UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549


__________________





FORM
10-Q


__________________





QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF


THE
SECURITIES EXCHANGE ACT OF 1934





For
      the quarterly period ended
              March
      31, 2009


Commission
File Number 000-02324


__________________________





AEROFLEX
INCORPORATED





(Exact
name of Registrant as specified in its Charter)





DELAWARE
              11-1974412(State
      or other jurisdiction
              (I.R.S.
      Employerof
      incorporation or organization)
              Identification
      No.)





35
      South Service RoadP.O.
      Box 6022Plainview,
      N.Y.
            11803-0622(Address
      of principal executive offices)
            (Zip
      Code)


(516)
694-6700


(Registrant’s
telephone number, including area code)


________________________________________________





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.





Yes xNo  ̈





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 Regulations 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  ̈                    No
 ̈





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.  (Check one):





Large
      accelerated filer  ̈
            
            Accelerated
      filer ̈Non-accelerated
      filer x
            
            Smaller
      reporting company  ̈(Do
      not check if a smaller reporting company)





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





Yes  ̈Nox





Indicate the number of shares
outstanding of each of the issuer’s classes of common stock as of the latest
practicable date.


May
      14, 2009
                1,000(Date)
                (Number
      of Shares)









AEROFLEX
INCORPORATED


AND
SUBSIDIARIES





INDEX





PAGEPART
      1:        FINANCIAL
      INFORMATIONItem
      1
                      UNAUDITED
      CONDENSED CONSOLIDATED BALANCE SHEETSMarch
      31, 2009 and June 30, 2008
                      
                      2UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSThree
      Months Ended March 31, 2009 and 2008Nine
      Months Ended March 31, 2009 andPeriods
      from July 1, 2007 to August 14, 2007and
      August 15, 2007 to March 31, 2008
                      
                      3 –
      4UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSNine
      Months Ended March 31, 2009 andPeriods
      from July 1, 2007 to August 14, 2007and
      August 15, 2007 to March 31, 2008
                      
                      5NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      
                      6
      – 38Item
      2
                      MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS
      OF OPERATIONSThree
      and Nine Months Ended March 31, 2009 and 2008
                      
                      39
      – 53Item
      3
                      QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                      
                      53Item
      4T
                      CONTROLS
      AND PROCEDURES
                      
                      53PART
      II:          OTHER
      INFORMATIONItem
      1
                      LEGAL
      PROCEEDINGS
                      
                      54Item
      1A
                      RISK
      FACTORS
                      
                      55Item
      2
                      UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
                      
                      55Item
      3
                      DEFAULTS
      UPON SENIOR SECURITIES
                      
                      55Item
      4
                      SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
                      
                      55Item
      5
                      OTHER
      INFORMATION
                      
                      56Item
      6
                      EXHIBITS
                      
                      56SIGNATURES
                      
                      57EXHIBIT
      INDEX
                      
                      58CERTIFICATIONS
                      
                      59
      –
63


- 1
-





Aeroflex
Incorporated


and
Subsidiaries


Unaudited
Condensed Consolidated Balance Sheets


(In
thousands, except share and per share data )





March
      31,
                                          
                                          
                                          June
      30,2009
                                          
                                          
                                          2008Successor Entity
                                          
                                          
                                          Successor EntityAssetsCurrent
      assets:Cash
      and cash equivalents
                                          
                                          $
                                          53,931
                                          
                                          
                                          $
                                          54,149Accounts
      receivable, less allowance for doubtful accounts of $3,059 and
      $2,683
                                          
                                          
                                          113,468
                                          
                                          
                                          
                                          147,983Inventories
                                          
                                          
                                          137,854
                                          
                                          
                                          
                                          134,891Deferred
      income taxes
                                          
                                          
                                          25,736
                                          
                                          
                                          
                                          27,039Prepaid
      expenses and other current assets
                                          
                                          
                                          10,897
                                          
                                          
                                          
                                          12,184Total
      current assets
                                          
                                          
                                          341,886
                                          
                                          
                                          
                                          376,246Property,
      plant and equipment, net
                                          
                                          
                                          98,173
                                          
                                          
                                          
                                          104,649Non-current
      marketable securities
                                          
                                          
                                          17,523
                                          
                                          
                                          
                                          19,960Deferred
      financing costs, net
                                          
                                          
                                          26,947
                                          
                                          
                                          
                                          30,185Other
      assets
                                          
                                          
                                          15,611
                                          
                                          
                                          
                                          18,560Intangible
      assets with definite lives, net
                                          
                                          
                                          298,594
                                          
                                          
                                          
                                          344,866Intangible
      assets with indefinite lives
                                          
                                          
                                          113,665
                                          
                                          
                                          
                                          123,378Goodwill
                                          
                                          
                                          454,252
                                          
                                          
                                          
                                          461,155Total
      assets
                                          
                                          $
                                          1,366,651
                                          
                                          
                                          $
                                          1,478,999Liabilities and Stockholder's
      EquityCurrent
      liabilities:Current
      portion of long-term debt
                                          
                                          $
                                          5,383
                                          
                                          
                                          $
                                          5,574Accounts
      payable
                                          
                                          
                                          36,811
                                          
                                          
                                          
                                          39,382Advance
      payments by customers and deferred revenue
                                          
                                          
                                          32,731
                                          
                                          
                                          
                                          27,144Income
      taxes payable
                                          
                                          
                                          11,373
                                          
                                          
                                          
                                          1,936Accrued
      payroll expenses
                                          
                                          
                                          20,979
                                          
                                          
                                          
                                          24,525Accrued
      expenses and other current liabilities
                                          
                                          
                                          34,359
                                          
                                          
                                          
                                          56,830Total
      current liabilities
                                          
                                          
                                          141,636
                                          
                                          
                                          
                                          155,391Long-term
      debt
                                          
                                          
                                          881,213
                                          
                                          
                                          
                                          873,237Deferred
      income taxes
                                          
                                          
                                          123,448
                                          
                                          
                                          
                                          159,457Defined
      benefit plan obligations
                                          
                                          
                                          6,043
                                          
                                          
                                          
                                          6,263Other
      long-term liabilities
                                          
                                          
                                          23,314
                                          
                                          
                                          
                                          8,003Total
      liabilities
                                          
                                          
                                          1,175,654
                                          
                                          
                                          
                                          1,202,351Stockholder's
      equity:Common
      stock, par value $.10 per share; authorized 1,000  shares;
      issued and outstanding 1,000 shares
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Additional
      paid-in capital
                                          
                                          
                                          396,018
                                          
                                          
                                          
                                          381,666Accumulated
      other comprehensive income (loss)
                                          
                                          
                                          (74,858
                                          )
                                          
                                          
                                          407Accumulated
      deficit
                                          
                                          
                                          (130,163
                                          )
                                          
                                          
                                          (105,425
                                          )Total
      stockholder's equity
                                          
                                          
                                          190,997
                                          
                                          
                                          
                                          276,648Total
      liabilities and stockholder's equity
                                          
                                          $
                                          1,366,651
                                          
                                          
                                          $
                                          1,478,999





See notes
to unaudited condensed consolidated financial statements.


- 2
-





Aeroflex
Incorporated and Subsidiaries


Unaudited
Condensed Consolidated Statements of Operations


(In
thousands)





Three
      Months Ended March 31,2009
                            
                            
                            2008Successor
      Entity
                            
                            
                            Successor
      EntityNet
      sales
                            
                            $
                            139,439
                            
                            
                            $
                            157,304Cost
      of sales
                            
                            
                            72,834
                            
                            
                            
                            88,068Gross
      profit
                            
                            
                            66,605
                            
                            
                            
                            69,236Selling,
      general and administrative costs
                            
                            
                            30,954
                            
                            
                            
                            32,194Research
      and development costs
                            
                            
                            17,941
                            
                            
                            
                            18,154Amortization
      of acquired intangibles
                            
                            
                            14,956
                            
                            
                            
                            20,872Acquired
      in-process research and development costs
                            
                            
                            2,291
                            
                            
                            
                            -Company
      sale transaction expenses
                            
                            
                            -
                            
                            
                            
                            85066,142
                            
                            
                            
                            72,070Operating
      income (loss)
                            
                            
                            463
                            
                            
                            
                            (2,834
                            )Other
      income (expense)Interest
      expense
                            
                            
                            (20,566
                            )
                            
                            
                            (20,536
                            )Other
      income (expense), net
                            
                            
                            (47
                            )
                            
                            
                            1,960Total
      other income (expense)
                            
                            
                            (20,613
                            )
                            
                            
                            (18,576
                            )Income
      (loss) from continuing operations before income taxes
                            
                            
                            (20,150
                            )
                            
                            
                            (21,410
                            )Provision
      (benefit) for income taxes
                            
                            
                            (6,416
                            )
                            
                            
                            (5,973
                            )Income
      (loss) from continuing operations
                            
                            
                            (13,734
                            )
                            
                            
                            (15,437
                            )Income
      (loss) from discontinued operations, net of taxes
                            
                            
                            -
                            
                            
                            
                            (968
                            )Net
      income (loss)
                            
                            $
                            (13,734
                            )
                            
                            $
                            (16,405
                            )





See notes
to unaudited condensed consolidated financial statements.


- 3
-





Aeroflex
Incorporated and Subsidiaries


Unaudited
Condensed Consolidated Statements of Operations


(In
thousands)





Nine
      Months Ended
                              
                              
                              August
      15, 2007
                              
                              
                              July
      1, 2007March
      31, 2009
                              
                              
                              to
      March 31, 2008
                              
                              
                              to
      August 14, 2007Successor
      Entity
                              
                              
                              Successor
      Entity
                              
                              
                              Predecessor
      EntityNet
      sales
                              
                              $
                              437,099
                              
                              
                              $
                              420,076
                              
                              
                              $
                              38,221Cost
      of sales
                              
                              
                              229,976
                              
                              
                              
                              258,952
                              
                              
                              
                              22,861Gross
      profit
                              
                              
                              207,123
                              
                              
                              
                              161,124
                              
                              
                              
                              15,360Selling,
      general and administrative costs
                              
                              
                              96,612
                              
                              
                              
                              84,150
                              
                              
                              
                              19,031Research
      and development costs
                              
                              
                              52,045
                              
                              
                              
                              48,556
                              
                              
                              
                              12,178Amortization
      of acquired intangibles
                              
                              
                              47,546
                              
                              
                              
                              52,281
                              
                              
                              
                              1,692Acquired
      in-process research and development costs
                              
                              
                              2,291
                              
                              
                              
                              24,340
                              
                              
                              
                              -Company
      sale transaction expenses
                              
                              
                              -
                              
                              
                              
                              32,459
                              
                              
                              
                              3,717198,494
                              
                              
                              
                              241,786
                              
                              
                              
                              36,618Operating
      income (loss)
                              
                              
                              8,629
                              
                              
                              
                              (80,662
                              )
                              
                              
                              (21,258
                              )Other
      income (expense)Interest
      expense
                              
                              
                              (63,031
                              )
                              
                              
                              (53,649
                              )
                              
                              
                              (275
                              )Other
      income (expense), net
                              
                              
                              12,366
                              
                              
                              
                              3,881
                              
                              
                              
                              294Total
      other income (expense)
                              
                              
                              (50,665
                              )
                              
                              
                              (49,768
                              )
                              
                              
                              19Income
      (loss) from continuing operations before income taxes
                              
                              
                              (42,036
                              )
                              
                              
                              (130,430
                              )
                              
                              
                              (21,239
                              )Provision
      (benefit) for income taxes
                              
                              
                              (17,298
                              )
                              
                              
                              (36,389
                              )
                              
                              
                              (6,831
                              )Income (loss) from continuing
      operations
                              
                              
                              (24,738
                              )
                              
                              
                              (94,041
                              )
                              
                              
                              (14,408
                              )Income
      (loss) from discontinued operations, net of taxes
                              
                              
                              -
                              
                              
                              
                              (2,457
                              )
                              
                              
                              (2,508
                              )Net
      income (loss)
                              
                              $
                              (24,738
                              )
                              
                              $
                              (96,498
                              )
                              
                              $
                              (16,916
                              )





See notes
to unaudited condensed consolidated financial statements.


- 4
-





Aeroflex
Incorporated


and
Subsidiaries


Unaudited
Condensed Consolidated Statements of Cash Flows


(In
thousands)





Nine
      Months Ended
                                          
                                          
                                          August
      15, 2007
                                          
                                          
                                          July
      1, 2007March
      31,
                                          
                                          
                                          to
      March 31,
                                          
                                          
                                          to
      August 14,2009
                                          
                                          
                                          2008
                                          
                                          
                                          2007Successor
      Entity
                                          
                                          
                                          Successor
      Entity
                                          
                                          
                                          Predecessor
      EntityCash
      flows from operating activities:Net
      income (loss)
                                          
                                          $
                                          (24,738
                                          )
                                          
                                          $
                                          (96,498
                                          )
                                          
                                          $
                                          (16,916
                                          )Loss
      from discontinued operations, net of taxes
                                          
                                          
                                          -
                                          
                                          
                                          
                                          2,457
                                          
                                          
                                          
                                          2,508Income
      (loss) from continuing operations
                                          
                                          
                                          (24,738
                                          )
                                          
                                          
                                          (94,041
                                          )
                                          
                                          
                                          (14,408
                                          )Adjustments
      to reconcile net income (loss)to net cash provided
      by (used in)operating activities:Depreciation
      and amortization
                                          
                                          
                                          63,659
                                          
                                          
                                          
                                          66,465
                                          
                                          
                                          
                                          3,662Acquired
      in-process research and development costs
                                          
                                          
                                          2,291
                                          
                                          
                                          
                                          24,340
                                          
                                          
                                          
                                          -Acquisition
      related adjustment to cost of sales
                                          
                                          
                                          -
                                          
                                          
                                          
                                          38,968
                                          
                                          
                                          
                                          -Acquisition
      related adjustment to sales
                                          
                                          
                                          240
                                          
                                          
                                          
                                          2,235
                                          
                                          
                                          
                                          -Deferred
      income taxes
                                          
                                          
                                          (27,851
                                          )
                                          
                                          
                                          (38,751
                                          )
                                          
                                          
                                          5,284Non
      - cash share based compensation
                                          
                                          
                                          1,466
                                          
                                          
                                          
                                          2,634
                                          
                                          
                                          
                                          214Amortization
      of deferred financing costs
                                          
                                          
                                          3,579
                                          
                                          
                                          
                                          2,812
                                          
                                          
                                          
                                          217Paid
      in kind interest
                                          
                                          
                                          11,913
                                          
                                          
                                          
                                          7,605
                                          
                                          
                                          
                                          -Excess tax benefits
      from share based compensationarrangements
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (12,542
                                          )Other,
      net
                                          
                                          
                                          729
                                          
                                          
                                          
                                          651
                                          
                                          
                                          
                                          (24
                                          )Change
      in operating assets and liabilities,net of effects
      from purchases of businesses:Decrease
      (increase) in accounts receivable
                                          
                                          
                                          21,185
                                          
                                          
                                          
                                          (30,689
                                          )
                                          
                                          
                                          47,889Decrease
      (increase) in inventories
                                          
                                          
                                          (14,451
                                          )
                                          
                                          
                                          8,008
                                          
                                          
                                          
                                          (12,885
                                          )Decrease
      (increase) in prepaid expenses and other
      assets
                                          
                                          
                                          2,253
                                          
                                          
                                          
                                          24
                                          
                                          
                                          
                                          (26,899
                                          )Increase
      (decrease) in accounts payable, accruedexpenses and other
      liabilities
                                          
                                          
                                          (5,282
                                          )
                                          
                                          
                                          (16,948
                                          )
                                          
                                          
                                          21,246Net
      cash provided by (used in) continuing operations
                                          
                                          
                                          34,993
                                          
                                          
                                          
                                          (26,687
                                          )
                                          
                                          
                                          11,754Net
      cash provided by (used in) discontinued operations
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (3,133
                                          )
                                          
                                          
                                          (461
                                          )Net
      cash provided by (used in) operating activities
                                          
                                          
                                          34,993
                                          
                                          
                                          
                                          (29,820
                                          )
                                          
                                          
                                          11,293Cash
      flows from investing activities:Acquisition
      of Predecessor Entity, net of cash acquired
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (1,118,293
                                          )
                                          
                                          
                                          -Payments
      for purchase of businesses, net of cash acquired
                                          
                                          
                                          (7,832
                                          )
                                          
                                          
                                          1,522
                                          
                                          
                                          
                                          -Capital
      expenditures
                                          
                                          
                                          (12,958
                                          )
                                          
                                          
                                          (8,528
                                          )
                                          
                                          
                                          (1,088
                                          )Proceeds
      from the sale of property, plant and equipment
                                          
                                          
                                          1,359
                                          
                                          
                                          
                                          30
                                          
                                          
                                          
                                          -Purchase
      of marketable securities
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (631,805
                                          )
                                          
                                          
                                          (53,828
                                          )Proceeds
      from sale of marketable securities
                                          
                                          
                                          -
                                          
                                          
                                          
                                          599,977
                                          
                                          
                                          
                                          63,328Other
                                          
                                          
                                          (4
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Net
      cash provided by (used in) investing activities by continuing operations
                                          
                                          
                                          (19,435
                                          )
                                          
                                          
                                          (1,157,097
                                          )
                                          
                                          
                                          8,412Net
      cash provided by (used in) discontinued operations
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (32
                                          )
                                          
                                          
                                          (6
                                          )Net
      cash provided by (used in) investing activities
                                          
                                          
                                          (19,435
                                          )
                                          
                                          
                                          (1,157,129
                                          )
                                          
                                          
                                          8,406Cash
      flows from financing activities:Proceeds
      from issuance of common stock
                                          
                                          
                                          -
                                          
                                          
                                          
                                          378,350
                                          
                                          
                                          
                                          -Borrowings
      under debt agreements
                                          
                                          
                                          -
                                          
                                          
                                          
                                          870,000
                                          
                                          
                                          
                                          -Debt
      repayments
                                          
                                          
                                          (4,129
                                          )
                                          
                                          
                                          (4,453
                                          )
                                          
                                          
                                          (29
                                          )Debt
      financing costs
                                          
                                          
                                          (340
                                          )
                                          
                                          
                                          (27,436
                                          )
                                          
                                          
                                          (477
                                          )Excess
      tax benefits from share based compensation arrangements
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          12,542Proceeds
      from the exercise of stock options and warrants
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          583Amounts
      paid for withholding taxes on stock option exercises
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (14,142
                                          )
                                          
                                          
                                          (56
                                          )Withholding
      taxes collected for stock option exercises
                                          
                                          
                                          -
                                          
                                          
                                          
                                          14,142
                                          
                                          
                                          
                                          56Net
      cash provided by (used in) financing activities
                                          
                                          
                                          (4,469
                                          )
                                          
                                          
                                          1,216,461
                                          
                                          
                                          
                                          12,619Effect
      of exchange rate changes on cash and cash
      equivalents
                                          
                                          
                                          (11,307
                                          )
                                          
                                          
                                          (2,305
                                          )
                                          
                                          
                                          178Net
      increase (decrease) in cash and cash equivalents
                                          
                                          
                                          (218
                                          )
                                          
                                          
                                          27,207
                                          
                                          
                                          
                                          32,496Cash
      and cash equivalents at beginning of period
                                          
                                          
                                          54,149
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          13,000Cash
      and cash equivalents at end of period
                                          
                                          $
                                          53,931
                                          
                                          
                                          $
                                          27,207
                                          
                                          
                                          $
                                          45,496





See notes
to unaudited condensed consolidated financial statements.


- 5
-





AEROFLEX
INCORPORATED AND SUBSIDIARIES


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





1.
            Basis
      of Presentation





The
condensed consolidated financial statements of Aeroflex Incorporated and
Subsidiaries (the “Company”, “we”, or “our’’) presented herein are
unaudited.  In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly our
financial position, results of operations and cash flows as of and for all
periods presented have been made.  Certain information and note
disclosures normally included in annual financial statements prepared in
accordance with U.S. generally accepted accounting principles (“GAAP”) have been
omitted.  These condensed consolidated financial statements should be
read in conjunction with the Company’s June 30, 2008 audited financial
statements and notes thereto.





Results
of operations for the three and nine months ended March 31, 2009 are not
necessarily indicative of results of operations for future interim periods or
for the full fiscal year ending June 30, 2009.





The
Company and its Sale


We
design, engineer and manufacture microelectronics and test solution and
measurement equipment that are sold primarily to the broadband communications,
aerospace and defense markets. Our fiscal year ends on June 30.





On August
15, 2007, the Company was acquired by affiliates of or funds managed by The
Veritas Capital Fund Ill, L.P. (“Veritas”), Golden Gate Private Equity, Inc.
(“Golden Gate”) and GS Direct, L.L.C. (“GS Direct”) and certain members of
management (“the Merger”) (see Note 3).





Presentation
and Use of Estimates





Our
financial statements are prepared in conformity with U.S. GAAP. We consolidate
our subsidiaries, all of which, except for Test Evolution Corporation (see Note
4), are wholly owned. All significant intercompany balances and transactions
have been eliminated.





The
condensed consolidated financial statements presented as of March 31, 2009 and
June 30, 2008, and for the three months ended March 31, 2009 and 2008, the nine
months ended March 31, 2009 and the period from August 15, 2007 to March 31,
2008 represent the Company subsequent to the Merger (the “Successor” or
“Successor Entity”), whereas the condensed consolidated financial statements for
the period from July 1, 2007 to August 14, 2007 represent the Company prior to
the Merger (the “Predecessor” or “Predecessor Entity”). The purchase method of
accounting was applied effective August 15, 2007 in connection with the Merger.
Therefore, our condensed consolidated financial statements for periods before
August 15, 2007 are presented on a different basis than those for the periods
after August 14, 2007 and, as such, are not comparable.





The
preparation of financial statements and related disclosures in conformity with
U.S. GAAP requires that management of the Company make a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Among the more significant estimates included in our
consolidated financial statements are revenue and cost recognition under
long-term contracts; the valuation of accounts receivable, inventories,
investments and deferred tax assets; the depreciable lives of fixed assets and
useful lives of amortizable intangible assets; the valuation of assets acquired
and liabilities assumed in business combinations; the recoverability of
long-lived amortizable intangible assets and goodwill; share-based compensation;
restructuring charges; asset retirement obligations and certain accrued expenses
and contingencies.





- 6
-


We are
subject to uncertainties such as the impact of future events, economic,
environmental and political factors, and changes in the business climate;
therefore, actual results may differ from those estimates. When no estimate in a
given range is deemed to be better than any other when estimating contingent
liabilities, the low end of the range is accrued. The accounting estimates used
in the preparation of our consolidated financial statements will change as new
events occur, as more experience is acquired, as additional information is
obtained and as our operating environment changes. Changes in estimates are made
when circumstances warrant them. Such changes and refinements in estimation
methodologies are reflected in reported results of operations. If material, the
effects of changes in estimates are disclosed in the notes to the consolidated
financial statements.





Cash
and Cash Equivalents


All
highly liquid investments having maturities of three months or less at the date
of acquisition are considered to be cash equivalents.





Marketable
Securities


Marketable
securities are classified as available-for-sale and are recorded at fair value
with unrealized gains and losses reported as a separate component of
stockholder’s equity. Realized gains and losses and declines in market value
judged to be other than temporary, of which there were none, are included in
other income (expense). Interest income is also included in other
income.





At March
31, 2009, our marketable securities consisted of $17.5 million of auction rate
securities, which is net of a $2.4 million valuation allowance. Auction rate
securities represent long-term (generally maturities of ten years to thirty-five
years from the date of issuance) variable rate bonds tied to short-term interest
rates that are reset through an auction process, which occurs every seven to
thirty-five days, and are classified as available for sale securities. All but
one (with the one security having a carrying value of $1.6 million and an A
rating) of our auction rate securities retain a triple-A rating by at least one
nationally recognized statistical rating organization. In addition, certain of
our auction rate securities are backed by student loans whose principal and
interest are federally guaranteed by the Family Federal Education Loan Program.
Through March 31, 2009, we have collected all interest payments on all our
auction rate securities when due, and since early February 2008 (when auctions
began to fail) have redeemed $26.5 million of auction rate securities at
par.





At March
31, 2009, the par value of our auction rate securities was $19.9 million;
however we have estimated that the fair value of our auction rate securities as
of that date was $17.5 million.  Since many auctions are failing and
given that there is currently no active secondary market for our investment in
auction rate securities, the determination of fair value was based on the
following factors:





·
            continuing
      illiquidity;


·
            lack
      of action by the issuers to establish different forms of financing to
      replace or redeem these securities;
and


·
            the
      credit quality of the underlying
securities.





As fair
values have continued to be below cost, we have considered various factors in
determining whether to recognize an other than temporary impairment charge,
including the length of time and the extent to which the fair value has been
below the cost basis, the current financial condition of the issuer and our
intent and ability to hold the investment for a period of time sufficient to
allow for any anticipated recovery in market value.





Auction
rate securities are classified as non-current assets in the accompanying March
31, 2009 and June 30, 2008 consolidated balance sheets.


- 7
-





Inventories


Inventories,
including amounts related to long-term contracts accounted for under
percentage-of-completion accounting, are stated at the lower of cost (first-in,
first-out) or market.





Financial
Instruments and Derivatives


Foreign
currency contracts are used in certain circumstances to protect us from
fluctuations in exchange rates. We enter into foreign currency contracts, which
are not designated as hedges. Thus the change in fair value is included in
income as it occurs, within other income (expense).





Our
interest rate swap derivatives are designated as cash flow hedges. As such, they
are recorded on the balance sheet as assets or liabilities at their fair value,
with changes in the fair value of such derivatives, net of taxes, recorded as a
component of other comprehensive income.





See Note
8 for more details.





Revenue
Recognition


We
recognize revenue when persuasive evidence of an arrangement exists, the selling
price is fixed or determinable, and collectability of the resulting receivable
is reasonably assured.





For
arrangements other than certain long-term contracts, revenue (including shipping
and handling fees) is recognized when products are shipped and title has passed
to the customer. If title does not pass until the product reaches the customer’s
delivery site, recognition of the revenue is deferred until that time. Certain
of our sales are to distributors which have a right to return some portion of
product within up to eighteen months of sale. We recognize revenue on these
sales at the time of shipment to the distributor as the returns under these
arrangements have been insignificant and can be reasonably estimated. A
provision for such estimated returns is recorded at the time sales are
recognized.





Long-term
contracts are accounted for in accordance with SOP 81-1 “Accounting for
Performance of Construction-Type and Certain Production-Type
Contracts.”  We determine estimated contract profit rates and use the
percentage-of-completion method to recognize revenues and associated costs as
work progresses on certain long-term contracts. We measure the extent of
progress toward completion generally based upon one of the following methods
(based upon an assessment of which method most closely aligns to the underlying
earnings process): (i) the units-of-delivery method, (ii) the cost-to-cost
method, using the ratio of contract costs incurred as a percentage of total
estimated costs at contract completion (based upon engineering and production
estimates), or (iii) the achievement of contractual milestones. Provisions for
anticipated losses or revisions in estimated profits on contracts-in-process are
recorded in the period in which such anticipated losses or revisions become
evident.





Revenue
from sales of products where software is other than incidental to their
performance, including related software support and maintenance contracts is
recognized in accordance with SOP 97-2, “Software Revenue Recognition.”
Accordingly, revenue for software is recognized when the software is delivered,
if all of the above criteria for revenue recognition are met.





When a
customer purchases software together with post contract support, we allocate a
portion of the fee to the post contract support for its fair value based on the
contractual renewal rate or the amount the support is sold for on a standalone
basis. Post contract support fees are deferred in Advance Payments by Customers
and Deferred Revenue, and recognized as revenue ratably over the term of the
related contract.


- 8
-





Acquisition
Accounting


We use
the purchase method to account for business combinations, whereby the total cost
of an acquisition is allocated to the tangible and intangible assets acquired
and liabilities assumed based upon their respective fair values at the date of
acquisition. The allocation of the purchase price is dependent upon certain
valuations and other studies, which contain estimates and
assumptions.





Long-Lived
Assets


We test
goodwill annually for impairment and whenever events or circumstances indicate
impairment might have occurred. We evaluate the recoverability of goodwill using
a two-step impairment test approach at the reporting unit level. In the first
step, which is used to identify potential impairments, the overall fair value
for the reporting unit is compared to its carrying amount including goodwill. If
the fair value of a reporting unit is less than the carrying amount, a second
step is performed which compares the implied fair value of the reporting unit’s
goodwill to the carrying amount of the goodwill. The implied fair value for the
goodwill is determined based on the difference between the fair value of the
reporting unit and the fair value of its net identifiable assets. If the implied
fair value of the goodwill is less than its carrying amount, the difference is
recognized as an impairment.





Our
amortizable intangible assets, which are comprised primarily of developed
technology and customer related intangibles, are subject to amortization over
periods ranging up to 11 years, on a straight-line basis. Property, plant and
equipment are stated at cost. Depreciation of plant and equipment is provided
over the estimated useful lives of the respective assets, principally on a
straight-line basis. Leasehold improvements are amortized over the life of the
lease, including anticipated renewals, or the estimated life of the asset,
whichever is shorter.





We
periodically review our depreciable and amortizable long-lived assets for
impairment whenever events or circumstances indicate that the carrying amount of
an asset may not be recoverable. If the sum of the expected undiscounted cash
flows is less than the carrying amount of the asset, an impairment loss is
recognized as the amount by which the carrying amount of the asset exceeds its
fair value.





Research
and Development Costs


We charge
all research and development costs to expense as incurred, except those of our
software products for which costs incurred between the date of product
technological feasibility and the date that the software is available for
general release are capitalized. We use a working model of the software or a
detailed program design to assess technological feasibility. There were software
development costs capitalized of $0 and $437,000 for the three months ended
March 31, 2009 and 2008, respectively, and $437,000 and $0 for the periods from
August 15, 2007 to March 31, 2008 and July 1, 2007 to August 14, 2007,
respectively.  Approximately $209,000 of software development costs
were capitalized during the nine months ended March 31,
2009.  Capitalized software development costs are amortized to cost of
sales based on the higher of a) the percentage of revenue for units delivered to
total anticipated revenue for the related product, or b) on a straight-line
basis.  Capitalized software development costs of $331,000 and $1.2
million were included in Other Assets at March 31, 2009 and June 30, 2008,
respectively.





Income
Taxes


We
recognize deferred tax assets and liabilities for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be realized 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.


- 9
-





Foreign
Currency Translations


The
financial statements of our foreign subsidiaries are measured in their local
currency and then translated into U.S. dollars using the current rate method.
Under the current rate method, assets and liabilities are translated using the
exchange rate at the balance sheet date. Revenues and expenses are translated at
average exchange rates prevailing throughout the year.





Gains and
losses resulting from the translation of financial statements of foreign
subsidiaries are accumulated in other comprehensive income (loss) and presented
as part of stockholder’s equity. Realized and unrealized foreign currency
exchange gains (losses) from the settlement of foreign currency transactions are
reflected in other income (expense) and amounted to $(669,000) and $820,000 for
the three months ended March 31, 2009 and 2008, respectively, and $10.5 million,
$1.8 million and $193,000 for the nine months ended March 31, 2009 and the
periods from August 15, 2007 to March 31, 2008 and July 1, 2007 to August 14,
2007, respectively.





Comprehensive
Income


Comprehensive
income consists of net income (loss) and equity adjustments relating to foreign
currency translation, changes in fair value of certain derivatives and
non-current marketable securities and adjustments to the minimum pension
liability.





Recently
Adopted Accounting Pronouncements


In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) 157, “Fair Value
Measurements,” to clarify the definition of fair value, establish a
framework for measuring fair value and expand the disclosures on fair value
measurements.  SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (an exit
price).  SFAS 157 also stipulates that, as a market-based measurement,
fair value measurement should be determined based on the assumptions that market
participants would use in pricing the asset or liability, and establishes a fair
value hierarchy that distinguishes between (a) market participant
assumptions developed based on market data obtained from sources independent of
the reporting entity (observable inputs) and (b) the reporting entity’s own
assumptions about market participant assumptions developed based on the best
information available in the circumstances (unobservable inputs).




In
February 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS
157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13
and Other Accounting Pronouncements That Address Fair Value Measurements for
Purposes of Lease Classification or Measurement under Statement 13.”  This
FSP amends SFAS 157 to exclude certain leasing transactions accounted for
under previously existing accounting guidance.  However, this scope
exception does not apply to assets acquired and liabilities assumed in a
business combination, regardless of whether those assets and liabilities are
related to leases.




In
February 2008, the FASB issued FSP No. FAS 157-2, “Effective Date for
FASB Statement No. 157.”  This FSP permits the delayed application of
SFAS 157 for nonfinancial assets and nonfinancial liabilities, as defined
in this FSP, except for those that are recognized or disclosed at fair value in
the financial statements at least annually, until the beginning of our fiscal
2010.  As of July 1, 2008, we adopted SFAS 157 (see Note 9), with
the exception of its application to nonfinancial assets and nonfinancial
liabilities, which we will defer in accordance with FSP No. FAS 157-2.  We
are currently evaluating the impact on our consolidated financial statements
of adopting SFAS 157 at the beginning of fiscal 2010 for such
nonfinancial assets and nonfinancial liabilities.


- 10
-





In
October 2008, the FASB issued FSP FAS 157-3, “Determining the Fair
Value of a Financial Asset When the Market for That Asset Is Not Active,” which
clarifies the application of SFAS 157 in a market that is not active and
provides an example to illustrate key considerations in determining the fair
value of a financial asset when the market for that financial asset is not
active.  The FSP was effective upon issuance, including prior periods for
which financial statements were not issued.  Revisions resulting from
a change in the valuation technique or its application will be accounted for as
a change in accounting estimate following the guidance in SFAS 154,
“Accounting Changes and Error Corrections.”  However, the disclosure
provisions in SFAS 154 for a change in accounting estimate are not required for
revisions resulting from a change in valuation technique or its
application.  We adopted SFAS 157 and FSP FAS 157-3 beginning in our
fiscal 2009 first quarter (see Note 9).  As of March 31, 2009, we have
a $2.4 million valuation allowance against the value of our auction rate
securities.





In
February 2007, the FASB issued SFAS 159, “The Fair Value Option for
Financial Assets and Financial Liabilities,” to permit all entities to choose to
elect, at specified election dates, to measure eligible financial instruments at
fair value.  An entity shall report unrealized gains and losses on items
for which the fair value option has been elected in earnings at each subsequent
reporting date, and recognize upfront costs and fees related to those items in
earnings as incurred and not deferred.  SFAS 159 became effective for
us as of July 1, 2008.  As we did not elect the fair value option for
our financial instruments (other than those already measured at fair value in
accordance with SFAS No. 157), the adoption of this standard did not have
an impact on our consolidated financial statements.





In March
2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and
Hedging Activities—an amendment of FASB Statement No. 133.”  SFAS 161
requires qualitative disclosures about a company’s objectives and strategies for
using derivative instruments, quantitative disclosures of the fair values and
gains and losses of these derivative instruments in a tabular format, as well as
more information about liquidity by requiring disclosure of a derivative
contract’s credit-risk-related contingent features.  SFAS 161 also
requires cross-referencing within footnotes to enable financial statement users
to locate important information about derivative instruments.  We
adopted this disclosure-only standard beginning in our fiscal 2009 third
quarter.





Recently
Issued Accounting Pronouncements Not Yet Adopted


In
December 2007, the FASB issued SFAS 141(R), “Business Combinations.” SFAS 141(R)
replaces SFAS 141. SFAS 141(R) establishes principles and requirements for how
an acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any non-controlling interest in the
acquiree and the goodwill acquired. The Statement also establishes disclosure
requirements which will enable users to evaluate the nature and financial
effects of the business combination. SFAS 141(R) is effective for us for
acquisitions consummated on or after July 1, 2009.





In
December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in
Consolidated Financial Statements—an amendment of Accounting Research Bulletin
No. 51.” SFAS 160 establishes accounting and reporting standards for ownership
interests in subsidiaries held by parties other than the parent, the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest, changes in a parent’s ownership interest and the valuation of retained
noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160
also establishes reporting requirements that provide sufficient disclosures that
clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners. SFAS 160 is effective for fiscal years
beginning after December 15, 2008. We are currently evaluating the impact, if
any, the provisions of SFAS 160 will have on our consolidated financial
statements.


- 11
-





In April
2008, the FASB issued FSPFAS No. 142-3,
“Determination of the Useful Life of Intangible Assets.”  This FSP
amends the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset
under SFAS 142, “Goodwill and Other Intangible Assets.” This FSP also adds
certain disclosures to those already prescribed in SFAS 142.  FSP
142-3 becomes effective for the annual and interim periods within the year,
beginning in our fiscal 2010. The guidance for determining useful lives must be
applied prospectively to intangible assets acquired after the effective date.
The disclosure requirements must be applied prospectively to all intangible
assets recognized as of the effective date.




In
November 2008, the FASB ratified the consensus reached on EITF Issue
No. 08-6, “Accounting for Equity Method Investment Considerations.” 
EITF No. 08-6 addresses questions about the potential effect of SFAS
No. 141(R) and SFAS No. 160 on equity-method accounting. 
The primary issues include how the initial carrying value of an equity method
investment should be determined, how to account for any subsequent purchases and
sales of additional ownership interests, and whether the investor must
separately assess its underlying share of the investee’s indefinite-lived
intangible assets for impairment.  The effective date of EITF No. 08-6
coincides with that of SFAS No. 141(R) and SFAS No. 160 and is to
be applied on a prospective basis beginning in our fiscal 2010.  Early
adoption is not permitted for entities that previously adopted an alternate
accounting policy.





In April
2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures about
Fair Value of Financial Instruments,” principally to require publicly traded
companies to provide disclosures about fair value of financial instruments in
interim financial information.  The adoption of this disclosure-only
guidance will not have an impact on our consolidated financial statements and is
effective beginning with our fiscal 2009 interim period ending June 30,
2009.





In April
2009, the FASB issued FSP No. FAS 141(R)-1, “Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies,” to
require that assets acquired and liabilities assumed in a business combination
that arise from contingencies be recognized at fair value if fair value can be
reasonably determined.  If the fair value of such assets or
liabilities cannot be reasonably determined, then they would generally be
recognized in accordance with SFAS No. 5, “Accounting for Contingencies” and
FASB Interpretation No. 14, “Reasonable Estimation of the Amount of a Loss – an
interpretation of FASB Statement No. 5.”  This FSP also amends the
subsequent accounting for assets and liabilities arising from contingencies in a
business combination and certain other disclosure requirements.  This
FSP is effective for the Company for assets or liabilities arising from
contingencies in business combinations that are consummated on or after July 1,
2009.





In April
2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly.” This FSP provides additional
guidance for estimating fair value in accordance with SFAS No. 157 when there
has been a significant decrease in market activity for a financial asset or
liability in relation to normal activity and circumstances that may indicate
that a transaction is not orderly. An entity is required to base its conclusion
about whether a transaction was distressed on the weight of the evidence
presented.  This FSP also re-affirms that the objective of fair value,
when the market for an asset is not active, is the price that would be received
to sell the asset in an orderly market (as opposed to a distressed or forced
transaction).  Additional enhanced disclosures are also required in
accordance with this FSP.  FSP No. FAS 157-4 must be applied
prospectively and is effective for interim and annual periods ending after June
15, 2009.  We are currently evaluating the impact, if any, the
provisions of FSP No. FAS 157-4 will have on our consolidated financial
statements.


- 12
-





In April
2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments (“FSP No. FAS
115-2”).  FSP No. FAS 115-2 provides additional guidance on the timing
of impairment recognition and greater clarity about the credit and noncredit
components of impaired debt securities that are not expected to be
sold.  FSP No. FAS 115-2 also requires additional disclosures about
impairments in interim and annual reporting periods.  FSP No. FAS
115-2 is effective for the Company for the quarter ending June 30,
2009.  We are currently evaluating the impact the provisions of FSP
No. FAS 115-2 and FAS 124-2 will have on our consolidated financial
statements.





2.
              Discontinued
      Operations





As a
result of continued operating losses, in June 2007 our then board of directors
approved a formal plan to divest our radar business (“Radar”) and to seek a
strategic buyer. This business had previously been included in the Test
Solutions segment.  As a result of this decision, the operating
results of Radar, net of taxes, had been classified in the consolidated
statements of operations as discontinued operations for all periods presented.
We recorded a loss on disposal of $3.7 million ($2.4 million, net of tax) in the
predecessor period July 1, 2007 to August 14, 2007, to reflect the net assets of
Radar at their net realizable value based on the May 15, 2008 sale of the
business for $750,000. The sale agreement provided for additional contingent
consideration, which was not included in the calculation of the loss on disposal
as realization was not probable.





Net sales
and income (loss) from discontinued operations (including impairment charges),
which were solely related to Radar, were as follows:





Three
      Months
                  
                  
                  August
      15, 2007
                  
                  
                  July
      1, 2007Ended
                  
                  
                  to
                  
                  
                  toMarch
      31,
                  
                  
                  March
      31,
                  
                  
                  August
      14,2008
                  
                  
                  2008
                  
                  
                  2007Successor
                  
                  
                  Successor
                  
                  
                  Predecessor(In
      thousands)Net
      sales
                  
                  $
                  178
                  
                  
                  $
                  756
                  
                  
                  $
                  120Income
      (loss) from discontinued operations before income taxes
                  
                  $
                  (1,190
                  )
                  
                  $
                  (3,021
                  )
                  
                  $
                  (3,861
                  )Income
      tax (benefit)
                  
                  
                  (222
                  )
                  
                  
                  (564
                  )
                  
                  
                  (1,353
                  )Income
      (loss) from discontinued operations
                  
                  $
                  (968
                  )
                  
                  $
                  (2,457
                  )
                  
                  $
                  (2,508
                  )





3.
            Company
      Sale Transaction





The
Merger on August 15, 2007 was funded by (i) a $378.4 million equity investment
by Veritas, Golden Gate, GS Direct and certain members of our management, (ii)
the majority of the proceeds from term loans aggregating $525 million and (iii)
two exchangeable unsecured credit facilities totaling $345
million.  An advisory agreement with the non-management equity
investors or their designated affiliates requires us to pay advisory services
fees of $2.3 million for fiscal 2009.  Refer to Note 3 to our June 30,
2008 annual financial statements for complete details of our Merger and the
Terminated Merger.





In
connection with the Merger and Terminated Merger, for the three months ended
March 31, 2008 and the periods from August 15, 2007 to March 31, 2008 and July
1,2007 to August 14,
2007, we incurred Company sale transaction and related expenses that we expensed
as incurred of $850,000, $32.5 million and $3.7 million, respectively,
consisting primarily of merger-related severance and other change of control
related payments, a merger termination fee and the related lawsuit settlement
charge and legal and other professional fees (“Company Sale Transaction
expenses”).


- 13
-





The
Merger constituted a change in control of the Company. The Company recorded its
assets and liabilities at fair value as of the date of the Merger, whereby the
purchase price was allocated to the assets acquired and liabilities assumed
based on their estimated fair values at the date of acquisition. Independent
third-party appraisers were engaged to assist management and perform valuations
of certain of the tangible and intangible assets acquired.





We
allocated the purchase price, including the acquisition costs of approximately
$22.9 million, based on the estimated fair value of the assets acquired and
liabilities assumed as follows:





(In
      thousands)Current
      assets (excluding cash of $45.5 million)
                    
                    $
                    335,252Property,
      plant and equipment
                    
                    
                    111,804Other
      assets
                    
                    
                    16,537Developed
      technology
                    
                    
                    195,500Customer
      related intangible assets
                    
                    
                    211,582Other
      acquired intangible assets
                    
                    
                    6,290Intangible
      assets with indefinite lives (tradenames)
                    
                    
                    122,870Goodwill
                    
                    
                    452,756In-process
      research and development
                    
                    
                    24,340Total
      assets acquired
                    
                    
                    1,476,931Current
      liabilities
                    
                    
                    (137,751
                    )Long-term
      liabilities
                    
                    
                    (220,887
                    )Total
      liabilities assumed
                    
                    
                    (358,638
                    )Net
      assets acquired
                    
                    $
                    1,118,293





At the
acquisition date, the acquired in-process research and development (“IPR&D”)
was not considered to have reached technological feasibility and had no
alternative future uses. Therefore, the fair value of the IPR&D of $24.3
million was expensed at the time of the acquisition in operating costs. The
allocation to IPR&D represents the estimated fair value of such incomplete
research and development, at the acquisition date, based on future cash
flows.  As of the acquisition date, cash flows from these projects
were expected to commence in fiscal year 2009. In determining the fair values of
IPR&D, risk adjusted discount rates that ranged from 17% to 25% were applied
to the projects’ cash flows, which have taken into account the respective
projects’ completion percentage.





The
unaudited pro forma results of operations presented below for the period from
July 1, 2007 to August 14, 2007 are presented as though the Merger had occurred
on July 1, 2006, after giving effect to purchase accounting adjustments relating
to depreciation and amortization of the revalued assets, interest expense
associated with the new credit facilities and other acquisition-related
adjustments in connection with the Merger. The pro forma results of operations
are not necessarily indicative of the combined results that would have occurred
had the Merger been consummated at July 1, 2006, nor are they necessarily
indicative of future operating results.





Period
      fromJuly
      1, 2007 toAugust
      14, 2007Predecessor(In
      thousands)Net
      sales
                  
                  $
                  38,178Net
      income (loss)
                  
                  $
                  (27,554
                  )


- 14
-





In
connection with the consummation of the Merger, we entered into amended
employment agreements with all participants, excluding one retired participant,
in our unfunded Supplemental Executive Retirement Plan (“the “SERP”) that
provided for specified payments, plus, for certain participants, 6% interest per
annum from August 15, 2007, in full satisfaction of the benefits payable under
the SERP.  In accordance with the terms of those agreements, we made a
payment of $16.6 million in December 2008 and a final payment of $3.2 million in
January 2009.  The actuarially determined liability to the one
remaining retired participant in the SERP, who will receive monthly payments
through at least December 15, 2015, was $6.7 million at March 31, 2009, of which
$628,000 and $6.0 million is included in Accrued Expenses and Defined Benefit
Plan Obligations, respectively.





4.
            Acquisition
      of Businesses and Intangible Assets





Test
Evolution Corporation





On
October 1, 2007, we purchased 40% of the outstanding stock of Test Evolution
Corporation (“TEC”) for $4.0 million ($2.0 million at closing and $2.0 million
paid in October 2008). TEC, located in Massachusetts, develops and manufactures
digital, analog and RF semiconductor automated test equipment. We have
determined that we have control of this company and have consolidated TEC’s
assets and liabilities and results of operations, all of which were
insignificant, into our financial statements commencing October 1, 2007. The
non-controlling interest of 60% in each of the equity and operations of TEC are
not material to our consolidated financial statements and have been included in
other long-term liabilities and other income (expense),
respectively.  TEC is included in our Test Solutions
segment.





Gaisler
Research AB





On June
30, 2008, we acquired the stock of Gaisler Research AB (“Gaisler”) for $12.3
million cash (net of $2.7 million cash acquired), plus up to another $15 million
over the next three years provided specified EBITDA targets are
achieved.  Located in Sweden, Gaisler provides integrated circuit
software products and services to European space system suppliers, plus other
U.S., Japanese and Russian space agencies. Gaisler is included in our
Microelectronic Solutions segment.





We
allocated the purchase price, including acquisition costs of approximately
$379,000, based on the estimated fair value of the assets acquired and
liabilities assumed as follows:





(In
      thousands)Current
      assets (excluding cash of $2.7 million)
                  
                  $
                  987Property,
      plant and equipment
                  
                  
                  62Developed
      technology
                  
                  
                  7,550Customer
      related intangibles
                  
                  
                  1,030Non-compete
      arrangements
                  
                  
                  1,820Tradenames
                  
                  
                  1,190Goodwill
                  
                  
                  2,069In-process
      research and development
                  
                  
                  2,300Total
      assets acquired
                  
                  
                  17,008Current
      liabilities
                  
                  
                  (1,076
                  )Deferred
      taxes
                  
                  
                  (3,245
                  )Total
      liabilities assumed
                  
                  
                  (4,321
                  )Net
      assets acquired
                  
                  $
                  12,687





The
customer related intangibles and developed technology are being amortized on a
straight-line basis over a range of 1 to 8 years.


- 15
-





On a pro
forma basis, had the Gaisler acquisition taken place as of the beginning of
fiscal 2008, our results of operations would not have been materially
affected.





VI
Technology, Inc.





On March
4, 2009, we acquired 100% of the stock of VI Technology, Inc. (VI
Tech).  We paid $5.0 million in cash for approximately 29% of the
stock of VI Tech, and the remaining approximately 71% of VI Tech stock was
acquired by a limited liability company (parent LLC), that is our ultimate
parent, in exchange for Class A membership interests in parent LLC with a fair
value of $12.7 million.  Immediately following the consummation of
these transactions, parent LLC contributed the 71% of VI Tech stock to the
Company, giving us 100% ownership in VI Tech.  VI Tech, located in
Austin, Texas, designs and manufactures independent automated test
systems.  VI Tech is included in our Test Solutions
segment.





We
preliminarily allocated the purchase price, including acquisition costs of
approximately $348,000, based on the estimated fair value of the assets acquired
and liabilities assumed as follows:





(In
      thousands)Current
      assets (excluding cash of $107,000)
                  
                  $
                  2,015Property,
      plant and equipment
                  
                  
                  149Other
      assets
                  
                  
                  37Developed
      technology
                  
                  
                  3,752Customer
      related intangibles
                  
                  
                  3,252Tradenames
                  
                  
                  1,042Non-compete
      arrangements
                  
                  
                  834Goodwill
                  
                  
                  11,428In-process
      research and development
                  
                  
                  626Total
      assets acquired
                  
                  
                  23,135Current
      liabilities
                  
                  
                  (1,908
                  )Deferred
      taxes
                  
                  
                  (3,286
                  )Total
      liabilities assumed
                  
                  
                  (5,194
                  )Net
      assets acquired
                  
                  $
                  17,941





The
customer related intangibles and developed technology are being amortized on a
straight-line basis over a range of 1 to 7 years.





On a pro
forma basis, had the VI Tech acquisition taken place as of the beginning of
fiscal 2009, our results of operations would not have been materially
affected.





Intangible
Assets with Definite Lives


The
components of amortizable intangible assets are as follows:





March
      31, 2009
                  
                  
                  June
      30, 2008(In
      thousands)Gross
                  
                  
                  
                  
                  
                  GrossCarrying
                  
                  
                  Accumulated
                  
                  
                  Carrying
                  
                  
                  AccumulatedAmount
                  
                  
                  Amortization
                  
                  
                  Amount
                  
                  
                  AmortizationDeveloped
      technology
                  
                  $
                  195,085
                  
                  
                  $
                  52,455
                  
                  
                  $
                  198,420
                  
                  
                  $
                  29,631Customer
      related intangibles
                  
                  
                  209,587
                  
                  
                  
                  62,528
                  
                  
                  
                  213,232
                  
                  
                  
                  42,433Non-compete
      arrangements
                  
                  
                  9,247
                  
                  
                  
                  2,142
                  
                  
                  
                  6,290
                  
                  
                  
                  1,012Tradenames
                  
                  
                  1,907
                  
                  
                  
                  107
                  
                  
                  
                  -
                  
                  
                  
                  -Total
                  
                  $
                  415,826
                  
                  
                  $
                  117,232
                  
                  
                  $
                  417,942
                  
                  
                  $
                  73,076


- 16
-





The
aggregate amortization expense for amortizable intangible assets was $15.0
million and $20.9 million for the three months ended March 31, 2009 and 2008,
respectively, and $47.5 million, $52.3 million and $1.7 million for the nine
months ended March 31, 2009 and the periods August 15, 2007 to March 31, 2008
and July 1, 2007 to August 14, 2007, respectively.





The
estimated aggregate amortization expense for each of the twelve-month periods
ending March 31, is as follows:





(In
      thousands)2010
                  
                  $
                  59,3592011
                  
                  
                  58,5142012
                  
                  
                  58,3132013
                  
                  
                  54,4952014
                  
                  
                  35,241





Goodwill





The
carrying amount of goodwill is as follows:





AMS
                    
                    
                    ATS
                    
                    
                    Total(In
      thousands)Balance
      at June 30, 2007 (predecessor entity)
                    
                    $
                    51,321
                    
                    
                    $
                    130,641
                    
                    
                    $
                    181,962Goodwill
      adjustment recorded in purchase accounting from allocation of purchase
      price (1)
                    
                    
                    243,456
                    
                    
                    
                    27,373
                    
                    
                    
                    270,829Balance
      at August 15, 2007 (successor entity)
                    
                    
                    294,777
                    
                    
                    
                    158,014
                    
                    
                    
                    452,791Acquisition
      of Test Evolution Corporation
                    
                    
                    -
                    
                    
                    
                    1,868
                    
                    
                    
                    1,868Acquisition
      of Gaisler
                    
                    
                    8,261
                    
                    
                    
                    -
                    
                    
                    
                    8,261Impact
      of foreign currency translation
                    
                    
                    (268
                    )
                    
                    
                    (1,497
                    )
                    
                    
                    (1,765
                    )Balance
      at June 30, 2008 (successor entity)
                    
                    
                    302,770
                    
                    
                    
                    158,385
                    
                    
                    
                    461,155Final
      adjustment to goodwill related to the Merger
                    
                    
                    494
                    
                    
                    
                    (529
                    )
                    
                    
                    (35
                    )Adjustment
      to goodwill for acquisitions(2)
                    
                    
                    (5,985
                    )
                    
                    
                    11,428
                    
                    
                    
                    5,443Impact
      of foreign currency translation
                    
                    
                    (1,102
                    )
                    
                    
                    (11,209
                    )
                    
                    
                    (12,311
                    )Balance
      at March 31, 2009 (successor entity)
                    
                    $
                    296,177
                    
                    
                    $
                    158,075
                    
                    
                    $
                    454,252





(1)  The
predecessor entity goodwill has been written off in purchase accounting for the
Merger.


(2)  Goodwill
was adjusted primarily due to finalizing purchase accounting for the Gaisler
acquisition in the amount of $(6.2) million and the VI Tech acquisition in the
amount of $11.4 million.





5.
            Restructuring
      Charges





In fiscal
2008, we initiated actions to restructure our U.K. business units by further
consolidating our manufacturing, research and development and selling, general
and administrative activities. In addition, we initiated a restructuring in our
Whippany, New Jersey, component manufacturing facility to address a slowdown in
sales of its integrated products line.  These actions resulted in the
termination of approximately 151 employees, which resulted in restructuring
costs, principally severance, for the periods from August 15, 2007 to March 31,
2008 and July 1, 2007 to August 14, 2007 of $1.8 million ($486,000 in cost of
sales, $498,000 in selling, general and administrative costs and $820,000 in
research and development costs) and $3.8 million ($1.6 million in selling,
general and administrative costs and $2.2 million in research and development
costs), respectively. Substantially all of the workforce reduction costs were
paid prior to June 30, 2008.  In May 2008, we incurred other
restructuring charges including $2.6 million of accrued contractual commitments
under operating leases for two facilities in the U.K. that we exited, which will
be paid through December 2010. In addition, approximately $485,000 of fixed
asset impairment charges were recorded in selling, general and administrative
costs in the fourth quarter of fiscal 2008 for the write-off of leasehold
improvements in the abandoned facilities.


- 17
-





For the
nine months ended March 31, 2009, in connection with continued restructuring
activities of certain manufacturing operations, we incurred $2.8 million of
severance costs for an additional 61 employees terminated primarily in our U.K.
business unit ($2.0 million in cost of sales, $463,000 in selling, general and
administrative costs and $303,000 in research and development
costs).





The
following table sets forth the charges and payments related to the restructuring
liability for the periods indicated:





Balance
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          BalanceJune
      30,
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          March
      31,2008
                          
                          
                          Nine
      Months Ended March 31, 2009
                          
                          
                          2009Effect
      ofRestructuring
                          
                          
                          
                          
                          
                          
                          
                          
                          foreign
                          
                          
                          RestructuringLiability
                          
                          
                          Net
      Additions
                          
                          
                          Cash
      Payments
                          
                          
                          currency
                          
                          
                          Liability(In
      thousands)Work
      forcereduction
                          
                          $
                          12
                          
                          
                          $
                          2,792
                          
                          
                          $
                          (2,334
                          )
                          
                          $
                          (4
                          )
                          
                          $
                          466Other
                          
                          
                          3,242
                          
                          
                          
                          -
                          
                          
                          
                          (902
                          )
                          
                          
                          (863
                          )
                          
                          
                          1,477Total
                          
                          $
                          3,254
                          
                          
                          $
                          2,792
                          
                          
                          $
                          (3,236
                          )
                          
                          $
                          (867
                          )
                          
                          $
                          1,943





6.
            Inventories





Inventories
consist of the following:





March
      31,
                  
                  
                  June
      30,2009
                  
                  
                  2008(In
      thousands)Raw
      materials
                  
                  $
                  64,421
                  
                  
                  $
                  64,533Work
      in process
                  
                  
                  52,868
                  
                  
                  
                  41,056Finished
      goods
                  
                  
                  20,565
                  
                  
                  
                  29,302$
                  137,854
                  
                  
                  $
                  134,891





7.
            Product
      Warranty




We
warrant our products against defects in design, materials and workmanship,
generally for one year from their date of shipment. A provision for estimated
future costs relating to these warranties is recorded when the related revenue
is recognized and is included in cost of sales. Quarterly we analyze our
warranty liability for reasonableness based on a 15-month history of warranty
costs incurred, the nature of the products shipped subject to warranty and
anticipated warranty trends.


- 18
-





Activity
related to our product warranty liability, which is reflected in accrued
expenses and other current liabilities in the accompanying consolidated balance
sheets, was as follows:





Nine
      Months
                  
                  
                  August
      15, 2007
                  
                  
                  July
      1, 2007Ended
                  
                  
                  to
                  
                  
                  toMarch
      31,
                  
                  
                  March
      31,
                  
                  
                  August
      14,2009
                  
                  
                  2008
                  
                  
                  2007Successor
                  
                  
                  Successor
                  
                  
                  Predecessor(In
      thousands)Balance
      at beginning of period
                  
                  $
                  2,944
                  
                  
                  $
                  3,002
                  
                  
                  $
                  2,929Provision
      for warranty obligations
                  
                  
                  2,028
                  
                  
                  
                  2,136
                  
                  
                  
                  469Cost
      of warranty obligations
                  
                  
                  (2,147
                  )
                  
                  
                  (2,115
                  )
                  
                  
                  (394
                  )Foreign
      currency impact
                  
                  
                  (285
                  )
                  
                  
                  7
                  
                  
                  
                  (2
                  )Balance
      at end of period
                  
                  $
                  2,540
                  
                  
                  $
                  3,030
                  
                  
                  $
                  3,002





8.
            Derivative
      Financial Instruments





We
adopted SFAS No. 161 as of January 1, 2009. The adoption did not have an impact
on our consolidated financial statements as it is a disclosure-only standard. We
address certain financial exposures through a controlled program of risk
management that includes the use of derivative financial instruments. We enter
into interest rate swap derivatives to manage the effects of interest rate
movements on portions of our debt. We also enter into foreign currency forward
contracts, not designated as hedging instruments, to protect us from
fluctuations in exchange rates.





The fair
values of our derivative financial instruments included in the condensed
consolidated balance sheet as of March 31, 2009 are presented as
follows:





Asset
      Derivatives
                    
                    Liability
      DerivativesBalance
      Sheet
                    
                    
                    
                    Balance
      Sheet(In
      thousands)
                    Location
                    
                    Fair
      Value(1)
                    
                    Location
                    
                    Fair
      Value(1)Derivatives
      designated as hedginginstruments:Interest
      rate swap contractsNot
      applicable
                    
                    $
                    -
                    
                    Other
      long-termliabilities
                    
                    $
                    17,436Derivatives
      not designated as hedginginstruments:Foreign
      currency forward contractsNot
      applicable
                    
                    
                    -
                    
                    Accrued
      expenses andother current
      liabilities
                    
                    
                    33Total
      Derivatives
                    
                    
                    $
                    -
                    
                    
                    
                    $
                    17,469





(1)  See
Note 9 for further information about how the fair values of derivative assets
and liabilities are determined.


- 19
-





The
amounts of the gains and losses related to our derivative financial instruments
designated as hedging instruments are presented as follows:





Location
      of Gain or (Loss)
                                                      
                                                      Amount
      of Gain or (Loss)Amount
      of Gain or (Loss)
                                                      
                                                      Reclassified
      from
                                                      
                                                      Reclassified
      fromRecognized
      in OCI on Derivative
                                                      
                                                      Accumulated
      OCI into
                                                      
                                                      Accumulated
      OCI into(In
      thousands)
                                                      
                                                      (Effective
      Portion)(1)
                                                      
                                                      Income
      (Effective Portion)
                                                      
                                                      Income
      (Effective Portion)Three
      Months
                                                      
                                                      Nine
      Months
                                                      
                                                      
                                                      
                                                      Three
      Months
                                                      
                                                      Nine
      MonthsDerivatives
      in Cash Flow
                                                      
                                                      Ended
                                                      
                                                      Ended
                                                      
                                                      
                                                      
                                                      Ended
                                                      
                                                      EndedHedging
      Relationships
                                                      
                                                      March
      31, 2009
                                                      
                                                      March 31, 2009
                                                      
                                                      
                                                      
                                                      March 31, 2009
                                                      
                                                      March 31, 2009Interest
      rate swap contracts
                                                      
                                                      $
                                                      479
                                                      
                                                      $
                                                      (12,396
                                                      )
                                                      
                                                      Interest
      expense
                                                      
                                                      $
                                                      (2,079
                                                      )
                                                      
                                                      $
                                                      (4,161
                                                      )




(1)  See
Note 12 for additional information on changes to other accumulated comprehensive
income (loss).





The
amounts of the gains and losses related to our derivative financial instruments
not designated as hedging instruments are presented as follows:


Location
      of Gain or (Loss)
                                        
                                        Amount
      of Gain or (Loss)Recognized
      in Earnings on
                                        
                                        Recognized
      in Earnings on(In
      thousands)
                                        Derivative
                                        
                                        DerivativeThree
      Months
                                        
                                        Nine
      MonthsEnded
                                        
                                        EndedMarch
      31, 2009
                                        
                                        March
      31, 2009Derivatives
      Not Designated as HedgingInstruments:Foreign
      currency forward contracts
                                        Other
      income (expense)
                                        
                                        $
                                        759
                                        
                                        $
                                        (46)


Interest
Rate Swap Cash-Flow Hedges





We enter
into interest rate swap contracts to manage the effects of interest rate
movements on portions of our debt. Such contracts effectively fix the borrowing
rates on floating rate debt to limit the exposure against the risk of rising
rates.  We do not enter into interest rate swap contracts for
speculative purposes and we have entered into transactions with counterparties
that are rated investment grade. Our interest rate swap contracts, all of which
were entered into in fiscal 2008 for an aggregate notional amount of $475
million, have varying maturities through February 2011.





Foreign
      Currency Contract Derivatives





Foreign
currency contracts are used to protect us from fluctuations in exchange rates.
We enter into foreign currency contracts, which are not designated as hedges.
Thus the change in fair value is included in income as it occurs, within other
income (expense). As of March 31, 2009, we had $10.7 million of notional value
foreign currency forward contracts maturing through June 2009. Notional amounts
do not quantify risk or represent assets or liabilities of the Company, but are
used in the calculation of cash settlements under the contracts.





9.
            Fair
      Value Measurements





We
adopted the provisions of SFAS 157 for financial assets and liabilities as of
July 1, 2008 and, as of March 31, 2009, have recorded a $2.4 million valuation
allowance against the cost of our auction rate securities.  SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability, in the principal or most advantageous market for the
asset or liability, in an orderly transaction between market participants at the
measurement date.  SFAS 157 also establishes a fair value hierarchy
which requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value.




- 20
-






Level
      1:
                    Inputs
      based on quoted market prices for identical assets or liabilities in
      active markets at the measurement date.Level
      2:
                    Observable
      inputs other than quoted prices included in Level 1, such as quoted prices
      for similar assets and liabilities in active markets; quoted prices for
      identical or similar assets and liabilities in markets that are not
      active; or other inputs that are observable or can be corroborated by
      observable market data.Level
      3:
                    Inputs
      reflect management’s best estimate of what market participants would use
      in pricing the asset or liability at the measurement date.  The
      inputs are unobservable in the market and significant to the instruments
      valuation.





The
following table presents for each hierarchy level, financial assets and
liabilities measured at fair value on a recurring basis as of March 31,
2009:





Quoted
      Prices inActive
      Markets
                        
                        
                        Significant
      Other
                        
                        
                        Significantfor
      Identical
                        
                        
                        Observable
                        
                        
                        UnobservableAssets
                        
                        
                        Inputs
                        
                        
                        Inputs(Level
      1)
                        
                        
                        (Level
      2)
                        
                        
                        (Level
      3)
                        
                        
                        Total(In
      thousands)Assets:Non-current
      marketable securities
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        17,523
                        
                        
                        $
                        17,523Liabilities:Foreign
      currency forwardcontracts
                        
                        $
                        -
                        
                        
                        $
                        33
                        
                        
                        $
                        -
                        
                        
                        $
                        33Interest
      rate swap contracts
                        
                        
                        -
                        
                        
                        
                        17,436
                        
                        
                        
                        -
                        
                        
                        
                        17,436Total
      Liabilities
                        
                        $
                        -
                        
                        
                        $
                        17,469
                        
                        
                        $
                        -
                        
                        
                        $
                        17,469




The
following table presents the changes in the carrying value of the Company’s
assets measured at fair value on a recurring basis using significant
unobservable inputs (Level 3), as defined in SFAS No. 157, for the nine months
ended March 31, 2009:





Fair
      Value MeasurementsUsing
      SignificantUnobservable
      Inputs(Level 3)AuctionRateSecurities(In
      thousands)Balance
      at June 30, 2008
                      
                      $
                      -Transfers
      to Level 3
                      
                      
                      19,945Total
      unrealized losses in accumulatedother comprehensive
      income (loss)
                      
                      
                      (2,422
                      )Balance
      at March 31, 2009
                      
                      $
                      17,523





Non-Current Marketable
Securities – Non-current marketable securities consist of auction rate
securities that currently have no active market from which we could obtain
pricing.  Since we adopted SFAS 157 on July 1, 2008, auction rate
securities have been classified as Level 3 as their valuation requires
substantial judgment and estimation of factors that are not currently observable
in the market due to the lack of trading in the securities.  Since
February 2008, when auctions for these securities began to fail, we have
redeemed $26.5 million of auction rate securities at par. To date, we have
collected all interest payments on all our auction rate securities when due.
Furthermore, we have the intent and are able to hold these securities until the
credit markets recover, or until maturity, if
necessary.   However, based on a discounted cash flow analysis,
which considered, among other items, the collateral underlying the securities,
the credit worthiness of the issuer, the timing of future cash flows and
liquidity risks, we have recorded a $2.4 million valuation allowance against the
auction rate securities.


- 21
-





Foreign Currency Forward
Contracts – The fair value of our foreign currency forward contracts were
valued using a pricing model with all significant inputs based on observable
market data such as measurement date spot and forward rates.





Interest Rate Swap Contracts –
The fair value of our outstanding interest rate swap contracts were based on
valuations received from the counterparties and corroborated by measurement date
equivalent swap rates.





10.
            Long
      Term Debt and Credit Agreements





On August
7, 2008, our 11.75% exchangeable senior unsecured loan in the amount of $225
million with an ultimate maturity on February 15, 2015 was refinanced with
unsecured senior notes with the same interest rate and maturity
date.  We may prepay the senior notes commencing August 15, 2011 at
105.875% of the principal amount prepaid, which decreases to 102.938% on August
15, 2012 and to 100% on or after August 15, 2013.  In addition, we may
redeem up to 35% of the original aggregate principal balance of the senior
notes, at any time prior to August 15, 2010, with the net proceeds of certain
equity offerings at 111.75% of the principal amount redeemed.  On
January 21, 2009, the SEC declared effective our exchange offer registration
statement which resulted in the exchange of the unregistered unsecured senior
notes for publicly registered 11.75% unsecured senior notes due February 15,
2015 with substantially identical terms as the exchanged notes.





As of
March 31, 2009, we are in compliance with all of the covenants contained in our
loan agreements.





In
connection with our credit facilities, we capitalized deferred financing costs
of $340,000, $27.4 million and $477,000 for the nine months ended March 31, 2009
and the periods August 15, 2007 to March 31, 2008 and July 1, 2007 to August 14,
2007, respectively, primarily consisting of facility, legal and advisory
fees.  We are amortizing these costs over the terms of the related
facilities.  For the three months ended March 31, 2009 and 2008 we
amortized $1.2 million and $1.6 million, respectively, to interest
expense.  For the nine months ended March 31, 2009 and the periods
August 15, 2007 to March 31, 2008 and July 1, 2007 to August 14, 2007, we
amortized $3.6 million, $2.8 million and $217,000, respectively, to interest
expense.





Interest
paid was $44.1 million for the nine months ended March 31, 2009, $35.7 million
for the period August 15, 2007 to March 31, 2008, and $57,000 for the period
July 1, 2007 to August 14, 2007.


- 22
-





The fair
value of our debt instruments are summarized as follows:





March
      31, 2009Carrying
                  
                  
                  EstimatedAmount
                  
                  
                  Fair
      Value(In
      thousands)Senior
      secured B-1 term loan
                  
                  $
                  393,857
                  
                  
                  $
                  248,130Senior
      secured B-2 term loan
                  
                  
                  123,080
                  
                  
                  
                  60,309Senior
      unsecured loan
                  
                  
                  225,000
                  
                  
                  
                  140,625Senior
      subordinated unsecured term loan
                  
                  
                  143,253
                  
                  
                  
                  75,208Other
                  
                  
                  1,406
                  
                  
                  
                  1,406Total
      debt
                  
                  $
                  886,596
                  
                  
                  $
                  525,678





The
carrying value of debt of $878.8 million as of June 30, 2008 had a fair value of
$804.2 million.





The
estimated fair values of each of our debt instruments are based on quoted market
prices for the same or similar issues. Fair value estimates related to our debt
instruments are made at a specific point in time based on relevant market
information.  These estimates are subjective in nature and involve
uncertainties and matters of significant judgments and therefore cannot be
determined with precision.  Changes in assumptions could significantly
affect the estimates.





11.
            Stockholder’s
      Equity





Share
Based Compensation




Stock
Options





All of
our Predecessor Entity stock option plans were terminated on August 15, 2007.
The Merger agreement provided that all stock options were cancelled and
converted into the right to receive a cash payment equal to the number of shares
of our common stock underlying the options multiplied by that amount, if any, by
which $14.50 exceeded the exercise price, without interest and less any
withholding taxes.  On August 15, 2007 we paid $43.9 million to option
holders to cancel all options outstanding in connection with the
Merger.





Member
Interests





On August
15, 2007 certain members of our management were granted Class B member interests
in a limited liability company (parent LLC) that is the ultimate parent of the
Company, and which owns all of the common stock of the Parent. The parent LLC is
a holding company with no operations or employees of its own. The parent LLC has
two classes of membership interests, Class A and Class B. Our non-management
equity investors, or their affiliates, the selling shareholders of VI Tech and
Company employees that made equity investments to partially fund the Merger are
Class A members and Class B members consist of Company employees. Pursuant to
the terms of the limited liability company operating agreement governing the
parent LLC, the holders of Class B member interests are entitled to receive a
percentage of all distributions, if any, made by the parent LLC after (x) the
holders of the Class A members in the parent LLC have received a return of their
invested capital, plus a 12% per annum internal rate of return (compounded
annually) on their invested capital and (y) certain members of our management
that received Class A interests for their capital contributions have received a
special distribution in the aggregate amount of $3.2 million, together with a
12% per annum internal rate of return (compounded annually). The Class B member
interests are non-transferable and vest ratably over five years, with any
unvested interests reverting to the holders of Class A interests in the event
they are forfeited or repurchased.


- 23
-





Compensation
expense attributable to share based compensation was $489,000 ($308,000 after
tax) and $488,000 ($307,000 after tax) for the three months ended March 31, 2009
and 2008, respectively, $1.5 million ($924,000 after tax) for the nine months
ended March 31, 2009, $2.6 million ($1.7 million after tax) for the period
August 15, 2007 to March 31, 2008 and $214,000 ($135,000 after tax) for the
period July 1, 2007 to August 14, 2007.





A summary
of the changes to outstanding stock options from July 1, 2007 to August 15, 2007
is presented below:





WeightedAverageExerciseShares
                  
                  
                  Price(In
      thousands)Outstanding
      at June 30, 2007
                  
                  
                  13,003
                  
                  
                  $
                  12.37Granted
                  
                  
                  -
                  
                  
                  
                  -Forfeited
                  
                  
                  (27
                  )
                  
                  
                  19.30Expired
                  
                  
                  -
                  
                  
                  
                  -Exercised
                  
                  
                  (51
                  )
                  
                  
                  11.39Cancelled
                  
                  
                  (3,825
                  )
                  
                  
                  18.74Paid
      out on Merger
                  
                  
                  (9,100
                  )
                  
                  
                  9.68Outstanding
      at August 15, 2007
                  
                  
                  -





Cash
received from stock option exercises was $583,000 for the period July 1, 2007 to
August 14, 2007.  The tax benefit received from stock option exercises
was $16.1 million for the period August 15, 2007 to March 31, 2008 and $41,000
for the period July 1, 2007 to August 14, 2007.





12.           Comprehensive
Income




The
components of comprehensive income (loss) are as follows:





Three
      Months
                  
                  
                  Three
      Months
                  
                  
                  Nine
      Months
                  
                  
                  August
      15, 2007
                  
                  
                  July
      1, 2007Ended
                  
                  
                  Ended
                  
                  
                  Ended
                  
                  
                  to
                  
                  
                  toMarch
      31,
                  
                  
                  March
      31,
                  
                  
                  March
      31,
                  
                  
                  March
      31,
                  
                  
                  August
      14,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008
                  
                  
                  2007Successor
                  
                  
                  Successor
                  
                  
                  Successor
                  
                  
                  Successor
                  
                  
                  Predecessor(In
      thousands)Net
      income (loss)
                  
                  $
                  (13,734
                  )
                  
                  $
                  (16,405
                  )
                  
                  $
                  (24,738
                  )
                  
                  $
                  (96,498
                  )
                  
                  $
                  (16,916
                  )Unrealized
      gain (loss) on interest rate swap contracts, net of tax provision
      (benefit) of $282,000, ($1.5 million), ($7.3 million), ($2.9 million) and
      $0
                  
                  
                  479
                  
                  
                  
                  (2,491
                  )
                  
                  
                  (12,396
                  )
                  
                  
                  (4,952
                  )
                  
                  
                  -Valuation
      allowance against non-current marketable securities
                  
                  
                  (219
                  )
                  
                  
                  -
                  
                  
                  
                  (2,422
                  )
                  
                  
                  -
                  
                  
                  
                  -Foreign
      currency translation adjustment
                  
                  
                  (4,467
                  )
                  
                  
                  (1,030
                  )
                  
                  
                  (60,447
                  )
                  
                  
                  (1,641
                  )
                  
                  
                  (497
                  )Total
      comprehensive income (loss)
                  
                  $
                  (17,941
                  )
                  
                  $
                  (19,926
                  )
                  
                  $
                  (100,003
                  )
                  
                  $
                  (103,091
                  )
                  
                  $
                  (17,413
                  )


- 24
-





Accumulated
other comprehensive income (loss) is as follows:





UnrealizedGain
      (Loss)
                  
                  
                  Valuation
                  
                  
                  Minimumon
      Interest
                  
                  
                  Allowance
      Against
                  
                  
                  Pension
                  
                  
                  ForeignRate
      Swap
                  
                  
                  Non-Current
                  
                  
                  Liability
                  
                  
                  CurrencyAgreements
                  
                  
                  Marketable
                  
                  
                  Adjustment
                  
                  
                  Translation
                  
                  
                  Total(net
      of tax)
                  
                  
                  Securities
                  
                  
                  (net
      of tax)
                  
                  
                  Adjustment
                  
                  
                  (net
      of tax)(In
      thousands)Balance,
      June 30, 2008
                  
                  $
                  1,411
                  
                  
                  $
                  -
                  
                  
                  $
                  (6
                  )
                  
                  $
                  (998
                  )
                  
                  $
                  407Nine
      months' activity
                  
                  
                  (12,396
                  )
                  
                  
                  (2,422
                  )
                  
                  
                  -
                  
                  
                  
                  (60,447
                  )
                  
                  
                  (75,265
                  )Balance,
      March 31, 2009
                  
                  $
                  (10,985
                  )
                  
                  $
                  (2,422
                  )
                  
                  $
                  (6
                  )
                  
                  $
                  (61,445
                  )
                  
                  $
                  (74,858
                  )





The
foreign currency translation adjustments are not adjusted for income taxes as
they relate to indefinite investments in non-U.S. subsidiaries.  The
valuation allowance for non-current marketable securities is not adjusted for
income taxes as it would create a capital loss carryforward upon realization for
which we would record a valuation allowance against the related deferred tax
asset.





13.
            Legal
      Matters





In March
2005, we sold the net assets of our shock and vibration control device
manufacturing business (“VMC”).  Under the terms of the sale
agreements, we retained certain liabilities relating to adverse environmental
conditions that existed at the premises occupied by VMC as of the date of
sale.  We recorded a liability for the estimated remediation costs
related to adverse environmental conditions that existed at the VMC premises
when it was sold.  The accrued environmental liability at March 31,
2009 is $1.0 million, of which $322,000 is expected to be paid within one
year.





During
the quarter ended March 31, 2007, we became aware that certain RadHard
bidirectional multipurpose transceivers sold by us since 1999 may have been
subject to the licensing jurisdiction of the U.S. Department of State in
accordance with the International Traffic in Arms Regulations (“ITAR”).
Accordingly, we filed a Voluntary Disclosure with the Directorate of Defense
Trade Controls, Department of State, describing the details of the possible
inadvertent misclassification. Simultaneously, we filed a Commodity Jurisdiction
request providing detailed information and data supporting our contention that
the product is not subject to ITAR and requesting a determination that such
product is not ITAR controlled. By letter dated November 15, 2007, we were
informed that the U.S. Department of State had determined in response to our
Commodity Jurisdiction request, that the product is subject to the licensing
jurisdiction of the U.S. Department of State in accordance with ITAR. We
requested reconsideration of this determination. On February 7, 2008, we filed
an addendum to the above referenced Voluntary Disclosure advising the
Directorate of Defense Trade Controls that other products sold by us similar in
nature to the transceiver described above may also be subject to the ITAR. The
Directorate of Defense Trade Controls agreed to extend our time to file such
addendum to the Voluntary Disclosure until a decision was rendered with respect
to our request for reconsideration of the determination in connection with the
above-referenced Commodity Jurisdiction request. On August 5, 2008, we received
a letter from the Office of Defense Trade Controls Compliance (“DTCC”)
requesting that we provide documentation and/or information relating to our
compliance initiatives after November 15, 2007 as well as the results of any
product reviews conducted by us, and indicating that a civil penalty against us
could be warranted in connection with this matter following the review of such
materials. We have provided all of the materials and documentation requested by
the DTCC.  Our request for reconsideration was denied by the
Directorate of Defense Trade Controls on August 19, 2008 which determined that
the product is subject to the licensing jurisdiction of the Department of State
in accordance with ITAR. Accordingly, on September 18, 2008, we filed an
addendum to our Voluntary Disclosure identifying other products that may have
been subject to the licensing jurisdiction of the U.S. Department of State in
accordance with the ITAR but were inadvertently misclassified.  At
this time it is not possible to determine whether any fines or other penalties
will be asserted against us, or the materiality of any outcome.


- 25
-





During
May 2008, we became further aware that a certain product sold by our KDI
subsidiary may have inadvertently been misclassified as not ITAR controlled. On
August 5, 2008, we filed a Voluntary Disclosure with the Directorate of Defense
Trade Controls, Department of State, describing the inadvertent
misclassification of this product. In January 2009 we identified another product
that should have been included in the August 5, 2008 disclosure.  We
filed an initial disclosure with the Department of State identifying this
product, and the Department of State instructed us to file an amendment to the
August 5, 2008 disclosure.  That amendment was filed in April 2009. At
this time it isnot
possible to determine whether any fines or other penalties will be asserted
against us with respect to the foregoing matters, or the materiality of any
outcome.





During
November 2008, we became aware that our Hauppauge facility had shipped two ITAR
controlled products to a foreign customer, but inadvertently had noted on the
requisite paperwork that only one ITAR controlled product was included in the
shipment. We filed a voluntary disclosure in January 2009, and that disclosure
has been closed by the State Department and no fine or penalty was
assessed.




During
January 2009, we became aware that a certain product sold by our Powell
subsidiary, for which an ITAR marketing license had been properly issued by the
U.S. Department of State, mistakenly was taken out of the country by an employee
without first obtaining the required U.S. Customs signature upon
departure.   We have filed an initial disclosure relating to this
issue and will file a detailed disclosure by June 6, 2009.  At this
time it is not possible to determine whether any fines or other penalties will
be asserted against us, or the materiality of any outcome.





In the
third quarter of fiscal 2009, we became aware that a product sold and licensed
to Raytheon U.K. was actually forwarded to an end user in Saudi
Arabia.  Aeroflex did not identify that end user on the initial
license application, so the product in question was forwarded to Saudi Arabia
when it was only authorized to travel as far as the U.K.  We filed an
initial disclosure concerning this matter in April 2009.  At this time
it is not possible to determine whether any fines or penalties will be asserted
against us, or the materiality of any outcome.





In March
2009 we became aware that Aeroflex’s subsidiary, Micrometrics, had inadvertently
misclassified a component and shipped it to a foreign customer in Italy under
the jurisdiction of the Export Administration Regulations (“EAR”) when it should
have been shipped under the jurisdiction of the ITAR.  We filed an
initial voluntary disclosure concerning this matter in April 2009.  At
this time it is not possible to determine whether any fines or penalties will be
asserted against us, or the materiality of any outcome.





An
amended class action complaint was filed against us and the Predecessor Entity’s
board of directors on June 20, 2007 in the Supreme Court of the State of New
York, Nassau County. The complaint alleges that the board breached its fiduciary
duties to our stockholders (i) by issuing a preliminary proxy statement on June
5, 2007 that was issued in connection with seeking stockholder approval of the
Merger and (ii) in approving certain amendments, that were allegedly beyond the
scope of our corporate powers, to our SERP and the employment agreements of
defendants Harvey R. Blau, our then Chairman and Chief Executive Officer, and
Leonard Borow, our then President and Chief Operating Officer and currently, the
Successor Entity’s President and Chief Executive Officer. We are currently in
settlement discussions with the plaintiffs and have accrued an insignificant
liability for the settlement.


- 26
-





We are
also involved in various other claims and legal actions that arise in the
ordinary course of business. We do not believe that the ultimate resolution of
any of these actions will have a material adverse effect on our financial
position, results of operations, liquidity or capital resources.





14.
            Business
      Segments





Our
business segments and major products included in each segment, are as
follows:





Microelectronic
Solutions (“AMS”)





·
            Microelectronic
      Components, Sub-assemblies and
Modules


·
            Integrated
      Circuits


·
            Motion
      Control Systems





Test
Solutions (“ATS”)





·
            Instrument
      Products and Test Systems





We are a
manufacturer of advanced technology systems and components for commercial
industry, government and defense contractors. Approximately 35% of our sales for
the nine months ended March 31, 2009, 29% of our sales for the period August 15,
2007 to March 31, 2008 and 21% for the period July 1, 2007 to August 14, 2007
were to agencies of the United States government or to prime defense contractors
or subcontractors of the United States government. No one customer constituted
more than 10% of sales during any of the periods presented. Inter-segment sales
were not material and have been eliminated from the tables below.





The
majority of our operations are located in the United States; however, we also
have operations in Europe and Asia, with our most significant international
operations in the U.K.  Net sales from facilities located in the U.K.
were approximately $32.2 million and $37.9 million for the three months ended
March 31, 2009 and 2008, respectively, and $100.0 million, $114.7 million and
$11.7 million for the nine months ended March 31, 2009 and the periods August
15, 2007 to March 31, 2008 and July 1, 2007 to August 14, 2007, respectively.
Total assets of the U.K. operations were $167.3 million and $237.5 million as of
March 31, 2009 and June 30, 2008, respectively.





Net
sales, based on the customers’ locations, attributed to the United States and
other regions are as follows:





Three
      Months
                  
                  
                  Three
      Months
                  
                  
                  Nine
      Months
                  
                  
                  August
      15, 2007
                  
                  
                  July
      1, 2007Ended
                  
                  
                  Ended
                  
                  
                  Ended
                  
                  
                  to
                  
                  
                  toMarch
      31,
                  
                  
                  March
      31,
                  
                  
                  March
      31,
                  
                  
                  March
      31,
                  
                  
                  August
      14,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008
                  
                  
                  2007(Successor)
                  
                  
                  (Successor)
                  
                  
                  (Successor)
                  
                  
                  (Successor)
                  
                  
                  (Predecessor)(In
      thousands)United
      States of America
                  
                  $
                  79,397
                  
                  
                  $
                  82,942
                  
                  
                  $
                  251,454
                  
                  
                  $
                  229,914
                  
                  
                  $
                  21,183Europe
      and Middle East
                  
                  
                  43,583
                  
                  
                  
                  36,318
                  
                  
                  
                  103,481
                  
                  
                  
                  97,604
                  
                  
                  
                  10,357Asia
      and Australia
                  
                  
                  14,201
                  
                  
                  
                  34,273
                  
                  
                  
                  75,263
                  
                  
                  
                  85,358
                  
                  
                  
                  6,242Other
      regions
                  
                  
                  2,258
                  
                  
                  
                  3,771
                  
                  
                  
                  6,901
                  
                  
                  
                  7,200
                  
                  
                  
                  439$
                  139,439
                  
                  
                  $
                  157,304
                  
                  
                  $
                  437,099
                  
                  
                  $
                  420,076
                  
                  
                  $
                  38,221





- 27
-





Selected
financial data by segment is as follows:





August
      15,Three
      Months
                
                
                Three
      Months
                
                
                Nine
      Months
                
                
                2007Ended
                
                
                Ended
                
                
                Ended
                
                
                through
                
                
                July
      1, 2007March
      31,
                
                
                March
      31,
                
                
                March
      31,
                
                
                March
      31,
                
                
                to
      August 14,2009
                
                
                2008
                
                
                2009
                
                
                2008
                
                
                2007(Successor)
                
                
                (Successor)
                
                
                (Successor)
                
                
                (Successor)
                
                
                (Predecessor)(In
      thousands)Net
      sales:Microelectronic
      solutions ("AMS")
                
                $
                70,232
                
                
                $
                77,380
                
                
                $
                208,564
                
                
                $
                197,279
                
                
                $
                19,017Test
      solutions ("ATS")
                
                
                69,207
                
                
                
                79,924
                
                
                
                228,535
                
                
                
                222,797
                
                
                
                19,204Net
      sales
                
                $
                139,439
                
                
                $
                157,304
                
                
                $
                437,099
                
                
                $
                420,076
                
                
                $
                38,221Segment
      adjusted operating income:-
      AMS
                
                $
                14,783
                
                
                $
                19,143
                
                
                $
                44,767
                
                
                $
                51,363
                
                
                $
                24-
      ATS
                
                
                8,700
                
                
                
                11,010
                
                
                
                34,304
                
                
                
                34,367
                
                
                
                (7,582
                )-
      General corporate expense
                
                
                (2,854
                )
                
                
                (2,088
                )
                
                
                (9,421
                )
                
                
                (5,497
                )
                
                
                (2,347
                )Adjusted
      operating income (loss)
                
                
                20,629
                
                
                
                28,065
                
                
                
                69,650
                
                
                
                80,233
                
                
                
                (9,905
                )Amortization
      of acquired intangibles-
      AMS
                
                
                (8,829
                )
                
                
                (12,621
                )
                
                
                (27,968
                )
                
                
                (31,464
                )
                
                
                (279
                )-
      ATS
                
                
                (6,127
                )
                
                
                (8,251
                )
                
                
                (19,578
                )
                
                
                (20,817
                )
                
                
                (1,413
                )Share
      based compensation-
      AMS
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (83
                )-
      ATS
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                95-
      Corporate
                
                
                (489
                )
                
                
                (488
                )
                
                
                (1,466
                )
                
                
                (2,634
                )
                
                
                (226
                )Restructuring
      charges-
      AMS
                
                
                -
                
                
                
                (402
                )
                
                
                -
                
                
                
                (402
                )
                
                
                --
      ATS
                
                
                (582
                )
                
                
                (355
                )
                
                
                (2,792
                )
                
                
                (1,400
                )
                
                
                (3,778
                )One-time
      lease termination costs-
      ATS
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (576
                )Merger
      related expenses - Corporate
                
                
                (815
                )
                
                
                (534
                )
                
                
                (3,621
                )
                
                
                (3,249
                )
                
                
                (1,319
                )Acquired
      in-process R&D costs-
      AMS
                
                
                (1,665
                )
                
                
                -
                
                
                
                (1,665
                )
                
                
                (15,700
                )
                
                
                --
      ATS
                
                
                (626
                )
                
                
                -
                
                
                
                (626
                )
                
                
                (8,640
                )
                
                
                -Current
      period impact of acquisition related adjustments:Inventory
      - AMS
                
                
                -
                
                
                
                (4,156
                )
                
                
                -
                
                
                
                (23,817
                )
                
                
                (57
                )Inventory
      - ATS
                
                
                -
                
                
                
                (1,495
                )
                
                
                -
                
                
                
                (15,151
                )
                
                
                -Depreciation
      - AMS
                
                
                (285
                )
                
                
                (293
                )
                
                
                (857
                )
                
                
                (732
                )
                
                
                -Depreciation
      - ATS
                
                
                (629
                )
                
                
                (823
                )
                
                
                (2,043
                )
                
                
                (2,058
                )
                
                
                -Depreciation
      - Corporate
                
                
                (55
                )
                
                
                (55
                )
                
                
                (165
                )
                
                
                (137
                )
                
                
                -Deferred
      revenue - ATS
                
                
                (64
                )
                
                
                (576
                )
                
                
                (240
                )
                
                
                (2,235
                )
                
                
                -Company
      sale transaction expenses
                
                
                -
                
                
                
                (850
                )
                
                
                -
                
                
                
                (32,459
                )
                
                
                (3,717
                )Operating
      income (loss) (GAAP)
                
                
                463
                
                
                
                (2,834
                )
                
                
                8,629
                
                
                
                (80,662
                )
                
                
                (21,258
                )Interest
      expense
                
                
                (20,566
                )
                
                
                (20,536
                )
                
                
                (63,031
                )
                
                
                (53,649
                )
                
                
                (275
                )Other
      income (expense), net
                
                
                (47
                )
                
                
                1,960
                
                
                
                12,366
                
                
                
                3,881
                
                
                
                294Income
      (loss) from continuing operations before income taxes
                
                $
                (20,150
                )
                
                $
                (21,410
                )
                
                $
                (42,036
                )
                
                $
                (130,430
                )
                
                $
                (21,239
                )


- 28
-





Management
evaluates the operating results of the two segments based upon pre-tax operating
income, before costs related to restructuring, lease termination charges,
amortization of acquired intangibles, share-based compensation, acquired
in-process research and development costs, Company Sale Transaction expenses,
merger related expenses and the impact of any acquisition related
adjustments.





15.
            Guarantor/Non-Guarantor
      Financial Information





The
following supplemental condensed consolidating financial information sets forth,
on an unconsolidated basis, the balance sheets and the statements of operations,
and cash flows for Aeroflex Incorporated (the “Parent Company”), the Guarantor
Subsidiaries and, on a combined basis, the Non-Guarantor
Subsidiaries.  The supplemental condensed consolidating financial
information reflects, for all fiscal periods presented, the investments of the
Parent Company in the Guarantor Subsidiaries as well as the investments of the
Parent Company and the Guarantor Subsidiaries in the Non-Guarantor Subsidiaries,
in all cases, using the equity method.  The Parent Company’s purchase
price allocation adjustments, including applicable intangible assets, arising
from business acquisitions have been pushed down to the applicable subsidiary
columns (see Notes 3 and 4).





Condensed
Consolidating Statement of Operations


For
the Three Months Ended March 31, 2009


(In
thousands)





Subsidiary
                
                
                SubsidiaryParent
                
                
                Guarantors
                
                
                Non-Guarantors
                
                
                Eliminations
                
                
                ConsolidatedNet
      sales
                
                $
                -
                
                
                $
                100,972
                
                
                $
                40,784
                
                
                $
                (2,317
                )
                
                $
                139,439Cost
      of sales
                
                
                -
                
                
                
                52,418
                
                
                
                22,170
                
                
                
                (1,754
                )
                
                
                72,834Gross
      profit
                
                
                -
                
                
                
                48,554
                
                
                
                18,614
                
                
                
                (563
                )
                
                
                66,605Selling,
      general and administrative costs
                
                
                4,214
                
                
                
                18,790
                
                
                
                7,950
                
                
                
                -
                
                
                
                30,954Research
      and development costs
                
                
                -
                
                
                
                11,980
                
                
                
                5,961
                
                
                
                -
                
                
                
                17,941Amortization
      of acquired intangibles
                
                
                -
                
                
                
                12,706
                
                
                
                2,250
                
                
                
                -
                
                
                
                14,956Acquired
      in-process R&D costs
                
                
                -
                
                
                
                626
                
                
                
                1,665
                
                
                
                -
                
                
                
                2,291Operating
      income (loss)
                
                
                (4,214
                )
                
                
                4,452
                
                
                
                788
                
                
                
                (563
                )
                
                
                463Other
      income (expense):Interest
      expense
                
                
                (20,542
                )
                
                
                (23
                )
                
                
                (1
                )
                
                
                -
                
                
                
                (20,566
                )Other
      income (expense), net
                
                
                711
                
                
                
                180
                
                
                
                (938
                )
                
                
                -
                
                
                
                (47
                )Intercompany
      charges
                
                
                18,433
                
                
                
                (18,115
                )
                
                
                (318
                )
                
                
                -
                
                
                
                -Income
      (loss) from continuing operations before income taxes
                
                
                (5,612
                )
                
                
                (13,506
                )
                
                
                (469
                )
                
                
                (563
                )
                
                
                (20,150
                )Provision
      (benefit) for income taxes
                
                
                (2,805
                )
                
                
                (7,207
                )
                
                
                3,436
                
                
                
                160
                
                
                
                (6,416
                )Income
      (loss) from continuing operations
                
                
                (2,807
                )
                
                
                (6,299
                )
                
                
                (3,905
                )
                
                
                (723
                )
                
                
                (13,734
                )Equity
      income (loss) of subsidiaries
                
                
                (10,927
                )
                
                
                (3,439
                )
                
                
                -
                
                
                
                14,366
                
                
                
                -Net
      income (loss)
                
                $
                (13,734
                )
                
                $
                (9,738
                )
                
                $
                (3,905
                )
                
                $
                13,643
                
                
                $
                (13,734
                )





- 29
-




Condensed
Consolidating Statement of Operations


For
the Three Months Ended March 31, 2008


(In
thousands)





Subsidiary
                  
                  
                  SubsidiaryParent
                  
                  
                  Guarantors
                  
                  
                  Non-Guarantors
                  
                  
                  Eliminations
                  
                  
                  ConsolidatedNet
      sales
                  
                  $
                  -
                  
                  
                  $
                  116,183
                  
                  
                  $
                  42,862
                  
                  
                  $
                  (1,741
                  )
                  
                  $
                  157,304Cost
      of sales
                  
                  
                  -
                  
                  
                  
                  65,434
                  
                  
                  
                  24,295
                  
                  
                  
                  (1,661
                  )
                  
                  
                  88,068Gross
      profit
                  
                  
                  -
                  
                  
                  
                  50,749
                  
                  
                  
                  18,567
                  
                  
                  
                  (80
                  )
                  
                  
                  69,236Selling,
      general and administrative costs
                  
                  
                  3,165
                  
                  
                  
                  18,823
                  
                  
                  
                  10,206
                  
                  
                  
                  -
                  
                  
                  
                  32,194Research
      and development costs
                  
                  
                  -
                  
                  
                  
                  11,069
                  
                  
                  
                  7,085
                  
                  
                  
                  -
                  
                  
                  
                  18,154Amortization
      of acquired intangibles
                  
                  
                  -
                  
                  
                  
                  18,130
                  
                  
                  
                  2,742
                  
                  
                  
                  -
                  
                  
                  
                  20,872Company
      sale transaction expenses
                  
                  
                  850
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  850Operating
      income (loss)
                  
                  
                  (4,015
                  )
                  
                  
                  2,727
                  
                  
                  
                  (1,466
                  )
                  
                  
                  (80
                  )
                  
                  
                  (2,834
                  )Other
      income (expense):Interest
      expense
                  
                  
                  (20,513
                  )
                  
                  
                  (27
                  )
                  
                  
                  4
                  
                  
                  
                  -
                  
                  
                  
                  (20,536
                  )Other
      income (expense), net
                  
                  
                  706
                  
                  
                  
                  27
                  
                  
                  
                  1,227
                  
                  
                  
                  -
                  
                  
                  
                  1,960Intercompany
      charges
                  
                  
                  10,122
                  
                  
                  
                  (9,347
                  )
                  
                  
                  (775
                  )
                  
                  
                  -
                  
                  
                  
                  -Income
      (loss) from continuing operations before income taxes
                  
                  
                  (13,700
                  )
                  
                  
                  (6,620
                  )
                  
                  
                  (1,010
                  )
                  
                  
                  (80
                  )
                  
                  
                  (21,410
                  )Provision
      (benefit) for income taxes
                  
                  
                  (4,081
                  )
                  
                  
                  (1,971
                  )
                  
                  
                  250
                  
                  
                  
                  (171
                  )
                  
                  
                  (5,973
                  )Income
      (loss) from continuing operations
                  
                  
                  (9,619
                  )
                  
                  
                  (4,649
                  )
                  
                  
                  (1,260
                  )
                  
                  
                  91
                  
                  
                  
                  (15,437
                  )Loss
      from discontinued operations, net of taxes
                  
                  
                  -
                  
                  
                  
                  (968
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (968
                  )Equity
      income (loss) of subsidiaries
                  
                  
                  (6,786
                  )
                  
                  
                  (1,110
                  )
                  
                  
                  -
                  
                  
                  
                  7,896
                  
                  
                  
                  -Net
      income (loss)
                  
                  $
                  (16,405
                  )
                  
                  $
                  (6,727
                  )
                  
                  $
                  (1,260
                  )
                  
                  $
                  7,987
                  
                  
                  $
                  (16,405
                  )


- 30
-




Condensed
Consolidating Statement of Operations


For
the Nine Months Ended March 31, 2009


(In
thousands)





Subsidiary
                    
                    
                    SubsidiaryParent
                    
                    
                    Guarantors
                    
                    
                    Non-Guarantors
                    
                    
                    Eliminations
                    
                    
                    ConsolidatedNet
      sales
                    
                    $
                    -
                    
                    
                    $
                    308,770
                    
                    
                    $
                    133,443
                    
                    
                    $
                    (5,114
                    )
                    
                    $
                    437,099Cost
      of sales
                    
                    
                    -
                    
                    
                    
                    161,170
                    
                    
                    
                    73,410
                    
                    
                    
                    (4,604
                    )
                    
                    
                    229,976Gross
      profit
                    
                    
                    -
                    
                    
                    
                    147,600
                    
                    
                    
                    60,033
                    
                    
                    
                    (510
                    )
                    
                    
                    207,123Selling,
      general and administrative costs
                    
                    
                    14,673
                    
                    
                    
                    55,120
                    
                    
                    
                    26,819
                    
                    
                    
                    -
                    
                    
                    
                    96,612Research
      and development costs
                    
                    
                    -
                    
                    
                    
                    34,422
                    
                    
                    
                    17,623
                    
                    
                    
                    -
                    
                    
                    
                    52,045Amortization
      of acquired intangibles
                    
                    
                    -
                    
                    
                    
                    40,582
                    
                    
                    
                    6,964
                    
                    
                    
                    -
                    
                    
                    
                    47,546Acquired
      in-process R&D costs
                    
                    
                    -
                    
                    
                    
                    626
                    
                    
                    
                    1,665
                    
                    
                    
                    -
                    
                    
                    
                    2,291Operating
      income (loss)
                    
                    
                    (14,673
                    )
                    
                    
                    16,850
                    
                    
                    
                    6,962
                    
                    
                    
                    (510
                    )
                    
                    
                    8,629Other
      income (expense):Interest
      expense
                    
                    
                    (62,952
                    )
                    
                    
                    (68
                    )
                    
                    
                    (11
                    )
                    
                    
                    -
                    
                    
                    
                    (63,031
                    )Other
      income (expense), net
                    
                    
                    49
                    
                    
                    
                    545
                    
                    
                    
                    11,772
                    
                    
                    
                    -
                    
                    
                    
                    12,366Intercompany
      charges
                    
                    
                    55,345
                    
                    
                    
                    (54,341
                    )
                    
                    
                    (1,004
                    )
                    
                    
                    -
                    
                    
                    
                    -Income
      (loss) from continuing operations before income taxes
                    
                    
                    (22,231
                    )
                    
                    
                    (37,014
                    )
                    
                    
                    17,719
                    
                    
                    
                    (510
                    )
                    
                    
                    (42,036
                    )Provision
      (benefit) for income taxes
                    
                    
                    (8,239
                    )
                    
                    
                    (15,268
                    )
                    
                    
                    6,139
                    
                    
                    
                    70
                    
                    
                    
                    (17,298
                    )Income
      (loss) from continuing operations
                    
                    
                    (13,992
                    )
                    
                    
                    (21,746
                    )
                    
                    
                    11,580
                    
                    
                    
                    (580
                    )
                    
                    
                    (24,738
                    )Equity
      income (loss) of subsidiaries
                    
                    
                    (10,746
                    )
                    
                    
                    12,452
                    
                    
                    
                    -
                    
                    
                    
                    (1,706
                    )
                    
                    
                    -Net
      income (loss)
                    
                    $
                    (24,738
                    )
                    
                    $
                    (9,294
                    )
                    
                    $
                    11,580
                    
                    
                    $
                    (2,286
                    )
                    
                    $
                    (24,738
                    )


- 31
-





Condensed
Consolidating Statement of Operations


For
the Period from August 15, 2007 to March 31, 2008


(In
thousands)





Subsidiary
                  
                  
                  SubsidiaryParent
                  
                  
                  Guarantors
                  
                  
                  Non-Guarantors
                  
                  
                  Eliminations
                  
                  
                  ConsolidatedNet
      sales
                  
                  $
                  -
                  
                  
                  $
                  298,928
                  
                  
                  $
                  124,676
                  
                  
                  $
                  (3,528
                  )
                  
                  $
                  420,076Cost
      of sales
                  
                  
                  -
                  
                  
                  
                  186,333
                  
                  
                  
                  76,120
                  
                  
                  
                  (3,501
                  )
                  
                  
                  258,952Gross
      profit
                  
                  
                  -
                  
                  
                  
                  112,595
                  
                  
                  
                  48,556
                  
                  
                  
                  (27
                  )
                  
                  
                  161,124Selling,
      general and administrative costs
                  
                  
                  11,518
                  
                  
                  
                  46,075
                  
                  
                  
                  26,557
                  
                  
                  
                  -
                  
                  
                  
                  84,150Research
      and development costs
                  
                  
                  -
                  
                  
                  
                  28,666
                  
                  
                  
                  19,890
                  
                  
                  
                  -
                  
                  
                  
                  48,556Amortization
      of acquired intangibles
                  
                  
                  -
                  
                  
                  
                  45,425
                  
                  
                  
                  6,856
                  
                  
                  
                  -
                  
                  
                  
                  52,281Acquired
      in-process R&D costs
                  
                  
                  -
                  
                  
                  
                  21,820
                  
                  
                  
                  2,520
                  
                  
                  
                  -
                  
                  
                  
                  24,340Company
      sale transaction expenses
                  
                  
                  32,459
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  32,459Operating
      income (loss)
                  
                  
                  (43,977
                  )
                  
                  
                  (29,391
                  )
                  
                  
                  (7,267
                  )
                  
                  
                  (27
                  )
                  
                  
                  (80,662
                  )Other
      income (expense):Interest
      expense
                  
                  
                  (53,586
                  )
                  
                  
                  (68
                  )
                  
                  
                  5
                  
                  
                  
                  -
                  
                  
                  
                  (53,649
                  )Other
      income (expense), net
                  
                  
                  1,450
                  
                  
                  
                  64
                  
                  
                  
                  2,367
                  
                  
                  
                  -
                  
                  
                  
                  3,881Intercompany
      charges
                  
                  
                  27,322
                  
                  
                  
                  (25,280
                  )
                  
                  
                  (2,042
                  )
                  
                  
                  -
                  
                  
                  
                  -Income
      (loss) from continuing operations before income taxes
                  
                  
                  (68,791
                  )
                  
                  
                  (54,675
                  )
                  
                  
                  (6,937
                  )
                  
                  
                  (27
                  )
                  
                  
                  (130,430
                  )Provision
      (benefit) for income taxes
                  
                  
                  (20,486
                  )
                  
                  
                  (16,281
                  )
                  
                  
                  1,715
                  
                  
                  
                  (1,337
                  )
                  
                  
                  (36,389
                  )Income
      (loss) from continuing operations
                  
                  
                  (48,305
                  )
                  
                  
                  (38,394
                  )
                  
                  
                  (8,652
                  )
                  
                  
                  1,310
                  
                  
                  
                  (94,041
                  )Loss
      from discontinued operations, net of taxes
                  
                  
                  -
                  
                  
                  
                  (2,457
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (2,457
                  )Equity
      income (loss) of subsidiaries
                  
                  
                  (48,193
                  )
                  
                  
                  (8,394
                  )
                  
                  
                  -
                  
                  
                  
                  56,587
                  
                  
                  
                  -Net
      income (loss)
                  
                  $
                  (96,498
                  )
                  
                  $
                  (49,245
                  )
                  
                  $
                  (8,652
                  )
                  
                  $
                  57,897
                  
                  
                  $
                  (96,498
                  )


- 32
-





Condensed
Consolidating Statement of Operations


For
the Period from July 1, 2007 to August 14, 2007


(In
thousands)





Subsidiary
                  
                  
                  SubsidiaryParent
                  
                  
                  Guarantors
                  
                  
                  Non-Guarantors
                  
                  
                  Eliminations
                  
                  
                  ConsolidatedNet
      sales
                  
                  $
                  -
                  
                  
                  $
                  25,858
                  
                  
                  $
                  12,809
                  
                  
                  $
                  (446
                  )
                  
                  $
                  38,221Cost
      of sales
                  
                  
                  -
                  
                  
                  
                  15,066
                  
                  
                  
                  8,074
                  
                  
                  
                  (279
                  )
                  
                  
                  22,861Gross
      profit
                  
                  
                  -
                  
                  
                  
                  10,792
                  
                  
                  
                  4,735
                  
                  
                  
                  (167
                  )
                  
                  
                  15,360Selling,
      general and administrative costs
                  
                  
                  3,892
                  
                  
                  
                  7,571
                  
                  
                  
                  7,568
                  
                  
                  
                  -
                  
                  
                  
                  19,031Research
      and development costs
                  
                  
                  -
                  
                  
                  
                  5,526
                  
                  
                  
                  6,652
                  
                  
                  
                  -
                  
                  
                  
                  12,178Amortization
      of acquired intangibles
                  
                  
                  -
                  
                  
                  
                  601
                  
                  
                  
                  1,091
                  
                  
                  
                  -
                  
                  
                  
                  1,692Company
      sale transaction expenses
                  
                  
                  3,717
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,717Operating
      income (loss)
                  
                  
                  (7,609
                  )
                  
                  
                  (2,906
                  )
                  
                  
                  (10,576
                  )
                  
                  
                  (167
                  )
                  
                  
                  (21,258
                  )Other
      income (expense):Interest
      expense
                  
                  
                  (261
                  )
                  
                  
                  (14
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (275
                  )Other
      income (expense), net
                  
                  
                  157
                  
                  
                  
                  27
                  
                  
                  
                  110
                  
                  
                  
                  -
                  
                  
                  
                  294Intercompany
      charges
                  
                  
                  5,544
                  
                  
                  
                  (5,109
                  )
                  
                  
                  (435
                  )
                  
                  
                  -
                  
                  
                  
                  -Income
      (loss) from continuing operations before income taxes
                  
                  
                  (2,169
                  )
                  
                  
                  (8,002
                  )
                  
                  
                  (10,901
                  )
                  
                  
                  (167
                  )
                  
                  
                  (21,239
                  )Provision
      (benefit) for income taxes
                  
                  
                  (853
                  )
                  
                  
                  (3,145
                  )
                  
                  
                  (2,833
                  )
                  
                  
                  -
                  
                  
                  
                  (6,831
                  )Income
      (loss) from continuing operations
                  
                  
                  (1,316
                  )
                  
                  
                  (4,857
                  )
                  
                  
                  (8,068
                  )
                  
                  
                  (167
                  )
                  
                  
                  (14,408
                  )Loss
      from discontinued operations, net of taxes
                  
                  
                  -
                  
                  
                  
                  (2,508
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (2,508
                  )Equity
      income (loss) of subsidiaries
                  
                  
                  (15,600
                  )
                  
                  
                  (7,814
                  )
                  
                  
                  -
                  
                  
                  
                  23,414
                  
                  
                  
                  -Net
      income (loss)
                  
                  $
                  (16,916
                  )
                  
                  $
                  (15,179
                  )
                  
                  $
                  (8,068
                  )
                  
                  $
                  23,247
                  
                  
                  $
                  (16,916
                  )




- 33
-





Condensed
Consolidating Balance Sheet


As
of March 31, 2009


(In
thousands)





Subsidiary
                      
                      
                      SubsidiaryParent
                      
                      
                      Guarantors
                      
                      
                      Non-Guarantors
                      
                      
                      Eliminations
                      
                      
                      ConsolidatedAssetsCurrent
      assets:Cash
      and cash equivalents
                      
                      $
                      28,608
                      
                      
                      $
                      (752
                      )
                      
                      $
                      26,075
                      
                      
                      $
                      -
                      
                      
                      $
                      53,931Accounts
      receivable, net
                      
                      
                      -
                      
                      
                      
                      74,123
                      
                      
                      
                      39,345
                      
                      
                      
                      -
                      
                      
                      
                      113,468Inventories
                      
                      
                      -
                      
                      
                      
                      108,576
                      
                      
                      
                      30,289
                      
                      
                      
                      (1,011
                      )
                      
                      
                      137,854Deferred
      income taxes
                      
                      
                      (2,352
                      )
                      
                      
                      23,831
                      
                      
                      
                      4,257
                      
                      
                      
                      -
                      
                      
                      
                      25,736Prepaid
      expenses and other current assets
                      
                      
                      2,189
                      
                      
                      
                      3,730
                      
                      
                      
                      4,978
                      
                      
                      
                      -
                      
                      
                      
                      10,897Total
      current assets
                      
                      
                      28,445
                      
                      
                      
                      209,508
                      
                      
                      
                      104,944
                      
                      
                      
                      (1,011
                      )
                      
                      
                      341,886Property,
      plant and equipment, net
                      
                      
                      12,893
                      
                      
                      
                      65,840
                      
                      
                      
                      19,440
                      
                      
                      
                      -
                      
                      
                      
                      98,173Non-current
      marketable securities
                      
                      
                      17,523
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      17,523Deferred
      financing costs
                      
                      
                      26,947
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      26,947Other
      assets
                      
                      
                      12,691
                      
                      
                      
                      2,298
                      
                      
                      
                      622
                      
                      
                      
                      -
                      
                      
                      
                      15,611Intangible
      assets with definite lives, net
                      
                      
                      -
                      
                      
                      
                      261,116
                      
                      
                      
                      37,478
                      
                      
                      
                      -
                      
                      
                      
                      298,594Intangible
      assets with indefinite lives
                      
                      
                      -
                      
                      
                      
                      90,229
                      
                      
                      
                      23,436
                      
                      
                      
                      -
                      
                      
                      
                      113,665Goodwill
                      
                      
                      (10
                      )
                      
                      
                      423,281
                      
                      
                      
                      30,981
                      
                      
                      
                      -
                      
                      
                      
                      454,252Total
      assets
                      
                      $
                      98,489
                      
                      
                      $
                      1,052,272
                      
                      
                      $
                      216,901
                      
                      
                      $
                      (1,011
                      )
                      
                      $
                      1,366,651Liabilities and Stockholder's
      EquityCurrent
      liabilities:Current
      portion of long-term debt
                      
                      $
                      5,063
                      
                      
                      $
                      320
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      5,383Accounts
      payable
                      
                      
                      22
                      
                      
                      
                      22,278
                      
                      
                      
                      14,511
                      
                      
                      
                      -
                      
                      
                      
                      36,811Deferred
      revenue, including advance payments
                      
                      
                      -
                      
                      
                      
                      18,624
                      
                      
                      
                      14,107
                      
                      
                      
                      -
                      
                      
                      
                      32,731Income
      taxes payable
                      
                      
                      -
                      
                      
                      
                      2,647
                      
                      
                      
                      8,726
                      
                      
                      
                      -
                      
                      
                      
                      11,373Accrued
      payroll expense
                      
                      
                      1,360
                      
                      
                      
                      18,011
                      
                      
                      
                      1,608
                      
                      
                      
                      -
                      
                      
                      
                      20,979Accrued
      expenses and other current liabilities
                      
                      
                      15,249
                      
                      
                      
                      9,976
                      
                      
                      
                      9,134
                      
                      
                      
                      -
                      
                      
                      
                      34,359Total
      current liabilities
                      
                      
                      21,694
                      
                      
                      
                      71,856
                      
                      
                      
                      48,086
                      
                      
                      
                      -
                      
                      
                      
                      141,636Long-term
      debt
                      
                      
                      880,128
                      
                      
                      
                      1,085
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      881,213Deferred
      income taxes
                      
                      
                      (26,677
                      )
                      
                      
                      135,557
                      
                      
                      
                      14,497
                      
                      
                      
                      71
                      
                      
                      
                      123,448Defined
      benefit plan obligations
                      
                      
                      6,043
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      6,043Other
      long-term liabilities
                      
                      
                      18,452
                      
                      
                      
                      434
                      
                      
                      
                      4,428
                      
                      
                      
                      -
                      
                      
                      
                      23,314Intercompany
      investment
                      
                      
                      (270,660
                      )
                      
                      
                      30,964
                      
                      
                      
                      239,696
                      
                      
                      
                      -
                      
                      
                      
                      -Intercompany
      receivable/payable
                      
                      
                      (859,390
                      )
                      
                      
                      892,486
                      
                      
                      
                      (32,613
                      )
                      
                      
                      (483
                      )
                      
                      
                      -Total
      liabilities
                      
                      
                      (230,410
                      )
                      
                      
                      1,132,382
                      
                      
                      
                      274,094
                      
                      
                      
                      (412
                      )
                      
                      
                      1,175,654Stockholder's
      equity
                      
                      
                      328,899
                      
                      
                      
                      (80,110
                      )
                      
                      
                      (57,193
                      )
                      
                      
                      (599
                      )
                      
                      
                      190,997Total
      liabilities and stockholder's equity
                      
                      $
                      98,489
                      
                      
                      $
                      1,052,272
                      
                      
                      $
                      216,901
                      
                      
                      $
                      (1,011
                      )
                      
                      $
                      1,366,651


- 34
-





Condensed
Consolidating Balance Sheet


As
of June 30, 2008


(In
thousands)





Subsidiary
                      
                      
                      SubsidiaryParent
                      
                      
                      Guarantors
                      
                      
                      Non-Guarantors
                      
                      
                      Eliminations
                      
                      
                      ConsolidatedAssetsCurrent
      assets:Cash
      and cash equivalents
                      
                      $
                      39,285
                      
                      
                      $
                      (2,379
                      )
                      
                      $
                      17,243
                      
                      
                      $
                      -
                      
                      
                      $
                      54,149Accounts
      receivable, net
                      
                      
                      -
                      
                      
                      
                      90,343
                      
                      
                      
                      57,640
                      
                      
                      
                      -
                      
                      
                      
                      147,983Inventories
                      
                      
                      -
                      
                      
                      
                      91,856
                      
                      
                      
                      43,537
                      
                      
                      
                      (502
                      )
                      
                      
                      134,891Deferred
      income taxes
                      
                      
                      (2,352
                      )
                      
                      
                      23,539
                      
                      
                      
                      5,852
                      
                      
                      
                      -
                      
                      
                      
                      27,039Prepaid
      expenses and other current assets
                      
                      
                      2,464
                      
                      
                      
                      2,616
                      
                      
                      
                      7,104
                      
                      
                      
                      -
                      
                      
                      
                      12,184Total
      current assets
                      
                      
                      39,397
                      
                      
                      
                      205,975
                      
                      
                      
                      131,376
                      
                      
                      
                      (502
                      )
                      
                      
                      376,246Property,
      plant and equipment, net
                      
                      
                      13,406
                      
                      
                      
                      63,964
                      
                      
                      
                      27,279
                      
                      
                      
                      -
                      
                      
                      
                      104,649Non-current
      marketable securities
                      
                      
                      19,960
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      19,960Deferred
      financing costs
                      
                      
                      30,185
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      30,185Other
      assets
                      
                      
                      16,480
                      
                      
                      
                      2,474
                      
                      
                      
                      (394
                      )
                      
                      
                      -
                      
                      
                      
                      18,560Intangible
      assets with definite lives, net
                      
                      
                      -
                      
                      
                      
                      297,408
                      
                      
                      
                      47,458
                      
                      
                      
                      -
                      
                      
                      
                      344,866Intangible
      assets with indefinite lives
                      
                      
                      -
                      
                      
                      
                      90,229
                      
                      
                      
                      33,149
                      
                      
                      
                      -
                      
                      
                      
                      123,378Goodwill
                      
                      
                      -
                      
                      
                      
                      435,570
                      
                      
                      
                      25,101
                      
                      
                      
                      484
                      
                      
                      
                      461,155Total
      assets
                      
                      $
                      119,428
                      
                      
                      $
                      1,095,620
                      
                      
                      $
                      263,969
                      
                      
                      $
                      (18
                      )
                      
                      $
                      1,478,999Liabilities and Stockholder's
      EquityCurrent
      liabilities:Current
      portion of long-term debt
                      
                      $
                      5,250
                      
                      
                      $
                      324
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      5,574Accounts
      payable
                      
                      
                      554
                      
                      
                      
                      19,882
                      
                      
                      
                      18,946
                      
                      
                      
                      -
                      
                      
                      
                      39,382Deferred
      revenue, including advance payments
                      
                      
                      -
                      
                      
                      
                      8,621
                      
                      
                      
                      18,523
                      
                      
                      
                      -
                      
                      
                      
                      27,144Income
      taxes payable
                      
                      
                      409
                      
                      
                      
                      -
                      
                      
                      
                      1,527
                      
                      
                      
                      -
                      
                      
                      
                      1,936Accrued
      payroll expense
                      
                      
                      2,106
                      
                      
                      
                      18,200
                      
                      
                      
                      4,219
                      
                      
                      
                      -
                      
                      
                      
                      24,525Accrued
      expenses and other current liabilities
                      
                      
                      31,205
                      
                      
                      
                      12,272
                      
                      
                      
                      13,353
                      
                      
                      
                      -
                      
                      
                      
                      56,830Total
      current liabilities
                      
                      
                      39,524
                      
                      
                      
                      59,299
                      
                      
                      
                      56,568
                      
                      
                      
                      -
                      
                      
                      
                      155,391Long-term
      debt
                      
                      
                      872,152
                      
                      
                      
                      1,085
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      873,237Deferred
      income taxes
                      
                      
                      (12,254
                      )
                      
                      
                      150,400
                      
                      
                      
                      21,311
                      
                      
                      
                      -
                      
                      
                      
                      159,457Defined
      benefit plan obligations
                      
                      
                      6,263
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      6,263Other
      long-term liabilities
                      
                      
                      1,368
                      
                      
                      
                      487
                      
                      
                      
                      6,148
                      
                      
                      
                      -
                      
                      
                      
                      8,003Intercompany
      investment
                      
                      
                      (248,051
                      )
                      
                      
                      2,944
                      
                      
                      
                      245,107
                      
                      
                      
                      -
                      
                      
                      
                      -Intercompany
      receivable/payable
                      
                      
                      (895,004
                      )
                      
                      
                      953,623
                      
                      
                      
                      (58,619
                      )
                      
                      
                      -
                      
                      
                      
                      -Total
      liabilities
                      
                      
                      (236,002
                      )
                      
                      
                      1,167,838
                      
                      
                      
                      270,515
                      
                      
                      
                      -
                      
                      
                      
                      1,202,351Stockholder's
      equity
                      
                      
                      355,430
                      
                      
                      
                      (72,218
                      )
                      
                      
                      (6,546
                      )
                      
                      
                      (18
                      )
                      
                      
                      276,648Total
      liabilities and stockholder's equity
                      
                      $
                      119,428
                      
                      
                      $
                      1,095,620
                      
                      
                      $
                      263,969
                      
                      
                      $
                      (18
                      )
                      
                      $
                      1,478,999


- 35
-





Condensed
Consolidating Statement of Cash Flows


For
the Nine Months Ended March 31, 2009


(In
thousands)





Non-Guarantor
                  
                  
                  Guarantor
                  
                  
                  ConsolidatingParent
                  
                  
                  Subsidiaries
                  
                  
                  Subsidiaries
                  
                  
                  Adjustments
                  
                  
                  ConsolidatedCash
      flows from operating activities:Net
      income (loss)
                  
                  $
                  (24,738
                  )
                  
                  $
                  (9,294
                  )
                  
                  $
                  11,580
                  
                  
                  $
                  (2,286
                  )
                  
                  $
                  (24,738
                  )Changes
      in operating assets and liabilities and non-cash items, included in net
      earnings (loss)
                  
                  
                  26,373
                  
                  
                  
                  18,186
                  
                  
                  
                  12,886
                  
                  
                  
                  2,286
                  
                  
                  
                  59,731Net
      cash provided by (used in) operating activities
                  
                  
                  1,635
                  
                  
                  
                  8,892
                  
                  
                  
                  24,466
                  
                  
                  
                  -
                  
                  
                  
                  34,993Cash
      flows from investing activities:Payment
      for purchase of businesses, net  of cash
acquired
                  
                  
                  (7,832
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (7,832
                  )Capital
      expenditures
                  
                  
                  (11
                  )
                  
                  
                  (8,406
                  )
                  
                  
                  (4,541
                  )
                  
                  
                  -
                  
                  
                  
                  (12,958
                  )Proceeds
      from the sale of property, plant and equipment
                  
                  
                  -
                  
                  
                  
                  1,145
                  
                  
                  
                  214
                  
                  
                  
                  -
                  
                  
                  
                  1,359Other,
      net
                  
                  
                  (4
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (4
                  )Net
      cash provided by (used in) investing activities
                  
                  
                  (7,847
                  )
                  
                  
                  (7,261
                  )
                  
                  
                  (4,327
                  )
                  
                  
                  -
                  
                  
                  
                  (19,435
                  )Cash
      flows from financing activities:Debt
      repayments
                  
                  
                  (4,125
                  )
                  
                  
                  (4
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (4,129
                  )Debt
      financing costs
                  
                  
                  (340
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (340
                  )Net
      cash provided by (used in) financing activities
                  
                  
                  (4,465
                  )
                  
                  
                  (4
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (4,469
                  )Effect
      of exchange rate changes on cash and cash equivalents
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (11,307
                  )
                  
                  
                  -
                  
                  
                  
                  (11,307
                  )Net
      increase (decrease) in cash and cash equivalents
                  
                  
                  (10,677
                  )
                  
                  
                  1,627
                  
                  
                  
                  8,832
                  
                  
                  
                  -
                  
                  
                  
                  (218
                  )Cash
      and cash equivalents at beginning of period
                  
                  
                  39,285
                  
                  
                  
                  (2,379
                  )
                  
                  
                  17,243
                  
                  
                  
                  -
                  
                  
                  
                  54,149Cash
      and cash equivalents at end of period
                  
                  $
                  28,608
                  
                  
                  $
                  (752
                  )
                  
                  $
                  26,075
                  
                  
                  $
                  -
                  
                  
                  $
                  53,931


- 36
-





Condensed
Consolidating Statement of Cash Flows


For
the Period from August 15, 2007 to March 31, 2008


(In
thousands)





Non-Guarantor
                      
                      
                      Guarantor
                      
                      
                      ConsolidatingParent
                      
                      
                      Subsidiaries
                      
                      
                      Subsidiaries
                      
                      
                      Adjustments
                      
                      
                      ConsolidatedCash
      flows from operating activities:Net
      income (loss)
                      
                      $
                      (96,498
                      )
                      
                      $
                      (49,245
                      )
                      
                      $
                      (8,652
                      )
                      
                      $
                      57,897
                      
                      
                      $
                      (96,498
                      )Loss
      from discontinued operations, net of tax
                      
                      
                      -
                      
                      
                      
                      2,457
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,457Income
      (loss) from continuing operations
                      
                      
                      (96,498
                      )
                      
                      
                      (46,788
                      )
                      
                      
                      (8,652
                      )
                      
                      
                      57,897
                      
                      
                      
                      (94,041
                      )Changes
      in operating assets and liabilities and  non cash items,
      included in net income (loss)
                      
                      
                      45,362
                      
                      
                      
                      57,304
                      
                      
                      
                      22,585
                      
                      
                      
                      (57,897
                      )
                      
                      
                      67,354Net
      cash provided by (used in) continuing operations
                      
                      
                      (51,136
                      )
                      
                      
                      10,516
                      
                      
                      
                      13,933
                      
                      
                      
                      -
                      
                      
                      
                      (26,687
                      )Net
      cash provided by (used in) discontinued operations
                      
                      
                      -
                      
                      
                      
                      (3,133
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (3,133
                      )Net
      cash provided by (used in) operating activities
                      
                      
                      (51,136
                      )
                      
                      
                      7,383
                      
                      
                      
                      13,933
                      
                      
                      
                      -
                      
                      
                      
                      (29,820
                      )Cash
      flows from investing activities:Acquisition
      of predecessor entity, net of cash acquired
                      
                      
                      (1,128,915
                      )
                      
                      
                      (2,593
                      )
                      
                      
                      13,215
                      
                      
                      
                      -
                      
                      
                      
                      (1,118,293
                      )Payment
      for purchase of businesses, net of cash acquired
                      
                      
                      1,522
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,522Capital
      expenditures
                      
                      
                      (258
                      )
                      
                      
                      (6,380
                      )
                      
                      
                      (1,890
                      )
                      
                      
                      -
                      
                      
                      
                      (8,528
                      )Proceeds
      from the sale of property, plant and equipment
                      
                      
                      -
                      
                      
                      
                      15
                      
                      
                      
                      15
                      
                      
                      
                      -
                      
                      
                      
                      30Purchase
      of marketable securities
                      
                      
                      (631,805
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (631,805
                      )Proceeds
      from sale of marketable securities
                      
                      
                      599,977
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      599,977Net
      cash provided by (used in) investing activities of continuing
      operations
                      
                      
                      (1,159,479
                      )
                      
                      
                      (8,958
                      )
                      
                      
                      11,340
                      
                      
                      
                      -
                      
                      
                      
                      (1,157,097
                      )Net
      cash provided by (used in) discontinued operations
                      
                      
                      -
                      
                      
                      
                      (32
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (32
                      )Net
      cash provided by (used in) investing activities
                      
                      
                      (1,159,479
                      )
                      
                      
                      (8,990
                      )
                      
                      
                      11,340
                      
                      
                      
                      -
                      
                      
                      
                      (1,157,129
                      )Cash
      flows from financing activities:Proceeds
      from issuance of common stock
                      
                      
                      378,350
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      378,350Borrowings
      under debt agreements
                      
                      
                      870,000
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      870,000Debt
      repayments
                      
                      
                      (4,434
                      )
                      
                      
                      (19
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (4,453
                      )Debt
      financing costs
                      
                      
                      (27,436
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (27,436
                      )Amounts
      paid for withholding taxes on stock optionexercises
                      
                      
                      (14,142
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (14,142
                      )Witholding
      taxes collected for stock option exercises
                      
                      
                      14,142
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      14,142Net
      cash provided by (used in) financing activities of continuing
      operations
                      
                      
                      1,216,480
                      
                      
                      
                      (19
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,216,461Effect
      of exchange rate changes on cash and cash equivalents
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (2,305
                      )
                      
                      
                      -
                      
                      
                      
                      (2,305
                      )Net
      increase (decrease) in cash and cash equivalents
                      
                      
                      5,865
                      
                      
                      
                      (1,626
                      )
                      
                      
                      22,968
                      
                      
                      
                      -
                      
                      
                      
                      27,207Cash
      and cash equivalents at beginning of period
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Cash
      and cash equivalents at end of period
                      
                      $
                      5,865
                      
                      
                      $
                      (1,626
                      )
                      
                      $
                      22,968
                      
                      
                      $
                      -
                      
                      
                      $
                      27,207


- 37
-





Condensed
Consolidating Statement of Cash Flows


For
the Period from July 1, 2007 to August 14, 2007


(In
thousands)





Non-Guarantor
                  
                  
                  Guarantor
                  
                  
                  ConsolidatingParent
                  
                  
                  Subsidiaries
                  
                  
                  Subsidiaries
                  
                  
                  Adjustments
                  
                  
                  ConsolidatedCash
      flows from operating activities:Net
      income (loss)
                  
                  $
                  (16,916
                  )
                  
                  $
                  (15,179
                  )
                  
                  $
                  (8,068
                  )
                  
                  $
                  23,247
                  
                  
                  $
                  (16,916
                  )Loss
      from discontinued operations, net of tax
                  
                  
                  -
                  
                  
                  
                  2,508
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,508Income
      (loss) from continuing operations
                  
                  
                  (16,916
                  )
                  
                  
                  (12,671
                  )
                  
                  
                  (8,068
                  )
                  
                  
                  23,247
                  
                  
                  
                  (14,408
                  )Changes
      in operating assets and liabilities and  non cash items,
      included in net income (loss)
                  
                  
                  23,110
                  
                  
                  
                  12,708
                  
                  
                  
                  13,591
                  
                  
                  
                  (23,247
                  )
                  
                  
                  26,162Net
      cash provided by (used in) continuing operations
                  
                  
                  6,194
                  
                  
                  
                  37
                  
                  
                  
                  5,523
                  
                  
                  
                  -
                  
                  
                  
                  11,754Net
      cash provided by (used in) discontinued operations
                  
                  
                  -
                  
                  
                  
                  (461
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (461
                  )Net
      cash provided by (used in) operating activities
                  
                  
                  6,194
                  
                  
                  
                  (424
                  )
                  
                  
                  5,523
                  
                  
                  
                  -
                  
                  
                  
                  11,293Cash
      flows from investing activities:Capital
      expenditures
                  
                  
                  (249
                  )
                  
                  
                  (587
                  )
                  
                  
                  (252
                  )
                  
                  
                  -
                  
                  
                  
                  (1,088
                  )Purchase
      of marketable securities
                  
                  
                  (53,828
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (53,828
                  )Proceeds
      from sale of marketable securities
                  
                  
                  63,328
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  63,328Net
      cash provided by (used in) investing activities of continuing
      operations
                  
                  
                  9,251
                  
                  
                  
                  (587
                  )
                  
                  
                  (252
                  )
                  
                  
                  -
                  
                  
                  
                  8,412Net
      cash provided by (used in) discontinued operations
                  
                  
                  -
                  
                  
                  
                  (6
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (6
                  )Net
      cash provided by (used in) investing activities
                  
                  
                  9,251
                  
                  
                  
                  (593
                  )
                  
                  
                  (252
                  )
                  
                  
                  -
                  
                  
                  
                  8,406Cash
      flows from financing activities:Debt
      repayments
                  
                  
                  (26
                  )
                  
                  
                  (3
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (29
                  )Debt
      financing costs
                  
                  
                  (477
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (477
                  )Excess
      tax benefits from share based  compensation
      arrangements
                  
                  
                  12,542
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  12,542Proceeds
      from the exercise of stock options and warrants
                  
                  
                  583
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  583Amounts
      paid for withholding taxes on stock
      option  exercises
                  
                  
                  (56
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (56
                  )Withholding
      taxes collected for stock option exercises
                  
                  
                  56
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  56Net
      cash provided by (used in) financing activities of continuing
      operations
                  
                  
                  12,622
                  
                  
                  
                  (3
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  12,619Effect
      of exchange rate changes on cash and cash equivalents
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  178
                  
                  
                  
                  -
                  
                  
                  
                  178Net
      increase (decrease) in cash and cash equivalents
                  
                  
                  28,067
                  
                  
                  
                  (1,020
                  )
                  
                  
                  5,449
                  
                  
                  
                  -
                  
                  
                  
                  32,496Cash
      and cash equivalents at beginning of period
                  
                  
                  6,807
                  
                  
                  
                  (1,573
                  )
                  
                  
                  7,766
                  
                  
                  
                  -
                  
                  
                  
                  13,000Cash
      and cash equivalents at end of period
                  
                  $
                  34,874
                  
                  
                  $
                  (2,593
                  )
                  
                  $
                  13,215
                  
                  
                  $
                  -
                  
                  
                  $
                  45,496


- 38
-





ITEM 2  -
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





Overview





We are a
leading provider of highly specialized microelectronics and test and measurement
equipment, primarily tothe global aerospace
and defense and broadband communications markets. We also design application
specific integrated circuits (“ASICs”) for CT scan equipment for the medical
industry. Founded in 1937, we have developed a substantial intellectual property
portfolio that includes more than 150 patents, extensive know-how, years of
collaborative research and development with our customers and a demonstrated
history in space, validating the high quality performance of our products. We
believe that the combination of our leading market positions, complementary
portfolio of products, years of experience and engineering capabilities provides
us with a competitive advantage and enables us to deliver high performance, high
value products to our customers.





The
Acquisition





On August
15, 2007, AX Acquisition and its parent consummated a merger with Aeroflex
Incorporated. At the effective time of the merger, AX Acquisition was merged
with and into Aeroflex Incorporated. Aeroflex Incorporated was the surviving
corporation in the merger and became a wholly-owned subsidiary of the
parent.





The
acquisition was funded by:





·
            equity
      investments in the parent of approximately $378.4 million by affiliates
      of, or funds managed by, The Veritas Capital Fund III, L.P., Golden Gate
      Private Equity, Inc. and GS Direct, L.L.C. (the “Sponsors”) and certain
      members of our management;





·
            borrowings
      under a senior secured credit facility, consisting of $525.0 million under
      our term loan facility;





·
            borrowings
      under an exchangeable senior unsecured credit facility, consisting of a
      $225.0 million term loan facility;
and





·
            borrowings
      under an exchangeable senior subordinated unsecured credit facility,
      consisting of a $120.0 million term loan
  facility.





On
September 21, 2007, we entered into a $120.0 million senior subordinated
unsecured credit facility to refinance the $120.0 million exchangeable senior
subordinated unsecured credit facility.  On August 7, 2008, we entered
into a $225.0 million senior unsecured credit facility to refinance the $225.0
million exchangeable senior unsecured credit facility.





Results
of Operations





Refer to
Notes 1 and 3 to our consolidated financial statements for details concerning
the Company’s August 15, 2007 acquisition by affiliates of or funds managed by
the Sponsors and certain members of our management and the basis upon which such
consolidated financial statements are presented. For comparative purposes in
this Management’s Discussion and Analysis of Financial Condition and Results of
Operations, we combined the Predecessor period from July 1, 2007 to August 14,
2007 with the Successor period from August 15, 2007 to March 31, 2008 to form
the nine months ended March 31, 2008. This combination is not a GAAP
presentation. However, we believe this presentation is useful to the reader as a
comparison to the Successor period for the nine months ended March 31,
2009.


- 39
-





The
following table sets forth our historical results of operations as a percentage
of net sales for the periods indicated below:





Non-GAAPcombinedPredecessorSuccessor
                
                
                Successor
                
                
                Successor
                
                
                and Successor
                
                
                Successor
                
                
                PredecessorPeriod
                
                
                PeriodThree
                
                
                Three
                
                
                Nine
                
                
                Nine
                
                
                August 15,
                
                
                July 1,Months
                
                
                Months
                
                
                Months
                
                
                Months
                
                
                2007
                
                
                2007Ended
                
                
                Ended
                
                
                Ended
                
                
                Ended
                
                
                through
                
                
                throughMarch 31,
                
                
                March 31,
                
                
                March 31,
                
                
                March 31,
                
                
                March 31,
                
                
                August 14,2009
                
                
                2008
                
                
                2009
                
                
                2008
                
                
                2008
                
                
                2007Net
      sales
                
                
                100.0
                %
                
                
                100.0
                %
                
                
                100.0
                %
                
                
                100.0
                %
                
                
                100.0
                %
                
                
                100.0
                %Costs
      of sales
                
                
                52.2
                
                
                
                56.0
                
                
                
                52.6
                
                
                
                61.5
                
                
                
                61.6
                
                
                
                59.8Gross
      profit
                
                
                47.8
                
                
                
                44.0
                
                
                
                47.4
                
                
                
                38.5
                
                
                
                38.4
                
                
                
                40.2Operating
      expenses:Selling,
      general and administrative costs
                
                
                22.2
                
                
                
                20.5
                
                
                
                22.1
                
                
                
                22.5
                
                
                
                20.0
                
                
                
                49.8Research
      and development costs
                
                
                12.9
                
                
                
                11.5
                
                
                
                11.9
                
                
                
                13.2
                
                
                
                11.6
                
                
                
                31.9Amortization
      of acquired intangibles
                
                
                10.7
                
                
                
                13.3
                
                
                
                10.9
                
                
                
                11.8
                
                
                
                12.5
                
                
                
                4.4Acquired
      in-process research and development costs
                
                
                1.7
                
                
                
                -
                
                
                
                -
                
                
                
                5.3
                
                
                
                5.8
                
                
                
                -Company
      sale transaction expenses
                
                
                -
                
                
                
                0.5
                
                
                
                0.5
                
                
                
                7.9
                
                
                
                7.7
                
                
                
                9.7Total
      operating expenses
                
                
                47.5
                
                
                
                45.8
                
                
                
                45.4
                
                
                
                60.7
                
                
                
                57.6
                
                
                
                95.8Operating
      income (loss)
                
                
                0.3
                
                
                
                (1.8
                )
                
                
                2.0
                
                
                
                (22.2
                )
                
                
                (19.2
                )
                
                
                (55.6
                )Interest
      expense
                
                
                (14.8
                )
                
                
                (13.1
                )
                
                
                (14.4
                )
                
                
                (11.8
                )
                
                
                (12.8
                )
                
                
                -Other
      income (expense), net
                
                
                -
                
                
                
                1.3
                
                
                
                2.8
                
                
                
                0.9
                
                
                
                0.9
                
                
                
                -(14.8
                )
                
                
                (11.8
                )
                
                
                (11.6
                )
                
                
                (10.9
                )
                
                
                (11.9
                )
                
                
                -Income
      (loss) from continuing operations before income taxes
                
                
                (14.5
                )
                
                
                (13.6
                )
                
                
                (9.6
                )
                
                
                (33.1
                )
                
                
                (31.1
                )
                
                
                (55.6
                )Provision
      (benefit) for income taxes
                
                
                (4.6
                )
                
                
                (3.8
                )
                
                
                (3.9
                )
                
                
                (9.4
                )
                
                
                (8.7
                )
                
                
                (17.9
                )Income
      (loss) from continuing operations
                
                
                (9.9
                )
                
                
                (9.8
                )
                
                
                (5.7
                )
                
                
                (23.7
                )
                
                
                (22.4
                )
                
                
                (37.7
                )Discontinued
      operations
                
                
                -
                
                
                
                (0.6
                )
                
                
                -
                
                
                
                (1.1
                )
                
                
                (0.6
                )
                
                
                (6.6
                )Net
      income (loss)
                
                
                (9.9
                )%
                
                
                (10.4
                )%
                
                
                (5.7
                )%
                
                
                (24.8
                )%
                
                
                (23.0
                )%
                
                
                (44.3
                )%





Management
evaluates the operating results of the Company’s two segments based upon pre-tax
operating income, before costs related to restructuring, lease termination
charges, amortization of acquired intangibles, share-based compensation,
acquired in-process research and development costs, Company Sale Transaction
expenses, merger related expenses and the impact of any acquisition related
adjustments.


- 40
-





The
following table sets forth our net sales and adjusted operating income by
business segment and reconciles Adjusted Operating Income (Loss) to Income
(Loss) From Continuing Operations Before Income Taxes for the periods
indicated:





Non-GAAPCombinedPredecessorSuccessor
                
                
                Successor
                
                
                Successor
                
                
                and Successor
                
                
                Successor
                
                
                PredecessorThree Months
                
                
                Three Months
                
                
                Nine Months
                
                
                Nine Months
                
                
                August 15, 2007Ended
                
                
                Ended
                
                
                Ended
                
                
                Ended
                
                
                through
                
                
                July 1, 2007March 31,
                
                
                March 31,
                
                
                March 31,
                
                
                March 31,
                
                
                March 31,
                
                
                to August 14,2009
                
                
                2008
                
                
                2009
                
                
                2008
                
                
                2008
                
                
                2007(In
      thousands)Net
      sales:Microelectronic
      solutions ("AMS")
                
                $
                70,232
                
                
                $
                77,380
                
                
                $
                208,564
                
                
                $
                216,296
                
                
                $
                197,279
                
                
                $
                19,017Test
      solutions ("ATS")
                
                
                69,207
                
                
                
                79,924
                
                
                
                228,535
                
                
                
                242,001
                
                
                
                222,797
                
                
                
                19,204Net
      sales
                
                $
                139,439
                
                
                $
                157,304
                
                
                $
                437,099
                
                
                $
                458,297
                
                
                $
                420,076
                
                
                $
                38,221Segment
      adjusted operating income:-
      AMS
                
                $
                14,783
                
                
                $
                19,143
                
                
                $
                44,767
                
                
                $
                51,387
                
                
                $
                51,363
                
                
                $
                24-
      ATS
                
                
                8,700
                
                
                
                11,010
                
                
                
                34,304
                
                
                
                26,785
                
                
                
                34,367
                
                
                
                (7,582
                )-
      General corporate expense
                
                
                (2,854
                )
                
                
                (2,088
                )
                
                
                (9,421
                )
                
                
                (7,844
                )
                
                
                (5,497
                )
                
                
                (2,347
                )Adjusted
      operating income (loss)
                
                
                20,629
                
                
                
                28,065
                
                
                
                69,650
                
                
                
                70,328
                
                
                
                80,233
                
                
                
                (9,905
                )Amortization
      of acquired intangibles-
      AMS
                
                
                (8,829
                )
                
                
                (12,621
                )
                
                
                (27,968
                )
                
                
                (31,743
                )
                
                
                (31,464
                )
                
                
                (279
                )-
      ATS
                
                
                (6,127
                )
                
                
                (8,251
                )
                
                
                (19,578
                )
                
                
                (22,230
                )
                
                
                (20,817
                )
                
                
                (1,413
                )Share
      based compensation-
      AMS
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (83
                )
                
                
                -
                
                
                
                (83
                )-
      ATS
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                95
                
                
                
                -
                
                
                
                95-
      Corporate
                
                
                (489
                )
                
                
                (488
                )
                
                
                (1,466
                )
                
                
                (2,860
                )
                
                
                (2,634
                )
                
                
                (226
                )Restructuring
      charges-
      AMS
                
                
                -
                
                
                
                (402
                )
                
                
                -
                
                
                
                (402
                )
                
                
                (402
                )
                
                
                --
      ATS
                
                
                (582
                )
                
                
                (355
                )
                
                
                (2,792
                )
                
                
                (5,178
                )
                
                
                (1,400
                )
                
                
                (3,778
                )One-time
      lease termination costs-
      ATS
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (576
                )
                
                
                -
                
                
                
                (576
                )Merger
      related expenses - Corporate
                
                
                (815
                )
                
                
                (534
                )
                
                
                (3,621
                )
                
                
                (4,568
                )
                
                
                (3,249
                )
                
                
                (1,319
                )Acquired
      in-process R&D costs-
      AMS
                
                
                (1,665
                )
                
                
                -
                
                
                
                (1,665
                )
                
                
                (15,700
                )
                
                
                (15,700
                )
                
                
                --
      ATS
                
                
                (626
                )
                
                
                -
                
                
                
                (626
                )
                
                
                (8,640
                )
                
                
                (8,640
                )
                
                
                -Current
      period impact of acquisition related adjustments:Inventory
      - AMS
                
                
                -
                
                
                
                (4,156
                )
                
                
                -
                
                
                
                (23,874
                )
                
                
                (23,817
                )
                
                
                (57
                )Inventory
      - ATS
                
                
                -
                
                
                
                (1,495
                )
                
                
                -
                
                
                
                (15,151
                )
                
                
                (15,151
                )
                
                
                -Depreciation
      - AMS
                
                
                (285
                )
                
                
                (293
                )
                
                
                (857
                )
                
                
                (732
                )
                
                
                (732
                )
                
                
                -Depreciation
      - ATS
                
                
                (629
                )
                
                
                (823
                )
                
                
                (2,043
                )
                
                
                (2,058
                )
                
                
                (2,058
                )
                
                
                -Depreciation
      - Corporate
                
                
                (55
                )
                
                
                (55
                )
                
                
                (165
                )
                
                
                (137
                )
                
                
                (137
                )
                
                
                -Deferred
      revenue - ATS
                
                
                (64
                )
                
                
                (576
                )
                
                
                (240
                )
                
                
                (2,235
                )
                
                
                (2,235
                )
                
                
                -Company
      sale transaction expenses
                
                
                -
                
                
                
                (850
                )
                
                
                -
                
                
                
                (36,176
                )
                
                
                (32,459
                )
                
                
                (3,717
                )Operating
      income (loss) (GAAP)
                
                
                463
                
                
                
                (2,834
                )
                
                
                8,629
                
                
                
                (101,920
                )
                
                
                (80,662
                )
                
                
                (21,258
                )Interest
      expense
                
                
                (20,566
                )
                
                
                (20,536
                )
                
                
                (63,031
                )
                
                
                (53,924
                )
                
                
                (53,649
                )
                
                
                (275
                )Other
      income (expense), net
                
                
                (47
                )
                
                
                1,960
                
                
                
                12,366
                
                
                
                4,175
                
                
                
                3,881
                
                
                
                294Income
      (loss) from continuing operations before income taxes
                
                $
                (20,150
                )
                
                $
                (21,410
                )
                
                $
                (42,036
                )
                
                $
                (151,669
                )
                
                $
                (130,430
                )
                
                $
                (21,239
                )


- 41
-





Three Months Ended March 31, 2009
Compared to Three Months Ended March 31, 2008





Net Sales.Net
sales decreased 11% to $139.4 million for the three months ended March 31, 2009
from $157.3 million for the three months ended March 31, 2008.





Net sales
in the microelectronic solutions (“AMS”) segment decreased 9% to $70.2 million
for the three months ended March 31, 2009 from $77.4 million for the three
months ended March 31, 2008 primarily due to a reduction in sales of components
due to a general slowdown in the market combined with a demand surge experienced
in the prior year that was not repeated in the current year.  This
reduction is partially offset by an increase in sales volume of integrated
circuits combined with additional sales from our acquisition of Gaisler in June
2008 ($2.0 million).  Net sales in the test solutions (“ATS”)segment decreased 13% to
$69.2 million in 2009 from $79.9 million in 2008.  The change in
foreign currency exchange rates has negatively impacted our U.K. sales by
approximately $11 million.  Excluding the impact of foreign currency
exchange rates, sales for the three months ended March 31, 2009 increased
$300,000 as compared to the three months ended March 31,
2008.   Increases in sales of wireless products were offset by
reductions in sales of radio test sets and synthetic test
products.  The period ended March 31, 2009 was impacted by a purchase
accounting adjustment to deferred revenue which reduced sales by $64,000; while
the period ended March 31, 2008, was impacted by a purchase accounting
adjustment to deferred revenue which reduced sales by $576,000.





Gross
Profit.Gross profit equals net sales less cost of sales. Cost
of sales includes materials, direct labor, amortization of capitalized software
development costs and overhead expenses such as engineering labor, fringe
benefits, depreciation, allocable occupancy costs and manufacturing
supplies.





On a
consolidated basis, gross margin was 47.8% for the three months ended March 31,
2009 and 44.0% for the three months ended March 31, 2008.  For the
three months ended March 31, 2008, gross margin was adversely affected by
purchase accounting adjustments aggregating $6.8 million which (i) increased
cost of sales in the 2008 period for the increase in the recorded value of the
Company’s Sale Transaction date inventories by $5.7 million to eliminate
manufacturing profits inherent in the inventories at that date; (ii) increased
depreciation expense by $542,000 due to acquisition date fair value adjustments
and (iii) reduced sales for the quarter by $576,000 related to eliminating
selling profits inherent in certain deferred revenues.  In 2009, gross
margin was adversely affected by (i) increased depreciation expense of $475,000
related to acquisition date fair value adjustments and (ii) reduced sales for
the quarter of $64,000 related to eliminating selling profits inherent in
certain acquisition date deferred revenues.  Ignoring the purchase
accounting adjustments, gross margin was 48.1% for both the period ended March
31, 2009 and the period ended March 31, 2008.





Three Months
                
                Gross ProfitEndedMarch 31,
                
                
                
                
                % of
                
                
                
                
                
                % of
                
                
                
                
                
                % of(In thousands)
                
                AMS
                
                
                sales
                
                
                ATS
                
                
                sales
                
                
                Total
                
                
                sales2009
                
                $
                33,095
                
                
                
                47.1
                %
                
                $
                33,510
                
                
                
                48.4
                %
                
                $
                66,605
                
                
                
                47.8
                %2008
                
                $
                32,487
                
                
                
                42.0
                %
                
                $
                36,749
                
                
                
                46.0
                %
                
                $
                69,236
                
                
                
                44.0
                %





Gross
margins in the AMS segment were 47.1% in 2009 and 42.0% in
2008.  Gross profit was negatively impacted by purchase accounting
adjustments of $198,000 in 2009 and $4.4 million in 2008. Ignoring the purchase
accounting adjustments, gross margins were 47.4% in 2009 and 47.6% in
2008.





Gross
margins in the ATS segment were 48.4% in 2009 and 46.0% in 2008. Gross profit
was negatively impacted by purchase accounting adjustments of $340,000 versus
$2.4 million in 2008. Ignoring the purchase accounting adjustments, gross
margins were 48.9% in 2009 and 48.6% in 2008.


- 42
-


Selling, General and Administrative
Costs.  Selling, general and administrative (“SG&A”) costs
include sales, office and management salaries, fringe benefits, commissions,
insurance and professional fees, as well as, merger related
expenses.  On a consolidated basis SG&A costs decreased $1.2
million, yet increased 170 basis points as a percentage of sales from the
quarter ended March 31, 2008 to the quarter ended March 31,
2009.  Excluding merger related expenses ($815,000 in 2009 and
$534,000 in 2008), stock compensation costs ($489,000 in 2009 and $488,000 in
2008), acquisition related depreciation expense ($276,000 in 2009 and $364,000
in 2008) and restructuring costs ($107,000 in 2009 and $265,000 in 2008)
SG&A was $29.3 million in 2009 and $30.5 million in 2008 and increased 170
basis points as a percentage of sales.





Three Months
                
                Selling, General and Administrative CostsEndedMarch 31,
                
                
                
                
                % of
                
                
                
                
                
                % of
                
                
                
                
                
                
                
                
                % of(In thousands)
                
                AMS
                
                
                sales
                
                
                ATS
                
                
                sales
                
                
                Corporate
                
                
                Total
                
                
                sales2009
                
                $
                11,019
                
                
                
                15.7
                %
                
                $
                15,721
                
                
                
                22.7
                %
                
                $
                4,214
                
                
                $
                30,954
                
                
                
                22.2
                %2008
                
                $
                10,650
                
                
                
                13.8
                %
                
                $
                18,379
                
                
                
                23.0
                %
                
                $
                3,165
                
                
                $
                32,194
                
                
                
                20.5
                %





Selling,
general and administrative costs increased $369,000, or 3%, in the AMS
segment.  Selling, general and administrative costs decreased $2.7
million, or 14%, in the ATS segment largely due to general cost savings and the
benefits of restructuring activities and the related closing of the Burnham
facility.





Corporate
general and administrative expenses increased $1.0 million primarily due to
increased professional fees related to acquisition investigations and SEC
filings for debt refinancing.





Selling,
general and administrative expenses increased 190 basis points, as a percentage
of sales, for AMS and decreased 30 basis points for ATS. Corporate general and
administrative expenses increased 100 basis points as a percentage of
consolidated sales.  Excluding merger related expenses, Corporate
SG&A expenses increased 75 basis points.





Research and Development
Costs. Research and development costs include materials, engineering
labor and allocated overhead. On a consolidated basis, research and development
expenses decreased $213,000, yet increased 140 basis points as a percentage of
sales.





Three Months
                  
                  Research and Development CostsEndedMarch 31,
                  
                  
                  
                  
                  % of
                  
                  
                  
                  
                  
                  % of
                  
                  
                  
                  
                  
                  % of(In thousands)
                  
                  AMS
                  
                  
                  sales
                  
                  
                  ATS
                  
                  
                  sales
                  
                  
                  Total
                  
                  
                  sales2009
                  
                  $
                  7,579
                  
                  
                  
                  10.8
                  %
                  
                  $
                  10,362
                  
                  
                  
                  15.0
                  %
                  
                  $
                  17,941
                  
                  
                  
                  12.9
                  %2008
                  
                  $
                  7,544
                  
                  
                  
                  9.7
                  %
                  
                  $
                  10,610
                  
                  
                  
                  13.3
                  %
                  
                  $
                  18,154
                  
                  
                  
                  11.5
                  %





AMS
segment self-funded research and development costs increased $35,000, resulting
from an increase in integrated circuit projects partially offset by a reduction
in microelectronic module projects.  As a percentage of sales,
research and development costs increased 110 basis points. Restructuring charges
included in R&D were $35,000 in 2008.  There were no comparable
charges in 2009.





ATS
segment self-funded research and development costs decreased $248,000, or 2%, as
restructuring charges included in R&D were $80,000 in 2009 and $352,000 in
2008.


- 43
-


Restructuring
Costs.The AMS segment incurred restructuring costs of
$402,000 in the three months ended March 31, 2008 ($107,000 in cost of sales,
$260,000 in SG&A and 35,000 in R&D) related to severance for personnel
reductions within our Whippany, New Jersey components manufacturing
facility.  The ATS segment incurred restructuring costs of $582,000 in
2009 ($395,000 in cost of sales, $107,000 in SG&A and 80,000 in R&D)
related to further consolidation and reorganization efforts primarily in our
U.K. operations and $355,000 in 2008 which was also related to consolidation and
reorganization efforts in our U.K. operations, primarily in
R&D.





Amortization of Acquired
Intangibles.Amortization of acquired intangibles decreased
$5.9 million in 2009 largely due to the impact of the change in foreign currency
exchange rates, combined with the completion of amortization of acquired backlog
recorded in the Merger. Amortization for the AMS segment decreased $3.8 million
and the ATS segment decreased $2.1 million.





Other Income
(Expense).Interest expense increased $30,000 to $20.6 million
in 2009.  Other income (expense) of $(47,000) for the three months
ended March 31, 2009 consisted primarily of $(669,000) of foreign currency
transaction losses and $622,000 of interest income and other miscellaneous
income, net. Other income (expense) of $2.0 million for the three months ended
March 31, 2008 consisted primarily of $820,000 of foreign currency transaction
gains, $582,000 of interest income and $560,000 of other miscellaneous
income.





Provision for Income
Taxes.The income tax benefit was $6.4 million for the
three months ended March 31, 2009, an effective income tax rate of
31.8%.  We had an income tax benefit of $6.0 million, an effective
income tax rate of 27.9% for the three months ended March 31, 2008. The
effective income tax rate for the two periods differed from the amount computed
by applying the U.S. Federal income tax rate to income before income taxes
primarily due to foreign, state and local income taxes and for 2008,
non-deductible merger expenses.  We paid income taxes of $597,000 in
the three months ended March 31, 2009 and $3.5 million in the three months ended
March 31, 2008.





Income (loss) from Continuing
Operations.  The loss from continuing operations was $13.7
million for the three months ended March 31, 2009 and $15.4 million for the
three months ended March 31, 2008.





Nine
Months Ended March 31, 2009 Compared to Nine Months Ended March 31,
2008





Net Sales.Net
sales decreased 5% to $437.1 million for the nine months ended March 31, 2009
from $458.3 million for the nine months ended March 31, 2008.





Net sales
in the microelectronic solutions (“AMS”) segment decreased 4% to $208.6 million
for the nine months ended March 31, 2009 from $216.3 million for the nine months
ended March 31, 2008 primarily due to a reduction in sales volume of components
and microelectronic modules, offset by increases in integrated circuits and
motion control products combined with additional sales from our acquisition of
Gaisler in June 2008 ($4.4 million).  Net sales in the test solutions
(“ATS”)segment
decreased 6% to $228.5 million in 2009 from $242.0 million in
2008.  The change in foreign currency exchange rates has negatively
impacted U.K. sales by approximately $20 million.  Excluding the
impact of foreign currency exchange rates, sales for the nine months ended March
31, 2009 increased approximately $7 million as compared to the nine months ended
March 31, 2008 primarily due to an increase in sales volume of wireless
products, offset by a reduction in sales of radio test and synthetic
products.  The period ended March 31, 2009 was impacted by a purchase
accounting adjustment to deferred revenue which reduced sales by $240,000; while
the period ended March 31, 2008 was impacted by a purchase accounting adjustment
to deferred revenue which reduced sales by $2.2 million.


- 44
-





Gross Profit.On a
consolidated basis, gross margin was 47.4% for the nine months ended March 31,
2009 and 38.5% for the nine months ended March 31, 2008.  In 2008,
gross margin was adversely affected by purchase accounting adjustments
aggregating $42.6 million which (i) increased cost of sales in the 2008 period
for the increase in the recorded value of the Company’s Sale Transaction date
inventories by $39.0 million to eliminate manufacturing profits inherent in the
inventories at that date; (ii) increased depreciation expense by $1.4 million
due to acquisition date fair value adjustments and (iii) reduced sales for the
nine months by $2.2 million related to eliminating selling profits inherent in
certain acquisition date deferred revenues.  In 2009, gross margin was
adversely affected by (i) increased depreciation expense of $1.5 million related
to acquisition date fair value adjustments and (ii) reduced sales for the nine
months by $240,000 related to eliminating profits inherent in certain
acquisition date deferred revenue.  Ignoring the purchase accounting
adjustments, gross margin was 47.8% for the period ended March 31, 2009 and
47.6% for the period ended March 31, 2008.





Nine Months
                
                Gross ProfitEndedMarch 31,
                
                
                
                
                % of
                
                
                
                
                
                % of
                
                
                
                
                
                % of(In thousands)
                
                AMS
                
                
                sales
                
                
                ATS
                
                
                sales
                
                
                Total
                
                
                sales2009
                
                $
                98,191
                
                
                
                47.1
                %
                
                $
                108,932
                
                
                
                47.7
                %
                
                $
                207,123
                
                
                
                47.4
                %2008
                
                $
                80,547
                
                
                
                37.2
                %
                
                $
                95,937
                
                
                
                39.6
                %
                
                $
                176,484
                
                
                
                38.5
                %





Gross
margins in the AMS segment were 47.1% in 2009 and 37.2% in
2008.  Gross profit in 2009 included purchase accounting adjustments
of $597,000 as compared to $24.4 million in 2008. Ignoring the purchase
accounting adjustments, gross margins were 47.4% in 2009 and 48.5% in
2008.  The decrease in gross margins is principally attributable to
decreased sales of components that generate higher margins, partially offset by
increased sales of integrated circuit products combined with a favorable product
mix in microelectronic modules and the acquisition of Gaisler in June 2008 ($3.0
million).





Gross
margins in the ATS segment were 47.7% in 2009 and 39.6% in 2008. Gross profit in
2009 was negatively impacted by purchase accounting adjustments of $1.1 million
versus $18.2 million in 2008. Ignoring the purchase accounting adjustments,
gross margins were 48.1% in 2009 and 46.7% in 2008.  Gross margins
increased principally due to increased sales and margins in our wireless
products and increased margins in our synthetic test products due to product
mix, and are partially offset by lower margins due to a reduction in sales of
frequency synthesizer products.





Selling, General and Administrative
Costs.  On a consolidated basis SG&A costs decreased 40
basis points as a percentage of sales from the nine months ended March 31, 2008
to the nine months ended March 31, 2009.  Excluding merger related
expenses ($3.6 million in 2009 and $4.6 million in 2008), stock compensation
costs ($1.5 million in 2009 and $2.8 million in 2008), acquisition related
depreciation expense ($884,000 in 2009 and $911,000 in 2008), restructuring
costs ($463,000 in 2009 and $2.1 million in 2008) and a one-time lease
termination cost ($576,000 in 2008), SG&A was $90.2 million in 2009 and
$92.2 million in 2008.





Nine Months
                
                Selling, General and Administrative CostsEndedMarch 31,
                
                
                
                
                % of
                
                
                
                
                
                % of
                
                
                
                
                
                
                
                
                % of(In thousands)
                
                AMS
                
                
                sales
                
                
                ATS
                
                
                sales
                
                
                Corporate
                
                
                Total
                
                
                sales2009
                
                $
                32,104
                
                
                
                15.4
                %
                
                $
                49,835
                
                
                
                21.8
                %
                
                $
                14,673
                
                
                $
                96,612
                
                
                
                22.1
                %2008
                
                $
                31,543
                
                
                
                14.6
                %
                
                $
                56,229
                
                
                
                23.2
                %
                
                $
                15,409
                
                
                $
                103,181
                
                
                
                22.5
                %


- 45
-





In the
AMS segment, selling, general and administrative costs increased $561,000, or
2%.  As a percentage of sales, selling, general and administrative
costs increased 80 basis points for AMS.  Excluding restructuring
costs ($260,000 in 2008), stock compensation costs ($56,000 in 2008),
acquisition related depreciation expense ($29,000 in 2009 and $30,000 in 2008),
SG&A was $32.1 million in 2009 and $31.2 million in 2008, representing an
increase of 100 basis points as a percentage of sales for AMS.





In the
ATS segment, selling, general and administrative costs decreased $6.4 million,
or 11%, largely due to a $1.4 million reduction in restructuring costs and one
time lease termination fees of $576,000 incurred in 2008 combined with cost
savings related to the closing of our Burnham facility.  As a
percentage of sales, selling, general and administrative costs decreased 140
basis points for ATS.  Excluding restructuring costs ($463,000 in 2009
and $1.8 million in 2008), a one-time lease termination cost of $576,000 in
2008, stock compensation costs ($90,000 favorable impact in 2008), acquisition
related depreciation expense ($690,000 in 2009 and $744,000 in 2008), SG&A
was $48.7 million in 2009 and $53.2 million in 2008.





Corporate
general and administrative expenses decreased $736,000 primarily due to a
reduction in stock-based compensation.  As a percentage of sales,
corporate general and administrative expenses remained relatively
unchanged.





Research and Development
Costs. On a consolidated basis, research and development expenses
decreased 140 basis points as a percentage of sales.





Nine Months
                  
                  Research and Development CostsEndedMarch 31,
                  
                  
                  
                  
                  % of
                  
                  
                  
                  
                  
                  % of
                  
                  
                  
                  
                  
                  % of(In thousands)
                  
                  AMS
                  
                  
                  sales
                  
                  
                  ATS
                  
                  
                  sales
                  
                  
                  Total
                  
                  
                  sales2009
                  
                  $
                  22,178
                  
                  
                  
                  10.6
                  %
                  
                  $
                  29,867
                  
                  
                  
                  13.1
                  %
                  
                  $
                  52,045
                  
                  
                  
                  11.9
                  %2008
                  
                  $
                  22,708
                  
                  
                  
                  10.5
                  %
                  
                  $
                  38,026
                  
                  
                  
                  15.7
                  %
                  
                  $
                  60,734
                  
                  
                  
                  13.3
                  %





AMS
segment self-funded research and development costs decreased $530,000, or 2%,
primarily due to a reduction of microelectronic module projects, partially
offset by increases in components projects and costs related to our acquisition
of Gaisler ($588,000).  As a percentage of sales, research and
development costs increased 10 basis points.





ATS
segment self-funded research and development costs decreased $8.2 million, or
21%, primarily due to (i) a reduction of $8.4 million in our wireless business
relating to cost savings related to the closing of our Burnham facility and a
reduction of wireless related projects and (ii) a reduction of $2.7 million in
restructuring costs primarily in our wireless business partially offset by
increased costs in our radio test products of $3.5 million.





Acquired In-Process Research and
Development Costs.  During the nine months ended March 31, 2008
and in connection with the Company Sale Transaction, we recorded and immediately
expensed $24.3 million of acquired IPR&D costs ($15.7 million in the AMS
segment and $8.6 million in the ATS segment).  In 2009, we recorded
and expensed $1.7 million of costs related to our acquisition of Gaisler in June
2008 and $626,000 of costs related to our acquisition of VI Technology in March
2009.





Restructuring
Costs.The AMS segment incurred total restructuring costs of
$402,000 ($107,000 in cost of sales, $260,000 in SG&A and $35,000 in
R&D), in the nine months ended March 31, 2008 which relate to severance for
personnel reductions within our Whippany, New Jersey components manufacturing
facility.




- 46
-




The ATS
segment incurred restructuring costs of $2.8 million in the nine months ended
March 31, 2009 ($2.0 million in cost of sales, $463,000 in SG&A and $303,000
in R&D).  In comparison, in the nine months ended March 31, 2008,
the ATS segment incurred restructuring costs of $5.2 million ($379,000 in cost
of sales, $1.8 million in SG&A and $3.0 million in R&D).  In
both periods, the costs related to consolidation and reorganization efforts in
our U.K. operations.





Amortization of Acquired
Intangibles.Amortization of acquired intangibles decreased
$6.4 million in 2009 primarily due to the impact of the change in foreign
currency exchange rates, combined with the completion of amortization of
acquired backlog recorded in the Merger.  The amortization for the AMS
segment decreased $3.8 million and the ATS segment decreased $2.6
million.





Company Sale Transaction
Expenses.In the nine months ended March 31, 2008, we incurred
Company Sale Transaction expenses of $36.2 million, consisting primarily of
merger related change of control, severance and other compensation payments, a
break-up fee and its related lawsuit settlement charge and legal and other
professional fees.  There were no comparable costs in the current
period.





Other Income
(Expense).Interest expense was $63.0 million in the nine
months ended March 31, 2009 and $53.9 million in the nine months ended March 31,
2008. The increase is due to the addition of $870 million of debt to finance the
purchase of the Company on August 15, 2007 combined with refinancing of our
$225.0 million Senior Subordinated Unsecured Credit Facility, which increased
the interest rate on the facility to 11.75%.  Other income (expense)
of $12.4 million for the nine months ended March 31, 2009 consisted primarily of
$10.5 million of foreign currency transaction gains and $1.3 million of interest
income. Other income (expense) of $4.2 million for the nine months ended March
31, 2008 consisted primarily of $2.0 million of foreign currency transaction
gains and $1.6 million of interest income.





Provision for Income
Taxes.The income tax benefit was $17.3 million for the
nine months ended March 31, 2009, an effective income tax rate of
41.2%.  We had an income tax benefit for the nine months ended March
31, 2008 of $43.2 million, an effective income tax rate of 28.5%. The effective
income tax rate for the two periods differed from the amount computed by
applying the U.S. Federal income tax rate to income before income taxes
primarily due to foreign, state and local income taxes and, for 2008, the tax
benefit was decreased for the impact of certain Company Sale Transaction
expenses that were not deductible for tax purposes, as well as nondeductible
IPR&D.  We paid income taxes of $3.0 million in the nine months
ended March 31, 2009 and $7.3 million in the nine months ended March 31,
2008.





Income (loss) from Continuing
Operations.  The loss from continuing operations was $24.7
million for the nine months ended March 31, 2009 and $108.4 million for the nine
months ended March 31, 2008.





Liquidity
and Capital Resources





As of
March 31, 2009, we had $53.9 million of cash and cash equivalents, $200.3
million in working capital and our current ratio was 2.4 to 1.  As of
June 30, 2008, we had $54.1 million of cash and cash equivalents, $220.9 million
in working capital and our current ratio was 2.4 to 1.





At March
31, 2009, our marketable securities consisted of $17.5 million of auction rate
securities, net of a $2.4 million valuation allowance, discussed below. Auction
rate securities represent long-term (generally maturities of ten years to
thirty-five years from the date of issuance) variable rate bonds tied to
short-term interest rates that are reset through an auction process, which
occurs every seven to thirty-five days, and are classified as available for sale
securities. All but one (with the one security having a carrying value of $1.6
million and an A rating) of our auction rate securities retain a triple-A rating
by at least one nationally recognized statistical rating organization. In
addition, certain of our auction rate securities are backed by student loans
whose principal and interest are federally guaranteed by the Family Federal
Education Loan Program.  We have redeemed $26.5 million of auction
rate securities at par since February 8, 2008.


- 47
-


Given the
high credit quality of our auction rate securities and our intent and ability to
hold these securities until liquidity returns to the market or maturity, if
necessary, we believe we will recover the full principal amount of $19.9
million, in the future. However, at March 31, 2009, we estimated that the fair
value of our auction rate securities was $17.5 million. Since many auctions are
failing and given that there is currently no active secondary market for our
investment in auction rate securities, the determination of fair value was based
on the following:





·
            continuing
      illiquidity;


·
            lack
      of action by the issuers to establish different forms of financing to
      replace or redeem these securities;
and


·
            the
      credit quality of the underlying
securities.





Should
credit market disruptions continue or increase in magnitude, we may be required
to record a further impairment on our investments or consider that an ultimate
liquidity event may take longer than currently anticipated.





Auction
rate securities are classified as non-current assets in the accompanying March
31, 2009 and June 30, 2008 consolidated balance sheets.





Our
principal liquidity requirements are to service our debt and interest and meet
our working capital and capital expenditure needs. As of March 31, 2009, we had
$886.6 million of debt outstanding (of which $881.2 million was long-term),
including approximately $516.9 million under our senior secured credit facility,
$225.0 million of unsecured senior notes and $143.3 million under our senior
subordinated unsecured credit facility, including paid-in-kind interest.
Additionally, at March 31, 2009 we were able to borrow an additional $50.0
million under the revolving portion of our senior secured credit
facility.





The
following is a summary of required principal repayments of long-term debt for
the next five years and thereafter as of March 31, 2009:





Twelve months ended
                    March 31,
                  
                  (In thousands)2010
                  
                  $
                  5,3832011
                  
                  
                  5,5902012
                  
                  
                  5,6102013
                  
                  
                  5,6352014
                  
                  
                  5,250Thereafter
                  
                  
                  859,128Total
                  
                  $
                  886,596





We expect
that cash generated from operating activities and availability under the
revolving portion of the senior secured credit facility will be our principal
sources of liquidity. Our ability to make payments on and to refinance our
indebtedness and to fund working capital needs and planned capital expenditures
will depend on our ability to generate cash in the future. This, to a certain
extent, is subject to general economic, financial, competitive and other factors
that are beyond our control. Based on our current level of operations, we
believe our cash flow from operations and available borrowings under our senior
secured credit facility will be adequate to meet our liquidity needs for at
least the next twelve months. We cannot assure you, however, that our business
will generate sufficient cash flow from operations, or those future borrowings
will be available to us under our senior secured credit facility in an amount
sufficient to enable us to repay our indebtedness or to fund other liquidity
needs. We may need to refinance all or a portion of our indebtedness on or
before the maturity thereof. We cannot assure you that we will be able to
refinance any of our indebtedness on commercially reasonable terms or at
all.


- 48
-


Cash
Flows





For the
nine months ended March 31, 2009, our cash flow provided by continuing
operations was $35.0 million.  Our investing activities from
continuing operations used cash of $19.4 million, primarily for $13.0 million of
capital expenditures and $7.8 million of payments for purchase of businesses
(net of cash acquired).  Our financing activities used cash of $4.5
million, primarily to repay $4.1 million of debt.





For the
nine months ended March 31, 2008, our cash flow used in continuing operations
was $14.9 million.  Our investing activities from continuing
operations used cash of $1.1 billion, primarily for payments of $1.1 billion to
predecessor shareholders and option holders, net of cash acquired, $9.6 million
of capital expenditures and the purchase (net of sales) of marketable securities
of $22.3 million. Our financing activities provided cash of $1.2 billion,
primarily from borrowings under our credit facilities of $870.0 million on
August 15, 2007 and proceeds from the issuance of common stock of $378.4
million, also on August 15, 2007.





Capital
Expenditures





Capital
expenditures were $13.0 million and $9.6 for the nine months ended March 31,
2009 and 2008, respectively.  Our capital expenditures primarily
consist of equipment replacements.





Contractual
Obligations





The
following table summarizes our obligations and commitments to make future
payments under debt, and other obligations as of March 31, 2009:





Payments Due By Period(1)(In millions)Less Than
                
                
                
                
                
                
                
                
                AfterTotal
                
                
                1 Year
                
                
                1 - 3 Years
                
                
                4 - 5 Years
                
                
                5 YearsSenior
      secured credit facility
                
                $
                516.9
                
                
                $
                5.1
                
                
                $
                10.5
                
                
                $
                10.5
                
                
                $
                490.8Senior
      unsecured notes
                
                
                225.0
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                225.0Subordinated
      unsecured credit facility
                
                
                143.3
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                143.3Other
      long-term debt
                
                
                1.4
                
                
                
                0.3
                
                
                
                0.7
                
                
                
                0.4
                
                
                
                -Operating
      leases(2)
                
                
                19.6
                
                
                
                6.0
                
                
                
                8.4
                
                
                
                3.6
                
                
                
                1.6Employment
      agreements
                
                
                9.2
                
                
                
                3.7
                
                
                
                4.5
                
                
                
                1.0
                
                
                
                -Advisory
      fee (3)
                
                
                10.2
                
                
                
                2.2
                
                
                
                4.3
                
                
                
                3.7
                
                
                
                -Total
                
                $
                925.6
                
                
                $
                17.3
                
                
                $
                28.4
                
                
                $
                19.2
                
                
                $
                860.7





(1)
              Amounts
      do not include interest
payments.





(2)
              The
      Company does not expect any future minimum sub-lease rentals associated
      with operatinglease
      commitments shown in the above
table.





(3)
              The
      annual advisory fee is payable to our Sponsors throughout the term of an
      advisory agreement, which has an initial term expiring on December 31,
      2013 and is automatically renewable for additional one year terms
      thereafter unless terminated. For purposes of this table we have assumed
      that such agreement terminates December 31, 2013. The annual fee will be
      the greater of $2.2 million or 1.8% of adjusted EBITDA for the prior
      fiscal year, as defined in the
agreement.


- 49
-





In the
normal course of business, we routinely enter into binding and non-binding
purchase obligations primarily covering anticipated purchases of inventory and
equipment. None of these obligations are individually significant. We do not
expect that these commitments, as of March 31, 2009, will have a material
adverse affect on our liquidity.





Off-Balance
Sheet Arrangements





We do not
maintain any off-balance sheet arrangements, transactions, obligations or other
relationships with unconsolidated entities that would be expected to have
material current or future effect upon our financial condition or results of
operations.





Seasonality





Historically
our net sales and earnings increase sequentially from quarter to quarter within
a fiscal year, but the first quarter is typically less than the previous year’s
fourth quarter.





Accounting
Policies Involving Significant Estimates





The
preparation of financial statements and related disclosures in conformity with
accounting principles generally accepted in the United States of America
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the revenues and expenses during the period
reported. The following accounting policies require us to make estimates and
assumptions based on the circumstances, information available and our experience
and judgment. These estimates and assumptions are reviewed periodically and the
effects of revisions are reflected in the period that they are determined to be
necessary. If actual results differ significantly from our estimates, our
financial statements could be materially impacted.





Revenues and Cost
Recognition.We recognize revenue when persuasive evidence of
an arrangement exists, the selling price is fixed or determinable, and
collectability of the resulting receivable is reasonably assured.





For
arrangements other than certain long-term contracts, revenue (including shipping
and handling fees) is recognized when products are shipped and title has passed
to the customer. If title does not pass until the product reaches the customer’s
delivery site, recognition of the revenue is deferred until that time. Certain
of our sales are to distributors which have a right to return some portion of
product within up to eighteen months of sale. We recognize revenue on these
sales at the time of shipment to the distributor as the returns under these
arrangements have been insignificant and can be reasonably estimated. A
provision for such estimated returns is recorded at the time sales are
recognized.





Long-term
contracts are accounted for in accordance with SOP 81-1 “Accounting for
Performance of Construction-Type and Certain Production-Type
Contracts.”  We determine estimated contract profit rates and use the
percentage-of-completion method to recognize revenues and associated costs as
work progresses on certain long-term contracts. We measure the extent of
progress toward completion generally based upon one of the following methods
(based upon an assessment of which method most closely aligns to the underlying
earnings process), (i) the units-of-delivery method, (ii) the cost-to-cost
method, using the ratio of contract costs incurred as a percentage of total
estimated costs at contract completion (based upon engineering and production
estimates), or (iii) the achievement of contractual milestones. Provisions for
anticipated losses or revisions in estimated profits on contracts-in-process are
recorded in the period in which such anticipated losses or revisions become
evident.





Revenue
from sales of products where software is other than incidental to their
performance, including related software support and maintenance contracts is
recognized in accordance with SOP-97-2, “Software Revenue Recognition.”
Accordingly, revenue for software is recognized when the software is delivered,
provided the requisite criteria for revenue recognition are
met.


- 50
-





When a
customer purchases software together with post contract support, we allocate a
portion of the fee to the post contract support for its fair value based on the
contractual renewal rate or the amount the support is sold for on a standalone
basis. Post contract support fees are deferred in Advance Payments by Customers
and Deferred Revenue and recognized as revenue ratably over the term of the
related contract.





Inventories.Inventories
are valued at the lower of cost (first-in, first-out) or
market.  Inventory levels are maintained in relation to expected sales
volumes. We periodically evaluate the net realizable value of our inventory.
Numerous analyses are applied including lower of cost or market analysis,
forecasted sales requirements and forecasted warranty requirements. After taking
these and other factors into consideration, such as technological changes, age
and physical condition, appropriate adjustments are recorded to the inventory
balance. If actual conditions differ from our expectation, then inventory
balances may be over or under valued, which could have a material effect on our
results of operations and financial condition.





Purchase Accounting and
Recoverability of Long-Lived and IntangibleAssets.  Determining the fair value of certain assets and
liabilities acquired in a business combination is judgmental in nature and often
involves the use of significant estimates and assumptions. There are various
methods used to estimate the value of tangible and intangible assets acquired,
such as discounted cash flow and market multiple approaches. Some of the more
significant estimates and assumptions inherent in the two approaches include:
projected future cash flows (including timing); discount rate reflecting the
risk inherent in the future cash flows; perpetual growth rate; determination of
appropriate market comparables; and the determination of whether a premium or a
discount should be applied to comparables. There are also judgments made to
determine the expected useful lives assigned to each class of assets and
liabilities acquired. Goodwill is measured as the excess of the cost of
acquisition over the sum of the amounts assigned to identifiable assets acquired
less liabilities assumed. We perform an assessment of whether there is an
indication that goodwill is impaired on an annual basis unless events or
circumstances warrant a more frequent assessment. The impairment assessment
involves, among other things, an estimation of the fair value of each of our
reporting units. We engage an independent valuation expert using both a market
value approach, when applicable and an income based approach to assist us in
estimating those fair values. Such estimates are inherently subjective, and
subject to change in future periods.





In
response to changes in industry and market conditions, we could be required to
strategically realign our resources and consider restructuring, disposing of, or
otherwise exiting businesses, which could result in the impairment of goodwill
and other long lived assets, as well as a reduction in the useful lives of such
depreciable or amortizable long lived assets. Impairment charges and the
reduction in useful lives could have a material impact on our results of
operations and financial condition.





Property,
plant and equipment are stated at cost less accumulated depreciation computed on
a straight-line basis over the estimated useful lives of the related assets.
Leasehold improvements are amortized over the life of the lease or the estimated
life of the asset, whichever is shorter. Changes in circumstances such as
technological advances or changes to our business model can result in the actual
useful lives differing from our estimates. To the extent the estimated useful
lives are incorrect, the value of these assets may be over or under stated,
which in turn could have a material effect on our results of operations and
financial condition.





Long-lived
assets other than goodwill are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying value of any such asset may
be impaired. We evaluate the recoverability of such assets by estimating future
cash flows. If the sum of the undiscounted cash flows expected to result from
the use of the assets and their eventual disposition is less than the carrying
amount of the assets, we will recognize an impairment loss to the extent of the
excess of the carrying amount of the assets over the discounted cash
flows.


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If our
actual results are not as favorable as the forecasted results used in our
impairment reviews of goodwill and other long-lived assets, impairment charges
may be necessary which could have a material effect on our results of operations
and financial condition.





Restructuring
Charges.When we incur a liability related to a restructuring
charge, we estimate and record all appropriate expenses. These expenses include
severance, retention bonuses, fringe benefits, asset impairment, buyout of
leases and inventory write-downs. To the extent that our estimates differ from
actual expenses, there could be significant additional expenses or reversals of
previously recorded charges in the future.





Income
Taxes.Significant judgment is required in determining our
worldwide income tax provision. In the ordinary course of a global business,
there are many transactions and calculations where the ultimate tax outcome is
uncertain. Some of these uncertainties arise as a consequence of revenue sharing
and cost reimbursement arrangements among related entities, the process of
identifying items of revenues and expense that qualify for preferential tax
treatment and segregation of foreign and domestic income and expense to avoid
double taxation. No assurance can be given that the final tax outcome of these
matters will not be different than that which is reflected in our historical
income tax provisions and accruals. Such differences could have a material
effect on our income tax provision and net earnings in the period in which such
determination is made.





We record
a valuation allowance to reduce our deferred tax assets to the amount of future
tax benefit that is more likely than not to be realized. While we have
considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance, there is no
assurance that sufficient taxable income will be generated in future years or
that tax strategies will continue to be prudent. Accordingly, the valuation
allowance might need to be increased to cover additional deferred tax assets
that may not be realizable. Any increase in the valuation allowance could have a
material adverse impact on our income tax provision and net earnings in the
period in which such determination is made.





Share-Based
Compensation.We are required to record the fair value of
share based compensation awards as an expense. In order to determine the fair
value of stock options on the date of grant, the Company utilizes the
Black-Scholes option-pricing model. Inherent in this model are assumptions
related to expected stock price volatility, option life, risk-free interest rate
and dividend yield. Expected volatilities are based on historical volatility of
our shares using daily price observations over a period consistent with the
expected life. We used the safe harbor guidance in Staff Accounting Bulletin
(“SAB”) 107 to estimate the expected life of options granted during fiscal 2007
and 2006. The risk-free rate is based on the U.S. Treasury yield curve in effect
at the time of grant for periods similar to the expected life. While the
risk-free interest rate and dividend yield are less subjective assumptions,
typically based on factual data derived from public sources, the expected stock
price volatility and option life assumptions require a greater level of judgment
which makes them critical accounting estimates.





Recently
Adopted Accounting Pronouncements





See Note
1 of the condensed consolidated financial statements.





Recently
Issued Accounting Pronouncements Not Yet Adopted





See Note
1 of the condensed consolidated financial statements.


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Forward-Looking
Statements





All
statements other than statements of historical fact included in this Quarterly
Report, including without limitation statements under “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” regarding our
financial position, business strategy and plans and objectives of our management
for future operations, are forward-looking statements.  When used in
this Quarterly Report, words such as “anticipate,” “believe,” “estimate,”
“expect,” “intend” and similar expressions, as they relate to us or our
management, identify forward-looking statements.  Such forward-looking
statements are based on the current beliefs of our management, as well as
assumptions made by and information currently available to our
management.  Actual results could differ materially from those
contemplated by the forward-looking statements as a result of certain factors,
including but not limited to those set forth above.  Such statements
reflect our current views with respect to the future and are subject to these
and other risks, uncertainties and assumptions relating to our financial
condition, results of operation, growth strategy and liquidity.  We do
not undertake any obligation to update such forward-looking
statements.





ITEM 3 – QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





Interest Rate
Risk.We are subject to interest rate risk in connection with
borrowings under our senior secured credit facility.  Although we
currently have interest rate swap agreements hedging portions of this debt,
these will expire before the borrowings are fully repaid. As of March 31, 2009,
we have $517 million outstanding under the term-loan portion of our senior
secured credit facility, some of which is subject to variable interest rates.
Each change of 0.125% in interest rates would result in a $58,000 change in our
annual interest expense on the un-hedged portion of the term-loan borrowings and
a $63,000 change in our annual interest expense on the revolving loan
borrowings, assuming the entire $50.0 million was outstanding.  Any
debt we incur in the future may also bear interest at floating
rates.





Foreign Currency
Risk.Foreign currency contracts are used in certain
circumstances to protect us from fluctuations in exchange rates. We enter into
foreign currency contracts, which are not designated as hedges. Thus the change
in fair value is included in income as it occurs, within other income (expense).
As of March 31, 2009, we had $10.7 million of notional value foreign currency
forward contracts maturing through June 2009. Notional amounts do not quantify
risk or represent assets or liabilities of the Company, but are used in the
calculation of cash settlements under the contracts. The fair value of these
contracts was a $33,000 liability at March 31, 2009 and a $13,000 asset at June
30, 2008.  If foreign currency exchange rates (primarily the British
pound and the Euro) change by 10% from the levels at March 31, 2009, the effect
on our comprehensive income would be approximately $20.5 million.





Inflation
Risk.Inflation has not had a material impact on our results
of operations or financial condition during the preceding three
years.





ITEM 4T – CONTROLS AND
PROCEDURES





Our
disclosure controls and procedures under the Securities Exchange Act of 1934, as
amended, are designed to ensure that information required to be disclosed in the
reports that we file or submit under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms of the Securities and Exchange
Commission. The Principal Executive Officer and the Principal Financial Officer,
with the assistance from other members of management, have reviewed the
effectiveness of our disclosure controls and procedures as of March 31, 2009
and, based on their evaluation, have concluded that the disclosure controls and
procedures were effective as of such date.





There
have been no changes in our internal controls over financial reporting that
occurred during the quarter ended March 31, 2009 that has materially affected,
or is reasonably likely to materially affect, our internal control over
financial reporting.


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PART
II – OTHER INFORMATION





Item 1.  Legal
Proceedings





In March
2005, we sold the net assets of our shock and vibration control device
manufacturing business (“VMC”).  Under the terms of the sale
agreements, we retained certain liabilities relating to adverse environmental
conditions that existed at the premises occupied by VMC as of the date of
sale.  We recorded a liability for the estimated remediation costs
related to adverse environmental conditions that existed at the VMC premises
when it was sold.  The accrued environmental liability at March 31,
2009 is $1.0 million, of which $322,000 is expected to be paid within one
year.





During
the quarter ended March 31, 2007, we became aware that certain RadHard
bidirectional multipurpose transceivers sold by us since 1999 may have been
subject to the licensing jurisdiction of the U.S. Department of State in
accordance with the International Traffic in Arms Regulations (“ITAR”).
Accordingly, we filed a Voluntary Disclosure with the Directorate of Defense
Trade Controls, Department of State, describing the details of the possible
inadvertent misclassification. Simultaneously, we filed a Commodity Jurisdiction
request providing detailed information and data supporting our contention that
the product is not subject to ITAR and requesting a determination that such
product is not ITAR controlled. By letter dated November 15, 2007, we were
informed that the U.S. Department of State had determined in response to our
Commodity Jurisdiction request, that the product is subject to the licensing
jurisdiction of the U.S. Department of State in accordance with ITAR. We
requested reconsideration of this determination. On February 7, 2008, we filed
an addendum to the above referenced Voluntary Disclosure advising the
Directorate of Defense Trade Controls that other products sold by us similar in
nature to the transceiver described above may also be subject to the ITAR. The
Directorate of Defense Trade Controls agreed to extend our time to file such
addendum to the Voluntary Disclosure until a decision was rendered with respect
to our request for reconsideration of the determination in connection with the
above-referenced Commodity Jurisdiction request. On August 5, 2008, we received
a letter from the Office of Defense Trade Controls Compliance (“DTCC”)
requesting that we provide documentation and/or information relating to our
compliance initiatives after November 15, 2007 as well as the results of any
product reviews conducted by us, and indicating that a civil penalty against us
could be warranted in connection with this matter following the review of such
materials. We have provided all of the materials and documentation requested by
the DTCC.  Our request for reconsideration was denied by the
Directorate of Defense Trade Controls on August 19, 2008 which determined that
the product is subject to the licensing jurisdiction of the Department of State
in accordance with ITAR. Accordingly, on September 18, 2008, we filed an
addendum to our Voluntary Disclosure identifying other products that may have
been subject to the licensing jurisdiction of the U.S. Department of State in
accordance with the ITAR but were inadvertently misclassified.  At
this time it is not possible to determine whether any fines or other penalties
will be asserted against us, or the materiality of any outcome.





During
May 2008, we became further aware that a certain product sold by our KDI
subsidiary may have inadvertently been misclassified as not ITAR controlled. On
August 5, 2008, we filed a Voluntary Disclosure with the Directorate of Defense
Trade Controls, Department of State, describing the inadvertent
misclassification of this product.  In January 2009 we identified
another product that should have been included in the August 5, 2008
disclosure.  We filed an initial disclosure with the Department of
State identifying this product, and the Department of State instructed us to
file an amendment to the August 5, 2008 disclosure.  That amendment
was filed in April 2009.  At this time it isnot
possible to determine whether any fines or other penalties will be asserted
against us with respect to the foregoing matters, or the materiality of any
outcome.





During
November 2008, we became aware that our Hauppauge facility had shipped two ITAR
controlled products to a foreign customer, but inadvertently had noted on the
requisite paperwork that only one ITAR controlled product was included in the
shipment.  We filed a voluntary disclosure in January 2009, and that
disclosure has been closed by the State Department and no fine or penalty was
assessed.




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During
January 2009, we became aware that a certain product sold by our Powell
subsidiary, for which an ITAR marketing license had been properly issued by the
U.S. Department of State, mistakenly was taken out of the country by an employee
without first obtaining the required U.S. Customs signature upon
departure.   We have filed an initial disclosure relating to this
issue and will file a detailed disclosure by June 6, 2009.  At this
time it is not possible to determine whether any fines or other penalties will
be asserted against us, or the materiality of any outcome.





In
the third quarter of fiscal 2009, we became aware that a product sold and
licensed to Raytheon U.K. was actually forwarded to an end user in Saudi
Arabia.  Aeroflex did not identify that end user on the initial
license application, so the product in question was forwarded to Saudi Arabia
when it was only authorized to travel as far as the U.K.  We filed an
initial disclosure concerning this matter in April 2009.  At this time
it is not possible to determine whether any fines or penalties will be asserted
against us, or the materiality of any outcome.





In March
2009 we became aware that Aeroflex’s subsidiary, Micrometrics, had inadvertently
misclassified a component and shipped it to a foreign customer in Italy under
the jurisdiction of the Export Administration Regulations ("EAR") when
it should have been shipped under the jurisdiction of the ITAR.  We
filed an initial voluntary disclosure concerning this matter in April
2009.  At this time it is not possible to determine whether any fines
or penalties will be asserted against us, or the materiality of any
outcome.





An
amended class action complaint was filed against us and the Predecessor Entity’s
board of directors on June 20, 2007 in the Supreme Court of the State of New
York, Nassau County. The complaint alleges that the board breached its fiduciary
duties to our stockholders (i) by issuing a preliminary proxy statement on June
5, 2007 that was issued in connection with seeking stockholder approval of the
Merger and (ii) in approving certain amendments, that were allegedly beyond the
scope of our corporate powers, to our SERP and the employment agreements of
defendants Harvey R. Blau, our then Chairman and Chief Executive Officer, and
Leonard Borow, our then President and Chief Operating Officer and currently, the
Successor Entity’s President and Chief Executive Officer. We are currently in
settlement discussions with the plaintiffs and have accrued an insignificant
liability for the settlement.





We are
also involved in various other claims and legal actions that arise in the
ordinary course of business. We do not believe that the ultimate resolution of
any of these actions will have a material adverse effect on our financial
position, results of operations, liquidity or capital
resources.





Item 1A. Risk
Factors





There
have been no material changes in our risk factors from the risk factors
disclosed in the Registration Statement on Form S-1 filed on February 2, 2009,
and which became effective on February 11, 2009.





Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds





None





Item 3. Defaults upon
Senior Securities





None





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





None


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Item 5.  Other
Information





None





Item
6.  Exhibits





Exhibit No.
                              
                              Exhibit
      Description31.1
                              
                              Certification
      pursuant to Rules 13a-14(a)/15d-14a as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.31.2
                              
                              Certification
      pursuant to Rules 13a-14(a)/15d-14a as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.31.3
                              
                              Certification
      pursuant to Rules 13a-14(a)/15d-14a as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.32.1
                              
                              Certification
      pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002.32.2
                              
                              Certification
      pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of
  2002.


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-





SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





AEROFLEX
      INCORPORATED(REGISTRANT)May 14, 2009
                    
                    /s/ John Adamovich, Jr.John
      Adamovich, Jr.Sr.
      Vice President andChief
      Financial
Officer


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-





EXHIBIT
INDEX





Exhibit No.
                            
                            Exhibit Description31.1
                            
                            Certification
      pursuant to Rules 13a-14(a)/15d-14a as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.31.2
                            
                            Certification
      pursuant to Rules 13a-14(a)/15d-14a as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.31.3
                            
                            Certification
      pursuant to Rules 13a-14(a)/15d-14a as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.32.1
                            
                            Certification
      pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002.32.2
                            
                            Certification
      pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of
  2002.


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