Cost Reduction Actions

Wind-Down of Microsatellite Product Line

During fiscal 2013, we completed our fiscal 2012 plan to wind-down our mobile data communications segment's microsatellite product line. In connection with this plan, we recorded a net pre-tax benefit of $56,000 in fiscal 2014, resulting from the reversal of previously accrued costs that were lower than expected. In fiscal 2013, we recorded a net pre-tax restructuring charge of $458,000. Almost all of these amounts are reflected in selling, general and administrative expenses in our Consolidated Statement of Operations for the respective periods. In fiscal 2012, we recorded a pre-tax restructuring charge of $2,577,000 related to this plan, of which $1,270,000 was recorded in cost of sales and the remainder in selling, general and administrative expenses in our Consolidated Statement of Operations.

The activity pertaining to the accruals with respect to this plan, since July 31, 2013, is summarized as follows:



	Facility exit costs			Other	Total
Balance as of July 31, 2013	$	413,000		50,000	$	463,000
Reversals	(56,000		)	—	(56,000		)
Payments made	(121,000		)	—	(121,000		)
Balance as of July 31, 2014	$	236,000		50,000	$	286,000

Of the total remaining microsatellite product line wind-down liabilities of $286,000, $263,000 is included in accrued expenses and other current liabilities and $23,000 is included in other long-term liabilities in our Consolidated Balance Sheet as of July 31, 2014.

Radyne Acquisition-Related Restructuring Plan

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



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

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

As of July 31, 2014, the amount of the acquisition-related restructuring reserve is as follows:



	Cumulative Activity Through July 31, 2014
Present value of estimated facility exit costs at August 1, 2008	$	2,100,000
Cash payments made	(6,396,000		)
Cash payments received	6,986,000
Accreted interest recorded	1,083,000
Net liability as of July 31, 2014	3,773,000
Amount recorded as prepaid expenses in the Consolidated Balance Sheet	462,000
Amount recorded as other liabilities in the Consolidated Balance Sheet	$	4,235,000

As of July 31, 2013, the present value of the estimated facility exit costs was $3,331,000. During the fiscal year ended July 31, 2014, we made cash payments of $1,069,000 and we received cash payments of $1,264,000. Interest accreted for the fiscal years ended July 31, 2014, 2013 and 2012 was $247,000, $217,000 and $189,000, respectively, and is included in interest expense for each respective fiscal period.

Future cash payments associated with our restructuring plan are summarized below:



	As of
	July 31, 2014
Future lease payments to be made in excess of anticipated sublease payments	$	4,235,000
Less net cash to be received in next twelve months	(462,000		)
Interest expense to be accreted in future periods	957,000
Total remaining net cash payments	$	4,730,000