10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

For the Fiscal Year Ended June 28, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-26634

LeCROY CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE	13-2507777
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
700 CHESTNUT RIDGE ROAD CHESTNUT RIDGE, NEW YORK	10977
(Address of principal executive office)	(Zip Code)

(845) 425-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of exchange on which registered
Common Stock, Par Value $.01 Per Share	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES  x            NO  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

YES  x            NO  ¨

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

YES  x            NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark (“X”) whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨            Accelerated filer  x            Non-Accelerated filer  ¨            Smaller reporting company  ¨

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

YES  ¨            NO  x

The number of shares outstanding of the registrant’s Common Stock, as of September 2, 2008, was 12,351,847 shares. The aggregate market value of shares of Common Stock held by non-affiliates as of the last business day of the registrant’s most recently completed second fiscal quarter was $110,831,484.

Documents Incorporated by Reference

Portions of the Definitive Proxy Statement to be delivered to shareholders in connection with the 2008 Annual Meeting of Stockholders are incorporated by reference in Part III hereof.

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LeCROY CORPORATION

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED JUNE 28, 2008

TABLE OF CONTENTS

Form 10-K Item Number:		Page No.
Cautionary Statement Regarding Forward-Looking Statements		3
	PART I
Item 1.	Business	4
Item 1A.	Risk Factors	19
Item 1B.	Unresolved Staff Comments	31
Item 2.	Properties	31
Item 3.	Legal Proceedings	31
Item 4.	Submission of Matters to a Vote of Security Holders	31
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
Item 6.	Selected Financial Data	35
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	53
Item 8.	Financial Statements and Supplementary Data	55
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	97
Item 9A.	Controls and Procedures	97
Item 9B.	Other Information	99
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	100
Item 11.	Executive Compensation	100
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	100
Item 13.	Certain Relationships, Related Transactions and Director Independence	100
Item 14.	Principal Accounting Fees and Services	100
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	101
	Signatures	105

LeCroy^®, Wavelink^™, WaveMaster^®, WavePro^®, WaveJet^®, WaveRunner^®, WaveScan^™, WaveSurfer^™, WaveExpert^™, MAUI^™, and CATC^™ are our trademarks, among others not referenced in this document. All other trademarks or servicemarks referred to in this Annual Report on Form 10-K are the property of their respective owners.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain information included in or incorporated by reference in this report, in press releases, written statements or other documents filed with or furnished to the SEC, or in our communications and discussions through webcasts, phone calls, conference calls and other presentations and meetings, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “future” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.

Any such forward-looking statements are not guarantees of future performance and actual results, developments and business decisions may differ materially from those envisaged by such forward-looking statements. These forward-looking statements speak only as of the date of the report, press release, statement, document, webcast, or oral discussion in which they were made. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section entitled “Risk Factors” (refer to Part I, Item 1A).

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PART I

ITEM 1. BUSINESS

Our Company

LeCroy Corporation (the “Company,” “LeCroy,” “us,” “we” or “our”) was founded in 1964 and is incorporated in the State of Delaware. Our principal executive offices and manufacturing facilities are located at 700 Chestnut Ridge Road, Chestnut Ridge, New York 10977 and our telephone number is (845) 425-2000. Our website is located at www.lecroy.com. We sell our products and provide service worldwide through direct sales, including our wholly-owned subsidiaries, manufacturers’ representatives, telesales and distributors.

We develop, manufacture, sell and license high-performance oscilloscopes and global communication protocol analyzers. Our oscilloscopes are tools used by designers and engineers to measure and analyze complex electronic signals in order to develop high-performance systems, validate electronic designs and improve time to market. We offer six families of oscilloscopes, which address different solutions for the markets we serve: WaveExpert, our line of Sampling Oscilloscopes; WaveMaster, one of our high performance product families; WavePro, which is targeted at the mid- to high-performance sector; WaveRunner, designed for the mid-performance sector; WaveSurfer, designed for value-oriented users in the low-performance bandwidth sector of the market; and WaveJet, our entry-level oscilloscope products. Our protocol analyzers are used to reliably and accurately monitor communications traffic and diagnose operational problems in a variety of communications devices to ensure that they comply with industry standards. The protocol analyzers are used by designers and engineers whose products are in development and production and also for products deployed in the field.

We generate revenue in a single segment within the Test and Measurement market, primarily from the sale of our oscilloscopes, protocol analyzers, probes, accessories, and applications solutions. To a lesser extent, we also generate revenue from the sales of our extended warranty contracts, maintenance contracts and repairs and calibrations on our instruments after their warranties expire. We sell our products into a broad range of end markets, including Computer/Semiconductor/Consumer Electronics, Data Storage, Automotive/Industrial, and Military/Aerospace. We believe designers in all of these markets are developing products which rely on increasingly complex electronic signals to provide the features and performance their customers require.

Test and Measurement Market

Test and Measurement equipment is used in the design, development, manufacture, deployment and operation of electronic products and systems. This equipment is required to verify functionality and performance of new product designs and to ensure compliance to industry standards and overall product quality. These instruments are used across all electronic equipment industries, including computer, semiconductor, communications, consumer, automotive, defense, and video. In addition, Test and Measurement instruments are utilized to install, maintain and monitor wireless and wire-line communications and broadcast networks. This Test and Measurement equipment aids in the research and development of new products, testing of products in production, and maintenance and service of products in the field.

According to Prime Data, Inc., an independent market research firm tracking the Test and Measurement industry, the market for this equipment exceeded $8.0 billion in 2007. Certain segments of the Test and Measurement industry have historically experienced greater volatility than the overall industry because of their exposure to certain end markets, such as communications, that experienced rapid growth in the late 1990s, followed by rapid declines.

Growth in the Test and Measurement market is driven by improvements in electronic systems performance, growth in the electronics market and emerging technologies and standards. Designers in a wide variety of industries are being constantly driven to increase the performance of their products and to add new features and capabilities. These improvements rely on advanced semiconductor technology and require the design of faster, more powerful and complex electronic systems. As a result, the underlying technological advances in communications and electronic signals are increasing exponentially in complexity and speed. This is driving the demand for analysis

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tools that allow designers and manufacturers of these devices to improve new product cycle time. With each advance in technology, engineers designing next generation technologies and products must contend with both a reduced margin for error and a progressively more difficult task of fully characterizing new product design.

While the overall market for test and measurement equipment is made up of hundreds of different types of instruments and measurement tools, one of the largest single product categories is oscilloscopes. We estimate that oscilloscopes represented approximately $1.2 billion of the overall $8.0 billion market in 2007 and protocol analyzers, inclusive of versions for wireless, represented approximately $800 million. Protocol analyzers address specific communications standards in the wide area network (WAN), local area network (LAN), storage area network (SAN), computer peripheral interconnect market spaces and wireless networks and systems. LeCroy presently focuses on the storage area network and computer peripheral interconnect space. We believe the potential total available market for the Company’s protocol analyzers lies in the $100 million range of the total protocol analyzer product category.

Oscilloscope Product Category

Oscilloscopes are the primary instrument used by engineers for testing and analyzing electronic signals. Historically, oscilloscope products within the Test and Measurement industry have experienced less volatility than the industry as a whole because of their widespread use across many applications and end markets. Thorough testing of complex electronic signals requires a measurement tool capable of physically attaching to the signal of interest, capturing data with high resolution for long periods of time and supporting detailed signal analysis while providing additional insight into data characteristics and signal trends over time. An oscilloscope utilizes a graphical display device that allows an engineer to view an electronic signal. The most basic display of an oscilloscope plots a signal’s voltage versus time (typically in billionths and trillionths of a second), providing a user insight into the performance of an electronic circuit. In many cases, a user is trying to either verify that the circuit is behaving as designed or measure the signal to gain a basic understanding of signal performance.

Today’s oscilloscopes are digital devices which capture electronic signals and convert the voltage values to digital representations, which are stored in computer memory, allowing the instrument not only to display the signal on a screen, but also to utilize a computer to analyze the signal’s characteristics. The ability of an oscilloscope to conduct in-depth analysis of a complex electronic signal’s characteristics and trends is referred to as wave shape analysis, which is increasingly important as signals become more complex.

The three primary specifications of an oscilloscope are its bandwidth, capacity to capture a signal of a particular speed; sample rate, or number of data points that can be captured within a specific time, typically billions of samples per second in modern oscilloscopes; and memory length, or the number of data points that may be captured at one time. Higher bandwidths allow capture of higher speed signals, increased sample rate improves resolution, and longer memory allows capture of longer, more complex signals. The merit of a specific oscilloscope depends on the combination of these specifications. Real-time oscilloscopes with bandwidths ranging from 20 Megahertz (“MHz”) up to 20 Gigahertz (“GHz”) are currently available. Generally, the prices of oscilloscopes increase as the primary specifications increase. We believe the oscilloscope market can be generally divided into four major categories:

• High-end oscilloscopes. The largest part of the market, which we believe currently accounts for slightly more than half of the market based on revenues generated, comprises instruments with the ability to capture and analyze signals ranging from 300 MHz up to the highest available real-time bandwidths. These instruments generally sell from $4,000 up to over $100,000 depending on their capabilities.

• Lower-end oscilloscopes. We believe about one-third of the market’s revenue comes from these products which include less complex instruments with the ability to capture and analyze signals ranging from 20 MHz to 300 MHz. These instruments generally sell for below $4,000.

• Handheld oscilloscopes. This includes a variety of handheld oscilloscopes which we believe currently comprise less than 10% of the overall market. Selling prices for these handheld instruments are generally between $1,000 and $3,000.

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• Sampling oscilloscopes. For certain high signal speed applications, such as optical communications, instruments with bandwidths of up to 100 GHz are required. At these speeds, real-time oscilloscopes do not have the ability to track the signal shape in real time and take samples quickly enough to be effective. We believe this category currently comprises less than 10% of the overall market, but because of their ability to provide extremely high bandwidths, sampling oscilloscopes can range in price generally from $28,000 to $90,000.

Protocol Analyzer Product Category

The demand for digital information has accelerated the need for communication among multiple electronic devices in various markets, including computers, telecommunications, networking, storage, consumer electronics, aerospace, automotive, industrial automation and medical instrumentation. This growing demand centers on the widespread need to transmit digital information. Communication among digital devices, or connectivity, occurs over a variety of physical media, such as copper wire and fiber optic cable, as well as over wireless frequencies.

Computer technology initially provided connectivity only among internal devices, such as the processor, memory and storage, and with external peripheral devices, such as the keyboard, mouse and printer. Today, computer technology also enables connectivity among multiple computing devices and across networks, such as LAN, WAN, SAN, home area networks, personal area networks and the Internet. Telecommunications technology also enables connectivity among multiple devices, such as telephones, fax machines, pagers and personal digital assistants. Consumer electronics technology is progressively enabling connectivity among devices, such as Internet appliances, digital cameras, audio systems and televisions.

Digital devices communicate by sending electronic signals through a transmission channel according to a specified protocol. A protocol is a set of detailed rules that governs and regulates the manner in which the signals are sent, received, and interpreted. The channel and the protocol are both typically specified in a formal communications standard. For communication to be successful, each device must implement and conform to the same standard.

Early communications standards were relatively simple, typically involving low-speed communications between two simple devices connected directly by copper wire. Current standards are increasingly complex, typically involving high-speed communications among multiple sophisticated devices indirectly linked to other devices and across various physical media, including copper wire, fiber optic cables, and wireless technologies with rapidly fluctuating frequencies. As a result, standards that were specified initially in only a few pages of text may now extend to over one thousand pages. The specifications for these standards are broadly available, which facilitates interoperability of hardware and software products from different manufacturers.

A communication standard is typically introduced by several leading technology and infrastructure companies. These core promoter companies comprise the nucleus of independent standards groups. These groups are sometimes referred to as implementers’ forums, trade associations or special interest groups which assist in the development, implementation, promotion, and compliance with the standards. As commercial interest in a standard increases, the communications standards group typically expands to include system and device manufacturers and service providers. The promoter companies typically remain closely associated with the standard throughout its lifecycle.

A standard is implemented over a lifecycle that includes three overlapping phases: development, production and market deployment. During the development phase, key component manufacturers develop and produce important building blocks such as semiconductors, embedded software, protocol stacks and device drivers which will be used by others in the industry to create products. During the production phase, system and device manufacturers apply these building blocks to construct their unique products and applications. The market deployment phase includes the introduction and sale of products and applications to end users in the market. Similarly, products associated with a particular standard follow their own unique lifecycle from development through production and deployment.

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Protocol analyzers are “standard specific” tools; they enable a design engineer to analyze the “conversation” between two devices. Many distinct communications standards are emerging to meet the growing demand for digital connectivity in the Computer/Semiconductor/Consumer Electronics, Data Storage, Automotive/Industrial, and Military/Aerospace industries. The characteristics of each standard, including its principal uses, physical medium, transmission speed and distance covered, vary greatly. Examples of existing and emerging standards supported by our products in the computer peripheral interconnect and storage space include the following:

• Bluetooth^®. The Bluetooth standard, or Bluetooth wireless technology, enables low speed, wireless connectivity among computers, telecommunication devices, such as mobile telephones, and consumer electronics devices, such as personal digital assistants and headphones. Bluetooth was introduced in 1998. The promoter group consists of Agere, Ericsson, IBM, Intel, Microsoft, Motorola, Nokia and Toshiba. Bluetooth operates through radio waves with rapidly fluctuating frequencies at speeds of up to 1 million bits (megabits) per second, or Mbps, over distances of up to 100 meters. Bluetooth has recently been enhanced further with updates to the specification to improve the performance and usability of the interface. In March of 2006, the Bluetooth Special Interest Group announced a next generation high-speed Bluetooth wireless technology to be based on the WiMedia Ultra-Wideband platform. Collaboration between the WiMedia Alliance and the Bluetooth community should help define Bluetooth technology as a key personal area network technology for today and the future.

• Fibre Channel. Fibre Channel enables reliable, cost-effective information storage and delivery at very high-speeds. Fibre Channel development started in 1988 and the American National Standards Institute (ANSI) standards body approved the first revision in 1994. Fibre Channel is designed to operate at speeds of 1, 2, 4, and 8 Gbps and gives users the option to develop storage networks with configuration choices at different price points, levels of scalability and availability. Fibre Channel is a layered protocol that supports additional storage or networking protocols such as SCSI (Small Computer System Interface), IP (Internet Protocol), VI (Virtual Interface), FcoE (Fibre channel over Ethernet) and ESCON (Enterprise System Connection), thus offering many choices for storage connectivity, cluster computing and network interconnect.

• IEEE 1394. The IEEE 1394 standard, commonly known as 1394, FireWire or i.Link, enables high-speed connectivity among computers, peripheral devices and consumer electronic devices, including audio systems, television sets, digital cameras, video recorders, video players and game consoles. 1394a was introduced in 1987 and was ratified by the IEEE in 1995. The promoter group includes Apple, Canon, Hewlett-Packard, IBM, Intel, Microsoft, NEC, Philips, Sony, Sun Microsystems, Texas Instruments and Yamaha. 1394a enables connectivity through copper wire at speeds of up to 400 Mbps over distances of up to four and one-half meters. This speed increases to up to 3.2 Gbps over distances of up to 100 meters in the 1394b standard approved by the IEEE in April 2002.

• InfiniBand. The InfiniBand standard enables high-speed connectivity inside computers and among computers and storage devices in complex storage area networks. InfiniBand was introduced in 1999 and is used largely in enterprise database, high performance computing (HPC) and storage applications. The promoter group consists of Dell, Hewlett-Packard, IBM, Intel, Qlogic, Cisco, Microsoft and Sun Microsystems. InfiniBand operates over copper wire and fiber optic cable at speeds of up to 10 Gbps per lane over distances of up to ten meters for copper wire and ten kilometers for fiber optic cable.

• PCI Express. PCI Express is an emerging standard first introduced in 2002 and is intended to enhance the Peripheral Connect Interface (PCI) architecture spanning multiple computer market segments: clients (desktop and mobile), servers (standard and enterprise), embedded computers and communication devices. PCI Express provides system original equipment manufacturers, or OEMs, and peripheral developers the ability to realize product versatility and market differentiation without the burden of maintaining obsolete interfaces or losing compatibility. The promoter group consists of Hewlett-Packard, Dell, IBM, Intel and Microsoft. PCI Express runs at 2.5 Gbps per lane in each direction, providing a total bandwidth of 80 Gbps in a 16-lane configuration. The next generation of PCI Express, Generation 2 or Gen 2, runs at 5.0 Gbps per lane in each direction, providing a total bandwidth of 160 Gbps for a 16-lane configuration. The adoption of PCI Express Gen2 began in the first half of fiscal 2007.

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• Serial ATA. The Serial ATA standard (SATA) enables high-speed, low-cost internal storage connections for desktops and mobile computers. Serial ATA was introduced in 2000 and has replaced Parallel ATA, the standard used to connect storage devices such as hard drives, DVD and CD drives to the motherboard. Serial ATA operates over copper wire at speeds up to 6 Gbps over distances of up to one meter. Broad based adoption of Serial ATA in the storage market has led to the use of SATA in new applications including server, networked storage and consumer electronics devices.

• Serial Attached SCSI. Initiated in December 2001 by the Small Computer System Interface (SCSI) Trade Association, Serial Attached SCSI (SAS) was designed to be the logical evolution of SCSI to satisfy the data center requirements of scalability, performance, reliability and manageability, while leveraging a common low-cost electrical and physical connection interface from Serial ATA. SAS provides universal interconnect with Serial ATA, while offering logical SCSI compatibility along with the reliability, performance and manageability of parallel SCSI. SAS is positioned primarily for enterprise class storage applications. SAS allows each host to address up to 4,096 devices via expanders. SAS’s flexibility allows single or multiple lane communications with devices, with a 3 Gbps four lane wide connection providing 12 Gbps total throughput. The SAS-2 specification initiated in May of 2005 runs at 6.0 Gbps per lane in each direction, providing a total bandwidth of 24 Gbps. Early adopters began sampling 6.0 Gbps devices in the second half of fiscal 2007.

• Universal Serial Bus. The Universal Serial Bus standard (USB) enables low, medium and high-speed connectivity between computers and peripheral devices, including keyboards, mice, printers, scanners, joysticks and cameras, using plug and play technology. In addition, it is becoming widely used as the replacement technology for proprietary cabling on medical and industrial control equipment. USB was introduced in 1995 and replaces the serial, parallel, mouse and keyboard ports. The specifications for the second version of USB, or USB 2.0, were released in April 2000. The promoter group for USB consists of Agere, Hewlett-Packard, Intel, Lucent, Microsoft, NEC and Philips. USB enables connectivity through copper wires at speeds of up to 480 Mbps over distances of up to five meters. Market research firm In-Stat forecasts that USB-enabled electronics device annual shipments will double from 1.4 billion in 2005 to 2.8 billion in 2010.

• Wireless USB. Certified Wireless USB is the wireless extension to USB that combines the speed and security of wired technology with the ease-of-use of wireless technology. Certified Wireless USB supports robust high-speed wireless connectivity by utilizing the WiMedia MB-OFDM Ultra-wideband (UWB) radio platform as developed by the WiMedia Alliance. The combination of a low-cost, low-power wireless transport with the ubiquitous USB protocol layer is expected to become a key enabler for next-generation consumer electronic devices.

LeCroy is a provider of protocol analyzers for these existing and emerging digital communications standards. Our products are used by semiconductor, device, system and software companies at each phase of their products’ lifecycles from development through production and market deployment. We have expertise in the Bluetooth, Fibre Channel, IEEE 1394, InfiniBand, PCI, PCI Express, SCSI, Serial ATA, SAS, USB, and wireless USB standards and are actively engaged with our customers throughout their development and production processes in order to deliver solutions that meet their needs. Utilizing our easy to use, color-coded expert analysis software called CATC Trace^™ and Catalyst Trace^™ View, our products generate, capture, filter and analyze high-speed communications traffic, allowing our customers to quickly discover and correct persistent and intermittent errors and flaws in their product design. Our production products are used during the manufacturing process to ensure that our customers’ products comply with standards and operate with other devices, as well as assist system manufacturers to download software onto new computers.

Our Competitive Strengths

We are a leading, worldwide provider of oscilloscopes and protocol analyzers as well as a provider of related test and measurement equipment used by electronic designers and engineers to measure and analyze complex electronic signals and communication protocols. Our key competitive strengths include:

Technology leadership. We are a recognized technology leader in the Test and Measurement industry and continue to leverage our core strengths to develop new and innovative products for the changing requirements of the

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markets we serve. Most recently, we have focused on incorporating our internally developed operating system and our advanced methodology for enabling high-speed signal acquisition into our entire oscilloscope product line. We are a major participant in the various standards groups found in our portfolio of supported protocols. Our expertise has helped make it possible for protocol technologies to increase in scope of utility and stability. We believe this has allowed us to transform general purpose oscilloscopes into application-specific analysis tools, providing a competitive advantage to our products. These, and our other core technologies, are currently protected by 83 U.S. patents. We also have a significant number of pending U.S. patent applications, as well as foreign patents and applications where we believe seeking such protection will provide us a competitive advantage.

Broad product portfolio. We offer a broad range of oscilloscope and protocol analyzer products which are designed to capture and analyze a wide range of electronic signals and data packets. We believe our breadth of product offerings, coupled with our ability to create application-specific analysis tools, address the specific needs of design engineers and systems integration teams in many industries.

Leading customer relationships. Our major customers are leaders in a range of industries, including computer/semiconductor/consumer electronics, data storage, automotive/industrial, and military/aerospace. Our ability to work with innovative, industry-leading customers allows us to continuously refine our products to better address the needs of the latest technologies.

Global sales and distribution. We have a global sales force and distribution structure covering North America, Europe/Middle East, Japan and Asia/Pacific. Each of these regions is a major contributor to our revenue and provided between approximately 8% and 36% of our revenues in the last three fiscal years. We currently have direct sales personnel in 12 countries and operate in approximately 50 smaller markets through regional managers, distributors and manufacturers’ sales representatives. We believe that our sales engineers are recognized by our customers for their technical expertise. Our sales force often works in tandem with design engineers to create solutions to complex applications.

Experienced management team. Our management team has a long and successful track record in the Test and Measurement industry with an average of over 18 years of experience in the industry. Our management team has overseen the introduction of many new products over the recent years and has restructured our operations, enhancing our focus on our core markets while developing our ongoing business strategy, which encourages product innovation.

Our Strategy

In order to enhance our position as a leading provider of oscilloscopes and protocol analyzers, our objective is to grow our Company and our market share in the markets in which we operate. In addition, we may pursue strategic acquisitions that have strong adjacent market positions or complement our current product lines. Key strategic goals include:

Focus on the general purpose oscilloscope market. We have a competitive product offering and ongoing engineering development efforts underway to address customer needs for oscilloscope solutions in market sectors representing the largest and most profitable portion of the oscilloscope market.

Focus on the market for serial data test applications. The market for testing important serial data standards including PCI Express, Gen I and Gen II, Serial ATA, SAS, USB2.0, wireless USB and Bluetooth, is a rapidly growing market — on the order of approximately 15% Compound Annual Growth Rates (CAGR) for markets addressed by the Company’s products, according to internal estimates. The primary tools associated with testing serial data links are oscilloscopes (to test the electrical signals and paths or the “physical layer”) as well as specialized protocol analyzers (to observe, decode and verify that the desired data traffic and device specific messages are flowing from node to node). Our high end real-time oscilloscope and sampling oscilloscope development efforts are aimed primarily at satisfying the needs of customers in this important applications area. We believe our offering in these two primary product categories combined with an intense focus on ensuring the right capability is available to our customers at the right time in the most important applications will allow us to continue to grow in this market segment.

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Products and Services

Oscilloscopes

We currently offer five major real-time oscilloscope families: WaveMaster, WavePro, WaveRunner, WaveSurfer and WaveJet and one sampling oscilloscope family, WaveExpert. Each oscilloscope model is capable of capturing and analyzing electronic signals at different bandwidth and performance points in the market. Each oscilloscope family is also offered with a selection of general software packages that expand its capabilities and allow customization of the operation and measurements of the specific product.

Product Family	Number of Models	Bandwidth Range	U.S. List Price Range	Market Introduction
WaveExpert Sampling Oscilloscope Series	3	Up to 100 GHz	$28,000 - $90,000	April 2005
WaveMaster/SDA/DDA Series	22	3 - 18 GHz	$47,000 - $128,000	January 2002
WavePro 7000A Series	7	1 - 3 GHz	$20,000 - $33,000	January 2003
WaveRunner 6000A Series	10	350 MHz - 2 GHz	$8,250 - $19,990	October 2003
WaveRunner Xi Series	5	400 - 2000 MHz	$9,390 - $20,390	January 2006
WaveSurfer Xs Series	6	200 - 1000 MHz	$5,740 - $12,740	January 2006
WaveSurfer 400 Series	11	200 - 500 MHz	$4,490 - $8,790	April 2004
WaveJet 300 Series	8	100 - 500 MHz	$2,890 - $7,490	January 2006

Supporting Analyzers and Application Software

Our general purpose oscilloscope products are tailored with proprietary software and hardware to create application specific analyzers which function as industry-specific oscilloscopes for use in:

• Data storage applications — Disk Drive Analyzer products and DDA5000 series, using WaveMaster and WavePro platforms;

• Serial data applications — Serial Data Analyzer products, SDA3000 series, SDA4000, SDA5000 series, SDA6000 series, SDA11000 series and the SDA18000 series, based on the WaveMaster platform;

• Automotive applications — Hardware and software applications based on the WaveRunner platform for use in understanding serial communications in automobiles and industrial systems; and

• Power measurement applications — Hardware and software applications based on the WaveRunner and WaveSurfer platforms for use in a variety of industries.

Protocol Analyzers

Our protocol analyzer products are advanced verification systems that assist hardware and software manufacturers in the efficient design of reliable and interoperable systems and devices. Most of these systems utilize our proprietary intuitive expert analysis software, the CATC Trace, which displays communications traffic in searchable, color-coded packets. Highlights include:

• Summit^™ T2-16 PCI Express Analyzer. The Summit T2-16, a new high performance platform, features full bi-directional decode and capture of x1 up to x16 PCI Express lanes at both 2.5 and 5 GT/s (Giga-Transfers per second) per lane. Like its predecessors it can capture, process and analyze PCI Express

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traffic but with the added capability to support physical layer decoding with the Bit Tracer option. Both 1GbE (Gigabit Ethernet) and USB host connectivity are provided to make it easy to set up and use. Passive and Active interposer technologies allow maximum high impedance and low power signal tapping.

• Summit^™ Z2-16 PCI Express Exerciser. The Summit Z2-16 is capable of emulating PCI Express root complex and end point devices. It supports x1 up to x16 lane training at both 2.5 and 5 GT/s speeds. It is a critical test and verification tool intended to assist engineers in improving the reliability of their solutions, while providing advanced capabilities for stress and corner case testing. Together with the Summit T2-16 analyzer, the Summit Z2-16 reduces time to market by enabling users to quickly identify logic and design flaws.

• Protocol Test Card(PTC). The PTC is a multimodal compliance test board used for checking adherence to the protocol-oriented sections of the PCI Express 2.0 specification. The PTC has been developed in close collaboration with Intel^®, and is specifically designed to meet industry requirements for next generation development tools for PCI Express. This new tool is used by validation and test engineers to check for functionality and interoperability of add-in cards, systems, and chips using PCI Express 2.0. The tests are mainly defined to check the platform (basic input/output systems, operating systems and root complex) and add-in devices (endpoints, switches, and bridges) in the form of an add-in card that works at both 5 GT/s and 2.5 GT/s.

• PETracer^™ ML. The PETracer ML (Multi-Lane) is an advanced verification system. First introduced in 2003, the PETracer ML is a high impedance, non-intrusive analyzer, capturing, processing and analyzing PCI Express traffic. The PETracer ML allow for full bi-directional decode and capture of up to x1 or x8 PCI Express lanes at 2.5 GT/s per lane. This analyzer is based on the UPAS (Universal Protocol Analyzer Systems) 10K platform. The PETracer ML has a variety of interposer probes for embedded and computing board form factors.

• PETrainer^™ ML. First introduced in 2003, the PETrainer is a PCI Express^™ exerciser capable of emulating PCI Express root complex and end point devices. The PETrainer ML is offered on both the ML supporting x1 up to x4 lane training at 2.5 GT/s per lane. It is a critical test and verification tool intended to assist engineers in improving the reliability of their solutions, while providing advanced capabilities for stress and corner case testing. Together with the CATC PETracer ML, the PETrainer reduces time to market by enabling users to quickly identify logic and design flaws.

• SATracer^™. The SATracer was first introduced in 2001 for SATA 1.5 Gbps speed and the second generation was introduced in the fourth quarter of 2003 for 3 Gbps. SATracer is a non-intrusive protocol analysis system that facilitates efficient and accurate debug, test and verification of Serial ATA semiconductors, devices and systems.

• SATrainer^™. The SATrainer, introduced in 2003, is an add-on traffic generation module for our SATracer. It allows designers and validation engineers to transmit valid and invalid traffic to emulate host or device-side SATA communications. SATrainer features error injection capabilities that permit observation of device behavior under faulty link conditions.

• SASTracer^™. The SASTracer, our Serial Attached SCSI development product introduced in 2003, is the Company’s first system that supports the advanced protocol analysis of 1.5 and 3 Gbps SAS in 1-, 2- and 4-wide configurations. The SASTracer is able to logically group multiple related bus transactions allowing developers to quickly understand complex SAS transactions. SASTracer’s features were especially designed for the multiple ways in which SAS systems can be configured.

• Avalanche — The Avalanche is LeCroy’s next generation serial storage analyzer that captures and displays up to 4 links of 6 Gbps, 3 Gbps and 1.5 Gbps SAS; and 6 Gbps, 3 Gbps and 1.5 Gbps SATA traffic. Avalanche features raw bit recording mode allowing capture of low-level bit stream traffic before

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it is decoded to high-level packets. Avalanche features a 4 GB recording memory and includes triggering and filtering to optimize memory efficiency further. Avalanche is available in a highly portable form factor and allows SAS and SATA disk drive vendors, silicon developers and storage integrators to quickly identify problems in their products and verify protocol behavior for faster time-to-market.

• STX Series. The STX SAS Master and SATA Master are integrated analyzer/exerciser systems designed to address the serial storage protocol test and verification market. The STX 231 and 431 series offer support for Serial ATA (SATA) and Serial Attached SCSI (SAS) 1.5 and 3 Gbps signaling speeds. The flagship STX 460 offers support for 1.5, 3, and 6 Gbps SAS-2 protocol capture. The STX product family also offers target and host emulation enabling full system validation. Both STX products accommodate a high degree of configurability across protocols, speeds, and target applications.

• USBTracer/Trainer^™. The USBTracer/Trainer system, introduced in 2001, is LeCroy’s flagship USB development and test tool that provides two independent recording channels and captures all USB bus speeds. The USBTrainer is an integrated traffic generator option capable of emulating host or device traffic behaviors. The analyzer/exerciser system is used by PC vendors, USB silicon and device manufactures to test the robustness of their USB designs. The analyzer/exerciser system can be used for error injection, compatibility testing and compliance verification.

• SBAE-30 Series. The SBAE-30 provides a complete protocol analysis and exerciser system for advanced USB development applications. In addition to supporting all USB bus speeds, the SBAE-30 provides dual USB recording channels and full support for the latest USB device class decodes. It is available with an integrated traffic generation capability that allows users to emulate USB host and device traffic. The analyzer/exerciser system can be used for error injection, compatibility testing and compliance verification.

• Conquest^™ Series. The Conquest Series provides a range of entry-level USB protocol analyzers that support all bus speeds, upper level protocol decoding and an easy-to-use graphical interface. Targeted at the growing market for embedded USB designs, the Conquest is available in a Standard and Pro model. Both systems offer high-speed USB protocol analysis with additional features like traffic generation and timing waveform displays available in the Pro model for more sophisticated testing applications.

• UWBTracer/Trainer^™. The UWBTracer system, introduced in 2006, addresses the emerging WiMedia ultra wideband and Certified Wireless USB test and debug marketplace. The UWBTracer captures and decodes wireless communications transmitted between WiMedia devices. The product is used during development of chipsets, firmware and device drivers to verify functional behavior and compliance with the specifications. The UWBTrainer is an integrated traffic generation option for the UWBTracer system released in August 2007.

• AirCom^™. The AirCom is an entry-level ultra wideband protocol analyzer that captures WiMedia-based UWB traffic at transfer rates from 53.3 Mbps to 480 Mbps. It features an easy-to-use graphical interface and includes a frame generator for emulating simple WiMedia traffic patterns. The AirCom features easy-mode recording for fast setup and is designed for developers getting started with WiMedia device integration.

Other Products and Services

We offer our customers a variety of complementary oscilloscope probes and accessory products. Probes provide the critical physical electrical or optical connection from the customer’s circuit to the oscilloscope. We believe our WaveLink high frequency differential probes provide the high bandwidth performance necessary to measure serial data signals in the expanding serial data communications market. We also offer digitizing modules from 150 MHz to 1 GHz bandwidths.

We also provide support, repairs, maintenance, recalibration and a variety of post sale upgrades and installations. We maintain field service centers in Chestnut Ridge, New York; Geneva, Switzerland; Tokyo, Japan; Seoul, South Korea; Singapore and Chengdu, China.

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Our Customers and End Markets

Our products are used primarily by electronic designers and engineers principally in the research and development of new products. These end users typically employ our oscilloscopes to validate the performance of electronic designs and components. Our protocol analyzers are used by designers and engineers whose products are in development and production and also for products deployed in the field. We currently provide products to customers in four primary end markets, including Computer/Semiconductor/Consumer Electronics, Data Storage, Automotive/Industrial, and Military/Aerospace. Our customers also include leading original equipment manufacturers.

Computer/Semiconductor/Consumer Electronics. These markets include companies providing components, interfaces, subsystems and complete products for high speed and general purpose computing, network servers, and related devices and systems. Requirements in this end market have been driven by:

• growth in the capability and complexity of devices, which now provide a higher level of integration and functionality;

• a dramatic increase in the use of high speed serial data communications interfaces in both the computer and semiconductor market;

• new interface standards, which enable increased interoperability and higher levels of bandwidth between devices and peripherals, including: PCI Express, Gen I and Gen II — a high speed serial data interface for connection to high performance subsystems, such as a graphics card, inside a computer; Serial Advanced Technology Attachment (Serial ATA) — a high speed serial data interface for computer disk drives; USB 2.0 — the latest version of the Universal Serial Bus standard, a high speed computer peripheral expansion interface; Wireless USB — new wireless extension to USB that combines the speed and security of wired USB with the ease of use of wireless; XAUI — a 10 Gigabit Ethernet standard that improves the routing of electrical interconnections; and Firewire — a high-speed serial interface for computer peripheral expansion; and

• system-on-a-chip validation.

Data Storage Devices. This market includes companies that provide magnetic and optical storage devices such as hard disk drives, removable media, tape, CDs and DVDs. Requirements in this end market are being driven by:

• continued pressure to reduce product development life cycle time;

• increasing need to store more information on storage media, which requires the encoding of signals to achieve higher density;

• migration of hard disk drives to portable media applications and consumer devices, such as MP3 players and digital video recorders;

• evolution to perpendicular magnetic recording for higher capacity storage; and

• adoption of faster point-to-point connections through the use of the Serial ATA (Advanced Technology Attachment), and Serial Attached Storage, or SAS, interface standards.

Automotive/Industrial. The automotive market includes automobile OEMs, component suppliers to automobile OEMs and industrial equipment manufacturers. Requirements in this end market are being driven by:

• proliferation of Electronic Control Units, or ECUs, to various automotive subsystems, such as engine control, braking, and traction control;

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• progression to networked ECUs; and

• serial data topologies managing complex inbound and outbound signals.

Military/Aerospace. The military and aerospace market includes companies that provide components and systems for defense and commercial airplane applications. Requirements in this end market are being driven by:

• applications that use complex communications signals in challenging environments;

• extraordinarily high need for precision and reliability given the consequences of failure; and

• need for long-term support due to long military program life.

Sales, Marketing and Distribution

We maintain a direct sales force of highly trained, technically sophisticated sales engineers who are knowledgeable in the use of oscilloscopes and protocol analyzers and the features and advantages of our products. In addition, because of our focus on high-performance oscilloscopes and protocol analyzers, our sales engineers are skilled in performing product demonstrations for current and prospective customers.

We sell our oscilloscopes and protocol analyzers through our own direct sales force and manufacturers representatives in the United States. Internationally, our protocol products are sold through specialized distributors that are aligned with key customers in our end markets as well as our own direct sales force. The oscilloscope products are sold through a direct sales force in Switzerland, Germany, Italy, France, the United Kingdom, Sweden, China, South Korea and Singapore, with regional sales headquarters located in Chestnut Ridge, New York; Santa Clara, California; and Geneva, Switzerland. In Japan, we sell our products through distributors.

We support our customers through a worldwide network of specialized applications engineers. We maintain service, repair and calibration facilities in Chestnut Ridge, New York; Geneva, Switzerland; Seoul, South Korea; Tokyo, Japan; Singapore and Chengdu, China.

In order to raise market awareness of our products, we maintain an informative website (www.lecroy.com), advertise in trade publications, distribute promotional materials, conduct marketing programs and seminars, issue press releases regarding new products, publish technical articles and participate in industry trade shows and conferences.

Technology and Product Development

We believe we are a technology leader in both the oscilloscope and protocol analyzer markets. We have developed core capabilities in the design of high-performance, high-speed signal conditioning, sampling and analog-to-digital conversion circuitry. We believe we are also a leader in the design of technologies related to the storage, movement and processing of the large amounts of data produced by oscilloscopes and protocol analyzers.

In protocol analyzers, with the acquisition of Computer Access Technology Corporation (“CATC”) in October 2004 and Catalyst Enterprises Inc. (“Catalyst”) in October 2006, we believe we have a competitive advantage as a result of our knowledge and expertise in multiple communications standards, computer and software architecture and advanced ASIC and programmable logic design. This expertise is enhanced by our advanced design tools and collaboration among our various design teams. We have a broad, vertically integrated technology base that includes the knowledge and expertise to design advanced ASICs, use programmable logic in the form of microcontrollers and programmable logic devices in real-time embedded applications, design electronic circuit boards and systems, and design and develop embedded software, software drivers and software applications. In October of 2006, LeCroy acquired Catalyst to broaden its protocol product line and increase penetration of certain new customer and market segments. The combination of Catalyst with the LeCroy Protocol Solutions Group allows the combined division to bring next-generation products to market faster, and satisfy more customer requirements.

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Our product development efforts are focused on hardware, software and mechanical development initiatives. Our hardware product development team is focused on developing innovative signal conditioning, data acquisition and electrical circuit probing technologies that allow better waveform fidelity and circuit connection capabilities. This is accomplished through the use of advanced integrated circuit techniques and processes, innovative design tools and methodologies and key technology partnerships.

Our software engineering group continues to develop and advance our protocol, wave shape analysis and measurement technologies in order to offer new and innovative analysis tools for our customers. This group also develops application solutions to perform specific analysis for specific communications protocols, data storage, power measurement, communications and other markets.

We have also entered into technology agreements that have provided us access to technologies that enable extremely high-speed, high-fidelity signal capture capabilities and very high throughput data movement capabilities. We intend to continue to develop and leverage such key partnerships in areas that complement or enhance our own internal strengths.

Manufacturing and Suppliers

We have consolidated and streamlined our manufacturing and operational activity to focus on our core expertise of oscilloscope and protocol analyzer product introduction and development. Our WaveMaster, WaveExpert, and WavePro oscilloscopes and related products are manufactured at our facility in Chestnut Ridge, New York. Protocol analyzer products are manufactured in our Santa Clara, California facility. Our focus on supply chain execution has allowed us to improve the cycle time required to build our instruments as well as reduce the time required to test and deliver products to our customers. For example, we have partnered with manufacturing companies in the U.S. and Asia that have allowed us to design and develop innovative products at reduced costs. This has allowed us to lower the costs of our products to our customers while improving our margins. Our WaveJet products and WaveSurfer 400s are manufactured by our strategic partner, Iwatsu, and our WaveRunner 6000A, WaveRunner Xi and WaveSurfer Xs products are manufactured by a contract manufacturer, Plexus Corporation.

We purchase a small number of parts from single-source suppliers. In particular, several key integrated circuits that we use are made by IBM. Although we have not experienced significant production delays attributable to supply changes, we believe that, for integrated circuits in particular, alternative sources of supply would be difficult to develop over a short period of time. Because we have no direct control over our third-party suppliers, interruptions or delays in the products and services provided by these third parties may be difficult to remedy in a timely fashion. In addition, if such suppliers are unable or unwilling to deliver the necessary parts or products, we may be unable to redesign or adapt our technology to work without such parts or find alternative suppliers or manufacturers. In such events, we could experience interruptions, delays, increased costs or quality control problems and loss of revenues.

Competition

Oscilloscopes

The oscilloscope market is highly competitive and characterized by rapid and continual advances in technology. Our principal competitors in this market are Tektronix, Inc., a subsidiary of Danaher Corporation (“Tektronix”) and Agilent Technologies, Inc. (“Agilent”). Both of our principal competitors have substantially greater sales and marketing, development and financial resources than we do. We believe that Tektronix, Agilent and other competitors offer a range of products that attempt to address most sectors of the oscilloscope market.

We believe that the principal bases of competition in the oscilloscope market are a product’s performance characterized by the confluence of bandwidth, sample rate, memory length and processing power, its price and quality, the vendor’s name recognition and reputation, product availability and the quality of post-sale support. We believe that we currently compete effectively with respect to each of the principal bases of competition in the oscilloscope market in the general price range ($2,900 to $205,000) in which our oscilloscopes are focused. We also believe that our

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success will depend in part on our ability to maintain and develop the advanced technology used in our oscilloscope products and our ability to offer high-performance products at a favorable “price-to-performance” ratio.

Protocol Analyzers

Our protocol analyzer markets are highly competitive, and we expect competition to intensify in the future. We compete with a number of companies, such as Agilent and Finisar Corporation, our largest competitors. These competitors are diverse and offer a variety of solutions directed at various segments of this marketplace. We believe the principal factors of competition include:

• Product functionality;

• Time to market with new products;

• Ease of product use;

• Product speed, reliability, stability and accuracy;

• Price performance;

• Flexibility and programmability of products;

• Upgradeability of products;

• Local support and service for products; and

• Breadth of product offerings.

We believe we compete favorably with respect to each of these factors and have gained significant market share in some of our target markets as a result. We believe our success has been driven by our vertically integrated technology, ability to generate customer loyalty and ability to anticipate market trends.

Backlog

Our backlog of unshipped customer orders was approximately $5.1 million and $6.8 million as of June 28, 2008 and June 30, 2007, respectively. Customers may cancel or reschedule orders at any time. We believe that our level of backlog, at any particular time, is not necessarily indicative of our future operating performance.

Intellectual Property

We rely on a combination of patents, trademarks and trade secret laws, non-disclosure agreements and other intellectual property protection methods, as well as technical expertise and continuing technological research and development to establish and protect proprietary rights in our products. We believe, however, that because of the rapid pace of change and advancement in oscilloscope technology, legal intellectual property protection is and will continue to be a less significant factor in our success than our core competency of wave shape analysis and the experience and expertise of our personnel.

We protect significant technologies, products and processes that we consider important to our business by, among other things, filing applications for patent protection. We currently hold 83 U.S. patents. We also have a significant number of pending U.S. patent applications, as well as foreign patents and applications. Although none of our products depends exclusively on any single patent, we believe our patents, in the aggregate, are important to our business and contribute to our competitive advantage.

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We license or otherwise acquire key enabling technologies from third parties in order to gain access to technologies that would be too expensive or too time consuming to develop internally or that would give us a competitive advantage or shorten our product development time-to-market. Our key licenses include a license agreement with Perigee LLC pursuant to which we license fast data readout technology for use in our WaveRunner 6000 Series family of products. This license is perpetual. We also license a patent from William A. Farnbach, which relates to the triggering characteristics of an oscilloscope. This license extends for the term of the patent, which expires in October 2008. The capabilities licensed or otherwise acquired through these agreements, and additional license agreements we entered into, could be developed by us, but would require considerable time and expense.

Although we believe that our products and technologies do not infringe the proprietary rights of third parties, there can be no assurance that third parties will not assert claims against us based on the infringement or alleged infringement of any such rights. Such claims are typically costly to defend, regardless of the legal outcome. There can be no assurance that we would prevail with respect to any such claim, or that a license to third party rights, if needed, would be available on acceptable terms. In any event, patent and proprietary rights litigation can be extremely protracted and expensive.

Regulatory Matters

As we manufacture our products in the United States and sell our products and purchase parts, components and sub-assemblies in a number of countries, we are subject to legal and regulatory requirements, particularly the imposition of tariffs and customs, in a variety of countries. Our products are also subject to United States export control restrictions. In certain cases, we may not be permitted to export products without obtaining an export license. U.S. export laws also prohibit the export of our products to a number of countries deemed by the United States to be hostile. The export of our high-performance oscilloscopes from the United States is also subject to regulation under the Treaty for Nuclear Non-Proliferation. We cannot be certain that the U.S. government will approve any pending or future export license requests. In addition, the list of products and countries for which export approval is required, and the regulatory policies with respect thereto, could be revised.

Employees

As of June 28, 2008, we had 455 full-time employees, 184 of whom work in our Chestnut Ridge, New York facility. Our employees are not represented by a labor union and we have not experienced any work stoppages. We believe that our employee relations are satisfactory.

Investor Information

Our Internet website address is www.lecroy.com. We make available, free of charge on our website, by clicking on “About LeCroy” and then selecting the “Investor Relations” link and the “SEC Filings” link, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the Securities and Exchange Commission (“SEC”).

Executive Officers of the Registrant

Unless otherwise set forth, below are the names, ages, positions, and a brief account of the business experience of each of our executive officers as of August 31, 2008:

Name	Age	Position(s)
Thomas H. Reslewic	49	President; Chief Executive Officer and Director
Carmine J. Napolitano	40	Vice President, General Manager-Protocol Solutions Group
Roberto Petrillo	48	Vice President, Sales, Americas, Europe, Middle East and Africa
David C. Graef	51	Vice President, Chief Technology Officer
Sean B. O’Connor	43	Vice President, Finance; Chief Financial Officer; Secretary and Treasurer
Conrad J. Fernandes	47	Vice President, Sales, Asia/Pacific
Corey L. Hirsch	51	Vice President, Chief Information Officer

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Thomas H. Reslewic was named to our Board of Directors in January 2002. He joined us in 1990 and has served as President and Chief Executive Officer since January 2002. Mr. Reslewic previously served as President from October 2000 until December 2001, and Executive Vice President and Chief Operating Officer from February 1998 until October 2000. Mr. Reslewic has a Bachelor of Science degree in physics from the College of the Holy Cross and a Master of Business Administration degree from the University of Oregon.

Carmine J. Napolitano was appointed Vice President and General Manager of LeCroy’s Protocol Solutions Group in August 2006. Previously he held the position of Vice President, President — Serial Data Division, with the acquisition of CATC in November 2004, having served as a CATC Director, President and Chief Executive Officer since July 2004. Mr. Napolitano joined CATC in September 2002 as Vice President, Chief Financial Officer and Secretary. He was named Chief Legal Officer in August 2003 and was promoted to President in November 2003. Before joining CATC, from August 1995 until August 2002, Mr. Napolitano was Vice President of Finance & Administration and Chief Financial Officer at Centric Software, a leader in collaborative product development software. Mr. Napolitano received a Bachelor of Science in Mechanical Engineering from the University of California, Santa Barbara and a Master of Business Administration in Finance from New York University.

Roberto Petrillo was appointed Vice President Sales, Americas, Europe, Middle East and Africa in January 2007. Previously he held the position of Vice President — LeCroy EMEA (Europe, Middle East and Africa) since August 2002. Mr. Petrillo held various sales management positions during an 11-year tenure with another leading oscilloscope manufacturer where he led the European Telecommunication Business Unit and the European Indirect Channel teams that generated $100 million in annual revenue. Earlier in his career, Mr. Petrillo also worked for Hewlett Packard as an Account Manager. Prior to HP, Mr. Petrillo worked at GTE Telecommunication as an R&D Electronic Engineer. Mr. Petrillo has a Bachelor of Electronic Engineering degree. He received his MBA from Pacific Western University in California.

David C. Graef has served as Vice President, Chief Technology Officer since April 2003. Previously, he served as Vice President, Research and Development from January 1999 through March 2003, Engineering Manager from June 1996 through January 1999 and Senior Engineer from January 1989 through May 1996. Mr. Graef has a Bachelor of Science degree in Electrical Engineering from the University of Bridgeport.

Sean B. O’Connor was appointed Vice President, Finance and Chief Financial Officer in November 2005. Previously he served as Vice President, Legal Affairs and Chief Compliance Officer and from August 2001 to May 2005, he served as the Company’s Tax Director. Prior to joining LeCroy, he was an attorney at the law firm of McDermott Will and Emory. Previously Mr. O’Connor served as Director of Taxation and Finance at Movado Group and as a senior consultant in the New York office of PricewaterhouseCoopers LLP. Mr. O’Connor, a CPA, received his B.B.A. from Pace University and his J.D. from Seton Hall University School of Law.

Conrad J. Fernandes was appointed Vice President, Sales, Asia/Pacific in July 2008. Previously he served as General Manager-Oscilloscope Division. From August 2006 through March 2007 he served as Vice President of Corporate Development and Strategy and as Vice President, Worldwide Sales from July 2001 to August 2006, Vice President, International Sales from 1999 until 2000, Director of Asia/Pacific Sales from 1994 until 1999 and Product Marketing Manager from 1990 until 1994. Mr. Fernandes has a Bachelor of Electronic Engineering degree and a Master of Business Administration degree from City University of London.

Dr. Corey L. Hirsch has served as Vice President, Information Systems and Facilities since January 2002, and was named Chief Information Officer in May 2005. He joined LeCroy in September 2001, after a 24-year tenure with another leading oscilloscope manufacturer, most recently as Director of European Operations, and Acting European Vice President. He completed his Doctorate degree in Business Administration from Brunel University, London and his Masters in Business Administration from the University of Oregon, and has recently earned a Certification in Information Security Management (CISM) from the Information Systems Audit and Control Association (ISACA).

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ITEM 1A. RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this Form 10-K when evaluating the Company and its business. If any of the following risks actually occurs, our business, financial condition, or results of operations could suffer. In that case, the trading price of our common stock and convertible note could decline and you may lose all or part of your investment.

Our operating results are expected to continue to fluctuate and may not meet our financial guidance or published analyst forecasts, which may cause the price of our common stock to decline significantly.

Our past operating results, including our gross profits, have fluctuated from fiscal period to fiscal period. We expect our future operating results and gross profits will continue to fluctuate from fiscal period to fiscal period due to a number of factors, many of which are outside our control and any of which could cause our stock price to fluctuate. The primary factors that affect our operating results include the following:

• changes in overall demand for our products;

• the timing of the announcement, introduction and market acceptance of new products by us or competing companies;

• the timing and magnitude of research and development expenses;

• changes in the estimation of the future size and growth rates of our markets;

• changes in our production efficiency;

• disruptions in operations at any of our facilities or the facilities of any of our contract manufacturers for any reason;

• changes in the selling prices of our products; and

• changes in foreign currency exchange risks.

In addition, we have historically experienced somewhat lower activity during our first fiscal quarter than in other fiscal quarters which, we believe, is due principally to the lower level of orders and market activity during the summer months, particularly in Europe. We believe this seasonal aspect of our business is likely to continue in the future.

Our common stock price may be subject to significant fluctuations and volatility.

The market price of our common stock fluctuates significantly. The stock price could fluctuate in the future due to a number of factors, some of which are beyond our control. These factors include:

• historically low trading volume in our stock relative to alternative investments;

• announcements of developments related to our business, including additions or departures of key personnel;

• announcements of technological innovations or new products or enhancements by us or our competitors;

• sales by competitors, including sales to our customers;

• sales of common stock into the public market, including those by directors and members of management;

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• developments in our relationships with our customers, partners, distributors and suppliers;

• shortfalls or changes from analysts’ expectations in revenue, gross profits, earnings or losses, or other financial results;

• changes to or discontinuance of our recent stock repurchase program;

• regulatory developments;

• fluctuations in results of operations;

• failure to meet our financial obligations under any loans or financing agreements;

• trends in the seasonality of our sales; and

• general conditions in our market or the markets served by our customers.

In addition, in recent years the stock market in general and the market for shares of technology stocks in particular have experienced extreme price fluctuations, which have often been due largely to factors other than the operating performance of the affected companies. We cannot ensure that the market price of our common stock will not decline substantially, or otherwise continue to experience significant fluctuations in the future, including fluctuations that are unrelated to our operating performance.

If demand for our products does not match manufacturing capacity, we may underutilize our capacity or, alternatively, be unable to fulfill orders in a timely manner, and in either situation our operating results may suffer.

The sale of our products is dependent, to a large degree, on customers whose industries are subject to cyclical trends in the demands for their products. We may not be able to adapt production capacity and related cost structures to rapidly changing market conditions in a timely manner. When demand does not meet expectations, manufacturing capacity will likely exceed production requirements. We have at times increased our production capacity and the overhead that supports production based on anticipated market demand which has not always developed as expected. As a result, we have periodically underutilized our capacity, which has adversely affected our earnings due to existing fixed costs. In addition, conversely, if during a market upturn we cannot increase manufacturing capacity to meet product demand, we will be unable to fulfill orders in a timely manner, which in turn may have a negative effect on operating results and our overall business.

If our operating results decline in the long-term, we may be required to establish an additional valuation allowance against our deferred tax assets.

We evaluate whether our deferred tax assets can be realized and assess the need for a valuation allowance on an ongoing basis. As of June 28, 2008, we recorded approximately $14.4 million of deferred tax assets related to the future tax benefit of certain temporary differences between our financial statements and our tax returns. Realization of our deferred tax assets is mainly dependent on our ability to generate future taxable income. As of June 28, 2008, we recorded a valuation allowance of approximately $1.7 million to reserve for those deferred tax assets we believe are not more likely than not to be realized in future periods. An additional valuation allowance would be recorded if it was deemed more likely than not that some or all of our deferred assets will not be realized. If we establish additional valuation allowances, we would record a tax expense in our Consolidated Statements of Operations, which would have an adverse impact on our operating results.

Changes to our tax rates or exposures to additional income tax liabilities could affect our operating results. Additionally, audits by tax authorities could result in additional tax payments for prior year periods.

We are subject to incomes taxes in the U.S. and in various foreign jurisdictions. Domestic and international tax liabilities are subject to the allocation of income among various tax jurisdictions. Our effective tax rate can be

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impacted by changes in the mix of earning in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, accruals related to uncertain tax positions, the results of audits and examinations of previously filed tax returns and changes in tax laws. Any of these factors may negatively impact our tax rate and as a result, decrease our operating results. The amount of income taxes we pay is subject to ongoing audits in the U.S. federal, state and local tax authorities and by non-U.S. authorities. If these audits result in assessments different from our reserves, our future operating results may include unfavorable adjustments to our tax liabilities.

We are required to test our goodwill for impairment at least annually and that could result in a material impairment charge that would negatively impact our results of operations.

Under current accounting standards, goodwill and certain other intangible assets with indefinite lives are no longer amortized, but instead, are assessed for impairment when impairment indicators are present. Accounting principles generally accepted in the United States (“GAAP”) require a company to perform an impairment test on goodwill annually. Testing is required between annual tests if events occur or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. Such an event may occur if, for an extended period of time, the market value of the Company’s common stock plus a control premium were less than the carrying value of the Company.

We face risks from fluctuations in the value of foreign currency versus the U.S. dollar and the cost of currency exchange, which affect our revenue, cost of revenue and operating margins and could result in exchange losses.

A large portion of our sales and expenses are denominated in foreign currencies. We purchase materials from suppliers and sell our products around the world and maintain investments in foreign subsidiaries, all denominated in a variety of currencies. As a consequence, we are exposed to risks from fluctuations in foreign currency exchange rates with respect to a number of currencies, changes in government policies and legal and regulatory requirements, political instability, transportation delays and the imposition of tariffs and export controls. Changes in the relation of foreign currencies to the U.S. dollar will affect revenues, our cost of revenue and operating margins and could result in exchange losses. Among the more significant potential risks to us of relative fluctuations in foreign currency exchange rates is the relationship among and between the U.S. dollar, European monetary unit (Euro), Swiss franc, British pound, Swedish krona, Japanese yen, Korean won, and Singapore dollar.

We have a program of entering into foreign exchange forward contracts to minimize the risks associated with currency fluctuations on assets, liabilities or other transactions denominated in other than the functional currency of us or our subsidiaries. It cannot be assured, however, that this program will effectively offset all of our foreign currency risk related to these assets or liabilities. These foreign exchange forward contracts do not qualify for hedge accounting. Other than this program, we do not attempt to reduce our foreign currency exchange risks by entering into foreign currency management programs. As a consequence, there can be no assurance that fluctuations in foreign currency exchange rates in the future will not result in mismatches between local currency revenues and expenses, and will not adversely affect our results of operations. Moreover, fluctuations in exchange rates could affect the demand for our products.

No assurance can be given that our strategies will prevent future currency fluctuations from having a material adverse affect on our business, financial condition, results of operations or liquidity.

We face numerous risks associated with our international operations, which could cause a material adverse effect on our business and results of operations since approximately two-thirds of our revenues are derived from international sales.

We market and sell our products and services outside the United States, and currently have employees located in China, France, Germany, Italy, Japan, Singapore, South Korea, Sweden, Switzerland and the United Kingdom. Many of our customers and licensees are located outside the United States. As part of our strategy, we have expanded our international sales, particularly in China. We face numerous risks in doing business outside the United States, including:

• dependence on sales representatives or foreign distributors and their sales channels;

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• longer accounts receivable collection cycles;

• less effective and less predictable recognition, protection and enforcement of intellectual property rights, specifically in areas of Asia and particularly in China;

• trade protection measures, import or export licensing requirements, tariffs and other trade barriers;

• highly cyclical business environments;

• unusual or burdensome foreign laws or regulatory requirements or unexpected changes to those laws or requirements;

• strengthening of the U.S. dollar, which could make our products more expensive;

• changes in the political or economic condition of a specific country or region, particularly in emerging markets; and

• potentially adverse tax consequences.

Such factors could cause our future international sales to decline.

We may be greatly impacted by the political, economic, and military conditions in China, Taiwan, North Korea, and South Korea. In the recent past, these countries have conducted military exercises in or near the others’ territorial waters and airspace. Such disputes may continue or escalate, resulting in economic embargoes, disruptions in shipping, or even military hostilities. This could severely harm our business by interrupting or delaying shipment of our products to or through these areas and/or reducing our sales in these areas.

Our business practices in international markets subjects us to the requirements of additional regulation. If we or any of our employees are found to have violated these regulations, we could be subject to significant fines and other penalties.

We manufacture certain products in the United States, and sell our products and purchase parts, components and sub-assemblies in a number of foreign countries. Our international activities subject us to United States export control restrictions and various significant international, federal, state and local regulations, including but not limited to health and safety, product content, labor and import/export regulations. In certain cases, we may not be permitted to export products without obtaining an export license. U.S. export laws also prohibit the export of our products to a number of countries deemed by the United States to be hostile. The export of our high-performance oscilloscopes from the United States, which accounts for a material portion of our internationally derived revenue, is also subject to regulation under the Treaty for Nuclear Non-Proliferation. However, only a small portion of those oscilloscopes are sold in countries where that treaty restricts the end-user. These restrictions may make foreign competitors facing less stringent controls on their products more competitive in the global market. We cannot be certain that the U.S. government will approve any pending or future export license requests. In addition, the list of products and countries for which export approval is required, and the regulatory policies with respect thereto, could be revised. Our international sales and, because approximately two-thirds of our revenue is derived from sales outside the United States, our sales in general, could be materially harmed by our inability to obtain required licenses or by the costs of compliance.

The regulations related to our international sales are complex, change frequently and have tended to become more stringent over time. We may be required to incur significant expenses to comply with these regulations or to remedy violations of these regulations. Any failure by us to comply with applicable government regulations could also result in cessation of our operation or portions of our operations, product recalls or impositions of fines and restrictions on our ability to carry on or expand our operations. In addition, because many of our products are regulated or sold into regulated industries, we must comply with additional regulations in marketing our products.

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If we suffer loss to our facilities or distribution system due to catastrophe, our operations could be negatively impacted.

Our facilities and distribution system are subject to catastrophic loss due to fire, flood, terrorism or other natural or man-made disasters. If any of our facilities were to undergo a catastrophic loss, it could interrupt our operations, delay production, shipments and revenue and could result in large expenses to repair or replace the facilities.

We depend on single-source suppliers for some of our products, and the loss of these suppliers could harm our business by interrupting or terminating our manufacture of those products.

We purchase a small number of parts from single-source suppliers. In particular, several key integrated circuits that we use are made by International Business Machines (“IBM”). Although we have not experienced significant production delays attributable to supply changes, we believe that, for integrated circuits in particular, alternative sources of supply would be difficult to develop over a short period of time. Because we have no direct control over our third-party suppliers, interruptions or delays in the products and services provided by these third parties may be difficult to remedy in a timely fashion. In addition, if such suppliers are unable or unwilling to deliver the necessary parts or products, we may be unable to redesign or adapt our technology to work without such parts or find alternative suppliers or manufacturers. In such events, we could experience interruptions, delays, increased costs, or quality control problems.

Adverse changes in our relationships with, or the financial condition or performance of key distributors could adversely impact our operating results.

We sell certain products through key distributors that have valuable relationships with our end customers. Adverse changes in our relationship could negatively impact our ability to generate revenue in certain markets and negatively impact our results of operations.

We depend upon key personnel and qualified future hires to implement our expansion strategy, and if we are unable to retain or attract personnel we may not be able to manage and operate successfully and we may not be able to meet our strategic objectives.

Our success depends on the efforts and abilities of senior management and key employees in the sales, marketing, research and development, and manufacturing areas. Many of these employees would be difficult to replace. We do not have employment contracts with most of our key personnel. If we cannot retain existing key managers and employ additional qualified senior employees, our business, financial condition, and results of operations could be materially and adversely affected. We do not maintain “key man” life insurance policies on any of our personnel. Future expansion of operations will require us to attract, train and retain new personnel. In addition, we may be limited by non-solicitation agreements entered into by our key personnel with respect to hiring employees from our competitors. These factors could increase our operating expenses. If we are unable to recruit or retain a sufficient number of qualified employees, or the costs of compensation or employee benefits increase substantially, our business, results of operations or financial condition could be materially and adversely affected.

We may not be successful in protecting our intellectual and proprietary rights, which would deprive us of a competitive advantage and thereby negatively impact our ability to compete.

As a technology-based company, our success depends on developing and protecting our intellectual property. We rely generally on patent, copyright, trademark and trade secret laws in the United States and abroad. Electronic equipment as complex as most of our products, however, is generally not patentable in its entirety. We also license intellectual property from third parties and rely on those parties to maintain and protect their technology. We cannot be certain that actions we take to establish and protect proprietary rights will be adequate, particularly in countries where intellectual property rights are not highly developed or protected. If we are unable to adequately protect our technology, or if we are unable to continue to obtain or maintain licenses for protected technology from third parties, it may be difficult to design alternatives to such technology without incurring significant costs. Thus, the

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loss of intellectual property rights to technology could have a material adverse effect on our business, results of operations or financial condition. From time to time, in the ordinary course of business, we receive notices from third parties regarding intellectual property infringement or take action against others with regard to intellectual property rights. Even where we are successful in defending or pursuing such claims, we may incur significant costs. In the event of a successful claim against us, we could lose our rights to needed technology or be required to pay license fees for the infringed rights, either of which could have an adverse impact on our business.

Catalyst outsources a portion of its research and development activities to a third party in a foreign jurisdiction; the failure of this third party to adequately protect Catalyst’s proprietary rights in the technologies developed for us by this third party or a change in the laws of its jurisdiction may result in the loss of those proprietary rights.

Catalyst currently outsources a portion of its research and development activities to a third party engineering firm located in the United Arab Emirates. Catalyst does not have any long-term contractual commitment from this engineering firm to continue to provide such services. The discontinuance of such services on short notice or any significant cost increases in the services they provide could harm our results of operations and slow our introduction of new products. In addition, the failure of this engineering firm to adequately protect Catalyst’s proprietary rights in the technologies developed by this firm, including the failure to comply with the intellectual property laws of the United Arab Emirates, may result in the loss of some or all of the proprietary rights in such technologies. In addition, any changes in the laws of the United Arab Emirates could also result in the loss of some or all of the proprietary rights in technologies developed in that country. It may also be more difficult to obtain a judgment enforcing our intellectual property rights in the United Arab Emirates than it may be in the United States.

We license certain intellectual property from third parties, and the loss of these licenses could delay development of future products or prevent the sale or enhancement of existing products.

We rely on licenses of intellectual property for our businesses, including technology used in our products. We cannot ensure that these licenses will be available in the future on favorable terms or at all. The loss of these licenses or the ability to maintain any of them on acceptable terms could delay development of future products or prevent the further sale or enhancement of existing products. Such loss could adversely affect our business, results of operations and financial condition.

Potential acquisitions, strategic alliances, and joint ventures may result in financial results that are different than expected.

In the normal course of business, we engage in discussions with third parties relating to possible acquisitions, strategic alliances and joint ventures. Some of the businesses we acquire may not have historically accounted for their business in the manner we account for our business, which may mean that these financial statements are not representative of what their financial results would have been if they had been our subsidiary for such periods. For example, on October 2, 2006, we acquired all of the outstanding shares of common stock of Catalyst, an entity that did not maintain its financial statements in accordance with U.S. GAAP nor did it have audited financial statements. As a result of our acquisition of Catalyst, and other similar transactions that we may consummate in the future, our financial results may differ from the investment community’s expectations in a given quarter and year. In addition, acquisitions and strategic alliances may require us to integrate a different company culture, management team and business infrastructure. We may have difficulty developing, manufacturing and marketing the products of the newly-acquired company in a way that enhances the performance of our combined businesses or product lines to realize the value from expected synergies. Depending on the size and complexity of an acquisition, our successful integration of the entity depends on a variety of factors, including:

• the retention of key employees;

• the management of facilities and employees in different geographic areas;

• the retention of key customers; and

• the integration or coordination of different research and development, product manufacturing and sales programs and facilities.

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Any impairment of the value of purchased assets or goodwill could have a significant negative impact on our future operating results.

All of these efforts require varying levels of management resources, which may divert our attention from other business operations. Further, if market conditions or other factors lead us to change our strategic direction, we may not realize the expected value from such transactions. If we do not realize the expected benefits or synergies of such transactions, our consolidated financial position, results of operations, cash flows and stock price could be negatively impacted.

We may not be able to obtain the capital we need to maintain or grow our business.

Our ability to execute our long-term strategy may depend to a significant degree on our ability to obtain long-term debt and equity capital. We have no commitments for additional borrowings at this time, other than $50.0 million available under our revolver with Manufacturers and Traders Trust Company (M&T), and the other lenders party thereto, which is subject to a borrowing base. We cannot determine the precise amount and timing of our funding needs at this time. We may be unable to obtain future additional financing on terms acceptable to us, or at all. If we fail to comply with certain covenants relating to our indebtedness, we may need to refinance our indebtedness or repay it. Pursuant to our secured credit agreement with M&T and other syndicated lenders, we granted the banks a security interest in our Chestnut Ridge, NY property. We also may need to refinance our indebtedness at maturity. We may not be able to obtain additional capital on favorable terms to refinance our indebtedness.

The following factors could affect our ability to obtain additional financing on favorable terms, or at all:

• our results of operations;

• general economic conditions and conditions in our industry;

• the perception in the capital markets of our business;

• our ratio of debt to equity;

• our financial condition;

• our business prospects; and

• changes in interest rates.

In addition, certain covenants relating to our $50.0 million credit facility impose limitations on additional indebtedness. If we are unable to obtain sufficient capital in the future, we may have to curtail our capital expenditures and reduce research and development expenditures. Any such actions could have a material adverse effect on our business, financial condition, results of operations and liquidity.

We have a credit facility that contains financial covenants, and the failure to comply with these covenants could harm our financial condition because our credit facility may be unavailable to us.

We have a $50.0 million credit facility with Manufacturers and Traders Trust Company, a New York Banking Corporation and the other lenders party thereto. The credit facility consists of a $50.0 million revolving loan. We are subject to financial covenants under this credit facility, including interest coverage ratio, minimum consolidated net worth, senior leverage ratio and fixed charge coverage ratio requirements. Failure to comply with the financial covenants under our credit facility would cause us to be in default under the facility, which could result in the acceleration of the indebtedness under the credit facility. The acceleration of our indebtedness under the credit facility would adversely affect our business, results of operations, liquidity and financial condition. The acceleration of our indebtedness under the credit facility would also likely cause an acceleration of the indebtedness due under our notes.

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We have significantly increased our leverage as a result of the sale of the notes.

In connection with the sale of our 4.00% Convertible Senior Notes, we have indebtedness of $67.5 million. The degree to which we are leveraged could, among other things:

• make it difficult for us to make payments on the notes;

• make it difficult for us to obtain financing for working capital, acquisitions or other purposes on favorable terms, if at all;

• make us more vulnerable to industry downturns and competitive pressures; and

• limit our flexibility in planning for, or reacting to changes in, our business.

Our ability to meet our debt service obligations will depend upon our future performance, which will be subject to financial, business and other factors affecting our operations, many of which are beyond our control.

The notes are effectively subordinated to all liabilities of our subsidiaries and to our secured debt and do not restrict certain corporate actions such as the payment of dividends and issuance of new debt.

None of our subsidiaries guarantee our obligations under, or have any obligation to pay amounts due on, the notes. As a result, the notes are “structurally subordinated” to all indebtedness and other liabilities, including trade payables and lease obligations, of our existing and future subsidiaries (unless such indebtedness is by its terms subordinated to the notes). In addition, the notes are not secured by any of our assets or those of our subsidiaries. As a result, the notes are effectively subordinated to our $50.0 million credit facility and any secured debt that we or our subsidiaries incur. In the event of our bankruptcy, liquidation or reorganization or upon acceleration of the notes, payment on the notes could be less, ratably, than on any secured indebtedness. We may not have sufficient assets remaining to pay amounts due on any or all of the notes then outstanding. At June 28, 2008, the Company has no outstanding borrowings under the secured debt and no other indebtedness, excluding the notes. Our subsidiaries had trade payables and other accrued liabilities (excluding obligations that are inter-company in nature) of approximately $5.6 million in the aggregate.

In addition, the indenture does not restrict us or any of our subsidiaries from paying dividends or issuing or repurchasing securities. If we or our subsidiaries were to incur additional debt or liabilities, our ability to pay our obligations on the notes could be adversely affected. Certain of our other debt instruments may, however, restrict these and other actions.

We may be unable to repay, repurchase or redeem the notes.

At maturity, the entire outstanding principal amount of the notes will become due and payable by us. Upon a designated event, as defined in the indenture, or on each of October 15, 2011, October 15, 2016 and October 15, 2021, or upon conversion, the holders may require the Company to repurchase all or a portion of the notes at a repurchase price of 100% of the principal amount of the notes, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the date of the repurchase of the notes. We cannot assure the note holders that we will have enough funds or be able to arrange for additional financing to pay the principal at maturity or to repurchase the notes upon a designated event or that our then-existing debt agreements will permit us to repay the principal amount at maturity or repurchase notes.

Our failure to repay the notes at maturity or to repurchase tendered notes upon a designated event or on each of October 15, 2011, October 15, 2016 and October 15, 2021, would constitute an event of default under the indenture that governs the notes and may also constitute an event of default under any other indenture or other agreement governing then-existing indebtedness, which could prevent us from repurchasing the notes. If a designated event occurred and accelerated our other indebtedness, we cannot assure you that we would have sufficient financial resources, or be able to arrange for additional financing, to repay the principal amount at maturity or pay the

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repurchase price for the notes and amounts due under any other indebtedness. The change in control feature of the notes could make it more difficult for a third party to acquire us, even if such an acquisition would be beneficial to the note holders and our stockholders. Our obligation to offer to repurchase the notes upon a designated event would not necessarily afford protection in the event of a highly leveraged transaction, reorganization, merger or similar transaction involving us.

If you hold notes, you will not be entitled to any rights with respect to our common stock, but you will be subject to all changes made with respect to our common stock.

If you hold notes, you will not be entitled to any rights with respect to our common stock (including, without limitation, voting rights and rights to receive any dividends or other distributions on our common stock), but you will be subject to all changes affecting the common stock. You will only be entitled to rights on the common stock if and when we deliver shares of common stock to you in exchange for your notes and in limited cases under the anti-dilution adjustments of the notes. For example, in the event that an amendment is proposed to our certification of incorporation or bylaws requiring stockholder approval and the record date for determine the stockholders of record entitled to vote on the amendment occurs prior to delivery of the common stock, you will not be entitled to vote on the amendment, although you will nevertheless be subject to any changes in the powers, preferences or special rights of our common stock.

Conversion of the notes will dilute the ownership interest of existing stockholders, including stockholders who had previously converted their notes.

The conversion of the notes into shares of our common stock, to the extent we choose not to deliver all cash for the conversion value in excess of the principal amount, will dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon conversion of the notes could adversely affect prevailing market prices of our common stock. In addition, the existence of the notes may encourage short selling by market participants due to this dilution or facilitate trading strategies involving the notes and our common stock.

Issuance of shares in connection with financing transactions or under stock plans will dilute current stockholders.

Pursuant to our stock plans, our management is authorized to grant restricted stock awards or stock options to our employees, directors and consultants. Our stockholders will incur dilution upon exercise of any outstanding stock options. In addition, if we raise additional funds by issuing additional common stock, or securities convertible into or exchangeable or exercisable for common stock, further dilution to our existing stockholders will result, and new investors could have rights superior to existing stockholders.

Anti-takeover provisions under our charter documents, stockholder rights plan, and Delaware law could delay or prevent a change of control and could also limit the market price of our stock.

Our certificate of incorporation, bylaws, and stockholder rights plan contain provisions that could delay or prevent a change of control of our company that our stockholders might consider favorable. Certain provisions of our certificate of incorporation and bylaws allow us to:

• authorize the issuance of preferred stock which can be created and issued by the board of directors without prior stockholder approval, with rights senior to those of the common stock;

• provide for a classified board of directors, with each director serving a staggered three-year term;

• prohibit stockholders from filling board vacancies, calling special stockholder meetings, or taking action by written consent; and

• require advance written notice of stockholder proposals and director nominations.

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Under our stockholder rights plan, if a person or group acquires, in the future, 15% or more of our common stock or announces a tender offer or exchange offer, the consummation of which would result in the beneficial ownership by a person or group of 15% or more of our common stock, then holders of our common stock, other than the acquirers, are entitled to purchase our common stock at a 50% discount to the then-current share price.

In addition, we are governed by the provisions of Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our certificate of incorporation, bylaws and stockholder rights plan and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors, including delay or impede a merger, tender offer, or proxy contest involving our company. Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline. Any of these results could adversely affect the price of our common stock and, therefore, the price of our notes. We may in the future issue shares of authorized preferred stock at any time.

Because we do not intend to pay dividends, stockholders will benefit from an investment in our common stock only if it appreciates in value.

We have never declared or paid any cash dividends on our common stock. For the foreseeable future, it is expected that earnings, if any, generated from our operations will be used to finance the growth of our business, and that no dividends will be paid to holders of the common stock. As a result, the success of an investment in our common stock will depend upon any future appreciation in its value. There is no guarantee our common stock will appreciate in value.

We could incur substantial costs as a result of violations of or liabilities under environmental laws.

Our operations and products are subject to laws and regulations relating to the protection of the environment, including those governing the discharge of pollutants into the air or water, the management and disposal of hazardous substances or wastes and the cleanup of contaminated sites. Some of our operations require environmental permits and controls to prevent and reduce air and water pollution, and these permits are subject to modification, renewal and revocation by issuing authorities. We could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions and third-party claims for property damage and personal injury as a result of violations of or liabilities under environmental laws or noncompliance with environmental permits.

Our former subsidiary, Digitech Industries, Inc., has been involved in environmental remediation activities, the liability for which was retained by us and the estimated remediation cost was reserved for after the sale of the Vigilant Networks business and the residual assets of Digitech. Any liability beyond what is currently expected and reserved for could have a material adverse affect on our results of operations.

We are subject to laws and regulations governing government contracts, and failure to address these laws and regulations or comply with government contracts could harm our business by leading to a reduction in revenue associated with these customers.

We have agreements relating to the sale of our products to government entities and, as a result, we are subject to various statutes and regulations that apply to companies doing business with the government. The laws governing government contracts differ from the laws governing private contracts. For example, many government contracts contain pricing terms and conditions that are not applicable to private contracts. We are also subject to investigation for compliance with the regulations governing government contracts. A failure to comply with these regulations might result in suspension of these contracts, or administrative penalties.

We face burdens relating to the recent trend toward stricter corporate governance and financial reporting standards.

Adopted or new legislation or regulations that follow the trend of imposing stricter corporate governance and financial reporting standards, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002, have lead

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to an increase in our costs of compliance. A failure to comply with these new laws and regulations may impact market perception of our financial condition and could materially harm our business. Additionally, it is unclear what additional laws or regulations may develop, and we cannot predict the ultimate impact of any future changes.

We must successfully execute our strategy to introduce new products.

One of our key strategies is to expand our addressable portion of the oscilloscope and protocol analysis markets by introducing new products such as sampling oscilloscopes and protocol exercisers and probes. We have in the past withdrawn product lines due to implementation and financial concerns. The success of our new product offerings will depend on a number of factors, including our ability to identify customers’ existing and future needs properly and quickly, timely manufacture and deliver products that address these needs in sufficient volumes, differentiate offerings from competitors’ offerings, price products competitively and anticipate competitors’ development of new products or technological innovations.

Without the timely introduction of competitive products, our products may become technologically obsolete.

We generally sell our products in industries that are characterized by rapid technological changes, frequent new product announcements and introductions and changing industry standards. The development of new, technologically advanced products is a complex and uncertain process requiring high levels of innovation, highly skilled engineering and development personnel and accurate anticipation of technological and market trends. Consequently, product development delays are typical in our industry. If we fail to introduce competitive products timely, customers may defer placing orders in anticipation of future releases or may purchase products from competitors. Product development delays may result from numerous factors, including:

• changing product specifications and customer requirements;

• unanticipated engineering complexities;

• difficulties with or delays by contract manufacturers or suppliers of key components or technologies;

• difficulties in allocating engineering resources and overcoming resource limitations; and

• difficulties in hiring and retaining necessary technical personnel.

Without the timely introduction of new products, services and enhancements, our products may become technologically obsolete, in which case our revenue and operating results could suffer.

If we devote resources to developing products for emerging communications standards that ultimately are not widely accepted, our business could be harmed.

Our future growth depends, in part, upon our ability to develop, manufacture and sell in volume advanced verification systems for existing, emerging and yet unforeseen communications standards. We have little or no control over the conception, development or adoption of new standards. Moreover, even in relation to currently emerging standards, the markets are rapidly evolving and we have virtually no ability to impact the adoption of those standards. As a result, there is significant uncertainty as to whether markets for new and emerging standards ultimately will develop at all or, if they do develop, their potential size or future growth rate. We may incur significant expenses and dedicate significant time and resources to develop products for standards that fail to gain broad acceptance. Failure of a standard for which we devote substantial resources to gain widespread acceptance would likely harm our business.

If we fail to maintain and expand our relationships with the core or promoter companies in our target markets, we may have difficulty developing and marketing certain protocol analyzer products.

It is important to our success that we establish, maintain and expand our relationships with technology and infrastructure leader companies developing emerging communications standards in our target markets. We must

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work closely with these companies to gain valuable insights into new market demands, obtain early access to standards as they develop and help us design new or enhanced products. Generally, we do not enter into contracts obligating these companies to work or share their technology. Industry leaders could choose to work with other companies in the future. If we fail to establish, maintain and expand our industry relationships, we could lose first-mover advantage with respect to emerging standards and it would likely be more difficult for us to develop and market products that address these standards.

We operate in highly competitive markets and this competition could reduce our market share and harm our business.

The oscilloscope and protocol analysis markets are highly competitive and characterized by rapid and continual advances in technology. Additionally, the test and measurement industry has been subject to increased consolidation. Our principal competitors in these markets are Tektronix and Agilent. In November 2007, Danaher Corporation completed the acquisition of Tektronix, Inc. Both of our principal competitors have substantially greater sales and marketing, development and financial resources. We believe that Tektronix, Agilent and other competitors each offer a wide range of products that attempt to address most sectors of the oscilloscope and many sectors of the protocol analysis markets. We believe that further consolidation in the test and measurement industry could result in our competitors increasing their market share through business combinations.

We have historically engaged in intense competition with Tektronix. Some of our senior managers, including our chief executive officer, are former employees of Tektronix. In fiscal 1994, we settled litigation with Tektronix alleging that our oscilloscope products infringed certain patents held by Tektronix by entering into a license agreement for the right to use that intellectual property. In fiscal 2005, we settled intellectual property litigation with Tektronix in which both sides claimed patent infringement.

We believe that the principal bases of competition in the oscilloscope and protocol analysis markets are a product’s performance (bandwidth, sample rate, memory length and processing power), its price and quality, the vendor’s name recognition and reputation, product availability and the quality of post-sale support. If any of our competitors surpass us or are perceived to have surpassed us with respect to one or more of these factors, we may lose customers. We also believe that our success will depend in part on our ability to maintain and develop the advanced technology used in our oscilloscope products and protocol analyzers and our ability to offer high-performance products timely and at a favorable “price-to-performance” ratio. We cannot assure that we will continue to compete effectively.

A prolonged economic downturn could materially harm our business by decreasing capital spending.

Negative trends in the general economy, including trends resulting from actual or threatened military action by the United States and threats of terrorist attacks in the United States and abroad, could cause a decrease in capital spending in many of the markets we serve. In particular, a downward cycle affecting the computer and semiconductor, data storage devices, automotive and industrial, and military and aerospace markets would likely result in a reduction in demand for our products and would have a material adverse effect on our business, results of operations, financial condition and liquidity. In addition, if customers’ markets decline, we may not be able to collect outstanding amounts due to us. Such declines could harm our consolidated financial position, results of operations, cash flows and stock price, and could limit our ability to maintain profitability.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

There are no unresolved comments to be reported pursuant to Item 1B.

ITEM 2. PROPERTIES

We own our executive offices and manufacturing facility, which is an approximately 95,000 square foot building in Chestnut Ridge, New York. Pursuant to our secured credit agreement with Manufacturers Traders and Trust and other syndicated lenders, we granted the banks a security interest in this property. In addition, we lease other office space around the world to support our local sales and service operations and to support our research and development activities. Our Santa Clara, California premises also serve as a manufacturing facility for a limited number of products. We believe that our facilities are in good condition and are suitable and sufficient for our current operations.

ITEM 3. LEGAL PROCEEDINGS

From time to time, the Company is involved in lawsuits, claims, investigations and proceedings, including patent and environmental matters, which arise in the ordinary course of business. There are no matters pending that the Company expects to be material to its business, results of operations, financial condition or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of fiscal 2008, there were no matters submitted to a vote of securities holders, through the solicitation of proxies or otherwise.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Price Range of Common Stock

Our common stock is traded on the NASDAQ Global Market under the symbol “LCRY.” The following table sets forth, for the periods indicated, the high and low closing prices per share of our common stock as reported on the NASDAQ Global Market. As of August 30, 2008, there were 388 stockholders of record of our common stock.

	High		Low
Year Ended June 30, 2007:
First Quarter	$	14.03	$	12.30
Second Quarter		13.88		10.95
Third Quarter		11.50		8.22
Fourth Quarter		9.72		8.24
Year Ended June 28, 2008:
First Quarter	$	9.64	$	6.74
Second Quarter		9.99		7.40
Third Quarter		10.13		7.06
Fourth Quarter		9.80		7.60

Issuer Purchases of Equity Securities

On May 25, 2006, LeCroy’s Board of Directors approved the adoption of a share repurchase plan authorizing the Company to purchase up to 2 million shares, not to exceed $25 million, of its common stock. Purchases under this buyback program may be made from time to time on the open market and in privately negotiated transactions. The timing of these purchases is dependent upon several factors, including market conditions, the market price of the Company’s common stock, the effect of the share dilution on earnings, available cash and any other potential risks the Company may encounter. The share repurchase plan may be discontinued at any time at the discretion of the Company. Through fiscal 2007, the Company repurchased approximately 1.04 million shares of Company common stock in open market transactions at a cost of approximately $12.4 million.

The following table sets forth information regarding LeCroy’s purchases of its common stock on a monthly basis during fiscal 2008. Share repurchases are recorded on a trade date basis.

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Program	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2007 to July 31, 2007	—	$	—	—	961,717
August 1, 2007 to August 31, 2007	—	$	—	—	961,717
September 1, 2007 to September 30, 2007	46,000	$	7.28	46,000	915,717
October 1, 2007 to October 31, 2007	30,000	$	8.23	30,000	885,717
November 1, 2007 to November 30, 2007	32,131	$	9.23	32,131	853,586
December 1, 2007 to December 31, 2007	16,250	$	9.10	16,250	837,336
January 1, 2008 to January 31, 2008	13,750	$	9.43	13,750	823,586
February 1, 2008 to February 29, 2008	28,500	$	8.28	28,500	795,086
March 1, 2008 to March 31, 2008	95,654	$	7.68	95,654	699,432
April 1, 2008 to April 30, 2008	31,238	$	8.08	31,238	668,194
May 1, 2008 to May 31, 2008	4,000	$	8.46	4,000	664,194
June 1, 2008 to June 28, 2008	—	$	—	—	664,194
Total	297,523	$	8.11	297,523	664,194

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Equity Compensation Plan Information

Information regarding LeCroy’s equity compensation plans, including both stockholder approved plans and plans not approved by stockholders, is set forth in the section entitled “Executive Compensation — Equity Compensation Plan Information” in LeCroy’s Notice of Annual Meeting of Stockholders and Proxy Statement, to be filed within 120 days after LeCroy’s fiscal year end of June 28, 2008 (the “Proxy Statement”), which information is incorporated herein by reference.

Convertible Notes

On October 12, 2006, the Company sold and issued $72.0 million in convertible senior subordinated notes to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the “Notes”). The Notes bear interest at a rate of 4.00% per annum, payable in cash semi-annually in arrears on each April 15 and October 15, beginning April 15, 2007. The Notes mature on October 15, 2026 unless earlier redeemed, repurchased or converted. Holders of the Notes will have the right to require the Company to repurchase for cash all or a portion of their Notes on each of October 15, 2011, October 15, 2016 and October 15, 2021, at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest, if any, up to but not including, the repurchase date. The Company may, from time to time, at its option repurchase the Notes in the open market. In addition, the Company may redeem the Notes for cash, either in whole or in part, anytime after October 20, 2011 at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest, if any, up to but not including the redemption date. The Notes are convertible into Company common stock by the holders at an initial conversion rate equal to 68.7285 shares per $1,000 principal amount of the Notes (equal to an initial conversion price of approximately $14.55 per share), subject to adjustment as described in the indenture. During fiscal 2008, the Company repurchased $4.5 million of the outstanding convertible notes, resulting in a remaining balance of $67.5 million at June 28, 2008.

Dividend Policy

We have never declared or paid cash dividends on our common stock and do not anticipate paying any dividends in the foreseeable future. We currently intend to retain future earnings, if any, to operate and expand our business. Subject to the terms of our revolving credit agreement, our payment of any future dividends will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, cash needs and growth plans. Under the terms of our bank credit agreement, we are not permitted to declare or pay dividends other than dividends payable solely in additional shares of our equity securities.

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Performance Graph

The performance graph set forth below compares the cumulative total stockholder return of our Common Stock for the last five fiscal years through the fiscal year ended June 28, 2008 with that of the U.S. Nasdaq^® stock market index, and a peer group comprising the S&P Information Technology index. The graph assumes an investment of $100 on June 28, 2003 and the reinvestment of dividends (where applicable). The comparisons in this table are set forth in response to SEC disclosure requirements, and are not intended to forecast or be indicative of future performance of the Common Stock.

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ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data as of and for the year ended for each fiscal year presented has been derived from our consolidated financial statements for each of the years in the five-year period ended June 28, 2008. The following information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.

Consolidated Statements of Operations Data:

	Years Ended
	June 28, 2008(5)(6)			June 30, 2007(5)(6)			July 1, 2006(5)			July 2, 2005(5)			June 26, 2004
(In thousands, except per share amounts)
Revenues:
Test and measurement products(1)	$	151,077		$	143,244		$	151,197		$	154,877		$	116,573
Service and other(1)		9,409			8,056			9,339			10,101			8,367
Total revenues		160,486			151,300			160,536			164,978			124,940
Cost of revenues(2)(7)		70,132			69,419			63,476			73,632			52,594
Gross profit		90,354			81,881			97,060			91,346			72,346
Operating expenses:
Selling, general and administrative(3)(7)		53,101			55,369			51,622			57,341			43,997
Legal settlements		—			—			2,792			1,000			—
Research and development(4)(7)		31,398			36,685			30,123			28,050			15,760
Reimbursement from escrow account		(240	)
Total operating expenses		84,259			92,054			84,537			86,391			59,757
Operating income (loss)		6,095			(10,173	)		12,523			4,955			12,589
Write-off of deferred bank financing fees		—			(997	)		—			—			—
Gain on extinguishment of convertible debt, net of issue cost write-off		338			—			—			—			—
Interest income		298			124			813			564			716
Interest expense		(4,331	)		(4,293	)		(3,096	)		(2,742	)		(720	)
Other, net		(632	)		(99	)		(204	)		238			(7	)
Income (loss) from continuing operations before income taxes		1,768			(15,438	)		10,036			3,015			12,578
Provision (benefit) for income taxes		56			(2,231	)		3,463			872			4,653
Income (loss) from continuing operations		1,712			(13,207	)		6,573			2,143			7,925
Gain from discontinued operations, net of tax		—			—			—			—			119
Net income (loss)		1,712			(13,207	)		6,573			2,143			8,044
Redemption of convertible preferred stock		—			—			—			—			7,665
Net income (loss) applicable to common stockholders	$	1,712		$	(13,207	)	$	6,573		$	2,143		$	379
Net income (loss) per common share — basic:
Income (loss) from continuing operations applicable to common stockholders	$	0.15		$	(1.13	)	$	0.54		$	0.18		$	0.02
Gain from discontinued operations, net of tax		—			—			—			—			0.01
Net income (loss) applicable to common stockholders		0.15			(1.13	)		0.54			0.18			0.04
Net income (loss) per common share — diluted:
Income (loss) applicable to common stockholders	$	0.14		$	(1.13	)	$	0.53		$	0.17		$	0.02
Gain from discontinued operations, net of tax		—			—			—			—			0.01
Net income (loss) applicable to common stockholders		0.14			(1.13	)		0.53			0.17			0.03
Weighted average number of common shares:
Basic		11,749			11,702			12,218			11,774			10,754
Diluted		12,007			11,702			12,474			12,258			11,074
	June 28, 2008			June 30, 2007			July 1, 2006			July 2, 2005			June 26, 2004
(In thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents and marketable securities, current	$	10,224		$	10,448		$	16,972		$	13,866		$	38,100
Working capital		45,117			54,710			46,997			44,313			69,916
Total assets		226,986			231,319			201,974			193,168			129,793
Total debt and capital leases		67,734			85,029			38,130			45,489			196
Total stockholders’ equity		118,960			112,731			129,703			116,818			101,608

(1) Certain reclassifications have been made to prior years’ amounts to conform to the current year presentation.

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Service and other revenue in each of fiscal 2005 and 2004 includes the recognition of $1.3 million of revenue that was deferred with the adoption of the Securities and Exchange Commission’s Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” (“SAB 101”) as of the beginning of fiscal 2001. Fiscal 2006 includes recognition of the remaining balance of $0.7 million of previously deferred revenue under SAB 101.

(2) Cost of revenues in fiscal 2008 includes $3.2 million of charges for inventory write-downs, including inventory recorded at fair value in the purchase accounting for Catalyst. Approximately $2.4 million resulted from a change in the Company’s product strategy and approximately $0.8 million related to certain inventory recorded at fair value in the purchase accounting of Catalyst, a portion of which the Company was indemnified.

Cost of revenues in fiscal 2007 includes $3.4 million of charges for inventory write-downs related to operational changes and realignment of product strategy, a $0.4 million charge for severance and other related charges and a $0.3 million impairment charge of an intangible asset.

Cost of revenues in fiscal 2006 includes a $0.1 million charge for severance and other related charges.

Cost of revenues in fiscal 2005 includes $2.7 million of charges for inventory write-downs related to a change in our long-term product support, $1.8 million in other inventory write-downs, $1.5 million of asset impairment charges, and a $0.1 million charge for severance and other related charges.

(3) In Selling, general and administrative expense in fiscal 2008, 2007, 2006 and 2005, the Company recorded a charge for severance and other related costs of $1.0 million, $1.4 million, $0.2 million and $1.5 million, respectively. Included in selling, general and administrative expense in fiscal 2004 is the reversal of an unused 2002 restructuring reserve of $0.1 million. Additionally, fiscal 2008 includes a $0.7 million impairment charge of an intangible asset.

(4) Research and development in each of fiscal 2008, 2007, 2006, 2005 and 2004 includes severance-related charges of zero, $0.5 million, $0.1 million and $0.1 million and zero, respectively.

(5) Results for fiscal 2008, 2007, 2006 and 2005 include Computer Access Technology Corporation (“CATC”) acquired October 29, 2004.

(6) Results for fiscal 2008 and 2007 include Catalyst Enterprises, Inc. (“Catalyst”) acquired October 2, 2006.

(7) Results for fiscal 2008, 2007 and 2006 include the effect of SFAS 123(R), “Share-based Compensation,” which was adopted by the Company on July 3, 2005. Total share-based compensation expense recorded in the Consolidated Statement of Operations for the years ended June 28, 2008, June 30, 2007 and July 1, 2006 was approximately $4.7 million, $5.2 million and $5.3 million, respectively.

In fiscal 2008, share-based compensation expense of approximately $0.1 million was recorded to Cost of revenue, $3.3 million was recorded to Selling, general and administrative, and $1.2 million was recorded to Research and development. In fiscal 2007, share-based compensation expense of approximately $0.1 million was recorded to Cost of revenue, $3.4 million was recorded to Selling, general and administrative, and $1.6 million was recorded to Research and development. Additionally, in fiscal 2006, share-based compensation expense of approximately $0.1 million was recorded to Cost of revenue, $3.6 million was recorded to Selling, general and administrative, and $1.7 million was recorded to Research and development.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the other financial information and consolidated financial statements and related notes appearing elsewhere in this Form 10-K and the documents incorporated by reference herein. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a variety of factors, including those discussed in “Risk Factors” and elsewhere in this Form 10-K.

Overview

We were founded in 1964 to develop, manufacture and sell high performance signal analysis tools to scientists engaged in high-energy physics research. In 1985 we introduced our first oscilloscope using our core competency of designing signal acquisition and digitizing technology.

We are a leading, worldwide provider of oscilloscopes and protocol analyzers as well as a provider of related test and measurement equipment and currently operate as one business segment in the Test and Measurement market. Our oscilloscopes are tools used by designers and engineers to measure and analyze complex electronic signals in order to develop high-performance systems, to validate electronic designs and to improve time to market. We currently offer six families of oscilloscopes, which address different solutions to the markets we serve: WaveExpert, a powerful family of sampling oscilloscopes and modules; WaveMaster, one of our high performance product families; WavePro, which is targeted at the mid- to high-performance sector; WaveRunner, designed for the mid-performance sector; WaveSurfer, designed for value-oriented users in the low-performance bandwith sector of the market; and WaveJet, our entry-level oscilloscope products. Our protocol analyzers are tools used by designers and engineers to generate and monitor traffic over high speed serial data interfaces, including USB2.0, Bluetooth, PCI Express, Serial ATA, Serial Attached SCSI (SAS), Wireless USB, and others.

We sell our products into a broad range of end markets, including Computer/Semiconductor/Consumer Electronics, Data Storage, Automotive/Industrial, and Military/Aerospace markets. We believe that our products offer the strongest value proposition in these markets by providing advanced analysis capabilities coupled with innovative and proprietary technology features. We believe designers in all of these markets are developing products which rely on increasingly complex electronic signals to provide the features and performance their customers require.

We employ a direct sales model utilizing a highly skilled global sales force where it makes economic sense to do so. We supplement our direct sales force with a combination of manufacturers’ representatives and distributors in certain geographic areas. We divided the world into four areas — North America, Europe/Middle East, Japan and Asia/Pacific. In North America we sell our products directly in the United States and have a strong manufacturers’ representative channel. In Europe/Middle East, we sell our products directly in Switzerland, Germany, Italy, France, the United Kingdom and Sweden. In Japan, we sell our products through distributors. In Asia/Pacific, we sell our products directly in South Korea, Singapore and five regions in China.

We generate revenue in a single segment within the Test and Measurement market, primarily from the sale of our oscilloscopes, protocol analyzers, probes, accessories, and applications solutions. To a lesser extent, we also generate revenue from the sales of our extended warranty, maintenance contracts and repairs and calibrations on our instruments after their warranties expire.

Generally, we transact revenues and pay our operating expenses in the local currencies of the countries in which we have a direct distribution presence or other operations, with limited exceptions, most notably in China where our sales and operating expenses are denominated in U.S. dollars. In Europe/Middle East, we transact business in Euros, Swiss francs, British pounds, Swedish krona and U.S. dollars. In Japan, we transact business in Japanese yen. In South Korea, we transact business in Korean won and in Singapore, we transact business in both U.S. dollars and Singapore dollars. For a discussion of our foreign currency exchange rate exposure, see below, Item 7A of this Part II entitled “Quantitative and Qualitative Disclosure About Market Risk.”

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Historically, we have, at times, experienced lower levels of demand during our first fiscal quarter than in other fiscal quarters which, we believe, have been principally due to the lower level of general market activity during the summer months, particularly in Europe.

Cost of revenues represents manufacturing and service costs, which primarily comprise materials, labor and factory overhead. Gross profit represents revenues less cost of revenues. Additional factors integral to gross profit earned on our products are mix, as the list prices of our products range from $2,900 to $205,000, and the effects of foreign currencies, as approximately two-thirds of our revenues are derived overseas, much of which is denominated in local currencies while product manufacturing costs are primarily U.S. dollar denominated.

Selling, general and administrative expenses consist of salaries and related overhead costs for sales, marketing and administrative personnel as well as legal, accounting and other professional services.

Research and development expenses consist primarily of salaries and related overhead costs associated with employees engaged in research, design and development activities, as well as the cost of masks, wafers and other materials and related test services and equipment used in the development process.

Our results of operations and financial position are affected by a variety of factors. As discussed below, we believe the most significant recurring factors are the economic strength of the technology markets into which we sell our products, our ability to identify market demands and develop competitive products to meet those demands, the announcements and actions of our competitors and our ability to enter into new markets and broaden our presence in existing markets.

Our sales are largely dependent on the health and growth of technology companies whose operations tend to be cyclical. Consequently, demand for our products tends to coincide with the increase or decrease in capital spending in the technology industry.

In addition, in response to fluctuations in the technology markets we target, we continually assess and adopt programs aimed at positioning us for long-term success. These programs may include streamlining operations, discontinuing older and less profitable product lines, changing our future product strategy, and reducing operating expenses from time to time. As an example, we implemented business realignment and restructuring initiatives intended to reduce costs and more efficiently allocate product development resources. For a more detailed discussion of our restructuring efforts in fiscal 2008, 2007 and 2006, see the Section entitled “Business Realignment, Restructuring Initiatives and Related Asset Impairments,” below.

We face significant competition in our target markets. We believe that in order to continue to compete successfully, we need to timely anticipate, recognize and respond to changing market demands by providing products that serve our customers’ needs as they arise at prices acceptable to the market. We believe that we compete favorably with our competition in each of these areas. Consequently, we are constantly reviewing our product development strategy and invest time, resources and capital in development projects we deem most likely to succeed.

In furtherance of our drive to meet our customers’ changing demands, we also look outside our organization for opportunities to expand our markets. Accordingly, on October 29, 2004 and October 2, 2006, we completed the acquisitions of Computer Access Technology Corporation (“CATC”) and Catalyst Enterprises, Inc. (“Catalyst”), respectively, to complement our expanding portfolio of serial data test solutions. This division, Protocol Solutions Group (“PSG”), now represents about 20% of our total business. In March 2006, we completed purchase and settlement agreements with Iwatsu Electric Corporation that included the rights to a new low-end product line, ‘ViewGo,’ re-engineered and launched as the WaveJet Family of products, as well as unrelated intellectual property designs and a 10-year non-compete agreement.

Also in fiscal 2006, we transformed our entire low and mid-range product lines by introducing a new line of WaveRunners and WaveSurfers and adding the new WaveJet product line noted above. Additionally, we expanded our high-end product line by introducing the SDA18000. We believe that our diversified product mix strategically positions us to expand our presence in the oscilloscope market.

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Catalyst Acquisition

On September 29, 2006, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) among the Company, 2006 Franklin Congress Corporation, a California corporation and a wholly owned subsidiary of the Company (“Sub”), Catalyst, and Nader Salehomoum, as Equityholder Representative, pursuant to which Sub merged with and into Catalyst (the “Catalyst Merger”), with Catalyst continuing as the surviving corporation and as a 100% owned subsidiary of the Company. Catalyst is a manufacturer of data bus analysis and emulation tools for advanced serial data communications and strengthens the Company’s position in protocol solutions.

The Catalyst Merger was recorded under the purchase method of accounting, which requires that the total consideration be allocated to the assets acquired and liabilities assumed based on their fair values. On October 2, 2006, the effective date of the Catalyst Merger, all shares of common stock of Catalyst issued and outstanding immediately prior to the Catalyst Merger were exchanged for approximately $26.7 million in cash immediately. In addition, pursuant to the terms of the Merger Agreement, 10% of the stated consideration was placed into escrow for the twelve-month period following the closing of the Catalyst Merger to secure certain indemnification obligations under the terms of the Merger Agreement.

LeCroy paid cash of $31.5 million, including direct transaction costs of $2.6 million, net of cash acquired of $1.0 million, using proceeds from the Revolver under the Prior Credit Agreement, issued a $3.5 million, 6% promissory note payable on January 2, 2008, to Nader Salehomoum, the former sole shareholder of Catalyst and current employee of the Company and assumed the fair value of certain vested Catalyst stock options totaling $0.5 million (See Note 2 — Catalyst Acquisition and Note 13 — Long-term Debt and Capital Leases for additional information).

Business Realignment, Restructuring Initiatives and Related Asset Impairments

The following business realignment, restructuring initiatives and related asset impairments represent our best efforts to respond to the current demands in our industry. However, these and future cost reductions, or other benefits expected from the business realignment and restructuring initiatives may be insufficient to align our operations with customer demand and the changes affecting our industry, or may be more costly or extensive than currently anticipated.

Fiscal 2008 Business Realignment and Related Asset Impairment

In the fourth quarter of fiscal 2008, the Catalyst tradename failed the impairment test as a result of a change in our product strategy, and therefore, we recorded an approximate $0.7 million non-cash charge to Selling, general and administrative expense for the impairment. Our change in product strategy resulted from the development of a next generation product architecture, which supports the best features of the LeCroy and Catalyst product lines. This change in product strategy allows us to streamline our product offering and provide customers with products that incorporate the best of both worlds, while freeing up resources consumed by the old dual product line structure.

In the third quarter of fiscal 2008, as a result of streamlining operational management processes and staffing requirements, we recorded severance of approximately $0.3 million, which was expensed to Selling, general and administrative. This resulted from headcount reductions of three employees or 0.7% of the workforce as compared to June 30, 2007. As of June 28, 2008, approximately $0.1 million has been paid in cash and approximately $0.2 million remains in Accrued expenses and other current liabilities on the Consolidated Balance Sheet. Severance is estimated to be paid by the end of the third quarter of fiscal 2009.

In the first quarter of fiscal 2008, primarily as the result of an effort to improve sales effectiveness and channel management, we recorded severance of approximately $0.6 million, which was expensed to Selling, general and administrative. This resulted from headcount reductions of twelve employees or 2.7% of the workforce as compared to June 30, 2007. As of June 28, 2008, approximately $0.5 million has been paid in cash and approximately $0.1 million remains in Accrued expenses and other current liabilities on the Consolidated Balance Sheet. Severance is estimated to be paid by the end of the first quarter of fiscal 2009.

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Fiscal 2007 Restructuring Initiatives

In the fourth quarter of fiscal 2007, as a result of local economic conditions in Japan, we changed our Japan sales strategy and approved a restructuring plan related to the Japanese operations which resulted in the closure of certain office facilities in Japan, which included lease termination costs. As a result of the office closures, there were headcount reductions of four employees or 0.9% of the workforce as compared to July 1, 2006. As a result, we recorded severance and related expenses of approximately $0.1 million and facility closure costs of approximately $0.2 million, which was expensed to Selling, general and administrative. As of June 28, 2008, approximately $0.3 million has been paid in cash and no accrual remains on the Consolidated Balance Sheet.

Fiscal 2007 Business Realignment and Related Asset Impairment

In the fourth quarter of fiscal 2007, an intangible asset failed the impairment test due to a change in our product strategy and, accordingly, we took an approximate $0.3 million non-cash charge to Cost of revenues for the impairment.

In the third quarter of fiscal 2007, prompted by the acquisition of Catalyst, we evaluated certain business processes and staffing requirements. As a result, we recorded severance and related expense of approximately $1.6 million, of which approximately $0.3 million was expensed to Cost of revenues, $1.2 million was expensed to Selling, general and administrative and $0.1 million was expensed to Research and development. The implementation of this plan resulted in headcount reductions of thirty-three employees or 7.2% of the workforce as compared to July 1, 2006. As of June 28, 2008, approximately $1.5 million has been paid in cash and approximately $0.1 million remains in Accrued expenses and other current liabilities. Severance and other related amounts under this plan are estimated to be paid by the end of the second quarter of fiscal 2009.

In the second quarter of fiscal 2007, as a result of a change in our organization stemming from the Catalyst acquisition, we recorded severance and related expenses of approximately $0.4 million, of which approximately $0.1 million was expensed to Selling, general and administrative and $0.3 million was expensed to Research and development. The implementation of this plan resulted in headcount reductions of eleven employees or 2.4% of the workforce as compared to July 1, 2006. Severance and other related amounts under this plan were fully paid by the end of fiscal 2007.

Fiscal 2006 Business Realignment

During the fourth quarter of fiscal 2006, we realigned some of our business processes and as a result, incurred severance and related expenses of approximately $0.4 million, of which approximately $0.1 million was expensed to Cost of revenues, $0.1 million was expensed to Research and development and $0.2 million was expensed to Selling, general and administrative. The implementation of this plan resulted in headcount reductions of sixteen employees or 3.5% of the workforce as compared to July 2, 2005. As of June 28, 2008, severance and other related amounts under this plan were fully paid.

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The table below summarizes the charges for business realignment, restructuring initiatives and related asset impairments for the fiscal years ended 2008, 2007 and 2006 (See Note 5 — Inventories for additional information).

(in thousands):

	Years Ended
	June 28, 2008		June 30, 2007		July 1, 2006
Charges for:
Impaired intangible assets	$	—	$	250	$	—
Severance and related costs		—		358		77
Cost of revenues	$	—	$	608	$	77
Charges for:
Severance and related costs	$	—	$	467	$	127
Research and development	$	—	$	467	$	127
Charges for:
Impaired intangible asset	$	699	$	—	$	—
Severance and related costs		954		1,248		176
Facility closure		—		156		—
Selling, general and administrative	$	1,653	$	1,404	$	176

Critical Accounting Policies

The discussion and analysis of our financial position and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles. Our significant accounting policies are described in Note 1 to the Consolidated Financial Statements. The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the Consolidated Financial Statements and accompanying notes. These estimates and assumptions are based on management’s judgment and available information and, consequently, actual results could differ from these estimates.

The accounting policies that we believe are the most critical in understanding and evaluating our reported financial results include: revenue recognition; reserves on accounts receivable; allowance for excess and obsolete inventory; uncertain tax positions; valuation of deferred tax assets; valuation of long-lived and intangible assets; valuation of goodwill; estimation of warranty liabilities and share-based compensation expense.

Revenue Recognition. We enter into agreements to sell products, services, and other arrangements that include combinations of products and services. Revenue from product sales, net of allowances for anticipated returns, is recognized provided that persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectibility is reasonably assured. Delivery is considered to have occurred when title and risk of loss have transferred to the customer, or when services have been provided. The price is considered fixed or determinable when it is not subject to refund or adjustments.

Revenue from services is deferred and recognized on a straight-line basis over the contractual period or as services are rendered and accepted by the customer. When arrangements include multiple elements, we use relative fair values to allocate revenue to the elements and recognize revenue when the criteria for revenue recognition have been met for each element. The amount of revenue recognized is affected by our judgments as to whether an arrangement includes multiple elements and if so, whether objective and reliable evidence of fair value exists for those elements. Changes to the elements in an arrangement and the ability to establish objective and reliable evidence of fair value for those elements could affect the timing of the revenue recognition.

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Due to the significant software content of our protocol analyzer products, we recognize revenue on the sale of these products in accordance with American Institute of Certified Public Accountants Statement of Position 97-2, “Software Revenue Recognition” (“SOP 97-2”) as amended by Statement of Position 98-9, “Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions”, upon shipment provided there is persuasive evidence of an arrangement, the product has been delivered, the price is fixed or determinable and collectibility is probable. Software maintenance support revenue is deferred based on its vendor specific objective evidence of fair value (“VSOE”) and recognized ratably over the maintenance support periods. Provisions for warranty costs are recorded at the time products are recognized as revenue. Revenues from protocol analyzer products are included in Test and measurement products in the Consolidated Statements of Operations.

In the first quarter of fiscal 2006, in an effort to provide end-user customers an alternative to purchasing the Company’s higher end products under its standard terms and conditions, the Company began offering customers an opportunity to enter into sales-type or direct financing leases for these products. The Company is accounting for these leases in accordance with Statement of Financial Accounting Standards (SFAS) No. 13, “Accounting for Leases.” Lease and rental revenues are reported within Test and measurement product revenue.

Reserves on Accounts Receivable. We maintain an allowance for doubtful accounts relating to the portion of the accounts receivable which we estimate is non-collectible. We analyze historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment patterns when evaluating the adequacy of the allowance for doubtful accounts. The allowance for doubtful accounts, which includes the allowance for anticipated returns, was approximately $0.7 million and $0.9 million at June 28, 2008 and June 30, 2007, respectively. Changes in the overall economic environment or in the financial condition of our customers may require adjustments to the allowance for doubtful accounts which could have a material adverse effect on our consolidated financial position, results of operations and cash flows.

Allowance for Excess and Obsolete Inventory. We assess the valuation of our inventory on a quarterly basis and provide an allowance for the value of estimated excess and obsolete raw materials and work in process inventory. Our marketing department plays a key role in our inventory review process by providing updated sales forecasts, managing product rollovers and working with our manufacturing department to maximize recovery of excess inventory. Based upon management’s forecast, inventory items no longer expected to be used in the future are considered obsolete and the difference between an inventory’s quantity and its forecasted usage are classified as excess. The allowance for excess and obsolete inventory was $4.5 million and $2.7 million at June 28, 2008 and June 30, 2007, respectively. If actual market conditions are less favorable than those projected by management, additional inventory allowances for excess or obsolete inventory may be required.

Uncertain Tax Positions. On July 1, 2007, we adopted Financial Accounting Standards Board (FASB) Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes”, as amended by FASB Staff Position No. 48-1 (“FSP-FIN 48-1”), “Definition of Settlement in FASB Interpretation 48”. FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. FIN 48 states that a tax benefit from an uncertain tax position may be recognized only if it is “more likely than not” that the position is sustainable, based on its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit greater than 50% likely of being realized upon settlement with a taxing authority having full knowledge of all relevant information. This measurement is inherently difficult and requires subjective estimations. We reevaluate the uncertain tax positions each quarter based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues, and new audit activity. Such a change in recognition or measurement could result in the recognition of a tax benefit or an additional charge to the tax provision in the period. Although we believe the measurement of our liabilities for uncertain tax positions is reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals. If additional taxes are assessed as a result of an audit or litigation, it could have a material effect on our income tax provision and net income in the period or periods for which that determination is made.

A tax benefit from an uncertain position was previously recognized if it was probable of being sustained. Under FIN 48, the liability for unrecognized tax benefits is classified as non-current unless the liability is expected to be settled in cash within twelve months of the reporting date.

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Valuation of Deferred Tax Assets. We have recorded approximately $18.7 million of deferred tax assets as of June 28, 2008 for the future tax benefits of temporary differences between our financial statements and tax return. Significant components of our deferred tax assets are federal, state and foreign net operating loss and credit carryforwards, deferred research expenses, inventory reserves and other reserves. The recorded amount of approximately $18.7 million is net of reductions in our gross deferred tax assets for tax exposures under FIN 48. Tax exposures under FIN 48 that reduced the carrying amount of our deferred tax assets totaled approximately $8.6 million as of June 28, 2008 and approximately $7.7 million upon adoption of FIN 48 on July 1, 2007.

In addition to the reduction of our gross deferred tax assets under FIN 48, we recorded a valuation allowance of approximately $1.7 million as of June 28, 2008 to reserve for certain tax credits, capital loss carryforwards and foreign net operating loss carryforwards due to the uncertainty surrounding the utilization of these deferred tax assets. The recognition of the deferred tax asset, after accounting for tax exposures under FIN 48, is based on the assessment that it is more likely than not that we will be able to generate sufficient future taxable income within statutory carryforward periods to realize the benefit of these tax benefits. The factors that management considered in assessing the likelihood of realization included, the forecast of future taxable income, reversal of taxable temporary differences and available tax planning strategies that could be implemented to realize the deferred tax assets. Adjustments to the valuation allowance may be made in the future if it is determined that the realizable amount of net operating losses and other deferred tax assets is greater or less than the amount recorded. Such adjustments may be material to our consolidated financial position and results of operations when made.

Valuation of Long-Lived and Intangible Assets. We assess the recoverability of our long-lived assets and intangible assets (including technology, manufacturing and distribution rights and patents and other intangibles) whenever events or changes in circumstances indicate that the carrying values may not be recoverable, but not less than once annually. When such events or changes in circumstances occur, we assess the recoverability of long-lived assets and intangible assets by determining whether the carrying values of such assets will be recovered through undiscounted expected future cash flows. If the undiscounted cash flows are less than the carrying amounts, an impairment loss is recorded to the extent that the carrying amounts exceed the fair value. Factors which could trigger an impairment review include the following: significant underperformance by us relative to historical or projected operating results; significant changes in the manner of our use of the assets or the strategy for the overall business; and significant negative industry or economic trends. We recognized intangible asset impairments of approximately $0.7 million and $0.3 million in fiscal 2008 and 2007, respectively, due to changes in product strategy, which eliminated the usefulness and value of the assets. There was no impairment indicators during fiscal year ended July 1, 2006.

Valuation of Goodwill. SFAS No. 142, “Goodwill and Other Intangible Assets,” (“SFAS 142”) requires goodwill to be tested for impairment annually, or more frequently, if events or changes in circumstances indicate that the carrying amount of the asset might be impaired. The goodwill impairment test is a two-step process which requires management to make judgmental assumptions regarding fair value. Testing is required between annual tests if events occur or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. Such an event may occur if, for an extended period of time, the market value of the Company’s common stock plus a control premium were less than the carrying value of the Company. We obtain information on sales of similar sized companies in the technology industry to estimate a control premium.

Management also reviews our financial position quarterly for other triggering events as described in SFAS 142. Should actual results not meet expectations or assumptions change in future years, the impairment assessment could result in a lower fair value estimate which could result in an impairment charge that may materially affect the carrying value of our assets and results from operations.

Impairment is assessed at the “reporting unit” level by applying a fair value-based test. A reporting unit is defined as the same as or one level below the operating segment level as described in SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” We have one reporting unit, in the test and measurement business, because none of the components of our Company constitute a business for which discrete financial information is available and for which management regularly reviews the results of operations.

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The first step is to identify if an impairment of goodwill has occurred by comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill test is performed to measure the amount of the impairment loss, if any. In this second step, the “implied” fair value (as defined in SFAS 142) of the reporting unit’s goodwill is compared with the carrying amount of the goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of the goodwill.

As our company consists of only one reporting unit, and is publicly traded, management estimates the fair value of its reporting unit utilizing our market capitalization, multiplying the number of actual shares outstanding by a one year average market price, as reflected on NASDAQ National Market, and applying an additional premium to give effect to management’s best estimate of a control premium, as if our company were to be acquired by a single stockholder, which seeks to give effect to the increased consideration a potential acquirer would be willing to pay in order to gain sufficient ownership to set policies, direct operations and make decisions related to our company.

A 30% control premium was utilized in our goodwill impairment testing in fiscal 2008. This control premium is not a standard amount based on broad assumptions; rather, the amount is based on detailed analysis that considers appropriate industry, market, economic and other pertinent factors, including, indications of such premiums from data on recent acquisition transactions. The control premium is reviewed periodically, taking into consideration current industry, market and economic conditions along with other factors or available information specific to our business.

As a result of the decline in our stock price since June 30, 2007, which affected our market capitalization, we updated our goodwill impairment test during interim periods in fiscal 2008 to identify whether a potential impairment of our recorded goodwill existed. No impairment resulted from our fiscal 2008 interim testing. In the fourth quarter of fiscal 2008, the Company changed its annual impairment testing date from fiscal year end to the last day of the eleventh month of the fiscal year. The Company believes the last day of the eleventh month of the fiscal year is preferable as it provides the Company additional time to complete the impairment test and report the results of that test in the Company’s annual filing on Form 10-K. We completed our annual impairment test required under SFAS 142 for both fiscal 2008 and 2007 and determined that there was no impairment to the recorded goodwill balance of $105.8 million and $105.9 million, respectively.

Management’s estimate of an appropriate control premium to apply in determining fair value is an important variable in our goodwill impairment assessment, and is subject to change. A significant impairment could result in additional charges and have a material adverse impact on the consolidated financial position and results of operations.

Warranty Liabilities. Provisions for estimated expenses related to product warranties are made at the time products are sold. These estimates are derived from historical data of product reliability and for certain new products, published (by a third party) expected failure rates. The expected failure is arrived at in terms of units, which are then converted into labor hours to which an average fully burdened cost per hour is applied to derive the amount of accrued warranty required. On a quarterly basis, we study trends of warranty claims, review estimates of costs to repair and take action to improve the quality of our products and minimize our warranty exposure. The warranty reserve was approximately $1.3 million, $1.2 million, and $1.0 million at June 28, 2008, June 30, 2007 and July 1, 2006, respectively. Management believes that the warranty reserve is appropriate; however, actual claims incurred could differ from the original estimates, requiring adjustments to the reserve.

Share-based Compensation Expense. In the first quarter of fiscal 2006, we adopted the provisions of SFAS 123R, “Share-based Payment”, which requires that the cost resulting from all share-based payment transactions be recognized in the financial statements at their fair values. We adopted SFAS 123R using the modified prospective application method under which the provisions of SFAS 123R apply to new awards and to awards modified, repurchased, or cancelled after the adoption date. We use the Black-Scholes option pricing model to estimate the fair value of options and stock appreciation rights. The fair value of stock options is estimated on the date of grant,

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while the fair value for stock appreciation rights is estimated on the date of grant and remeasured at each subsequent reporting period, since it is liability-classified. Determining the fair value of options and stock appreciation rights requires certain estimates by management including the expected volatility and expected term of the option. Management also makes decisions regarding the risk free interest rate used in the model and makes estimates regarding forfeiture rates. If our actual forfeiture rate is materially different from our estimate or if we reevaluate the forfeiture rate in the future, the share-based compensation expense could be significantly different from what was recorded in the current periods. Further, fluctuations in the market that affect these estimates could have an impact on the resulting compensation cost. Total share-based compensation expense recorded in the Consolidated Statement of Operations for the years ended June 28, 2008, June 30, 2007 and July 1, 2006 was approximately $4.7 million, $5.2 million and $5.3 million, respectively.

Results of Operations

The following table sets forth certain operating data as a percentage of our total revenues for the fiscal years indicated:

	Year Ended
	June 28, 2008		June 30, 2007		July 1, 2006
Revenues:
Test and measurement products(1)	94.1	%	94.7	%	94.2	%
Service and other(1)	5.9		5.3		5.8
Total revenues	100.0		100.0		100.0
Cost of revenues	43.7		45.9		39.5
Gross profit	56.3		54.1		60.5
Operating expenses:
Selling, general and administrative	33.1		36.6		32.2
Legal settlement	—		—		1.7
Research and development	19.6		24.2		18.8
Reimbursement from escrow account	(0.2	)	—		—
Total operating expenses	52.5		60.8		52.7
Operating income (loss)	3.8		(6.7	)	7.8
Other income (expense):
Interest income	0.2		0.1		0.5
Interest expense	(2.7	)	(2.8	)	(1.9	)
Write-off of bank deferred financing fees	—		(0.7	)	—
Gain on extinguishment of convertible debt, net of issue cost write-off	0.2		—		—
Other, net	(0.4	)	(0.1	)	(0.1	)
Other expense, net	(2.7	)	(3.5	)	(1.5	)
Income (loss) before income taxes	1.1		(10.2	)	6.3
Provision (benefit) for income taxes	0.0		(1.5	)	2.2
Net income (loss)	1.1	%	(8.7	)%	4.1	%

(1) Certain reclassifications have been made to prior years’ amounts to conform to the current year presentation.

Comparison of Fiscal Years 2008 and 2007

Total revenues were approximately $160.5 for the year ended June 28, 2008, compared to approximately $151.3 million in the prior year, representing an increase of 6.1%, or approximately $9.2 million, primarily as a result of increased sales of Test and measurement products and positive foreign currency impact. Foreign currency fluctuations increased total revenues by approximately $4.4 million in fiscal 2008 as compared to fiscal 2007. The

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increase in Test and measurement products was driven mainly by increased oscilloscope product shipments as a result of an improved distribution channel and the incremental impact from the Catalyst acquisition in the second quarter of fiscal 2007, which was approximately 1.8% of revenues. These increases were partially offset by decreased demand and softness in orders from Japan.

Service and other revenues primarily consist of service revenues and maintenance fees. Service and other revenues were approximately $9.4 million for the year ended June 28, 2008, representing an increase of 16.8% or approximately $1.4 million, as compared to approximately $8.1 million for the prior year. The increase was primarily the result of a company-wide service initiative that began during fiscal 2008 to improve customer service by focusing on opportunities to add value to our products, positive foreign currency impact and an improved distribution channel.

Our geographic breakdown of revenues by area in total dollars and as a percentage of total revenues is as follows (in thousands):

	June 28, 2008		June 30, 2007			June 28, 2008		June 30, 2007
North America	$	52,883	$	50,891	North America	33.0	%	33.6	%
Europe/Middle East		57,982		51,899	Europe/Middle East	36.1		34.3
Japan		12,125		16,929	Japan	7.6		11.2
Asia/Pacific		37,496		31,581	Asia/Pacific	23.3		20.9
Total revenues	$	160,486	$	151,300	Total revenues	100.0	%	100.0	%

For the year end June 28, 2008, the geographic revenues in terms of dollars were higher in all regions except Japan. The increases in Europe/Middle East and Asia/Pacific were driven by strong distribution channels and improved sales productivity, as well as favorable foreign currency impact. Improved performance in North America resulted from our reorganized distribution channel, including a network of manufacturers’ representatives. Foreign currency fluctuations increased Europe/Middle East revenues by approximately $4.2 million in fiscal 2008 as compared to fiscal 2007. These increases were offset by decreases in Japan, primarily from the realignment of our Japan operations at the end of fiscal 2007 and local economic conditions.

Gross profit for the year ended June 28, 2008 was approximately $90.4 million, or 56.3% gross margin, compared to $81.9 million, or 54.1% gross margin, for the same period last year. The lower gross margin in fiscal 2007 was primarily attributable to approximately $3.4 million of costs associated with an inventory write-down, including inventory recorded at fair value in the purchase accounting for Catalyst and the elimination of a product line, $1.7 million of costs associated with the sell through of “stepped up” inventory acquired in the Catalyst acquisition, $0.4 million relating to the implementation of a business realignment and $0.3 million charge for the impairment of an intangible asset. The gross margin in fiscal 2008 included approximately $3.2 million for inventory write-downs. Approximately $2.4 million resulted from a change in the Company’s product strategy and approximately $0.8 million related to certain inventory recorded at fair value in the purchase accounting for Catalyst, a portion of which we were indemnified. This charge was partially offset by a reduction in amortization expense for an acquired Catalyst intangible asset of approximately $1.3 million. Absent these non-cash charges in both years, fiscal 2008 margins as a percentage of sales were consistent with the fiscal 2007.

Selling, general and administrative (“SG&A”) expense was approximately $53.1 million in fiscal 2008 compared to approximately $55.4 million in fiscal 2007, representing a decrease of 4.1% or approximately $2.3 million. The decrease was primarily attributable to a reduction in general spending levels, resulting from the prior year’s cost-cutting efforts. Business realignment charges in fiscal 2008 were approximately $1.0 million. Additionally, the Catalyst trade name failed the intangible asset impairment test due to a change in our product strategy, and accordingly we took a non-cash charge of approximately $0.7 million in the fourth quarter of fiscal 2008. Business realignment and restructuring charges in fiscal 2007 were approximately $1.4 million, prompted by the acquisition of Catalyst as well as the reorganization of our Japan facility. As a percentage of revenue, SG&A expense decreased from 36.6% in fiscal 2007 to 33.1% in fiscal 2008 as a result of a higher sales base as well as benefits derived from fiscal 2007 cost-cutting and realignment efforts.

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Research and development (“R&D”) expense was approximately $31.4 million in fiscal 2008 compared to approximately $36.7 million in fiscal 2007, a decrease of 14.4% or approximately $5.3 million. As a percentage of total revenues, R&D expense decreased from 24.2% in fiscal 2007 to 19.6% in fiscal 2008. The decrease resulted primarily from the $4.0 million charge for acquired in-process research and development costs related to the Catalyst acquisition and approximately $0.5 million of realignment charges, both recorded in fiscal 2007. Also contributing to the decrease in R&D expense were reductions in expenses in fiscal 2008 incurred for prototype materials and supplies and general spending levels.

Reimbursement from escrow account represents fiscal 2008 income resulting from the final Catalyst indemnification release. We received approximately $0.2 million from the remaining Catalyst escrow balance, representing the indemnification obligation for certain Catalyst inventory, assumed at acquisition.

Other expense, net, which consists primarily of interest income and expense and foreign exchange gains and losses, was approximately $4.3 million for the year ended June 28, 2008, compared to approximately $5.3 million for fiscal 2007. Net interest expense was approximately $4.0 million and $4.2 million in fiscal 2008 and 2007, respectively. There was a foreign exchange loss of approximately $0.6 million in fiscal 2008 compared to a loss of approximately $0.3 million in the prior year, resulting from the changes in our foreign exchange forward contracts and on transactions denominated in other than our functional currency or that of our subsidiaries. Additionally, fiscal 2008 Other expense, net includes a Gain on extinguishment of convertible debt, net of issue cost write-off of approximately $0.3 million, resulting from the repurchase of $4.5 million of the our convertible notes. Fiscal 2007 Other expense, net includes a charge of approximately $1.0 million for the write-off of bank deferred financing fees associated with the repayment of the term loan and revolver under the prior credit agreement.

The effective tax rate for fiscal 2008 was 3.2%, compared to an effective tax rate of (14.5)% for fiscal 2007. The effective tax rate for fiscal 2008 includes the effect of a reduction of tax expense of approximately $0.5 million resulting from true-ups of the tax provision to previously filed tax returns; and an election for certain R&D credits made by the Company in the second quarter of fiscal 2008; a reduction of tax expense of approximately $0.4 million from the recognition of unrecognized tax benefits due to the expiration of the statute of limitations; and an increase in tax expense of approximately $0.6 million for the write-down of the deferred tax asset related to restricted stock grants that resulted in a shortfall of cumulative tax benefits. The effective tax rate for fiscal 2007 includes the effects of the in-process research and development (“IPR&D”) charge of $4.0 million related to the Catalyst acquisition, which is not deductible for tax purposes, and an increase in the valuation allowance of approximately $1.0 million. The Company calculates income tax expense (benefit) based upon an annual estimated effective tax rate that includes estimates and assumptions that may change during the year. The differences between the annual estimated effective tax rate and the U.S. federal statutory rate of 35% principally result from the Company’s geographical distribution of taxable income, and differences between the book and tax treatment of certain items.

Comparison of Fiscal Years 2007 and 2006

Total revenues were $151.3 million for the year ended June 30, 2007, compared to $160.5 million in the prior year, a net decrease of 5.8%, or $9.2 million. The total decrease in revenue was partially offset by revenue derived from the Catalyst acquisition which mitigated the impact by 5.6% and favorable currency fluctuation of 1.9%. Revenues from Test and measurement products decreased 5.3% to $143.2 million in fiscal 2007 from $151.2 million in fiscal 2006. The decrease in Test and measurement products was mainly due to a reduction in shipments to our disk drive customers as a result of decreased demand, the longer than anticipated time to finalize our new distributor arrangement in Japan, and the reduction in the average selling prices in our high-end products which have been impacted by competitive pressure in the marketplace. Additionally, mid- and low-end products have not penetrated the market fully, and there has been lower than expected demand from our next generation products and serial data protocol solutions. These decreases were partially offset by the addition of revenue from our September 2006 acquisition of Catalyst as noted above.

Service and other revenues consist primarily of service revenue and license and maintenance fees. Service revenue decreased by 13.7%, or $1.3 million, to $8.1 million in fiscal 2007 from $9.3 million in fiscal 2006,

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primarily as a result of a reduction in the amount recognized of previously deferred revenue from the adoption of the SEC’s Staff Accounting Bulletin No. 101 (“SAB 101”), “Revenue Recognition in Financial Statements.” The fiscal year ended June 30, 2007 did not include revenue related to this previously deferred revenue as it was fully amortized as of March 31, 2006. Fiscal 2006 included $0.7 million of revenue recognized from previously deferred revenue. Additionally, the reduction in shipments to our disk drive customers contributed to a decrease in service and other revenues.

Our geographic breakdown of revenues by area in total dollars and as a percentage of total revenues is as follows (in thousands):

	June 30, 2007		July 1, 2006			June 30, 2007		July 1, 2006
North America	$	50,891	$	51,795	North America	33.6	%	32.3	%
Europe/Middle East		51,899		48,767	Europe/Middle East	34.3		30.4
Japan		16,929		22,043	Japan	11.2		13.7
Asia/Pacific		31,581		37,931	Asia/Pacific	20.9		23.6
Total revenues	$	151,300	$	160,536	Total revenues	100.0	%	100.0	%

Our geographic revenues were lower in North America, Japan and Asia/Pacific. This decrease was mainly attributable to a slower than anticipated ramp up of sales via our indirect selling channel of our mid- to low-end product line, the longer than anticipated time to finalize our distribution strategy in Japan, as well as a decrease in the average selling prices in the high-end product line. Europe/Middle East was the exception where our operations have incorporated our diverse product lines through indirect and direct channels more effectively.

Gross profit for the year ended June 30, 2007 was $81.9 million, or 54.1% gross margin, compared to $97.1 million, or 60.5% gross margin, for the same period last year. The lower gross margin in fiscal 2007 was primarily attributable to $3.4 million of costs associated with inventory write-downs and the elimination of a product line, $0.3 million charge for the impairment of an intangible asset, $0.4 million relating to the implementation of a restructuring plan and the balance primarily due to lower sales volume and the impact of lower average selling prices on our high end products, partially offset by incremental profit from sales of Catalyst protocol analyzers. In the fiscal 2006 period there were no similar write-downs affecting gross margin; however, in 2006, we received price reductions from a vendor for inventory purchases which increased our overall gross margin on resulting product sales by 1.0%.

Selling, general and administrative (“SG&A”) expense increased 7.3%, or $3.7 million, from $51.6 million in fiscal 2006 to $55.4 million in fiscal 2007. The increase was primarily attributable to $1.4 million of restructuring charges prompted by the acquisition of Catalyst, as well as, the reorganization of our Japan facility, $1.9 million of increased commissions for the addition of the manufacturers’ representative channel and employee commission, $0.7 million of freight expenses and additional SG&A expenses related to Catalyst. These increases were primarily offset by a decrease of $0.7 million related to non-cash share-based compensation expense and a decrease of approximately $1.0 million related to legal and consulting expenses. As a percentage of sales, SG&A expense increased from 32.2% in the year ended July 1, 2006 to 36.6% in the year ended June 30, 2007.

Legal settlement expense of $2.8 million, for the year ended July 1, 2006, is related to the settlement of a dispute with Iwatsu pertaining to the ownership rights of certain intellectual property and other assets relating to Iwatsu’s ‘ViewGo’ product line. There was no similar charge in the fiscal 2007 period.

Research and development (“R&D”) expense increased 21.8%, or $6.6 million, from $30.1 million in fiscal 2006 to $36.7 million in fiscal 2007. This increase in expense is primarily due to a $4.0 million charge for acquired in-process research and development (“IPR&D”) related to the Catalyst acquisition, $0.3 million of restructuring charges and additional expenses related to Catalyst. Additionally, expenses incurred for prototype materials and supplies used for several product launches in the beginning of the year contributed to the overall increase. There was no similar IPR&D charge in the fiscal 2006 period. As a percentage of total revenues, research and development expense increased from 18.8% in fiscal 2006 to 24.2% in fiscal 2007.

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Other expense, net, which consists primarily of interest income and expense and foreign exchange gains and losses, was approximately $5.3 million for the year ended June 30, 2007, compared to $2.5 million for fiscal 2006. Other expense, net for the current year is comprised primarily of interest expense of approximately $4.3 million, compared to approximately $3.1 million last year, which increase is due to a the issuance of $72.0 million of convertible notes in October 2006. Interest expense for both periods also includes interest on capital lease agreements and bank debt. Interest expense was partially offset by interest income of approximately $0.1 million and $0.8 million for the years ended June 30, 2007 and July 1, 2006, respectively. Included in Other, net were foreign exchange losses of $0.3 million for both of the years ended June 30, 2007 and July 1, 2006, resulting from the changes in our foreign exchange forward contracts and on transactions denominated in other than our functional currency or that of our subsidiaries. In fiscal 2007, we wrote-off $1.0 million of deferred financing fees associated with the repayment of the term loan and revolver under the Prior Credit Agreement.

A tax benefit of $2.2 million was recorded in fiscal 2007, compared to a tax provision of $3.5 million in fiscal 2006. The Company’s effective tax rate was 14.5% and 34.5% in fiscal 2007 and fiscal 2006, respectively. The effective income tax benefit rate for fiscal 2007 differs from prior year principally due to discrete tax items for the non-deductible purchased IPR&D charges associated with the Catalyst acquisition, and a $1.4 million increase to the valuation allowance for deferred tax assets related to a change in judgment regarding the realizability of certain state investment tax credits and certain foreign net operating losses.

Liquidity and Capital Resources

Cash and cash equivalents at June 28, 2008 were approximately $10.2 million, compared to approximately $10.4 million at June 30, 2007.

We believe that our cash and cash equivalents on hand, cash flow generated by our operations and availability under our revolving credit line will be sufficient to fund our operations, working capital, debt repayment (excluding the repurchase of all of the convertible notes), share repurchases and capital expenditure requirements for the foreseeable future and provide funds for potential acquisition opportunities. As of June 28, 2008, we have no borrowings under our credit facility.

Operating Activities

Net cash provided by (used in) operating activities was approximately $22.0 million for the year ended June 28, 2008 compared to approximately $(0.6) million for the year ended June 30, 2007. The net cash provided by operating activities in fiscal 2008 was attributable to net income of approximately $1.7 million, working capital contributions of approximately $8.2 million, non-cash depreciation and amortization of approximately $7.1 million and share-based compensation of approximately $4.7 million. The approximate $22.6 million increase from the prior year is primarily due to an increase in net income and working capital contributions.

Investing Activities

Net cash used in investing activities was approximately $4.5 million for the year ended June 28, 2008 compared to approximately $35.7 million in fiscal 2007. Net cash used in fiscal 2008 relates to the purchase of property, plant and equipment, while net cash used in fiscal 2007 was primarily due to approximately $31.5 million net cash paid in connection with the Catalyst acquisition along with approximately $4.1 of property, plant and equipment purchases.

Financing Activities

Net cash (used in) provided by financing activities was approximately $(18.4) million in fiscal 2008 compared to approximately $30.1 million in fiscal 2007. Net cash used in financing activities in fiscal 2008 primarily resulted from approximately $9.4 million repayment of borrowings under the credit agreement, $3.6 million repurchase of convertible notes, $3.5 million payment of related party note payable and approximately $2.4 million for repurchases of treasury stock. Net cash provided by financing activities in fiscal 2007 was primarily attributable to

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proceeds from the issuance of convertible notes of $72.0 million and borrowings under the credit agreement of approximately $40.2 million, partially offset by the repayments under the credit agreement of approximately $34.3 million, repayments of the term loan for approximately $34.1 million, purchase of treasury shares for approximately $10.5 million and payment of debt issuance costs related to the convertible note of approximately $3.8 million.

Long-Term Debt

Credit Facility

As of June 28, 2008, we have a $50.0 million credit agreement. The terms of the New Credit Agreement provide us with a $50.0 million revolving credit facility (“Revolver”), which includes a $5.0 million swingline loan subfacility and a $5.0 million letter of credit subfacility. The performance of our obligations under the New Credit Agreement is secured by all of the assets of our Company and its domestic subsidiaries, and is guaranteed by our domestic subsidiaries. As of June 28, 2008, we had no outstanding borrowings against the Revolver and nothing against the letter of credit subfacility or the swingline loan subfacility.

We are required to comply with certain financial covenants, measured quarterly, including a minimum interest coverage ratio, minimum total net worth, maximum leverage ratio, minimum fixed charge coverage ratio and limitations on capital expenditures. As of June 28, 2008, we are in compliance with the financial covenants under the New Credit Agreement.

The New Credit Agreement will expire on July 15, 2011, unless, in the absence of any default, extended by us to April 1, 2012, contingent on the waiver or extension of the first redemption date of our convertible notes (See Note 12 — Long Term Debt and Capital Leases for additional information).

Convertible Debt

On October 12, 2006, we sold and issued $72.0 million in convertible senior subordinated notes to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the “Notes”). The Notes bear interest at a rate of 4.00% per annum, payable in cash semi-annually in arrears on each April 15 and October 15, beginning April 15, 2007. The Notes are direct, unsecured, senior subordinated obligations and rank: (i) subordinate in right of payment to all of our existing and future secured indebtedness; (ii) equal in right of payment with all of our existing and future senior unsecured indebtedness, and (iii) senior in right of payment to all of our existing and future subordinated indebtedness, except that the Notes rank equally with the $3.5 million note issued in connection with the Catalyst acquisition (repaid in fiscal 2008), which is subordinated to our credit facility. In connection with the issuance and sale of the Notes, we entered into an indenture dated as of October 12, 2006, with U.S. Bank National Association as trustee. The terms of the Notes are governed by the indenture.

The Notes mature on October 15, 2026 unless earlier redeemed, repurchased or converted. Holders of the Notes will have the right to require us to repurchase for cash all or a portion of their Notes on each of October 15, 2011, October 15, 2016 and October 15, 2021, at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest, if any, up to but not including, the repurchase date. We may, from time to time, at our option repurchase the Notes in the open market. In addition, we may redeem the Notes for cash, either in whole or in part, anytime after October 20, 2011 at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest, if any, up to but not including the redemption date. The Notes are convertible into our common stock by the holders at an initial conversion rate equal to 68.7285 shares per $1,000 principal amount of the Notes (equal to an initial conversion price of approximately $14.55 per share), subject to adjustment as described in the indenture. Upon conversion, we will deliver for each $1,000 principal amount of Notes, an amount consisting of cash equal to the lesser of $1,000 and the conversion value (as defined in the indenture) and, to the extent that the conversion value exceeds $1,000, at our election, cash or shares of our common stock in respect of the remainder. Prior to September 15, 2026, holders may convert their notes into cash and shares of our common stock, if any, at the applicable conversion rate, at their option, only under limited circumstances described in the indenture. On or after September 15, 2026, holders may convert their notes into cash and shares of our common stock, if any, at the applicable conversion price, at our option, at any time prior

50

to the close of business on the business day immediately preceding the maturity date. Upon conversion of each $1,000 principal amount of the notes, the holder will receive an amount in cash equal to the lesser of (i) $1,000 or (ii) the conversion value, as described in the indenture; if the conversion value exceeds $1,000 on the conversion date, we will also deliver, at our election, cash or common stock or combination of each with a value equal to such excess. During fiscal 2008, we repurchased $4.5 million of the outstanding convertible notes, leaving a balance of $67.5 million at June 28, 2008. At June 28, 2008, it was our intent to repurchase $5.5 million of the outstanding notes during fiscal 2009. As such, $5.5 million related to the Notes was included in Accrued expenses and other current liabilities and $62.0 million was included in Convertible notes on the Consolidated Balance Sheet.

If we undergo a “change in control” (as defined in the indenture), holders of the Notes will have the right, subject to certain conditions, to require us to repurchase for cash all or a portion of their Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest, if any.

In connection with the sale of its Notes, we also entered into a Registration Rights Agreement. Pursuant to the Registration Rights Agreement, we filed a shelf registration statement, which has been declared effective by the Securities and Exchange Commission, covering resales by holders of the Notes and any common stock issuable upon conversion of such Notes (subject to certain conditions specified in the Registration Rights Agreement). We agreed to use its commercially reasonable efforts to keep the registration statement effective until the earliest of the following has occurred: (i) all securities covered by the registration statement have been sold pursuant to the registration statement or Rule 144 under the Securities Act; (ii) the holders of the Notes and the shares of our common stock issuable upon conversion of the Notes that are not our affiliates are able to sell all such securities immediately pursuant to Rule 144(k) under the Securities Act; (iii) the date when all of the Notes and shares of common stock issuable upon conversion have ceased to be outstanding; and (iv) October 12, 2008.

We will pay predetermined additional interest on notes that are registerable securities if the shelf registration statement is unavailable for periods in excess of those permitted under the indenture. We believe the likelihood of occurrence of such event is remote and, as such, we have not recorded a liability at June 28, 2008. In the event that it becomes probable that the Company would have to pay additional interest under the registration rights agreement, the Company estimates the maximum potential amount at June 28, 2008 to be approximately $0.3 million per year. No amounts are owed, nor have any been recorded for failure to maintain the effectiveness of the registration statement (See Note 12 — Long Term Debt and Capital Leases for additional information).

Foreign Credit Facilities

We maintain certain short-term foreign credit facilities. The Company has a Japanese facility totaling 50.0 million yen (approximately $0.5 million as of June 28, 2008). No amounts were outstanding under this facility as of June 28, 2008. Our Swiss subsidiary has an overdraft facility totaling 1.0 million Swiss francs (approximately $1.0 million as of June 28, 2008). As of June 28, 2008, approximately 0.4 million Swiss francs were held against supplier obligations leaving an available balance of 0.6 million Swiss francs under this credit facility. These obligations to Swiss suppliers, such as rent and utilities, are payable under the credit facility only in the event that the subsidiary is unable to meet its financial obligations to those suppliers.

Share Purchase Plan

On May 25, 2006, our Board of Directors approved the adoption of a share repurchase plan authorizing the purchase of up to 2.0 million shares, not to exceed $25.0 million, of our common stock for treasury. Purchases under this buyback program may be made from time to time on the open market and in privately negotiated transactions, including pursuant to the terms of a 10b5-1 plan. A 10b5-1 plan allows a company to purchase shares during a blackout period, provided the company communicates its share purchase instructions to the broker prior to the blackout period, pursuant to a written plan that may not be changed. The timing of these purchases is dependent upon several factors, including market conditions, the market price of our common stock, the effect of the share dilution on earnings, available cash and any other potential risks we may encounter. The share repurchase plan may be discontinued at any time at the discretion of the Company. Through fiscal 2007, the Company repurchased approximately 1.04 million shares of common stock in open market transactions at a cost of approximately $12.4 million. During fiscal 2008, the Company purchased 297,523 shares for approximately $2.4 million.

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Off-Balance Sheet Arrangements

It is not our business practice to enter into off-balance sheet arrangements. We do not enter into off-balance sheet transactions specifically structured to provide income or tax benefits or to avoid recognizing or disclosing assets or liabilities.

Our 4% notes payable are convertible into shares of our common stock at a conversion price of $14.55 per share and pose a reasonable likelihood of potential significant dilution. The maximum potential dilutive effect of conversion of the 4% notes is approximately 4.6 million shares (See Note 12 — Long Term Debt and Capital Leases for additional information).

In addition, stock options to purchase approximately 1.5 million shares of our common stock at a weighted average exercise price of $13.46 per share and approximately 0.5 million restricted stock units were outstanding at June 28, 2008 that represent additional potential dilution (See Note 13 — Share-Based Compensation for additional information).

Contractual Obligations and Other Commitments

Our contractual obligations and commitments include obligations associated with our employee severance agreements, supplier agreements, operating and capital leases and convertible note obligations, as set forth in the table below (in thousands):

	Payments due by period as of June 28, 2008
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Severance	$	432	$	432	$	—	$	—	$	—
Supplier agreements		464		464		—		—		—
Operating lease obligations		3,776		2,042		1,557		177		—
Vendor supplied capital lease agreement		553		234		319		—		—
Convertible notes(1)		67,500		—		67,500		—		—
Total(2)	$	72,725	$	3,172	$	69,376	$	177	$	—

(1) The Convertible notes mature on October 15, 2026. Holders of the Convertible notes have the right to require the Company to purchase all or a portion of the Convertible notes on October 15, 2011, which is reflected above. Although not contractually due until October 15, 2011, the Company has included $5.5 million in Accrued expenses and other current liabilities on the June 28, 2008 Consolidated Balance Sheet, as this represents the amount of convertible notes that the Company intends to repurchase during fiscal 2009, based on current market conditions.

(2) The Contractual Obligations and Other Commitments disclosed in our Form 10-K for the year ended June 30, 2007 did not include any reserves for income taxes under FIN 48. Because we are unable to reasonably predict the ultimate amount or timing of settlement of our reserves for income taxes under FIN 48, the Contractual Obligations and Other Commitments table does not include our reserves for income taxes. As of June 28, 2008, our reserves for income taxes totaled approximately $2.7 million which is reflected as a non-current liability and included in Deferred revenue and other non-current liabilities on our Consolidated Balance Sheets (See Note 11 — Income Taxes for additional information).

Recent Accounting Pronouncements

The following recent accounting pronouncements are not yet adopted:

• Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”).

• Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115” (“SFAS 159”).

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• Emerging Issues Task Force No. 07-3, “Accounting for Nonrefundable Advance Payments for Goods and Services to Be Used in Future Research and Development Activities” (“EITF 07-03”).

• Statement of Financial Accounting Standards No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”).

• Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”).

• Financial Accounting Standards Board Staff Position No. 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”).

• Financial Accounting Standards Board Staff Position Accounting Principles Board Opinion No. 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”).

See Note 1 — Summary of Significant Accounting Policies, “New Accounting Pronouncements” for additional information on recent pronouncements not yet adopted and recent pronouncements adopted.

Forward-Looking Information

This Form 10-K contains forward-looking statements. When used in this Form 10-K, the words “anticipate,” “believe,” “estimate,” “will,” “plan,” “intend,” and “expect” and similar expressions identify forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in any forward-looking statements are reasonable, these plans, intentions, or expectations may not be achieved. Our actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied, by the forward-looking statements contained in this Form 10-K. Important factors that could cause actual results to differ materially from our forward-looking statements are set forth in this Form 10-K, including under the heading “Risk Factors.” All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth in this Form 10-K. Except as required by federal securities laws, we are under no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We purchase materials from suppliers and sell our products around the world and maintain investments in foreign subsidiaries, all denominated in a variety of currencies. As a consequence, we are exposed to risks from fluctuations in foreign currency exchange rates with respect to a number of currencies, changes in government policies and legal and regulatory requirements, and political instability. Among the more significant potential risks to us of relative fluctuations in foreign currency exchange rates is the relationship among and between the U.S. dollar, Euro, Swiss franc, British pound, Swedish krona, Japanese yen, Korean won and Singapore dollar.

Our operations generate non-functional currency cash flows such as third-party vendor payments, revenues and intercompany payments. In anticipation of these foreign currency cash flows, we have a program of entering into foreign exchange forward contracts to minimize the risks associated with currency fluctuations on assets or liabilities denominated in other than the functional currency of us or our subsidiaries. It cannot be assured, however, that this program will effectively offset all of our foreign currency risk related to these assets or liabilities. These foreign exchange forward contracts do not qualify for hedge accounting in accordance with SFAS No. 133, “Accounting for Derivative Investments and Hedging Activities” (“SFAS No. 133”).

Other than this program, we do not attempt to reduce our foreign currency exchange risks by entering into foreign currency management programs. As a consequence, there can be no assurance that fluctuations in foreign currency exchange rates in the future resulting in mismatches between local currency revenues and expenses, the translation of foreign currencies into the U.S. dollar, our financial reporting currency, or otherwise, will not adversely affect our results of operations. Moreover, fluctuations in exchange rates could affect the demand for our products.

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During fiscal 2008, 2007 and 2006, foreign currency exchange losses on these derivatives and on transactions denominated in other than the subsidiaries’ functional currencies were approximately $0.6 million, $0.3 million and $0.3 million, respectively. These net losses are included in Other, net in the Consolidated Statements of Operations. At June 28, 2008 and June 30, 2007, the notional amounts of the Company’s open foreign exchange forward contracts, all with maturities of less than six months, were approximately $16.3 million and $12.9 million, respectively.

We performed a sensitivity analysis at June 28, 2008, assuming a hypothetical 10% adverse change in foreign currency exchange rates on our open foreign exchange forward contracts and our assets and liabilities denominated in other than their functional currencies. In management’s opinion, a 10% adverse change in foreign currency exchange rates would have an immaterial effect on these instruments and therefore, on our consolidated results of operations, financial position, and cash flows from operations.

On October 15, 2006, we completed the sale of $72.0 million of 4.00% convertible senior notes (the “Notes”) due October 15, 2026. The Notes will pay interest semiannually through maturity and will be convertible at an initial conversion rate of 68.7285 shares of common stock per $1,000 principal amount of Notes, which is equivalent to a conversion price of approximately $14.55 per share of our common stock. The conversion rate will be subject to adjustment upon the occurrence of specified events. Upon conversion of the Notes, holders will receive cash up to the principal amount of each note, and any excess conversion value will be delivered in cash or shares of our common stock, at our option. During fiscal 2008, we repurchased $4.5 million of the outstanding convertible notes, resulting in a balance of $67.5 million at June 28, 2008. As of June 28, 2008, the market value of our convertible notes was approximately $60.8 million.

We are exposed to adverse changes in interest rates primarily due to our investment in cash and cash equivalents, as well as, our $50.0 million credit facility. Market risk is estimated as the potential change in fair value resulting from a hypothetical 1% adverse change in interest rates, which would have been immaterial to our results of operations, financial position or cash flows in fiscal 2008.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

LeCROY CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	56
Consolidated Balance Sheets as of June 28, 2008 and June 30, 2007	57
Consolidated Statements of Operations for the years ended June 28, 2008, June 30, 2007 and July  1, 2006	58
Consolidated Statements of Stockholders’ Equity for the years ended June 28, 2008, June 30, 2007 and July 1, 2006	59
Consolidated Statements of Cash Flows for the years ended June 28, 2008, June 30, 2007 and July  1, 2006	60
Notes to Consolidated Financial Statements	61
Financial Statement Schedule — Valuation and Qualifying Accounts for the years ended June 28, 2008, June 30, 2007 and July 1, 2006	96

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

LeCroy Corporation:

We have audited the accompanying consolidated balance sheets of LeCroy Corporation and subsidiaries as of June 28, 2008 and June 30, 2007, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended June 28, 2008, June 30, 2007, and July 1, 2006. In connection with our audits of the consolidated financial statements, we also have audited the valuation and qualifying accounts financial statement schedule. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of LeCroy Corporation and subsidiaries as of June 28, 2008 and June 30, 2007, and the results of their operations and their cash flows for the years ended June 28, 2008, June 30, 2007, and July 1, 2006, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109”, effective July 1, 2007.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), LeCroy Corporation’s internal control over financial reporting as of June 28, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated September 9, 2008 expressed an unqualified opinion on the effectiveness of LeCroy Corporation’s internal control over financial reporting.

/s/ KPMG LLP

Short Hills, New Jersey

September 9, 2008

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LeCROY CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share data)

	June 28, 2008			June 30, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	10,224		$	10,448
Accounts receivable, net of reserves of $742 and $882 at June 28, 2008 and June 30, 2007, respectively		33,274			31,941
Inventories, net		32,886			38,645
Other current assets		10,214			9,608
Total current assets		86,598			90,642
Property, plant and equipment, net		21,683			20,339
Goodwill		105,771			105,885
Other non-current assets		12,934			14,453
Total assets	$	226,986		$	231,319
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	22,280		$	16,905
Accrued expenses and other current liabilities		19,201			15,527
Note payable — related party		—			3,500
Total current liabilities		41,481			35,932
Long-term bank debt		—			9,410
Convertible notes		62,000			72,000
Deferred revenue and other non-current liabilities		4,545			1,246
Total liabilities		108,026			118,588
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value (authorized 5,000,000 shares; none issued and outstanding as of June 28, 2008 and June 30, 2007)		—			—
Common stock, $.01 par value (authorized 45,000,000 shares; 12,656,899 shares issued at June 28, 2008 and 12,342,809 issued and outstanding at June 30, 2007)		127			123
Additional paid-in capital		113,693			108,713
Accumulated other comprehensive income		3,451			1,409
Retained earnings		4,102			2,486
Treasury stock, at cost (297,523 shares and 0 shares at June 28, 2008 and June 30, 2007, respectively)		(2,413	)		—
Total stockholders’ equity		118,960			112,731
Total liabilities and stockholders’ equity	$	226,986		$	231,319

The accompanying notes are an integral part of these consolidated financial statements.

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LeCROY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Years Ended
	June 28, 2008			June 30, 2007			July 1, 2006
	(52 Weeks)			(52 Weeks)			(52 Weeks)
Revenues:
Test and measurement products	$	151,077		$	143,244		$	151,197
Service and other		9,409			8,056			9,339
Total revenues		160,486			151,300			160,536
Cost of revenues		70,132			69,419			63,476
Gross profit		90,354			81,881			97,060
Operating expenses:
Selling, general and administrative		53,101			55,369			51,622
Legal settlements		—			—			2,792
Research and development		31,398			36,685			30,123
Reimbursement from escrow account		(240	)		—			—
Total operating expenses		84,259			92,054			84,537
Operating income (loss)		6,095			(10,173	)		12,523
Other income (expense):
Gain on extinguishment of convertible debt, net of issue cost write-off		338			—			—
Write-off of bank deferred financing fees		—			(997	)		—
Interest income		298			124			813
Interest expense		(4,331	)		(4,293	)		(3,096	)
Other, net		(632	)		(99	)		(204	)
Other expense, net		(4,327	)		(5,265	)		(2,487	)
Income (loss) before income taxes		1,768			(15,438	)		10,036
Provision (benefit) for income taxes		56			(2,231	)		3,463
Net income (loss)	$	1,712		$	(13,207	)	$	6,573
Net income (loss) per common share:
Basic	$	0.15		$	(1.13	)	$	0.54
Diluted	$	0.14		$	(1.13	)	$	0.53
Weighted average number of common shares:
Basic		11,749			11,702			12,218
Diluted		12,007			11,702			12,474

The accompanying notes are an integral part of these consolidated financial statements.

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LeCROY CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

	Common Stock					Common Stock Warrants			Additional Paid-in Capital			Accumulated Other Comprehensive Income		Deferred Stock Compensation			Retained Earnings			Treasury Stock			Total
	Shares		Amount
Balance at July 2, 2005	12,634		$	127		$	2,165		$	113,229		$	779	$	(8,602	)	$	9,120		$	—		$	116,818
Comprehensive income:
Net income	—			—			—			—			—		—			6,573			—			6,573
Foreign currency translation	—			—			—			—			513		—			—			—			513
Total comprehensive income																								7,086
Exercise of stock options and employee stock purchases	209			2			—			2,382			—		—			—			—			2,384
Issuance of restricted stock to employees	73			—			—			—			—		—			—			—			—
Forfeitures of restricted stock for terminated employees	(33	)		—			—			—			—		—			—			—			—
Reclass warrants to additional paid-in capital	—			—			(2,165	)		2,165			—		—			—			—			—
Reclass deferred stock compensation to additional paid-in capital upon adoption of SFAS 123R	—			—			—			(8,602	)		—		8,602			—			—			—
Purchase of treasury shares	—																				(1,858	)		(1,858	)
Share-based compensation expense	—			—			—			5,273			—		—			—			—			5,273
Balance at July 1, 2006	12,883		$	129		$	—		$	114,447		$	1,292	$	—		$	15,693		$	(1,858	)	$	129,703
Comprehensive loss:
Net loss	—			—			—			—			—		—			(13,207	)		—			(13,207	)
Foreign currency translation	—			—			—			—			117		—			—			—			117
Total comprehensive loss																								(13,090	)
Exercise of stock options and employee stock purchases	156			1			—			957			—		—			—			—			958
Issuance of restricted stock to employees	406			3			—			(3	)		—		—			—			—			—
Forfeitures of restricted stock for terminated employees	(64	)		—			—			—			—		—			—			—			—
Issuance of LeCroy stock options in Merger	—			—			—			451			—		—			—			—			451
Purchase of treasury shares	—			—			—			—			—		—			—			(10,508	)		(10,508	)
Retirement of treasury shares	(1,038	)		(10	)					(12,356	)										12,366			—
Share-based compensation expense	—			—			—			5,217			—		—			—			—			5,217
Balance at June 30, 2007	12,343		$	123		$	—		$	108,713		$	1,409	$	—		$	2,486		$	—		$	112,731
Comprehensive income:
Net income	—			—			—			—			—		—			1,712			—			1,712
Foreign currency translation	—			—			—			—			2,042		—			—			—			2,042
Total comprehensive income																								3,754
Exercise of stock options and employee stock purchases	151			2			—			834			—		—			—			—			836
Issuance of restricted stock to employees	227			2			—			(2	)		—		—			—			—			—
Forfeitures of restricted stock for terminated employees	(64	)		—			—			—			—		—			—			—			—
Share-based compensation expense	—			—			—			4,148			—		—			—			—			4,148
Adjustment for adoption of FIN 48	—			—			—			—			—		—			58			—			58
Adjustment for adoption of EITF 06-2	—			—			—			—			—		—			(154	)		—			(154	)
Purchase of treasury shares	—			—			—			—			—		—			—			(2,413	)		(2,413	)
Balance at June 28, 2008	12,657		$	127		$	—		$	113,693		$	3,451	$	—		$	4,102		$	(2,413	)	$	118,960

The accompanying notes are an integral part of these consolidated statements.

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LeCROY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Years Ended
	June 28, 2008			June 30, 2007			July 1, 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	1,712		$	(13,207	)	$	6,573
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Write-off of acquired in-process research and development		—			4,000			—
Depreciation and amortization		7,105			8,127			7,558
Share-based compensation		4,695			5,217			5,315
Amortization of debt issuance costs		742			530			377
Deferred income taxes		(644	)		(2,691	)		2,282
Write-off of bank deferred financing fees		—			997			—
Gain on extinguishment of convertible debt, net of issue cost write-off		(338	)		—			—
Impairment of intangible assets		699			250			—
(Gain) loss on disposal of property, plant and equipment, net		(97	)		176			196
Recognition of deferred license revenue		—			—			(665	)
Gross profit on non-cash sale		(44	)		—			—
Change in operating assets and liabilities, net of assets acquired and liabilities assumed in acquisitions:
Accounts receivable		547			(1,977	)		(65	)
Inventories		3,866			(1,337	)		(7,731	)
Other current and non-current assets		1,031			(475	)		(1,636	)
Accounts payable, accrued expenses and other liabilities		2,763			(234	)		3,790
Net cash provided by (used in) operating activities		22,037			(624	)		15,994
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(4,483	)		(4,143	)		(4,823	)
Business acquisition, net of acquired cash		—			(31,512	)		—
Purchase of intangible assets		—			—			(812	)
Net cash used in investing activities		(4,483	)		(35,655	)		(5,635	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of term loan		—			(34,076	)		(10,300	)
Borrowings under credit lines		—			40,160			3,500
Repayment of borrowings under credit agreement		(9,410	)		(34,250	)		—
Payment of debt issuance costs		—			(3,826	)		(187	)
Repurchase of convertible notes		(3,583	)		—			—
Proceeds from issuance of convertible notes		—			72,000			—
Purchase of treasury shares		(2,413	)		(10,508	)		(1,715	)
Payments made on capital leases		(283	)		(391	)		(562	)
Payment of note payable to related party for business acquisition		(3,500	)		—			—
Proceeds from employee stock purchase and option plans		836			958			2,384
Net cash (used in) provided by financing activities		(18,353	)		30,067			(6,880	)
Effect of exchange rate changes on cash and cash equivalents		575			(312	)		(373	)
Net (decrease) increase in cash and cash equivalents		(224	)		(6,524	)		3,106
Cash and cash equivalents, beginning of year		10,448			16,972			13,866
Cash and cash equivalents, end of year	$	10,224		$	10,448		$	16,972
Supplemental Cash Flow Disclosure
Cash paid during the year for:
Interest	$	3,860		$	1,184		$	2,541
Income taxes		869			695			1,805
Non-cash transactions:
Issuance of note payable to related party for business acquisition		—			3,500			—
Issuance of LeCroy stock options for business acquisition		—			451			—
Transaction costs for business acquisition, unpaid at June 30, 2007		—			99			—
Property, plant and equipment acquired under capital lease		718			—			125
Treasury stock purchased, but unpaid at July 1, 2006		—			—			143
Receipt of advertising in exchange for test and measurement product		62			—			—
Transfer of inventory into property, plant and equipment		2,047			1,024			1,550
Repurchase of convertible notes, unpaid at June 28, 2008		448			—			—

The accompanying notes are an integral part of these consolidated financial statements.

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LeCROY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

1. Summary of Significant Accounting Policies

Organization

LeCroy Corporation (the “Company” or “LeCroy”), was founded and incorporated in the State of New York in 1964 and reincorporated in the State of Delaware in 1995. The Company develops, manufactures, sells and licenses high-performance oscilloscopes and global communications protocol analyzers. Oscilloscopes are tools used by designers and engineers to measure and analyze complex electronic signals in order to develop high-performance systems, to validate electronic designs and to improve time to market. Protocol analyzers are tools used by designers and engineers to generate and monitor traffic over high speed serial data interfaces, including USB2.0, Bluetooth, PCI Express, Serial ATA, Serial Attached SCSI (SAS), Wireless USB, and others. The Company’s products are sold worldwide into a broad range of end markets, including computer/semiconductor/consumer electronics, data storage, automotive/industrial, and military/aerospace. Revenues are also generated from the sale of probes, accessories, and applications solutions, and to a lesser extent, extended warranty and maintenance contracts, repairs and calibrations performed on instruments after the expiration of their warranties.

Basis of Presentation and Use of Estimates

The Consolidated Financial Statements include the accounts of LeCroy Corporation and its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to prior-years’ amounts to conform to the current year presentation.

The Company’s Consolidated Financial Statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“US GAAP”), which require management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the revenues and expenses reported during the period. The most significant of these estimates and assumptions relate to revenue recognition, reserves for accounts receivable, allowance for excess and obsolete inventory, valuation of long-lived and intangible assets, goodwill, income taxes, share-based compensation expense and estimation of warranty liabilities. These estimates and assumptions are based on management’s judgment and available information and, consequently, actual results could differ from these estimates.

Revenue

LeCroy recognizes product and service revenue, net of allowances for anticipated returns, provided that (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the selling price is fixed or determinable and (4) collection is reasonably assured. Delivery is considered to have occurred when title and risk of loss have transferred to the customer, or when services have been provided. The price is considered fixed or determinable when it is not subject to refund or adjustments.

The Company maintains an allowance for doubtful accounts relating to accounts receivable estimated to be non-collectible. The Company analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In addition, the Company maintains an allowance for anticipated sales returns. The Company analyzes historical return trends as well as in-transit product returns to evaluate the adequacy of the allowance for anticipated returns.

Test and measurement products revenue. The Company generates Test and measurement product revenue from the sales of oscilloscopes and application solutions, protocol analyzers, probes and accessories. Provisions for warranty costs are recorded at the time products are shipped.

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Application solutions, which provide oscilloscopes with additional analysis capabilities, are either delivered via compact disc or are already loaded in the oscilloscopes and activated via a key code after the sale is made to the customer. No post-contract support is provided on the oscilloscope application solutions. All sales of test and measurement products are based upon separately established prices for the items and are recorded as revenue according to the above revenue recognition criteria. Revenues from oscilloscope products are included in revenues from Test and measurement products in the Consolidated Statements of Operations. Certain software is embedded in the Company’s oscilloscopes, but the embedded software component is considered incidental.

Due to the significant software content of its protocol analyzer products, the Company recognizes revenue on the sale of these products, in accordance with American Institute of Certified Public Accountants Statement of Position 97-2, “Software Revenue Recognition” (“SOP 97-2”), as amended by Statement of Position 98-9, “Modifications of SOP 97-2 with Respect to Certain Transactions” (“SOP 98-9”), upon shipment, provided there is persuasive evidence of an arrangement, the product has been delivered, the price is fixed or determinable and collectibility is probable. Software maintenance support revenue is deferred based on its vendor specific objective evidence of fair value (“VSOE”) and recognized ratably over the maintenance support periods. In limited circumstances where VSOE does not exist for software maintenance support, the Company recognizes revenue and accrues costs, if applicable, under the appropriate provisions of SOP 97-2 determined by the facts and circumstances of each transaction. Provisions for warranty costs are recorded at the time products are recognized as revenue. Revenues from protocol analyzer products are included in Test and measurement products in the Consolidated Statements of Operations.

In fiscal 2006, in an effort to provide end-user customers an alternative to purchasing the Company’s higher end products under its standard terms and conditions, the Company began offering customers an opportunity to enter into sales-type or direct financing leases for these products. The Company is accounting for these leases in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 13, “Accounting for Leases.” Lease and rental revenues are reported within Test and measurement product revenue and were $0.7 million, $1.8 million and $0.7 million for the years ended June 28, 2008, June 30, 2007 and July 1, 2006, respectively.

Service and other revenue. Service and other revenue includes extended warranty contracts, software maintenance agreements, repairs and calibrations performed on instruments after the expiration of their normal warranty period and direct service accessories and packages. The Company records deferred revenue for extended warranty contracts, software maintenance agreements and calibrations services and then recognizes such revenue on a straight-line basis over the related service period. When arrangements include multiple elements, the Company uses relative fair values in accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables,” to allocate revenue to the elements and recognizes revenue when the criteria for revenue recognition have been met for each element.

Deferred license revenue. Revenue from license fees under agreements that have exclusivity clauses and, from the licensee’s perspective, have ongoing requirements or expectations that are more than perfunctory, are recognized on a straight-line basis over the terms of the related agreements. An ongoing requirement or expectation would be considered more than perfunctory if any party to the contract considers it to be “essential to the functionality” of the delivered product or service or failure to complete the activities would result in the customer receiving a full or partial refund or rejecting the products delivered or services performed to date.

Beginning in fiscal 2001 with the adoption of the SEC’s Staff Accounting Bulletin, (“SAB”) No. 101 (“SAB 101”), “Revenue Recognition in Financial Statements,” (superseded by SAB 104), certain previously recognized license fee revenue was deferred and recognized in future periods over the terms of the agreements. The adoption of SAB 101 was recorded as of the beginning of fiscal 2001 and resulted in a non-cash charge for the cumulative effect of an accounting change of $4.4 million, net of a tax benefit of $2.7 million. The deferred revenue was being amortized into revenue on a straight-line basis over 5.5 years, the remaining terms of the license agreements. The Company recognized pretax license fee revenue of $0.7 million during fiscal year 2006, which is included in Service and other revenue in the Consolidated Statements of Operations. As of July 1, 2006, there was no remaining deferred license revenue from the adoption of SAB 101.

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Share -Based Compensation

In the first quarter of fiscal 2006, the Company adopted the provisions of SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”) which requires that the cost resulting from all share-based payment transactions be recognized in the financial statements at their fair values. The Company adopted SFAS 123R using the modified prospective application method under which the provisions of SFAS 123R apply to new awards and to awards modified, repurchased, or cancelled after the adoption date. The fair value of the compensation cost is recognized on a straight-line basis over the requisite service period of the award. Additionally, compensation cost for the portion of the awards for which the requisite service had not been rendered that were outstanding as of the adoption date is recognized in the Consolidated Statement of Operations over the remaining service period after the adoption date based on the award’s original estimate of fair value. The Company uses the Black-Scholes option pricing model to estimate the fair value of options and stock appreciation rights. The fair value of stock options is estimated on the date of grant, while the fair value for stock appreciation rights is estimated on the date of grant and remeasured at each subsequent reporting period, since it is liability-classified. Determining the fair value of options and stock appreciation rights requires certain estimates by management including the expected volatility and expected term of the option. Management also makes decisions regarding the risk free interest rate used in the model and makes estimates regarding forfeiture rates. Fluctuations in the market or other factors that affect these estimates could have a material impact on the resulting compensation cost. The fair value of restricted stock grants (referred to as non-vested stock) is determined based on the closing price of the Company’s common stock on the date of grant. Related compensation expense is recognized ratably over the associated requisite service period, giving effect to estimated forfeitures.

On November 10, 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position 123(R)-3 (“FSP 123R-3”), “Transition Election Related to Accounting for the Tax Effects of Share-based Payment Awards,” that provided an elective alternative transition method of calculating the pool of excess tax benefits available to absorb tax deficiencies recognized subsequent to the adoption of SFAS 123R (the “APIC Pool”) to the method otherwise required by paragraph 81 of SFAS 123R. During the second quarter of fiscal 2007, the Company made the election to use the alternative method; however, the alternative method does not have an impact on the Company’s results of operations or financial condition due to the Company’s net operating loss position for tax purposes (See Note 13 — Share-based Compensation for additional information).

Warranty

The Company provides a warranty on its products, generally extending between one and three years after delivery, and accounted for in accordance with SFAS No. 5, “Accounting for Contingencies” (“SFAS 5”). Estimated future warranty obligations related to products are provided by charges to Cost of revenues in the period that the related revenue is recognized. These estimates are derived from historical data of product reliability and, for certain new products, published (by a third party) expected failure rates. The expected failure rate is arrived at in terms of units, which are then converted into labor hours to which an average fully burdened cost per hour is applied to derive the amount of accrued warranty required. On a quarterly basis, the Company studies trends of warranty claims and performance of specific products and adjusts its warranty obligation through charges or credits to Cost of revenues (See Note 10 — Warranties and Guarantees for additional information).

Business Realignment and Related Asset Impairment Costs

The Company records realignment charges related to workforce reductions in accordance with SFAS No. 112, “Employer’s Accounting for Postemployment Benefits” (“SFAS 112”), and SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits” (“SFAS 88”). Pursuant to SFAS 112, costs related to employee severance are recorded when probable and estimable in accordance with our ongoing severance policy. SFAS 88, paragraph 15, provides that contractual termination benefits are recorded when it is probable and estimable. Charges for the impairment of long-lived assets are recognized in accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which establishes a single accounting model for the impairment of long-lived assets, as described below in the policy titled, “Impairment of Long-Lived Assets and Acquired Intangible Assets”.

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Restructuring Charges

The Company records restructuring costs in accordance with SFAS 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”), which requires that a liability for charges associated with an exit or disposal activity be measured and recognized initially at fair value only when the liability is incurred. Related to restructuring (exit) activities, the Company may also have involuntary terminations that are accounted for under SFAS 112 or SFAS 88 as applicable, or under SFAS 146 if the severance and related costs are considered to be a one-time benefit arrangement outside of the Company’s ongoing severance policy.

Shipping and handling costs

The Company records the costs and fees associated with transporting its products to customers as a component of Selling, general and administrative expense in the Consolidated Statements of Operations. These costs totaled approximately $3.1 million, $4.2 million and $3.5 million for the fiscal years ended June 28, 2008, June 30, 2007 and July 1, 2006, respectively.

Advertising Costs

The costs of general advertising, promotion and marketing programs are charged to Selling, general and administrative expense in the Consolidated Statements of Operations in the fiscal year incurred. The costs of advertising related to new product introductions are deferred until such advertising first takes place, which generally coincides with product introduction. Advertising expense for the fiscal years ended June 28, 2008, June 30, 2007 and July 1, 2006 was approximately $2.8 million, $3.0 million and $2.6 million, respectively.

Research and Development

Research and development costs are expensed as incurred. The Company evaluates the requirement to capitalize certain software development costs for protocol analyzers in accordance with SFAS No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed” (“SFAS 86”). Under SFAS 86, costs incurred to develop or significantly enhance computer software products are charged to research and development expense as incurred until technological feasibility has been established. The nature of the Company’s development for protocol analyzers is generally such that the Company can measure technological feasibility most effectively using the working model method where the time between establishment of a working model and general availability is of short duration which results in very little or no costs that qualify for capitalization. As such, the Company has not capitalized any software development costs for the years ended June 28, 2008, June 30, 2007 and July 1, 2006.

Cash and Cash Equivalents

Cash in excess of current operating requirements are invested in cash equivalents, which are short-term, highly liquid interest bearing investments with maturities of three months or less at the date of purchase and are stated at cost, which approximates fair value.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Replacements, maintenance and repairs which do not improve or extend the life of the respective asset are expensed as incurred and major betterments are capitalized. Depreciation and amortization of property, plant and equipment is provided on a straight-line basis over the asset’s estimated useful life or related lease term, if shorter, as follows:

Building and improvements	10-32 years
Furniture, machinery and equipment	2-10 years
Computer software and hardware	2-7 years

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Inventories

Inventories, with the exception of demonstration units in finished goods, are stated at the lower of cost (first-in, first-out method) or market. Costs include material, labor and overhead charges. Demonstration units are accounted for as inventory since they are sold in the normal course of business and are stated at lower of cost (specific identification method) or market.

The Company reviews the valuation of inventory on a quarterly basis and provides an allowance for the value of estimated excess and obsolete raw materials and work in process inventory. The Company’s marketing department plays a key role in the inventory review process by providing updated sales forecasts, managing product rollovers and working with the manufacturing department to maximize recovery of excess inventory. Based upon management’s forecast, inventory items no longer expected to be used in the future are considered obsolete and the difference between an inventory’s quantity and its forecasted usage are classified as excess. If actual market conditions are less favorable than those projected by management, additional inventory allowances for excess or obsolete inventory may be required.

Impairment of Long-Lived Assets and Acquired Intangible Assets

The Company monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets, including amortizable intangible assets, may not be recoverable. When such events or changes in circumstances occur, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the undiscounted cash flows are less than the carrying amount, an impairment loss is recorded to the extent that the carrying amount exceeds the fair value. During fiscal 2006, there were no impairment indicators. During fiscal 2007, an intangible asset failed the impairment test due to a change in the Company’s product strategy and, accordingly, a $0.3 million pre-tax loss was recognized in Cost of revenues in the fiscal 2007 Consolidated Statement of Operations. During fiscal 2008, an indefinite-lived intangible asset failed the impairment test due to a change in the Company’s product strategy and, accordingly, a $0.7 million pre-tax loss was recognized in Selling, general and administrative expenses in the fiscal 2008 Consolidated Statement of Operations (See Note 8 —Goodwill and Other Non-Current Assets for additional information).

Goodwill

Under SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), goodwill is tested for impairment annually, or more frequently, if events or changes in circumstances indicate that the carrying amount of the asset might be impaired. The goodwill impairment test is a two-step process which requires the Company to make judgmental assumptions regarding fair value. Testing is required between annual tests if events occur or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. Such an event may occur if, for an extended period of time, the market value of the Company’s common stock plus a control premium were less than the carrying value of the Company. The Company obtains information on sales of similar sized companies in the technology industry to estimate a control premium.

Management also reviews the Company’s financial position quarterly for other triggering events as described in SFAS No. 142. Should actual results not meet expectations or assumptions change in future years, the impairment assessment could result in a lower fair value estimate which could result in an impairment charge that may materially affect the carrying value of the Company’s assets and results from operations.

Impairment is assessed at the “reporting unit” level by applying a fair value-based test. A reporting unit is defined as the same as or one level below the operating segment level as described in SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” The Company has one reporting unit, in the test and measurement business, because none of the components of the Company constitute a business for which discrete financial information is available and for which Company management regularly reviews the results of operations.

The first step is to identify if an impairment of goodwill has occurred by comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the carrying amount of the reporting

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unit exceeds its fair value, the second step of the goodwill test is performed to measure the amount of the impairment loss, if any. In this second step, the “implied” fair value (as defined in SFAS 142) of the reporting unit’s goodwill is compared with the carrying amount of the goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of the goodwill.

As the Company consists of only one reporting unit, and is publicly traded, management estimates the fair value of its reporting unit utilizing the Company’s market capitalization, multiplying the number of actual shares outstanding by a one year average market price, as reflected on NASDAQ National Market, and applying an additional premium to give effect to the Company’s best estimate of a control premium, as if the Company were to be acquired by a single stockholder, which seeks to give effect to the increased consideration a potential acquirer would be willing to pay in order to gain sufficient ownership to set policies, direct operations and make decisions related to the Company.

As a result of the decline in the Company’s stock price since June 30, 2007, which affected the Company’s market capitalization, the Company updated its goodwill impairment test on a quarterly basis in fiscal 2008. A 30% control premium was utilized in the Company’s interim and annual goodwill impairment testing. This control premium is not a standard amount based on broad assumptions; rather, the amount is based on detailed analysis that considers appropriate industry, market, economic and other pertinent factors, including, indications of such premiums from data on recent acquisition transactions. The control premium is reviewed periodically, taking into consideration current industry, market and economic conditions along with other factors or available information specific to the Company’s business.

Management’s estimate of an appropriate control premium to apply in determining fair value is an important variable in the Company’s goodwill impairment assessment, and is subject to change. A significant impairment could result in additional charges and have a material adverse impact on the consolidated financial condition and operating results.

In the fourth quarter of fiscal 2008, the Company changed its annual impairment testing date from fiscal year end to the last day of the eleventh month of the fiscal year. The Company believes the last day of the eleventh month of the fiscal year is preferable as it provides the Company additional time to complete the impairment test and report the results of that test in the Company’s annual filing on Form 10-K.

No impairment charge resulted from the Company’s interim goodwill impairment testing. Additionally, the Company completed its annual impairment test required under SFAS 142 during the fourth quarter and determined that there was no impairment to the recorded goodwill balances in fiscal 2008, 2007, or 2006 (See Note 8 — Goodwill and Other Non-Current Assets for additional information).

Concentration of Credit Risk

The Company develops, manufactures, sells and licenses high-performance oscilloscopes, serial data analyzers and global communication protocol test solutions. The Company’s products are sold into a broad range of end markets, including computer/semiconductor/consumer electronics, data storage, automotive/industrial, and military/aerospace markets. Sales occur in all regions of the United States as well as a many foreign countries. No customer accounted for more than 10% of the Company’s consolidated revenues in any of the last three fiscal years. There is no significant concentration of the Company’s accounts receivable portfolio in any customer or geographical region that presents a risk to the Company based on that concentration. The Company performs on-going credit evaluations of its customers and generally does not require collateral for sales on credit. The Company maintains allowances for potential credit losses. Credit losses have been minimal in fiscal 2008, 2007 and 2006.

Income Taxes

Deferred tax assets and liabilities are recognized under the asset and liability method based upon the difference between the amounts reported for financial reporting and tax purposes. These deferred taxes are measured by applying current enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. A valuation allowance is provided when it is

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more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income, reversal of deferred tax liabilities during the period in which related temporary differences become deductible and available tax planning strategies. The Company’s policy is not to provide for U.S. taxes on undistributed earnings of foreign subsidiaries to the extent such earnings are determined to be permanently invested outside the United States.

Effective July 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”), as amended by FASB Staff Position No. FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48” (“FSP-FIN 48-1”). FIN 48 prescribes recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires the Company to determine whether the benefits of tax positions are more likely than not of being sustained upon audit based solely on the technical merits of the tax position. For tax positions that are more likely than not of being sustained upon examination, the Company recognizes the largest amount of the benefit that is greater than 50% likely of being realized upon effective settlement with a taxing authority having full knowledge of all relevant information. For tax positions that are not more likely than not of being sustained upon examination, the Company does not recognize any portion of the benefit in the financial statements. Both before and after adoption of FIN 48, interest related to income taxes is included in the provision of income taxes line of the Consolidated Statement of Operations.

Foreign Exchange

The Company’s foreign subsidiaries use their local currency as the functional currency and translate all assets and liabilities at fiscal year-end exchange rates and all income and expenses at average fiscal year exchange rates with translation adjustments recorded in Accumulated other comprehensive income, a separate component of stockholders’ equity in the Consolidated Balance Sheets. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in Other, net in the Consolidated Statements of Operations. Foreign currency transaction gains and losses, related to short-term intercompany loans, are recorded in the Consolidated Statements of Operations as incurred. Intercompany loans that are of a long-term nature are accounted for in accordance with SFAS No. 52, “Foreign Currency Translation,” (“SFAS 52”) whereby foreign currency transaction gains and losses are recorded in Accumulated other comprehensive income, a component of stockholders’ equity. In fiscal 2006, certain intercompany loans to foreign subsidiaries were considered long-term in nature. During fiscal 2007, management changed its intention for one intercompany loan to be short-term in nature, and, as required under SFAS 52, foreign exchange gains and losses subsequent to this change in intent are recorded in the Consolidated Statements of Operations as incurred. In fiscal 2008, management’s intention for this intercompany loan remained short-term in nature and, as such, foreign exchange gains and losses were recorded in the Consolidated Statements of Operations as incurred.

Financial Instruments

Cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities, short-term bank debt, and note payable — related party reported in the Consolidated Balance Sheets equal or approximate their fair value due to their short term to maturity. Borrowings under the revolving line of credit have variable interest rates and their carrying amounts are considered by management to be a reasonable estimate of their fair value. On October 12, 2006, the Company sold and issued $72.0 million 4.0% convertible senior subordinated notes. During fiscal 2008, the Company repurchased $4.5 million of the outstanding convertible notes, resulting in a remaining balance of $67.5 million at June 28, 2008. The market value of the convertible notes at June 28, 2008 was $60.9 million. Fair value is determined through information obtained from a third party using the latest available market data. (See Note 12 — Long Term Debt and Capital Leases for additional information).

Derivative Instruments

The Company accounts for derivatives and hedging activities in accordance with SFAS No. 133, “Accounting for Derivative Investments and Hedging Activities,” as amended (“SFAS 133”), which requires that all derivative instruments be recorded on the balance sheet at their respective fair values. The accounting for changes in the fair

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value (i.e., gains or losses) of a derivative instrument is dependent upon whether the derivative has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. The Company’s foreign exchange forward contracts and interest rate swap agreements are not accounted for as hedges in accordance with SFAS 133; therefore, any changes in fair value of these contracts are recorded in the Consolidated Statements of Operations. These derivatives are also recorded on the Consolidated Balance Sheets at fair value.

The Company enters into short-term foreign exchange forward contracts to minimize the risks associated with foreign currency fluctuations on assets or liabilities denominated in other than the functional currency of the Company or its subsidiaries. The fair value of the open foreign exchange forward contracts is a net liability of approximately $5,000 at June 28, 2008 as compared to net liabilities of approximately $36,000 at June 30, 2007 and $0.2 million at July 1, 2006. The changes in the fair values of these contracts are recorded in Other expense, net in the Consolidated Statements of Operations.

The changes in fair value of the foreign exchange contracts are inversely correlated to changes in the value of certain of the Company’s foreign currency-denominated assets and liabilities. At June 28, 2008 and June 30, 2007, the notional amounts of the Company’s open foreign exchange forward contracts, all with maturities of less than six months, were approximately $16.3 million and $12.9 million, respectively.

On October 16, 2006 in conjunction with the repayment of the term loan (See Note 12 — Long-term Debt and Capital Leases for additional information), the Company terminated its interest rate swap with M&T Bank. The net interest income earned on the swap was $0.3 million for the year ended June 30, 2007 and is recognized in Interest expense in the Consolidated Statements of Operations.

The Company does not use derivative financial instruments for trading or other speculative purposes and does not enter into fair value hedges.

New Accounting Pronouncements

Recent pronouncements not yet adopted

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. SFAS 157 requires companies to disclose the fair value of their financial instruments according to a fair value hierarchy as defined in the standard. Additionally, companies are required to provide enhanced disclosure regarding financial instruments in one of the categories, including a reconciliation of the beginning and ending balances separately for each major category of assets and liabilities. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157” (“FSP FAS 157-2”). FSP FAS 157-2 amends FAS 157 to delay the effective date of FAS 157 for non-financial assets and non-financial liabilities until fiscal years beginning after November 15, 2008, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Management is currently evaluating the effect that adoption of this statement will have on the Company’s consolidated financial position and results of operations.

In February 2007, the FASB issued SFAS No. 159 (“SFAS 159”), “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115”. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, applies to all entities with available-for-sale and trading securities. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS 157. Management does not expect that the adoption of SFAS 159 will have a material effect on the Company’s consolidated financial position and results of operations.

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In June 2007, the Emerging Issues Task Force (“EITF”) issued EITF 07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities” (“EITF 07-3”). EITF 07-3 addresses the diversity that exists with respect to the accounting for the non-refundable portion of a payment made by a research and development entity for future research and development activities. The EITF concluded that an entity must defer and capitalize non-refundable advance payments made for research and development activities until the related goods are delivered or the related services are performed. EITF 07-3 is effective for interim or annual reporting periods in fiscal years beginning after December 15, 2007. Management does not expect that the adoption of EITF 07-3 will have a material effect on the Company’s consolidated financial position or results of operations.

In December 2007, the FASB issued SFAS No. 141 (revised 2007) (“SFAS 141R”), “Business Combinations”. This statement establishes the principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date fair value. SFAS 141R also establishes disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption is not permitted. Management is currently evaluating the effect that adoption of SFAS 141R will have on the Company’s consolidated financial position and results of operations.

In March 2008, the FASB issued SFAS No. 161 (“SFAS 161”), “Disclosures about Derivative Instruments and Hedging Activities”. This statement requires companies with derivative instruments to disclose information that should enable financial statement users to understand how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under FASB Statement No. 133 “Accounting for Derivative Instruments and Hedging Activities” and how derivative instruments and related hedged items affect a company’s financial position, financial performance and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Management is currently evaluating the impact of the adoption of the enhanced disclosures required by SFAS 161.

In April 2008, the FASB finalized Staff Position No. 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”). This position amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets”. FSP 142-3 applies to intangible assets that are acquired individually or with a group of other assets and both intangible assets acquired in business combinations and asset acquisitions. This position is effective for fiscal years beginning after December 15, 2008. Management is currently evaluating the effect that the adoption of FSP 142-3 will have on the Company’s consolidated financial position and results of operations.

In May 2008, the FASB issued FASB Staff Position Accounting Principles Board Opinion No. 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). This FSP requires cash settled convertible debt to be separated into debt and equity components at issuance and a value to be assigned to each. The value assigned to the debt component will be the estimated fair value, as of the issuance date, of a similar bond without the conversion feature. The difference between the bond cash proceeds and this estimated fair value will be recorded as a debt discount and amortized to interest expense over the life of the bond. The FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008 and for interim periods within those years and requires retrospective application. Management is currently evaluating the effect that adoption of FSP APB 14-1 will have on the Company’s consolidated financial position and results of operations, which may be material.

Recent pronouncements adopted

In February 2006, the FASB issued SFAS No. 155 (“SFAS 155”), “Accounting for Certain Hybrid Instruments, an amendment of FASB Statements No. 133 and 140”. SFAS 155 allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to separate the derivative from its host) if the holder

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elects to account for the whole instrument on a fair value basis. It also clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133; establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring separation; clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and amends FASB Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The adoption of SFAS 155 did not have a material effect on the Company’s consolidated financial position or results of operations.

In June 2006, the Emerging Issues Task Force (“EITF”) issued EITF Abstract 06-2 (“EITF 06-2”), “Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43”. EITF 06-2 provides guidance that an employee’s right to a compensated absence under a sabbatical or other similar benefit arrangement should be accrued over the requisite service period. EITF 06-2 is effective for fiscal years beginning after December 15, 2006. EITF 06-2 allows for adoption through retrospective application to all prior periods or through a cumulative-effect adjustment to retained earnings. The Company adopted EITF 06-2 beginning July 1, 2007 using the cumulative-effect adjustment approach. The effect of this adoption resulted in a decrease to beginning Retained earnings of approximately $0.2 million, an increase to deferred tax assets of approximately $0.1 million and an increase to Accrued expenses and other current liabilities and Deferred revenue and other non-current liabilities of approximately $0.2 million and $0.1 million, respectively.

In July 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109”, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 was effective for fiscal years beginning after December 15, 2006, and was adopted by the Company effective July 1, 2007 (See Note 11 — Income Taxes for additional information).

In December 2006, the FASB issued FASB Staff Position EITF 00-19-2, “Accounting for Registration Payment Arrangements” (“FSP EITF 00-19-2”). FSP EITF 00-19-2 specifies that registration payment arrangements should play no part in determining the initial classification and subsequent accounting for the securities to which they relate. FSP EITF 00-19-2 requires the contingent obligation in a registration payment arrangement to be separately analyzed under SFAS No. 5, “Accounting for Contingencies”, and FASB Interpretation No. 14, “Reasonable Estimations of the Amount of a Loss”. If payment in a registration payment arrangement is probable and can be reasonably estimated, a liability should be recorded. FSP EITF 00-19-2 is effective for fiscal years beginning after December 15, 2006. The adoption of this FSP did not have a material effect on the Company’s consolidated financial position or results of operations.

In May 2007, the FASB issued FASB Staff Position No. FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48” (“FSP-FIN 48-1”). FSP-FIN 48-1 further clarifies if it is appropriate for an entity to recognize a previously unrecognized tax benefit when the only change since the initial determination is the completion of an examination or audit by a taxing authority. FSP-FIN 48-1 provides that the determination of whether a position is effectively settled should be taken on a case by case basis; however, positions may be grouped by tax year and considered effectively settled. The adoption of this FSP on July 1, 2007 did not have a significant impact on the Company’s consolidated financial statements (See Note 11 — Income Taxes for additional information).

2. Catalyst Acquisition

On September 29, 2006, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) among the Company, 2006 Franklin Congress Corporation, a California corporation and a wholly owned subsidiary of the Company (“Sub”), Catalyst, and Nader Salehomoum, as Equityholder Representative, pursuant to which Sub merged with and into Catalyst (the “Catalyst Merger”), with Catalyst continuing as the surviving corporation and as a 100% owned subsidiary of the Company. Catalyst is a manufacturer of data bus analysis and emulation tools for advanced serial data communications and strengthens the Company’s position in protocol solutions.

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The Catalyst Merger was recorded under the purchase method of accounting in accordance with SFAS 141. On October 2, 2006, the effective date of the Catalyst Merger, all shares of common stock of Catalyst issued and outstanding immediately prior to the Catalyst Merger were exchanged for approximately $26.7 million in cash immediately. In addition, pursuant to the terms of the Merger Agreement, 10% of the stated consideration was placed into escrow for the twelve-month period following the closing of the Catalyst Merger to secure certain indemnification obligations under the terms of the Merger Agreement. On October 2, 2007, approximately $3.1 million was released from the escrow to the Catalyst stockholders, pursuant to the terms of the Merger Agreement. In the third quarter of fiscal 2008, the Company and the former Catalyst owners agreed to a final indemnification release. The Company received approximately $0.2 million from the remaining Catalyst escrow balance, representing the indemnification obligation for certain Catalyst inventory, assumed at acquisition. This amount was recorded as a component of operating income in fiscal 2008.

LeCroy paid cash of $31.5 million, including direct transaction costs of $2.6 million, net of cash acquired of $1.0 million, using proceeds from the Revolver under the Prior Credit Agreement (Note 13 — Long-term Debt and Capital Leases for additional information), issued a $3.5 million, 6% promissory note payable on January 2, 2008, to Nader Salehomoum, the former sole shareholder of Catalyst and current employee of the Company and assumed the fair value of certain vested Catalyst stock options totaling $0.5 million. The Catalyst Merger consideration is summarized below (in thousands):

Cash for shares and certain vested options	$	26,650
Cash paid in escrow		3,350
Note payable to former shareholder		3,500
Fair value of vested stock options assumed		450
Transaction costs		2,629
Total purchase price	$	36,579

In connection with the Catalyst Merger, LeCroy assumed Catalyst’s Stock Option Plan. On October 2, 2006, Catalyst stock option holders approved technical amendments to their stock option grants in anticipation of their assumption by LeCroy pursuant to the Catalyst Merger including, without limitation, amendments reflecting that any stock option or other award granted thereunder would be exercisable for LeCroy common stock. Pursuant to SFAS No. 123R, of the 136,826 assumed stock options granted by the Company in exchange for the stock options held by the employees of Catalyst, the fair value of 36,858 vested options or approximately $450,000 was considered part of the purchase price for Catalyst and the fair value of 99,968 unvested options or approximately $1,196,000, will be charged to compensation expense in operations as earned by employees over their remaining requisite service periods. The fair value of assumed options was determined using the Black-Scholes option pricing model in accordance with EITF 99-12, “Determination of the Measurement Date for the Market Price of Acquiror Securities Issued in a Purchase Business Combination” and SFAS 123R (See Note 13 — Share-Based Compensation for additional information).

The Company was required to grant restricted stock to certain former Catalyst employees contingent on the continuation of employment and the percentage of the escrow paid to the former shareholders of Catalyst twelve months subsequent to the Catalyst Merger. The value of the 26,733 restricted shares that were granted was approximately $0.2 million.

The fair value of tangible and intangible assets acquired and liabilities assumed was established based upon the unaudited October 1, 2006 balance sheet of Catalyst, as well as certain assumptions made regarding fair values. The fair value of finished goods inventory is based on estimated selling prices less direct costs to sell and a reasonable profit margin on the selling effort. The fair value of work in process inventory is based on estimated selling prices less cost to complete, direct costs to sell and a reasonable profit margin on the cost to complete and selling effort. The fair value of the IPR&D, purchased technology, trade name, backlog and manufacturers’ representative relationships was determined by considering a variety of factors, including; appraisal, comparable transactions, and discounted cash flow approaches. The fair value of the IPR&D was based on the total estimated costs to develop the related technologies less the costs incurred to date for the projects, and the intangible asset values were based on

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estimates of future cash flows associated with those assets. The purchased technology, backlog and manufacturers’ representative relationships related to this acquisition are being amortized over their estimated economic useful lives ranging from two to fifteen months. It was originally determined that the Catalyst trade name valued at $0.7 million had an indefinite life. However, during fiscal 2008, the Catalyst trade name failed the impairment test due to a change in the Company’s product strategy and, accordingly, a $0.7 million pre-tax loss was recognized in Selling, general and administrative expenses in the Consolidated Statement of Operations (See Note 8 — Goodwill and Other Non-Current Assets for additional information).

The excess of the purchase price over the fair value of the net assets acquired has been allocated to goodwill. The primary contributors to the Catalyst goodwill, included, (i) substantial revenue benefits due to synergies in product offerings and platforms between the Catalyst and CATC product portfolio; (ii) expanded base of industry knowledge; (iii) economies of scale benefits for the protocol products and the complementary strategic fit with the CATC products, including the expansion of protocol products; and (iv) opportunity to further strengthen direct sales model with Catalyst’s already experienced sales team. The goodwill is not deductible for tax purposes.

The final purchase price allocation is summarized below (in thousands):

Cash	$	1,017
Accounts receivable		738
Inventory		4,269
Other assets		206
In-process research and development		4,000
Purchased intangibles		2,220
Goodwill		27,512
Current liabilities assumed		(1,095	)
Deferred tax liability		(2,288	)
Total purchase price	$	36,579

The following table presents the details of the amortizable intangible assets acquired in the Catalyst Merger and their carrying values as of June 28, 2008 (in thousands):

	Original Weighted Average Lives	Cost		Accumulated Amortization		Net
Amortizable intangible assets:
Purchased technology	0.9 years	$	1,030	$	1,030	$	—
Purchased backlog	0.1 years		450		450		—
Purchased manufacturers’ representative relationships	0.0 years		40		40		—
Total amortizable intangibles purchased		$	1,520	$	1,520	$	—

Amortization expense for intangible assets acquired in the Catalyst Merger was approximately $0.4 million for the year ended June 28, 2008 and approximately $1.1 million for the year ended June 30, 2007, which was recorded in Cost of revenues in the Consolidated Statements of Operations.

The $4.0 million related to IPR&D was written off at the time of the acquisition in accordance with FIN 4. This charge is included in Research and development expense in the Consolidated Statement of Operations for the year ended June 30, 2007.

The Consolidated Statements of Operations includes the results of operations of Catalyst since October 2, 2006.

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3. Business Realignment, Restructuring Initiatives and Related Asset Impairments

Fiscal 2008 Business Realignment and Related Asset Impairment

In the fourth quarter of fiscal 2008, the Catalyst tradename failed the impairment test as a result of a change in the Company’s product strategy, and therefore, the Company recorded an approximate $0.7 million non-cash charge to Selling, general and administrative expense for the impairment.

In the third quarter of fiscal 2008, as a result of streamlining operational management processes and staffing requirements, the Company recorded severance of approximately $0.3 million, which was expensed to Selling, general and administrative. This resulted from headcount reductions of three employees or 0.7% of the workforce as compared to June 30, 2007. As of June 28, 2008, approximately $0.1 million has been paid in cash and approximately $0.2 million remains in Accrued expenses and other current liabilities on the Consolidated Balance Sheet. Severance is estimated to be paid by the end of the third quarter of fiscal 2009.

In the first quarter of fiscal 2008, primarily as the result of an effort to improve sales effectiveness and channel management, the Company recorded severance of approximately $0.6 million, which was expensed to Selling, general and administrative. This resulted from headcount reductions of twelve employees or 2.7% of the workforce as compared to June 30, 2007. As of June 28, 2008, approximately $0.5 million has been paid in cash and approximately $0.1 million remains in Accrued expenses and other current liabilities on the Consolidated Balance Sheet. Severance is estimated to be paid by the end of the first quarter of fiscal 2009.

Fiscal 2007 Restructuring Initiatives

In the fourth quarter of fiscal 2007, as a result of local economic conditions in Japan, the Company changed its Japan sales strategy and approved a restructuring plan related to the Japanese operations which resulted in the closure of certain office facilities in Japan, which included lease termination costs. As a result of the office closures, there were headcount reductions of four employees or 0.9% of the workforce as compared to July 1, 2006. As a result, the Company recorded severance and related expenses of approximately $0.1 million and facility closure costs of approximately $0.2 million, which was expensed to Selling, general and administrative. As of June 28, 2008, approximately $0.3 million has been paid in cash and no accrual remains on the Consolidated Balance Sheet.

Fiscal 2007 Business Realignment and Related Asset Impairment

In the fourth quarter of fiscal 2007, an intangible asset was written off due to a change in the Company’s product strategy and, accordingly, the Company took an approximate $0.3 million non-cash charge to Cost of revenues for the impairment.

In the third quarter of fiscal 2007, prompted by the acquisition of Catalyst, the Company evaluated certain business processes and staffing requirements. As a result, the Company recorded severance and related expense of approximately $1.6 million, of which approximately $0.3 million was expensed to Cost of revenues, $1.2 million was expensed to Selling, general and administrative and $0.1 million was expensed to Research and development. The implementation of this plan resulted in headcount reductions of thirty-three employees or 7.2% of the workforce as compared to July 1, 2006. As of June 28, 2008, approximately $1.5 million has been paid in cash and approximately $0.1 million remains in Accrued expenses and other current liabilities. Severance and other related amounts under this plan are estimated to be paid by the end of the second quarter of fiscal 2009.

In the second quarter of fiscal 2007, as a result of a change in the Company’s organization stemming from the Catalyst acquisition, the Company recorded severance and related expenses of approximately $0.4 million, of which approximately $0.1 million was expensed to Selling, general and administrative and $0.3 million was expensed to Research and development. The implementation of this plan resulted in headcount reductions of eleven employees or 2.4% of the workforce as compared to July 1, 2006. Severance and other related amounts under this plan were fully paid by the end of fiscal 2007.

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Fiscal 2006 Business Realignment

During the fourth quarter of fiscal 2006, the Company realigned some of its business processes and as a result, incurred severance and related expenses of approximately $0.4 million, of which approximately $0.1 million was expensed to Cost of revenues, $0.1 million was expensed to Research and development and $0.2 million was expensed to Selling, general and administrative. The implementation of this plan resulted in headcount reductions of sixteen employees or 3.5% of the workforce as compared to July 2, 2005. As of June 28, 2008, severance and other related amounts under this plan were fully paid.

The table below summarizes the charges for business realignments, restructuring initiatives and related asset impairments for the fiscal years ended 2008, 2007 and 2006.

(in thousands):

	Years Ended
	June 28, 2008		June 30, 2007		July 1, 2006
Charges for:
Impaired intangible assets	$	—	$	250	$	—
Severance and related costs		—		358		77
Cost of revenues	$	—	$	608	$	77
Charges for:
Severance and related costs	$	—	$	467	$	127
Research and development	$	—	$	467	$	127
Charges for:
Impaired intangible asset	$	699	$	—	$	—
Severance and related costs		954		1,248		176
Facility closure		—		156		—
Selling, general and administrative	$	1,653	$	1,404	$	176

4. Accounts Receivable, net

As of June 28, 2008 and June 30, 2007, the Company had an agreement with one of its customers, who is also a vendor, that provided the Company with the legal right to offset outstanding accounts receivable balances against outstanding accounts payable balances. At June 28, 2008 and June 30, 2007, the Company did not offset the balances as the amounts were immaterial.

The allowance for doubtful accounts and sales returns was approximately $0.7 million and $0.9 million as of June 28, 2008 and June 30, 2007, respectively.

5. Inventories

Inventories consist of the following (in thousands):

	June 28, 2008		June 30, 2007
Raw materials	$	9,581	$	9,312
Work in process		6,008		7,354
Finished goods		17,297		21,979
	$	32,886	$	38,645

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The value of demonstration units included in finished goods was $10.3 million and $13.6 million at June 28, 2008 and June 30, 2007, respectively. The Company’s demonstration units are held for sale and are sold regularly in the ordinary course of business through its normal sales distribution channels and existing customer base. The allowance for excess and obsolete inventory (raw materials and work in progress), included above, amounted to $4.5 million and $2.7 million at June 28, 2008 and June 30, 2007, respectively.

In fiscal 2008, the Company recorded an approximate $2.4 million inventory write-down as a result of a change in the Company’s product strategy and an approximate $0.8 million charge related to certain inventory recorded at fair value in the purchase accounting of Catalyst, a portion of which the Company was indemnified. These charges totaled approximately $3.2 million and were recorded to Cost of revenues in the Consolidated Statement of Operations.

In fiscal 2007, the Company made certain operational changes as well as realigned its product strategy. These changes resulted in a write-down of inventory of approximately $3.4 million which was recorded in Cost of revenues, including inventory recorded at fair value in the purchase accounting of Catalyst.

6. Other Current Assets

Other current assets consist of the following (in thousands):

	June 28, 2008		June 30, 2007
Deferred tax assets, net	$	5,506	$	4,863
Prepaid taxes		249		381
Other receivables		1,695		1,371
Value-added tax receivables		664		808
Other		2,100		2,185
	$	10,214	$	9,608

7. Property, Plant and Equipment, net

Property, plant and equipment consist of the following (in thousands):

	June 28, 2008			June 30, 2007
Land, building and improvements	$	17,306		$	17,053
Furniture, machinery and equipment		37,620			32,915
Computer software and hardware		20,465			18,233
		75,391			68,201
Less: Accumulated depreciation		(53,708	)		(47,862	)
	$	21,683		$	20,339

Depreciation expense for the fiscal years ended June 28, 2008, June 30, 2007 and July 1, 2006 was approximately $5.7 million, $5.2 million and $5.0 million, respectively.

Amortization for assets under capital leases is included in depreciation expense above. The net carrying value of assets under capital leases is approximately $0.6 million and $0.1 million at June 28, 2008 and June 30, 2007, respectively.

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8. Goodwill and Other Non-Current Assets

Goodwill and Other non-current assets consist of the following (in thousands):

	June 28, 2008		June 30, 2007
Goodwill	$	105,771	$	105,885
Intangibles, net	$	972	$	3,032
Deferred tax assets, net		9,186		7,809
Deferred financing costs on convertible note		1,920		2,642
Other		856		970
	$	12,934	$	14,453

Goodwill

The Company completed the acquisition of its two complementary protocol businesses, CATC, on October 29, 2004 and Catalyst, on October 2, 2006. These acquisitions were completed because of their strategic fit with the Company’s existing business and because they were of such a nature and size as to establish new products for growth of the Company. Each of the acquisitions resulted in the recognition of goodwill in the Company’s consolidated financial statements. This goodwill arose because the purchase prices for these businesses reflect a number of factors, including the future earnings and cash flow potential of these products and the multiple to earnings, cash flow and other factors at which similar businesses have been purchased by other acquirers.

The primary contributors to the CATC goodwill, included, (i) substantial revenue potential, due to synergies in geographic and end-market opportunities; (ii) synergy benefits derived through the termination of costly third party distributors, using a direct sales model, leveraging an existing LeCroy worldwide sales-force and customer support infrastructure; (iii) access to an expanded base of industry knowledge and workforce expertise; (iv) the resulting synergies CATC brings to existing operations, particularly the ability to capitalize on growing serial data test application standards; and (v) immediate savings in general and administrative expenses due to elimination of CATC’s public company costs.

The primary contributors to the Catalyst goodwill, included, (i) substantial revenue benefits due to synergies in product offerings and platforms between the Catalyst and CATC product portfolio; (ii) expanded base of industry knowledge; (iii) economies of scale benefits for the protocol products and the complementary strategic fit with the CATC products, including the expansion of protocol products; and (iv) opportunity to further strengthen direct sales model with Catalyst’s already experienced sales team.

Under SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), goodwill is tested for impairment annually, or more frequently, if events or changes in circumstances indicate that the carrying amount of the asset might be impaired. The goodwill impairment test is a two-step process which requires the Company to make judgmental assumptions regarding fair value. Testing is required between annual tests if events occur or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. Such an event may occur if, for an extended period of time, the market value of the Company’s common stock plus a control premium were less than the carrying value of the Company.

As a result of the decline in the Company’s stock price since June 30, 2007, which affected the Company’s market capitalization, the Company updated its goodwill impairment test as of September 29, 2007, December 29, 2007, and March 29, 2008 respectively, to identify whether a potential impairment of the Company’s recorded goodwill existed. For the first quarter ended September 29, 2007 the Company’s market capitalization, without regard to a control premium, exceeded its carrying value. For the second quarter testing as of December 29, 2007, the fair value of the Company’s reporting unit was determined to be $142.8 million, using a 30% control premium, which exceeded the carrying amount by $25.6 million, or 21%. For the third quarter testing as of March 29, 2008, the fair value of the Company’s reporting unit was determined to be $137.8 million, using a 30% control premium,

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which exceeded the carrying amount by $18.5 million, or 15.5%. For the fourth quarter testing as of May 31, 2008, the fair value of the Company’s reporting unit was determined to be $138.0 million, using a 30% control premium, which exceeded the carrying amount by $19.8 million, or 16.7%.

A 30% control premium was utilized in the Company’s second quarter, third quarter and annual goodwill impairment testing. This control premium is not a standard amount based on broad assumptions; rather, the amount is based on detailed analysis that considers appropriate industry, market, economic and other pertinent factors, including, indications of such premiums from data on recent acquisition transactions. The control premium is reviewed periodically, taking into consideration current industry, market and economic conditions along with other factors or available information specific to the Company’s business.

The Company determined that there was no impairment to the recorded goodwill balances in fiscal 2008, 2007 and 2006. The Company did, however, during the fourth quarter of fiscal 2007 and 2006, reduce the goodwill by approximately $0.1 million and $0.4 million, respectively, as a result of a reversal of a pre-acquisition tax contingency reserve. Additionally, upon adoption of FIN 48 on July 1, 2007, some accruals for uncertain tax positions related to the acquisition of CATC were reduced, resulting in a decrease to goodwill of approximately $0.1 million.

Intangible Assets

The following table reflects the gross carrying amount and accumulated amortization of the Company’s amortizable intangible assets included in Other non-current assets on the Consolidated Balance Sheets as of the dates indicated (in thousands):

	Original Weighted Average Lives	June 28, 2008			June 30, 2007
Amortizable intangible assets:
Technology, manufacturing and distribution rights	2.9 years	$	8,296		$	8,296
Accumulated amortization			(7,729	)		(6,599	)
Net carrying amount		$	567		$	1,697
Patents and other intangible assets	5.9 years		1,592			1,592
Accumulated amortization			(1,187	)		(957	)
Net carrying amount		$	405		$	635
Total Net carrying amount		$	972		$	2,332

Purchased intangibles acquired in the Catalyst acquisition totaled $2.2 million of which $1.5 million related to amortizable intangible assets with finite lives. Additionally, approximately $0.7 million related to the Catalyst tradename was included in Intangibles, net at June 30, 2007, which had been established as an indefinite-lived intangible.

In the fourth quarter of fiscal 2008, the Catalyst tradename failed the annual impairment test due to a change in the Company’s product strategy and, accordingly, the Company took an approximate $0.7 million non-cash charge to Selling, general and administrative expense for the impairment.

In the fourth quarter of fiscal 2007, the Company realigned its product strategy and cancelled certain engineering programs. The cancellation of these programs resulted in a non-cash impairment charge of an intangible asset of approximately $0.3 million which was recorded in Cost of revenues in the Consolidated Statement of Operations.

Amortization expense for those intangible assets with finite lives was approximately $1.4 million, $3.0 million, and $2.6 million for fiscal 2008, 2007 and 2006, respectively. The cost of an amortizable intangible asset is

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amortized on a straight-line basis over the estimated economic life of the asset. Management estimates intangible assets amortization expense on a straight-line basis in fiscal 2009 through 2013 will approximate $0.5 million, $0.1 million, $0.1 million, $0.1 million and $0.1 million, respectively.

9. Accrued Expenses and Other Current Liabilities

Accrued expenses and other liabilities consist of the following (in thousands):

	June 28, 2008		June 30, 2007
Compensation and benefits, including severance	$	7,573	$	6,494
Income taxes		114		1,996
Warranty		1,313		1,190
Deferred revenue, current portion		1,421		1,195
Accrued interest on debt		598		1,033
Retained liabilities from discontinued operations		160		160
Convertible notes(a)		5,500		—
Capital leases		234		119
Other current liabilities		2,288		3,340
	$	19,201	$	15,527

(a) This represents the amount of convertible notes that the Company intends to repurchase during fiscal 2009 based on current market conditions.

10. Warranties and Guarantees

The following table is a reconciliation of the changes in the Company’s aggregate product warranty liability during the years ended June 28, 2008, June 30, 2007 and July 1, 2006 (in thousands):

	June 28, 2008			June 30, 2007			July 1, 2006
Balance at beginning of year	$	1,190		$	1,005		$	971
Warranty liability assumed in business acquisition		—			150			—
Accruals for warranties issued during the year		931			850			797
Warranty costs incurred during the year		(808	)		(815	)		(763	)
Balance at end of year	$	1,313		$	1,190		$	1,005

As is customary in the test and measurement industry, and as provided for by local law in the U.S. and other jurisdictions, the Company’s standard terms of sale provide remedies to customers, such as defense, settlement or payment of a judgment for intellectual property claims related to the use of the Company’s products. Such indemnification provisions are accounted for in accordance with SFAS No. 5. To date, there have been no claims under such indemnification provisions.

11. Income Taxes

The components of income (loss) before income taxes are as follows (in thousands):

	Years Ended
	June 28, 2008			June 30, 2007			July 1, 2006
Domestic	$	(1,896	)	$	(16,382	)	$	5,896
Foreign		3,664			944			4,140
	$	1,768		$	(15,438	)	$	10,036

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The income tax provision (benefit) consists of the following (in thousands):

	Years Ended
	June 28, 2008			June 30, 2007			July 1, 2006
Current:
U.S. federal	$	(147	)	$	3		$	81
U.S. state and local		263			118			245
Foreign		584			339			1,289
Deferred:
U.S. federal		(619	)		(3,797	)		1,567
U.S. state and local		(198	)		782			322
Foreign		173			324			(41	)
	$	56		$	(2,231	)	$	3,463

The reconciliations between the income tax provision (benefit) at the U.S. federal statutory rate and the Company’s effective tax rate is as follows (in thousands):

	Years Ended
	June 28, 2008			June 30, 2007			July 1, 2006
Provision (benefit) at U.S. federal statutory rate	$	619		$	(5,403	)	$	3,512
Difference between U.S. and foreign rates		(247	)		(166	)		(214	)
Non-deductible purchased in-process research technology		—			1,400			—
Adjustment of deferred tax assets		—			100			(607	)
State income taxes, net of federal benefit		(40	)		(384	)		484
(Decrease) increase in valuation allowance		(18	)		1,397			(92	)
Non-deductible share-based compensation		825			695			514
Research and investment tax credits		(1,200	)		—			—
Other, net		117			130			(134	)
Income tax provision (benefit)	$	56		$	(2,231	)	$	3,463

Significant components of the Company’s deferred tax assets as of June 28, 2008 and June 30, 2007 were as follows (in thousands):

	June 28, 2008			June 30, 2007
Deferred tax assets:
U.S. net operating loss carryforwards	$	1,400		$	2,414
Acquired U.S. net operating loss carryforwards		1,902			1,902
Foreign net operating loss carryforwards		185			370
Tax credit carryforwards		3,479			2,813
Inventory reserves		1,903			1,319
Deferred revenue		320			300
Share-based compensation		1,804			2,056
Accrued compensation/benefits		450			756
Deferred research expenses		6,695			6,033
Other reserves		2,343			1,317
Deferred tax assets before valuation allowance		20,481			19,280
Valuation allowance		(1,735	)		(1,655	)
Deferred tax assets after valuation allowance		18,746			17,625
Deferred tax liabilities:
Unrepatriated foreign earnings		(1,622	)		(1,622	)
Depreciation and amortization		(2,064	)		(2,408	)
Other		(691	)		(1,013	)
Deferred tax liabilities		(4,377	)		(5,043	)
Deferred tax assets	$	14,369		$	12,582

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At June 28, 2008 and June 30, 2007, $5.5 million and $4.9 million, respectively, of the Company’s deferred tax assets were included on the Consolidated Balance Sheets in Other current assets, $9.2 million and $7.8 million, respectively, were included in Other non–current assets, and $0.3 million and $0.1 million of foreign deferred tax liabilities, respectively, were included in Accrued expenses and other current liabilities.

During the year ended June 28, 2008, the valuation allowance increased by approximately $80,000. The increase was due to an increase in state investment tax credit carryforwards, which remain uncertain in their utilization, an increase in gross deferred tax assets due to the adoption of FIN 48 on July 1, 2007, partially offset by decreases in the valuation allowance due to the utilization of foreign net operating loss carryforwards in Asia and Europe, and changes surrounding the utilization of such foreign deferred tax assets.

During the year ended June 30, 2007, the valuation allowance increased by approximately $1.4 million. The increase was primarily due to a change in state tax law, which reduced the probability of utilizing state investment tax credit carryforwards, and losses incurred in Asia, which increased foreign net operating loss carryforwards and uncertainty surrounding the utilization of deferred tax assets in Asia.

A valuation allowance of approximately $1.7 million existed as of both June 28, 2008 and June 30, 2007 for certain tax credit carryforwards, capital loss carryforwards and foreign deferred tax assets due to the uncertainty surrounding the utilization of these deferred tax assets. Management believes that it is more likely than not that the Company will realize the benefits of the Company’s net deductible temporary differences, net of the valuation allowance. The factors that management considered in assessing the likelihood of realization included forecasted future taxable income, reversal of taxable temporary differences and available tax planning strategies that could be implemented to realize the deferred tax assets. Management will continue to assess the realizability of the deferred tax assets at each interim and annual balance sheet date based on actual and forecasted operating results.

Historically, it has been the practice of the Company to reinvest unremitted earnings of foreign subsidiaries. In a previous fiscal year, however, the Company determined that it would repatriate approximately $7.0 million in future periods from its foreign subsidiaries. The Company believes repatriation of these earnings will result in additional taxes in the amount of $1.6 million and provided for that amount in the 2001 tax provision. The cumulative amount of all other undistributed earnings of consolidated foreign subsidiaries, for which U.S. federal income tax has not been provided, was approximately $7.7 million and $5.7 million at June 28, 2008 and June 30, 2007, respectively. These earnings, which reflect full provision for non-U.S. income taxes, are anticipated to be reinvested permanently outside the United States. Determining the U.S. income tax liability that might result if these earnings were remitted is not practicable.

At June 28, 2008, the Company had self-generated federal and state net operating loss carryforwards of approximately $4.3 million and acquired net operating loss carryforwards of $5.3 million available to offset future taxable income. The carryforwards begin to expire at various dates starting in fiscal 2022 through 2027. Self-generated Foreign tax net operating loss carryforwards of approximately $0.5 million at June 28, 2008 are available to offset future taxable income of certain foreign subsidiaries. Approximately $0.3 million of these foreign net operating loss carryforwards expire in 2014, and approximately $0.2 million of these foreign net operating loss carryforwards do not have an expiration period. As of June 28, 2008, the Company has approximately $1.4 million of self-generated foreign tax credit carryforwards, $3.5 million of self-generated state tax credit carryforwards, $1.2 million of acquired state tax credit carryforwards, $4.6 million of self-generated federal general business tax credit carryforwards, and $0.9 million of acquired federal general business tax credit carryforwards. The foreign, state and federal tax credits expire at various dates between fiscal 2009 and 2028.

Effective July 1, 2007, the Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes,” as amended by FASB Staff Position No. 48-1 (“FSP-FIN 48-1”), “Definition of Settlement in FASB Interpretation 48”. FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. FIN 48 states that a tax benefit from an uncertain tax position may be recognized only if it is “more likely than not” that the position is sustainable, based on its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit greater than 50%

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likely of being realized upon settlement with a taxing authority having full knowledge of all relevant information. A tax benefit from an uncertain position was previously recognized if it was probable of being sustained. Under FIN 48, the liability for unrecognized tax benefits is classified as non-current unless the liability is expected to be settled in cash within twelve months of the reporting date. The impact of adopting FIN 48 and FSP-FIN 48-1 on the Company’s consolidated financial statements is summarized below:

	Balance at June 30, 2007	FIN 48 Adjustment		Balance at July 1, 2007
Goodwill	105,885	(114	)	105,771
Other non-current assets	14,453	1,057		15,510
Accrued expenses and other current liabilities	15,527	(1,968	)	13,559
Deferred revenue and other non-current liabilities	1,246	2,853		4,099
Retained earnings	2,486	58		2,544

The Company operates in multiple taxing jurisdictions, both within and outside the United States. At July 1, 2007 and June 28, 2008, the total amount of unrecognized tax benefits related to federal, state and foreign taxes and accrued interest was approximately $10.1 million and $10.4 million, respectively, (of which approximately $7.5 million and $7.8 million, respectively, would impact the effective tax rate if recognized). Approximately $2.6 million of the total unrecognized tax benefits are related to the CATC acquisition, and would reduce goodwill if recognized at July 1, 2007 and June 28, 2008. As of June 28, 2008, the Company has approximately $10.4 million of unrecognized tax benefits, of which, approximately $2.7 million are reflected as a non-current liability and approximately $7.7 million are reflected as a reduction of gross deferred tax assets.

The Company believes it is reasonably possible that approximately $1.1 million of net unrecognized tax benefits will be recognized during the next twelve months due to the expiration of the statute of limitations and impact the Company’s effective tax rate.

The Company recognizes interest and, if applicable, penalties which could be assessed related to unrecognized tax benefits in income tax expense. As of July 1, 2007 and June 28, 2008, the total amount of accrued interest and penalties, before federal and, if applicable, state effect, was approximately $57,000 and $87,000, respectively.

The Company files income tax returns in the U.S., various states and in foreign jurisdictions. For federal and foreign income tax purposes, the fiscal 2005 through 2008 tax years remain open for examination by the tax authorities. For state tax purposes, (principally California and New York) fiscal 2004 through 2008 tax years remain open for examination by the tax authorities.

A reconciliation of the unrecognized tax benefits for the year ended June 28, 2008 follows:

	Unrecognized Tax Benefits (in thousands)
Balance as of July 1, 2007	$	10,075
Additions for current year tax positions		379
Additions for prior year tax positions		272
Reductions of tax positions related to expiration of statute of limitations		(347	)
Reductions of interest related to expiration of statute of limitations		(8	)
Additional interest		38
Balance as of June 28, 2008	$	10,409

In accordance with the Company’s accounting policy, both before and after adoption of FIN 48, interest related to income taxes is included in the provision of income taxes line of the Consolidated Statements of Operations. For the year ended June 28, 2008, the Company recognized approximately $38,000 for interest expense related to uncertain tax positions. As of July 1, 2007 and June 28, 2008, the Company had recorded liabilities for interest expense related to uncertain tax positions in the amounts of $57,000 and $87,000, respectively. The Company made no accrual for penalties related to income tax positions.

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12. Long Term Debt and Capital Leases

Credit Agreement

On March 30, 2007, the Company entered into a $40.0 million senior, secured, four-year credit agreement with the lenders listed therein and Manufacturers and Traders Trust Company (“M&T Bank”), as administrative agent for such lenders (the “New Credit Agreement”), which replaced LeCroy’s existing credit facility that was entered into on October 29, 2004 and subsequently amended. The terms of the New Credit Agreement provided LeCroy with a $40.0 million revolving credit facility (“Revolver”), which includes a $5.0 million swingline loan subfacility and a $5.0 million letter of credit subfacility. The performance by LeCroy of its obligations under the New Credit Agreement is secured by all of the assets of LeCroy and its domestic subsidiaries, and is guaranteed by LeCroy’s domestic subsidiaries. On March 30, 2007, the Company borrowed $9.4 million under the New Credit Agreement which was used to pay the outstanding balance under LeCroy’s Prior Credit Agreement and for general corporate purposes, including the financing of working capital requirements and capital expenditures. Additionally, the termination of the Prior Credit Agreement resulted in a $1.0 million write-off of bank deferred financing fees in fiscal 2007.

As of June 28, 2008, the Company has zero outstanding borrowings against the Revolver, the letter of credit subfacility or the swingline loan subfacility.

Effective as of April 26, 2007, LeCroy, in accordance with New Credit Agreement, entered into a First Modification and Lender Joinder Agreement (“Joinder Agreement”). This Joinder Agreement increased the Company’s credit limit to $50.0 million and added Capital One Bank (formally North Fork Bank) to the New Credit Agreement. On May 7, 2008, the Company entered into a Second Modification Agreement to modify certain financial and negative covenants of its New Credit Agreement.

Borrowings under the New Credit Agreement bear interest at variable rates equal to, at LeCroy’s election, (1) the higher of (a) the prime rate or (b) the federal funds rate plus 0.5% plus an applicable margin based on LeCroy’s leverage ratio or (2) LIBOR plus an applicable margin based on LeCroy’s leverage ratio. In addition, LeCroy must pay commitment fees during the term of the New Credit Agreement at rates dependent on LeCroy’s leverage ratio.

The New Credit Agreement contains, among other things, conditions precedent, covenants, representations and warranties and events of default customary for facilities of this size, type and purpose. Negative covenants include certain restrictions or limitations on, among other things, the incurrence of indebtedness; liens; consolidations and mergers; investments, loans, advances, guarantees and acquisitions; sales of assets (subject to customary exceptions for sales of inventory in the ordinary course and sales of equipment in connection with the replacement thereof in the ordinary course); sale and lease-back transactions; hedging agreements; and restricted payments, including repurchase of a portion of the convertible notes exceeding $22.0 million, dividends and stock repurchases.

The Company is required to comply with certain financial covenants, measured quarterly, including a minimum interest coverage ratio, minimum total net worth, maximum leverage ratio, minimum fixed charge coverage ratio and limitations on capital expenditures. As of June 28, 2008, the Company was in compliance with its financial covenants under the New Credit Agreement.

The New Credit Agreement will expire on July 15, 2011, unless, in the absence of any default, extended by LeCroy to April 1, 2012, contingent on the waiver or extension of the first redemption date of the Company’s convertible notes.

The Company incurred approximately $0.6 million of financing costs in connection with entering into the New Credit Agreement, which were deferred and are being amortized, on a straight line basis, over the term of the New Credit Agreement. At June 28, 2008, approximately $0.1 million of deferred financing costs were included in Other current assets, and approximately $0.3 million were included in Other non-current assets on the Consolidated Balance Sheets.

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Prior Credit Agreement

On October 29, 2004, the Company entered into a $75.0 million senior, secured, five-year credit agreement with the lenders listed therein and JP Morgan Chase Bank, N.A., successor to The Bank of New York, as administrative agent for such lenders (the “Prior Credit Agreement”). The terms of the Prior Credit Agreement, as amended thereafter, provided the Company with a $50.0 million term loan and a $50.0 million revolving credit facility, which includes a $1.0 million swing-line loan sub-facility and a $1.0 million letter of credit sub-facility. Borrowings under the Prior Credit Agreement, reflected interest at variable rates equal to, at the Company’s election, (1) the higher of (a) the prime rate or (b) the federal funds rate plus 0.5%, plus an applicable margin of between 0.00% and 1.50% based on the Company’s leverage ratio, as defined in the Prior Credit Agreement, or (2) the London Interbank Offering Rate (“LIBOR”) plus an applicable margin of between 1.25% and 2.75% based on the Company’s leverage ratio. In addition, the Company must pay commitment fees on unused revolver borrowings during the term of the Prior Credit Agreement at rates between 0.375% and 0.5% dependent upon its leverage ratio.

Convertible Debt

On October 12, 2006, the Company sold and issued $72.0 million in convertible senior subordinated notes to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the “Notes”). The Notes bear interest at a rate of 4.00% per annum, payable in cash semi-annually in arrears on each April 15 and October 15, beginning April 15, 2007. The Notes are direct, unsecured, senior subordinated obligations of the Company and rank: (i) subordinate in right of payment to all of the Company’s existing and future secured indebtedness; (ii) equal in right of payment with all of the Company’s existing and future senior unsecured indebtedness, and (iii) senior in right of payment to all of the Company’s existing and future subordinated indebtedness, except that the Notes ranked equally with the $3.5 million note issued in connection with the Catalyst acquisition, which was subordinated to the Company’s credit facility. In connection with the issuance and sale of the Notes, the Company entered into an indenture dated as of October 12, 2006, with U.S. Bank National Association as trustee. The terms of the Notes are governed by the indenture.

The Notes mature on October 15, 2026 unless earlier redeemed, repurchased or converted. Holders of the Notes will have the right to require the Company to repurchase for cash all or a portion of their Notes on each of October 15, 2011, October 15, 2016 and October 15, 2021, at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest, if any, up to but not including, the repurchase date. The Company may, from time to time, at its option repurchase the Notes in the open market. In addition, the Company may redeem the Notes for cash, either in whole or in part, anytime after October 20, 2011 at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest, if any, up to but not including the redemption date. The Notes are convertible into Company common stock by the holders at an initial conversion rate equal to 68.7285 shares per $1,000 principal amount of the Notes (equal to an initial conversion price of approximately $14.55 per share), subject to adjustment as described in the indenture. Upon conversion, the Company will deliver for each $1,000 principal amount of Notes, an amount consisting of cash equal to the lesser of $1,000 and the conversion value (as defined in the indenture) and, to the extent that the conversion value exceeds $1,000, at the Company’s election, cash or shares of Company common stock in respect of the remainder. Prior to September 15, 2026, holders may convert their notes into cash and shares of the Company’s common stock, if any, at the applicable conversion rate, at their option, only under limited circumstances described in the indenture. On or after September 15, 2026, holders may convert their notes into cash and shares of the Company’s common stock, if any, at the applicable conversion price, at the Company’s option, at any time prior to the close of business on the business day immediately preceding the maturity date. Upon conversion of each $1,000 principal amount of the notes, the holder will receive an amount in cash equal to the lesser of (i) $1,000 or (ii) the conversion value, as described in the indenture; if the conversion value exceeds $1,000 on the conversion date, the Company will also deliver, at the Company’s election, cash or common stock or combination of each with a value equal to such excess. During fiscal 2008, the Company repurchased $4.5 million of the outstanding Notes, leaving a balance of $67.5 million at June 28, 2008. At June 28, 2008 it was the Company’s intent to repurchase approximately $5.5 million of the outstanding notes during fiscal 2009 based on current market conditions. As such, $5.5 million related to the Notes was included in Accrued expenses and other current liabilities and $62.0 million was included in Convertible notes on the Consolidated Balance Sheet. As of June 28, 2008, the market value of the Notes was $60.8 million.

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The Company evaluated the accounting for the conversion feature in accordance with EITF Issue No. 00-19, “Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in, a Company’s Own Stock” and related issues, at the date of issuance of the Notes and determined that the conversion feature would be equity-classified if it were a stand-alone instrument, and, therefore, it does not need to be accounted for separately from the Notes. The Company updates its analysis of the accounting for the conversion feature as circumstances warrant. If the conversion feature is required to be bifurcated in the future, changes in the fair value of the conversion feature would be charged or credited to interest expense in each period.

If the Company undergoes a “change in control” (as defined in the indenture), holders of the Notes will have the right, subject to certain conditions, to require the Company to repurchase for cash all or a portion of their Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest, if any.

In connection with the sale of its Notes, the Company also entered into a Registration Rights Agreement. Pursuant to the Registration Rights Agreement, the Company filed a shelf registration statement, which has been declared effective by the Securities and Exchange Commission, covering resales by holders of the Notes and any common stock issuable upon conversion of such Notes (subject to certain conditions specified in the Registration Rights Agreement). The Company has agreed to use its commercially reasonable efforts to keep the registration statement effective until the earliest of the following has occurred: (i) all securities covered by the registration statement have been sold pursuant to the registration statement or Rule 144 under the Securities Act; (ii) the holders of the Notes and the shares of the Company’s common stock issuable upon conversion of the Notes that are not affiliates are able to sell all such securities immediately pursuant to Rule 144(k) under the Securities Act; (iii) the date when all of the Notes and shares of common stock issuable upon conversion have ceased to be outstanding; and (iv) October 12, 2008.

The Company will pay predetermined additional interest on notes that are registrable securities if the shelf registration statement is unavailable for periods in excess of those permitted under the indenture. The Company believes the likelihood of occurrence of such event is remote and, as such, the Company has not recorded a liability at June 28, 2008. In the event the Company would have to pay additional interest under the registration rights agreement, the Company estimates the maximum potential amount at June 28, 2008 to be approximately $0.3 million per year. No amounts are owed, nor have any been recorded for failure to maintain the effectiveness of the registration statement.

The Company received net proceeds from the sale of the Notes of approximately $69.0 million. Immediately thereafter, the net proceeds from the sale were used to repay the outstanding term debt balance of approximately $31.9 million under the Company’s Prior Credit Agreement, repurchase of 850,000 shares of the Company’s common stock at a cost of approximately $9.9 million and repay approximately $22.8 million of revolving debt under the Company’s Prior Credit Agreement that was drawn down to fund the acquisition of Catalyst.

The Company incurred approximately $3.0 million of transaction fees in connection with issuing the Notes, which have been deferred and are being amortized over the term of the Notes using the effective interest method. The term of the Notes for amortization purposes is considered to be five years in accordance with SAB Topic 3-C, “Redeemable Preferred Stock,” as that is the first period in which the redemption feature of the Notes can be executed by either the Noteholders or LeCroy and therefore is considered the mandatory redemption date.

In the fourth quarter of fiscal 2008, the Company repurchased $4.5 million of the outstanding convertible notes. The difference between the net carrying amount and the repayment of the debt along with the write-off of unamortized fees resulted in an approximate $0.3 million Gain on extinguishment of debt in the Consolidated Statement of Operations. At June 28, 2008, approximately $1.9 million of unamortized fees related to the Notes was included in Other non-current assets on the Consolidated Balance Sheet.

Foreign Credit Facilities

The Company maintains certain short-term foreign credit facilities. There is a Japanese facility totaling 50.0 million yen (approximately $0.5 million as of June 28, 2008). No amounts were outstanding under this facility

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as of June 28, 2008 and June 30, 2007. The Company’s Swiss subsidiary has an overdraft facility totaling 1.0 million Swiss francs (approximately $1.0 million as of June 28, 2008). As of June 28, 2008 and June 30, 2007, approximately 0.4 million Swiss francs were held against supplier obligations leaving an available balance of 0.6 million Swiss francs under this credit facility. These obligations to Swiss suppliers, such as rent and utilities, are payable under the credit facility only in the event that the subsidiary is unable to meet its financial obligations to those suppliers.

Capital Lease Agreements

During fiscal 2005, the Company entered into vendor supplied capital lease agreements for technology rights of approximately $1.3 million. These leases bore interest at 4.5% to 4.88% and were fully paid by the first quarter of fiscal 2008. At June 30, 2007, the Company had outstanding balances under capital lease agreements entered into in a prior year of approximately $0.1 million.

During fiscal 2008, the Company acquired a software license under a capital lease agreement for approximately $0.7 million. The lease bears interest at 7.75% with a three-year term. At June 28, 2008, the Company’s outstanding balance under this agreement was approximately $0.6 million, approximately $0.2 million was included in Accrued expenses and other current liabilities and approximately $0.3 million was included in Deferred revenue and other non-current liabilities on the Consolidated Balance Sheet. Future minimum lease payments required during fiscal years 2009, 2010, and 2011 are approximately $0.2 million, $0.3 million and $0.1 million, respectively.

Other Line of Credit

The Company had a $2.0 million capital lease line of credit to fund certain capital expenditures that bore interest at an annual rate of 12.2% on outstanding borrowings. The capital lease line of credit was terminated in the second quarter of fiscal 2007. No amounts were outstanding as of June 28, 2008 and June 30, 2007.

13. Share-Based Compensation

Total share-based compensation expense recorded in the Consolidated Statements of Operations for the years ended June 28, 2008, June 30, 2007 and July 1, 2006 is $4.7 million, $5.2 million, and $5.3 million, respectively.

Less than $0.1 million of compensation cost was capitalized in inventory or any other assets for the year ended June 28, 2008. For the years ended June 30, 2007 and July 1, 2006, no compensation cost was capitalized in inventory or any other assets.

Method of Accounting

On July 3, 2005, the start of the first quarter of fiscal 2006, the Company adopted the provisions of SFAS 123R, which requires that the costs resulting from all share-based payment transactions be recognized in the financial statements at their fair values. The Company adopted SFAS 123R using the modified prospective application method under which the provisions of SFAS 123R apply to new awards and to awards modified, repurchased, or cancelled after the adoption date. With the adoption of SFAS 123R, unamortized deferred stock compensation relating to previous grants of non-vested stock of $8.6 million was credited to additional paid-in capital. The Company recorded compensation cost for the non-vested portion of previously granted stock-based awards outstanding at the date of adoption over the requisite service periods for the individual awards based on the fair value estimated in accordance with the original provisions of SFAS 123, adjusted for estimated forfeitures as required by SFAS 123R. Compensation expense for all share-based compensation awards granted after July 3, 2005 is based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. The Company recognizes these compensation costs, net of estimated forfeitures, on a straight-line basis over the requisite service period of the award, which is generally the vesting term of 4 years. The Company’s estimated forfeiture rate at adoption was based on its historical experience.

On November 10, 2005, the FASB issued FASB Staff Position 123(R)-3 (“FSP 123R-3”), “Transition Election Related to Accounting for the Tax Effects of Share-based Payment Awards,” that provided an elective alternative

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transition method of calculating the pool of excess tax benefits available to absorb tax deficiencies recognized subsequent to the adoption of SFAS 123R (the “APIC Pool”) to the method otherwise required by paragraph 81 of SFAS 123R. During the second quarter of fiscal 2007, the Company made the election to use the alternative method, however, the alternative method did not have an impact on the Company’s results of operations or financial condition due to the Company’s net operating loss position.

Prior to the adoption of SFAS 123R, the Company presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the Consolidated Statement of Cash Flows. SFAS 123R requires that the cash flows resulting from tax benefits of tax deductions in excess of the book compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. For the years ended June 28, 2008, June 30, 2007, and July 1, 2006, there were no excess tax benefits recognized resulting from share-based compensation cost.

Company Stock-Based Plans

The Company maintains share-based payment arrangements under the following plans: (i) the Amended and Restated 1993 Stock Incentive Plan (“1993 Plan”), (ii) the Amended and Restated 1995 Employee Stock Purchase Plan (“ESPP”), (iii) the Amended and Restated 1998 Non-Employee Director Stock Plan (“1998 Plan”), (iv) the 2003 Stock Incentive Plan (“2003 Plan”), (v) the 2004 Employment Inducement Stock Plan (“2004 Plan”), (vi) the LeCroy Corporation (CATC) Special 2000 Stock Option Plan, (vii) the LeCroy Corporation (CATC) 2000 Stock Incentive Plan, (viii) the LeCroy Corporation (CATC) 1994 Stock Option Plan (items (vi), (vii) and (viii) collectively the “LeCroy (CATC) Plans”) and (ix) the LeCroy Catalyst 2005 Stock Option Plan. The Company has a policy of issuing new shares of its common stock to satisfy share option exercises.

Shares available for grant under all company stock-based plans were 495,660 and 901,008 at June 28, 2008 and June 30, 2007, respectively. These amounts include 285,680 shares at June 28, 2008 and 394,285 at June 30, 2007 under the ESPP Plan.

The 1993 Plan expired on January 4, 2003. All options outstanding under the 1993 Plan at the time of its expiration will continue in full force and effect in accordance with their terms. The lives of the options are generally ten years from the date of grant.

In October 1998, the Board of Directors and stockholders terminated the 1995 Non-Employee Director Stock Option Plan (“1995 Plan”) and adopted the 1998 Plan. As of June 28, 2008, stock options to purchase 901 shares of Common Stock issued pursuant to the 1995 Plan are outstanding and fully vested. Pursuant to the 1998 Plan, each non-employee director receives upon initial election to the Board of Directors either a stock option grant of 15,000 shares to vest ratably over 36 months, or a restricted stock award of 10,000 shares of Common Stock, subject to such vesting and other conditions and restrictions as the Board may determine at its discretion. In fiscal 2008, the Compensation Committee of the Board of Directors revised the Board compensation such that each non-employee director will receive annually, an immediately vested restricted stock award equal to $95,000, based on the closing price of the Company’s Common Stock on the Annual Shareholder Meeting date, rounded up or down to the nearest hundred shares. The compensation was effective for equity awards granted at the October 31, 2007 Annual Shareholder Meeting, which resulted in 9,700 shares being granted to each non-employee director. Prior to fiscal 2008, each non-employee director received annually, a restricted stock award of 5,000 shares of Common Stock subject to such vesting and other conditions and restrictions as the Board may determine at its discretion. A total of 500,000 shares of Common Stock can be issued during the term of the 1998 Plan. The 1998 Plan expires on October 27, 2010.

The 2003 Plan provides for the grant of incentive stock options, nonqualified stock options and restricted stock awards to employees (including officers and employee directors) and consultants. Unless approved by stockholders owning a majority of shares present and entitled to vote at a duly convened meeting of stockholders of the Company, the purchase price of any option granted under the 2003 Plan may not be less than 100% of the fair value of the Company’s common stock on the date of grant. The aggregate number of shares of Common Stock that may be issued or transferred pursuant to options or restricted stock awards under the 2003 Plan is 1,560,167 shares. The 2003 Plan also allows for awards based on performance criteria which awards may then qualify as “performance-

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based compensation” under Section 162(m) of the Internal Revenue Code. The Compensation Committee of the Board of Directors administers the 2003 Plan and has the authority to determine the terms of such options or awards including the number of shares, exercise or purchase prices and times at which the options become and remain exercisable or restricted stock is no longer restricted. There have been no performance-based awards granted under the 2003 Plan. The 2003 Plan expires on October 29, 2013.

In connection with the CATC Merger, on October 29, 2004, the Company’s Board of Directors approved the 2004 Plan to promote the interests of the Company and its stockholders by strengthening the Company’s ability to attract and induce persons to become employees of the Company, including certain of CATC’s employees. The adoption of the 2004 Plan did not require stockholder approval. The number of shares of LeCroy common stock that may be issued or transferred pursuant to options or restricted stock awards granted under the 2004 Plan is 750,000 shares. On October 29, 2004, the Company issued the following grants under the 2004 Plan: (i) 70,000 shares of restricted common stock to certain former officers of CATC, and (ii) options to purchase an aggregate of 230,984 shares of common stock to 61 former CATC employees who became non-officer employees of LeCroy (none of whom received an option grant of more than 20,000 shares). The options were issued with vesting periods of four to six years. On September 13, 2005, the Board of Directors resolved that no further grants would be made under the 2004 Plan. The 2004 Plan expires on October 29, 2014.

In connection with the CATC Merger, LeCroy assumed the LeCroy (CATC) Plans. On October 27, 2004, the Board of Directors of CATC approved technical amendments to each of the CATC Stock Plans in anticipation of their assumption by LeCroy pursuant to the CATC Merger including, without limitation, amendments reflecting that any stock option or other award granted thereunder would be exercisable for LeCroy common stock. Pursuant to SFAS No. 141 and FIN 44, the 648,284 unvested stock options, as well as certain vested but unexercised stock options, granted by the Company in exchange for the stock options held by the employees of CATC were considered part of the purchase price for CATC. The $5.1 million fair value of the new awards was included in the purchase price, less the intrinsic value of unvested options of $1.9 million, which, during the period from October 29, 2004 to June 30, 2005, was being charged as compensation expense to operations on a straight-line basis as earned by employees over their remaining vesting periods. In connection with the adoption of SFAS 123R, the remaining unamortized deferred compensation was eliminated against additional paid-in capital on the date of adoption and compensation cost for unvested options under the LeCroy (CATC) Plans is being recognized over the remaining vesting period using the fair value of the options on the date of the CATC Merger. On September 13, 2005, the Board of Directors resolved that no further grants would be made under the LeCroy (CATC) Plans.

In connection with the Catalyst Merger, LeCroy assumed Catalyst’s 2005 Stock Option Plan. On October 2, 2006, Catalyst stock option holders approved technical amendments to their stock option grants in anticipation of their assumption by LeCroy pursuant to the Catalyst Merger including, without limitation, amendments reflecting that any stock option or other award granted thereunder would be exercisable for LeCroy common stock. Pursuant to SFAS No. 123R, of the 136,826 assumed stock options granted by the Company in exchange for the stock options held by the employees of Catalyst, the fair value of 36,858 vested options or approximately $450,000 was considered part of the purchase price for Catalyst and the fair value of 99,968 unvested options or approximately $1,196,000, is charged to compensation expense in operations as earned by employees over their remaining requisite service periods. The fair value of assumed options was determined using the Black-Scholes option pricing model.

The public announcement of the Catalyst Merger occurred on the same date as the closing, October 2, 2006. Upon completion of the Merger, each outstanding stock option issued by Catalyst was assumed by LeCroy and was converted into an option to purchase that number of shares of LeCroy common stock equal to the number of shares of Catalyst common stock purchasable pursuant to the Catalyst option immediately prior to the effective time of the merger, multiplied by the exchange ratio, rounded down to the nearest whole number of shares of LeCroy common stock. The exercise price per share was equal to the exercise price per share of Catalyst common stock divided by the exchange ratio, rounded up to the nearest whole cent. The Company’s assumption of the Catalyst issued options was treated as a modification, under SFAS No. 123R, of the terms of the original Catalyst grant. The same conversion formula was utilized to calculate the number of assumed options as was used in the Merger consideration and, as such, the aggregate fair value of Catalyst’s awards immediately prior to the Merger was substantially similar to the aggregate fair value of the LeCroy awards on the date of grant.

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Stock Options and Assumptions

The fair value of options granted is estimated on the date of grant using a Black-Scholes option pricing model. Expected volatilities are calculated based on the historical volatility of the Company’s stock. Management monitors share option exercise and employee termination patterns to estimate forfeiture rates. Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The Company analyzed its historical forfeiture rate, the remaining lives of unvested options and the amount of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what was recorded in the current periods. The expected holding period of options represents the period of time that options granted are expected to be outstanding. The risk-free interest rate is based on the interest rate of a 5-year U.S. Treasury note in effect on the date of the grant or such other period that most closely equals the expected term of the option.

The table below presents the assumptions used to calculate the fair value of options granted during the fiscal years ended June 28, 2008, June 30, 2007 (including Catalyst assumed options in fiscal 2007) and July 1, 2006:

	Years Ended
	June 28, 2008	June 30, 2007	July 1, 2006
Expected holding period (years)	5.0	3.7	5.0
Risk-free interest rate	2.67% - 4.57%	4.46% -4.91%	3.86% - 4.99%
Dividend yield	0.0%	0.0%	0.0%
Expected volatility	42.8% - 48.6%	32.0% - 54.2%	47.3% - 64.9%
Weighted average fair value of options granted	$3.69	$10.66	$7.64

Changes in the Company’s stock options for the fiscal year ended June 28, 2008 are as follows:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms (Years)	Aggregate Intrinsic Value ($000)
Outstanding at June 30, 2007	2,012,655		$	14.49
Granted	73,400			8.24
Exercised	(42,897	)		1.44
Expired	(454,532	)		18.95
Forfeited	(90,556	)		10.26
Outstanding at June 28, 2008	1,498,070		$	13.46	3.65	$	827
Vested and expected to vest at June 28, 2008	1,443,938		$	13.79	3.39	$	813
Exercisable at June 28, 2008	1,329,131		$	13.89	3.31	$	534

The total intrinsic value of stock options exercised during each of the years ended June 28, 2008, June 30, 2007 and July 1, 2006 was approximately $0.3 million, $0.5 million and $0.5 million, respectively.

As of June 28, 2008, there was approximately $0.7 million, of unrecognized compensation cost (net of estimated forfeitures) related to stock options granted under the plans. That cost is expected to be recognized over a weighted-average period of approximately 1.8 years.

Non-Vested Stock and Assumptions

The fair value of new grants is determined based on the closing price on the date of grant. Related compensation expense is recognized ratably over the associated requisite service period, giving effect to estimated forfeitures. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what was recorded in the current periods.

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The following table summarizes transactions related to non-vested stock for the fiscal year ended June 28, 2008:

	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested stock at June 30, 2007	647,141		$	14.61
Granted	226,317		$	8.48
Vested	(312,592	)	$	14.47
Forfeited	(64,362	)	$	11.95
Non-vested stock at June 28, 2008	496,504		$	12.24

Non-vested stock is included in the issued and outstanding share numbers presented on the Consolidated Balance Sheets. Non-vested stock is not included in the weighted average share calculation for basic earnings per share. However, the dilutive effect of the non-vested stock is included in the weighted average share calculation for diluted earnings per share.

Of the shares granted, 48,500 shares were issued under the 1998 Plan to non-employee directors and were immediately vested and the remaining 177,817 shares were issued to employees under the 2003 Plan. Of the shares issued to employees, vesting periods are generally four years from the date of grant, however there are certain grants with vesting periods less than four years.

As of June 28, 2008, there was approximately $3.7 million of unrecognized compensation cost (net of estimated forfeitures) related to non-vested stock granted under the plans. That cost is expected to be recognized over a weighted-average period of approximately 2.5 years.

Employee Stock Purchase Plan and Assumptions

The Company has an Employee Stock Purchase Plan (“ESPP”) with a look-back option that allows employees to purchase shares of common stock at 85% of the market value at the lower of either the date of enrollment or the date of purchase. Payment for the ESPP is a fixed amount, set at the beginning of the period, made through payroll withholding over the enrollment period of six months. The number of shares the participant can acquire is variable based on the fixed amount withheld and the applicable fair value. SFAS No. 123R requires an ESPP with a purchase price discount of greater than 5% and a look-back option to be compensatory. The Company accounts for the ESPP in accordance with FASB Technical Bulletin No. 97-1, “Accounting under Statement 123 for Certain Employee Stock Purchase Plans with a Look-Back Option”. The fair value of the “put” and “call” features of the estimated shares to be purchased are estimated at the beginning of the purchase period using a Black-Scholes option pricing model. Expected volatilities are calculated based on the historical six-month volatility of the Company’s stock. The expected holding period is equal to the six-month enrollment period. The risk-free interest rate is based on the interest rate of a six-month U.S. Treasury note in effect on the first day of the enrollment period. The fair value of the shares is liability classified until the end of the six-month period at which time the amount is then equity classified. As of both June 28, 2008 and June 30, 2007, there is approximately $41,000 of liability classified share-based compensation expense for the ESPP included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets.

The ESPP has reserved for issuance an aggregate of 1,060,000 shares of Common Stock and is set to expire on November 30, 2011. The purpose of the ESPP is twofold: first, to encourage stock ownership by employees by establishing a program that permits them to purchase shares of Common Stock on a regular basis through payroll deductions; and second, to offer employees an opportunity, without adverse tax consequences, to purchase stock at a price equal to 85% of the market value on the first or last business day of the offering period. In fiscal 2008, 108,605 shares were issued under the ESPP.

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Stock Appreciation Rights and Assumptions

On August 20, 2007, the Board of Directors adopted and approved the 2007 Stock Appreciation Right Plan (the “SAR Plan”). Under the SAR Plan, the Compensation Committee of the Board of Directors may award stock appreciation rights to eligible employees. Each stock appreciation right (“SAR”) awarded represents the right to receive an amount of cash equal to the excess of the fair market value of a share of the Company’s common stock on the date that a participant exercises such right over the fair market value of a share of the Company’ common stock on the date that such SAR was awarded. Awards of SARs will vest in four successive annual installments of 25% of the SARs subject to such award on the anniversary of the date of the grant of such award. The employee will have four years from the date of vesting of an installment in which to exercise such installment. The SAR Plan will terminate on August 20, 2017.

On August 20, 2007, the Company granted 712,000 SARs. The exercise price of the SARs was set at $7.60 per share, which equaled the closing price of the Company’s common stock on the grant date. The fair value at grant date was $3.61, using the Black-Scholes option pricing model. Expected volatilities are calculated based on the historical volatility of the Company’s stock. Management monitors award exercise and employee termination patterns to estimate forfeiture rates. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what was recorded in the current periods. The expected holding period of SARs represents the period of time that SARs granted are expected to be outstanding. The risk-free interest rate is based on the interest rate of a 5-year U.S. Treasury note in effect on the date of the grant or other such period that is closest to the expected term of the SARs. At June 28, 2008, 712,000 SARS were outstanding with a weighted average remaining contractual term of 5.65 years and an intrinsic value of approximately $890,000.

The Company records compensation expense ratably over the service period and adjusts for changes in the fair value of SARs at each reporting period. Based on the fair value of $3.79 per SAR on June 28, 2008 there was approximately $1.9 million of unrecognized compensation cost (net of estimated forfeitures) related to SARs, which is expected to be recognized over a weighted average period of approximately 3.1 years.

The table below presents the assumptions used to remeasure the value of the SARs at June 28, 2008:

	June 28, 2008
Expected holding period (years)		4.5
Risk-free interest rate		3.14	%
Dividend yield		0.0	%
Expected volatility		40.36	%
Fair value of SARs granted	$	3.79

The fair value of the SARs is liability classified because the awards are payable in cash. As of June 28, 2008, there was approximately $0.6 million of liability classified share-based compensation expense for the SARs included in Accrued expenses and other current liabilities on the Consolidated Balance Sheet.

14. Common Stock, Treasury Stock and Warrants to Purchase Common Stock

On May 25, 2006, the Company’s Board of Directors approved the adoption of a share repurchase plan authorizing the Company to purchase up to 2.0 million shares, not to exceed $25.0 million, of its common stock for treasury. During fiscal 2008, the Company purchased 297,523 shares for a total consideration of approximately $2.4 million. During fiscal 2007 and fiscal 2006, respectively, the Company purchased 896,000 shares and 142,283 shares for a total consideration of approximately $10.5 million and $1.9 million. During the year ended June 30, 2007, the Company retired 1.0 million shares of its treasury stock. These shares are authorized but unissued.

Purchases under this buyback program may be made from time to time on the open market and in privately negotiated transactions, including pursuant to the terms of a 10b5-1 plan. A 10b5-1 plan allows a company to

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purchase shares during a blackout period, provided the company communicates its share purchase instructions to the broker prior to the blackout period, pursuant to a written plan that may not be changed. The timing of these purchases is dependent upon several factors, including market conditions, the market price of the Company’s common stock, the effect of the share dilution on earnings, available cash and any other potential risks the Company may encounter. The share repurchase plan may be discontinued at any time at the discretion of the Company.

At July 1, 2006 the Company had outstanding warrants to purchase 28,571 shares of common stock at a purchase price of $17.50 per share. These warrants expired on August 15, 2006. No warrants were exercised during the fiscal years ended June 30, 2007 and July 1, 2006 and there are no warrants outstanding as of June 28, 2008.

15. Net Income (Loss) Per Common Share (EPS)

Basic net income (loss) per common share is net income (loss) divided by the weighted average of common shares outstanding during the period. Diluted net income (loss) per common share is calculated using the weighted average of common shares outstanding adjusted to include the effect of shares from the assumed exercise of dilutive stock options, convertible debt (if dilutive) and non-vested stock using the treasury stock method. The following is a presentation of the numerators and the denominators of the basic and diluted net income (loss) per common share computations for the years ended June 28, 2008, June 30, 2007 and July 1, 2006 (in thousands):

	Years Ended
	June 28, 2008		June 30, 2007			July 1, 2006
Numerator:
Net income (loss)	$	1,712	$	(13,207	)	$	6,573
Denominator:
Weighted average shares outstanding:
Basic		11,749		11,702			12,218
Employee stock options and non-vested stock		258		—			256
Diluted		12,007		11,702			12,474

The computations of diluted EPS for the years ended June 28, 2008, June 30, 2007 and July 1, 2006 do not include approximately 1.7 million, 2.6 million and 1.7 million, respectively, of stock options and non-vested stock, as the effect of their inclusion would have been anti-dilutive to EPS. For the years ended June 28, 2008 and June 30, 2007, the convertible notes had no impact on diluted EPS because the average share price during the fiscal years was below $14.55 per share (the initial conversion price), and accordingly, the Notes, if converted, would have required only cash at settlement.

16. Stockholder Rights Plan

On November 2, 1998, the Company’s Board of Directors declared a dividend distribution of one right in respect to each share of LeCroy’s Common Stock outstanding at the record date, November 18, 1998. To date, the rights have been traded together with the Common Stock and are not exercisable or separately tradable. The rights will be exercisable if a person or group acquires, in the future, 15% or more of the Company’s common stock or announces a tender offer. Right holders, other than the acquiring person or group, are then entitled to purchase an amount of the Company’s common stock at a 50% discount to the share price at that time. The number of shares of common stock that a right holder is entitled to purchase is based on the exercise price. Under certain circumstances, the right will entitle the stockholder to buy shares in an acquiring entity at a discount.

The Board of Directors may redeem the rights at a price of $0.001 per right up until 10 days following a public announcement that any person or group has acquired 15% or more of LeCroy’s Common Stock. The rights will expire on November 2, 2008, unless redeemed prior to that date. The rights plan had no impact on the financial position or results of operations of the Company.

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17. Employee Benefit Plans

The Company has an employee 401(k) savings plan. It is a trusted, employee 401(k) savings plan for eligible U.S. employees under which it contributes an unconditional match of up to 50% of employee contributions up to a maximum employer contribution of 5% of the employee’s eligible compensation, as defined. For the fiscal years 2008, 2007 and 2006, the Company has expensed approximately $0.5 million, $0.6 million and $0.6 million, respectively, in matching contributions to this plan.

The Company’s subsidiary in Switzerland maintains a defined contribution plan, which requires employee contributions based upon a percentage of the employee’s earnings, as defined, currently ranging from 4.6% to 8.4%. The Company makes a matching contribution based also upon a percentage of the employee’s earnings, as defined, currently ranging from 5.4% to 9.6%. For fiscal 2008, 2007 and 2006, the Company has expensed $0.5 million, $0.5 million, and $0.4 million, respectively, in matching contributions to this plan.

18. Segment Reporting and Geographic Information

The Company operates in a single-reportable segment in the test and measurement market, in which it develops, manufactures, sells and licenses high-performance oscilloscopes, serial data analyzers and global communication protocol test solutions. These products are used by design engineers and researchers to measure and analyze complex electronic signals in order to develop high performance systems, to validate electronic designs and to improve time to market. Revenue from the sale of the Company’s products, which are similar in nature, are reflected as Test and measurement product revenue in the Consolidated Statements of Operations.

Revenues are attributed to countries based on customer ship-to addresses. Revenues by geographic area are as follows (in thousands):

	June 28, 2008		June 30, 2007		July 1, 2006
North America	$	52,883	$	50,891	$	51,795
Europe/Middle East		57,982		51,899		48,767
Japan		12,125		16,929		22,043
Asia/Pacific		37,496		31,581		37,931
Total revenues	$	160,486	$	151,300	$	160,536

Total assets by geographic area are as follows:

	June 28, 2008		June 30, 2007
North America	$	207,572	$	211,264
Europe/Middle East		13,430		13,263
Japan		1,135		2,813
Asia/Pacific		4,849		3,979
Total assets	$	226,986	$	231,319

Total long-lived assets (1) by geographic area are as follows:

	June 28, 2008		June 30, 2007
North America	$	20,218	$	19,671
Europe/Middle East		892		513
Japan		232		95
Asia/Pacific		341		60
Total long-lived assets	$	21,683	$	20,339

(1) Long-lived assets presented in the table above include only Property, plant and equipment, net.

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No customer accounted for more than 10% of the Company’s consolidated revenues in any of the last three fiscal years. Revenues attributable to individual countries based on customer ship-to addresses that account for 10% or more of total revenues in fiscal 2008 include the United States (approximately $48.4 million) and Germany (approximately $21.3 million). In fiscal 2007, the United States and Germany accounted for approximately $50.9 million and $16.7 million, respectively and in fiscal 2006, the United States and Germany accounted for approximately $46.0 million and $17.3 million, respectively.

19. Commitments and Contingencies

The Company’s contractual obligations and commitments include obligations associated with employee severance agreements (See Note 3 — Business Realignment, Restructuring Initiatives and Related Asset Impairments for additional information), supplier agreements, operating leases, capital leases and convertible note obligations (See Note 12 — Long Term Debt and Capital Leases for additional information).

Operating Leases and Supplier Agreements

Operating leases covering plant, certain office facilities and equipment expire at various dates in the future. Future minimum annual lease payments required during fiscal years 2009, 2010, 2011, 2012, 2013 and thereafter, under non-cancelable operating leases having an original term of more than one year, are approximately $2.0 million, $1.1 million, $0.4 million, $0.1 million, $0.1 million and zero, respectively. Aggregate rental expense on non-cancelable operating leases for the fiscal years ended 2008, 2007 and 2006 approximated $2.7 million, $2.6 million and $2.1 million, respectively.

As of June 28, 2008, the Company is committed to purchase approximately $0.5 million of inventory from suppliers.

Environmental

The Company’s former subsidiary, Digitech Industries, Inc. (“Digitech”), was notified prior to 1999 by the Connecticut Department of Environmental Protection (the “DEP”) that it may be responsible for environmental damage that occurred at its previously leased facilities in Ridgefield, Connecticut (the “Ridgefield Site”). Based upon recommendations made by the DEP, Digitech engaged environmental consultants to assist it in evaluating the costs associated with the DEP’s recommendations for monitoring and remediation of the environmental damage.

In May 1999, LeCroy, Digitech and the former owners of the Ridgefield Site entered into an agreement with the current owners of the Ridgefield Site. The current owners purchased an insurance policy providing for $2.0 million of coverage against certain environmental liabilities related to the Ridgefield Site. That insurance policy names both LeCroy and Digitech as insured parties. The current owners of the Ridgefield Site also agreed to remediate all environmental problems associated with the property and to obtain all applicable approvals and certifications from the DEP. The current owners of the Ridgefield Site also agreed to hold both LeCroy and Digitech harmless in the event of a claim made against them relating to these environmental matters. In return for the above, forty-five days after the DEP has provided written notification to the Company that the site remediation has been accomplished to its satisfaction, the Company agreed to pay the former owners of the Ridgefield Site $0.2 million as compensation for the reduced sale value of the property due to the environmental problems existing on the site.

In August 2000, the Company closed the sale of the assets and business of its Vigilant Networks, Inc. subsidiary (“Vigilant”) and a portion of the assets and business of its Digitech subsidiary for gross proceeds of $12.0 million. The remaining business of Digitech was classified as discontinued operations. The Company has accrued retained liabilities from discontinued operations of $0.2 million after the sale of the Vigilant business and the residual assets of Digitech, which amount is recorded in Accrued expenses and other current liabilities on the June 28, 2008 and June 30, 2007 Consolidated Balance Sheets.

Legal

From time to time, the Company may be involved in lawsuits, claims, investigations and proceedings, including patent and environmental matters, which arise in the ordinary course of business. There are no matters pending that the Company expects to have a material adverse affect on its business, results of operations, financial position or cash flows.

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20. Related Party Transactions

On October 20, 2000, the Compensation Committee of the Board of Directors approved a $0.3 million five-year loan to Thomas H. Reslewic, LeCroy’s Chief Executive Officer and President, secured by Mr. Reslewic’s non-qualified stock options. The loan accrued interest at 9.5% compounded annually with interest payable at the maturity of the loan. If Mr. Reslewic remained an employee of LeCroy for the entire five-year term of the loan or was terminated without cause prior to the maturity date of the loan, the Company would forgive the loan principal and all accrued interest. The loan was amortized on a straight-line basis and the compensation expense was recorded within Selling, general and administrative expenses. The loan reached maturity in the second quarter of fiscal 2006 and was forgiven along with the accrued interest, in accordance with the agreement.

On July 19, 2005 the Compensation Committee of the Board of Directors approved a $0.3 million retention bonus to Mr. Reslewic. This retention bonus requires Mr. Reslewic to remain an employee for five years. If Mr. Reslewic terminates his employment earlier than five years, he will be required to repay the bonus in full. The retention bonus is being amortized over five years on a straight line basis as compensation expense. At June 28, 2008, a total of approximately $0.1 million remains on the Consolidated Balance Sheet, included in Other current assets and Other non-current assets.

In conjunction with the Catalyst acquisition, the Company issued a $3.5 million, 6% promissory note payable on January 2, 2008, to Nader Salehomoum, the former sole shareholder of Catalyst and current employee of the Company. In fiscal 2008, the note was fully repaid.

21. Derivative Instruments

The Company has or had the following derivative instruments:

Interest Rate Swap

As required by the terms of the Company’s Prior Credit Agreement (See Note 12 — Long-term Debt and Capital Leases for additional information), on January 27, 2005 the Company entered into a Master Agreement for an interest rate swap with M&T Bank, the purpose of which was to protect against rising interest rates during the term of the Credit Agreement.

On October 16, 2006 in conjunction with the repayment of the term loan (See Note 12 — Long-term Debt and Capital Leases for additional information), the Company terminated its interest rate swap with M&T Bank. The net interest income earned on the swap was approximately $0.3 million for fiscal 2007 and $0.1 million for fiscal 2006 and is recognized in Interest expense in the Consolidated Statements of Operations.

Forward foreign exchange contracts

The Company enters into short-term forward exchange agreements to purchase foreign currencies at set rates in the future. These foreign currency forward exchange agreements are used to limit exposure to fluctuations in foreign currency exchange rates on assets and liabilities denominated in currencies other than the Company’s functional currency. Subsidiaries may also use forward exchange agreements to offset the foreign currency risk for receivables and payables not denominated in, or indexed to, their functional currencies. The Company records these short-term forward exchange agreements on the balance sheet at fair value and changes in the fair value are recognized currently in Other, net in the Consolidated Statement of Operations.

During fiscal 2008, 2007 and 2006, foreign currency losses on these derivatives and on transactions denominated in other than their functional currencies, were approximately $0.6 million, $0.3 million and $0.3 million, respectively. At June 28, 2008 and June 30, 2007, the notional amounts of the Company’s open foreign exchange forward contracts, all with maturities of less than six months, were approximately $16.3 million and $12.9 million, respectively.

94

22. Iwatsu Settlement/Purchase Agreement

On March 22, 2006, the Company completed a purchase and settlement agreement with Iwatsu Electric Company, Ltd. (“Iwatsu”) for a total of approximately $3.6 million, which included the settlement of an underlying dispute between the Company and Iwatsu relating to the ownership of intellectual property contained in Iwatsu’s ViewGo product line, a non-compete agreement, whereby Iwatsu agreed not to engage in competition with the Company for a period of ten years, and the purchase of certain other intellectual property rights unrelated to the ViewGo product line. The Company obtained an independent third-party appraisal to value these elements of the Iwatsu agreement. As a result of the appraisal, in fiscal 2006, the Company expensed approximately $2.8 million of the total purchase price as a legal settlement. An approximate $0.8 million was recorded as intangible assets of which $0.5 million is being amortized over the 10-year estimated life of the non-compete agreement and $0.3 million is being amortized over the 7-year estimated useful life of the acquired intellectual property assets. The ViewGo product line was re-engineered by the Company and launched as the WaveJet family of products during the third quarter of fiscal 2006.

During the fiscal years ended 2008, 2007 and 2006, approximately $0.1 million, $0.1 million and $31,000, respectively was amortized to Cost of revenues in the Consolidated Statement of Operations related to the Iwatsu acquired intangibles.

23. Unaudited Quarterly Results of Operations

The Company has quarterly periods ending on the Saturday closest to the end of the month. Summarized unaudited quarterly operating results for fiscal years 2008 and 2007 are as follows (in thousands, except per share data):

	Quarters Ended
	Fiscal Year 2008												Fiscal Year 2007
	June 28, 2008			Mar. 29, 2008			Dec. 29, 2007			Sept. 29, 2007			June 30, 2007			Mar. 31, 2007			Dec. 30, 2006			Sept. 30, 2006
Revenues
Test and measurement products(1)	$	38,646		$	37,761		$	38,177		$	36,493		$	35,114		$	37,298		$	35,948		$	34,884
Service and other(1)		2,013			2,793			2,396			2,207			1,687			2,044			2,168			2,157
Total revenues		40,659			40,554			40,573			38,700			36,801			39,342			38,116			37,041
Cost of revenue		19,075			17,811			16,855			16,391			17,778			18,524			18,294			14,823
Gross profit		21,584			22,743			23,718			22,309			19,023			20,818			19,822			22,218
Selling, general and administrative expenses		13,476			13,121			13,769			12,735			12,777			15,065			14,681			12,846
Research and development expenses		8,379			8,113			7,629			7,277			8,108			8,080			12,845			7,652
Reimbursement from escrow account		—			(240	)		—			—			—			—			—			—
Operating (loss) income		(271	)		1,749			2,320			2,297			(1,862	)		(2,327	)		(7,704	)		1,720
Other expense, net		(774	)		(1,031	)		(1,227	)		(1,295	)		(1,093	)		(1,677	)		(1,706	)		(789	)
(Loss) income before income taxes		(1,045	)		718			1,093			1,002			(2,955	)		(4,004	)		(9,410	)		931
Benefit (provision) for income taxes		235			(65	)		112			(338	)		730			69			1,754			(322	)
Net (loss) income	$	(810	)	$	653		$	1,205		$	664		$	(2,225	)	$	(3,935	)	$	(7,656	)	$	609
Net (loss) income per common share:
Basic	$	(0.07	)	$	0.06		$	0.10		$	0.06		$	(0.19	)	$	(0.34	)	$	(0.67	)	$	0.05
Diluted	$	(0.07	)	$	0.05		$	0.10		$	0.06		$	(0.19	)	$	(0.34	)	$	(0.67	)	$	0.05
Weighted average number of shares:
Basic		11,717			11,763			11,785			11,730			11,601			11,499			11,492			12,217
Diluted		11,717			12,032			12,056			11,913			11,601			11,499			11,492			12,459

(1) Certain reclassifications have been made to current year quarters and prior year quarters to conform to the June 28, 2008 quarter presentation.

95

Schedule II

LeCROY CORPORATION

VALUATION AND QUALIFYING ACCOUNTS

(In thousands)

Description	Balance at Beginning of Period	Charged to (Recovery of) Costs and Expenses		Deductions/ Other		Balance at End of Period
Year ended July 1, 2006:
Net accounts receivable reserves(a)	380	94		(16	)	458
Allowance for excess and obsolete inventory	1,086	543		—		1,629
Valuation allowance on deferred tax assets	350	—		(92	)	258
Year ended June 30, 2007:
Net accounts receivable reserves(a)	458	576		(152	)	882
Allowance for excess and obsolete inventory	1,629	1,823		(791	)	2,661
Valuation allowance on deferred tax assets	258	1,443		(46	)	1,655
Year ended June 28, 2008:
Net accounts receivable reserves(a)	882	(134	)	(6	)	742
Allowance for excess and obsolete inventory	2,661	2,418		(542	)	4,537
Valuation allowance on deferred tax assets(b)	1,655	(18	)	98		1,735

(a) The change in balances includes uncollectible accounts receivable written-off and change in sales return estimates.

(b) The change in balances (Deductions/Other) includes an increase in the deferred tax valuation allowance due to the adoption of FIN 48 as of 7/1/07.

96

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure the information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There have not been any changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 28, 2008 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that management document and test the Company’s internal controls over financial reporting and include in this Annual Report on Form 10-K a report on management’s assessment of the effectiveness of the Company’s internal controls over financial reporting. See “Management’s Report on Internal Control over Financial Reporting.” In addition, KPMG LLP, an independent registered public accounting firm, has audited the effectiveness of internal control over financial reporting as of June 28, 2008 and has issued their report thereon, also included in this Annual Report on Form 10-K.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the guidelines established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management has concluded that our internal control over financial reporting is effective as of June 28, 2008. In addition, KPMG LLP, our independent registered public accounting firm, has audited the effectiveness of internal control over financial reporting as of June 28, 2008 and has issued their report thereon. That report appears below.

97

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

LeCroy Corporation:

We have audited LeCroy Corporation’s internal control over financial reporting as of June 28, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). LeCroy Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, LeCroy Corporation maintained, in all material respects, effective internal control over financial reporting as of June 28, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of LeCroy Corporation and subsidiaries as of June 28, 2008 and June 30, 2007, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended June 28, 2008, June 30, 2007, and July 1, 2006, and our report dated September 9, 2008 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Short Hills, New Jersey

September 9, 2008

98

ITEM 9B. OTHER INFORMATION

None

99

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information with respect to our directors will be contained in the section captioned “Structure of the Board of Directors” and “Compensation of Non-Named Executive Officer Directors” of the Definitive Proxy Statement relating to our 2008 Annual Meeting of Stockholders (“2008 Proxy Statement”), which is scheduled to be held October 29, 2008. Information with respect to Item 405 disclosure of delinquent Form 3, 4 or 5 filers will be contained in the section captioned “Section 16(A) Beneficial Ownership Reporting Compliance” in the 2008 Proxy Statement. Those portions of the 2008 Proxy Statement are incorporated herein by reference. The discussion of our executive officers is included in Item 1, Part I of this report under “Executive Officers of the Registrant.”

The Company has adopted a code of ethics entitled “Revised Principles of Business Conduct Policy,” which applies to its officers, directors and employees. A copy is available to any person without charge upon written request to:

LeCroy Corporation

Attention: Investor Relations

700 Chestnut Ridge Road

Chestnut Ridge, New York 10977

ITEM 11. EXECUTIVE COMPENSATION

A description of the compensation of our executive officers will be contained in the section captioned “Executive Officer Compensation” and “Compensation Committee Interlocks and Insider Participation” of the 2008 Proxy Statement. That portion of the 2008 Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

A description of the security ownership of certain beneficial owners and management will be contained in the section captioned “Security Ownership of Certain Beneficial Owners and Management” of the 2008 Proxy Statement. That portion of the 2008 Proxy Statement is incorporated herein by reference.

Equity Compensation Plan Information

A description of our equity compensation plans will be contained in the section captioned “Executive Officer Compensation” of the 2008 Proxy Statement. That portion of the 2008 Proxy Statement is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Certain relationships and related transactions with management will be contained in the section captioned “Certain Relationships and Related Transactions” in the 2008 Proxy Statement. That portion of the 2008 Proxy Statement is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

A description of the principal accounting fees and services will be contained in the section captioned “Principal Accounting Fees and Services” in the 2008 Proxy Statement. That portion of the 2008 Proxy Statement is incorporated herein by reference.

100

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:

(a) (1) Financial Statements — See Index to Consolidated Financial Statements at Part II, Item 8 of this report.

(a) (2) Financial Statement Schedules — See Index to Consolidated Financial Statements at Part II, Item 8 of this report (Schedule II).

Schedules not listed above have been omitted because the information required to be set forth therein is not applicable, not required or is included elsewhere in the financial statements or notes thereto.

(a) (3) Exhibits

The following exhibits are filed with this report:

Exhibit Number	Description
2.1	Agreement and Plan of Merger, dated as of September 1, 2004, among the Registrant, Cobalt Acquisition Corporation and Computer Access Technology Corporation, filed as Exhibit 2.1 to Form 8-K dated September 2, 2004, incorporated herein by reference.
2.2	Agreement and Plan of Merger dated as of September 29, 2006, among the Registrant, 2006 Franklin Congress Corporation, Catalyst Enterprises, Inc., and Nader Salehomoum, filed as Exhibit 2.1 to Form 8-K filed on October 3, 2006, incorporated herein by reference.
3.1	Certificate of Incorporation of the Registrant as of July 24, 1995, filed as Exhibit 3.1 to Form S-1 Registration Statement No. 33-95620, incorporated herein by reference.
3.2	Amendment to the Certificate of Designation of the Series A Convertible Redeemable Preferred Stock as of April 9, 2001, filed as Exhibit 10.37 to Form 10-Q for the quarterly period ended March 31, 2001, incorporated herein by reference.
3.3	By-Laws of the Registrant, as amended, dated August 16, 2000, filed as Exhibit 3.3 to Form 10-Q for the quarterly period ended September 30, 2000, incorporated herein by reference.
3.4	Second Amendment to the By-Laws of Registrant, adopted on December 10, 2007, filed as Exhibit 3.01 to Form 8-K filed on December 11, 2007.
4.1	Purchase Agreement dated October 5, 2006, between LeCroy Corporation and Cowen and Company, LLC, filed as Exhibit 4.1 to Form 8-K filed on October 12, 2006, incorporated herein by reference.
4.2	Registration Rights Agreement dated October 12, 2006, between LeCroy Corporation and Cowen and Company, LLC, filed as Exhibit 4.2 to Form 8-K filed on October 12, 2006, incorporated herein by reference.
4.3	Indenture dated October 12, 2006, between LeCroy Corporation, as issuer, and U.S. Bank National Association, as trustee, filed as Exhibit 4.3 to Form 8-K filed on October 12, 2006, incorporated herein by reference.
10.1	Credit Agreement, dated as of October 29, 2004, among the Registrant, the lenders party thereto and The Bank of New York, as Administrative Agent, filed as Exhibit 10.14 to Form 8-K filed on November 2, 2004, incorporated herein by reference.
10.2	LeCroy Corporation Amended and Restated 1993 Stock Incentive Plan filed as Exhibit 10.1 to Form S-1 Registration Statement No. 33-95620, incorporated herein by reference.*
10.3	Amendment to LeCroy Corporation Amended and Restated 1993 Stock Incentive Plan, filed as Exhibit 10.33 to Form 10-Q for the quarterly period ended September 30, 2000, incorporated herein by reference.*

101

Exhibit Number	Description
10.4	LeCroy Corporation 1995 Non-Employee Director Stock Option Plan filed as Exhibit 10.2 to Form S-1 Registration Statement No. 33-95620, incorporated herein by reference.*
10.5	LeCroy Corporation 1995 Employee Stock Purchase Plan, filed as Exhibit 10.3 to Form S-1 Registration Statement No. 33-95620, incorporated herein by reference.*
10.6	LeCroy Corporation 1998 Non-Employee Director Stock Option Plan, incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement filed on September 18, 1998.
10.7	Amendment to the LeCroy Corporation 1998 Non-Employee Director Stock Option Plan, dated August 16, 2000, filed as Exhibit 10.34 to Form 10-Q for the quarterly period ended September 30, 2000, incorporated herein by reference.*
10.8	Amendment to the LeCroy Corporation 1998 Non-Employee Director Stock Option Plan, dated October 25, 2000, filed as Exhibit 10.35 to Form 10-Q for the quarterly period ended September 30, 2000, incorporated herein by reference.*
10.9	LeCroy Corporation’s 2003 Stock Incentive Plan, incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement filed on September 26, 2003.*
10.10	Form of Restricted Stock Purchase Agreement, filed as Exhibit 10.41 to Form 10-K for the fiscal year ended June 30, 2002, incorporated herein by reference.*
10.11	LeCroy Corporation Amended and Restated 1995 Employee Stock Purchase Plan, incorporated by reference to Appendix B to the Registrant’s Definitive Proxy Statement filed on September 26, 2003.*
10.12	LeCroy Corporation’s 2004 Employment Inducement Stock Plan, filed as Exhibit 10.5 to Form 8-K filed on November 2, 2004, incorporated herein by reference.*
10.13	Computer Access Technology Corporation Special 2000 Stock Option Plan, filed as Exhibit 10.7 to Form 8-K filed on November 2, 2004, incorporated herein by reference.*
10.14	Amendments to Computer Access Technology Corporation 2000 Special Stock Option Plan, filed as Exhibit 10.11 to Form 8-K filed on November 2, 2004, incorporated herein by reference.*
10.15	Amendment to LeCroy Corporation (CATC) Special 2000 Stock Option Plan, filed as Exhibit 10.2 to Form 8-K filed on November 19, 2004, incorporated herein by reference.*
10.16	Computer Access Technology Corporation 2000 Stock Incentive Plan, filed as Exhibit 10.8 to Form 8-K filed on November 2, 2004, incorporated herein by reference.*
10.17	Amendments to Computer Access Technology Corporation 2000 Stock Incentive Plan, filed as Exhibit 10.12 to Form 8-K filed on November 2, 2004, incorporated herein by reference.*
10.18	Amendment to LeCroy Corporation (CATC) 2000 Stock Incentive Plan, filed as Exhibit 10.3 to Form 8-K filed on November 19, 2004, incorporated herein by reference.*
10.19	Computer Access Technology Corporation 1994 Stock Option Plan, filed as Exhibit 10.9 to Form 8-K filed on November 2, 2004, incorporated herein by reference.*
10.20	Amendments to Computer Access Technology Corporation 1994 Stock Option Plan, filed as Exhibit 10.13 to Form 8-K filed on November 2, 2004, incorporated herein by reference.*
10.21	Amendment to LeCroy Corporation (CATC) 1994 Stock Option Plan, filed as Exhibit 10.4 to Form 8-K filed on November 19, 2004, incorporated herein by reference.*
10.22	Employee Agreement Regarding Inventions, Confidentiality and Non-Competition, dated as of March 28, 1995, between the Registrant and Walter O. LeCroy, Jr., filed as Exhibit 10.13 to Form S-1 Registration Statement No. 33-95620, incorporated herein by reference.*
10.23	Form of Indemnification Agreement, between the Registrant and each of its executive officers and directors filed as Exhibit 10.29 to Form S-1 Registration Statement No. 33-95620, incorporated herein by reference.*

102

Exhibit Number	Description
10.24	Employment Agreement, dated August 13, 2001, between the Registrant and R. Scott Bausback, filed as Exhibit 10.38 to Form 10-Q for the quarterly period ended December 31, 2001, incorporated herein by reference.*
10.25	Separation Agreement, dated August 19, 2004, between the Registrant and R. Scott Bausback, filed as Exhibit 10.50 to Form 10-K for the fiscal year ended June 30, 2004, incorporated herein by reference.*
10.26	Employment Agreement, dated January 1, 2002, between the Registrant and Thomas H. Reslewic, filed as Exhibit 10.40 to Form 10-Q for the quarterly period ended March 31, 2003, incorporated herein by reference.*
10.27	Amendment No. 1 to Employment Agreement, dated December 16, 2002, between the Registrant and Thomas H. Reslewic, filed as Exhibit 10.43 to Form 10-Q for the quarterly period ended March 31, 2003, incorporated herein by reference.*
10.28	Separation Agreement, dated August 19, 2004, between the Registrant and Thomas H. Reslewic, filed as Exhibit 10.49 to Form 10-K for the fiscal year ended June 30, 2004, incorporated herein by reference.*
10.29	Form of Separation Agreement between the Registrant and certain of its executive officers, filed as Exhibit 10.51 to Form 10-K for the fiscal year ended June 30, 2004, incorporated herein by reference.*
10.30	Employment Agreement, dated September 1, 2004 and effective October 29, 2004, between the Registrant and Carmine Napolitano, filed as Exhibit 10.1 to Form 8-K filed on November 2, 2004, incorporated herein by reference.*
10.31	Amendment No. 1 to Employment Agreement, dated September 30, 2004 and effective October 29, 2004, between the Registrant and Carmine Napolitano, filed as Exhibit 10.2 to Form 8-K filed on November 2, 2004, incorporated herein by reference.*
10.32	Services Agreement, dated August 31, 2004, between Computer Access Technology Corporation and Dan Wilnai, filed as Exhibit 10.3 to Form 8-K filed on November 2, 2004, incorporated herein by reference.*
10.33	Employment Agreement, dated August 31, 2004, between Computer Access Technology Corporation and Peretz Tzarnotsky, filed as Exhibit 10.4 to Form 8-K filed on November 2, 2004, incorporated herein by reference.*
10.34	Amendment No. 2 to Credit Agreement, dated as of May 9, 2006, among the Registrant, the lenders party thereto and The Bank of New York, as Administrative Agent, filed as Exhibit 10.40 to Form 10-Q filed on May 10, 2006, incorporated herein by reference.
10.35	Amendment No. 3 to Credit Agreement, dated as of September 26, 2006, among the Registrant, the lenders party thereto and The Bank of New York, as Administrative Agent, filed as Exhibit 10.36 to Form 10-Q filed on November 9, 2006, incorporated herein by reference.
10.36	Amendment No. 4 to Credit Agreement, dated as of September 28, 2006, among the Registrant, the lenders party thereto and The Bank of New York, as Administrative Agent, filed as Exhibit 10.37 to Form 10-Q filed on November 9, 2006, incorporated herein by reference.
10.37	Amendment No. 5 to Credit Agreement, dated as of December 29, 2006, among the Registrant, the lenders party thereto and The Bank of New York, as Administrative Agent, filed as Exhibit 10.1 to Form 8-K filed on December 29, 2006, incorporated herein by reference.
10.38	Catalyst Enterprises, Inc. 2005 Stock Option Plan, filed as Exhibit 10.1 to Form 8-K filed on December 22, 2006, incorporated herein by reference.*
10.39	Amendments to Catalyst Enterprises, Inc. 2005 Stock Option Plan filed as Exhibit 10.2 to Form 8-K filed on December 22, 2006, incorporated herein by reference.*

103

Exhibit Number	Description
10.40	Credit Agreement, dated as of March 30, 2007, among the Registrant, the Lenders listed therein and Manufacturers and Traders Trust Company, as Administrative Agent, filed as Exhibit 10.1 to Form 8-K filed on April 4, 2007, incorporated herein by reference.
10.41	First Modification and Lender Joinder Agreement, dated as of April 26, 2007, among Registrant, the Lenders listed therein and Manufacturers and Traders Trust Company, as Administrative Agent, filed as Exhibit 10.1 to Form 8-K filed on May 2, 2007, incorporated herein by reference.
10.42	Assignment and Acceptance, dated as of April 26, 20007, between Manufacturers and Traders Trust Company and North Fork Bank, filed as Exhibit 10.2 to Form 8-K filed on May 2, 2007, incorporated herein by reference.
10.43	Stock Appreciation Right Plan, filed as Exhibit 10.1 to Form 8-K filed on August 24, 2007, incorporated herein by reference.*
10.44	Stock Appreciation Right Grant Agreement, filed as Exhibit 10.2 to Form 8-K filed on August 24, 2007, incorporated herein by reference.*
10.45	Second Modification Agreement, dated as of May 7, 2008, among Registrant, the Lenders listed therein and Manufacturers and Traders Trust Company, as Administrative Agent, filed as Exhibit 10.45 to Form 10-Q filed on May 8, 2008, incorporated herein by reference.
10.46	LeCroy Corporation Amended and Restated 2007 Stock Appreciation Right Plan.*
14.1	Revised Code of Ethics-Principles of Business Conduct dated December 14, 2005, filed as Exhibit 14.1 to Form 10-K for the fiscal year ended July 1, 2006, incorporated herein by reference.
18.1	Preferability Letter of KPMG LLP, Independent Registered Public Accounting Firm.
21.1	Subsidiaries of LeCroy Corporation.
23.1	Consent of Independent Registered Public Accounting Firm.
31.1	Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2	Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32.1	Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2	Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

* Indicates management contract or compensatory plan, contract or arrangement.

104

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	LeCroy CORPORATION
Date: September 9, 2008	By	/s/    SEAN B. O’CONNOR
		Sean B. O’Connor
		Vice President and Chief Financial Officer,
		Secretary and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/    CHARLES A. DICKINSON         Charles A. Dickinson	Chairman of the Board of Directors	September 9, 2008
/s/    THOMAS H. RESLEWIC         Thomas H. Reslewic	President, Chief Executive Officer and Director (Principal Executive Officer)	September 9, 2008
/s/    SEAN B. O’CONNOR         Sean B. O’Connor	Vice President and Chief Financial Officer, Secretary and Treasurer (Principal Accounting Officer)	September 9, 2008
/s/    ROBERT E. ANDERSON         Robert E. Anderson	Director	September 9, 2008
/s/    WALTER O. LECROY, JR.         Walter O. LeCroy, Jr.	Director	September 9, 2008
/s/    NORMAN R. ROBERTSON         Norman R. Robertson	Director	September 9, 2008
/s/    WILLIAM G. SCHEERER         William G. Scheerer	Director	September 9, 2008
/s/    ALLYN C. WOODWARD, JR.         Allyn C. Woodward, Jr.	Director	September 9, 2008

105

EX-10.46

Exhibit 10.46

LECROY CORPORATION

AMENDED AND RESTATED

2007 STOCK APPRECIATION RIGHT PLAN

1. Purposes of the SAR Plan.

The purposes of this Amended and Restated Stock Appreciation Right Plan (the “SAR Plan”) of LeCroy Corporation (the “Company”) are to promote the interests of the Company and its stockholders by strengthening the Company’s ability to attract, motivate, and retain employees of exceptional ability, to ensure that the compensation provided to selected employees is competitive with the market peers of such selected employees and to provide an additional competitive long-term incentive value to those key employees of the Company upon whose judgment, initiative, and efforts the financial success and growth of the business of the Company largely depend.

2. Definitions.

(a) “Beneficial Ownership” means beneficial ownership as defined in Securities and Exchange Commission Rule 13d-3 under the Exchange Act.

(b) “Board” means the Board of Directors of the Company.

(c) “Code” means the Internal Revenue of 1986, as amended, including any successor law thereto, and the rules and regulations promulgated thereunder.

(d) “Committee” means a committee appointed by the Board consisting of at least two members of the Board.

(e) “Change in Control” means a change in ownership or control of the Company effected through either of the following transactions:

(i) any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with the Company) directly or indirectly acquires Beneficial Ownership of securities possessing more than 50% of the total fair market value or total voting power of the Company’s outstanding securities, or

(ii) over a period of 12 consecutive months or less, there is a change in the composition of the Board such that a majority of the Board members (rounded up to the next whole number, if a fraction) is replaced by directors whose election is not endorsed by a majority of the members of the Company’s Board before the date of the election.

Solely with respect to any grant that is subject to Section 409A of the Code and that is payable upon a Change of Control, and to the extent that the above definition does not comply with Section 409A, such definition shall be modified, to the extent required to ensure that this definition complies with the requirements of Section 409A of the Code, as set forth in regulations or other regulatory guidance issued under Section 409A of the Code by the appropriate governmental authority and the Plan shall be operated in accordance with the above definition of Change in Control as modified to the extent necessary to ensure that the above definition complies with the definition prescribed in such regulations or other regulatory guidance.

(f) “Common Stock” means the authorized common stock of the Company, par value $0.01.

(g) “Company” means LeCroy Corporation.

(h) “Date of Grant” means the effective date of the grant of a Stock Appreciation Right as set forth in the Grant Document.

(i) “Eligible Employee” means any person who is, at the time of the grant of a Stock Appreciation Right, an employee of the Company or any Subsidiary.

(j) “Exchange Act” means the Securities Exchange Act of 1934, as amended and in effect from time to time.

(k) “Fair Market Value” means the value of a share of Common Stock on any relevant date as determined in accordance with the following provisions:

(i) If the Common Stock is at the time listed on the Nasdaq Stock Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the relevant date, as such price is reported by the National Association of Securities Dealers on the Nasdaq Stock Market and published in The Wall Street Journal. If there is no closing selling price for Common Stock on the relevant date, then the Fair Market Value shall be the closing selling price on the last preceding date for which such closing selling price exists.

(ii) If the Common Stock is at the time listed on any stock exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the relevant date on the stock exchange determined by the Committee to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange and published in the Wall Street Journal. If there is no closing selling price for the Common Stock on the relevant date, then the Fair Market Value shall be the closing selling price on the last preceding date for which such closing selling price exists.

(iii) If the Common Stock is at the time neither listed on any stock exchange nor the Nasdaq Stock Market, then the Fair Market Value shall be a value determined by the Committee, in its sole discretion, by the reasonable application of a reasonable valuation method taking into consideration all available information material to the value of the Company.

Notwithstanding anything in this Plan, to the extent that the above definition does not comply with Section 409A, such definition shall be modified, to the extent required to ensure that this definition complies with the requirements of Section 409A of the Code, as set forth in regulations or other regulatory guidance issued under Section 409A of the Code by the appropriate governmental authority and the Plan shall be operated in accordance with the above definition of Fair Market Value as modified to the extent necessary to ensure that the above definition complies with the definition prescribed in such regulations or other regulatory guidance.

(l) “Grant Document” means the written agreement, notice of grant or other documentation governing the grant of a Stock Appreciation Right under the SAR Plan, in a form approved by the Committee, which shall contain terms and conditions not inconsistent with the SAR Plan and which shall incorporate the SAR Plan by reference.

(m) “Participant” means an Eligible Employee selected to receive a Stock Appreciation Right pursuant to the SAR Plan.

(n) “SAR Plan” means this 2007 Stock Appreciation Right Plan as set forth herein and as amended and/or restated from time to time.

(o) “Stock Appreciation Right” means a contractual right granted to a Participant, pursuant to the SAR Plan, to receive the value of the appreciation of the specified number of shares of Common Stock that were granted over the specified period of time, less the applicable withholding taxes. Such value will be determined by the following formula: ((Fair Market Value – exercise price) X number of shares) – withholding taxes)), as determined in accordance with the SAR Plan and subject to such other terms and condition as are set forth in the SAR Plan and in the applicable Grant Document. The value will be provided to Participant in cash, Common Stock or a combination thereof, at the discretion of the Company, and as provided in the Grant Document.

(p) “Subsidiary” means a “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code.

3. Administration of the SAR Plan.

(a) The SAR Plan will be governed by and interpreted and construed in accordance with the internal laws of the State of Delaware (without reference to principles of conflicts or choice of law). The captions of sections of the SAR Plan are for reference only and will not affect the interpretation or construction of the SAR Plan.

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(b) The SAR Plan will be administered by the Committee. The Committee has and may exercise such powers and authority of the Board as may be necessary or appropriate for the Committee to carry out its functions as described in the SAR Plan. The Committee shall determine the Eligible Employees to whom, and the time or times at which, a Stock Appreciation Right may be granted and the number of shares subject to each Stock Appreciation Right. The Committee also has authority (i) to interpret the SAR Plan, (ii) to determine the terms and provisions of the Stock Appreciate Right and the Grant Document, and (iii) to make all other determinations necessary or advisable for SAR Plan administration. The Committee has authority to prescribe, amend, and rescind rules and regulations relating to the SAR Plan. All interpretations, determinations, and actions by the Committee will be final, conclusive, and binding upon all parties.

(c) No member of the Committee will be liable for any action taken or determination made in good faith by the Committee with respect to the SAR Plan or any Stock Appreciation Right.

4. Grants.

The Committee shall determine and designate from time to time those Eligible Employees who are to be granted a Stock Appreciation Right and the applicable terms, which shall be consistent with the SAR Plan and which shall include, without limitation, the number of shares of the Stock Appreciation Right, the exercise price and the vesting terms. Each grant of a Stock Appreciation Right will be evidenced by a Grant Document.

5. Terms and Conditions of a Stock Appreciation Right.

(a) The exercise price of a Stock Appreciation Right shall not be less than 100% of the Fair Market Value of a share of Common Stock on the Date of Grant of such Stock Appreciation Right and such exercise price of any Stock Appreciation Right may not be reduced after the Date of Grant.

(b) A Stock Appreciation Right shall be exercisable at such time and for such numbers of shares as set forth in the Grant Document.

(c) In order to vest in any portion of a Stock Appreciation Right, a Participant must be employed by the Company or a Subsidiary on the date the Stock Appreciation Right is scheduled to vest.

(d) Unless otherwise set forth in the Grant Document, a Stock Appreciation Right shall vest in a series of 4 equal yearly installments on each anniversary date of the Grant Date, 25% to vest on the first anniversary, 25% to vest on the second anniversary, 25% to vest on the third anniversary and the final 25% to vest on the fourth anniversary (each date a “Vest Date”). As a Stock Appreciation Right becomes exercisable for an installment, that installment shall remain exercisable as to that vested amount until the fourth anniversary of the applicable Vest Date. Upon each fourth anniversary date of each Vest Date, that applicable vested portion of a Stock Appreciation Right that has not been exercised by Participant shall expire. The installments that become exercisable shall not accumulate for any reason, including to remain exercisable.

(e) Should a Participant’s employment with the Company or a Subsidiary be terminated for any reason, then the vested portion, if any, of a Stock Appreciation Right shall remain exercisable for a three month period measured from Participant’s last day of employment with the Company or a Subsidiary, except in the event that such termination is due to death or disability, the vested portion, if any, of a Stock Appreciation Right shall remain exercisable for a twelve month period measured from the last day of employment. At midnight on the date at the end of the applicable period any vested portion of a Stock Appreciation Right that has not been exercised by Participant shall expire.

(f) No additional vesting will occur after the date of Participant’s last day of employment and the unvested portion, if any, of a Stock Appreciation Right shall immediately terminate, subject to Section 6 (a) and below.

(g) A Participant cannot exercise any portion of a Stock Appreciation Right except during an open trading period for directors, officers and certain other employees designated under the Stock Trading Policy adopted by the Board, a copy of which is attached to this Plan and incorporated by this reference.

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6. Adjustment Provisions.

(a) The Committee shall have discretion to provide for the acceleration of any Stock Appreciation Right held by a Participant upon the occurrence of a Change in Control of the Company. Such accelerated vesting may be conditioned on the subsequent termination of the affected Participant’s employment. Any Stock Appreciation Right accelerated in connection with a Change in Control shall remain fully exercisable until the expiration or sooner termination of the Stock Appreciation Right.

(b) The Committee shall have discretion to: (i) cancel a Stock Appreciation Right previously granted and give the Participant notice and opportunity to exercise any vested portion of a Stock Appreciation Right for 30 days prior to such cancellation or; (ii) to cancel the Stock Appreciation Right and to deliver to the Participant the value of the Stock Appreciation Right in cash or common share or combination thereof, which the Committee shall determine in its sole discretion, subject to the terms of the SAR Plan.

(c) Each Stock Appreciation Right that is assumed in connection with a Change in Control, or is otherwise to continue in effect subsequent to such Change in Control, shall be appropriately adjusted so as to preserve, without increasing, the value of such Stock Appreciation Right.

(d) Adjustments under this section will be made by the Committee in accordance with the terms of the SAR Plan, whose determination as to what adjustments, if any, are made will be final, binding, and conclusive.

7. General Provisions.

(a) Nothing in the SAR Plan or in any instrument executed pursuant to the SAR Plan will confer upon any Participant any right to continue in the employ of the Company or any of its Subsidiaries or affect the right of the Company or any Subsidiary to terminate the employment of any Participant at any time and for any reason or no reason, with or without cause and without notice.

(b) No shares of Common Stock will be issued or transferred pursuant to either the grant or vesting of a Stock Appreciation Right and no Participant and no beneficiary or other person claiming under or through such Participant will have any right or title in or to any shares of Common Stock due to grant or vesting.

(c) No right under the SAR Plan, contingent or otherwise, will be transferable or assignable or subject to any encumbrance, pledge, or charge of any nature except that, under such rules and regulations as the Committee may establish pursuant to the terms of the SAR Plan, a beneficiary may be designated with respect to a Stock Appreciation Right in the event of death of a Participant. If such beneficiary is the executor or administrator of the estate of the Participant, any rights with respect to such Stock Appreciation Right may be transferred to the person or persons or entity (including a trust) entitled thereto under the will of the holder of such Stock Appreciation Right.

(d) The Grant Document may contain such other provisions as the Committee may deem advisable. Without limiting the foregoing, and if so authorized by the Committee, the Company may, with the consent of the Participant and at any time or from time to time, cancel all or a portion of any Stock Appreciation Right granted under the SAR Plan then subject to exercise and discharge its obligation with respect to the Stock Appreciation Right by payment to the Participant of the applicable value amount, either by providing a cash payment, Common Shares or a combination thereof, at the discretion of the Company.

(e) It is the intention of the Company that all grants by Plan Committee be in compliance with Section 409A of the Code in all respects and the Plan shall be so construed; provided, however that the Participant shall be solely responsible for and liable for any tax consequences (including but not limited to any interest or penalties) as a result of participation in the Plan. Neither the Board, nor the Company nor the Committee makes any commitment or guarantee that any federal, state or local tax treatment will apply or be available to any person participating or eligible to participate hereunder and assumes no liability whatsoever for the tax consequences to the Participants. Notwithstanding anything herein to the contrary, if any amounts payable hereunder are reasonably determined by the Committee to be “nonqualified deferred compensation” payable to a “specified employee” upon “separation

4

from service” (within the meaning of section 409A of the Code) then such amounts that would otherwise be payable upon separation from service shall be held and not be paid by the Company upon separation from service, but shall be paid as soon as administratively feasible following the earlier of: (1) the first day that is six months following the Participant’s separation from service; or (2) Participant’s date of death. Such amounts that would otherwise be payable in installments commencing on separation from service shall be accumulated and paid in a lump sum on the date that is the earlier of (1) or (2) above and shall be paid in installments thereafter.

8. Amendment and Termination.

(a) The Board shall have the power, in its sole discretion, to amend, modify, suspend, or terminate the SAR Plan at any time, subject to the rights of a holder of a Stock Appreciation Right on the date of such action.

(b) The Committee may, with the consent of Participant, make such modifications in the terms and conditions of a Stock Appreciation Right then currently-held by such Participant as it deems advisable.

(c) No amendment, suspension or termination of the SAR Plan will, without the consent of Participant, adversely affect any right or obligation under a Stock Appreciation Right then currently held by to such Participant under the SAR Plan.

9. Effective Date of SAR Plan and Duration of SAR Plan.

The SAR Plan shall become effective upon its adoption by the Board on September 8, 2008. The SAR Plan will terminate on August 20, 2017.

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EX-18.1

EXHIBIT 18.1

September 9, 2008

LeCroy Corporation

150 Chestnut Ridge Rd.

Chestnut Ridge, NY 10799

Ladies and Gentlemen:

We have audited the consolidated balance sheets of LeCroy Corporation and subsidiaries (the “Company”) as of June 28, 2008 and June 30, 2007, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended June 28, 2008, June 30, 2007, and July 1, 2006 and have reported thereon under date of September 9, 2008. The aforementioned consolidated financial statements and our audit report thereon are included in the Company’s annual report on Form 10-K for the year ended June 28, 2008. As stated in Note 1 to those financial statements, the Company changed its annual goodwill impairment testing date from fiscal year-end to the last day of the eleventh month of the fiscal year and states that the newly adopted accounting principle is preferable in the circumstances because it provides the Company additional time to complete the impairment test and report the results of that test in the Company’s annual filing on Form 10-K. In accordance with your request, we have reviewed and discussed with Company officials the circumstances and business judgment and planning upon which the decision to make this change in the method of accounting was based.

With regard to the aforementioned accounting change, authoritative criteria have not been established for evaluating the preferability of one acceptable method of accounting over another acceptable method. However, for purposes of the Company’s compliance with the requirements of the Securities and Exchange Commission, we are furnishing this letter.

Based on our review and discussion, with reliance on management’s business judgment and planning, we concur that the newly adopted method of accounting is preferable in the Company’s circumstances.

Very truly yours,

/s/ KPMG LLP

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF LeCROY CORPORATION

Name of Subsidiary	Jurisdiction Organized
LeCroy Corporation*	Delaware
LeCroy Lightspeed Corporation	Delaware
Computer Access Technology Corporation	Delaware
Catalyst Enterprises, Inc.	California
LeCroy, S.A.R.L.	France
LeCroy, GmbH	Germany
LeCroy (Beijing) Trading Co, Ltd.	China
LeCroy, S.R.L.	Italy
LeCroy Japan Corporation	Japan
LeCroy, Pte. Ltd.	Singapore
LeCroy Korea, Ltd.	South Korea
LeCroy AB	Sweden
LeCroy, S.A.	Switzerland
LeCroy, Ltd.	United Kingdom

* Parent

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

LeCroy Corporation:

We consent to the incorporation by reference in the registration statements (Nos. 333-139638, 333-129490, 333-120656, 333-113271, 333-03144, and 333-91833) on Form S-8, (Nos. 333-119730, 333-46418, 333-43690, 333-88239, 333-43699, 333-37269, and 333-22117) on Form S-3 and (Nos. 333-139708, 333-112630 and 333-64848) on Form S-3/A of LeCroy Corporation of our reports dated September 9, 2008, with respect to the consolidated balance sheets of LeCroy Corporation and subsidiaries as of June 28, 2008 and June 30, 2007, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended June 28, 2008, June 30, 2007, and July 1, 2006 and the related financial statement schedule, and the effectiveness of internal control over financial reporting as of June 28, 2008, which reports appear in the June 28, 2008 annual report on Form 10-K of LeCroy Corporation.

Our report on the consolidated financial statements refers to the Company’s adoption of the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income taxes — an Interpretation of FASB Statement No. 109”, effective July 1, 2007.

/s/ KPMG LLP

Short Hills, New Jersey

September 9, 2008

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas H. Reslewic, certify that:

1. I have reviewed this annual report on Form 10-K of LeCroy Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 9, 2008

/S/    THOMAS H. RESLEWIC        

Thomas H. Reslewic

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Sean B. O’Connor, certify that:

1. I have reviewed this annual report on Form 10-K of LeCroy Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 9, 2008

/S/    SEAN B. O’CONNOR        

Sean B. O’Connor

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of LeCroy Corporation (the “Company”) on Form 10-K for the year ended June 28, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas H. Reslewic, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: September 9, 2008

/S/    THOMAS H. RESLEWIC        

Thomas H. Reslewic

Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of LeCroy Corporation (the “Company”) on Form 10-K for the year ended June 28, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sean B. O’Connor, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: September 9, 2008

/S/    SEAN B. O’CONNOR        

Sean B. O’Connor

Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.