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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended December 31, 2005



OR



| ̈ | 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: 001-14617



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ANDREW CORPORATION

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 36-2092797                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|3 Westbrook Corporate Center, Suite 900 Westchester, Illinois  |  | 60154                               
|(Address of principal executive offices)                       |  | (Zip Code)                          



(708) 236-6600

(Registrants telephone number, including area code)



10500 W. 153rdStreet, Orland Park, Illinois 60462

(Former name, former address and former fiscal year, if changed
since last report)



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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  x    No ̈



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



|                           |  |                    |  |                       
|-------------------------- |  | ------------------ |  | ----------------------
|Large accelerated filer  x |  | Accelerated filer ̈ |  | Non-accelerated filer ̈



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



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



|                             |  |                                          
|---------------------------- |  | -----------------------------------------
|Common Stock, $.01 Par Value |  | 159,336,921 shares as of February 6, 2006



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INDEX

ANDREW CORPORATION



|          |  |                                                                                       |  |   
|--------- |  | ------------------------------------------------------------------------------------- |  | --
|PART I.   |  | FINANCIAL INFORMATION                                                                 |  | 3 
|          |  |                                                                                      
|Item 1.   |  | Financial Statements (Unaudited)                                                      |  | 3 
|          |  |                                                                                      
|          |  | Consolidated Balance Sheets December 31, 2005 and September 30, 2005                 |  | 3 
|          |  |                                                                                      
|          |  | Consolidated Statements of Operations Three months ended December 31, 2005 and 2004  |  | 4 
|          |  |                                                                                      
|          |  | Consolidated Statements of Cash Flows Three months ended December 31, 2005 and 2004  |  | 5 
|          |  |                                                                                      
|          |  | Notes to Consolidated Financial Statements December 31, 2005                         |  | 6 
|          |  |                                                                                      
|Item 2.   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 15
|          |  |                                                                                      
|Item 3.   |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 22
|          |  |                                                                                      
|Item 4.   |  | Controls and Procedures                                                               |  | 22
|          |  |                                                                                      
|PART II.  |  | OTHER INFORMATION                                                                     |  | 23
|          |  |                                                                                      
|Item 1.   |  | Legal Proceedings                                                                     |  | 23
|          |  |                                                                                      
|Item 2.   |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 23
|          |  |                                                                                      
|Item 6.   |  | Exhibits                                                                              |  | 24
|          |  |                                                                                      
|SIGNATURE |  |                                                                                       |  | 25



2



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PART I - FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



ANDREW CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)



|                                                                                                                                                                    |  |                 |           |   |                  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                                                    |  | December 312005 |           |   | September 302005 |  
|                                                                                                                                                                    |  | (Unaudited)     |           |   |                  |  
|ASSETS                                                                                                                                                              |  |                 |           |   |                  |   |           |  
|Current Assets                                                                                                                                                      |  |                 |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                                                                           |  | $               | 163,400   |   |                  | $ | 188,780   |  
|Accounts receivable, less allowances (December 2005$11,598; September 2005$12,240)                                                                                |  |                 | 464,330   |   |                  |   | 471,097   |  
|Inventories                                                                                                                                                         |  |                 | 364,775   |   |                  |   | 353,402   |  
|Other current assets                                                                                                                                                |  |                 | 63,106    |   |                  |   | 63,578    |  
|                                                                                                                                                                    |  |                 |           |   |                  |   |           |  
|Total Current Assets                                                                                                                                                |  |                 | 1,055,611 |   |                  |   | 1,076,857 |  
|                                                                                                                                                                    |  |                
|Other Assets                                                                                                                                                        |  |                 |           |   |                  |   |           |  
|Goodwill                                                                                                                                                            |  |                 | 862,532   |   |                  |   | 862,083   |  
|Intangible assets, less amortization                                                                                                                                |  |                 | 50,113    |   |                  |   | 56,753    |  
|Other assets                                                                                                                                                        |  |                 | 88,589    |   |                  |   | 83,772    |  
|Property, Plant, and Equipment                                                                                                                                      |  |                 |           |   |                  |   |           |  
|Land and land improvements                                                                                                                                          |  |                 | 22,012    |   |                  |   | 21,693    |  
|Buildings                                                                                                                                                           |  |                 | 130,689   |   |                  |   | 131,335   |  
|Equipment                                                                                                                                                           |  |                 | 540,055   |   |                  |   | 533,317   |  
|Allowance for depreciation                                                                                                                                          |  |                 | (464,479  | ) |                  |   | (454,783  | )
|                                                                                                                                                                    |  |                 |           |   |                  |   |           |  
|                                                                                                                                                                    |  |                 | 228,277   |   |                  |   | 231,562   |  
|                                                                                                                                                                    |  |                 |           |   |                  |   |           |  
|TOTAL ASSETS                                                                                                                                                        |  | $               | 2,285,122 |   |                  | $ | 2,311,027 |  
|                                                                                                                                                                    |  |                 |           |   |                  |   |           |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                |  |                 |           |   |                  |   |           |  
|Current Liabilities                                                                                                                                                 |  |                 |           |   |                  |   |           |  
|Accounts payable                                                                                                                                                    |  | $               | 222,559   |   |                  | $ | 230,620   |  
|Accrued expenses and other liabilities                                                                                                                              |  |                 | 104,574   |   |                  |   | 112,596   |  
|Compensation and related expenses                                                                                                                                   |  |                 | 45,532    |   |                  |   | 52,002    |  
|Restructuring                                                                                                                                                       |  |                 | 12,072    |   |                  |   | 13,432    |  
|Notes payable and current portion of long-term debt                                                                                                                 |  |                 | 42,368    |   |                  |   | 26,966    |  
|                                                                                                                                                                    |  |                 |           |   |                  |   |           |  
|Total Current Liabilities                                                                                                                                           |  |                 | 427,105   |   |                  |   | 435,616   |  
|                                                                                                                                                                    |  |                
|Deferred liabilities                                                                                                                                                |  |                 | 49,695    |   |                  |   | 49,255    |  
|Long-Term Debt, less current portion                                                                                                                                |  |                 | 269,071   |   |                  |   | 275,604   |  
|                                                                                                                                                                    |  |                
|SHAREHOLDERS EQUITY                                                                                                                                                |  |                 |           |   |                  |   |           |  
|Common stock (par value, $.01 a share: 400,000,000 shares authorized: 162,476,513 shares issued at December 31, 2005 and at
September 30, 2005, including treasury) |  |                 | 1,625     |   |                  |   | 1,625     |  
|Additional paid-in capital                                                                                                                                          |  |                 | 678,358   |   |                  |   | 676,262   |  
|Accumulated other comprehensive income                                                                                                                              |  |                 | 9,077     |   |                  |   | 19,720    |  
|Retained earnings                                                                                                                                                   |  |                 | 885,431   |   |                  |   | 870,588   |  
|Treasury stock, common stock at cost (3,154,955 shares at December 31, 2005 and                                                                                     |  |                 |           |   |                  |   |           |  
|1,557,030 shares at September 30, 2005)                                                                                                                             |  |                 | (35,240   | ) |                  |   | (17,643   | )
|                                                                                                                                                                    |  |                 |           |   |                  |   |           |  
|Total Shareholders Equity                                                                                                                                          |  |                 | 1,539,251 |   |                  |   | 1,550,552 |  
|                                                                                                                                                                    |  |                 |           |   |                  |   |           |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                          |  | $               | 2,285,122 |   |                  | $ | 2,311,027 |  
|                                                                                                                                                                    |  |                 |           |   |                  |   |           |  



See Notes to Consolidated Financial
Statements



3



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ANDREW CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share amounts)



|                                            |  |                               |         |   |      |   |         |  
|------------------------------------------- |  | ----------------------------- | ------- | - | ---- | - | ------- | -
|                                            |  | Three Months EndedDecember 31 |        
|                                            |  | 2005                          |         |   | 2004 |  
|Sales                                       |  | $                             | 514,699 |   |      | $ | 473,837 |  
|Cost of products sold                       |  |                               | 397,693 |   |      |   | 382,677 |  
|                                            |  |                               |         |   |      |   |         |  
|Gross Profit                                |  |                               | 117,006 |   |      |   | 91,160  |  
|                                            |  |                              
|Operating Expenses                          |  |                               |         |   |      |   |         |  
|Research and development                    |  |                               | 27,959  |   |      |   | 26,871  |  
|Sales and administrative                    |  |                               | 61,704  |   |      |   | 51,029  |  
|Intangible amortization                     |  |                               | 5,119   |   |      |   | 7,550   |  
|Restructuring                               |  |                               | (501    | ) |      |   | 1,838   |  
|Loss on sale of assets                      |  |                               | 1,461   |   |      |   |        |  
|                                            |  |                               |         |   |      |   |         |  
|                                            |  |                               | 95,742  |   |      |   | 87,288  |  
|                                            |  |                              
|Operating Income                            |  |                               | 21,264  |   |      |   | 3,872   |  
|                                            |  |                              
|Other                                       |  |                               |         |   |      |   |         |  
|Interest expense                            |  |                               | 3,769   |   |      |   | 3,708   |  
|Interest income                             |  |                               | (881    | ) |      |   | (1,706  | )
|Other expense (income)                      |  |                               | (154    | ) |      |   | 1,516   |  
|                                            |  |                               |         |   |      |   |         |  
|                                            |  |                               | 2,734   |   |      |   | 3,518   |  
|                                            |  |                               |         |   |      |   |         |  
|Income Before Income Taxes                  |  |                               | 18,530  |   |      |   | 354     |  
|Income Taxes                                |  |                               | 3,687   |   |      |   | (2,624  | )
|                                            |  |                               |         |   |      |   |         |  
|Net Income                                  |  |                               | 14,843  |   |      |   | 2,978   |  
|Preferred Stock Dividends                   |  |                               |        |   |      |   | 117     |  
|                                            |  |                               |         |   |      |   |         |  
|Net Income Available to Common Shareholders |  | $                             | 14,843  |   |      | $ | 2,861   |  
|                                            |  |                               |         |   |      |   |         |  
|Basic Net Income per Share                  |  | $                             | 0.09    |   |      | $ | 0.02    |  
|                                            |  |                               |         |   |      |   |         |  
|Diluted Net Income per Share                |  | $                             | 0.09    |   |      | $ | 0.02    |  
|                                            |  |                               |         |   |      |   |         |  
|Average Shares Outstanding                  |  |                               |         |   |      |   |         |  
|Basic                                       |  |                               | 160,210 |   |      |   | 160,927 |  
|Diluted                                     |  |                               | 178,140 |   |      |   | 161,407 |  



See Notes to Consolidated Financial
Statements



4



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ANDREW CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)



|                                                    |  |                               |         |   |      |   |         |  
|--------------------------------------------------- |  | ----------------------------- | ------- | - | ---- | - | ------- | -
|                                                    |  | Three Months EndedDecember 31 |        
|                                                    |  | 2005                          |         |   | 2004 |  
|Cash Flows from Operations                          |  |                               |         |   |      |   |         |  
|Net Income                                          |  | $                             | 14,843  |   |      | $ | 2,978   |  
|                                                    |  |                              
|Adjustments to Net Income                           |  |                               |         |   |      |   |         |  
|Depreciation                                        |  |                               | 13,860  |   |      |   | 14,392  |  
|Amortization                                        |  |                               | 5,119   |   |      |   | 7,550   |  
|Restructuring costs                                 |  |                               | (1,360  | ) |      |   | (3,308  | )
|Loss on sale of assets and other                    |  |                               | (28     | ) |      |   | (91     | )
|                                                    |  |                              
|Change in Operating Assets and Liabilities          |  |                               |         |   |      |   |         |  
|Accounts receivable                                 |  |                               | 2,429   |   |      |   | (11,277 | )
|Inventories                                         |  |                               | (14,002 | ) |      |   | 2,109   |  
|Other assets                                        |  |                               | (3,756  | ) |      |   | (17,049 | )
|Accounts payable and other liabilities              |  |                               | (18,886 | ) |      |   | (6,244  | )
|                                                    |  |                               |         |   |      |   |         |  
|Net Cash Used for Operations                        |  |                               | (1,781  | ) |      |   | (10,940 | )
|                                                    |  |                              
|Investing Activities                                |  |                               |         |   |      |   |         |  
|Capital expenditures                                |  |                               | (12,346 | ) |      |   | (14,036 | )
|Acquisition of businesses, net of cash acquired     |  |                               |        |   |      |   | (7,872  | )
|Investments                                         |  |                               | (1,722  | ) |      |   |        |  
|Proceeds from sale of businesses and investments    |  |                               |        |   |      |   | 9,494   |  
|Proceeds from sale of property, plant and equipment |  |                               | 1,238   |   |      |   | 553     |  
|                                                    |  |                               |         |   |      |   |         |  
|Net Cash Used for Investing Activities              |  |                               | (12,830 | ) |      |   | (11,861 | )
|                                                    |  |                              
|Financing Activities                                |  |                               |         |   |      |   |         |  
|Long-term debt payments, net                        |  |                               | (6,920  | ) |      |   | (8,158  | )
|Notes payable borrowings, net                       |  |                               | 16,138  |   |      |   | 9,064   |  
|Preferred stock dividends                           |  |                               |        |   |      |   | (117    | )
|Payments to acquire common stock for treasury       |  |                               | (17,600 | ) |      |   |        |  
|Stock purchase and option plans                     |  |                               | 3       |   |      |   | 184     |  
|                                                    |  |                               |         |   |      |   |         |  
|Net Cash From (Used for) Financing Activities       |  |                               | (8,379  | ) |      |   | 973     |  
|Effect of exchange rate changes on cash             |  |                               | (2,390  | ) |      |   | 12,201  |  
|                                                    |  |                               |         |   |      |   |         |  
|Decrease for the Period                             |  |                               | (25,380 | ) |      |   | (9,627  | )
|Cash and Equivalents at Beginning of Period         |  |                               | 188,780 |   |      |   | 189,048 |  
|                                                    |  |                               |         |   |      |   |         |  
|Cash and Equivalents at End of Period               |  | $                             | 163,400 |   |      | $ | 179,421 |  
|                                                    |  |                               |         |   |      |   |         |  



See Notes to Consolidated Financial
Statements



5



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ANDREW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1. BASIS OF PRESENTATION



The accompanying unaudited
consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three month period ended December 31, 2005 are not necessarily indicative of the results that may be expected for the year ending September 30, 2006. For further
information, refer to the consolidated financial statements and footnotes thereto included in the companys annual report on Form 10-K for the year ended September 30, 2005.



NOTE 2. EARNINGS PER SHARE



The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):



|                                                                      |  |                                |         |      |   |        
|--------------------------------------------------------------------- |  | ------------------------------ | ------- | ---- | - | -------
|                                                                      |  | Three Months EndedDecember 31 
|BASIC EARNINGS PER SHARE                                              |  | 2005                           |         | 2004
|Net income                                                            |  | $                              | 14,843  |      | $ | 2,978  
|Preferred stock dividends                                             |  |                                |        |      |   | 117    
|                                                                      |  |                                |         |      |   |        
|Net income available to common shareholders                           |  |                                | 14,843  |      |   | 2,861  
|                                                                      |  |                               
|Average basic shares outstanding                                      |  |                                | 160,210 |      |   | 160,927
|                                                                      |  |                                |         |      |   |        
|Basic net income per share                                            |  | $                              | 0.09    |      | $ | 0.02   
|                                                                      |  |                                |         |      |   |        
|                                                                      | 
|                                                                      |  | Three Months Ended December 31
|DILUTED EARNINGS PER SHARE                                            |  | 2005                           |         | 2004
|Net income                                                            |  | $                              | 14,843  |      | $ | 2,978  
|Preferred stock dividends                                             |  |                                |        |      |   | 117    
|                                                                      |  |                                |         |      |   |        
|Net income available to common shareholders                           |  |                                | 14,843  |      |   | 2,861  
|Effect of dilutive securities:                                        |  |                                |         |      |   |        
|Interest expense for convertible notes                                |  |                                | 1,487   |      |   |       
|                                                                      |  |                                |         |      |   |        
|Net income available to common shareholders after assumed conversions |  |                                | 16,330  |      |   | 2,861  
|                                                                      |  |                               
|Average basic shares outstanding                                      |  |                                | 160,210 |      |   | 160,927
|Effect of dilutive securities:                                        |  |                                |         |      |   |        
|Convertible Notes                                                     |  |                                | 17,532  |      |   |       
|Options, warrants, and equivalents                                    |  |                                | 398     |      |   | 480    
|                                                                      |  |                                |         |      |   |        
|Average diluted shares outstanding                                    |  |                                | 178,140 |      |   | 161,407
|                                                                      |  |                                |         |      |   |        
|Diluted net income per share                                          |  | $                              | 0.09    |      | $ | 0.02   
|                                                                      |  |                                |         |      |   |        



The companys convertible
subordinated notes are potentially convertible into 17,531,568 shares of the companys common stock. These shares were not included in the calculation of diluted earnings per share for the three months ended December 31, 2004 because
including these shares and excluding the interest expense on these notes would have increased reported diluted earnings per share.



Options to purchase 8,369,842 and 7,931,743 shares of common stock, at December 31, 2005 and 2004, respectively, were not included in the computation of diluted
shares because the options exercise prices were greater than the average market price of the companys common stock.



6



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NOTE 3. INVENTORIES



Inventories consisted of the following at December 31, 2005 and September 30, 2005, net of reserves:



|                |  |                 |         |                  |   |        
|--------------- |  | --------------- | ------- | ---------------- | - | -------
|(In thousands)  |  | December 312005 |         | September 302005
|Raw materials   |  | $               | 110,376 |                  | $ | 97,781 
|Work in process |  |                 | 91,183  |                  |   | 93,917 
|Finished goods  |  |                 | 163,216 |                  |   | 161,704
|                |  |                 |         |                  |   |        
|                |  | $               | 364,775 |                  | $ | 353,402
|                |  |                 |         |                  |   |        



NOTE 4. COMPREHENSIVE INCOME



For the three months ended December 31, 2005 and 2004, comprehensive
income consisted of net income available to common shareholders and foreign currency translation adjustments. Foreign currency translation adjustments are recorded in Accumulated Other Comprehensive Income, a component of shareholders equity.
In the three months ended December 31, 2005 the company recognized a $1.5 million gain for foreign currency translation adjustments related to the liquidation of an investment in a foreign subsidiary. The following table sets forth
comprehensive income for the three months ended December 31, 2005 and 2004:



|                                                 |  |                                |         |   |      |   |       
|------------------------------------------------ |  | ------------------------------ | ------- | - | ---- | - | ------
|                                                 |  | Three months ended December 31
|(In thousands)                                   |  | 2005                           |         |   | 2004
|Net income available to common shareholders      |  | $                              | 14,843  |   |      | $ | 2,861 
|Foreign currency translation adjustments         |  |                                | (12,132 | ) |      |   | 38,043
|Realized foreign currency translation adjustment |  |                                | 1,489   |   |      |   |      
|                                                 |  |                                |         |   |      |   |       
|Comprehensive Income                             |  | $                              | 4,200   |   |      | $ | 40,904
|                                                 |  |                                |         |   |      |   |       



NOTE 5. RECENTLY ISSUED ACCOUNTING
POLICIES



In May 2005, the Financial Accounting Standards Board (FASB)
issued revised Statement of Financial Accounting Standards (SFAS) No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3. This statement applies to all
voluntary changes in accounting principle, and requires retrospective application to prior periods financial statements for changes in accounting principle. SFAS No. 154 will be effective for the Company beginning in fiscal year 2007.



In October 2005, the Financial Accounting Standards Board (FASB) issued FASB
Staff Position (FSP) 13-1, Accounting for Rental Costs Incurred during a Construction Period.The guidance requires that the rental costs for ground or building operating leases during the construction period be
recognized as rental expenses. The guidance permits either retroactive or prospective treatment for periods beginning after December 15, 2005. The company is currently evaluating the impact of this FSP.



NOTE 6. ADOPTION OF NEW ACCOUNTING POLICIES



In January 2005, the Financial Accounting Standards Board (FASB) issued revised Statement of
Financial Accounting Standards (SFAS) No. 151, Inventory Costs,an amendment of ARB No. 43. The amendments made by SFAS 151 clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted
materials (spoilage) should be recognized as current-period charges and require the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The company adopted SFAS 151 starting in fiscal year
2006. The adoption of SFAS 151 did not have a material impact on the companys results of operations.



Starting in fiscal 2006 the company has adopted Statement of Financial Accounting Standards (SFAS) No. 123(R), Share Based Payments, as described in Note 7.



7



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NOTE 7. STOCK BASED COMPENSATION



In the first quarter of fiscal 2006, the company adopted Statement of Financial Accounting Standards (SFAS) No. 123(R), Share
Based Payments, which revises SFAS No. 123, Accounting for Stock Based Compensation. SFAS No. 123(R) requires the company to record compensation expense for all share-based payments, including employee stock
options, at fair value. Prior to fiscal 2006, the company had accounted for its stock-based compensation awards pursuant to Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and its
related interpretations, which allowed the use of the intrinsic value method. Under the intrinsic value method, compensation expense for stock option-based employee compensation was not recognized in the income statement as all stock options granted
by the company had an exercise price equal to the market value of the underlying common stock on the option grant date.



The company has elected to use the modified prospective transition method to adopt SFAS No. 123(R). Under this transition method starting in 2006, compensation
expense recognized will include: (a) expense for all share-based payments granted prior to, but not yet vested as of October 1, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS
No. 123, and (b) expense for all share-based payments granted subsequent to October 1, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). As required under the modified
prospective transition method the company has not restated prior period results. As a result, certain components of the companys quarterly financial statements will not be comparable until the first quarter of fiscal 2007, the anniversary of
the adoption of SFAS No. 123(R).



The company maintains a long term
incentive plans (LTIPs) which provides for the issuance of equity-based awards including stock options, which vest over a four to five year period. Prior to fiscal 2006, the company used the intrinsic value method to value all stock options issued
under these plans and therefore recorded no compensation expenses for these stock options. At the start of fiscal 2006, the company had approximately 1.0 million unvested stock options outstanding under its LTIPs. Beginning in fiscal 2006, the
company has recognized compensation expense ratably over the remaining vesting period of these options. The fair value of these options was calculated using the Black-Scholes option-pricing model using the original provisions of SFAS No. 123.
In the first quarter of fiscal 2006, the company recognized pre-tax compensation expense of $0.9 million and anticipates that it will recognize expense of $3.5 million for these options in fiscal 2006.



In November 2005, the company granted 455,400 stock options under its LTIPs. The company has
elected to value these options using the Black-Scholes option-pricing model and has determined that the fair value of these options is $5.29 per option. Based on this valuation, the company recorded $0.1 million of pre-tax compensation expense in
the first quarter of fiscal 2006 and anticipates that it will recognize $0.5 million of expense for these options in fiscal year 2006. Total cost recognized in the first quarter of fiscal 2006 for all stock options was $1.0 million, a reduction to
net income of $0.6 million or $0.00 per share. The company estimates that for fiscal 2006 the company will recognize $4.0 million, on a pre-tax basis, of compensation expense for all stock options, an estimated reduction to net income of $2.5
million or approximately $0.02 per share. As of December 31, 2005, unrecognized compensation expense related to the unvested portion of the companys stock options was approximately $7.9 million.



The fair value of each unvested option was estimated based on the date of grant using the
Black-Scholes option valuation model with the following assumptions:



|                        |  |           |   |  |           |   |  |           |   |  |           |  
|----------------------- |  | --------- | - |  | --------- | - |  | --------- | - |  | --------- | -
|                        |  | 2006      |   |  | 2005      |   |  | 2004      |   |  | 2003      |  
|Risk free interest rate |  | 4.42      | % |  | 4.25      | % |  | 4.00      | % |  | 3.98      | %
|Expected life           |  | 5.5 years |   |  | 6.0 years |   |  | 6.0 years |   |  | 6.0 years |  
|Expected volatility     |  | 50        | % |  | 66        | % |  | 61        | % |  | 58        | %
|Dividend yield          |  | 0         | % |  | 0         | % |  | 0         | % |  | 0         | %
|Estimated forfeitures   |  | 10        | % |  | NA        |   |  | NA        |   |  | NA        |  



The risk free interest rate was based
on U.S. Treasury yields with a remaining term that approximates the expected life of the options granted. The expected life used for options granted in 2006 was based on historical data of employee exercise performance. Prior to fiscal 2006, the
expected life was based on the average life of outstanding options. The estimated volatility for fiscal 2006 was based both on the companys historical stock price volatility and the market-implied volatility from traded options. Prior to
fiscal 2006, the company calculated volatility based only on historical stock price volatility. The company used an expected dividend yield of 0% for all periods because the company has never paid and does anticipate paying dividends in the
foreseeable future. Starting in fiscal 2006, the company has used an estimated forfeiture rate of 10% based on historical data. Prior to 2006, the company used the actual forfeiture method allowed under SFAS 123 which assumed that all options would
vest and pro forma expense was adjusted when options were forfeited.



8



---

The following table illustrates the pro forma effect on net income and earnings per share if the company had applied the
fair value recognition provisions of SFAS 123 to stock options for the first quarter of fiscal 2005:



|                                                     |  |                              |        |  
|---------------------------------------------------- |  | ---------------------------- | ------ | -
|(In thousands, except per share amounts)             |  | Quarter EndedDecember 312004 |       
|Reported net income                                  |  | $                            | 2,978  |  
|Preferred stock dividends                            |  |                              | (117   | )
|                                                     |  |                              |        |  
|Reported net income available to common shareholders |  |                              | 2,861  |  
|                                                     | 
|Less: stock-based compensation, net of tax           |  |                              | (9,151 | )
|                                                     |  |                              |        |  
|Pro forma loss available to common shareholders      |  | $                            | (6,290 | )
|                                                     | 
|Reported basic and diluted net income per share      |  | $                            | 0.02   |  
|Pro forma basic and diluted net loss per share       |  | $                            | (0.04  | )



In the first quarter of fiscal 2005,
the company granted 1.5 million stock options that vested immediately and included a restriction on the resale of the underlying shares of common stock. For pro forma disclosure purposes, these options were treated as if they were expensed in
the first quarter of 2005, increasing pro forma expense net of tax by approximately $8.4 million.



A summary of the companys stock option activity and related information follows for the quarter ended December 31, 2005:



|                                  |  |                           |   |  |                               |      
|--------------------------------- |  | ------------------------- | - |  | ----------------------------- | -----
|                                  |  | Summary of OptionActivity |   |  | Weighted AverageExercisePrice
|Outstanding at September 30, 2005 |  | 8,535,804                 |   |  | $                             | 17.41
|Granted                           |  | 455,400                   |   |  |                               | 10.39
|Expired or cancelled              |  | (242,374                  | ) |  |                               | 18.55
|Exercised                         |  | (2,075                    | ) |  |                               | 9.27 
|                                  |  |                           |   |  |                               |      
|Outstanding at December 31, 2005  |  | 8,746,755                 |   |  |                               | 17.02
|                                  |  |                           |   |  |                               |      
|Exercisable at December 31, 2005  |  | 7,364,367                 |   |  | $                             | 18.20
|                                  |  |                           |   |  |                               |      



The weighted average fair value of
options granted during fiscal years 2005, 2004, and 2003, was $8.88, $7.07, and $4.42, per share, respectively. In the first quarter of fiscal 2006 the company granted 455,400 stock options with an weight average fair value of $5.29



The range of exercise prices for options outstanding and
exercisable at December 31, 2005 was $8.91 to $38.17.



|                         |  |               |           |                 |   |                 |  |                |           |                |   |                 |  |                |         |       |   |           |  |   |         |  |   |          
|------------------------ |  | ------------- | --------- | --------------- | - | --------------- |  | -------------- | --------- | -------------- | - | --------------- |  | -------------- | ------- | ----- | - | --------- |  | - | ------- |  | - | ---------
|Range of Exercise Prices |  | $8.91 -$10.27 |           | $11.09 - $12.91 |   | $13.03 - $16.94 |  | $17.11 -$18.65 |           | $19.12 -$22.19 |   | $22.65 - $24.94 |  | $27.19 -$38.17 |         | Total
|Outstanding Options      |  |               | 1,376,913 |                 |   | 1,628,945       |  |                | 1,943,725 |                |   | 768,778         |  |                | 895,494 |       |   | 1,706,975 |  |   | 425,925 |  |   | 8,746,755
|Weighted Average         |  |               |           |                 |   |                 |  |                |           |                |   |                 |  |                |         |       |   |           |  |   |         |  |   |          
|Exercise Price           |  | $             | 9.66      |                 | $ | 11.42           |  | $              | 14.85     |                | $ | 17.63           |  | $              | 21.82   |       | $ | 23.17     |  | $ | 36.19   |  | $ | 17.02    
|Average Life             |  |               | 7.82      |                 |   | 7.68            |  |                | 7.78      |                |   | 4.02            |  |                | 5.56    |       |   | 3.96      |  |   | 0.93    |  |   | 6.13     
|Exercisable Options      |  |               | 751,627   |                 |   | 871,843         |  |                | 1,943,725 |                |   | 768,778         |  |                | 895,494 |       |   | 1,706,975 |  |   | 425,925 |  |   | 7,364,367
|Weighted Average         |  |               |           |                 |   |                 |  |                |           |                |   |                 |  |                |         |       |   |           |  |   |         |  |   |          
|Exercise Price           |  | $             | 9.42      |                 | $ | 10.75           |  | $              | 14.85     |                | $ | 17.63           |  | $              | 21.82   |       | $ | 23.17     |  | $ | 36.19   |  | $ | 18.20    



9



---

SFAS No 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost be reported as a
financing cash flow rather than as an operating cash flow as required under SFAS No. 123. This requirement could reduce net operating cash flows and increase net financing cash flows in periods after adoption. The impact of this change was
immaterial in the first quarter of fiscal 2006. Operating cash flows recognized in fiscal 2005 for such excess tax deductions were approximately $0.1 million.



As part of the companys LTIPs it has also granted deferred and restricted stock units (RSUs) to officers, key employees and directors. Each RSU entitles the
participant to one share of the companys common stock on the vesting date. In order to calculate compensation expense, SFAS No. 123(R) requires expense to be adjusted for an estimated forfeiture factor, which did not materially impact
expense in the first quarter of fiscal 2006. Compensation expense for RSUs is recognized on a straight-line basis over the vesting period and is based on the market price of the companys common stock on the grant date. RSUs vest based on
service periods ranging from three to four years. In fiscal 2006, the company granted RSUs that vest based on the company obtaining a target return on invested capital in fiscal 2008. In determining compensation expense, the company assumes that
this target will be achieved and will evaluate this assumption periodically. The fair value of these RSUs was based on the companys common stock market price at the date of grant. The company recognized pre-tax compensation expense for these
RSUs of $1.1 million and $0.3 million in the first quarter of fiscal 2006 and 2005, respectively.



The table below shows the companys outstanding RSUs at December 31, 2005:



|          |  |              |  |                   |  |                      |       |                                                |   |       
|--------- |  | ------------ |  | ----------------- |  | -------------------- | ----- | ---------------------------------------------- | - | ------
|GrantYear |  | RSUsGranted |  | Vesting Period    |  | WeightedAverageValue |       | UnearnedCompensationExpense atDecember 31,2005
|          |  |              |  |                   |  |                      |       | (in thousands)                                
|2004      |  | 300,700      |  | 3 years           |  | $                    | 12.04 |                                                | $ | 1,189 
|2005      |  | 482,000      |  | 4 years           |  | $                    | 13.28 |                                                |   | 4,768 
|2006      |  | 30,300       |  | 4 years           |  | $                    | 10.57 |                                                |   | 303   
|2006      |  | 682,589      |  | performance based |  | $                    | 10.21 |                                                |   | 6,571 
|          |  |              |  |                   |  |                      |       |                                                |   |       
|TOTAL     |  | 1,495,589    |  |                   |  |                      |       |                                                | $ | 12,831
|          |  |              |  |                   |  |                      |       |                                                |   |       



NOTE 8. RESTRUCTURING AND
INTEGRATION



At December 31, 2005, the companys total
restructuring reserve balance was $12.1 million, which is comprised of $2.8 million for its 2002 restructuring plan, $4.1 million for its Allen Telecom acquisition integration plan and $5.2 million for the integration plan for Channel Master. The
company recorded a gain of $0.5 million in restructuring expense, a component of operating income, in the first quarter of fiscal 2006. This was comprised of a $0.7 million reversal of lease reserves and $0.2 million of employee termination costs
expensed as incurred.



Restructuring Reserve



In 2002, the company initiated a plan to restructure its operations. As part of this plan
the company consolidated its operations into fewer, more efficient facilities and opened two new manufacturing facilities in Mexico and the Czech Republic. In 2002, when the company initiated its restructuring efforts, it incurred pre-tax charges of
$36.0 million, consisting of inventory provisions of $11.1 million, charged to cost of products sold, and an operating expense charge of $24.9 million. In 2003 and 2004, the company made additional accruals to operating expense of $7.9 million and
$7.5 million, respectively, primarily for additional severance and lease cancellation costs. The remaining reserve balance at December 31, 2005 of $2.8 million relates to a leased facility previously used by the Base Station Subsystems
operating segment, and relates to lease cancellation costs that are scheduled to continue through 2007.



Since the start of this restructuring initiative in 2002, the company has paid severance costs of $17.3 million to 1,226 employees and $9.9 million for lease cancellation and other costs. In the first quarter of
fiscal 2006, the company incurred cash costs of $0.5 million for lease payments and reversed $0.7 million from the reserve as the company terminated a portion of the lease obligation.



10



---

A summary of the restructuring reserve activity for the first quarter of fiscal 2006 is
as follows (in thousands):



|                                                                    |  |                               |       |                       |   |      |                    |  |   |                              |   |  |   |      
|------------------------------------------------------------------- |  | ----------------------------- | ----- | --------------------- | - | ---- | ------------------ |  | - | ---------------------------- | - |  | - | -----
|Restructuring Activity for the three months
ended December 31, 2005 |  | Reserve BalanceSept. 30, 2005 |       | Utilizationof Reserve |   |      | Reversal ofAccrual |  |   | Reserve BalanceDec. 31, 2005
|Lease Cancellation Expense and Total Restructuring Reserve          |  | $                             | 3,966 |                       | $ | (484 | )                  |  | $ | (707                         | ) |  | $ | 2,775



Allen Telecom Acquisition
Integration Reserve



As part of the Allen Telecom acquisition in 2003, the
company accrued an integration reserve for costs to integrate Allens operations with those of the company and to eliminate duplicate operations. The initial cost estimate of $29.9 million was comprised of a $16.2 million provision for
inventory and fixed asset write-offs and a restructuring reserve of $13.7 million for employee termination, lease cancellation and other costs. During 2004, the company adjusted this initial estimate and recorded an additional $13.6 million of
reserves consisting of $14.1 million of additional employee termination, lease cancellation and other costs, and a $0.5 million reduction in expected inventory write-offs. In fiscal 2005, the company reversed a reserve for a French facility that the
company decided not to close. This resulted in the company reversing $2.7 million in severance and $0.9 million of lease cancellation and other costs that had been accrued for closing this facility. Integration reserves established in purchase
accounting were accounted for as a decrease in assets acquired and an increase in liabilities assumed from Allen Telecom.



Since the start of these integration efforts in 2003, the company has paid severance costs of $14.4 million to 407 employees and $9.3 million for lease cancellation and
other costs. In the first quarter of fiscal 2006, the company paid cash costs of $0.2 million consisting of $0.1 million of severance payments to two employees and $0.1 million of lease payments. The company anticipates paying severance benefits to
approximately 80 employees and expects to substantially complete its integration activities in 2006. The remaining reserve balance at December 31, 2005 of $4.1 million primarily relates to the Base Station Subsystems business.



A summary of integration reserve activity for the first
quarter of fiscal 2006 is as follows (in thousands):



|                                                                                |  |                               |       |                       |   |      |                              |  |   |      
|------------------------------------------------------------------------------- |  | ----------------------------- | ----- | --------------------- | - | ---- | ---------------------------- |  | - | -----
|Allen Integration Reserve Activity for the three months ended December 31, 2005 |  | Reserve BalanceSept. 30, 2005 |       | Utilization OfReserve |   |      | Reserve BalanceDec. 31, 2005
|Severance                                                                       |  | $                             | 1,426 |                       | $ | (55  | )                            |  | $ | 1,371
|Lease cancellation and other costs                                              |  |                               | 2,868 |                       |   | (114 | )                            |  |   | 2,754
|                                                                                |  |                               |       |                       |   |      |                              |  |   |      
|Total Integration Reserve                                                       |  | $                             | 4,294 |                       | $ | (169 | )                            |  | $ | 4,125



Channel Master Integration Reserve



As part of the Channel Master acquisition, the company accrued an
integration reserve for costs to restructure Channel Masters U.S. manufacturing operations. The initial cost estimate of $5.2 million was comprised of a $2.9 million provision for relocation and restructuring of manufacturing operations and a
$2.3 million provision to pay severance benefits for approximately 245 manufacturing employees. The $5.2 million was treated as a purchase accounting adjustment and was recorded as an increase in the value of net assets acquired. Channel
Masters operations are included in the Satellite Communications segment.



The company expects to substantially complete its Channel Master integration activities in 2007. A summary of integration reserve activity for the first quarter of fiscal 2006 is as follows (in thousands):



|                                                                             |  |                               |       |                       |   |                              |  |   |      
|---------------------------------------------------------------------------- |  | ----------------------------- | ----- | --------------------- | - | ---------------------------- |  | - | -----
|Channel Master Reserve Activity for the three months ended December 31, 2005 |  | Reserve BalanceSept. 30, 2005 |       | Utilization OfReserve |   | Reserve BalanceDec. 31, 2005
|Severance                                                                    |  | $                             | 2,293 |                       | $ | 0                            |  | $ | 2,293
|Lease cancellation and other costs                                           |  |                               | 2,879 |                       |   | 0                            |  |   | 2,879
|                                                                             |  |                               |       |                       |   |                              |  |   |      
|Total Channel Master Reserve                                                 |  | $                             | 5,172 |                       | $ | 0                            |  | $ | 5,172



NOTE 9. CONTINGENCIES



Warranty Reserve



The company offers warranties on most of its products. The specific terms and conditions of
the warranties offered by the company vary depending upon the product sold. The company estimates the costs that may be incurred under its warranty plans and records a liability in the amount of such estimated costs at the time product revenue is
recognized. Factors that affect the



11



---

companys warranty liability include the number of units sold, the type of products sold, historical and anticipated rates of warranty claims and cost
per claim. The company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. The company reports warranty reserves as a current liability, included in accrued expenses and other liabilities.



In fiscal 2005, the company incurred $16.6 million of costs above normal
warranty provisions associated with abnormally high field failure rates for a specific component supplied by third-parties used in certain base station subsystem product lines. This $16.6 million was comprised of a first quarter 2005 charge of $19.8
million and a fourth quarter recovery from third parties of $3.2 million. The company anticipates that the repair and replacement of installed units will be completed over the next twelve months. In the quarter ended December 31, 2005, the
company paid $3.8 million for this component failure, which is included in warranty settlements in the table below. Changes in the companys warranty reserve during the three months ended December 31, 2005 and 2004 are as follows:



|                                        |  |                               |        |   |      |   |        |  
|--------------------------------------- |  | ----------------------------- | ------ | - | ---- | - | ------ | -
|                                        |  | Three Months EndedDecember 31 |       
|(In thousands)                          |  | 2005                          |        |   | 2004 |  
|Warranty reserve at beginning of period |  | $                             | 26,754 |   |      | $ | 18,900 |  
|Accrual for warranties issued           |  |                               | 5,145  |   |      |   | 4,062  |  
|Warranty settlements made               |  |                               | (5,961 | ) |      |   | (2,914 | )
|Warranty expirations and adjustments    |  |                               | (456   | ) |      |   | 174    |  
|Product recall                          |  |                               |       |   |      |   | 19,800 |  
|                                        |  |                               |        |   |      |   |        |  
|Warranty reserve at end of period       |  | $                             | 25,482 |   |      | $ | 40,022 |  
|                                        |  |                               |        |   |      |   |        |  



Legal Proceedings



On October 25, 2005, TruePosition, Inc. filed a complaint in the U.S. District Court
for the District of Delaware, alleging the companys potential sale of certain geolocation products to Saudi Telecom will infringe a TruePosition patent. As relief, the complaint seeks, among other things, injunctive relief and unspecified
monetary damages. The company filed its answer and counterclaim on December 15, 2005 and intends to defend this litigation vigorously.



The company is also a party to various other legal proceedings, lawsuits and other claims arising in the ordinary course of its business. The company does not believe
that such other litigation, if adversely determined, would have a material effect on the companys business, financial position, results of operations or cash flow.



NOTE 10. ACQUISITION OF BUSINESS



On February 2, 2006, the company acquired Skyware Radio Systems GmbH, a German manufacturer of electronic products for broadband satellite communications networks.
Under the terms of this acquisition agreement the company will pay $9.0 million to acquire the stock of Skyware with additional consideration of up to $6.0 million possible if certain financial performance goals are reached over a two-year period.



NOTE 11. SALE OF ASSETS



In the first quarter of 2006, the company recorded a loss on the sale of assets of $1.5
million. This includes a $2.0 million write-down to fair value of certain assets that the company anticipates selling by the end of fiscal 2006. These assets consist of intangible assets of $1.5 million and $0.5 million of inventory and fixed
assets. In the first quarter of fiscal 2006 the company also recognized a gain of approximately $0.8 million on the sale of assets principally from the sale of unimproved land in Denton, Texas.



NOTE 12. DEBT COVENANTS



Under the terms of the companys $250 million revolving credit facility, the company has agreed to meet various quarterly requirements,
including maintaining a ratio of earnings before interest, taxes, depreciation and amortization (EBITDA) to total debt, including letters of credit, maintaining a ratio of EBITDA to senior debt, maintaining a fixed charge coverage ratio and limiting
the amount of assets that the company can dispose of in a fiscal year. These requirements may limit the amount of borrowing under this credit agreement. The company was in compliance with all of these requirements as of December 31, 2005.



12



---

At December 31, 2005, under the most restrictive of these requirements the company had the ability to utilize the
entire credit facility.



NOTE 13. BENEFIT PLANS



The company has two defined benefit plans, one that covers approximately 650 current and
former employees of the companys United Kingdom subsidiary and a frozen plan that was acquired from Allen Telecom that covers approximately 1,600 former employees of Allen Telecom.



The components of net periodic expense for these plans, as well as the companys post-retirement medical and life insurance plans, for
the three months ended December 31, 2005 and 2004 are as follows:



|                                                 |  |                                               |        |   |                                                                |   |        |      |  |   |      |   |  |   |      |  
|------------------------------------------------ |  | --------------------------------------------- | ------ | - | -------------------------------------------------------------- | - | ------ | ---- |  | - | ---- | - |  | - | ---- | -
|                                                 |  | Pension BenefitsThree months endedDecember 31 |        |   | Medical Plans and Other Benefits Three months endedDecember 31 |  
|(In thousands)                                   |  | 2005                                          |        |   | 2004                                                           |   |        | 2005 |  |   | 2004 |  
|Service costs                                    |  | $                                             | 448    |   |                                                                | $ | 504    |      |  | $ | 102  |   |  | $ | 50   |  
|Interest costs                                   |  |                                               | 1,709  |   |                                                                |   | 1,599  |      |  |   | 243  |   |  |   | 173  |  
|Expected return on plan assets                   |  |                                               | (1,380 | ) |                                                                |   | (1,392 | )    |  |   |     |   |  |   |     |  
|Amortization of unrecognized prior service costs |  |                                               | 79     |   |                                                                |   | 88     |      |  |   | (135 | ) |  |   | (135 | )
|Amortization of net loss                         |  |                                               | (40    | ) |                                                                |   | 204    |      |  |   | 337  |   |  |   | 158  |  
|                                                 |  |                                               |        |   |                                                                |   |        |      |  |   |      |   |  |   |      |  
|Net periodic expense                             |  | $                                             | 816    |   |                                                                | $ | 1,003  |      |  | $ | 547  |   |  | $ | 246  |  
|                                                 |  |                                               |        |   |                                                                |   |        |      |  |   |      |   |  |   |      |  



In fiscal year 2005 the company
initiated the process of terminating the frozen defined benefit plan assumed as part of the Allen Telecom acquisition. The company estimates that additional contributions of up to $10 million by the end of calendar 2006 will be required to fully
fund and terminate this plan based on current actuarial projections.



NOTE
14. INCOME TAXES



The reported tax rate for the first quarter was 19.9%,
reflecting an underlying effective tax rate on operations of 30.0% and the recording of a $1.9 million benefit related to the repatriation of foreign earnings. During the quarter, the companys operations benefited from a favorable geographic
mix shift of earnings to lower tax jurisdictions and a rate benefit from the permanent reinvestment of earnings in China. The American Jobs Creation Act (AJCA) of 2004 provides a temporary incentive for U.S. corporations to repatriate accumulated
income earned abroad and reinvest the repatriated earnings in qualified domestic U.S. business activities by providing an 85% dividends received deduction for certain dividends from controlled foreign corporations. In the first quarter of fiscal
2006, the company approved a definitive plan to repatriate earnings from certain foreign subsidiaries during fiscal 2006 in order to take advantage of the provisions of the AJCA. The company expects to repatriate up to $55 million of dividends
eligible for the dividends received deduction. The tax cost of repatriation was offset by the reversal of previously established deferred tax liabilities related to undistributed earnings of the companys Chinese subsidiaries resulting in a net
income tax benefit of $1.9 million, which was recorded in the first quarter of fiscal 2006.



Income tax for the first quarter of fiscal 2005 was a benefit of $2.6 million primarily related to the reversal of previously accrued taxes resulting from a favorable resolution of certain tax-related matters.



NOTE 15. SEGMENTS



The company manages its business in five operating segments: Antenna and Cable Products,
Base Station Subsystems, Network Solutions, Wireless Innovations and Satellite Communications.



Antenna and Cable Products includes a diverse product line for the wireless infrastructure market including base station antennas, coaxial cable and connectors and microwave antennas. Base Station Subsystems products
are integral components of wireless base stations and include products such as power amplifiers, filters, duplexers and combiners. Network Solutions includes geolocation products, network optimization analysis systems, and engineering and consulting
services. Wireless Innovations products are used to extend and enhance the coverage of wireless networks in areas where signals are difficult to send or receive



13



---

such as tunnels, subways, airports and other coverage gaps. Satellite Communications is comprised of the following product lines: direct-to-home (DTH)
satellite antennas, earth station antennas and systems (ESA), radar and high frequency product lines. The company evaluates the performance of these segments based on sales and operating income (loss). The table below shows sales and operating
income (loss) by segment for the three months ended December 31, 2005 and 2004.



|                                             |  |                               |         |   |      |   |         |   
|-------------------------------------------- |  | ----------------------------- | ------- | - | ---- | - | ------- | --
|                                             |  | Three Months EndedDecember 31 |        
|(In thousands)                               |  | 2005                          |         |   | 2004 |  
|Sales                                        |  |                               |         |   |      |   |         |   
|Antenna and Cable Products1                  |  | $                             | 290,944 |   |      | $ | 231,762 |   
|Base Station Subsystems                      |  |                               | 123,454 |   |      |   | 117,148 |   
|Network Solutions                            |  |                               | 22,420  |   |      |   | 34,772  |   
|Wireless Innovations                         |  |                               | 48,818  |   |      |   | 41,252  |   
|Satellite Communications                     |  |                               | 29,063  |   |      |   | 48,903  |   
|                                             |  |                               |         |   |      |   |         |   
|Total Consolidated Sales                     |  | $                             | 514,699 |   |      | $ | 473,837 |   
|                                             |  |                               |         |   |      |   |         |   
|Operating Income (Loss)                      |  |                               |         |   |      |   |         |   
|Antenna and Cable Products                   |  | $                             | 42,070  |   |      | $ | 37,593  |   
|Base Station Subsystems                      |  |                               | 2,851   |   |      |   | (24,130 | )2
|Network Solutions                            |  |                               | 2,192   |   |      |   | 16,130  |   
|Wireless Innovations                         |  |                               | 9,356   |   |      |   | 6,907   |   
|Satellite Communications                     |  |                               | (2,601  | ) |      |   | (1,041  | ) 
|Items not included in segments               |  |                               |         |   |      |   |         |   
|Unallocated Sales and Administrative Expense |  |                               | (26,024 | ) |      |   | (24,037 | ) 
|Intangible Amortization                      |  |                               | (5,119  | ) |      |   | (7,550  | ) 
|Loss on the Sale of Assets                   |  |                               | (1,461  | ) |      |   |        |   
|                                             |  |                               |         |   |      |   |         |   
|Total Consolidated Operating Income          |  | $                             | 21,264  |   |      | $ | 3,872   |   
|                                             |  |                               |         |   |      |   |         |   

---

|1. | Includes sales for freight and distribution services of $13 million and $7 million for the three months December 31, 2005 and 2004, respectively.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------

|2. | Includes a product recall charge of $19.8 million.
|-- | --------------------------------------------------



14



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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and accompanying notes contained herein and
the consolidated financial statements and accompanying notes and managements discussion and analysis of results of operations and financial condition contained in the companys Annual Report on Form 10-K for the fiscal year ended
September 30, 2005. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a
result of many factors, including but not limited to those described below under the heading Safe Harbor for Forward-Looking Statements.



Overview



Andrew Corporation, together with its subsidiaries, is engaged in the design, manufacture, and supply of communications equipment, services, and systems for global communications infrastructure markets. The
companys products are used in the infrastructure for traditional wireless networks, third generation (3G) technologies, voice, data, video and internet services, as well as applications for microwave and satellite communications, and
other specialized applications. The company operates in five segments: Antenna and Cable Products, Base Station Subsystems, Network Solutions, Wireless Innovations, and Satellite Communications. With the exception of Satellite Communications, all of
Andrews operating segments sell products and services to the wireless infrastructure market.



The companys financial results are influenced by factors in the markets in which it operates and by its ability to successfully execute its business strategy. Marketplace factors include competition for
customers, raw material prices, product and price competition, economic conditions in various geographic regions, foreign currency exchange rates, interest rates, changes in technology, fluctuations in customer demand, patent and intellectual
property issues, litigation results and legal and regulatory developments. The company expects that the marketplace environment will remain highly competitive. Andrews ability to execute its business strategy successfully will require that we
meet a number of challenges, including our ability to accurately forecast sales demand and calibrate manufacturing to such demand, develop, manufacture and successfully market new and enhanced products and product lines, control overhead,
successfully integrate acquired businesses, and attract, motivate and retain key personnel to manage its operational, financial and management information systems.



Highlights



Sales for the quarter ended December 31, 2005 were $515 million, a 9% increase from the first quarter of fiscal 2005, due primarily to growth in wireless
infrastructure sales as wireless operators continued to upgrade and expand their networks worldwide.



The gross profit margin for the quarter improved versus the prior year quarter to 22.7% primarily due to improved Base Station Subsystem margins partially offset by higher commodity costs and a decline in higher
margin geolocation sales. Additionally, the prior year quarter included a $19.8 warranty provision for a component used in certain Base Station Subsystem products.



Operating expenses increased as compared with the prior year quarter primarily due to higher sales and administrative expenses.



Income tax expense increased as compared with the prior year quarter due to higher current
quarter earnings and a positive tax settlement in the prior year quarter. Income tax expense in the current quarter also included a tax benefit for the repatriation of income earned outside of the United States under the American Jobs Creation Act
of 2004.



Earnings per share were $.09 compared to $.02 in the first quarter of
fiscal 2005 and $.05 in the fourth quarter of fiscal 2005.



15



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RESULTS OF OPERATIONS



Sales.Sales for the first quarter of fiscal 2006 were $515 million, 9% higher than the first quarter of fiscal 2005 and 1% lower compared to the fourth
quarter of fiscal 2005. The year over year sales increase was due primarily to growth in the wireless infrastructure market and was partially offset by a decline in Satellite Communications sales. Andrews sales by operating segment for the
three months ended December 31, 2005 and 2004 were as follows:



|                               |  |                               |     |      |   |        |   |     |       |  |     |  
|------------------------------ |  | ----------------------------- | --- | ---- | - | ------ | - | --- | ----- |  | --- | -
|                               |  | Three Months EndedDecember 31 |     | %    |   |        | % |    
|Sales by Segment (in millions) |  | 2005                          |     | 2004 |   | Change |   |     | Total | 
|Antenna and Cable Products     |  | $                             | 291 |      | $ | 232    |   | 25  | %     |  | 56  | %
|Base Station Subsystems        |  |                               | 124 |      |   | 117    |   | 6   |       |  | 24  |  
|Network Solutions              |  |                               | 22  |      |   | 35     |   | (37 | )     |  | 4   |  
|Wireless Innovations           |  |                               | 49  |      |   | 41     |   | 20  |       |  | 10  |  
|Satellite Communications       |  |                               | 29  |      |   | 49     |   | (41 | )     |  | 6   |  
|                               |  |                               |     |      |   |        |   |     |       |  |     |  
|Total                          |  | $                             | 515 |      | $ | 474    |   | 9   | %     |  | 100 | %
|                               |  |                               |     |      |   |        |   |     |       |  |     |  



Antenna and Cable Products sales
increased 25% versus the prior year quarter due mainly to significant growth in base station antenna products, radio frequency (RF) cable and components supporting network expansion and coverage requirements, and the inclusion of a full quarter of
sales from the December 2004 acquisition of ATC Tower Services, which increased sales by $17 million. Base station antenna sales increased significantly due to strong growth in India and sales of new products, such as Andrews Teletilt® antenna systems. RF cable and component sales increased
significantly as a result of strong sales in North America.



Base Station
Subsystems sales increased 6% versus the first quarter of fiscal 2005 due mainly to a significant increase in power amplifier sales and new product introductions in North America, partially offset by lower overall sales in Europe and South America.
Network Solutions sales declined 37% versus the first quarter of fiscal 2005 due mainly to a $17 million anticipated decline in sales of E-911 related geolocation equipment in North America. Wireless Innovations sales increased 20% due mainly to an
increase in operator needs for distributed coverage solutions in North America and Europe. Satellite Communications sales declined 41% due mainly to the companys planned reduced involvement in certain consumer broadband satellite programs.



Andrews sales by region for the three
months ended December 31, 2005 and 2004 were as follows:



|                                   |  |                               |     |      |   |        |   |    |       |  |     |  
|---------------------------------- |  | ----------------------------- | --- | ---- | - | ------ | - | -- | ----- |  | --- | -
|                                   |  | Three Months EndedDecember 31 |     | %    |   |        | % |   
|Sales by Region (in millions)      |  | 2005                          |     | 2004 |   | Change |   |    | Total | 
|Americas                           |  | $                             | 298 |      | $ | 254    |   | 17 | %     |  | 57  | %
|Europe, Middle East, Africa (EMEA) |  |                               | 152 |      |   | 158    |   | (4 | )     |  | 30  |  
|Asia Pacific                       |  |                               | 65  |      |   | 62     |   | 5  |       |  | 13  |  
|                                   |  |                               |     |      |   |        |   |    |       |  |     |  
|Total                              |  | $                             | 515 |      | $ | 474    |   | 9  | %     |  | 100 | %
|                                   |  |                               |     |      |   |        |   |    |       |  |     |  



Sales in the Americas increased 17%
versus the first quarter of fiscal 2005 due mainly to growth in North America for Antenna and Cable Products, Base Station Subsystems and Wireless Innovations supporting network upgrades and expansion, partially offset by lower sales of Satellite
Communications and Network Solutions. EMEA declined 4% from the first quarter of fiscal 2005 due mainly to lower Base Station Subsystem sales in Europe and unfavorable foreign currency exchange rate movements, partially offset by higher Antenna and
Cable Products and Wireless Innovations sales. The company estimates that unfavorable foreign currency exchange rates as a result of a stronger U.S. dollar against the euro resulted in approximately a $5 million decrease in EMEA sales compared with
the first quarter of fiscal 2005. Asia Pacific sales increased 5% versus the prior year quarter due mainly to increased demand in India and Taiwan for Antenna and Cable Products supporting network expansions.



In the first quarter of fiscal 2006 the top 25 customers represented 68% of sales compared to
69% in the fourth quarter of fiscal 2005 and 68% in the first quarter of fiscal 2005. Major original equipment manufacturers (OEMs) accounted for 38% of sales in first quarter of fiscal 2006 compared to 37% in the fourth quarter of fiscal 2005 and
41% in the first quarter of fiscal 2005. Lucent Technologies was the largest customer for the first quarter of fiscal 2006 at 11% of sales, while Cingular Wireless declined to 10% of sales due mainly to a significant decline of E-911 geolocation
equipment sales. In the first quarter of fiscal 2006, Ericsson and Siemens each represented 5% or more of sales.



16



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Gross profit.The gross profit percentage was 22.7% in the first quarter of fiscal 2006, compared with
22.4% in the fourth quarter of fiscal 2005 and 19.2% in the first quarter of fiscal 2005. Gross profit for the fourth quarter of fiscal 2005 included $4.2 million of favorable benefits related to an adjustment of value added tax (VAT) reserves and
recoveries from third parties of warranty costs. These items resulted in a 0.8% improvement in the gross profit percentage in the fourth quarter. The first quarter of fiscal 2005 included a $19.8 million warranty provision for a component used in
certain base station subsystem products that resulted in a 4.2% decrease in the gross profit percentage.



Excluding the $19.8 million warranty provision, the decrease in gross profit percentage as compared with the prior year quarter was primarily caused by the $17 million decrease in Network Solutions geolocation
sales and higher copper prices in the Antenna and Cable Products group. These negative gross margin impacts were offset by better margin performance primarily in the Base Station Subsystems group. The average cost of copper used in RF cable products
increased 56% from an average of a $1.08 per pound in the first quarter of fiscal 2005 to an average of $1.69 per pound in the first quarter of fiscal 2006. The company estimates that higher copper costs increased cost of goods sold by approximately
$11 million compared to the year-ago period. The company has taken steps in recent quarters to increase the amount of copper it has under purchase agreements to mitigate the impact of fluctuations in copper prices. At the start of the fiscal second
quarter of 2006, the company had contracts to purchase approximately 44 million pounds of copper, or approximately 90% of its anticipated fiscal 2006 requirements.



The increase in the gross profit percentage from the fourth quarter of fiscal 2005 to the first quarter of 2006 was mainly due to improved
Base Station Subsystems results and a benefit related to a recent price increase on cable products. Base Station Subsystems margins benefited from a better product mix due to a significant increase in power amplifier sales and improved filter
margins due to cost reductions realized from the transition of filter production to China.



Research and development expenses.Research and development expenses were $28.0 million or 5.4% of sales in the first quarter of fiscal 2006, compared to $26.9 million or 5.7% of sales in the
first quarter of 2005 and $28.4 million or 5.5% of sales in the fourth quarter of 2005. Research and development expenses increased year over year due mainly to higher spending on new product development by the Network Solutions segment focused on
Geometrix® mobile location systems and network
management solutions.



Sales and administrative expenses.Sales and administrative expenses increased to $61.7 million or 12.0% of sales in the first quarter of fiscal 2006, compared to $51.0 million or 10.8% of sales in the first quarter of 2005 and $58.0 million or 11.2% of sales in the fourth
quarter of fiscal 2005. Significant factors in this year-over-year increase were: $1.3 million increase in sales expense, $2.3 million for incremental expense related to the acquisitions of ATC Tower Services in December 2004 and Xenicom in January
2005, $1.8 million for equity compensation programs including $1.0 million from the initial impact of stock option expense recognition, $1.6 million of additional finance and administrative expense caused by increases in compliance, audit and legal
expense, and $0.8 million in IT systems related expense primarily due to global IT systems implementations.



During the first quarter of fiscal 2006, the company adopted SFAS No. 123(R), Share Based Payments, which requires the company to record compensation expense for stock options issued to
employees. Prior to fiscal 2006, the company accounted for stock options granted to employees under the intrinsic value method of APB No. 25, where no compensation expense was recognized. The company has elected to use the modified prospective
transition method where compensation expense is recorded prospectively. The adoption of SFAS No. 123(R) resulted in $1.0 of sales and administrative expense being recorded for stock options in the first quarter of fiscal 2006 compared to no
stock option expense being recorded in the first quarter of fiscal 2005. For additional information see Note 7, of the Notes to Consolidated Condensed Financial Statements in this Quarterly Report on Form 10-Q.



Intangible amortization. Intangible amortization decreased to $5.1 million in
the first quarter of fiscal 2006, compared to $7.6 million in the first quarter of fiscal 2005. The reduction in intangible amortization compared to the prior year quarter is due mainly to a reduction of amortized expense associated with the
acquisition of Allen Telecom in July 2003. It is anticipated that total intangible amortization will be approximately $18 million in fiscal 2006, compared to $22 million in fiscal 2005.



Loss on sale of assets. In the first quarter of 2006, the company recorded a loss on the sale of assets of $1.5 million. This
includes a $2.0 million write-down to fair value of certain assets that the company anticipates selling by the end of fiscal 2006. These assets consist of intangible assets of $1.5 million and $0.5 million of inventory and fixed assets. This loss
was partially offset by a gain recognized on the sale of unimproved land in Denton, Texas.



17



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Operating income. Operating income increased to $21.3 million in the first quarter of fiscal 2006 compared
to $3.9 million in the first quarter of fiscal 2005. Operating income by operating segment for the three months ended December 31, 2005 and 2004 is as follows:



|                                             |  |                               |         |   |      |   |         |  
|-------------------------------------------- |  | ----------------------------- | ------- | - | ---- | - | ------- | -
|                                             |  | Three Months EndedDecember 31 |        
|(in thousands)                               |  | 2005                          |         |   | 2004 |  
|Antenna and Cable Products                   |  | $                             | 42,070  |   |      | $ | 37,593  |  
|Base Station Subsystems                      |  |                               | 2,851   |   |      |   | (24,130 | )
|Network Solutions                            |  |                               | 2,192   |   |      |   | 16,130  |  
|Wireless Innovations                         |  |                               | 9,356   |   |      |   | 6,907   |  
|Satellite Communications                     |  |                               | (2,601  | ) |      |   | (1,041  | )
|Items not included in segments               |  |                               |         |   |      |   |         |  
|Unallocated Sales and Administrative Expense |  |                               | (26,024 | ) |      |   | (24,037 | )
|Intangible Amortization                      |  |                               | (5,119  | ) |      |   | (7,550  | )
|Loss on the Sale of Assets                   |  |                               | (1,461  | ) |      |   |        |  
|                                             |  |                               |         |   |      |   |         |  
|Total Consolidated Operating Income          |  | $                             | 21,264  |   |      | $ | 3,872   |  
|                                             |  |                               |         |   |      |   |         |  



Antenna and Cable Products operating
income increased due mainly to a 24% increase in sales partially offset by the impact of higher copper prices. Base Station Subsystems operating loss for the first quarter of fiscal 2005 includes a $19.8 million warranty provision related to a
defective component used in certain Base Station Subsystems products. Excluding this charge, Base Station Subsystems operating income increased due mainly to a 6% increase in sales, a more favorable mix of products and manufacturing cost
improvements due to the movement of more filter production to China. Network Solutions operating income declined versus the prior year due mainly to an anticipated decline of E-911 geolocation product sales. Geolocation sales declined to $13 million
in the first quarter compared to $27 million in the fourth quarter of fiscal 2005 and $30 million in the first quarter of fiscal 2005. Wireless Innovations operating income increased versus the first quarter of fiscal 2005 due mainly to a 20%
increase in sales. Satellite Communications operating loss increased versus the first quarter of fiscal 2005 due to a 41% decline in sales.



Interest. Interest expense for the first quarter of fiscal 2006 has remained flat compared to the first quarter of fiscal 2005. In the first quarter of
fiscal 2006 the company increased its notes payable borrowings by $16.1 million to meet short-term working capital needs and decreased its more expensive long-term debt by $6.9 million, resulting in interest expense being relatively unchanged.
Interest income decreased $0.8 million compared to the first quarter of fiscal 2005, due primarily to interest income for a favorable tax ruling recorded in first quarter of fiscal 2005.



Other expense (income). Other expense (income) resulted in income of $0.2 million in the first quarter of fiscal 2006,
compared to expense of $1.5 million in the first quarter of fiscal 2005 and $2.4 million in the fourth quarter of fiscal 2005. Other expense is primarily a result of foreign exchange gains and losses. Movement in the euro against the U.S. dollar was
the principal cause of the change from first quarter of fiscal 2005 to the first quarter of fiscal 2006.



Taxes. The reported tax rate for the first quarter was 19.9%, reflecting an underlying effective tax rate on operations of 30.0% and the recording of a $1.9 million benefit related to repatriation of
foreign earnings. During the quarter, the companys operations benefited from a favorable geographic mix shift of earnings to lower tax jurisdictions and a rate benefit from the permanent reinvestment of earnings in China. The American Jobs
Creation Act (AJCA) of 2004 provides a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad and reinvest the repatriated earnings in qualified domestic U.S. business activities by providing an 85% dividends
received deduction for certain dividends from controlled foreign corporations. In the first quarter of fiscal 2006, the company approved a definitive plan to repatriate earnings from certain foreign subsidiaries during fiscal 2006 in order to take
advantage of the provisions of the AJCA. The company expects to repatriate up to $55 million of dividends eligible for the dividends received deduction. The tax cost of repatriation was offset by the reversal of previously established deferred tax
liabilities related to undistributed earnings of the companys Chinese subsidiaries resulting in a net income tax benefit of $1.9 million, which was recorded in the first quarter of fiscal 2006.



Income tax for the first quarter of fiscal 2005 was a benefit of $2.6 million primarily
related to the reversal of previously accrued taxes resulting from a favorable resolution of certain tax-related matters.



18



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LIQUIDITY AND CAPITAL RESOURCES



Cash and cash equivalents were $163.4 million at December 31, 2005, compared to $188.8 million at September 30, 2005. Working
capital at December 31, 2005 was $628.5 million compared to $641.2 million at September 30, 2005. Management believes that the companys strong working capital position, projected ability to generate cash flow from operations, and
ability to borrow under its revolving credit agreements will allow the company to meet its normal operating cash flow needs for the foreseeable future.



The company maintains a $250 million revolving credit facility with a group of lenders that expires in September 2010. Under the terms of this facility, the company is
subject to various quarterly covenant requirements, including maintaining a ratio of earnings before interest, taxes, depreciation and amortization (EBITDA) to total debt, including letters of credit, maintaining a ratio of EBITDA to senior debt,
maintaining a fixed charge coverage ratio and limiting the amount of assets that the company can dispose of in a fiscal year. These requirements may limit the amount of borrowing under this credit agreement. As of December 31, 2005, the company
was in compliance with all of these requirements and had the ability to utilize the entire credit facility.



In the first quarter of fiscal 2006, the company used $1.8 million of cash to fund its operations, compared to $10.9 million used in the first quarter of fiscal 2005. The decrease in cash required to fund operations
was primarily due to higher net income.



Cash flow used for operations in the
first quarter of fiscal 2006 was primarily the result of net income of $14.8 million, $19.0 million of non-cash charges for depreciation and amortization, offset by a net change in operating assets and liabilities that resulted in a $34.2 million
decrease in cash flow.



The decrease in accounts receivable generated $2.4
million as days sales outstanding (DSOs) were 76 days at December 31, 2005, compared to 76 days at September 30, 2005, and 82 days at December 31, 2004. The fluctuations in DSOs from the prior year quarter are primarily the result of
the lower mix of international sales compared with domestic sales. International sales generally carry longer payment terms than domestic sales.



Inventory increased by $14.0 million in the first quarter of fiscal 2006. Inventory turns were 4.4 at December 31, 2005, compared to 4.6 at September 30, 2005
and 4.3 at December 31, 2004. The increase in inventory was primarily due to planned inventory growth to better meet customer needs. Accounts payable and other liabilities decreased by $18.9 million in the first quarter of fiscal 2006. This
decrease was primarily due to annual incentive payments and a decrease in trade payables and other current liabilities.



The company used $12.8 million of cash for investing activities in the first quarter of fiscal 2006, compared to $11.9 million in the first quarter of fiscal 2005.
Capital expenditures were $12.3 million in the first quarter of fiscal 2006, down from $14.0 million in the first quarter of 2005. In the first quarter of fiscal 2006, the company increased its investment in convertible interest bearing notes to
Cambridge Positioning Systems LTD, a mobile location technology developer by $1.7 million. Also in the first quarter of fiscal 2006, the company received $1.2 million from the sale of assets, principally from the sale of unimproved land in Denton,
Texas.



In the first quarter of fiscal 2005, the company paid $7.9 million for
two acquisitions. The company acquired selected assets of ATC Tower Services, Inc. for total purchase consideration of $8.4 million, including $6.8 million of cash. The company also paid $1.1 million to acquire the remaining 20% interest in a Czech
Republic subsidiary that was acquired in the Allen Telecom acquisition. Also in the first quarter of fiscal 2005, the company received net proceeds of $9.5 million from the sale of selected assets of its mobile antenna product line to PCTEL, Inc.



The company used $8.4 million for financing activities in the first quarter of
fiscal 2006 compared to $1.0 million generated from financing activities in the first quarter of fiscal 2005. The company reduced its net long-term debt by $6.9 million and $8.2 million in the first quarters of fiscal years 2006 and 2005,
respectively. These debt reductions were due to annual principal payments on senior notes of $7.8 million in the first fiscal quarter of each year. The company borrows under its revolving lines of credit to meet its short-term financing needs. The
company increased its notes payable borrowings by $16.1 million and $9.1 million in the first quarters of fiscal years 2006 and 2005, respectively. Also in the first quarter of fiscal 2006 the company spent $17.6 million to acquire 1.6 million
shares of the companys common stock.



As of December 31, 2005, the
company had remaining authority to repurchase approximately 9.8 million shares of common stock under a repurchase plan approved by the Board of Directors. These repurchases may be made on the open market or in negotiated transactions and the
timing and amount of shares repurchased will be determined by the companys management.



19



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CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS



The company has contractual obligations and commercial commitments as described in Item 7. Managements Discussion and Analysis
of Financial Condition and Results of Operations  Aggregate Contractual Obligations and Commitments of its Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended September 30, 2005. In
addition, we have obligations under open purchase orders and the long-term liabilities reflected in our consolidated balance sheet. There have been no material changes in our contractual obligations and commercial commitments since
September 30, 2005 arising outside of the ordinary course of business.



CHANGE IN CRITICAL ACCOUNTING POLICIES AND ESTIMATES



The
company uses certain critical accounting policies as described in Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations  Critical Accounting Policies of its Annual Report on Form 10-K
filed with the Securities and Exchange Commission for the year ended September 30, 2005. With the exception of the adoption of SFAS No. 151, Inventory Costsand SFAS No. 123(R), Share Based
Payments, as described in Notes 6 and Note 7, of the Notes to Consolidated Condensed Financial Statements in this Quarterly Report on Form 10-Q, there have been no material changes in the companys critical accounting policies
during the three months ended December 31, 2005.



This discussion and
analysis of financial condition and results of operations is based on the companys condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States. The
preparation of these financial statements requires the use of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses and related disclosures. In preparing these financial statements, the company has made its
best estimates and judgments of certain amounts included in the financial statements. Estimates are revised periodically. Actual results could differ from these estimates.



SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS



We have made forward-looking statements in this Form 10-Q under Managements Discussion and Analysis of Financial Condition and Results of Operations
and in the Notes to Consolidated Financial Statements. In addition, our representatives or management may make other written or oral statements that constitute forward-looking statements. Forward-looking statements are based on
managements beliefs and assumptions and on information currently available to them. These statements often contain words like believe, expect, anticipate, intend, contemplate, seek, plan, estimate, forecast or similar expressions. We make
these statements under the protection afforded them by Section 21E of the Securities Exchange Act of 1934.



Forward-looking statements involve risks, uncertainties and assumptions, including those discussed in this report and in Item 1A (Risk Factors) and the other
disclosures in the companys Annual Report on Form 10-K for the fiscal year ended September 30, 2005. We operate in a continually changing business environment, and new risk factors emerge from time to time. We cannot predict those risk
factors, nor can we assess the impact, if any, of those risk factors on our business or the extent to which any factors may cause actual results to differ materially from those projected in any forward-looking statements. Forward-looking statements
do not guarantee future performance, and you should not put undue reliance on them.



While Andrew Corporations management is optimistic about the companys long-term prospects, one should consider the risks and uncertainties in evaluating its growth outlook. Factors that may cause actual results to differ from
expected results include the companys ability to integrate acquisitions and to realize the synergies and cost savings anticipated from these transactions, fluctuations in commodity expense, the effects of competitive products and pricing,
economic and political conditions that may impact customers ability to fund purchases of our products and services, the companys ability to achieve the cost savings anticipated from cost reduction programs, fluctuations in international
exchange rates, the timing of cash payments and receipts, end-use demands for wireless communication services, the loss of one or more significant customers and other business factors. For a more complete discussion of these and other risks,
uncertainties and assumptions that may affect us, see the companys Annual Report on Form 10-K for the fiscal year ended September 30, 2005.



Section 404 of the Sarbanes-Oxley Act (the Act) requires that the company evaluate and determine the effectiveness of its internal controls over
financial reporting in order to allow management to report on, and our independent auditors to attest to, such effectiveness. The company has dedicated a significant amount of time and resources to ensuring compliance with the Act. The company
believes its process for documenting, evaluating, remediating and monitoring its internal controls over financial reporting is consistent with the objectives of the Act. However, there is a risk that the company, or its independent auditors, will



20



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not be able to conclude at September 30, 2006 that the companys internal controls over financial reporting are effective as required by the Act.
We believe the inability to comply with the Act could negatively impact investors confidence and companys stock price.



The European Union has issued directives governing the design of energy-using products, the restriction of the use of certain hazardous substances and the waste
(disposal) of electrical and electronic equipment. These directives require companies to change the way they design, manufacture, track and bring new products into the market. Certain products we manufacture and distribute throughout the
European Union will need to comply with these directives. If we are not able to comply with these directives, customer shipments and financial results may be adversely affected.



A substantial portion of the companys manufacturing capacity and business activity is outside the United States. Conducting business
in international markets involves risks and uncertainties such as foreign exchange rate exposure and political and economic instability that could lead to reduced international sales and reduced profitability associated with such sales, which would
reduce the companys sales and income. A significant portion of our sales are outside the United States. We anticipate that international sales will continue to represent a substantial portion of our total sales and that continued growth and
profitability will require further international expansion. Identifiable foreign exchange rate exposures result primarily from currency fluctuations, accounts receivable from customer sales, the anticipated purchase of products from affiliates and
third-party suppliers and the repayment of inter-company loans denominated in foreign currencies with our foreign subsidiaries. International business risks also include political and economic instability, tariffs and other trade barriers, longer
customer payment cycles, burdensome taxes, restrictions on the repatriation of earnings, expropriation or requirements of local or shared ownership, compliance with local laws and regulations, terrorist attacks, developing legal systems, reduced
protection of intellectual property rights in some countries, cultural and language differences, difficulties in managing and staffing operations and difficulties maintaining good employee relations. The company believes that international risks and
uncertainties could lead to reduced international sales and reduced profitability associated with such sales, which would reduce the companys sales and income.



On August 29, 2005, the company entered into a contract to sell its Orland Park, Illinois manufacturing and corporate headquarters site
for approximately $26 million. This transaction is expected to close in two phases over approximately an eighteen-month period. The corporate headquarters was relocated to a leased facility in Westchester, Illinois in January 2006. The company plans
to construct a state-of-the-art manufacturing and office facility in Joliet, Illinois and expects construction to be completed in 2007. In order to avoid customer-related disruptions, the company has developed a detailed plan to transition
administrative and manufacturing operations to the Joliet facility. However, due to the scope and nature of the move, customer shipments could be affected, which could have an adverse financial result.



The Chinese government is planning to issue licenses for next generation wireless networks.
It is anticipated that these licenses will be issued during calendar year 2006. Additionally, the company anticipates an increase in wireless infrastructure spending associated with the build-out of these anticipated new
networks. Significant delays of license issuance could adversely affect the companys financial results.



The company undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law. You are advised, however,
to consult any further disclosures the company makes on related subjects in its 8-K, 10-Q, and 10-K reports filed with or furnished to the Securities and Exchange Commission.



21



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Information with respect to the companys exposure to interest rate risk, foreign currency risk and commodity risk is contained in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of the
companys Annual Report on Form 10-K for the year ended September 30, 2005. With the exception of copper purchase commitments, the company believes that there has been no material change from the end of the previous fiscal year through
December 31, 2005 to the companys market risks as disclosed in its Annual Report on Form 10-K for the year ended September 30, 2005.



The company uses various metals in the production of its products. Copper, which is used to manufacture coaxial cable, is the most significant of these metals. The
company forecasts that it will use approximately 63 million pounds of copper in fiscal year 2006. As a result, the company is exposed to fluctuations in the price of copper. In order to reduce this exposure, the company has entered into
contracts with various suppliers to purchase copper. At December 31, 2005, the company had contracts to purchase 43.6 million pounds of copper for $69.8 million. For the remainder of fiscal year 2006, the company estimates that it will
purchase approximately 50 million pounds of copper, approximately six million pounds more than what the company currently has under contract. A 10% increase in the market price of copper as of December 31, 2005 would increase the
companys cost of this estimated six million pounds of copper by approximately $1.3 million.



ITEM 4. CONTROLS AND PROCEDURES



Evaluation of Disclosure Controls and Procedures:



As of December 31, 2005, the companys management, including its Chief Executive Officer and Chief Financial Officer, reviewed and evaluated the effectiveness of the companys disclosure controls and procedures pursuant to
Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act). Based on that review and evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the companys disclosure controls and
procedures were effective as of December 31, 2005 in providing reasonable assurance that information required to be disclosed by the company in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and Exchange Commission.



Changes in Internal Controls:



As previously disclosed in the companys Annual Report on Form 10-K filed with the SEC on December 14, 2005, in connection with the evaluation by management,
including its Chief Executive Officer and Chief Financial Officer, of the companys internal controls over reporting, pursuant to Exchange Act Rule 13a-15(d), the following changes were implemented during the quarter ended December 31,
2005 to the companys internal control over financial reporting as a result of the existence of material weaknesses as disclosed in the companys Annual Report on Form 10-K:



Revenue recognition accountingIn order to address the material weakness in its software revenue recognition, the
company has established a formal procedure for the review of significant new contracts, including formal communication protocol among the contracts and legal department, group finance directors and corporate accounting, in considering the
applicability of SOP 97-2 and all other relevant revenue recognition guidance, and determination of the appropriate revenue recognition policies to those contracts.



Segment reportingIn order to address the material weakness in its application of SFAS 131, Disclosures about
Segments of an Enterprise and Related Information,key personnel involved in the financial reporting process have enhanced the controls by which the SFAS No. 131 authoritative guidance is monitored and applied on a regular basis. In
addition, the companys disclosure committee now reviews segment reporting on a quarterly basis.



The company completed the implementation of these changes in internal control over financial reporting during the fiscal quarter ended December 31, 2005. The companys independent registered public
accounting firm has not yet audited these remediated controls and will evaluate them in connection with its audit of the companys internal control over financial reporting as of September 30, 2006.



Except as described above, during the fiscal quarter ended December 31, 2005 there were
no changes in the companys internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or in other factors that have materially affected, or are reasonably likely to materially affect, the
companys internal control over financial reporting.



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PART IIOTHER INFORMATION



Item 3,
Item 4 and Item 5 of this Part II are not applicable.



ITEM 1. LEGAL PROCEEDINGS



On
October 25, 2005, TruePosition, Inc. filed a complaint in the U.S. District Court for the District of Delaware, alleging the companys potential sale of certain geolocation products to Saudi Telecom will infringe a TruePosition patent. As
relief, the complaint seeks, among other things, injunctive relief and unspecified monetary damages. The company filed its answer and counterclaim on December 15, 2005 and intends to defend this litigation vigorously.



The company is also a party to various other legal proceedings, lawsuits and other claims
arising in the ordinary course of its business. The company does not believe that such other litigation, if adversely determined, would have a material effect on the companys business, financial position, results of operations or cash flow.



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



Since 1997, the companys Board of Directors has authorized the company to repurchase up to 30.0 million common shares. As of December 31, 2005, the company had repurchased approximately
20.2 million shares under this plan. These repurchases may be made on the open market or in negotiated transactions and the timing and amount of shares repurchased will be determined by the companys management. Included in the
20.2 million shares repurchased are 1.6 million shares repurchased in the first quarter of 2006 for $17.6 million.



The table below lists the companys repurchases of shares of common stock during the fiscal quarter ended December 31, 2005:



|                          |  |                                   |  |                                  |       |                                                                     |           |                                |           
|------------------------- |  | --------------------------------- |  | -------------------------------- | ----- | ------------------------------------------------------------------- | --------- | ------------------------------ | ----------
|                          |  | Total Number ofShares Repurchased |  | Average Price Paid per Share (1) |       | Total Number ofShares Repurchasedas Part of PubliclyAnnounced Plans |           | Shares Availablefor Repurchase
|October 1 to October 31   |  |                                  |  |                                  |      |                                                                     |          |                                | 11,389,568
|November 1 to November 30 |  | 725,000                           |  | $                                | 10.73 |                                                                     | 725,000   |                                | 10,664,568
|December 1 to December 31 |  | 875,000                           |  | $                                | 11.22 |                                                                     | 875,000   |                                | 9,789,568 
|                          |  |                                   |  |                                  |       |                                                                     |           |                                |           
|Total                     |  | 1,600,000                         |  | $                                | 11.00 |                                                                     | 1,600,000 |                                |           

---

|(1) | Average price paid per share is calculated using execution price, excluding commissions paid to brokers.
|--- | --------------------------------------------------------------------------------------------------------



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ITEM 6. EXHIBITS



|            |  |                                                                                                                                                              |  |                                                                                                                             
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                  |  | Reference                                                                                                                   
|4           |  | First Amendment, dated October 26, 2005 to the Rights Agreement, dated as of November 14, 1996, between Andrew Corporation and Harris Trust and Savings Bank |  | Incorporated by reference to Exhibit 4.2 to the Form 8-A/A filed by the company on October 31, 2005 (SEC File No. 001-14617)
|            |  |                                                                                                                                                             
|10.1 *      |  | Form of Performance Cash Agreement under the Andrew Corporation Management Incentive Plan                                                                    |  | Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the company on November 22, 2005 (SEC File No. 001-14617)
|            |  |                                                                                                                                                             
|10.2 *      |  | Form of Restricted Stock Unit Agreement under the Andrew Corporation Long-Term Incentive Plan                                                                |  | Incorporated by reference to Exhibit 10.2 to the Form 8-K filed by the company on November 22, 2005 (SEC File No. 001-14617)
|            |  |                                                                                                                                                             
|10.3 *      |  | Form of Stock Option Agreement under the Andrew Corporation Long-Term Incentive Plan                                                                         |  | Incorporated by reference to Exhibit 10.3 to the Form 8-K filed by the company on November 22, 2005 (SEC File No. 001-14617)
|            |  |                                                                                                                                                             
|10.4        |  | Lease agreement dated November 18, 2005 between Cherry Hill Seven LLC and Andrew Corporation                                                                 |  | Incorporated by reference to Exhibit 99.1 to the Form 8-K filed by the company on November 23, 2005 (SEC File No. 001-14617)
|            |  |                                                                                                                                                             
|10.5        |  | Agreement for Purchase and Sale of Real Estate dated as of August 25, 2005                                                                                   |  | Incorporated by reference to Exhibit 99.1 to the Form 8-K filed by the company on December 2, 2005 (SEC File No. 001-14617) 
|            |  |                                                                                                                                                             
|10.6        |  | First Amendment to Agreement for Purchase and Sale of Real Estate dated November 28, 2005                                                                    |  | Incorporated by reference to Exhibit 99.2 to the Form 8-K filed by the company on December 2, 2005 (SEC File No. 001-14617) 
|            |  |                                                                                                                                                             
|10.7 *      |  | Executive Severance Benefit Plan Agreement dated December 7, 2005 between Andrew Corporation and Jude Panetta                                                |  | Incorporated by reference to Exhibit 99.1 to the Form 8-K filed by the company on December 13, 2005 (SEC File No. 001-14617)
|            |  |                                                                                                                                                             
|31.1        |  | Rule 13a-14(a) Certification of Chief Executive Officer                                                                                                      |  | Filed herewith                                                                                                              
|            |  |                                                                                                                                                             
|31.2        |  | Rule 13a-14(a) Certification of Chief Financial Officer                                                                                                      |  | Filed herewith                                                                                                              
|            |  |                                                                                                                                                             
|32          |  | 18 U.S.C. Section 1350 Certifications of Chief Executive and Chief Financial Officers                                                                        |  | Furnished herewith                                                                                                          



---

|* | Indicates a management contract or compensatory plan or arrangement
|- | -------------------------------------------------------------------



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SIGNATURE



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.



|                       |  |     |  |                                                          
|---------------------- |  | --- |  | ---------------------------------------------------------
|Date  February 9, 2006 |  | By: |  | /s/ Marty R. Kittrell                                    
|                       |  |     |  | Marty R. Kittrell                                        
|                       |  |     |  | Chief Financial Officer                                  
|                       |  |     |  | (Duly Authorized Officer and Principal Financial Officer)



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