##### Table of Contents





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United States Securities and Exchange
Commission

Washington, DC 20549




---

Form 10-Q

(Mark One)

|     |  |                                                                                                                                                                     
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[X]  |  | Quarterly report pursuant to Section 13
    or 15(d) of the Securities
    Exchange Act of 1934
    For the quarterly period ended March 31, 2002                   
|     |  | 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: 0-21213


LCC International, Inc.

(Exact name of registrant as specified in its
charter)




---

|                                         |  |                                     
|---------------------------------------- |  | ------------------------------------
|Delaware                                 |  | 54-1807038                          
|(State of Incorporation)                 |  | (IRS Employer Identification Number)
|                                        
|7925 Jones Branch Drive, McLean, VA      |  | 22102                               
|(Address of principal executive offices) |  | (Zip Code)                          

Registrants telephone number, including
area code: (703) 873-2000

Not Applicable




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

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS

DURING THE PRECEDING FIVE YEARS:


Indicate by check mark whether the registrant has
filed all documents and reports required to be filed by
Sections 12, 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan
confirmed by a court.

Yes           No

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

As of May 2, 2002 the registrant had
outstanding 14,601,198 shares of Class A Common Stock, par
value $0.01 per share (the Class A Common
Stock) and 6,318,874 shares of Class B Common Stock,
par value $0.01 per share (the Class B Common Stock).



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TABLE OF CONTENTS



|                                                     |                                                                                               |  |  |  |  |  |  | 
|---------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I: FINANCIAL INFORMATION                       
|                                                     | Item 1: Financial Statements                                                                 
|Condensed Consolidated Statements of Operations     
|Condensed Consolidated Balance Sheets               
|Condensed Consolidated Statements of Cash Flows     
|Notes to Condensed Consolidated Financial Statements
|                                                     | Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
|PART II: OTHER INFORMATION                          
|                                                     | Item 1: Legal Proceedings                                                                    
|                                                     | Item 2: Changes in Securities                                                                
|                                                     | Item 3: Defaults Upon Senior Securities                                                      
|                                                     | Item 4: Submission of Matters to a Vote of Security Holders                                  
|                                                     | Item 5: Other Information                                                                    
|                                                     | Item 6: Exhibits and Reports on Form 8-K                                                     
|Calculation of Net Income Per Share                 



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##### Table of Contents



LCC International, Inc. and
Subsidiaries

Quarterly Report on Form 10-Q

For the quarter ended March 31,
2002


INDEX

|         |  |                                                                                                        |  |        |    | 
|-------- |  | ------------------------------------------------------------------------------------------------------ |  | ------ | -- | 
|         |  |                                                                                                        |  | Page  
|         |  |                                                                                                        |  | Number
|         |  |                                                                                                        |  |       
|PART I:  |  | FINANCIAL INFORMATION                                                                                  |  |        |    | 
|ITEM 1:  |  | FINANCIAL STATEMENTS                                                                                   |  |        |    | 
|         |  | Condensed consolidated statements of operations
    for the three months ended March 31, 2001 and 2002 |  |        | 3  | 
|         |  | Condensed consolidated balance sheets as of
    December 31, 2001 and March 31, 2002                   |  |        | 4  | 
|         |  | Condensed consolidated statements of cash flows
    for the three months ended March 31, 2001 and 2002 |  |        | 5  | 
|         |  | Notes to condensed consolidated financial
    statements                                               |  |        | 6  | 
|ITEM 2:  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS              |  |        | 10 | 
|PART II: |  | OTHER INFORMATION                                                                                      |  |        |    | 
|ITEM 1:  |  | Legal Proceedings                                                                                      |  |        | 18 | 
|ITEM 2:  |  | Changes in Securities                                                                                  |  |        | 18 | 
|ITEM 3:  |  | Defaults Upon Senior Securities                                                                        |  |        | 18 | 
|ITEM 4:  |  | Submission of Matters to a Vote of Security
    Holders                                                |  |        | 18 | 
|ITEM 5:  |  | Other Information                                                                                      |  |        | 18 | 
|ITEM 6:  |  | Exhibits and Reports on Form 8-K                                                                       |  |        | 18 | 

2



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##### Table of Contents






PART I: FINANCIAL INFORMATION






Item 1: Financial Statements


LCC International, Inc. and
Subsidiaries






Condensed Consolidated Statements of
Operations


(In thousands, except per share
data)


(Unaudited)


|                                                                                |                                                             |                    |        |        |   |   |        |        |  
|------------------------------------------------------------------------------- | ----------------------------------------------------------- | ------------------ | ------ | ------ | - | - | ------ | ------ | -
|                                                                                |                                                             |                   
|                                                                                |                                                             | Three Months Ended
|                                                                                |                                                             | March 31,         
|                                                                                |                                                             |                   
|                                                                                |                                                             | 2001               |        | 2002  
|                                                                                |                                                             |                    |        |       
|REVENUES                                                                        |                                                             | $                  | 42,655 |        |   | $ | 17,398 |       
|COST OF REVENUES                                                                |                                                             |                    | 32,747 |        |   |   | 16,270 |       
|                                                                                |                                                             |                    |        |        |   |   |        |       
|GROSS PROFIT                                                                    |                                                             |                    | 9,908  |        |   |   | 1,128  |       
|                                                                                |                                                             |                    |        |        |   |   |        |       
|OPERATING (INCOME) EXPENSE:                                                     |                                                             |                    |        |        |   |   |        |       
|                                                                                | Sales and marketing                                         |                    |        | 2,006  |   |   |        | 2,295  |  
|                                                                                | General and administrative                                  |                    |        | 4,187  |   |   |        | 5,105  |  
|                                                                                | Gain on sale of tower portfolio and
    administration, net |                    |        | (1,605 | ) |   |        |       |  
|                                                                                | Depreciation and amortization                               |                    |        | 720    |   |   |        | 691    |  
|                                                                                |                                                             |                    |        |        |   |   |        |       
|                                                                                |                                                             |                    | 5,308  |        |   |   | 8,091  |       
|                                                                                |                                                             |                    |        |        |   |   |        |       
|OPERATING INCOME (LOSS)                                                         |                                                             |                    | 4,600  |        |   |   | (6,963 | )     
|                                                                                |                                                             |                    |        |        |   |   |        |       
|OTHER INCOME (EXPENSE):                                                         |                                                             |                    |        |        |   |   |        |       
|                                                                                | Interest income                                             |                    |        | 589    |   |   |        | 302    |  
|                                                                                | Other                                                       |                    |        | (49    | ) |   |        | 2      |  
|                                                                                |                                                             |                    |        |        |   |   |        |       
|                                                                                |                                                             |                    | 540    |        |   |   | 304    |       
|                                                                                |                                                             |                    |        |        |   |   |        |       
|INCOME (LOSS) FROM OPERATIONS BEFORE INCOME
    TAXES                           |                                                             |                    | 5,140  |        |   |   | (6,659 | )     
|PROVISION (BENEFIT) FOR INCOME TAXES                                            |                                                             |                    | 2,056  |        |   |   | (1,598 | )     
|                                                                                |                                                             |                    |        |        |   |   |        |       
|NET INCOME (LOSS)                                                               |                                                             | $                  | 3,084  |        |   | $ | (5,061 | )     
|                                                                                |                                                             |                    |        |        |   |   |        |       
|NET INCOME (LOSS) PER SHARE:                                                    |                                                             |                    |        |        |   |   |        |       
|                                                                                | Basic                                                       |                    | $      | 0.15   |   |   | $      | (0.24  | )
|                                                                                |                                                             |                    |        |        |   |   |        |       
|                                                                                | Diluted                                                     |                    | $      | 0.15   |   |   | $      | (0.24  | )
|                                                                                |                                                             |                    |        |        |   |   |        |       
|WEIGHTED AVERAGE SHARES USED IN CALCULATION OF
    NET INCOME (LOSS) PER SHARE: |                                                             |                    |        |        |   |   |        |       
|                                                                                | Basic                                                       |                    |        | 20,494 |   |   |        | 20,833 |  
|                                                                                |                                                             |                    |        |        |   |   |        |       
|                                                                                | Diluted                                                     |                    |        | 21,189 |   |   |        | 20,833 |  
|                                                                                |                                                             |                    |        |        |   |   |        |       

See accompanying notes to condensed consolidated
financial statements.

3



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##### Table of Contents



LCC International, Inc. and
Subsidiaries






Condensed Consolidated Balance
Sheets


(In thousands)


|                                                                                    |                                                                                                                                         |                                         |         |             |        |   |         |        |        | 
|----------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | ------- | ----------- | ------ | - | ------- | ------ | ------ | 
|                                                                                    |                                                                                                                                         | December 31,                            |         | March 31,  
|                                                                                    |                                                                                                                                         | 2001                                    |         | 2002       
|                                                                                    |                                                                                                                                         |                                         |         |            
|                                                                                    |                                                                                                                                         |                                         |         | (Unaudited)
|ASSETS:                                                                             |                                                                                                                                         |                                         |         |             |        |   |         |       
|Current assets:                                                                     |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                    | Cash and cash equivalents                                                                                                               |                                         | $       | 52,658      |        |   | $       | 42,067 |       
|                                                                                    | Short-term investments                                                                                                                  |                                         |         | 484         |        |   |         | 505    |       
|                                                                                    | Receivables, net of allowance for doubtful
    accounts of $2,048 and $3,087 at December 31, 2001 and
    March 31, 2002, respectively: |                                         |         |             |        |   |         |        |       
|                                                                                    |                                                                                                                                         | Trade accounts receivable               |         |             | 26,294 |   |         |        | 23,441 | 
|                                                                                    |                                                                                                                                         | Due from related parties and affiliates |         |             | 1,073  |   |         |        | 989    | 
|                                                                                    |                                                                                                                                         | Unbilled receivables                    |         |             | 10,240 |   |         |        | 7,121  | 
|                                                                                    | Deferred income taxes, net                                                                                                              |                                         |         | 2,724       |        |   |         | 2,904  |       
|                                                                                    | Prepaid expenses and other current assets                                                                                               |                                         |         | 1,607       |        |   |         | 1,527  |       
|                                                                                    | Prepaid income taxes                                                                                                                    |                                         |         | 2,632       |        |   |         | 6,615  |       
|                                                                                    |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                    |                                                                                                                                         | Total current assets                    |         |             | 97,712 |   |         |        | 85,169 | 
|Property and equipment, net                                                         |                                                                                                                                         |                                         | 5,730   |             |        |   | 5,663   |       
|Investments                                                                         |                                                                                                                                         |                                         | 5,162   |             |        |   | 5,141   |       
|Deferred income taxes, net                                                          |                                                                                                                                         |                                         | 2,038   |             |        |   | 762     |       
|Goodwill and other intangibles                                                      |                                                                                                                                         |                                         | 637     |             |        |   | 8,895   |       
|Other assets                                                                        |                                                                                                                                         |                                         | 952     |             |        |   | 933     |       
|                                                                                    |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                    |                                                                                                                                         | $                                       | 112,231 |             |        | $ | 106,563 |       
|                                                                                    |                                                                                                                                         |                                         |         |             |        |   |         |       
|LIABILITIES AND SHAREHOLDERS
    EQUITY:                                           |                                                                                                                                         |                                         |         |             |        |   |         |       
|Current liabilities:                                                                |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                    | Accounts payable                                                                                                                        |                                         | $       | 3,840       |        |   | $       | 4,752  |       
|                                                                                    | Accrued expenses                                                                                                                        |                                         |         | 5,791       |        |   |         | 5,199  |       
|                                                                                    | Accrued employee compensation and benefits                                                                                              |                                         |         | 10,323      |        |   |         | 7,475  |       
|                                                                                    | Deferred revenue                                                                                                                        |                                         |         | 640         |        |   |         |       |       
|                                                                                    | Income taxes payable                                                                                                                    |                                         |         | 2,788       |        |   |         | 2,789  |       
|                                                                                    | Other current liabilities                                                                                                               |                                         |         | 2,196       |        |   |         | 2,495  |       
|                                                                                    |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                    |                                                                                                                                         | Total current liabilities               |         |             | 25,578 |   |         |        | 22,710 | 
|Other liabilities                                                                   |                                                                                                                                         |                                         | 849     |             |        |   | 856     |       
|                                                                                    |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                    |                                                                                                                                         | Total liabilities                       |         |             | 26,427 |   |         |        | 23,566 | 
|                                                                                    |                                                                                                                                         |                                         |         |             |        |   |         |       
|Preferred stock:                                                                    |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                    | 10,000 shares authorized; 0 shares issued and
    outstanding                                                                           |                                         |         |            |        |   |         |       |       
|Class A common stock, $0.01 par value:                                              |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                    | 70,000 shares authorized; 12,271 and 14,601
    shares issued and outstanding at December 31, 2001 and
    March 31, 2002, respectively |                                         |         | 123         |        |   |         | 146    |       
|Class B common stock, $0.01 par value:                                              |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                    | 20,000 shares authorized; 8,407 and 6,319 shares
    issued and outstanding at December 31, 2001 and
    March 31, 2002, respectively   |                                         |         | 84          |        |   |         | 63     |       
|Paid-in capital                                                                     |                                                                                                                                         |                                         | 92,428  |             |        |   | 94,058  |       
|Accumulated deficit                                                                 |                                                                                                                                         |                                         | (1,409  | )           |        |   | (6,470  | )     
|Note(s) receivable from shareholder(s)                                              |                                                                                                                                         |                                         | (2,325  | )           |        |   | (1,625  | )     
|                                                                                    |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                    | Subtotal                                                                                                                                |                                         |         | 88,901      |        |   |         | 86,172 |       
|Accumulated other comprehensive loss 
    foreign currency translation adjustments |                                                                                                                                         |                                         | (3,097  | )           |        |   | (3,175  | )     
|                                                                                    |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                    |                                                                                                                                         | Total shareholders equity              |         |             | 85,804 |   |         |        | 82,997 | 
|                                                                                    |                                                                                                                                         |                                         |         |             |        |   |         |       
|                                                                                    |                                                                                                                                         | $                                       | 112,231 |             |        | $ | 106,563 |       
|                                                                                    |                                                                                                                                         |                                         |         |             |        |   |         |       

See accompanying notes to condensed consolidated
financial statements.

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LCC International, Inc. and
Subsidiaries






Condensed Consolidated Statements of Cash
Flows


(In thousands)


(Unaudited)


|                                                   |                                             |                                                                                              |                                   |                                              |                                          |   |         |        |        |   |       |        |  
|-------------------------------------------------- | ------------------------------------------- | -------------------------------------------------------------------------------------------- | --------------------------------- | -------------------------------------------- | ---------------------------------------- | - | ------- | ------ | ------ | - | ----- | ------ | -
|                                                   |                                             |                                                                                             
|                                                   |                                             | Three Months Ended                                                                          
|                                                   |                                             | March 31,                                                                                   
|                                                   |                                             |                                                                                             
|                                                   |                                             | 2001                                                                                         |                                   | 2002                                        
|                                                   |                                             |                                                                                              |                                   |                                             
|Cash flows from operating activities:              |                                             |                                                                                              |                                   |                                              |                                          |   |         |       
|                                                   |                                             | Net income (loss)                                                                            |                                   | $                                            | 3,084                                    |   |         | $      | (5,061 | )
|                                                   |                                             | Adjustments to reconcile net income
    (loss) to net cash used in
    operating activities: |                                   |                                              |                                          |   |         |        |        |  
|                                                   |                                             |                                                                                              |                                   | Depreciation and amortization                |                                          |   | 720     |        |        |   | 691   |       
|                                                   |                                             |                                                                                              |                                   | Provision for doubtful accounts              |                                          |   | 262     |        |        |   | 678   |       
|                                                   |                                             |                                                                                              |                                   | Gain on sale of tower portfolio              |                                          |   | (1,605  | )      |        |   |      |       
|                                                   |                                             |                                                                                              |                                   | Changes in operating assets and liabilities: |                                          |   |         |        |        |   |       |       
|                                                   |                                             |                                                                                              |                                   |                                              | Trade, unbilled, and other receivables   |   |         | (2,138 | )      |   |       | 7,679  |  
|                                                   |                                             |                                                                                              |                                   |                                              | Accounts payable and accrued expenses    |   |         | (1,489 | )      |   |       | (5,483 | )
|                                                   |                                             |                                                                                              |                                   |                                              | Other current assets and liabilities     |   |         | 791    |        |   |       | (1,625 | )
|                                                   |                                             |                                                                                              |                                   |                                              | Other non-current assets and liabilities |   |         | (586   | )      |   |       | (706   | )
|                                                   |                                             |                                                                                              |                                   |                                              |                                          |   |         |       
|Net cash used in operating activities              |                                             |                                                                                              | (961                              | )                                            |                                          |   | (3,827  | )     
|                                                   |                                             |                                                                                              |                                   |                                              |                                          |   |         |       
|Cash flows from investing activities:              |                                             |                                                                                              |                                   |                                              |                                          |   |         |       
|                                                   |                                             | (Purchases) sales of short term investments                                                  |                                   |                                              | 78                                       |   |         |        | (21    | )
|                                                   |                                             | Purchases of property and equipment                                                          |                                   |                                              | (1,087                                   | ) |         |        | (406   | )
|                                                   |                                             | Investments                                                                                  |                                   |                                              | (1,732                                   | ) |         |        |       |  
|                                                   |                                             | Business acquisition                                                                         |                                   |                                              |                                         |   |         |        | (7,146 | )
|                                                   |                                             |                                                                                              |                                   |                                              |                                          |   |         |       
|Net cash used in investing activities              |                                             |                                                                                              | (2,741                            | )                                            |                                          |   | (7,573  | )     
|                                                   |                                             |                                                                                              |                                   |                                              |                                          |   |         |       
|Cash flows from financing activities:              |                                             |                                                                                              |                                   |                                              |                                          |   |         |       
|                                                   | Proceeds from issuance of common stock, net |                                                                                              |                                   | 162                                          |                                          |   |         |       |       
|                                                   | Proceeds from exercise of options           |                                                                                              |                                   | 132                                          |                                          |   |         | 109    |       
|                                                   | Repayment of loan to shareholder            |                                                                                              |                                   |                                             |                                          |   |         | 700    |       
|                                                   |                                             |                                                                                              |                                   |                                              |                                          |   |         |       
|Net cash provided by financing activities          |                                             |                                                                                              | 294                               |                                              |                                          |   | 809     |       
|                                                   |                                             |                                                                                              |                                   |                                              |                                          |   |         |       
|Net decrease in cash and cash equivalents          |                                             |                                                                                              | (3,408                            | )                                            |                                          |   | (10,591 | )     
|Cash and cash equivalents at beginning of period   |                                             |                                                                                              | 22,271                            |                                              |                                          |   | 52,658  |       
|                                                   |                                             |                                                                                              |                                   |                                              |                                          |   |         |       
|Cash and cash equivalents at end of period         |                                             | $                                                                                            | 18,863                            |                                              |                                          | $ | 42,067  |       
|                                                   |                                             |                                                                                              |                                   |                                              |                                          |   |         |       
|Supplemental disclosures of cash flow information: |                                             |                                                                                              |                                   |                                              |                                          |   |         |       
|                                                   |                                             |                                                                                              | Cash paid during the quarter for: |                                              |                                          |   |         |        |        |   |      
|                                                   |                                             |                                                                                              |                                   | Income taxes                                 |                                          | $ | 851     |        |        | $ | 1,316 |       
|                                                   |                                             |                                                                                              | Non-cash activity:                |                                              |                                          |   |         |        |        |   |      
|                                                   |                                             |                                                                                              |                                   | Common stock issued in business acquisition  |                                          |   |        |        |        | $ | 1,524 |       

See accompanying notes to condensed consolidated
financial statements.

5



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LCC International, Inc. and
Subsidiaries






Notes to Condensed Consolidated Financial
Statements

(Unaudited)


Note 1:  Description of
Operations

The Company provides integrated end-to-end
solutions for wireless voice and data communication networks
with service offerings that include high level technical
consulting, system design and deployment and ongoing operations
and maintenance services. Telcom Ventures owns the Class B
Common Stock shares outstanding, which have ten-to-one voting
rights over the Class A Common Stock shares and therefore
represent approximately 81% of the voting control.

The Company operates in a highly competitive
environment subject to rapid technological change and emergence
of new technologies. Historically, the key drivers of growth in
the Companys wireless services business have been
(1) the issuance of new or additional licenses to wireless
operators; (2) the introduction of new services or
technologies; (3) increases in the number of subscribers
served by wireless operators; and (4) the increasing
complexity of wireless systems in operation. Although the
Company believes that its services are transferable to emerging
technologies, rapid changes in technology could have an adverse
financial impact on the Company.

Note 2:  Basis of
Presentation

The condensed consolidated financial statements
of the Company included herein have been prepared by the Company
without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission and reflect all adjustments
which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods.

Certain information and footnote disclosure
normally included in the consolidated financial statements
prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or
omitted. The interim financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Companys Annual Report on
Form 10-K for the year ended December 31, 2001.
Operating results for the interim periods are not necessarily
indicative of results for an entire year.

Certain reclassifications of prior year amounts
have been made to conform to the current year presentation.

Note 3:  Recent Accounting
Pronouncements

On January 1, 2002, the Company adopted FASB
SFAS No. 142, Goodwill and Other Intangible Assets.
SFAS No. 142 requires that goodwill and intangible assets
with indefinite useful lives no longer be amortized, but instead
be tested for impairment at least annually in accordance with
the provisions of SFAS No. 142. SFAS No. 142 also
requires that intangible assets with estimable useful lives be
amortized over their estimated useful lives to their residual
values, and be reviewed for impairment in accordance with SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. The adoption of SFAS No. 142 did not
have a significant impact on the Companys financial
condition and results of operations.

On January 1, 2002, the Company adopted FASB
SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assetswhich supersedes FASB SFAS
No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of, and APB
Opinion No. 30, Reporting the Results of
Operations  Reporting Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual, and
Infrequently Occurring Events and Transactions. The
statement addresses the accounting and reporting of a disposal
of a segment and resolves significant implementation issues
related to SFAS No. 121. The adoption of SFAS No. 144
did not have a significant impact on the Companys
financial condition and results of operations.

Note 4:  Other Comprehensive Income
(Loss)

Comprehensive income (loss) is defined as
net income (loss) plus the change in equity of a business
enterprise during a period from transactions and other events
and circumstances from non-owner sources. Other comprehensive
income (loss) refers to revenues, expenses, gains and
losses that under accounting

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##### Table of Contents



principles generally accepted in the United
States of America are included in comprehensive income (loss),
but excluded from net income (loss). Other comprehensive income
(loss) consists solely of foreign currency translation
adjustments at March 31, 2001 and 2002. Comprehensive
income (loss) for the three months ended March 31 is
as follows (in thousands).


|                                                                       |  |      |       |      |  |   |        |  
|---------------------------------------------------------------------- |  | ---- | ----- | ---- |  | - | ------ | -
|                                                                       |  | 2001 |       | 2002
|                                                                       |  |      |       |     
|Net income (loss)                                                      |  | $    | 3,084 |      |  | $ | (5,061 | )
|                                                                       |  |      |       |      |  |   |        |  
|Other comprehensive loss, before tax                                   |  |      | (700  | )    |  |   | (103   | )
|Income tax benefit related to items of
    comprehensive income (loss) |  |      | (280  | )    |  |   | (25    | )
|                                                                       |  |      |       |      |  |   |        |  
|Other comprehensive loss, net of tax                                   |  |      | (420  | )    |  |   | (78    | )
|                                                                       |  |      |       |      |  |   |        |  
|Comprehensive income (loss)                                            |  | $    | 2,664 |      |  | $ | (5,139 | )
|                                                                       |  |      |       |      |  |   |        |  

Note 5:     Business
Combinations

On January 31, 2002, the Company acquired
all of the assets of Smith Woolley Telecom (Smith
Woolley). Smith Woolley is a telecommunications
consultancy company that specializes in the provision of search,
acquisition, design, build, management and maintenance services
to the wireless industry in the United Kingdom. Smith Woolley is
based in Cambridge, England, with several regional offices. The
purchase price of the acquisition was approximately $8.6 million
consisting of $7.1 million in cash and approximately
215,000 shares of LCC Class A common stock, par value $0.01
per share. The value of the LCC Class A common stock was
approximately $1.5 million and was based on the closing
price on January 31, 2002 of $7.08 per share. The
acquisition was accounted for using the purchase method of
accounting and therefore, Smith Woolleys results have been
included in the condensed consolidated financial statements
since the date of acquisition.

Allocation of the purchase price to the assets
acquired and liabilities assumed for this acquisition is
preliminary. The excess of the purchase price over the estimated
fair values of the net assets acquired was $8.3 million. It
will be recorded as goodwill and other intangibles. Final
determination of the fair values to be assigned will result in
adjustments to the preliminary values assigned at the date of
acquisition. Goodwill and other intangibles will be evaluated
annually for possible impairment under the provisions of SFAS
No. 142.

Note 6:     Tower
Portfolio Sale and Administration

During 2000, Microcell Management, Inc.
(Microcell), a subsidiary of the Company, completed
the closing of the sale of its telecommunication tower portfolio
to Pinnacle Towers Inc. (Pinnacle) pursuant to an
Asset Purchase Agreement between Pinnacle and Microcell. As part
of the tower sale transaction, Microcell and Pinnacle entered
into a Master Antenna Site Lease pursuant to which Microcell
agreed to lease, until December 31, 2002, the unoccupied
space on each telecommunication tower sold to Pinnacle. As of
December 31, 2001, the Company had deferred
$2.0 million of the gain and included it in other current
liabilities. Microcell and Pinnacle also entered into a Tower
Services Agreement to provide Pinnacle with audit, maintenance,
and program management services. The Tower Services Agreement,
which expired in August 2001, provided for minimum annual
payments to Microcell of $10.0 million for the contemplated
services.

On January 25, 2002, the Company entered
into a settlement agreement with Pinnacle. Pursuant to the
agreement, the Company received $2.0 million in cash to
satisfy Pinnacles obligations under the Tower Services
Agreement. The Company has not recorded the gain related to
payment under the Tower Services Agreement and will not do so
until the ultimate resolution of uncertainties which is expected
during the second quarter of 2002. In addition, the Company paid
Pinnacle $2.0 million to satisfy all remaining obligations
under the Master Antenna Site Lease.

Note 7:     Related
Party Transactions

During 2001 and the first quarter of 2002, the
Company provided services to Telcom Ventures and various other
companies majority owned, or controlled by, Telcom Ventures or
its members. Revenues from Telcom Ventures are not material,
providing 0.1% in 2001 revenues and none in the first quarter of
2002. Receivables from these related parties were $19,000 at
December 31, 2001 and March 31, 2002 and are included
in due from related parties and affiliates in the accompanying
consolidated balance sheets. Also

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included in due from related parties and
affiliates are unbilled receivables and advances to employees
aggregating approximately $89,000 and $123,000 at
December 31, 2001 and March 31, 2002, respectively.


During 2001 and the first quarter of 2002, the
Company made certain payments on behalf of Telcom Ventures that
consisted primarily of fringe benefit and payroll
service-related payments. At December 31, 2001 and March
31, 2002, outstanding amounts associated with these payments,
totaling $0.4 million and $0.2 million, respectively, are
included in due from related parties and affiliates within the
accompanying condensed consolidated balance sheets.

In September 1996, the Company lent
$3.5 million to Telcom Ventures to assist in the payment of
taxes due in connection with the assumption by the Company of
$30.0 million of convertible subordinated debt from Telcom
Ventures. The original note was payable over five years with
equal annual principal payments over the term. Interest accrued
at the rate of LIBOR, plus 1.75%. The final payment of principal
and accrued interest of approximately $0.8 million was
received by the Company during the first quarter of 2002 in
satisfaction of the note.

During 2001 and the first quarter of 2002, the
Company provided services to XM Satellite. Telcom Ventures has a
minority investment in XM Satellite, and Dr. Rajendra
Singh, a director of Telcom Ventures, is a member of the board
of directors of the Company. Revenues earned during the first
quarter of 2001 and 2002 for services provided to XM Satellite
were $21.3 million and $3.0 million, respectively.
Receivables due from XM Satellite were $13.0 million and
$12.7 million at December 31, 2001 and March 31, 2002,
respectively.

Note 8:  Contingencies

The Company is party to various non-material
legal proceedings and claims incidental to its business.
Management does not believe that these matters will have a
material adverse affect on the consolidated results of
operations or financial condition of the Company.

Note 9:  Segment
Information

The Companys operating segments include
Services (Design Services and Deployment Services) and Tower
ownership and management. Design Services provides engineering
and design services for cellular phone system operators,
personal communication system (PCS) operators and
other wireless communication system providers. Deployment
Services provides program and construction management services
related to the build-out of wireless communication systems.

Operating Segments:

(In thousands)


|                                      |                         |                |        |                 |        |         |     |   |   |   |        |        |        | 
|------------------------------------- | ----------------------- | -------------- | ------ | --------------- | ------ | ------- | --- | - | - | - | ------ | ------ | ------ | 
|                                      |                         |                |        | Tower Ownership |        | Segment
|                                      |                         | Services       |        | and Management  |        | Total  
|                                      |                         |                |        |                 |        |        
|Three Months Ended March 31,
    2001 |                         |                |        |                 |        |         |     |   |   |   |        |       
|Revenues:                             |                         |                |        |                 |        |         |     |   |   |   |        |       
|                                      | From external customers |                | $      | 42,655          |        |         | $   |  |   |   | $      | 42,655 |       
|                                      | Inter-segment revenues  |                |        |                |        |         |     |  |   |   |        |       |       
|                                      |                         |                |        |                 |        |         |     |   |   |   |        |       
|                                      |                         | Total revenues |        | $               | 42,655 |         |     | $ |  |   |        | $      | 42,655 | 
|                                      |                         |                |        |                 |        |         |     |   |   |   |        |       
|Net income                            |                         | $              | 3,610  |                 |        | $       | 954 |   |   | $ | 4,564  |       
|                                      |                         |                |        |                 |        |         |     |   |   |   |        |       
|Total assets                          |                         | $              | 63,624 |                 |        | $       | 725 |   |   | $ | 64,349 |       
|                                      |                         |                |        |                 |        |         |     |   |   |   |        |       

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|                                      |                         |                |        |                 |        |         |   |   |   |   |        |        |        | 
|------------------------------------- | ----------------------- | -------------- | ------ | --------------- | ------ | ------- | - | - | - | - | ------ | ------ | ------ | 
|                                      |                         |                |        | Tower Ownership |        | Segment
|                                      |                         | Services       |        | and Management  |        | Total  
|                                      |                         |                |        |                 |        |        
|Three Months Ended March 31,
    2002 |                         |                |        |                 |        |         |   |   |   |   |        |       
|Revenues:                             |                         |                |        |                 |        |         |   |   |   |   |        |       
|                                      | From external customers |                | $      | 17,398          |        |         | $ |  |   |   | $      | 17,398 |       
|                                      | Inter-segment revenues  |                |        |                |        |         |   |  |   |   |        |       |       
|                                      |                         |                |        |                 |        |         |   |   |   |   |        |       
|                                      |                         | Total revenues |        | $               | 17,398 |         |   | $ |  |   |        | $      | 17,398 | 
|                                      |                         |                |        |                 |        |         |   |   |   |   |        |       
|Net loss                              |                         | $              | (3,998 | )               |        | $       |  |   |   | $ | (3,998 | )     
|                                      |                         |                |        |                 |        |         |   |   |   |   |        |       
|Total assets                          |                         | $              | 57,216 |                 |        | $       |  |   |   | $ | 57,216 |       
|                                      |                         |                |        |                 |        |         |   |   |   |   |        |       

A reconciliation of net income (loss) reported
for the operating segments to the amount in the condensed
consolidated financial statements is as follows (in thousands):

|     |            |         |   |              |   |              |   |        |   |  |   |        |  
|---- | ---------- | ------- | - | ------------ | - | ------------ | - | ------ | - |  | - | ------ | -
|     |            |         |   | Unallocated  |   |             
|     |            | Segment |   | Corporate    |   | Consolidated
|     |            | Total   |   | Expenditures |   | Total       
|     |            |         |   |              |   |             
|2001 |            |         |   |              |   |              |   |        |   |  |   |       
|     | Net income |         | $ | 4,564        |   |              | $ | (1,480 | ) |  | $ | 3,084  |  
|     |            |         |   |              |   |              |   |        |   |  |   |       
|2002 |            |         |   |              |   |              |   |        |   |  |   |       
|     | Net loss   |         | $ | (3,998       | ) |              | $ | (1,063 | ) |  | $ | (5,061 | )
|     |            |         |   |              |   |              |   |        |   |  |   |       

Note 10:  Recovery of
Receivables

On March 28, 2001, the United States
Bankruptcy Court, District of Maryland, Northern Division,
entered an order confirming the Amended Joint Plan of
Reorganization Under Chapter 11 (the Plan) for
DCR PCS, Inc. (DCR) and Pocket Communications, Inc.
(Pocket). The Plan provides that the Companys
claim against DCR will be allowed in the amount of
$5.0 million. The Company received payment of
$5.0 million on April 11, 2001, which was recognized
as a recovery of a bad debt and included in general and
administrative expense in 2001. The Plan also provides that
LCCs general unsecured claim against Pocket will be
allowed in the amount filed minus $5.0 million, or
approximately $12.4 million, which is to be paid at the same
percentage recovery received by the Pocket general unsecured
creditors as a class (excluding certain creditors which also
hold secured claims under the Plan and who have agreed to forgo
recovery on the first $5.8 million in available funds)
after the resolution of certain remaining disputed claims and
the calculation of administrative fees and expenses of the
estate. Based on the current estimates of the Official Committee
of Unsecured Creditors, there is a potential of recovery on the
Pocket general unsecured claims of 10% to 12% of the allowed
amount. Any additional amounts recovered will be recognized if
and when received. As of March 31, 2002 the Company did not
carry any assets or liabilities on its books relating to Pocket;
all amounts were written off in prior years.

During 1997, the Company recorded a charge for
receivables due from a Malaysian corporation. On March 15,
2001, the Company received payment of $2.1 million, net of taxes
withheld at the source of $0.4 million, as complete
settlement on these balances after the Malaysian corporation
successfully emerged from bankruptcy. This amount has been
recognized as a recovery of bad debt and was recorded as a
reduction in general and administrative expense in 2001.

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Item
2:     Managements Discussion and
Analysis of Financial Condition and Results of
Operations

LCC International, Inc. and
Subsidiaries

For the Three Months Ended March 31, 2001
and 2002

This quarterly report on Form 10-Q contains
forward-looking statements within the meaning of
Section 27A of the Securities Exchange Act of 1934. The
Managements Discussion and Analysis of Financial Condition
and Results of Operations includes, without limitation,
forward-looking statements regarding the Companys ability
to pursue and secure new business opportunities, its tower
business, and its working capital. A more complete discussion of
business risks is included in the Companys Annual Report
on Form 10-K for the year ended December 31, 2001.

Overview

The Company provides integrated end-to-end
solutions for wireless voice and data communication networks
with service offerings that include high level technical
consulting, system design and deployment and ongoing operations
and maintenance services. Since its inception in 1983, the
Company has delivered wireless network solutions to more than
300 customers in over 50 countries.

In the last two years, the Company has made
several strategic decisions that have enabled it to focus on its
core competency in providing end-to-end wireless services. In
March 2000, the Company sold its telecommunication tower
business. The Company expanded its international presence with
the acquisitions of Transmast Italia in Italy and Smith Woolley
Telecom in the United Kingdom. In addition, the Company
maintains a minority investment in a German wireless network
deployment firm.

The Company operates in a highly competitive
environment subject to rapid technological change and emergence
of new technologies. Historically, the key drivers of growth in
the Companys wireless services business have been
(1) the issuance of new or additional licenses to wireless
operators; (2) the introduction of new services or
technologies; (3) increases in the number of subscribers
served by wireless operators; and (4) the increasing
complexity of wireless systems in operation.

The Companys primary sources of revenues
are from engineering design and system deployment services.
Revenues from services are derived from fixed price and time and
materials contracts. The Company recognizes revenues from fixed
price service contracts using the percentage-of-completion
method. With fixed price contracts the Company recognizes
revenue based on the ratio of individual contract costs incurred
to date on a project compared with total estimated costs.
Anticipated contract losses are recognized, as they become known
and estimable. The Company recognizes revenues on time and
materials contracts as the services are performed.

Cost of revenues includes direct compensation and
benefits, living and travel expenses, payments to third-party
subcontractors and consultants, equipment rentals, expendable
computer software and equipment, and allocated, or directly
attributed, facility and overhead costs identifiable to projects.

General and administrative expenses consist of
compensation, benefits, office and occupancy, and other costs
required for the finance, human resources, information systems,
and executive office functions. Sales and marketing expenses
consist of salaries, benefits, sales commissions, travel and
other related expenses required to implement the Companys
marketing, sales and customer support plans.

Trends That Have Affected or May Affect
Results of Operations and Financial Condition

The Company has continued to see tightened
capital markets, which, among other things have contributed to a
slowdown in wireless telecommunications infrastructure spending.
The Companys success depends upon continued growth in the
design and deployment and optimization of wireless networks.
Many wireless carriers are reliant upon the capital markets to
obtain funds to finance building and improving their wireless
networks. Most vulnerable are the customers that are new
licensees and operator/carriers who have limited sources of
funds from operations or have business plans that are dependent
on funding from the capital markets. The slowdown in wireless
telecommunications infrastructure spending caused some of the
Companys customers or potential customers to slow,
postpone or reduce the scope of the deployment of new wireless
networks or expansion of existing networks, which has reduced
the demand for the Companys services. This industry
slowdown is occurring, as the Company needs to replace the
revenue provided by the

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Companys largest client XM Satellite. This
contract was substantially completed in the first quarter of
2002, and significant revenue is not anticipated from this
customer for the remainder of the year.


The slowdown in the industry and the tightened
capital markets are also having an adverse impact on Plan and
Design Netcare AG, a German wireless network deployment firm
(PDN) in which the Company maintains a strategic
investment. The Company acquired 15% of this firm in August
2000, with total investment in PDN totaling $4.6 million.
The Company was recently notified at a PDN board meeting that
PDN has concerns about its short-term liquidity. PDN is working
on a corrective action plan. Should PDN fail to develop or
successfully execute a corrective action plan, this could result
in an impairment of the Companys investment.

The completion of the XM Satellite contract
coupled with the industry slowdown cause the Company to
anticipate revenue to further decline in the second quarter of
2002 over the first quarter of 2002. Cost reduction measures
currently being taken by the Company are not sufficient to
return the Company to profitability without additional growth in
revenue. The Company has seen renewed customer activity lately
to upgrade or enhance existing systems. Despite this renewed
activity, it remains uncertain the impact, if any, and the
related timing of any such impact, upon the Companys
future revenue growth opportunities.

The most promising area for revenue growth is in
Europe. This optimism is caused by the need of the European
carriers to meet network building obligations associated with
their 3G licenses, which represent a significant investment on
their part. With the recent availability of 3G equipment in
Europe, the Company expects that demand for the types of
services provided by the Company will increase. While revenue
from 3G networks only constituted 13.4% of the Companys
revenues for the three months ended March 31, 2002, it is
expected to be an area of business growth in 2002 and in the
future. In anticipation of this growth, the Company has recently
acquired additional deployment capability in Europe. In December
2001, the Company acquired Transmast Italia, a wireless
infrastructure, deployment, civil engineering and project
management firm located in Milan, Italy. In addition, in January
2002, the Company acquired the assets of Smith Woolley Telecom,
a telecommunications consultancy company that specializes in the
provision of search, acquisition, design, build, management and
maintenance services to the wireless industry in the United
Kingdom. The Company also anticipates that its reliance upon
fixed price contracts will continue to grow in connection with
these recent acquisitions. These newly acquired international
operations provide more support for network deployment and
construction management, where use of fixed price contracts is
more typical.

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Results of Operations

The following table and discussion provide
information which management believes is relevant to an
assessment and understanding of the Companys consolidated
results of operations and financial condition. The discussion
should be read in conjunction with the condensed consolidated
financial statements and accompanying notes thereto included
elsewhere herein.

|                                                      |                                              |                                  |       |      |      |  |       |      |      | 
|----------------------------------------------------- | -------------------------------------------- | -------------------------------- | ----- | ---- | ---- |  | ----- | ---- | ---- | 
|                                                      |                                              |                                 
|                                                      |                                              | Percentage of Revenues          
|                                                      |                                              | Three Months Ended              
|                                                      |                                              | March 31,                       
|                                                      |                                              |                                 
|                                                      |                                              | 2001                             |       | 2002
|                                                      |                                              |                                  |       |     
|Revenues                                              |                                              |                                  | 100.0 | %    |      |  | 100.0 | %   
|Cost of revenues                                      |                                              |                                  | 76.8  |      |      |  | 93.5  |     
|                                                      |                                              |                                  |       |      |      |  |       |     
|Gross profit                                          |                                              |                                  | 23.2  |      |      |  | 6.5   |     
|                                                      |                                              |                                  |       |      |      |  |       |     
|Operating (income) expense:                           |                                              |                                  |       |      |      |  |       |     
|                                                      | Sales and marketing                          |                                  |       | 4.7  |      |  |       | 13.2 |     
|                                                      | General and administrative                   |                                  |       | 9.8  |      |  |       | 29.3 |     
|                                                      | Tower portfolio sale and administration, net |                                  |       | (3.8 | )    |  |       |     |     
|                                                      | Depreciation and amortization                |                                  |       | 1.7  |      |  |       | 4.0  |     
|                                                      |                                              |                                  |       |      |      |  |       |     
|                                                      |                                              | Total operating (income) expense |       |      | 12.4 |  |       |      | 46.5 | 
|                                                      |                                              |                                  |       |      |      |  |       |     
|Operating income (loss)                               |                                              |                                  | 10.8  |      |      |  | (40.0 | )   
|                                                      |                                              |                                  |       |      |      |  |       |     
|Other income (expense):                               |                                              |                                  |       |      |      |  |       |     
|                                                      | Interest income                              |                                  |       | 1.3  |      |  |       | 1.7  |     
|                                                      | Other                                        |                                  |       | (0.1 | )    |  |       |     |     
|                                                      |                                              |                                  |       |      |      |  |       |     
|                                                      |                                              | Total other income (expense)     |       |      | 1.2  |  |       |      | 1.7  | 
|                                                      |                                              |                                  |       |      |      |  |       |     
|Income (loss) from operations before income
    taxes |                                              |                                  | 12.0  |      |      |  | (38.3 | )   
|Provision (benefit) for income taxes                  |                                              |                                  | 4.8   |      |      |  | (9.2  | )   
|                                                      |                                              |                                  |       |      |      |  |       |     
|Net income (loss)                                     |                                              |                                  | 7.2   | %    |      |  | (29.1 | )%  
|                                                      |                                              |                                  |       |      |      |  |       |     

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Three Months Ended March 31,
2002

Compared to


Three Months Ended March 31,
2001


Revenues.Revenues
for the three months ended March 31, 2002 were $17.4
million compared to $42.7 million for the prior year, a
decrease of $25.3 million or 59.2%. The substantial completion
of the XM Satellite contract in 2001 was the largest contributor
to the decline. The XM Satellite contract generated
$3.0 million of revenue for the three months ended
March 31, 2002, compared to $21.3 million in the
comparable quarter in 2001, a decline of $18.3 million. A
large network deployment contract in the Middle East was also
substantially completed in the prior year, contributing
$2.4 million of the revenue decline. The balance of the
revenue decline is attributed to a slowdown in wireless
telecommunications infrastructure spending in the United States,
in large part caused by tightening of the capital markets.

Cost of Revenues.Cost of revenues for the three months
ended March 31, 2002 was $16.3 million compared to
$32.7 million for the prior year, a decrease of
$16.4 million. As a percentage of total revenues, cost of
revenues was 93.5% and 76.8% for 2002 and 2001, respectively.
The increase in cost of revenues was caused by lower utilization
of professional staff of approximately $1.8 million. The staff
utilization decline was caused by the completion of several
large fixed price contracts and difficulty in obtaining new
contracts as a result of the slowdown in wireless
telecommunications infrastructure spending. In addition, a
customer with budget constraints reduced work to be performed on
an existing fixed price contract, resulting in a cost increase
of $0.5 million. The additional costs associated with the idle
professional staff and fixed price cost growth increased cost of
revenues for the three months ended March 31, 2002 by 13.2%
as a percentage of revenues.

Gross Profit.Gross
profit for the three months ended March 31, 2002 was $1.1
million compared to $9.9 million for the prior year, a
decrease of $8.8 million. As a percentage of total revenues,
gross profit was 6.5% and 23.2% for the three months ended
March 31, 2002 and 2001, respectively. The decline in gross
profit margin in 2002 is primarily attributable to additional
items of cost, discussed in Cost of Revenues, and contract
margin declines caused by increased competition driven by a
slowdown in wireless telecommunications infrastructure spending.

Sales and Marketing.Sales and marketing expenses were $2.3 million for the
three months ended March 31, 2002 compared to
$2.0 million for the prior year, an increase of
$0.3 million. As a percentage of total revenues, sales and
marketing was 13.2% and 4.7% for 2002 and 2001, respectively.
The slowdown in wireless telecommunications infrastructure
spending has increased competition, particularly in the United
States. To respond to competitive pressures, the Company
maintained a higher level of sales and marketing expenditures
despite a decline in revenues.

General and Administrative.General and administrative expenses
were $5.1 million for the three months ended March 31, 2002
compared to $4.2 million for the prior year. General and
administrative expenditures in 2001 include a net benefit of
$2.5 million due to the recovery of a receivable balance
written-off in prior years related to a bankrupt customer. The
provision for doubtful accounts increased $0.4 million in
2002 relative to the same quarter in 2001, reflecting increased
difficulty collecting receivables due to tightening of capital
markets and increased competition in the wireless
telecommunications market. Excluding the receivable recovery and
provision for bad debts, general and administrative expenditures
decreased $2.0 million, reflecting cost saving initiatives
and reduced administrative support requirements.

Gain on Sale of Tower Portfolio and
Administration, Net. During February
2000, the Company entered into an agreement for the sale of
telecommunications towers that it owned. As part of the sale
agreement, the Company agreed to lease unoccupied space on the
towers, effectively guaranteeing a minimum rent level of
$5.2 million on the towers sold. The gain from the tower
portfolio sale deferred an amount corresponding to this rent
commitment, until the space was leased to another tenant. In
2001, the Company recognized $1.6 million of this
previously deferred revenue.

Depreciation and
Amortization.Depreciation and
amortization expense was $0.7 million for both the three months
ended March 31, 2002 and 2001. As a percentage of total
revenues, depreciation and amortization was 4.0% and 1.7% for
2002 and 2001, respectively.

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Interest Income.Interest income was $0.3 million for the three months ended
March 31, 2002 compared to $0.6 million for the prior
year. Interest income in 2002 declined over 2001 reflecting a
decline in yields available for short-term investments.

Provision for Income Taxes.The provision for income taxes was
recorded for the three months ended March 31, 2002 using an
effective income tax rate of 24.0% compared to 40.0% for the
comparable period in 2001. The decrease in the effective income
tax rate in 2002 is the result of the decrease in U.S. operating
results relative to the total results of worldwide operations.
In addition, no tax benefits have been recorded on the losses
anticipated on the overseas businesses for 2002. The effective
income tax rate would have been approximately 35% in 2002 if
these benefits were recorded. These foreign operating losses
will be a carry forward item for income tax purposes, and the
tax asset will be recognized when it can be demonstrated these
tax losses can be utilized.

Net Income.The net
loss was $5.1 million for the three months ended
March 31, 2002 compared to net income of $3.1 million
in the prior year. The net income in 2001 was bolstered by
unusual gains from the sale of the Companys tower
portfolio assets of $1.6 million and the recovery of a
receivable from a bankrupt client included in general and
administrative costs of $2.5 million. Excluding these items
included in the prior year earnings, net income would have been
$0.6 million for the three months ended March 31,
2001. The decline in revenue and associated gross profit, as
discussed above, and the inability to reduce costs at the same
rate as revenues declined in 2002, are the largest contributing
factors to the net loss in 2002.

Liquidity and Capital Resources

Cash combined with short-term investments at
March 31, 2002 provides total liquid assets of
$42.6 million compared to $53.1 million at
December 31, 2001, a decrease of $10.5 million. This
decrease in liquidity largely relates to $7.1 million used
to purchase Smith Woolley in January 2002 and cash used in
operations of $3.8 million.

Cash used by operations was $3.8 million for
the three months ended March 31, 2002, compared to
$1.0 million in the prior year. The cash used from
operations in 2002 was driven by 2001 bonuses paid in the first
quarter of 2002 of $1.9 million and income tax payments of
$1.3 million. The cash used from operating activities in
2001 was a result of increased receivables.

Cash used by investing activities totaled
$7.6 million for the three months ended March 31,
2002. The largest use of cash by investing activities was
$7.1 million to acquire Smith Woolley in January 2002. Cash
used in investing activity in 2001 totaled $2.7 million.
Investing activity in 2001 was driven by a minority interest
investment of $1.7 million in a German wireless network
deployment firm.

Working capital was $62.5 million at
March 31, 2002 compared to $72.1 million at
December 31, 2001, a decrease of $9.6 million. The
decrease in working capital was largely due to the purchase of
Smith Woolley for cash of $7.1 million, which is included
in goodwill and other intangibles, a long-term asset. The
Companys primary requirement for working capital is to
fund receivables relative to services performed. With the
substantial completion of the XM Satellite contract, the Company
expects to generate an operating loss in the current year, which
will also require working capital. The Company has no material
cash commitments other than obligations under its operating
leases. Future capital requirements will depend upon many
factors, including the timing of payments under contracts and
increases in personnel in advance of new contracts.

The Company had no debt and did not maintain a
line of credit as of March 31, 2002, since it had cash and
short-term investments that it considered sufficient to meet
liquidity requirements. The Company has not engaged in any
off-balance sheet financing as of March 31, 2002. The
Company believes it has sufficient assets and relationships with
financial institutions to obtain a loan commitment should the
business need arise.

For the short-term, the Company believes it has
adequate cash and short-term investments to satisfy cash
requirements for the next twelve months. The Company also
believes it will generate sufficient cash from operations to
meet its long-term liquidity needs.

Quantitative and Qualitative Disclosures about
Market Risk

The Company is exposed to the impact of foreign
currency fluctuations. The Companys exposure to exchange
rates relates primarily to its foreign subsidiaries.
Subsidiaries with material foreign currency

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exposure are in England, Brazil, and Egypt. For
its foreign subsidiaries, exchange rates can have an impact on
the U.S. dollar value of their reported earnings and the
intercompany transactions with the subsidiaries.


Approximately 49.4% of the Companys
revenues were generated outside the United States for the three
months ended March 31, 2002; the majority of which were in
Europe. In connection with the Companys recent
acquisitions and the increased availability of 3G equipment in
Europe, the Company anticipates continued growth of its
international operations, particularly in Europe, the Middle
East and Africa, in 2002 and beyond. As a result, fluctuations
in the value of foreign currencies against the U.S. dollar may
have a significant impact on the reported results of the
Company. Revenues and expenses denominated in foreign currencies
are translated monthly into United States dollars at the
weighted average exchange rate. Consequently, as the value of
the dollar strengthens relative to other currencies in the
Companys major markets the resulting translated revenues,
expenses and operating profits are lower.

Fluctuations in currency exchange rates also can
have an impact on the U.S. dollar amount of shareholders
equity of the Company. The assets and liabilities of the
Companys non-U.S. subsidiaries are translated into United
States dollars at the exchange rate in effect at March 31,
2002. The resulting translation adjustments are recorded in
shareholders equity as accumulated other comprehensive
loss. The dollar was stronger relative to many of the foreign
currencies at March 31, 2002 compared to March 31,
2001. Consequently, the accumulated other comprehensive loss
component of shareholders equity increased
$0.1 million during the three months ended March 31,
2002. As of March 31, 2002, the total amount of long-term
intercompany receivable/payables in non-U.S. subsidiaries
subject to this equity adjustment, using the exchange rate as of
the same date, was approximately $6.5 million.

The Company is exposed to the impact of foreign
currency fluctuations due to the operations of and short-term
intercompany transactions with its consolidated foreign
subsidiaries. While these intercompany balances are eliminated
in consolidation, exchange rate changes do affect consolidated
earnings. Foreign subsidiaries with amounts owed to U.S.
operations at March 31, 2002 (denominated in U.S. dollars)
include Brazil in the amount of $0.3 million. The potential
foreign currency translation losses from a hypothetical 10%
adverse change relative to this intercompany balance would not
be material. In addition, a hypothetical 10% adverse change
would result in a $0.2 million decline relative to
operating losses generated outside the United States. This was
estimated using a 10% deterioration factor to the average
monthly exchange rates applied to net income or loss for each of
the subsidiaries in the respective period. Foreign exchange
gains and losses recognized on any transactions are included in
the Consolidated Statements of Operations.

Although currency fluctuations can impact the
Companys reported results and shareholders equity,
such fluctuations generally do not affect the Companys
cash flow or result in actual economic gains or losses. The
Company currently does not hedge any of these risks in its
foreign subsidiaries because: (i) the Companys
Brazilian and Egyptian subsidiaries derive revenues and incur
expenses within a single country and consequently, do not incur
currency risks in connection with the conduct of their normal
operations, (ii) the British pound sterling, U.S. dollar, and
Euro are relatively stable against each other, (iii) other
foreign operations are minimal, and (iv) the Company does
not believe that hedging transactions are justified by the
current exposure and cost at this time.

Critical Accounting Policies

The Companys critical accounting policies
are as follows:



| |   |                                                                     
| | - | --------------------------------------------------------------------
| |  | Revenue recognition;                                                
|
| |  | Allowance for doubtful accounts and accrual of
    expatriate taxes;
|
| |  | Accounting for income taxes; and                                    
|
| |  | Impairment of long-lived assets and investments
    in affiliates.  

Revenue
recognition policy

The Companys principal source of revenues
consists of design and system deployment services. The Company
provides design services on a contract basis, usually in a
customized plan for each client and generally charges for
engineering services on a time and materials or fixed price
basis. The Company generally offers its deployment services on a
fixed price, time-certain basis. The Company recognizes revenue
on fixed price contracts using the percentage-of-completion
method. With the percentage-of-completion method,

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expenses on each project are recognized as
incurred, and revenues are recognized based on the ratio of the
current costs incurred for the project to the then estimated
total costs of the project. Accordingly, revenue recognized in a
given period depends on, among other things, the costs incurred
on each individual project and its then current estimate of the
total remaining costs to complete individual projects.
Considerable judgment on the part of the Companys
management may be required in determining estimates to complete
a project including the scope of the work to be completed, and
reliance on the customer or other vendors to fulfill some
task(s). If in any period the Company significantly increases
its estimate of the total costs to complete a project, it may
recognize very little or no additional revenue with respect to
that project. For example, in 2001, the Companys gross
profits were decreased by $3.3 million because of increased
costs to complete a project performed in the Middle East. If
total contract cost estimates increase, gross profit for any
single project may be significantly reduced or eliminated. If
the total contract cost estimates indicate that there is a loss,
the loss is recognized in the period the determination is made.


Allowance for
doubtful accounts and accrual of expatriate taxes

The preparation of financial statements requires
the Companys management to make estimates and assumptions
that affect the reported amount of assets, liabilities,
contingent assets and liabilities and the reported amounts of
revenues and expenses during the reported period. Specifically,
the Companys management must make estimates on the
uncollectability of its accounts receivable. Management
specifically analyzes accounts receivable balances, customer
concentrations, customer credit-worthiness, current economic
trends and changes in its customer payment terms when evaluating
the adequacy of the valuation allowance for doubtful accounts.
The Company derived 68.3% of its total revenues during the
quarter ended March 31, 2002, from its ten largest
customers, indicating significant customer concentration risk
with the Companys receivables. These ten largest customers
constituted 84.1% of the Companys net receivable balance
as of March 31, 2002, respectively. In addition, fixed
price contracts with unfavorable milestone payments can cause
unbilled receivables to grow prior to achieving the applicable
milestone that permits billing. Lastly, the Company frequently
performs services for development stage customers, which carry a
higher degree of risk, particularly as to the collection of
accounts receivable. These customers may be particularly
vulnerable to current tightening of available credit and general
economic slowdown. For example, XM Satellite has billed
receivable balances outstanding as of March 31, 2002 of
$12.7 million and unbilled receivables of $0.5 million.

The Company estimates liabilities associated with
taxes relative to employees sent to assignments in foreign
countries. These expatriate employees are reimbursed for the
additional personal income tax burden that was derived as a
result of the assignment. Calculation of these obligations takes
considerable knowledge of payroll, social, and other taxes in
multiple countries, as well as the employees personal tax
situation. In addition, it requires interpretation of tax laws
and an assessment of potential audit risk from tax authorities.
Often the resolution of the tax liabilities may not occur for
several years. For example, in 2001, the Companys gross
profits were decreased by $1.3 million because of an
additional provision for expatriate employees reimbursed taxes.
The Company has $3.5 million and $2.4 million accrued
for expatriate tax obligations as of December 31, 2001 and
March 31, 2002, respectively.

Accounting for
income taxes

As part of the process of preparing the
Companys consolidated financial statements an estimate for
income taxes is required for each of the jurisdictions in which
the Company operates. This process requires estimating the
Companys actual current tax exposure together with
assessing temporary differences resulting from differing
treatment of items, such as deferred revenue, for tax accounting
purposes. These differences result in deferred tax assets and
liabilities, which are included in the consolidated balance
sheet. The Company must then assess the likelihood that its
deferred tax assets will be recovered from future taxable
income. To the extent the Company believes that recovery is not
likely, it must establish a valuation allowance. To the extent
the Company establishes a valuation allowance or increases this
allowance in a period, it must include an expense within the tax
provision in the statement of operations.

Significant management judgment is required in
determining the Companys provision for income taxes, its
deferred tax assets and liabilities and any valuation allowance
recorded against its net deferred tax assets. The Company has
recorded a valuation allowance of $5.9 million as of
March 31, 2002, due to uncertainties

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related to its ability to utilize some of its
deferred tax assets, primarily consisting of foreign net
operating losses carried forward and foreign tax credits, before
they expire. The valuation allowance is based on the
Companys estimates of taxable income by jurisdiction in
which it operates and the period over which its deferred tax
assets will be recoverable. In the event the actual results
differ from these estimates the Company may need to increase or
decrease its valuation allowance which could have a material
impact on its financial position and results of operations. The
net deferred tax assets, as of March 31, 2002 was
$3.7 million, net of a valuation allowance of
$5.9 million.


Impairment of
investments in affiliates

The Company maintains investments in affiliates
of $5.2 million as of December 31, 2001 and
March 31, 2002. These investments are accounted for at
cost. Factors considered to determine whether these investments
in affiliates are impaired include the unaudited financial
results of the affiliated companies and availability of equity
transactions with independent third parties in these affiliates.
For example, the Company was recently notified at a PDN board
meeting that PDN has concerns about its short-term liquidity.
PDN is working on a corrective action plan. Should PDN fail to
develop or successfully execute a corrective action plan, this
could lead to an impairment of the Companys investment.

Related Party Transactions

The Company provided services to Telcom Ventures
and various other companies that are majority owned, or
controlled by, Telcom Ventures or its members. The
Companys relationship with Telcom Ventures may result in
potential conflicts of interest. Revenues from Telcom Ventures
are not material, providing 0.1% in 2001 of revenues and none in
the first quarter of 2002.

During 2001 and 2002, the Company provided
services to XM Satellite. Telcom Ventures has a minority
investment in XM Satellite, and Dr. Rajendra Singh, a
director of Telcom Ventures, is a member of the board of
directors of the Company. Revenues earned during the first
quarter of 2001 and 2002 for services provided to XM Satellite
were $21.3 million and $3.0 million, respectively.
Receivables from XM Satellite were $13.0 million and $ 12.7
million at December 31, 2001 and March 31, 2002,
respectively.

Recent Accounting Pronouncements

On January 1, 2002, the Company adopted FASB
SFAS No. 142, Goodwill and Other Intangible Assets.
SFAS No. 142 requires that goodwill and intangible assets
with indefinite useful lives no longer be amortized, but instead
be tested for impairment at least annually in accordance with
the provisions of SFAS No. 142. SFAS No. 142 also
requires that intangible assets with estimable useful lives be
amortized over their estimated useful lives to their residual
values, and be reviewed for impairment in accordance with SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. The adoption of SFAS No. 142 did not
have a significant impact on the Companys financial
condition and results of operations.

On January 1, 2002, the Company adopted FASB
SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assetswhich supersedes FASB SFAS
No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of, and APB
Opinion No. 30, Reporting the Results of
Operations  Reporting Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual, and
Infrequently Occurring Events and Transactions. The
statement addresses the accounting and reporting of a disposal
of a segment and resolves significant implementation issues
related to SFAS No. 121. The adoption of SFAS No. 144
did not have a significant impact on the Companys
financial condition and results of operations.

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PART II: OTHER INFORMATION




Item 1:  Legal
Proceedings

The Company is party to various non-material
legal proceedings and claims incidental to its business.




Item 2:  Changes in
Securities

Not Applicable




Item 3:  Defaults Upon Senior
Securities

Not Applicable




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

Not Applicable




Item 5:  Other
Information

Not Applicable




Item 6:  Exhibits and Reports
on Form 8-K



| |     |         
| | --- | --------
| | (a) | Exhibits

11  Calculation of Net Income Per Share

(b) Reports on Form 8-K

On January 31, 2002, the Company filed a
Current Report on Form 8-K, which reported that the Company
issued a press release on January 31, 2002 announcing the
purchase of all of the assets of Smith Woolley Telecom.

On February 11, 2002, the Company filed a
Current Report on Form 8-K, which reported that the Company
issued a press release on February 11, 2002 announcing its
revenues and operating results for the fourth quarter of 2001
and for the fiscal year ended December 31, 2001.

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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.



| |                                         
| | ----------------------------------------
| | LCC International, Inc. and Subsidiaries



| |         |                    
| | ------- | -------------------
| | Signed: | /s/ DAVID N. WALKER

| |                                  
| | ---------------------------------
| |                                  
| | David N. Walker                  
| | Senior Vice President, Treasurer 
| | and Chief Financial Officer      
| | (Principal Accounting Officer and
| | Chief Financial Officer)         

Date: May 10, 2002


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