##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-Q
  þ
    
    Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2007
 o
    
    Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File Number: 000-27312
 TOLLGRADE COMMUNICATIONS, INC.
  Pennsylvania
    
    25-1537134(State or other jurisdiction 
of incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 493 Nixon Rd.
Cheswick, PA 15024
 412-820-1400
  þ o
  o þ o
  o þ




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##### 



TOLLGRADE COMMUNICATIONS, INC.
 Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 2007  Table of Contents
 PAGENO.PART I. FINANCIAL INFORMATIONItem 1 Condensed Consolidated Financial Statements (unaudited):Condensed Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006
    
    
    3Condensed Consolidated Statements of Operations for the three month periods ended March 31, 2007 and April 1, 2006
    
    
    4Condensed Consolidated Statements of Cash Flows for the three month periods ended March 31, 2007 and April 1, 2006
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3 Quantitative and Qualitative Disclosures about Market Risk
    
    
    30Item 4 Controls and Procedures
    
    
    30PART II. OTHER INFORMATIONItem 1A Risk Factors
    
    
    31Item 6 Exhibits
    
    
    42SIGNATURES
    
    
    43EXHIBIT INDEX
    
    
    44EX-10.1EX-31.1EX-31.2EX-32
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PART I. FINANCIAL INFORMATION
 
 Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 TOLLGRADE COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands except par value) (Unaudited)
 March 31, 2007
    
    December 31, 2006*ASSETSCurrent assets:Cash and cash equivalents
    
    $
    60,801
    
    
    $
    57,378Short-term investments
    
    
    4,095
    
    
    
    5,323Accounts receivable:Trade, net of allowance for doubtful accounts of
$473 in 2007 and $535 in 2006
    
    
    11,659
    
    
    
    15,149Other
    
    
    672
    
    
    
    1,918Inventories
    
    
    11,528
    
    
    
    8,556Prepaid expenses and other current assets
    
    
    1,117
    
    
    
    776Deferred tax assets and refundable income tax
    
    
    3,067
    
    
    
    2,939Assets held for sale
    
    
    1,164
    
    
    
    1,190Total current assets
    
    
    94,103
    
    
    
    93,229Property and equipment, net
    
    
    3,171
    
    
    
    3,301Intangibles, net
    
    
    40,942
    
    
    
    41,487Goodwill
    
    
    23,836
    
    
    
    23,836Other assets
    
    
    506
    
    
    
    499Total assets
    
    $
    162,558
    
    
    $
    162,352LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,416
    
    
    $
    1,580Accrued warranty
    
    
    2,144
    
    
    
    2,135Accrued expenses
    
    
    1,493
    
    
    
    2,590Accrued salaries and wages
    
    
    91
    
    
    
    658Accrued royalties payable
    
    
    302
    
    
    
    200Deferred income
    
    
    3,050
    
    
    
    2,783Total current liabilities
    
    
    9,496
    
    
    
    9,946Deferred tax liabilities and other taxes
    
    
    3,147
    
    
    
    2,962Total liabilities
    
    
    12,643
    
    
    
    12,908Commitments and contingent liabilitiesShareholders equity:Preferred stock, $1.00 par value; Authorized
shares, 10,000; issued shares, -0- in 2007 and 2006
    
    
    
    
    
    
    Common stock, $.20 par value; authorized shares,
50,000; issued shares, 13,721 in 2007 and 13,709 in
2006
    
    
    2,742
    
    
    
    2,742Additional paid-in capital
    
    
    72,837
    
    
    
    72,477Treasury stock, at cost, 462 shares in 2007 and 2006
    
    
    (4,791
    )
    
    
    (4,791
    )Retained earnings
    
    
    79,127
    
    
    
    79,016Total shareholders equity
    
    
    149,915
    
    
    
    149,444Total liabilities and shareholders equity
    
    $
    162,558
    
    
    $
    162,352
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TOLLGRADE COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data) (Unaudited)
 Three Months EndedMarch 31, 2007
    
    
    April 1, 2006Revenues:Products
    
    $
    10,267
    
    
    $
    14,361Services
    
    
    2,775
    
    
    
    3,246Total revenues:
    
    
    13,042
    
    
    
    17,607Cost of sales:Products
    
    
    4,527
    
    
    
    7,625Services
    
    
    929
    
    
    
    1,059Amortization of intangibles
    
    
    568
    
    
    
    977Total cost of sales
    
    
    6,024
    
    
    
    9,661Gross profit
    
    
    7,018
    
    
    
    7,946Operating expenses:Selling and marketing
    
    
    2,185
    
    
    
    2,686General and administrative
    
    
    2,108
    
    
    
    2,320Research and development
    
    
    2,953
    
    
    
    3,659Restructuring expense
    
    
    382
    
    
    
    Total operating expense
    
    
    7,628
    
    
    
    8,665Loss from operations
    
    
    (610
    )
    
    
    (719
    )Interest income:
    
    
    776
    
    
    
    627Income (loss) before taxes
    
    
    166
    
    
    
    (92
    )Provision (benefit) for income taxes
    
    
    55
    
    
    
    (28
    )Net income (loss)
    
    $
    111
    
    
    $
    (64
    )Income (loss) per share information:Weighted average shares of common stock
and equivalents:Basic
    
    
    13,254
    
    
    
    13,214Diluted
    
    
    13,442
    
    
    
    13,214Net income (loss) per common share:Basic
    
    $
    0.01
    
    
    $
    0.00Diluted
    
    $
    0.01
    
    
    $
    0.00
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TOLLGRADE COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands) (Unaudited)
 Three Months EndedMarch 31, 2007
    
    April 1, 2006Cash flows from operating activities:Net income (loss)
    
    $
    111
    
    
    $
    (64
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    982
    
    
    
    1,520Stock-based compensation expense
    
    
    354
    
    
    
    115Deferred income taxes
    
    
    57
    
    
    
    (190
    )Excess tax benefits from stock-based compensation
    
    
    (1
    )
    
    
    (91
    )Provision for losses on inventory
    
    
    214
    
    
    
    (18
    )Provision (benefit) for allowance for doubtful accounts
    
    
    (23
    )
    
    
    12Restructuring
    
    
    174
    
    
    
    Changes in assets and liabilities:Accounts receivable-trade
    
    
    3,513
    
    
    
    (4,388
    )Accounts receivable-other
    
    
    1,072
    
    
    
    (45
    )Inventory
    
    
    (3,186
    )
    
    
    (922
    )Prepaid expenses and other assets
    
    
    (348
    )
    
    
    (11
    )Refundable income taxes
    
    
    
    
    
    
    651Accounts payable
    
    
    836
    
    
    
    1,015Accrued warranty
    
    
    9
    
    
    
    27Accrued expenses and deferred income
    
    
    (1,396
    )
    
    
    (284
    )Accrued royalties payable
    
    
    102
    
    
    
    37Income taxes payable
    
    
    
    
    
    
    (581
    )Net cash provided by (used in) operating activities
    
    
    2,470
    
    
    
    (3,217
    )Cash flows from investing activities:Purchase of Emerson test system business
    
    
    
    
    
    
    (5,501
    )Purchase of short-term investments
    
    
    (1,956
    )
    
    
    (2,136
    )Redemption/maturity of short-term investments
    
    
    3,184
    
    
    
    2,570Capital expenditures, including capitalized software
    
    
    (281
    )
    
    
    (437
    )Net cash provided by (used in) investing activities
    
    
    947
    
    
    
    (5,504
    )Cash flows from financing activities:Proceeds from exercise of stock options
    
    
    5
    
    
    
    399Excess tax benefit from stock-based compensation
    
    
    1
    
    
    
    91Net cash provided by financing activities
    
    
    6
    
    
    
    490Net increase (decrease) in cash and cash equivalents
    
    
    3,423
    
    
    
    (8,231
    )Cash and cash equivalents at beginning of period
    
    
    57,378
    
    
    
    49,421Cash and cash equivalents at end of period
    
    $
    60,801
    
    
    $
    41,190
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. BASIS OF PRESENTATION
  RECLASSIFICATIONS
  NEW ACCOUNTING STANDARDS
  2. STOCK COMPENSATION PLANS AND ACCOUNTING FOR STOCK-BASED COMPENSATION EXPENSE
 The Plans
  6




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Grants Under the Plans
   Stock-Based Compensation Expense
   7




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Shares Authorized But Not GrantedMarch 31, 2007
    
    December 31, 20061998 Employee Incentive Compensation Plan
    
    
    166,239
    
    
    
    153,3732006 Long Term Incentive Compensation Plan
    
    
    1,146,118
    
    
    
    1,276,666
  Range of
    
    Weighted AverageNumber of Shares
    
    Option Prices
    
    Exercise PriceOutstanding, December 31,
2006
    
    
    1,358,385
    
    
    $
    7.28 - 159.19
    
    
    $
    30.24Granted
    
    
    10,000
    
    
    
    9.84
    
    
    
    9.84Exercised
    
    
    (500
    )
    
    
    9.49
    
    
    
    9.49Cancelled/Forfeited/Expired
    
    
    (19,866
    )
    
    
    9.27-159.19
    
    
    
    50.40Outstanding, March 31, 2007
    
    
    1,348,019
    
    
    $
    7.28-159.19
    
    
    $
    29.79
 3. RESTRUCTURING
   Balance atDecember
    
    
    
    
    
    
    Cash
    
    
    Asset write-
    
    
    Balance at31,2006
    
    
    Expense
    
    
    payments
    
    
    downs
    
    
    March 31, 2007Facility
rationalization
including employee
costs
    
    $
    341
    
    
    $
    356
    
    
    $
    (247
    )
    
    $
    (174
    )
    
    $
    276Real estate impairment
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    (26
    )
    
    
    Total
    
    $
    341
    
    
    $
    382
    
    
    $
    (247
    )
    
    $
    (200
    )
    
    $
    276
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4. ACQUISITION
   Accounts Receivable
    
    $
    1,827Inventories
    
    
    1,113Property and Equipment
    
    
    112Intangible Assets:Customer Relationship
    
    
    193Tradename
    
    
    62Purchased Technology
    
    
    761Sales Order Backlog
    
    
    97Goodwill
    
    
    2,274Total Assets Acquired
    
    
    6,439Deferred Income
    
    
    175Accounts Payable
    
    
    636Restructuring
    
    
    127Total Liabilities
    
    
    938Net Assets Acquired
    
    $
    5,501
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(In Thousands, Except Per Share Data)Unaudited Pro FormaFor the three monthsended April 1, 2006Revenues
    
    $
    119,173Loss from operations
    
    $
    (981
    )Net loss
    
    $
    (236
    )Pro forma diluted loss per share
    
    $
    (0.02
    )Actual diluted earnings per share
    
    $
    0.00
 5. INTANGIBLE ASSETS
  Useful
    
    
    March 31, 2007Life
    
    
    
    
    
    
    Accumulated(Years)
    
    
    Gross
    
    
    Amortization
    
    
    NetAmortizing Intangible Assets:Post Warranty Service Agreements
    
    
    50
    
    
    $
    32,000
    
    
    $
    960
    
    
    $
    31,040Technology
    
    
    5-10
    
    
    
    17,935
    
    
    
    12,375
    
    
    
    5,560Customer Relationships
    
    
    5-15
    
    
    
    2,843
    
    
    
    833
    
    
    
    2,010Other
    
    
    1-3
    
    
    
    159
    
    
    
    127
    
    
    
    32Non-Amortizing Intangible Assets:Tradenames
    
    
    
    
    
    
    2,300
    
    
    
    
    
    
    
    2,300Total Intangible Assets
    
    
    
    
    
    $
    55,237
    
    
    $
    14,295
    
    
    $
    40,942Goodwill
    
    
    
    
    
    $
    23,836
    
    
    $
    
    
    
    $
    23,836
 Useful
    
    

December 31, 2006Life
    
    
    
    
    
    
    Accumulated(Years)
    
    
    Gross
    
    
    Amortization
    
    
    NetAmortizing Intangible Assets:Post Warranty Service Agreements
    
    
    50
    
    
    $
    32,000
    
    
    $
    800
    
    
    $
    31,200Technology
    
    
    5-10
    
    
    
    17,912
    
    
    
    12,057
    
    
    
    5,855Customer Relationships
    
    
    5-15
    
    
    
    2,843
    
    
    
    748
    
    
    
    2,095Other
    
    
    1-3
    
    
    
    159
    
    
    
    122
    
    
    
    37Non-Amortizing Intangible Assets:Tradenames
    
    
    
    
    
    
    2,300
    
    
    
    
    
    
    
    2,300Total Intangible Assets
    
    
    
    
    
    $
    55,214
    
    
    $
    13,727
    
    
    $
    41,487Goodwill
    
    
    
    
    
    $
    23,836
    
    
    $
    
    
    
    $
    23,836
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6. INVENTORY
  March 31, 2007
    
    December 31, 2006Raw materials
    
    $
    6,644
    
    
    $
    5,895Work in process
    
    
    4,303
    
    
    
    2,728Finished goods
    
    
    3,220
    
    
    
    2,35814,167
    
    
    
    10,981Reserves for slow moving and obsolete inventory
    
    
    (2,639
    )
    
    
    (2,425
    )$
    11,528
    
    
    $
    8,556
 7. PER SHARE INFORMATION
   Three Months Ended
    
    
    Three Months EndedMarch 31, 2007
    
    
    April 1, 2006Net income (loss)
    
    $
    111
    
    
    $
    (64
    )Common and common equivalent shares:Weighted average common shares outstanding
    
    
    13,254
    
    
    
    13,214Effect of dilutive securities  stock
options and restricted stock
    
    
    188
    
    
    
    13,442
    
    
    
    13,214Earnings per share:Basic
    
    $
    0.01
    
    
    $
    0.00Diluted
    
    $
    0.01
    
    
    $
    0.00
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8. PRODUCT WARRANTY
   Three Months Ended
    
    
    Year EndedMarch 31, 2007
    
    
    December 31, 2006Balance at the beginning of the period
    
    $
    2,135
    
    
    $
    2,220Accruals for warranties issued during the period
    
    
    305
    
    
    
    1,595Settlements during the period
    
    
    (296
    )
    
    
    (1,680
    )Balance at the end of the period
    
    $
    2,144
    
    
    $
    2,135
 9. CONTINGENCIES AND COMMITMENTS
  10. INCOME TAXES
    11. MAJOR CUSTOMERS AND INTERNATIONAL SALES
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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion should be read in conjunction with the Condensed Consolidated Financial
Statements and Notes thereto appearing elsewhere in this report.
 CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995.
 will, believes, intends, expects, plans, could or may,
  OVERVIEW
 About the Company
 ®
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About our customers
  PRODUCTS
 TELECOMMUNICATION TEST SYSTEMS
  DigiTest and LoopCare; N(x)Test, N(x)DSL-3 and LTSC
 
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MCU
  CABLE TESTING PRODUCTS
   17




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SERVICES
  BACKLOG
    OPERATING SEGMENT
  18




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INTERNATIONAL SALES
   APPLICATION OF CRITICAL ACCOUNTING POLICIES
  Revenue Recognition
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Goodwill and Intangible Assets
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Sensitivity Analysis
  YearsTwelve MonthRemaining
    
    Carrying
    
    RollingOriginal
    
    Life at
    
    Value at
    
    ProjectedAsset Description
    
    Life
    
    3/31/07
    
    3/31/07
    
    Amortization(in millions)LoopCareBase Software
    
    
    10
    
    
    
    4.50
    
    
    
    2.0
    
    
    
    0.5Post-WarrantyMaintenance Service
Agreements
    
    
    50
    
    
    
    48.50
    
    
    
    31.0
    
    
    
    0.6CheetahBase Software
    
    
    10
    
    
    
    5.75
    
    
    
    1.7
    
    
    
    0.3Proprietary Technology
    
    
    10
    
    
    
    5.75
    
    
    
    0.6
    
    
    
    0.1Customer Base
    
    
    15
    
    
    
    10.75
    
    
    
    1.9
    
    
    
    0.3EmersonProprietary Technology
    
    
    5
    
    
    
    4.00
    
    
    
    0.6
    
    
    
    0.2Customer Relationship
    
    
    5
    
    
    
    4.00
    
    
    
    0.2
    
    
    
    0.1Other
    
    
    3-5
    
    
    
    2.00
    
    
    
    0.6
    
    
    
    0.2$
    38.6
    
    
    $
    2.3
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Reviews for Impairment:
     23




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Inventory Valuation
   Allowance for Doubtful Accounts
   Income Taxes
  Warranty
  24




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Long-Lived Assets Held for Sale
   Restructuring Accrual
   RESULTS OF OPERATIONS
 FIRST QUARTER OF 2007 COMPARED TO FIRST QUARTER OF 2006
 Revenues
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Gross Profit
  Selling and Marketing Expense
  General and Administrative Expense
 .
 Research and Development Expense
  Restructuring Expense
  27




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Balance atDecember
    
    
    
    
    
    
    Cash
    
    
    Asset write-
    
    
    Balance at31,2006
    
    
    Expense
    
    
    payments
    
    
    downs
    
    
    March 31, 2007Facility
rationalization
including employee
costs
    
    $
    341
    
    
    $
    356
    
    
    $
    (247
    )
    
    $
    (174
    )
    
    $
    276Real estate impairment
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    (26
    )
    
    
    Total
    
    $
    341
    
    
    $
    382
    
    
    $
    (247
    )
    
    $
    (200
    )
    
    $
    276
   Interest Income
  Income Taxes
  Income (Loss) Per Share
  28




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LIQUIDITY AND CAPITAL RESOURCES
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KEY RATIOS
  NEW ACCOUNTING STANDARDS
  
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4. CONTROLS AND PROCEDURES
  30




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PART II. OTHER INFORMATION
 
 Item 1A. RISK FACTORS
  We depend upon a few major customers for a majority of our revenues, and the loss of any of these
customers, or the substantial reduction in the products that they purchase from us, would
significantly reduce our revenues and net income.
  
    
    the conditions of the communications market and the economy in general;
    
    subscriber line loss and related reduced demand for wireline telecommunications services;
    
    changes or shifts in the technology utilized in the networks;
    
    labor disputes between our customers and their collective bargaining units;
    
    the failure of our customers to meet established purchase forecasts and growth projections;
    
    competition among the RBOCs, competitive exchange carriers and wireless telecommunications
and cable providers; and
    
    reorganizations, including management changes, at one or more of our customers or
potential customers.
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Our operating results may vary from quarter to quarter, causing our stock price to fluctuate.
  The sale of our products is dependent upon our ability to satisfy the proprietary requirements of
our customers.
  The sale of our products is dependent on our ability to respond to rapid technological change,
including evolving industry-wide standards, and may be adversely affected by the development, and
acceptance by our customers, of new technologies which may compete with or reduce the demand for
our products.
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Our reliance on third parties to manufacture certain aspects of our products involves risks,
including delays in product shipments and reduced control over product quality.
  Our future sales in international markets are subject to numerous risks and uncertainties.
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We face intense competition, which could result in our losing market share or experiencing a
decline in our gross margins.
   Our future results are dependent on our ability to establish, maintain and expand our distribution
channels and our existing third-party distributors.
  The sales cycle for our system products is long, and the delay or failure to complete one or more
large license transactions in a quarter could cause our operating results to fall below our
expectations.
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We depend on sales of our MCU products for a meaningful portion of our revenues, but this product
is mature and its sales will continue to decline.
   35




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Our Services business is subject to a trend of reduced capital spending by our major customers.
  Our continued emphasis on our network assurance and testing solutions and cable status monitoring
products, and on software products in particular, could have a material adverse effect on our
profitability.
    36




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Our customers are subject to an evolving governmental regulatory environment that could
significantly reduce the demand for our products or increase our costs of doing business.
   Our limited ability to protect our proprietary information and technology may adversely affect our
ability to compete, and our products could infringe upon the intellectual property rights of
others, resulting in claims against us the results of which could be costly.
   The success of some of our products is dependent on our ability to maintain licenses to technology
from the manufacturers of systems with which our products must be compatible.
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If we are unable to satisfy our customers specific product quality, certification or network
requirements, our business could be disrupted and our financial condition could be harmed.
  We have completed, and may pursue additional acquisitions, which could result in the disruption of
our current business, difficulties related to the integration of acquired businesses, and
substantial expenditures.
  The
failure of acquired assets to meet expectations, or a decline in our fair value determined by
market prices of our stock, could indicate impairment of our intangible assets and result in
impairment charges.
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If our accounting controls and procedures are circumvented or otherwise fail to achieve their
intended purposes, our business could be seriously harmed.
  If we ship products that contain defects, the market acceptance of our products and our reputation
will be harmed and our customers could seek to recover their damages from us.
  We are dependent upon our ability to attract, retain and motivate our key personnel.
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Consolidations in, or a continued slowdown in, the telecommunications industry could harm our
business.
  Our expenses are relatively fixed in the short term, and we may be unable to adjust spending to
compensate for unexpected revenue shortfalls.
  We rely on software that we have licensed from third-party developers to perform key functions in
our products.
  We are affected by a pattern of product price decline in certain markets, which can harm our
business.
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Our common stock price may be extremely volatile.
  
    
    General market and economic conditions;
    
    Changes in the telecommunications industry;
    
    Actual or anticipated variations in operating results;
    
    Announcements of technological innovations, new products or new
services by us or by our competitors or customers;
    
    Changes in financial estimates or recommendations by stock market
analysts regarding us or our competitors;
    
    Announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
    
    Announcements by our customers regarding end market conditions and the
status of existing and future infrastructure network deployments;
    
    Additions or departures of key personnel; and
    
    Future equity or debt offerings or our announcements of these offerings.
  We may be subject from time to time to legal proceedings, and any adverse determinations in these
proceedings could materially harm our business.
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Item 6. EXHIBITS
   ExhibitNumber
    
    Description10.1
    
    Management Incentive Compensation Plan, as amended February 16,
2007, filed herewith10.2
    
    Amendment No.1 dated January 24, 2007 to Agreement dated May 31,
2005 by and between Tollgrade Communications, Inc. and Mark B.
Peterson, filed as exhibit 10.1 to the Current Report on Form 8-K
filed January 29, 200731.1
    
    Certification of Chief Executive Officer, filed herewith31.2
    
    Certification of Chief Financial Officer, filed herewith32
    
    Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18.U.S.C. Section 350, filed herewith
 
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SIGNATURES
  Tollgrade Communications, Inc.(Registrant)Dated: April 27, 2007
    
    /s/ Mark B. Peterson

Mark B. PetersonChief Executive OfficerDated: April 27, 2007
    
    /s/ Samuel C. KnochSamuel C. KnochChief Financial Officer and TreasurerDated: April 27, 2007
    
    /s/ Sean M. ReillySean M. ReillyController
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EXHIBIT INDEX
  ExhibitNumber
    
    Description10.1
    
    Management Incentive Compensation Plan, as amended February 16, 2007, filed herewith10.2
    
    Amendment No.1 dated January 24, 2007 to Agreement dated May 31, 2005 by and
between Tollgrade Communications, Inc. and Mark B. Peterson, filed as exhibit 10.1
to the Current Report on Form 8-K filed January 29, 200731.1
    
    Certification of Chief Executive Officer, filed herewith31.2
    
    Certification of Chief Financial Officer, filed herewith32
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to
18.U.S.C. Section 350, filed herewith
 44