(10)         Cost Reduction Actions

 

Fiscal 2011 Cost Reduction Actions

During the nine months ended April 30, 2011, we began implementing certain cost reduction actions in all of our reportable operating segments. These cost reduction actions are expected to continue through the remainder of our fiscal 2011. In our mobile data communications segment, we continue to align staffing levels with expected future business activity. We are also continuing to reduce our manufacturing headcount in our telecommunications transmission segment to align with the expected lower level of manufacturing of products for our mobile data communications segment. In our RF microwave amplifiers segment we have reduced headcount and have yet to pay certain merit raises. In our unallocated or corporate segment, we have reduced headcount and continue to substantially reduce the use of outside consultants. To-date, all costs related to these actions (including severance), which are included in our Condensed Consolidated Statements of Operations for the three and nine months ended April 30, 2011, have not been material.

 

Fiscal 2010 Cost Reduction Actions

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

 

Fiscal 2009 Radyne Acquisition-Related Restructuring Plan

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

	At August 1, 2008
Total non-cancelable lease obligations	$    12,741,000
Less:  Estimated sublease income	(8,600,000)
Total net estimated facility exit costs	4,141,000
Less:  Interest expense to be accreted	(2,041,000)
Present value of estimated facility exit costs	$      2,100,000

 

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

 

As of April 30, 2011, the amount of aquisition-related restructuring reserve is as follows:

 

	Cumulative Activity Through      April 30, 2011
Present value of estimated facility exit costs at August 1, 2008	$      2,100,000
Cash payments made	(3,050,000)
Cash payments received	2,982,000
Accreted interest recorded	388,000
Net liability as of April 30, 2011	2,420,000
Amount recorded as prepaid expenses in the Condensed Consolidated Balance Sheet	395,000
Amount recorded as other liabilities in the Condensed Consolidated Balance Sheet	$      2,815,000

 

As of July 31, 2010, the present value of the estimated facility exit costs was $2,136,000. During the nine months ended April 30, 2011, we made cash payments of $736,000 and we received cash payments of $901,000. Interest accreted during the three and nine months ended April 30, 2011 was approximately $41,000 and $119,000, respectively, as compared to $34,000 and $113,000, respectively, for the three and nine months ended April 30, 2010, and is included in interest expense for each respective fiscal period.

 

 

As of April 30, 2011, future cash payments associated with our restructuring plan are summarized below:

 

	As of April 30, 2011
Future lease payments to be made in excess of anticipated sublease payments	$     2,815,000
Less expected net cash to be received in next twelve months	(395,000)
Interest expense to be accreted in future periods	1,653,000
Total remaining net cash payments	$      4,073,000