price per share of $28.18 and at an aggregate cost of $100.1 million (including
transaction costs). This program was completed in July 2011.

In September 2011, our Board of Directors raised our annual targeted dividend from $1.00 per common share to $1.10 per common
share. During fiscal 2012, our Board of Directors declared quarterly dividends of $0.275 per common share on September 27,
2011, totaling $6.1 million, on December 8, 2011, totaling $5.4 million, on March 8, 2012, totaling $5.1 million, and June 7, 2012,
totaling $4.8 million, which were paid on November 22, 2011, February 22, 2012, May 22, 2012 and August 20, 2012, respectively.
On September 26, 2012, our Board of Directors declared our fifth consecutive quarterly dividend of $0.275 per common share
payable on November 20, 2012 to shareholders of record at the close of business on October 19, 2012. Future dividends are subject
to Board approval.

Our material long-term cash requirements primarily consist of the possible use of cash to repay $200.0 million of our 3.0%
convertible senior notes and payments relating to our operating leases. In addition, we expect to make future cash payments of
approximately $4.3 million related to our 2009 Radyne-related restructuring plan.

We have historically met both our short-term and long-term cash requirements with funds provided by a combination of cash and
cash equivalent balances, cash generated from operating activities and cash generated from financing transactions.

In June 2012, we amended our secured revolving credit facility. The amended agreement allows us to borrow up to $100.0 million,
has lower fees, provides an option to extend the agreement beyond April 30, 2014 and continues to provide us the flexibility to
repurchase additional shares of our common stock.

In light of ongoing tight credit market conditions and overall adverse business conditions, we continue to receive requests from
our customers for higher credit limits and longer payment terms. Because of our strong cash position and the nominal amount of
interest we are earning on our cash and cash equivalents, we have, on a limited basis, approved certain customer requests. We
continue to monitor our accounts receivable credit portfolio and have not had any material negative customer credit experiences
to date. Based on our anticipated level of future sales and operating income, we believe that our existing cash and cash equivalent
balances and our cash generated from operating activities will be sufficient to meet both our currently anticipated short-term and
long-term operating cash requirements.

Although it is difficult in the current economic and credit environment to predict the terms and conditions of financing that may
be available in the future, should our short-term or long-term cash requirements increase beyond our current expectations, we
believe that we would have sufficient access to credit from financial institutions and/or financing from public and private debt
and equity markets.

As discussed in “Notes to Consolidated Financial Statements – Note (14)(b) Commitments and Contingencies – Legal Proceedings
and Other Matters” included in “Part II — Item 8. — Financial Statements and Supplementary Data,” we are incurring legal
fees and professional costs associated with legal proceedings and other matters. The outcome of these legal proceedings and
investigations is inherently difficult to predict and an adverse outcome in one or more matters could have a material adverse effect
on our consolidated financial condition and results of operations in the period of such determination.

We currently expect capital expenditures for fiscal 2013 to be approximately $8.0 million to $10.0 million.

Financing Arrangements
In May 2009, we issued $200.0 million of our 3.0% 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 approximately $194.5 million after deducting
the initial purchasers’ discount and transaction costs. For further information, see “Notes to Consolidated Financial Statements –
Note (9) 3.0% Convertible Senior Notes” included in “Part II — Item 8. — Financial Statements and Supplementary Data.”

We have a committed $100.0 million secured revolving credit facility ("Credit Facility") with a syndicate of bank lenders, as
amended June 6, 2012. The Credit Facility expires on April 30, 2014 but may be extended by us to December 31, 2016, subject
to certain conditions relating primarily to the repurchase, redemption or conversion of our 3.0% convertible senior notes and
compliance with all other Credit Facility covenants. The Credit Facility provides for the extension of credit to us in the form of
revolving loans, including letters of credit, at any time and from time to time during its term, in the aggregate principal amount
at any time outstanding not to exceed $100.0 million for both revolving loans and letters of credit, with sub-limits of $15.0 million
for commercial letters of credit and $35.0 million for standby letters of credit. Subject to certain limitations as defined, the Credit
Facility may be used for acquisitions, stock repurchases, dividends, working capital and other general corporate purposes. The
Credit Facility also contains financial condition covenants requiring that we: (i) not exceed a maximum ratio of consolidated total
indebtedness to Consolidated Adjusted EBITDA (each as defined in the Credit Facility); (ii) not exceed a maximum ratio of
consolidated senior secured indebtedness to Consolidated Adjusted EBITDA (each as defined in the Credit Facility); (iii) maintain
a minimum fixed charge ratio (as defined in the Credit Facility); and (iv) maintain a minimum consolidated net worth; in each
case measured on the last day of each fiscal quarter. The Credit Facility also requires that, in the event total consolidated indebtedness
(as defined in the Credit Facility) is less than $200.0 million, we maintain a minimum level of Consolidated Adjusted EBITDA
(as defined in the Credit Facility). See “Notes to Consolidated Financial Statements – Note (8) Credit Facility” included in “Part
II — Item 8. — Financial Statements and Supplementary Data.”

At July 31, 2012, we have approximately $1.5 million of standby letters of credit outstanding under this Credit Facility relating
to the guarantee of future performance on certain customer contracts and no commercial letters of credit outstanding.

Off-Balance Sheet Arrangements
As of July 31, 2012, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

Commitments
Except as disclosed in the below table, in the normal course of business, we routinely enter into binding and non-binding purchase
obligations primarily covering anticipated purchases of inventory and equipment. We do not expect that these commitments, as
of July 31, 2012, will materially adversely affect our liquidity.

At July 31, 2012, we had contractual cash obligations relating to: (i) our operating lease commitments; (ii) satellite lease
expenditures, in fiscal 2013, for our mobile data communications segment's commercial asset tracking products, such as our SENS
products; and (iii) the potential cash repayment of our 3.0% convertible senior notes. At July 31, 2012, payments due under these
long-term obligations, excluding interest on the 3.0% convertible senior notes, are as follows:

Operating lease commitments
3.0% convertible senior notes
Total contractual cash obligations
Less contractual sublease payments
Net contractual cash obligations

Obligations Due by Fiscal Years or Maturity Date (in thousands)

2014
and
2015

10,864
—
10,864
(2,555)
8,309

2016
and
2017

8,493
—
8,493
(324)
8,169

After
2017

6,941
200,000
206,941
—
206,941

Total

2013

9,088
—
9,088
(1,224)
7,864

35,386
200,000
235,386
(4,103)
231,283

As discussed further in “Notes to Consolidated Financial Statements – Note (9) 3.0% Convertible Senior Notes” included in “Part
II — Item 8. — Financial Statements and Supplementary Data,” on May 8, 2009, we issued $200.0 million of our 3.0% convertible
senior notes. Holders of the notes will have the right to require us to repurchase some or all of the outstanding notes, solely for
cash, on May 1, 2014, May 1, 2019 and May 1, 2024 and upon certain events, including a change in control. If not redeemed by
us or repaid pursuant to the holders’ right to require repurchase, the notes mature on May 1, 2029.

As discussed further in “Notes to Consolidated Financial Statements – Note (17) Stockholders’ Equity,” included in “Part II —
Item 8. — Financial Statements and Supplementary Data,” on September 26, 2012, our Board of Directors declared a cash dividend
of $0.275 per common share to be paid on November 20, 2012 to our shareholders of record at the close of business on October 19,
2012. Future dividends are subject to Board approval. No dividend amounts are included in the above table.

At July 31, 2012, we have approximately $1.5 million of standby letters of credit agreements outstanding under our Credit Facility
related to the guarantee of future performance on certain contracts and no commercial letters of credit outstanding. Such amounts
are not included in the above table.

In October 2010, we acquired the WAN optimization technology assets and assumed certain liabilities of Stampede for $5.3 million,
of which $1.7 million was paid as of July 31, 2012. The estimated fair value of the remaining contingent earn-out payments which
we expect to make through October 1, 2013, is $3.5 million. Such amounts are not included in the above table.

In the ordinary course of business we include indemnification provisions in certain of our customer contracts. Pursuant to these
agreements, we have agreed to indemnify, hold harmless and reimburse the indemnified party for losses suffered or incurred by
the indemnified party, including but not limited to losses related to third-party intellectual property claims. To date, there have not
been any material costs or expenses incurred in connection with such indemnification clauses. Our insurance policies may not
cover the cost of defending indemnification claims or providing indemnification. As a result if a claim were asserted against us
by any party that we have agreed to indemnify, we could incur future legal costs and damages.

We have change of control agreements and indemnification agreements with certain of our executive officers and certain key
employees. All of these agreements may require payments by us, in certain circumstances, including, but not limited to, a change
in control of our Company.

During fiscal 2012, pursuant to an indemnification agreement with our CEO (see Exhibit 10.1, "Form of Indemnification
Agreement" in our Current Report on Form 8-K filed with the Securities and Exchange Commission ("SEC") on March 8, 2007),
our Board of Directors agreed to pay, on behalf of our CEO, expenses incurred by him in connection with an investigation currently
being conducted by the SEC and an investigation by the United States Attorney for the Eastern District Court of New York, on
the condition that Mr. Kornberg repay such amounts to the extent that it is ultimately determined that he is not entitled to be
indemnified by us. To date, legal expenses paid on behalf of our CEO have been nominal; however we have incurred approximately
$1.0 million of expenses, in fiscal 2012, responding to the subpoenas. See “Notes to Consolidated Financial Statements - Note
(14)(b) Commitments and Contingencies - Legal Proceedings and Other Matters” included in “Part II - Item 8. - Financial
Statements and Supplementary Data.” Any amounts that may be advanced to our CEO in the future are not included in the above
table.

Our consolidated balance sheet at July 31, 2012 includes total liabilities of $2.6 million for uncertain tax positions, including
interest, all of which may result in cash payment. The future payments related to uncertain tax positions have not been presented
in the table above due to the uncertainty of the amounts and timing of cash settlement with the taxing authorities.

Recent Accounting Pronouncements

As further discussed in “Notes to Consolidated Financial Statements – Note (1)(o) Adoption of New Accounting Standards”
included in “Part II — Item 8. — Financial Statements and Supplementary Data,” during fiscal 2012, we adopted:

•

Financial Accounting Standards Board (“FASB”) Accounting Standards Updates (“ASU”) No. 2010-06, which amends
the disclosure requirements of FASB ASC 820-10, “Fair Value Measurements and Disclosures - Overall,” and requires
that information about purchases, sales, issuances and settlements be presented separately, on a gross basis, in Level 3
fair value measurement reconciliations.

FASB ASU No. 2010-20, which amends ASC 310, “Receivables” by requiring additional disclosures regarding troubled
debt restructurings and FASB ASU No. 2011-02, which amends previously issued guidance on evaluation of whether or
not a restructuring constitutes a troubled debt restructuring.

FASB ASU No. 2010-28, which amends the factors considered in determining if goodwill is impaired in FASB ASC 350,
“Intangibles - Goodwill and Other,” requires entities that have reporting units with carrying amounts that are zero or
negative to assess whether it is more likely than not that the reporting unit's goodwill is impaired and, if an impairment
is likely, to perform Step 2 of the goodwill impairment test for the reporting unit(s).

FASB ASU No. 2010-29, which amends the presentation and disclosure requirements of FASB ASC 805, “Business
Combinations,” and requires a public entity that presents comparative financial statements to disclose revenue and earnings
of the combined entity as though the business combination(s) that occurred during the current year had occurred as of
the beginning of the comparable prior annual reporting period only. This ASU also expands the supplemental proforma
disclosures required.

FASB ASU No. 2011-04, which amends the fair value measurement and disclosure requirements of FASB ASC 820,
“Fair Value Measurements,” clarifies, among other things, the intent of the application of existing fair value requirements,
including those related to highest and best use concepts, and also expands the disclosure requirements for fair value
measurements categorized within Level 3 of the fair value hierarchy.

FASB ASU No. 2011-05, which eliminates the option to present components of other comprehensive income as part of
the statement of changes in stockholders' equity and provides the ability to present the total of comprehensive income,
the components of net income and the components of other comprehensive income either in a single continuous statement
of comprehensive income, or in two separate but consecutive statements.

FASB ASU No. 2011-08, which provides, subject to certain conditions, an entity the option to first assess qualitative
factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount
as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in ASC
350, “Intangibles - Goodwill and Other.”

FASB ASU No. 2012-02, which provides, subject to certain conditions, an entity the option to first assess qualitative
factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for
determining whether it is necessary to perform the quantitative impairment test in accordance with ASC 350-30,
“Intangibles - Goodwill and Other - General Intangibles Other than Goodwill.”

The adoption of these accounting standards did not have any material impact on our consolidated statement of operations or
financial position.

In addition, the following FASB ASU has been issued and incorporated into the FASB ASC and is applicable to us:

•

FASB ASU No. 2011-11, issued in December 2011, which requires entities to disclose both gross and net information
about both instruments and transactions eligible for offset in the statement of financial position and instruments and
transactions subject to an agreement similar to a master netting agreement. The objective of this ASU is to facilitate
comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities
that prepare their financial statements on the basis of International Financial Reporting Standards (“IFRS”). This ASU
is effective in our third quarter of fiscal year 2013 and should be applied retrospectively for all comparable periods
presented. We currently do not have any master netting agreements and do not believe this ASU will have any impact on
our consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our earnings and cash flows are subject to fluctuations due to changes in interest rates primarily from our investment of available
cash balances. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate
changes.

As of July 31, 2012, we had unrestricted cash and cash equivalents of $367.9 million, which consisted of cash and highly-liquid
money market mutual funds, certificates of deposit, bank deposits and U.S. Treasury securities. Many of these investments are
subject to fluctuations in interest rates, which could impact our results. Based on our investment portfolio balance as of July 31,
2012, a hypothetical change in interest rates of 10% would have a $0.1 million impact on interest income over a one-year period.
Ultimately, the availability of our cash and cash equivalents is dependent on a well-functioning liquid market.

Our 3.0% convertible senior notes bear a fixed rate of interest. As such, our earnings and cash flows are not sensitive to changes
in interest rates on our long-term debt. As of July 31, 2012, we estimate the fair market value on our 3.0% convertible senior notes
to be $211.9 million based on quoted market prices in an active market.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reports of Independent Registered Public Accounting Firm, Consolidated Financial Statements, Notes to Consolidated Financial
Statements and Related Financial Schedule are listed in the Index to Consolidated Financial Statements and Schedule annexed
hereto.

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

None.

Evaluation of Disclosure Controls and Procedures

ITEM 9A. CONTROLS AND PROCEDURES

As of the end of the period covered by this Annual Report on Form 10-K, an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures was carried out by us under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period
covered by the report to provide reasonable assurance that the information required to be disclosed by us in reports filed under
the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms. A system of controls, no matter how well designed and operated, cannot provide absolute
assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within a company have been detected.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules
13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles. All internal control systems, no matter how
well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of July 31, 2012. In making this
assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)
in Internal Control – Integrated Framework. Based on our assessment, we determined that, as of July 31, 2012, our internal control
over financial reporting was effective based on those criteria.

KPMG LLP (“KPMG”), our independent registered public accounting firm, has performed an audit of our internal control over
financial reporting as of July 31, 2012 based on criteria established in Internal Control – Integrated Framework issued by the
COSO. This audit is required to be performed in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Our independent auditors were given unrestricted access to all financial records and related data. KPMG’s
audit reports appear on pages F-2 and F-3 of this annual report.

Changes In Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act that occurred during our fiscal quarter ended July 31, 2012, that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.

Not applicable.

ITEM 9B. OTHER INFORMATION

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Certain information concerning directors and officers is incorporated by reference to our Proxy Statement for the Annual Meeting
of Stockholders (the “Proxy Statement”) which will be filed with the Securities and Exchange Commission no more than 120 days
after the close of our fiscal year.

ITEM 11. EXECUTIVE COMPENSATION

Information regarding executive compensation is incorporated by reference to the Proxy Statement, which will be filed with the
Securities and Exchange Commission no more than 120 days after the close of our fiscal year.

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

Information regarding securities authorized for issuance under equity compensation plans and certain information regarding
security ownership of certain beneficial owners and management is incorporated by reference to the Proxy Statement, which will
be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year.

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

Information regarding certain relationships and related transactions is incorporated by reference to the Proxy Statement, which
will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Information regarding principal accountant fees and services is incorporated by reference to the Proxy Statement, which will be
filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)

(1) The Registrant’s financial statements together with a separate index are annexed hereto.

(2) The Financial Statement Schedule listed in a separate index is annexed hereto.

(3) Exhibits required by Item 601 of Regulation S-K are listed below.

Exhibit
Number
3(a)(i)

Description of Exhibit
Restated Certificate of Incorporation of the Registrant

3(a)(ii)

Second Amended and Restated By-Laws of the Registrant

Incorporated By
Reference to Exhibit
Exhibit 3(a)(i) to the Registrant’s 2006
Form 10-K

Exhibit 3(ii) to the Registrant’s Form 8-K
dated January 18, 2012

4(a)

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)*

Third Amended and Restated Employment Agreement dated
August 1, 2011, between the Registrant and Fred Kornberg

Exhibit 10(a) to the Registrant’s Form 8-K
filed August 2, 2011

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)*

2000 Stock Incentive Plan, Amended and Restated, Effective
September 21, 2011

Exhibit 10 to the Registrant’s Form 8-K
filed January 18, 2012

10(d)*

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(e)*

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(f)*

2001 Employee Stock Purchase Plan

Appendix B to the Registrant’s Proxy
Statement dated November 6, 2000

10(g)*

Lease agreement dated September 23, 2011 on the Melville, New
York Facility

Exhibit 10(s) to the Registrant's 2011 Form
10-K

10(h)*

Form of Indemnification Agreement between the Registrant and
the Named Executive Officers and Certain Other Executive
Officers

Exhibit 10.1 to Registrant’s Form 8-K filed
on March 8, 2007

10(i)

10(j)

Credit Facility, dated as of June 24, 2009, by and among
Comtech Telecommunications Corp. and Citibank, N.A., as
Administrative Agent and The Lenders Party Hereto+

Exhibit 10.2 to the Registrant's Form 10-Q
filed March 3, 2010

Amendment to Credit Facility, dated as of June 24, 2009, by and
among Comtech Telecommunications Corp. and Citibank, N.A.,
as Administrative Agent and The Lenders Party Hereto

Exhibit 10.1 to the Registrant’s Form 10-Q
filed June 3, 2010

Exhibit
Number
10(k)

10(l)

10(m)

10(n)

10(o)

Description of Exhibit
Second Amendment to Credit Facility, dated as of June 24, 2009
(as amended by the Amendment dated as of August 20, 2010),
by and among Comtech Telecommunications Corp. and
Citibank, N.A., as Administrative Agent and The Lenders Party
Hereto

Incorporated By
Reference to Exhibit
Exhibit 10.1 to the Registrant’s Form 8-K
filed August 23, 2010

Termination and Release Agreement, dated as of September 7,
2010, among Comtech Telecommunications Corp., Angels
Acquisition Corp., and CPI International, Inc.

Exhibit 10.1 to the Registrant’s Form 8-K
filed September 8, 2010

Third Amendment to Credit Facility, dated as of June 24, 2009
(as amended by the Amendment dated as of September 21,
2010), by and among Comtech Telecommunications Corp. and
Citibank, N.A., as Administrative Agent and The Lenders Party
Hereto

Fourth Amendment to Credit Facility, dated as of June 24, 2009
(as amended by the Amendment dated as of July 12, 2011), by
and among Comtech Telecommunications Corp. and Citibank,
N.A., as Administrative Agent and the Lenders Party Hereto

Exhibit 10(r) to the Registrant’s 2010 Form
10-K

Exhibit 10.1 to the Registrant’s Form 8-K
filed July 12, 2011

Fifth Amendment to Credit Facility, dated as of June 24, 2009 (as
amended by the Amendment dated as of October 31, 2011), by
and among Comtech Telecommunications Corp. and Citibank,
N.A., as Administrative Agent and the Lenders Party Hereto

Exhibit 10.1 to the Registrant's Form 8-K
filed November 4, 2011

10(p)*

Form of Stock Unit Agreement for Non-employee Directors
pursuant to the 2000 Stock Incentive Plan

Exhibit 10.1 to the Registrant's Form 10-Q
filed June 6, 2012

10(q)*

Form of Restricted Stock Unit Agreement for Non-employee
Directors pursuant to the 2000 Stock Incentive Plan

Exhibit 10.2 to the Registrant's Form 10-Q
filed June 6, 2012

10(r)

Blue Force Tracking System Contract between Comtech Mobile
Datacom Corporation and the U.S. Army CECOM dated March
29, 2012+

Exhibit 10.3 to the Registrant's Form 10-Q
filed June 6, 2012

10(s)*

Form of Performance Shares Agreement pursuant to the 2000
Stock Incentive Plan

10(t)

31.1

31.2

32.1

Sixth Amendment to Credit Facility, dated as of June 24, 2009 (as
amended by the Amendment dated as of June 6, 2012), by and
among Comtech Telecommunications Corp. and Citibank, N.A.,
as Administrative Agent and the Lenders Party Hereto+

Subsidiaries of the Registrant

Consent of Independent Registered Public Accounting Firm

Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002

Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002

Certification of Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002

Exhibit
Number
32.2

Description of Exhibit
Certification of Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002

Incorporated By
Reference to Exhibit

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB XBRL Taxonomy Extension Labels Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

* Management contract or compensatory plan or arrangement.

+Certain portions of this agreement have been omitted and filed separately with the Securities and Exchange Commission pursuant
to a request for confidential treatment.

Exhibits to this Annual Report on Form 10-K are available from the Company upon request and payment to the Company for the
cost of reproduction. The information is also available on our Internet website at www.comtechtel.com.

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

SIGNATURES

September 26, 2012
(Date)

COMTECH TELECOMMUNICATIONS CORP.

By: /s/Fred Kornberg
Fred Kornberg, Chairman of the Board
and Chief Executive Officer

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

Signature

Title

September 26, 2012
(Date)

/s/Fred Kornberg
Fred Kornberg

Chairman of the Board
Chief Executive Officer and President
(Principal Executive Officer)

September 26, 2012
(Date)

/s/Michael D. Porcelain
Michael D. Porcelain

Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)

September 26, 2012
(Date)

/s/Richard L. Goldberg
Richard L. Goldberg

Director

September 26, 2012
(Date)

/s/Edwin Kantor
Edwin Kantor

September 26, 2012
(Date)

/s/Ira Kaplan
Ira Kaplan

September 26, 2012
(Date)

/s/Robert G. Paul
Robert G. Paul

September 26, 2012
(Date)

/s/Stanton Sloane
Stanton Sloane

Director

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

Index to Consolidated Financial Statements and Schedule

Reports of Independent Registered Public Accounting Firm

Consolidated Financial Statements:

Balance Sheets as of July 31, 2012 and 2011

Statements of Operations for each of the years in the three-year period ended July 31,
2012

Statements of Stockholders' Equity for each of the years in the three-year period ended
July 31, 2012

Statements of Cash Flows for each of the years in the three-year period ended July 31,
2012

Notes to Consolidated Financial Statements

Additional Financial Information Pursuant to the Requirements of Form 10-K:

Schedule II – Valuation and Qualifying Accounts and Reserves

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.

Page
F- 2

F- 4

F- 5

F- 6

F- 7

F- 9

S- 1

F- 1

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Consolidated Balance Sheets
As of July 31, 2012 and 2011

Assets

2012

2011

Current assets:

Cash and cash equivalents

Accounts receivable, net

Inventories, net

Prepaid expenses and other current assets

Deferred tax asset, net

Total current assets

Property, plant and equipment, net

Goodwill

Intangibles with finite lives, net

Deferred tax asset, net, non-current

Deferred financing costs, net

Other assets, net

Total assets

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

Accrued expenses and other current liabilities

Dividends payable

Customer advances and deposits

Interest payable

Income taxes payable

Total current liabilities

Convertible senior notes

Other liabilities

Income taxes payable

Deferred tax liability

Total liabilities
Commitments and contingencies (See Note 14)

Stockholders’ equity:

$ 367,894,000

558,804,000

56,242,000

72,361,000

8,196,000

12,183,000

70,801,000

74,661,000

7,270,000

11,529,000

516,876,000

723,065,000

22,832,000

26,638,000

137,354,000

38,833,000

45,470,000

438,000

2,487,000

958,000

—

3,823,000

1,159,000

$ 719,778,000

937,509,000

20,967,000

40,870,000

4,773,000

14,516,000

1,529,000

—

23,501,000

49,858,000

6,100,000

11,011,000

1,531,000

4,056,000

82,655,000

96,057,000

200,000,000

5,098,000

2,624,000

—

6,360,000

3,811,000

2,101,000

290,377,000

308,329,000

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
28,931,679 shares and 28,731,265 shares at July 31, 2012 and 2011, respectively

Additional paid-in capital

Retained earnings

Less:

Treasury stock, at cost (shares 11,564,059 and 4,508,445 shares at July 31, 2012

and 2011, respectively)

Total stockholders’ equity

Total liabilities and stockholders’ equity

2,893,000

2,873,000

361,458,000

355,001,000

404,227,000

393,109,000

768,578,000

750,983,000

(339,177,000)
429,401,000

(121,803,000)
629,180,000

$ 719,778,000

937,509,000

See accompanying notes to consolidated financial statements.
F- 4

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations
Fiscal Years Ended July 31, 2012, 2011 and 2010

Net sales

Cost of sales

Gross profit

Expenses:

Selling, general and administrative

Research and development

Amortization of intangibles

Impairment of goodwill

Merger termination fee, net

2012

2011

2010

$ 425,070,000

612,379,000

778,205,000

241,561,000

371,333,000

507,607,000

183,509,000

241,046,000

270,598,000

87,106,000

38,489,000

6,637,000

—

132,232,000

94,141,000

43,516,000

8,091,000

—
(12,500,000)
133,248,000

99,883,000

46,192,000

7,294,000

13,249,000

—

166,618,000

Operating income

51,277,000

107,798,000

103,980,000

Other expenses (income):

Interest expense

Interest income and other

8,832,000
(1,595,000)

8,415,000
(2,421,000)

7,888,000
(1,210,000)

Income before provision for income taxes

Provision for income taxes

44,040,000

11,624,000

101,804,000

33,909,000

97,302,000

36,672,000

Net income

Net income per share (See Note 1(i)):

Basic

Diluted

32,416,000

67,895,000

60,630,000

1.62

1.42

2.53

2.22

2.14

1.91

Weighted average number of common shares outstanding – basic

19,995,000

26,842,000

28,270,000

Weighted average number of common and common equivalent

shares outstanding – diluted

25,991,000

32,623,000

34,074,000

Dividends declared per issued and outstanding common share as

of the applicable dividend record date

1.10

1.00

—

See accompanying notes to consolidated financial statements.

F- 5

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-
F

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Fiscal Years Ended July 31, 2012, 2011 and 2010

Cash flows from operating activities:

Net income

Adjustments to reconcile net income to net cash provided by operating

activities:

2012

2011

2010

32,416,000

67,895,000

60,630,000

Depreciation and amortization of property, plant and equipment

10,205,000

14,253,000

11,773,000

Amortization of intangible assets with finite lives

Amortization of stock-based compensation

Impairment of goodwill

Deferred financing costs

Change in fair value of contingent earn-out liability

Loss on disposal of property, plant and equipment

Provision for allowance for doubtful accounts

Provision for excess and obsolete inventory

Excess income tax benefit from stock-based award exercises

Deferred income tax (benefit) expense

Changes in assets and liabilities, net of effects of acquisitions and sale

of certain assets and liabilities:

Accounts receivable

Inventories

Prepaid expenses and other current assets

Other assets

Accounts payable

Accrued expenses and other current liabilities

Customer advances and deposits

Other liabilities

Interest payable

Income taxes payable

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of property, plant and equipment

Purchases of other intangibles with finite lives

Proceeds from sale of certain assets and liabilities

Payments for business acquisitions

Net cash used in investing activities

Cash flows from financing activities:

Repurchases of common stock

Cash dividends paid

Proceeds from exercises of stock options

Proceeds from issuance of employee stock purchase plan shares

Excess income tax benefit from stock-based award exercises

Payment of contingent consideration related to business acquisition

F- 7

6,637,000

3,572,000

—

1,652,000

(918,000)

14,000

458,000

3,862,000

(231,000)

(4,570,000)

14,101,000

(4,407,000)

1,427,000

201,000

(2,534,000)

(5,221,000)

3,505,000

877,000

(2,000)

(7,551,000)

53,493,000

8,091,000

5,357,000

—

1,391,000

—

7,000

244,000

4,091,000

(225,000)

761,000

64,795,000

(5,224,000)

1,606,000

737,000

(54,343,000)

(4,866,000)

(1,927,000)

789,000

—

(6,072,000)

97,360,000

7,294,000

8,716,000

13,249,000

1,386,000

—

116,000

219,000

7,744,000

(250,000)

(7,311,000)

(56,582,000)

12,015,000

4,789,000

(1,340,000)

58,611,000

484,000

(6,684,000)

235,000

113,000

9,313,000

124,520,000

(6,413,000)

(7,138,000)

—

(50,000)

—

(2,850,000)

(7,402,000)

(113,000)

2,038,000

—

(6,413,000)

(10,038,000)

(5,477,000)

(219,375,000)

(119,617,000)

(22,625,000)

(20,135,000)

3,202,000

1,088,000

231,000

(195,000)

2,838,000

1,140,000

225,000

(24,000)

—

1,671,000

1,306,000

250,000

—

(Continued)

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
Fiscal Years Ended July 31, 2012, 2011 and 2010

Fees related to line of credit

Transaction costs related to issuance of convertible senior notes

(316,000)

(539,000)

—

Net cash (used in) provided by financing activities

(237,990,000)

(136,112,000)

(8,000)

(118,000)

3,101,000

2012

2011

2010

Net (decrease) increase in cash and cash equivalents

(190,910,000)

(48,790,000)

122,144,000

Cash and cash equivalents at beginning of period

558,804,000

607,594,000

485,450,000

Cash and cash equivalents at end of period

367,894,000

558,804,000

607,594,000

Supplemental cash flow disclosure

Cash paid during the period for:

Interest

Income taxes

Non-cash investing and financing activities:

Business acquisition liabilities (See Note 2)

Cash dividends declared

Accrued repurchases of common stock

6,509,000

6,407,000

6,219,000

23,746,000

39,498,000

35,107,000

—

4,170,000

1,350,000

4,773,000

6,100,000

—

2,001,000

—

See accompanying notes to consolidated financial statements.

F- 8

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting and Reporting Policies

(a) Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Comtech Telecommunications Corp. and
its subsidiaries (“Comtech,” “we,” “us,” or “our”), all of which are wholly-owned. All significant intercompany balances
and transactions have been eliminated in consolidation.

(b) Nature of Business

We design, develop, produce and market innovative products, systems and services for advanced communications
solutions.

Our business is highly competitive and characterized by rapid technological change. Our growth and financial position
depends, among other things, on our ability to keep pace with such changes and developments and to respond to the
sophisticated requirements of an increasing variety of electronic equipment users. Many of our competitors are
substantially larger, and have significantly greater financial, marketing and operating resources and broader product lines
than us. A significant technological breakthrough by others, including smaller competitors or new companies, could have
a material adverse effect on our business. In addition, certain of our customers have technological capabilities in our
product areas and could choose to replace our products with their own.

International sales expose us to certain risks, including barriers to trade, fluctuations in foreign currency exchange rates
(which may make our products less price competitive), political and economic instability, availability of suitable export
financing, export license requirements, tariff regulations, and other United States (“U.S.”) and foreign regulations that
may apply to the export of our products, as well as the generally greater difficulties of doing business abroad. We attempt
to reduce the risk of doing business in foreign countries by seeking contracts denominated in U.S. dollars, advance or
milestone payments, credit insurance and irrevocable letters of credit in our favor.

The vast majority of sales in our mobile data communications segment have historically come from sales relating to the
U.S. Army's MTS and BFT-1 programs. Our combined MTS and BFT-1 sales for fiscal 2010 through fiscal 2012 were
as follows:

2012

2011

2010

Net Sales

87,769,000

248,578,000

423,213,000

Percentage of
Mobile Data
Communications
Segment Net Sales

Percentage of
Consolidated
Net Sales

78.0%

86.2%

94.8%

20.6%

40.6%

54.4%

We are currently providing both MTS and BFT-1 sustainment services pursuant to a three-year IDIQ contract that we
were awarded in March 2012. This three-year contract has a not-to-exceed value of $80,731,000 and a base performance
period that began April 1, 2012 and ends March 31, 2013. The contract provides for two twelve-month option periods
exercisable by the U.S. Army and, except for a fixed annual intellectual property license ("IP license") fee of $10,000,000,
the three-year $80,731,000 contract value is subject to finalization and downward negotiation. Payments of annual IP
license fees beyond the base year are contingent upon the U.S. Army's exercise of optional performance periods.

F- 9

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

Revenue is generally recognized when the earnings process is complete, upon shipment or customer acceptance. Revenue
from contracts relating to the design, development or manufacture of complex electronic equipment to a buyer’s
specification or to provide services relating to the performance of such contracts is generally recognized in accordance
with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 605-35 “Revenue
Recognition — Construction-Type and Production-Type Contracts” (“ASC 605-35”). We primarily apply the percentage-
of-completion method and generally recognize revenue based on the relationship of total costs incurred to total projected
costs, or, alternatively, based on output measures, such as units delivered or produced. In the case of our mobile data
communications segment’s MTS and BFT-1 contracts with the U.S. Army, we utilize the percentage-of-completion
method. Profits expected to be realized on such contracts are based on total estimated sales for the contract compared to
total estimated costs, including warranty costs, at completion of the contract. These estimates are reviewed and revised
periodically throughout the lives of the contracts, and adjustments to profits resulting from such revisions are made
cumulative to the date of the change. Provision for anticipated losses on uncompleted contracts is made in the period in
which such losses become evident. Long-term, U.S. government, cost-reimbursable type contracts are also specifically
covered by FASB ASC 605-35.

We have historically demonstrated an ability to estimate contract revenues and expenses in applying the percentage-of-
completion method of accounting. However, there exist inherent risks and uncertainties in estimating future revenues and
expenses, particularly on larger or longer-term contracts. Changes to such estimates could have a material effect on our
consolidated financial condition and results of operations.

Revenue recognized in excess of amounts billable under long-term contracts accounted for under the percentage-of-
completion method are recorded as unbilled receivables in the accompanying consolidated balance sheets. Unbilled
receivables are billable upon various events, including the attainment of performance milestones, delivery of hardware,
submission of progress bills based on time and materials, or completion of the contract. We do not recognize revenue, or
record unbilled receivables, until we receive fully funded orders.

In fiscal 2012, 86.2% of our consolidated U.S. government net sales were derived from firm fixed-price contracts. Under
these types of contracts, we perform for an agreed-upon price and derive benefits from cost savings, but bear the risk of
cost overruns. Our cost-plus-fixed-fee contracts, which to date have not been significant, typically provide for
reimbursement of allowable costs incurred plus a negotiated fee.

Most government contracts have termination for convenience clauses that provide the customer with the right to terminate
the contract at any time. Historically, we have not experienced material contract terminations or write-offs of unbilled
receivables. We address customer acceptance provisions in assessing our ability to perform our contractual obligations
under long-term contracts. Historically, we have been able to perform on our long-term contracts.

Revenues from contracts that contain multiple elements that are not accounted for under the percentage-of-completion
method are accounted for in accordance with FASB ASC 605-25 “Revenue Recognition — Multiple Element
Arrangements,” as amended by FASB Accounting Standards Update (“ASU”) No. 2009-13, which, among other things,
requires revenue to be allocated to each element based on the relative selling price method.

(d) Cash and Cash Equivalents

Our cash equivalents are short-term, highly liquid investments that are both readily convertible to known amounts of cash
and have insignificant risk of change in value as a result of changes in interest rates. Our cash and cash equivalents, as
of July 31, 2012 and 2011, amounted to $367,894,000 and $558,804,000, respectively, and primarily consist of money
market mutual funds (both government and commercial), certificates of deposit, bank deposits and U.S. Treasury securities
(with maturities at the time of purchase of three months or less). Many of our money market mutual funds invest in direct
obligations of the U.S. government, bank securities guaranteed by the Federal Deposit Insurance Corporation, certificates
of deposits and commercial paper and other securities issued by other companies. None of our cash equivalents include
municipal auction-rate securities. Cash equivalents are carried at cost, which approximates fair market value.

F- 10

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(e) Inventories

Work-in-process inventory reflects all accumulated production costs, which are comprised of direct production costs and
overhead, and is reduced by amounts recorded in cost of sales as the related revenue is recognized. These inventories are
reduced to their estimated net realizable value by a charge to cost of sales in the period such excess costs are determined.
Indirect costs relating to long-term contracts, which include expenses such as general and administrative, are charged to
expense as incurred and are not included in our work-in-process (including our contracts-in-progress) inventory or cost
of sales.

Raw materials and components and finished goods inventory are stated at the lower of cost or market, computed on the
first-in, first-out (“FIFO”) method.

(f) Long-Lived Assets

Our machinery and equipment, which are recorded at cost, are depreciated or amortized over their estimated useful lives
(three to eight years) under the straight-line method. Capitalized values of properties and leasehold improvements under
leases are amortized over the life of the lease or the estimated life of the asset, whichever is less.

Goodwill represents the excess cost of a business acquisition over the fair value of the net assets acquired. In accordance
with the FASB ASC 350, “Intangibles – Goodwill and Other,” goodwill is not amortized. We periodically, at least on an
annual basis in the first quarter of each fiscal year, review goodwill, considering factors such as projected cash flows and
revenue and earnings multiples, to determine whether the carrying value of the goodwill is impaired. If the goodwill is
deemed to be impaired, the difference between the carrying amount reflected in the financial statements and the estimated
fair value is recognized as an expense in the period in which the impairment occurs. We define our reporting units to be
the same as our operating segments.

We assess the recoverability of the carrying value of our other long-lived assets, including identifiable intangible assets
with finite useful lives, whenever events or changes in circumstances indicate that the carrying amount of the assets may
not be recoverable. We evaluate the recoverability of such assets based upon the expectations of undiscounted cash flows
from such assets. If the sum of the expected future undiscounted cash flows were less than the carrying amount of the
asset, a loss would be recognized for the difference between the fair value and the carrying amount.

We performed our annual impairment testing for fiscal 2013 on August 1, 2012 (the start of our first quarter of fiscal
2013) and we determined that there was no impairment of goodwill. Unless there are future indicators of impairment,
such as a significant adverse change in our future financial performance, our next impairment review for goodwill will
be performed and completed in the first quarter of fiscal 2013. Any impairment charges that we may take in the future
could be material to our results of operations and financial condition.

We performed our annual impairment testing for fiscal 2012 on August 1, 2011 (the start of our first quarter of fiscal
2012) and we determined that there was no impairment of goodwill.

During the fourth quarter of fiscal 2010, we were advised by the U.S. Army that we were not selected as the vendor and
program manager for the BFT-2 program. As a result, we experienced a significant and sustained decline in our stock
price and we determined that it was appropriate to conduct an interim impairment test for all three of our reporting units.
Based on our interim goodwill impairment review, we determined that, as of July 31, 2010, the carrying value of our
goodwill in our mobile data communications reporting unit was fully impaired. Accordingly, we recorded a goodwill
impairment charge of $13,249,000 for the fiscal year ended July 31, 2010.

(g) Research and Development Costs

We charge research and development costs to operations as incurred, except in those cases in which such costs are
reimbursable under customer funded contracts. In fiscal 2012, 2011 and 2010, we were reimbursed by customers for such
activities in the amount of $5,665,000, $10,703,000 and $12,611,000, respectively.

F- 11

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(h) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment date.

We determine the uncertain tax positions taken or expected to be taken in income tax returns in accordance with the
provisions of FASB ASC 740-10-25, which prescribes a two-step evaluation process for tax positions. The first step is
recognition based on a determination of whether it is more-likely-than-not that a tax position will be sustained upon
examination, including resolution of any related appeals or litigation processes, based on the technical merits of the
position. The second step is to measure a tax position that meets the more-likely-than-not threshold. The tax position is
measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. If a
tax position does not meet the more-likely-than-not recognition threshold, the benefit of that position is not recognized
in the financial statements. Our policy is to recognize interest and penalties related to uncertain tax positions in income
tax expense.

(i) Earnings Per Share

Our basic earnings per share (“EPS”) is computed based on the weighted average number of shares, including fully-
vested stock units, outstanding during each respective period. Our diluted EPS reflects the dilution from potential common
stock issuable pursuant to the exercise of equity-classified stock-based awards and convertible senior notes, if dilutive,
outstanding during each respective period. When calculating our diluted earnings per share, we consider (i) the amount
an employee must pay upon assumed exercise of stock-based awards; (ii) the amount of stock-based compensation cost
attributed to future services and not yet recognized; and (iii) the amount of excess tax benefits, if any, that would be
credited to additional paid-in capital assuming exercise of in-the-money stock-based awards. This excess tax benefit is
the amount resulting from a tax deduction for compensation in excess of compensation expense, based on the Black
Scholes option pricing model, recognized for financial reporting purposes.

Equity-classified stock-based awards to purchase 2,169,000, 2,486,000 and 2,148,000 shares for fiscal 2012, 2011 and
2010, respectively, were not included in our diluted 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 addition, the weighted-average basic and diluted shares outstanding for the fiscal years ended July 31, 2012 and 2011
reflect a reduction of approximately 4,350,000 and 1,781,000 shares as a result of the repurchase of our common shares
during the respective periods. See Note (17) – “Stockholders’ Equity” for more information on the stock repurchase
program.

F- 12

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

Fiscal Years Ended July 31,

2012

2011

2010

Numerator:

Net income for basic calculation

$ 32,416,000

67,895,000

60,630,000

Effect of dilutive securities:

Interest expense (net of tax) on 3.0%
convertible senior notes

4,468,000

Numerator for diluted calculation

36,884,000

72,363,000

65,098,000

Denominator:

Denominator for basic calculation

19,995,000

26,842,000

28,270,000

Effect of dilutive securities:

Stock options

Conversion of 3.0% convertible senior notes

228,000

5,768,000

215,000

5,566,000

316,000

5,488,000

Denominator for diluted calculation

25,991,000

32,623,000

34,074,000

(j) Accounting for Stock-Based Compensation

We issue stock-based awards to certain of our employees and our Board of Directors and we recognize related stock-
based compensation for both equity and liability-classified stock-based awards in our consolidated financial statements.
These awards are issued pursuant to our 2000 Stock Incentive Plan and our 2001 Employee Stock Purchase Plan (the
“ESPP”).

Stock-based compensation for equity-classified awards is measured at the date of grant, based on an estimate of the fair
value of the award and is generally expensed over the vesting period of the grant. Stock-based compensation for liability-
classified awards is determined the same way, except that 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.

Stock-based compensation for awards issued is reflected in the following line items in our Consolidated Statements of
Operations:

Fiscal Years Ended July 31,

Cost of sales

Selling, general and administrative expenses

Research and development expenses

Stock-based compensation expense
before income tax benefit

Income tax benefit

Net stock-based compensation expense

2012

284,000

2,716,000

572,000

3,572,000
(1,308,000)
2,264,000

2011

410,000

3,976,000

971,000

5,357,000
(1,913,000)
3,444,000

2010

828,000

6,317,000

1,571,000

8,716,000
(3,201,000)
5,515,000

Of the total stock-based compensation expense before income tax benefit recognized in fiscal 2012, 2011 and 2010,
$232,000, $270,000 and $307,000, respectively, related to stock-based awards issued pursuant to our ESPP.

F- 13

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

Included in total stock-based compensation expense before income tax benefit in fiscal 2012, 2011 and 2010 is a benefit
of $16,000, $52,000 and $41,000, respectively, as a result of the required fair value re-measurement of our liability-
classified stock appreciation rights (“SARs”) at the end of each of the respective reporting periods.

Stock-based compensation that was capitalized and included in ending inventory at July 31, 2012, 2011 and 2010 was
$48,000, $117,000 and $159,000, respectively.

Included in total stock-based compensation expense before income tax benefit for fiscal 2010, was an expense of
approximately $1,396,000 which represents the estimated fair value of an increase in the respective contractual terms of
601,875 previously granted stock-based awards for seventy-eight employees. These stock-based awards were fully vested
and their respective contractual lives were nearing expiration. In determining the fair value of the increase in contractual
terms, we utilized the following weighted average assumptions: (i) expected life in years of 1.59; (ii) expected volatility
of 40.98%; (iii) risk free interest rate of 0.47%; and (iv) expected dividend yield of 0%. There was no material expense
relating to modifications recorded in fiscal 2012 or fiscal 2011.

We estimate the fair value of certain 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 our best estimates,
but involve uncertainties relating to market and other conditions, many of which are outside of our control. Estimates of
fair value are not intended to predict actual future events or the value ultimately realized by the employees who receive
stock-based awards.

The per share weighted average grant-date fair value of stock options granted during fiscal 2012, 2011 and 2010 was
$6.53, $6.51 and $10.47, respectively. In addition to the exercise and grant-date prices of these awards, we utilized certain
weighted average assumptions to estimate the initial fair value of stock-based awards.

Weighted average assumptions related to our stock options are listed in the table below:

Fiscal Years Ended July 31,
2011

2010

2012

Expected dividend yield
Expected volatility
Risk-free interest rate
Expected life (years)

3.76%
36.63%
0.64%
5.29

3.62%
36.31%
1.58%
5.10

0.00%
38.00%
1.99%
5.01

The expected dividend yield is the expected annual dividend as a percentage of the fair market value of the stock on the
date of grant. For the stock options granted during fiscal 2012 and 2011, the expected dividend yield was equal to our
targeted annual dividend of $1.10 per share and $1.00 per share, respectively, divided by the quoted market price of our
common stock on the date of the grant. We estimate expected volatility by considering the historical volatility of our
stock, the implied volatility of publicly traded call options on our stock, the implied volatility of call options embedded
in our 3.0% convertible senior notes and our expectations of volatility for the expected life of stock options. The risk-
free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for an instrument which closely
approximates the expected option term. The expected option term is the number of years we estimate that stock options
will be outstanding prior to exercise. The expected life of awards issued is determined by employee groups with sufficiently
distinct behavior patterns.

Stock options and SARs granted have exercise prices equal to the fair market value of the stock on the date of grant, a
contractual term of five or ten years and a vesting period of three or five years. We settle employee stock option exercises
with new shares. All SARs granted through July 31, 2012 may only be settled with cash. Included in accrued expenses
at July 31, 2012, 2011 and 2010 is $6,000, $22,000 and $74,000, respectively, relating to the potential cash settlement
of SARs.

Stock units granted are fully-vested on the date of grant and are convertible into shares of our common stock on a one-
for-one basis for no cash consideration, generally at the time of termination or earlier, under certain specific circumstances.

F- 14

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

During fiscal 2012, 410 fully-vested stock units were granted with a weighted average grant-date market value of $30.48
per share. Included in total stock-based compensation expense before income tax benefit for the fiscal year ended July 31,
2012 is an expense of $12,000 related to these stock units. There were no stock units granted or related stock-based
compensation expense recognized in fiscal 2011 and 2010. We expect to settle stock units with new shares.

Restricted Stock Units ("RSUs") granted are subject to certain terms, have a vesting period of three years, and are
convertible into shares of our common stock on a one-for-one basis for no cash consideration, generally at the time of
termination or earlier, under certain specific circumstances. During fiscal 2012, 12,668 RSUs were granted with a vesting
period of three years. The fair value of the awards was $26.23 per share, based on the closing market price of our common
stock on the date of grant, net of the present value of the dividends using the applicable risk-free interest rate, as these
RSUs are not entitled to dividend equivalents while unvested and unissued. Included in total stock-based compensation
expense before income tax benefit for the fiscal year ended July 31, 2012 is an expense of $13,000 related to these RSUs.
There were no RSUs granted or related stock-based compensation expense recognized in fiscal 2011 and 2010. We expect
to settle RSUs with new shares.

Performance shares granted are subject to certain terms and restrictions and vest following the achievement of requisite
pre-established performance goals. During fiscal 2012, 35,003 performance shares were granted. The fair value of these
awards was $26.25 per share, based on the closing market price of our common stock on the date of grant, net of the
present value of the dividends using the applicable risk-free interest rate, as these performance shares are not entitled to
dividend equivalents while unvested and unissued. Once the performance goals are attained, these awards will vest over
a 5.3 year period beginning on the date of grant and each of these awards will be convertible into shares of our common
stock on a one-for-one basis at the end of each vesting tranche for no cash consideration. As of July 31, 2012, we expect
that the performance goal relating to awards granted in fiscal 2012 will be attained. As a result, we recorded a compensation
expense of $52,000 related to performance shares, which is included in total stock-based compensation expense before
income tax benefit for the fiscal year ended July 31, 2012. There were no performance shares issued or related stock-
based compensation expense recognized in fiscal 2011 and 2010.

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

Fiscal Years Ended July 31,

2012

2011

2010

Actual income tax benefit recorded for the tax deductions

relating to the exercise of stock-based awards

$ 438,000

306,000

484,000

Less: Tax benefit initially recognized on exercised stock-
based awards vesting subsequent to the adoption of
accounting standards that require us to expense stock-
based awards, excluding income tax shortfalls

Excess income tax benefit recorded as an increase to

additional paid-in capital

Less: Tax benefit initially disclosed but not previously
recognized on exercised equity-classified stock-based
awards vesting prior to the adoption of accounting
standards that require us to expense stock-based awards

Excess income tax benefit from exercised equity-classified
stock-based awards reported as a cash flow from
financing activities in our Consolidated Statements of
Cash Flows

(197,000)

(81,000)

(227,000)

241,000

225,000

257,000

(10,000)

—

(7,000)

$ 231,000

225,000

250,000

At July 31, 2012, total remaining unrecognized compensation cost related to unvested stock-based awards was $9,200,000,
net of estimated forfeitures of $700,000. The net cost is expected to be recognized over a weighted average period of 3.8
years.

F- 15

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

As of July 31, 2012 and 2011, the amount of hypothetical tax benefits related to stock-based awards was $22,786,000
and $24,118,000, respectively. During fiscal 2012 and 2011, we recorded $1,377,000 and $1,785,000, respectively, as a
reduction to additional paid-in capital, which represented the reversal of unrealized deferred tax assets associated with
certain vested equity-classified stock-based awards that expired during the period. There was no such reduction to
additional paid-in capital or similar reversal of unrealized deferred tax assets during fiscal 2010.

(k) Fair Value Measurements and Financial Instruments

In accordance with FASB ASC 825, “Financial Instruments,” we determined that, as of July 31, 2012 and 2011, the fair
value of our 3.0% convertible senior notes was approximately $211,920,000 and $207,680,000, respectively, based on
quoted market prices in an active market. Our 3.0% convertible senior notes are not marked-to-market and are shown on
the accompanying balance sheet at their original issuance value. As such, changes in the estimated fair value of our 3.0%
convertible senior notes are not recorded in our consolidated financial statements.

As of July 31, 2012 and 2011, we had approximately $84,610,000 and $152,878,000, respectively, of money market
mutual funds which are classified as cash and cash equivalents in our Consolidated Balance Sheets. These money market
mutual funds are recorded at their current fair value. FASB ASC 820, “Fair Value Measurements and Disclosures,” requires
us to define fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. As such, using the fair value hierarchy described
in FASB ASC 820, we valued our money market mutual funds using Level 1 inputs that were based on quoted market
prices.

At July 31, 2012, we had a contingent earn-out liability relating to our acquisition of Stampede Technologies, Inc.
(“Stampede”) (See Note 2 - "Acquisitions") that is recorded at current fair value using Level 3 inputs, primarily
management's estimates of future sales and cash flows relating to the earn-out, which also incorporated market participant
expectations.

As of July 31, 2012 and 2011, other than our cash and cash equivalents and our contingent earn-out liability, we had no
other assets or liabilities included in our Consolidated Balance Sheets recorded at current fair value. If we acquire different
types of assets or incur different types of liabilities in the future, we might be required to use different FASB ASC fair
value methodologies.

(l) Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the reported 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. We make significant estimates in many areas of our
accounting, including but not limited to the following: long-term contracts, stock-based compensation, intangible assets
including goodwill, provision for excess and obsolete inventory, allowance for doubtful accounts, warranty obligations
and income taxes. Actual results may differ from those estimates.

(m) Comprehensive Income

In accordance with FASB ASC 220, “Comprehensive Income,” we report all changes in equity during a period, except
those resulting from investment by owners and distribution to owners, for the period in which they are recognized.
Comprehensive income is the total of net income and all other non-owner changes in equity (or other comprehensive
income) such as unrealized gains/losses on securities classified as available-for-sale, foreign currency translation
adjustments and minimum pension liability adjustments. Comprehensive income was the same as net income in fiscal
2012, 2011 and 2010.

(n) Reclassifications

Certain reclassifications have been made to previously reported consolidated financial statements to conform to the fiscal
2012 presentation.

F- 16

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(o) Adoption of New Accounting Standards

The Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) is subject to updates
by FASB, which are known as Accounting Standards Updates (“ASU”). The following are FASB ASUs which have been
issued and incorporated into the FASB ASC and were adopted by us in fiscal 2012:

FASB ASU No. 2010-06, which amends the disclosure requirements of FASB ASC 820-10, “Fair Value Measurements
and Disclosures - Overall.” This FASB ASU requires that information about purchases, sales, issuances and settlements
be presented separately, on a gross basis, in Level 3 fair value measurement reconciliations. Our adoption of this ASU
did not have any impact on our consolidated financial statements, other than disclosure relating to the valuation techniques
and inputs used to develop fair value measurements of certain assets and liabilities that are recorded in our Consolidated
Balance Sheets at fair value.

FASB ASU No. 2010-28, which amends the factors considered in determining if goodwill is impaired in FASB ASC 350,
“Intangibles - Goodwill and Other.” This ASU requires entities that have reporting units with carrying amounts that are
zero or negative to assess whether it is more likely than not that the reporting unit's goodwill is impaired and, if an
impairment is likely, to perform Step 2 of the goodwill impairment test for the reporting unit(s). On August 1, 2011, the
date we performed our annual goodwill impairment test for fiscal 2012, none of our reporting units with goodwill had a
zero or negative carrying value and, as such, our adoption of this ASU did not have any impact on our consolidated
financial statements.

FASB ASU No. 2010-29, which amends the presentation and disclosure requirements of FASB ASC 805, “Business
Combinations.” This ASU requires a public entity that presents comparative financial statements to disclose revenue and
earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred
as of the beginning of the comparable prior annual reporting period only. This ASU also expands the supplemental
proforma disclosures required. Our adoption of this ASU did not have any impact on our consolidated financial statements,
as we did not acquire any businesses during the twelve months ended July 31, 2012.

FASB ASU No. 2010-20, which amends ASC 310, “Receivables” by requiring additional disclosures regarding troubled
debt restructuring. In addition, we also adopted FASB ASU No. 2011-02, which amends the previously issued guidance
on evaluation of whether or not a restructuring constitutes a troubled debt restructuring. Our adoption of these ASUs did
not have any impact on our consolidated financial statements given that substantially all of our receivables are classified
as trade receivables.

FASB ASU No. 2011-04, which amends the fair value measurement and disclosure requirements of FASB ASC 820,
“Fair Value Measurements.” This ASU clarifies, among other things, the intent of the application of existing fair value
requirements, including those related to highest and best use concepts, and also expands the disclosure requirements for
fair value measurements categorized within Level 3 of the fair value hierarchy. Our adoption of this FASB ASU did not
have any impact on our consolidated financial statements.

FASB ASU No. 2011-05, which eliminates the option to present components of other comprehensive income as part of
the statement of changes in stockholders' equity. In addition, this ASU provides the ability to present the total of
comprehensive income, the components of net income and the components of other comprehensive income either in a
single continuous statement of comprehensive income, or in two separate but consecutive statements. In both choices,
the entity is required to present each component of net income along with total net income, each component of other
comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income.
In December 2011, FASB issued ASU 2011-12, which defers certain provisions in the new guidance related to the
presentation of reclassification adjustments. Our adoption of this FASB ASU did not have any impact on our consolidated
financial statements, including additional disclosures, because we did not have any component of other comprehensive
income in our consolidated financial statements other than net income for the twelve months ended July 31, 2012, 2011
and 2010, respectively.

F- 17

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(2) Acquisitions

Stampede
In October 2010, we acquired the WAN optimization technology assets and assumed certain liabilities of Stampede for
an estimated total purchase price of approximately $5,303,000. Almost all of the purchase price for Stampede was allocated
to the estimated fair value of technologies acquired and was assigned an estimated amortizable life of five years.

As of July 31, 2012, we maintain a liability on our Consolidated Balance Sheet of approximately $3,519,000 related to
contingent earn-out payments which we expect to pay based on our belief that certain revenue and related gross margin
milestones will be met in future periods. Such payments are expected to be made through October 1, 2013. We estimated
this liability based on a number of factors, primarily the likelihood of meeting these milestones based on forecasted
revenues. We review our estimates and updated forecasts on a quarterly basis and record adjustments as required. Any
adjustments are included in selling, general and administrative expenses in our Consolidated Statement of Operations
and are recorded in the period in which we make such a change.

Of the remaining $3,519,000 contingent earn-out liability as of July 31, 2012, $1,752,000 is included in accrued expenses
and other current liabilities and $1,767,000 is included in other long-term liabilities in our Consolidated Balance Sheet.
As of July 31, 2012, we paid $1,719,000 of the total purchase price in cash, including $219,000 of earn-out payments.
Interest accreted on the contingent earn-out liability for the years ended July 31, 2012 and 2011 was $462,000 and
$391,000, respectively, and total interest accreted through July 31, 2012 was $853,000.

Stampede was immediately combined with our existing business and is now part of the telecommunications transmission
reportable operating segment. Sales and income related to the Stampede acquisition were not material to our results of
operations for the fiscal years ended July 31, 2012 and 2011 and the effects of the acquisition would not have been material
to our historical consolidated financial statements.

(3) Accounts Receivable

Accounts receivable consist of the following at July 31, 2012 and 2011:

Billed receivables from commercial customers

41,139,000

2012

Billed receivables from the U.S. government and its agencies

Unbilled receivables on contracts-in-progress

Total accounts receivable

Less allowance for doubtful accounts

Accounts receivable, net

11,927,000

4,764,000

57,830,000

1,588,000

56,242,000

2011

38,245,000

22,075,000

11,701,000

72,021,000

1,220,000

70,801,000

Unbilled receivables on contracts-in-progress include $3,320,000 and $4,487,000 at July 31, 2012 and 2011, respectively,
due from the U.S. government and its agencies. There was $13,000 and $28,000 of retainage included in unbilled
receivables at July 31, 2012 and July 31, 2011, respectively. In the opinion of management, substantially all of the unbilled
balances will be billed and collected within one year.

F- 18

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(4) Inventories

Inventories consist of the following at July 31, 2012 and 2011:

Raw materials and components

Work-in-process and finished goods

Total inventories

Less reserve for excess and obsolete inventories

Inventories, net

2012

55,404,000

33,243,000

88,647,000

16,286,000

72,361,000

2011

53,678,000

34,299,000

87,977,000

13,316,000

74,661,000

At July 31, 2012 and 2011, the amount of total inventory directly related to long-term contracts (including contracts-in-
progress) was $2,041,000 and $8,041,000, respectively.

As of July 31, 2012, $1,146,000 of our long-term contract inventory relates to BFT-1 sustainment activities with the U.S.
Army. Our BFT-1 contract is known as “indefinite delivery/indefinite quantity” type contract; thus, the U.S. Army is not
obligated to purchase any additional products or services from us in the future. Almost all of our BFT-1 inventory relates
to BFT-1 orders already in our backlog. The remaining portion is expected to be used for incidental purchases and customer
repairs. If we are left with inventories of unusable parts, we would likely have to write-off the remaining balance in the
period that we make such determination.

At July 31, 2012 and 2011, $1,070,000 and $1,339,000, respectively, of the inventory balance above related to contracts
from third party commercial customers who outsource their manufacturing to us.

(5) Property, Plant and Equipment

Property, plant and equipment consist of the following at July 31, 2012 and 2011:

Machinery and equipment

Leasehold improvements

Less accumulated depreciation and amortization

Property, plant and equipment, net

2012

$ 101,272,000

11,162,000

2011

96,976,000

9,904,000

112,434,000

106,880,000

89,602,000

22,832,000

80,242,000

26,638,000

Depreciation and amortization expense on property, plant and equipment amounted to $10,205,000, $14,253,000 and
$11,773,000 for the fiscal years ended July 31, 2012, 2011 and 2010, respectively.

F- 19

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(6) Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following at July 31, 2012 and 2011:

Accrued wages and benefits

Accrued warranty obligations

Accrued commissions and royalties

Accrued business acquisition payments

Other

2012

2011

16,467,000

19,751,000

7,883,000

3,946,000

1,752,000

10,822,000

9,120,000

3,295,000

726,000

16,966,000

49,858,000

Accrued expenses and other current liabilities

40,870,000

We provide warranty coverage for most of our products for a period of at least one year from the date of shipment. We
record a liability for estimated warranty expense based on historical claims, product failure rates and other factors. Some
of our product warranties are provided under long-term contracts, the costs of which are incorporated into our estimates
of total contract costs.

Changes in our product warranty liability during the fiscal years ended July 31, 2012 and 2011 were as follows:

Balance at beginning of period

Provision for warranty obligations

Reversal of warranty liability

Charges incurred

Balance at end of period

(7) Cost Reduction Actions

2012

2011

9,120,000

10,562,000

5,598,000

—
(6,835,000)
7,883,000

8,203,000
(1,120,000)
(8,525,000)
9,120,000

Fiscal 2011 and 2012 Cost Reduction Actions
In fiscal 2011 and 2012, we implemented certain cost reduction actions in all of our reportable operating segments. In
our mobile data communications segment, we aligned staffing levels with expected future business activity. We reduced
our manufacturing headcount in our telecommunications transmission segment to align with the expected lower level of
manufacturing of products for our mobile data communications segment. In our RF microwave amplifiers segment we
reduced headcount and deferred certain merit raises. In our unallocated or corporate segment, we reduced headcount and
substantially reduced the use of outside consultants.

In fiscal 2012, due to ongoing and anticipated future pressure on our U.S. government customer to reduce its spending,
we adopted a restructuring plan to wind-down our mobile data communications segment's microsatellite product line. In
connection with this plan, we recorded $2,577,000 of pre-tax restructuring charges in fiscal 2012, as follows:

Accelerated depreciation expense

Inventory write-downs

Write-down of other assets and charges

Facility exit costs

Severance and related costs

Total

F- 20

Fiscal Year-Ended

July 31, 2012

680,000

553,000

538,000

496,000

310,000

2,577,000

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

Of the $2,577,000 pre-tax restructuring charge, $1,270,000 is reflected in cost of sales and the remainder is reflected in
selling, general and administrative expenses. Of the $2,577,000, $1,136,000 is included in accrued expenses and other
current liabilities in our Consolidated Balance Sheet at July 31, 2012, which primarily relates to facility exit costs,
severance and related costs and estimated losses on customer contracts relating to the wind-down of our microsatellite
product line. We expect to record additional restructuring charges of approximately $1,000,000 during the first quarter
of fiscal 2013. These additional costs primarily relate to facility exit costs for remaining leased spaces associated with
our microsatellite product line, which we expect to fully vacate by October 31, 2012.

Other than the aforementioned pre-tax restructuring charges related to the wind-down of our microsatellite product line,
costs associated with our fiscal 2012 and 2011 cost reduction actions, almost all of which were related to severance and
are included in our Consolidated Statement of Operations for the fiscal years ended July 31, 2012 and 2011, were not
material.

Fiscal 2010 Cost Reduction Actions
In August 2009, in connection with cost reduction actions we adopted in July 2009, we sold a small product line to a
third party for $2,038,000.

Radyne Acquisition-Related Restructuring Plan
In connection with our August 1, 2008 acquisition of Radyne, we immediately adopted a restructuring plan to achieve
operating synergies for which we recorded $2,713,000 of estimated restructuring costs. Of this amount, $613,000 relates
to severance for Radyne employees which was paid in fiscal 2009. The remaining estimated amounts relate to facility
exit costs and were determined as follows:

Total non-cancelable lease obligations
Less: Estimated sublease income
Total net estimated facility exit costs
Less: Interest expense to be accreted
Present value of estimated facility exit costs

At August 1, 2008
12,741,000
$
8,600,000
4,141,000
2,041,000
2,100,000

Our total non-cancelable lease obligations were based on the actual lease term which runs from November 1, 2008 through
October 31, 2018. We estimated sublease income based on (i) the terms of a fully executed sublease agreement, whose
lease term runs from November 1, 2008 through October 31, 2015 and (ii) our assessment of future uncertainties relating
to the commercial real estate market. Based on our assessment of commercial real estate market conditions, we currently
believe that it is not probable that we will be able to sublease the facility beyond the current sublease terms. As such, in
accordance with grandfathered accounting standards that were not incorporated into the FASB’s ASC, we recorded these
costs, at fair value, as assumed liabilities as of August 1, 2008, with a corresponding increase to goodwill.

As of July 31, 2012, the amount of the acquisition-related restructuring reserve is as follows:

Cumulative
Activity Through
July 31, 2012

Present value of estimated facility exit costs at August 1, 2008

Cash payments made

Cash payments received

Accreted interest recorded

Net liability as of July 31, 2012

Amount recorded as prepaid expenses in the Consolidated Balance Sheet

Amount recorded as other liabilities in the Consolidated Balance Sheet

2,100,000
(4,301,000)
4,498,000

619,000

2,916,000

415,000

3,331,000

F- 21

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

As of July 31, 2011, the present value of the estimated facility exit costs was $2,518,000. During the fiscal year ended
July 31, 2012, we made cash payments of $1,005,000 and we received cash payments of $1,214,000. Interest accreted
for the fiscal years ended July 31, 2012, 2011 and 2010 was $189,000, $161,000 and $150,000, respectively, and is
included in interest expense for each respective fiscal period.

As of July 31, 2012, future cash payments associated with our restructuring plan are summarized below:

Future lease payments to be made in excess of anticipated sublease payments
Less net cash to be received in next twelve months
Interest expense to be accreted in future periods
Total remaining net cash payments

3,331,000
(415,000)
1,421,000
4,337,000

As of
July 31, 2012

(8) Credit Facility

We have a committed $100,000,000 secured revolving credit facility (the “Credit Facility”) with a syndicate of bank
lenders, as amended on June 6, 2012. The Credit Facility expires on April 30, 2014 but may be extended by us to
December 31, 2016, subject to certain conditions relating primarily to the repurchase, redemption or conversion of our
3.0% convertible senior notes and compliance with all other Credit Facility covenants.

The Credit Facility provides for the extension of credit to us in the form of revolving loans, including letters of credit, at
any time and from time to time during its term, in an aggregate principal amount at any time outstanding not to exceed
$100,000,000 for both revolving loans and letters of credit, with sub-limits of $15,000,000 for commercial letters of credit
and $35,000,000 for standby letters of credit. The Credit Facility may be used for acquisitions, equity securities repurchases,
dividends, working capital and other general corporate purposes.

At our election, borrowings under the Credit Facility will bear interest either at LIBOR plus an applicable margin or at
the base rate plus an applicable margin, as amended. The interest rate margin over LIBOR ranges from 1.75 percent up
to a maximum amount of 2.50 percent. The base rate is a fluctuating rate equal to the highest of (i) the Prime Rate; (ii)
the Federal Funds Effective Rate from time to time plus 0.50 percent; and (iii) two hundred (200) basis points in excess
of the floating rate of interest determined, on a daily basis, in accordance with the terms of the agreement. The interest
rate margin over the base rate ranges from 0.75 percent up to a maximum amount of 1.50 percent. In both cases, the
applicable interest rate margin is based on the ratio of our consolidated total indebtedness to our consolidated earnings
before interest, taxes, depreciation and amortization (“Consolidated Adjusted EBITDA”). As defined in the Credit Facility,
Consolidated Adjusted EBITDA is adjusted for certain items and, in the event of an acquisition with a purchase price in
excess of $10,000,000, provides for the inclusion of the last twelve months of consolidated EBITDA of a target.

The Credit Facility contains covenants, including covenants limiting certain debt, certain liens on assets, certain sales of
assets and receivables, certain payments (including dividends), certain repurchases of equity securities, certain sale and
leaseback transactions, certain guaranties and certain investments. The Credit Facility also contains financial condition
covenants requiring that we (i) not exceed a maximum ratio of consolidated total indebtedness to Consolidated Adjusted
EBITDA (each as defined in the Credit Facility); (ii) not exceed a maximum ratio of consolidated senior secured
indebtedness to Consolidated Adjusted EBITDA (each as defined in the Credit Facility); (iii) maintain a minimum fixed
charge ratio (as defined in the Credit Facility); (iv) maintain a minimum consolidated net worth; in each case measured
on the last day of each fiscal quarter and (v) in the event total consolidated indebtedness (as defined in the Credit Facility)
is less than $200,000,000, we maintain a minimum level of Consolidated Adjusted EBITDA (as defined in the Credit
Facility).

F- 22

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

At July 31, 2012, we had $1,489,000 of standby letters of credit outstanding related to our guarantees of future performance
on certain customer contracts and no outstanding commercial letters of credit.

At July 31, 2012, had borrowings been outstanding under the Credit Facility, the applicable interest rate margin above
LIBOR and base rate borrowings would have been 2.50 percent and 1.50 percent, respectively. We are also subject to an
undrawn line fee based on the ratio of our consolidated total indebtedness to our Consolidated Adjusted EBITDA, as
defined and adjusted for certain items in the Credit Facility. Interest expense, including amortization of deferred financing
costs, related to our credit facility recorded during fiscal 2012, 2011 and 2010 was $1,089,000, $752,000 and $625,000
respectively.

At July 31, 2012, based on our Consolidated Adjusted EBITDA (as defined in the Credit Facility) and our business outlook
and related business plans, we believe we will be able to meet or obtain waivers for the applicable financial covenants
that we are required to maintain.

(9) 3.0% Convertible Senior Notes

In May 2009, we issued $200,000,000 of our 3.0% 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 $194,541,000 after deducting
the initial purchasers' discount and other transaction costs of $5,459,000.

The 3.0% convertible senior notes bear interest at an annual rate of 3.0%. Pursuant to the terms of the 3.0% convertible
senior notes indenture, cash dividends require an adjustment to the conversion rate, effective on the record date. Effective
July 20, 2012 (the record date of our dividend declared on June 7, 2012), the 3.0% convertible senior notes are convertible
into shares of our common stock at a conversion price of $33.91 per share (a conversion rate of 29.4863 shares per $1,000
original principal amount of notes) at any time prior to the close of business on the second scheduled trading day
immediately preceding the maturity date, subject to adjustment in certain circumstances.

We may, at our option, redeem some or all of the 3.0% convertible senior notes on or after May 5, 2014. Holders of the
3.0% convertible senior notes will have the right to require us to repurchase some or all of the outstanding 3.0% convertible
senior notes, solely for cash, on May 1, 2014, May 1, 2019 and May 1, 2024 and upon certain events, including a change
in control. If not redeemed by us or repaid pursuant to the holders' right to require repurchase, the 3.0% convertible senior
notes mature on May 1, 2029.

The 3.0% convertible notes are senior unsecured obligations of Comtech.

(10) Income Taxes

Income before provision for income taxes consists of the following:

U.S.

Foreign

Fiscal Years Ended July 31,

2012

44,930,000

(890,000)

44,040,000

2011

102,159,000
(355,000)
101,804,000

2010

97,217,000

85,000

97,302,000

F- 23

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

The provision for income taxes included in the accompanying consolidated statements of operations consists of the
following:

Federal – current

Federal – deferred

State and local – current

State and local – deferred

Foreign – current

Foreign – deferred

Fiscal Years Ended July 31,

2012

2011

14,389,000

29,735,000

(4,194,000)

683,000

2,045,000

(380,000)

(240,000)

4,000

3,683,000

62,000

(270,000)
16,000

2010

39,448,000
(7,180,000)

5,448,000
(651,000)

(406,000)
13,000

11,624,000

33,909,000

36,672,000

The provision for income taxes differed from the amounts computed by applying the U.S. Federal income tax rate as a
result of the following:

Fiscal Years Ended July 31,

2012

2011

2010

Amount

Rate

Amount

Rate

Amount

Rate

$15,414,000

35.0% 35,632,000

35.0% 34,056,000

35.0%

995,000

—

86,000

2.3

—

0.2

2,614,000

—

2.6

—

3,118,000

1,666,000

3.2

1.7

94,000

0.1

167,000

0.2

(1,436,000)

(3.3)

(2,893,000)

(2.9)

(2,086,000)

(2.2)

(241,000)

(0.5)

(1,255,000)

(1.3)

(137,000)

(0.1)

Computed “expected” tax
expense

Increase (reduction) in income

taxes resulting from:

State and local income
taxes, net of Federal
benefit

Impairment of goodwill

Nondeductible stock-based

compensation

Domestic production
activities deduction

Research and

experimentation credits

Change in the beginning of

the year valuation
allowance for deferred
tax assets

—

20,000

—

0.1

(50,000)
(302,000)
9,000

0.2
(0.5)
33.3% 36,672,000

231,000

(0.1)
(0.3)
0.1

0.2

37.7%

—

Audit settlements

(2,841,000)

(6.5)

0.2

151,000
(454,000)
26.4% 33,909,000

(1.0)

Foreign income taxes

Other

99,000

(452,000)

$11,624,000

F- 24

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at
July 31, 2012 and 2011 are presented below.

Deferred tax assets:

Allowance for doubtful accounts receivable

576,000

Inventory and warranty reserves

Compensation and commissions

State research and experimentation credits

7,684,000

1,890,000

1,691,000

436,000

6,998,000

1,273,000

1,449,000

2012

2011

Stock-based compensation

Net operating losses

Other

Less valuation allowance

Total deferred tax assets

Deferred tax liabilities:

Plant and equipment

Intangibles

Total deferred tax liabilities

Net deferred tax assets

10,133,000

10,606,000

101,000

4,922,000
(1,162,000)
25,835,000

663,000

4,970,000
(1,162,000)
25,233,000

(2,137,000)
(11,077,000)
(13,214,000)
12,621,000

(3,261,000)
(12,544,000)
(15,805,000)
9,428,000

We provide for income taxes under the provisions of FASB ASC 740, “Income Taxes.” FASB ASC 740 requires an asset
and liability based approach in accounting for income taxes. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or all of them will not be realized. If management
determines that it is more likely than not that some or all of its deferred tax assets will not be realized, a valuation allowance
will be recorded against such deferred tax assets.

As of July 31, 2012 and 2011, our deferred tax assets have been offset by a valuation allowance primarily related to state
research and experimentation credits which may not be utilized in future periods. As of July 31, 2012, we had a deferred
tax asset relating to state net operating losses of approximately $101,000, which will expire from fiscal year 2029 through
fiscal year 2030. We believe that it is more likely than not that we will realize these net operating losses before their
expiration.

We must generate approximately $73,000,000 of taxable income in the future to fully utilize our gross deferred tax assets
as of July 31, 2012. Management believes it is more likely than not that the results of future operations will generate
sufficient taxable income to realize the net deferred tax assets. In addition, as of July 31, 2012, we had a hypothetical
additional paid-in capital (“APIC”) pool related to stock-based compensation of approximately $22,786,000. To the extent
that previously issued and outstanding stock-based awards either expire unexercised or are exercised for an intrinsic value
less than the original fair-market value recorded at the time of issuance, the difference between the related deferred tax
asset amount originally recorded and the actual tax benefit would be recorded against the hypothetical APIC pool. Once
this hypothetical APIC pool is reduced to zero, future shortfalls would be recorded as income tax expense in the period
of stock-based award expiration or exercise.

At July 31, 2012 and 2011, the total unrecognized tax benefits, excluding interest, were $2,529,000 and $6,763,000,
respectively. Of these amounts, $1,990,000 and $5,719,000, respectively, net of the reversal of the federal benefit
recognized as a deferred tax asset relating to state reserves, would positively impact our effective tax rate, if recognized.
Unrecognized tax benefits result from income tax positions taken or expected to be taken on our income tax returns for
which a tax benefit has not been recorded in our financial statements. Of the total unrecognized tax benefits, $2,624,000
and $3,811,000, including interest, were recorded as non-current income taxes payable in our Consolidated Balance
Sheets at July 31, 2012 and 2011, respectively.

F- 25

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

Our policy is to recognize interest and penalties relating to uncertain tax positions in income tax expense. At July 31,
2012 and 2011, interest accrued relating to income taxes was $60,000 and $545,000, respectively, net of the related
income tax benefit. The following table summarizes the activity related to our unrecognized tax benefits for fiscal years
2012 and 2011:

Balance as of July 31

Increase related to fiscal 2012

Increase related to prior periods

Expiration of statute of limitations

Decrease related to prior periods

Settlements with taxing authorities

Balance as of July 31

2012

6,763,000

432,000

417,000
(1,401,000)
(3,309,000)
(373,000)
2,529,000

2011

7,056,000

639,000

601,000
(1,087,000)
(446,000)
—

6,763,000

In August 2011, we reached an effective settlement with the IRS relating to its audit of our federal income tax returns for
fiscal 2007, 2008 and 2009. Although adjustments relating to the settlement of our prior year completed audits were
immaterial, a resulting tax assessment or settlement for other potential later periods, or for other tax jurisdictions, could
have a material adverse effect on our consolidated results of operations and financial condition. Our federal income tax
returns for fiscal 2010, 2011 and 2012 are subject to potential future IRS audit.

(11) Stock Option Plan and Employee Stock Purchase Plan

We issue stock-based awards pursuant to the following plan:

2000 Stock Incentive Plan – The 2000 Stock Incentive Plan, as amended, provides for the granting to all employees and
consultants of Comtech (including prospective employees and consultants) non-qualified stock options, SARs, restricted
stock, restricted stock units (“RSUs”), stock units, performance shares, performance units and other stock-based awards.
In addition, our employees are eligible to be granted incentive stock options. Our non-employee directors are eligible to
receive non-discretionary grants of non-qualified stock options, restricted stock, RSUs, stock units and other stock-based
awards, subject to certain limitations. The aggregate number of shares of common stock which may be issued may not
exceed 8,962,500. Grants of incentive and non-qualified stock awards may not have a term exceeding ten years or, in the
case of an incentive stock award granted to a stockholder who owns stock representing more than 10.0% of the voting
power, no more than five years.

Stock options and SARs granted to date have exercise prices equal to the fair market value of our common stock on the
date of grant. RSUs, stock units and performance shares, which are convertible into shares of our common stock, are
initially valued at the closing fair market value of our common stock at the grant date.

As of July 31, 2012, we had granted stock-based awards representing the right to purchase and/or acquire an aggregate
of 7,237,694 shares (net of 1,665,865 canceled awards), of which 3,506,484 were outstanding at July 31, 2012. Stock
options and SARS were granted at prices ranging between $3.13 - $51.65. As of July 31, 2012, 3,731,210 stock-based
awards have been exercised, of which 750 were SARs. No stock units, RSUs or performance shares have been converted
as of July 31, 2012.

F- 26

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

The following table summarizes certain stock option plan activity during the three years ended July 31, 2012:

Outstanding at July 31, 2009
Granted
Expired/canceled
Exercised
Outstanding at July 31, 2010
Granted
Expired/canceled
Exercised
Outstanding at July 31, 2011
Granted
Expired/canceled
Exercised
Outstanding at July 31, 2012

Number of
Shares
Underlying
Stock-Based
Awards
3,065,245
653,000
(94,100)
(103,478)
3,520,667
680,750
(481,364)
(139,885)
3,580,168
471,609
(390,148)
(155,145)
3,506,484

Exercisable at July 31, 2012

2,237,495

Vested and expected to vest at July 31, 2012

3,426,823

Weighted
Average
Exercise Price
33.26
$
28.90
40.85
16.15
32.75
27.64
35.79
20.29
31.86
26.26
35.71
20.64
31.17

33.29

31.25

Weighted
Average
Remaining
Contractual
Term (Years)

Aggregate
Intrinsic Value

4.33

2.15

4.24

4,682,000

3,365,000

4,633,000

RSUs, stock units and performance shares are convertible into shares of our common stock, are subject to certain terms
and restrictions, do not require the recipient to pay an exercise price and are not subject to expiration. As such, for these
awards, the weighted average exercise price and the weighted average remaining contractual term reflected in the above
table assumes a zero dollar exercise price and no expiration, respectively.

Included in the number of shares underlying stock-based awards outstanding at July 31, 2012, in the above table, are
26,000 SARs and, 410 stock units, all of which are vested, and 12,668 RSUs and 35,003 performance shares, all of which
are unvested, with a combined aggregate intrinsic value of $1,314,000.

The total intrinsic value of stock-based awards exercised during the years ended July 31, 2012, 2011 and 2010 was
$1,654,000, $1,177,000 and $1,671,000, respectively.

2001 Employee Stock Purchase Plan – The ESPP was approved by the shareholders on December 12, 2000, and 675,000
shares of our common stock were reserved for issuance. The ESPP is intended to provide our eligible employees the
opportunity to acquire our common stock at 85% of fair market value at the date of issuance through participation in the
payroll-deduction based ESPP. Through fiscal 2012, we issued 474,018 shares of our common stock to participating
employees in connection with the ESPP.

F- 27

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(12) Customer and Geographic Information

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

Fiscal Years Ended July 31,
2011

2010

2012

United States
U.S. government
Commercial

Total United States

International

48.9%
12.4%
61.3%

61.7%
8.1%
69.8%

71.1%
6.0%
77.1%

38.7%

30.2%

22.9%

Sales to U.S. government customers include the DoD and intelligence and civilian agencies, as well as sales directly to
or through prime contractors. International sales for fiscal 2012, 2011 and 2010, which include sales to U.S. domestic
companies for inclusion in products that will be sold to international customers, were $164,503,000, $184,848,000 and
$178,469,000, respectively.

For fiscal 2012, 2011 and 2010, except for sales to U.S. customers, no other customer or individual country, including
sales to U.S. domestic companies for inclusion in products that will be sold to a foreign country, represented more than
10% of consolidated net sales.

(13) Segment Information

Reportable operating segments are determined based on Comtech’s management approach. The management approach,
as defined by accounting standards which have been codified into FASB ASC 280, “Segment Reporting,” 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. Our chief operating decision-maker is our President and Chief
Executive Officer.

While our 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) RF microwave amplifiers,
and (iii) mobile data communications.

Telecommunications transmission products include satellite earth station products (such as analog and digital modems,
frequency converters, power amplifiers, transceivers and voice gateways) and over-the-horizon microwave
communications products and systems (such as digital troposcatter modems).

RF microwave amplifier products include traveling wave tube amplifiers and solid-state, high-power broadband amplifier
products that use the microwave and radio frequency spectrums.

Mobile data communications products include satellite-based mobile location tracking and messaging hardware (such
as mobile satellite transceivers and third-party produced ruggedized computers) and related services and the design and
production of microsatellites. In fiscal 2012, we adopted a restructuring plan to wind-down our microsatellite product
line. Sales related to our microsatellite product line in fiscal 2012 were $17,737,000 and are expected to be virtually none
in fiscal 2013.

F- 28

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

Corporate management defines and reviews segment profitability based on the same allocation methodology as presented
in the segment data tables below:

Telecommunications
Transmission

RF Microwave
Amplifiers

Mobile Data

Communications Unallocated

Total

Fiscal Year Ended July 31, 2012

Net sales

210,006,000

102,497,000

112,567,000

— $ 425,070,000

Operating income (loss)

Interest income and other

(expense)

Interest expense

Depreciation and
amortization

Expenditure for long-lived

assets, including
intangibles

41,709,000

7,622,000

19,924,000

(17,978,000)

51,277,000

42,000

651,000

(21,000)
—

30,000

—

1,544,000

8,181,000

1,595,000

8,832,000

10,088,000

4,395,000

2,173,000

3,758,000

20,414,000

5,490,000

733,000

190,000

—

6,413,000

Total assets at July 31, 2012

244,285,000

98,864,000

11,217,000

365,412,000

719,778,000

Telecommunications
Transmission

RF Microwave
Amplifiers

Mobile Data
Communications

Unallocated

Total

Fiscal Year Ended July 31, 2011

Net sales

231,957,000

91,973,000

288,449,000

— $ 612,379,000

Operating income (loss)

Interest income and other

(expense)

Interest expense

Depreciation and
amortization

Expenditure for long-lived

assets, including
intangibles

49,913,000

1,063,000

64,945,000

(8,123,000)

107,798,000

89,000

562,000

(8,000)
—

43,000

10,000

2,297,000

7,843,000

2,421,000

8,415,000

11,241,000

4,576,000

6,282,000

5,602,000

27,701,000

10,607,000

1,069,000

922,000

43,000

12,641,000

Total assets at July 31, 2011

252,839,000

98,261,000

31,265,000

555,144,000

937,509,000

Fiscal Year Ended July 31, 2010

Net sales

Operating income (loss)

Interest income and other

Interest expense

Depreciation and
amortization

Expenditure for long-lived

assets, including
intangibles

Telecommunications
Transmission

RF Microwave
Amplifiers

219,701,000

111,959,000

47,493,000

9,808,000

73,000

171,000

15,000

—

Mobile Data

Communications Unallocated

Total

446,545,000

75,506,000

47,000

— $ 778,205,000

(28,827,000)
1,075,000

—

7,717,000

103,980,000

1,210,000

7,888,000

10,821,000

4,630,000

3,403,000

8,929,000

27,783,000

3,490,000

1,288,000

3,887,000

200,000

8,865,000

Total assets at July 31, 2010

253,212,000

101,290,000

105,698,000

606,362,000

1,066,562,000

F- 29

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

Operating income in our mobile data communications segment for fiscal 2012 includes a $2,577,000 restructuring charge
related to the wind-down of our microsatellite product line. See Note (7) – “Cost Reduction Actions.” Operating income
in our mobile data communications segment for fiscal 2010 includes a $13,249,000 charge relating to the impairment of
goodwill. See Note (1)(f) – “Summary of Significant Accounting and Reporting Policies – Long-Lived Assets.”

Unallocated operating loss for fiscal 2012 includes $2,638,000 of costs related to a contested proxy solicitation in
connection with our fiscal 2011 annual meeting of stockholders. This contested proxy solicitation was initiated by a third
party who publicly announced, on November 18, 2011, that it would not proceed with its proxy solicitation. There was
no agreement with, consideration paid to, or any accommodation granted to this third party by us. Unallocated operating
loss during fiscal 2011 includes the receipt of a net termination fee of $12,500,000 related to a Termination and Release
Agreement dated September 7, 2010, by which we and CPI International, Inc. (“CPI”) terminated a previously announced
Merger Agreement dated May 8, 2010.

Unallocated expenses result from such corporate expenses as legal, accounting and executive compensation. In addition,
for fiscal 2012, 2011 and 2010, unallocated expenses include $3,572,000, $5,357,000 and $8,716,000, respectively, of
stock-based compensation expense. Interest expense (which includes amortization of deferred financing costs) associated
with our convertible senior notes and our Credit Facility 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 our long-lived assets are located in the U.S.

Intersegment sales in fiscal 2012, 2011 and 2010 by the telecommunications transmission segment to the RF microwave
amplifiers segment were $5,378,000, $3,810,000 and $7,172,000, respectively.

Intersegment sales in fiscal 2012, 2011 and 2010 by the telecommunications transmission segment to the mobile data
communications segment were $11,161,000, $36,959,000 and $82,170,000, respectively.

Intersegment sales in fiscal 2012, 2011 and 2010 by the RF microwave amplifiers segment to the telecommunications
transmission segment were $382,000, $90,000 and $436,000, respectively.

All intersegment sales have been eliminated from the tables above.

(14) Commitments and Contingencies

(a) Operating Leases

We are obligated under non-cancellable operating lease agreements, including satellite lease expenditures in fiscal 2013
relating to our mobile data communications segment's commercial asset tracking products, such as our Sensor Enabled
Notification System ("SENS") products. At July 31, 2012, the future minimum lease payments, net of subleases, under
operating leases are as follows:

2013

2014

2015

2016

2017

Thereafter

Total

7,864,000

4,372,000

3,937,000

4,407,000

3,762,000

6,941,000

31,283,000

Lease expense charged to operations was $7,060,000, $6,891,000 and $7,665,000 in fiscal 2012, 2011 and 2010,
respectively. Lease expense excludes satellite lease expenditures incurred of $40,827,000, $46,356,000 and $35,928,000
in fiscal 2012, 2011 and 2010, respectively, relating to our mobile data communications segment. Satellite lease
expenditures are allocated to individual contracts and expensed to cost of sales.

F- 30

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

We lease our Melville, New York production facility from a partnership controlled by our Chairman, Chief Executive
Officer and President. Lease payments made in fiscal 2012 were $599,000. The current lease provides for our use of the
premises as they exist through December 1, 2021 with an option for an additional 10 years. In connection with the lease,
our Nominating and Governance Committee of the Board of Directors obtained written reports from three independent
commercial real estate firms regarding prevailing rents for comparable facilities. Based on this assessment, and the
continued suitability of the facility for our current operations, the annual rent of the facility is $598,000 for calendar 2013
and is subject to customary adjustments. We have a right of first refusal in the event of a sale of the facility.

(b) Legal Proceedings and Other Matters

U.S. Government Investigations
In June 2012, certain officers and employees of the Company received subpoenas issued by the United States District
Court for the Eastern District of New York (“EDNY”) seeking certain documents and records relating to our Chief
Executive Officer (“CEO”). Although the EDNY subpoenas make no specific allegations, we believe the subpoenas relate
to a grand jury investigation stemming from our CEO's contacts with a scientific attaché to the Israeli Purchasing Mission
in the United States who our CEO met in connection with the sale of our equipment to the State of Israel during the
1980's. This scientific attaché was later alleged to have conducted intelligence operations in the U.S. In August 2012, we
were informed by the U.S. government that our CEO's security clearance was suspended. In order to maintain our
qualification for government contracts requiring facility security clearance, we have made certain internal organizational
realignments. These changes restrict access to classified information to other Comtech senior executives, management
and other employees who maintain the required level of clearance.

Separately, in connection with an investigation by the Securities and Exchange Commission (“SEC”) into trading in
securities of CPI International, Inc. (“CPI”), we and our CEO, and other persons, have received subpoenas for documents
from the SEC concerning transactions in CPI stock by our CEO and other persons (including one subsidiary employee).
Our CEO purchased CPI stock in November 2010 which was after the September 2010 termination of our May 2010
agreement to acquire CPI.

We and our CEO are cooperating with the U.S. government regarding the above matters. The independent members of
our Board of Directors are monitoring these matters with the assistance of independent counsel.

The outcome of any investigation is inherently difficult, if not impossible, to predict. However, based on our work to
date in respect of the subpoenas in each matter, we do not believe that it is likely that either investigation will result in a
legal proceeding against our CEO or the Company. If either of these investigations results in a legal proceeding, it could
have a material adverse effect on our business and results of operations.

Defense Contract Audit Agency (“DCAA”) Audit
U.S. government agencies, including the DCAA, routinely audit costs and performance on contracts, as well as accounting
and general business practices. Based on the results of the audit, the U.S. government may adjust contract related costs
and fees, including allocated indirect costs. In addition, under U.S. government purchasing regulations, some of our costs
may not be reimbursable. Until such audits are completed, the ultimate profit on these contracts cannot be determined;
however, it is management’s belief that the final contract settlements will not have a material adverse effect on our
consolidated financial condition or results of operations.

In May 2011, we were notified that our BFT-1 contract which expired on December 31, 2011 was selected for a post
award audit by the DCAA. A post award audit (sometimes referred to as a Truth in Negotiations Act or “TINA” audit)
generally focuses on whether the contractor disclosed current, accurate and complete cost or pricing data in the contract
negotiation process pursuant to Federal Acquisition Regulations (“FAR”). We received $376,987,000 in total orders under
our BFT-1 contract.

F- 31

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

In January 2012, the Defense Contract Management Agency (“DCMA”) advised us that the fiscal 2008 award of the
BFT-1 contract triggered full coverage under the Cost Accounting Standards (“CAS”), which are a set of specialized rules
and standards that the U.S. government uses for determining costs on large, negotiated contracts. The DCMA also requested
that we submit an initial CAS disclosure statement that would describe our cost accounting practices. We have informed
the DCMA that we had addressed this issue with them shortly after we were awarded the BFT-1 contract in fiscal 2008.
We believed then, as we do now, that the BFT-1 contract does not trigger full CAS coverage. In response to this issue
being raised again, we provided information to the DCMA to support our view that the BFT-1 contract is subject to a
CAS exemption for fixed price commercial contract line items (such as our mobile satellite transceivers).

In March 2012, we were awarded a new three-year indefinite delivery/indefinite quantity (“IDIQ”) BFT-1 sustainment
contract with the U.S. Army to provide the same type of commercial equipment and services that we previously provided
under the aforementioned BFT-1 contract. This new contract incorporates specific FAR Part 12 clauses, which specify
that the equipment provided under the contract is commercial (as that term is defined in the FAR). We believe that the
commercial designation in our new contract also applies to the original BFT-1 contract and that our original BFT-1 contract
was not subject to full coverage under CAS.

In May 2012, the DCAA informed us that it is finalizing its post award audit in accordance with 41 U.S.C. 254b and FAR
52.215-10 and that it anticipated it will issue its audit report by September 2012. As of the date of this Annual Report on
Form 10-K, the DCAA has not rendered its report to us and we do not currently know the timing of the issuance of this
report. In addition, after having provided additional information to DCMA, it has not yet commented on whether or not
we are required to provide a CAS disclosure statement or whether or not it believes the BFT-1 contract was subject to
full coverage under CAS.

Although we believe that our BFT-1 contract was not subject to full coverage under CAS and that our equipment is
commercial (as that term is defined), the outcome of both the DCAA audit and the DCMA matter are difficult to predict.
If it is ultimately determined that a cost or price adjustment for our BFT-1 contract is appropriate, we may be required
to refund monies to the U.S. government, with interest. These amounts could have a material adverse effect on our results
of operations and financial condition.

Other Proceedings
There are certain other pending and threatened legal actions, which arise in the normal course of business. Although the
ultimate outcome of litigation is difficult to accurately predict, we believe that the outcome of these other pending and
threatened actions will not have a material adverse effect on our consolidated financial condition or results of operations.

We have an employment agreement with our Chairman of the Board, Chief Executive Officer and President. The
employment agreement generally provides for an annual salary and bonus award. We have also entered into change of
control agreements with certain of our executive officers and certain key employees. All of these agreements may require
payments by us, in certain circumstances, including, but not limited to, a change in control of our Company.

During fiscal 2012, pursuant to an indemnification agreement with our CEO (see Exhibit 10.1, "Form of Indemnification
Agreement" in our Current Report on Form 8-K filed with the Securities and Exchange Commission ("SEC") on March
8, 2007), our Board of Directors agreed to pay, on behalf of our CEO, expenses incurred by him in connection with an
investigation currently being conducted by the SEC and an investigation by the United States Attorney for the Eastern
District Court of New York, on the condition that Mr. Kornberg repay such amounts to the extent that it is ultimately
determined that he is not entitled to be indemnified by us. To date, legal expenses paid on behalf of our CEO have been
nominal; however, we have incurred approximately $1,000,000 of expenses in fiscal 2012 responding to the subpoenas.
See Note (14)(b) – "Legal Proceedings and Other Matters." Any amounts that may be advanced to our CEO in the future
may be material.

F- 32

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(15) Goodwill

The carrying amount of goodwill by segment as of July 31, 2012 and 2011 are as follows:

Telecommunications
Transmission

RF Microwave
Amplifiers

Mobile Data
Communications

Goodwill

Accumulated impairment

Balance

107,779,000

29,575,000

—

107,779,000

29,575,000

13,249,000
(13,249,000)

— $

Total

150,603,000
(13,249,000)
137,354,000

Based on our annual impairment review performed on August 1, 2012 (the start of our first quarter of fiscal 2013), we
determined that none of the goodwill recorded on our consolidated balance sheet was impaired. Unless there are future
indicators of impairment, such as a significant adverse change in our future financial performance, our next impairment
review for goodwill will be performed and completed in the first quarter of fiscal 2014. Any impairment charges that we
may record in the future could be material to our results of operations and financial condition.

We performed our annual impairment reviews on August 1, 2011 and 2010 (the start of our first quarter of fiscal 2012
and 2011, respectively) and we determined that none of the goodwill recorded on our Consolidated Balance Sheets was
impaired. During fiscal 2012, there were no indicators of impairment which would have required us to perform an interim
impairment test in accordance with FASB ASC 350, “Intangibles – Goodwill and Other.”

During the fourth quarter of our fiscal 2010, we were notified by the U.S. Army that we were not selected as the vendor
or program manager for the BFT-2 program. As a result, we experienced a significant and sustained decline in our stock
price and we determined that it was appropriate to conduct an interim impairment test for all three of our reporting units
in that fiscal quarter. Based on that interim impairment analysis, we determined that all of our mobile data communications
reporting unit’s goodwill was impaired. As a result, we recorded a goodwill impairment charge of $13,249,000 for the
fiscal year ended July 31, 2010.

F- 33

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(16) Intangible Assets

Intangible assets with finite lives as of July 31, 2012 and 2011 are as follows:

Weighted Average
Amortization Period

Gross Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount

July 31, 2012

Technologies

Customer relationships

Trademarks and other

Total

11.7

10.0

20.0

47,694,000

30,321,000

17,373,000

29,931,000

6,044,000

12,231,000

2,284,000

17,700,000

3,760,000

83,669,000

44,836,000

38,833,000

July 31, 2011

Technologies
Customer relationships
Trademarks and other
Total

Weighted Average
Amortization Period
10.2
10.0
18.6

Gross Carrying
Amount

47,694,000
29,931,000
6,044,000
83,669,000

Accumulated
Amortization
27,000,000
9,281,000
1,918,000
38,199,000

Net Carrying
Amount

20,694,000
20,650,000
4,126,000
45,470,000

The weighted average amortization period in the above table excludes fully amortized intangible assets. Amortization
expense for the years ended July 31, 2012, 2011 and 2010 was $6,637,000, $8,091,000 and $7,294,000, respectively.
The estimated amortization expense for the fiscal years ending July 31, 2013, 2014, 2015, 2016 and 2017 is
$6,327,000, $6,285,000, $6,211,000, $4,962,000 and $4,782,000, respectively.

(17) Stockholders’ Equity

Stock Repurchase Program
In September 2010, our Board of Directors authorized a $100,000,000 stock repurchase program that we completed in
July 2011. Also in July 2011, our Board of Directors authorized an additional stock repurchase program for $150,000,000
which was increased to $250,000,000 on September 27, 2011. There is no time restriction on this authorization and
repurchases may be made in open-market or privately negotiated transactions and may be made pursuant to SEC
Rule10b5-1 trading plans.

During the fiscal year ended July 31, 2012, we repurchased 7,055,614 shares in open-market transaction for an aggregate
cost of $217,374,000 (including transaction costs), with an average price per share of $30.81. As of July 31, 2012, we
can repurchase up to an additional $11,268,000 of our common stock pursuant to our current $250,000,000 authorization.
During fiscal 2012, we paid $2,001,000 for repurchases of our common stock which was accrued as of July 31, 2011.

During the fiscal year ended July 31, 2011, we repurchased 4,297,508 shares in open-market transactions for an aggregate
cost of $121,618,000 (including transaction costs), with an average price per share of $28.30.

Dividends
In September 2011, our Board of Directors raised our annual targeted dividend from $1.00 per common share to $1.10
per common share. During the fiscal year ended July 31, 2012, our Board of Directors declared four quarterly dividends
of $0.275 per common share on September 27, 2011, December 8, 2011, March 8, 2012, and June 7, 2012 which were
paid on November 22, 2011, February 22, 2012, May 22, 2012 and August 20, 2012, respectively. During the fiscal year
ended July 31, 2011, our Board of Directors declared four quarterly cash dividends of $0.25 per common share.

On September 26, 2012, our Board of Directors declared a dividend of $0.275 per common share payable on November 20,
2012 to shareholders of record at the close of business on October 19, 2012.

F- 34

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(18) Unaudited Quarterly Financial Data

The following is a summary of unaudited quarterly operating results:

Fiscal 2012

Net sales

Gross profit

Net income

Diluted income per share

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Total

$ 113,361,000

51,280,000

12,601,000

0.47

99,141,000

41,416,000

5,821,000

0.27

99,793,000

41,678,000

6,066,000

0.29

112,775,000

425,070,000

49,135,000

183,509,000

7,928,000

32,416,000

0.38

1.42

Fiscal 2011

Net sales

Gross profit

Net income

Diluted income per share

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Total

$ 178,160,000

162,811,000

131,081,000

140,327,000

612,379,000

64,234,000

25,656,000

0.79

60,910,000

16,096,000

0.52

56,971,000

14,255,000

0.47

58,931,000

241,046,000

11,888,000

67,895,000

0.42

2.22

Fiscal 2010

Net sales

Gross profit

Net income

Diluted income per share

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Total

$ 133,816,000

171,132,000

216,303,000

256,954,000

778,205,000

49,774,000

9,032,000

0.30

63,501,000

16,333,000

0.51

74,791,000

21,796,000

0.67

82,532,000

270,598,000

13,469,000

60,630,000

0.43

1.91

* Income per share information for the full fiscal year may not equal the total of the quarters within the year.

F- 35

Schedule II

COMTECH TELECOMMUNICATIONS CORP.
AND SUBSIDIARIES

Valuation and Qualifying Accounts and Reserves

Fiscal Years Ended July 31, 2012, 2011 and 2010

Column A

Column B

Column C Additions

Column D

Column E

Balance at
beginning of
period

Charged to
cost and
expenses

Charged to
other
accounts
- describe

Transfers
(deductions)
- describe

Balance at
end of
period

Description

Allowance for doubtful
accounts receivable:

Year ended July 31,

2012
2011

2010

$ 1,220,000
1,127,000

1,252,000

458,000
244,000

219,000

(A)

—
—

—

(90,000)
(151,000)
(344,000)

(B)

$ 1,588,000
1,220,000

1,127,000

Inventory reserves:

Year ended July 31,

2012

2011

2010

$ 13,316,000

13,791,000

11,744,000

3,862,000

4,091,000

7,744,000

(C)

Valuation allowance for
deferred tax assets:

Year ended July 31,

2012

2011

2010

$ 1,162,000

1,162,000

1,212,000

—

(A) Provision for doubtful accounts.
(B) Write-off of uncollectible receivables.
(C) Provision for excess and obsolete inventory.
(D) Reclassification of contract loss accrued in fiscal 2011.
(E) Write-off of inventory.
(F) Change in valuation allowance.

2,776,000

(D)

—

(3,668,000)
(4,566,000)
(5,697,000)

(E)

$ 16,286,000

13,316,000

13,791,000

—

(50,000)

(F)

$ 1,162,000

1,162,000

S- 1

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C O R P O R A T E

I N F O R M A T I O N

CORPORATE MANAGEMENT
Fred Kornberg
Chief Executive Officer and President

INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
KPMG LLP
Melville, New York

BOARD OF DIRECTORS
Fred Kornberg (1)
Chairman, Chief Executive Officer
and President

Edwin Kantor (1) (3) (4)
Lead Independent Director
Chairman, S2K Partners LLC

Ira Kaplan (2) (3)
Private Investor

Michael D. Porcelain
Senior Vice President and
Chief Financial Officer

Robert G. Rouse
Senior Vice President,
Strategy and M&A

Richard L. Goldberg (1) (4)
Independent Senior Strategic Advisor

SUBSIDIARY MANAGEMENT
John Branscum
President of Comtech Xicom Technology, Inc.

Robert G. Paul (2) (4)
Private Investor

Stanton D. Sloane (2) (3)
President and CEO of Decision
Sciences International Corporation

(1) Executive Committee

(2) Audit Committee

(3) Executive Compensation Committee

(4) Nominating and Governance Committee

Richard L. Burt
Senior Vice President,
President of Comtech Systems, Inc.

Larry M. Konopelko
Senior Vice President,
President of Comtech PST Corp.

Paul Lithgow
President of Comtech Mobile Datacom Corporation

Robert L. McCollum
Senior Vice President,
President of Comtech EF Data Corp.

MARKET FOR COMMON STOCK
Common Stock is traded on the NASDAQ
Stock Market LLC under the stock symbol CMTL.

REGISTRAR AND TRANSFER AGENTS
Common Stock
American Stock Transfer and Trust Co.
6201 15th Avenue
Brooklyn, New York 11219

Convertible Senior Notes
The Bank of New York Mellon
101 Barclay Street, Floor 8 West
New York, New York 10286

COMMON STOCK PRICE RANGE

Fiscal Year Ended July 31, 2011
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

High

Low

$ 31.48
32.00
29.94
29.80

$ 20.19
25.75
25.46
23.51

Fiscal Year Ended July 31, 2012
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

$ 34.08
35.65
34.89
31.75

$ 24.04
27.88
30.66
26.51

INVESTOR RELATIONS AND
SHAREHOLDER INFORMATION
Visit us at www.comtechtel.com or call (631) 962-7000. A copy
of the Form 10-K Annual Report, exhibits and other reports as
filed with the Securities and Exchange Commission are available
to shareholders. Requests for information should be made by
submitting an email to info@comtechtel.com or by writing to us
at Comtech Telecommunications Corp., Attention: Corporate
Secretary, 68 South Service Road, Suite 230, Melville, NY 11747.

68 South Service Road, Suite 230
Melville, New York 11747
Tel: (631) 962-7000 • Fax: (631) 962-7001
www.comtechtel.com