Legal Proceedings and Other Matters

9 Months Ended

Apr. 30, 2012

Legal Proceedings and Other Matters [Abstract]

Legal Proceedings and Other Matters

(20)Legal Proceedings and Other Matters

Patent Infringement Lawsuit Settlement

In May 2012, we entered into a full settlement related to a lawsuit that involved our Double Talk^® Carrier-in-Carrier^® ("CIC") technology that we license from Raytheon Applied Signal Technology, Inc. ("Raytheon"), formerly known as Applied Signal Technology, Inc. We use CIC technology in certain of our satellite earth station modem products. This settlement did not have any material impact on our consolidated financial condition or results of operations.

BFT-1 Contract Audit

In May 2011, we were notified that our BFT-1 contract which expired on December 31, 2011 was selected for a post award audit by the Defense Contract Audit Agency ("DCAA"). A post award audit (sometimes referred to as a Truth in Negotiations Act or "TINA" audit) generally focuses on whether the contractor disclosed current, accurate and complete cost or pricing data in the contract negotiation process pursuant to Federal Acquisition Regulations ("FAR"). We received $376,355,000 in total orders under our BFT-1 contract.

In January 2012, the Defense Contract Management Agency ("DCMA") advised us that the fiscal 2008 award of the BFT-1 contract triggered full coverage under the Cost Accounting Standards ("CAS"), which are a set of specialized rules and standards that the U.S. government uses for determining costs on large, negotiated contracts. The DCMA also requested that we submit an initial CAS disclosure statement that would describe our cost accounting practices. We have informed the DCMA that we had addressed this issue with them shortly after we were awarded the BFT-1 contract in fiscal 2008. We believed then, as we do now, that the BFT-1 contract does not trigger full CAS coverage. In response to this issue being raised again, we provided information to the DCMA to support our view that the BFT-1 contract is subject to a CAS exemption for fixed price commercial contract line items (such as our mobile satellite transceivers).

In March 2012, we were awarded a new three-year indefinite delivery/indefinite quantity ("IDIQ") BFT-1 sustainment contract with the U.S. Army to provide the same type of commercial equipment and services that we previously provided under the aforementioned BFT-1 contract. This new contract incorporates specific FAR Part 12 clauses, which specify that the equipment provided under the contract is commercial (as that term is defined in the FAR). We believe that the commercial designation in our new contract also applies to the original BFT-1 contract and that our original BFT-1 contract was not subject to full coverage under CAS.

In May 2012, the DCAA informed us that it is finalizing its post award audit in accordance with 41 U.S.C. 254b and FAR 52.215-10 and that it anticipates it will issue its audit report by September 2012. The DCMA has not yet commented on whether or not we are required to provide a CAS disclosure statement or whether or not it believes the BFT-1 contract was subject to full coverage under CAS.

Although we believe that our BFT-1 contract was not subject to full coverage under CAS and that our equipment is commercial (as that term is defined), the outcome of the DCAA audit is difficult to predict. If it is ultimately determined that a cost or price adjustment for our BFT-1 contract is appropriate, we may be required to refund monies to the U.S. government, with interest. These amounts could have a material adverse effect on our results of operations and financial condition. 

Other Proceedings

There are certain other pending and threatened legal actions, which arise in the normal course of business. Although the ultimate outcome of litigation is difficult to accurately predict, we believe that the outcome of these pending and threatened actions will not have a material adverse effect on our consolidated financial condition or results of operations.