Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Mark Jordan – Noble Financial Group.
Mark Jordan – Noble Financial Group
Looking at inventory, you noted in the Q that your Blueforce and MTS inventory at the end of the quarter was $26.5 million versus $6.5 a year ago. That’s clearly a significant increase and I was wondering if you could comment why that has moved up? And, what level do you expect that to be at overall inventory in that segment as you exit the year.
Michael D. Porcelain
We do expect a significant decline in inventory over the next six months. We were anticipating some orders from the government sometime in Q3 that have kind of been pushed out that we expect to get shortly. So, it was a decision that when we get an opportunity to buy parts, we take advantage of it so it was a buildup in inventory that we expect to decline over the next six months.
Mark Jordan – Noble Financial Group
Could you detail any specific transaction costs that flowed through here relative to Radyne in the third quarter? And, do you expect any in the fourth quarter?
Michael D. Porcelain
We do at this point given where we are with the tender at this point to be in a capitalization stage so our Q4 kind of reflects the fact that we do anticipate capitalizing most of the cost. It is fair to say in Q4 that there will be less than $0.01 or so of expenses that you can’t capitalize to hit the balance sheet. But, at this point, most of the transaction costs would be in the balance sheet. In total, for the transaction we’re expecting about $5 million of transaction costs itself at this point and I believe as of the beginning of June we had about $1.4 million that we spent so far.
Mark Jordan – Noble Financial Group
In Fred’s comments he’s talking about the development of next generation transceiver that’s FIPS certified. Would you envision that would be the catalyst for an upgrade cycle for the installed base or would that just be bleed in over time?
Fred Kornberg
It’s hard to say right now Mark. I think it could be either way. We’re obviously trying to do it as an upgrade but it may have to wait for the next generation.
Mark Jordan – Noble Financial Group
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