Quarterly report pursuant to Section 13 or 15(d)

Interim Segment Information

v2.4.0.6
Interim Segment Information
 9 Months Ended
Dec. 31, 2012
Segment Reporting [Abstract]  
Interim Segment Information
Interim Segment Information
The Company’s two reportable segments are as follows:
Westell: The Company’s Westell product family consists of indoor and outdoor cabinets, enclosures and mountings; power distribution products; network interface devices (“NIDs”) for TDM/SONET networks and service demarcation; span powering equipment; remote monitoring devices; copper/fiber connectivity panels; managed Ethernet switches for utility and industrial networks; Ethernet extension devices for providing native Ethernet service handoff in carrier applications; wireless signal conditioning and monitoring products for cellular networks; tower-mounted amplifiers; multi-carrier power amplifier boosters; cell site antenna-sharing products for cell site optimization; and custom systems integration (“CSI”) services. Legacy products are sold primarily into wireline markets, but the Company also is actively moving to develop revenues from wireless telecommunications products. In the quarter ended September 30, 2012, the Company completed the relocation of the majority of the power distribution and remote monitoring products which were manufactured at the Company’s Noran Tel subsidiary located in Regina, Saskatchewan, Canada, to its location in Aurora, Illinois. The remaining operations in Canada are focused on power distribution product development and on sales of Westell products in Canada.
CNS: The Company’s CNS family of broadband products enables high-speed routing and networking of voice, data, video, and other advanced services in the home. The products allow service providers to deliver services, content, and applications over existing copper, fiber, coax, and wireless infrastructures. CNS products are typically installed in consumer residences or small businesses as a key component of broadband service packages. During the quarter ended June 30, 2011, the Company completed the CNS asset sale. The Company retained a major CNS customer relationship and contract. The Company completed the remaining contracted product shipments under this contract in December 2011. In fiscal year 2013, the Company continued to provide warranty services under its contractual obligations and to sell ancillary products and software on a project basis to the retained customer.  The Company expects limited CNS activity with that retained customer going forward. The Company also retained the Homecloud product development program, which continues. The Homecloud product family aims to provide a new suite of services into the home, with an initial focus on media and information management, sharing and delivery, and with prospective functionality applicable to enhanced security, home control, and network management.
Management evaluates performance of these segments primarily by utilizing revenue and segment operating income (loss). The accounting policies of the segments are the same as those for Westell Technologies, Inc. described in the summary of significant accounting policies. The Company defines segment operating income (loss) as gross profit less expenses, including direct expenses from research and development expenses, sales and marketing expenses, and general and administrative (“G&A”). In fiscal year 2012, certain operating expenses were allocated between the Westell and CNS segments, including rent, information technology costs, and accounting. The Westell segment was allocated 72% of these resource costs and the CNS segment was allocated 28% of the costs in the three and nine months ended December 31, 2011. Segment operating income (loss) excludes certain unallocated G&A costs. Unallocated costs include a portion of executive costs plus costs for corporate development, corporate governance, compliance and unutilized office space. When combined with the operating segments and after elimination of intersegment expenses, these costs total to the amounts reported in the Condensed Consolidated Financial Statements.

Segment information for the three and nine months ended December 31, 2012 and 2011 is set forth below: 
 
Three months ended December 31, 2012
(in thousands)
Westell
 
CNS
 
Unallocated
 
Total
Revenue
$
8,873

 
$
55

 
$
—

 
$
8,928

Cost of goods sold
5,783

 
2

 
—

 
5,785

Gross profit
3,090

 
53

 
—

 
3,143

Gross margin
34.8
%
 
96.4
%
 
—

 
35.2
%
Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
1,862

 
(55
)
 
—

 
1,807

Research and development
1,331

 
423

 
—

 
1,754

General and administrative
938

 
(11
)
 
1,197

 
2,124

Restructuring
—

 
—

 
—

 
—

Intangible amortization
234

 
2

 
—

 
236

Total operating expenses
4,365

 
359

 
1,197

 
5,921

Operating income (loss)
$
(1,275
)
 
$
(306
)
 
(1,197
)
 
(2,778
)
Other income
 
 
 
 
43

 
43

Income (loss) before income taxes and discontinued operations
 
 
 
 
(1,154
)
 
(2,735
)
Income tax benefit (expense)
 
 
 
 
1,399

 
1,399

Net income (loss) from continuing operations
 
 
 
 
$
245

 
$
(1,336
)
 
 
 
 
 
 
 
 
 
Three months ended December 31, 2011
(in thousands)
Westell
 
CNS
 
Unallocated
 
Total
Revenue
$
7,674

 
$
6,718

 
$
—

 
$
14,392

Cost of goods sold
5,024

 
5,105

 
—

 
10,129

Gross profit
2,650

 
1,613

 
—

 
4,263

Gross margin
34.5
%
 
24.0
%
 
—

 
29.6
%
Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
1,269

 
145

 
—

 
1,414

Research and development
1,223

 
574

 
—

 
1,797

General and administrative
649

 
200

 
858

 
1,707

Restructuring
—

 
(2
)
 
—

 
(2
)
Intangible amortization
135

 
1

 
—

 
136

Total operating expenses
3,276

 
918

 
858

 
5,052

Operating income (loss)
$
(626
)
 
$
695

 
(858
)
 
(789
)
Other income
 
 
 
 
106

 
106

Interest (expense)
 
 
 
 
(37
)
 
(37
)
Income (loss) before income taxes and discontinued operations
 
 
 
 
(789
)
 
(720
)
Income tax benefit (expense)
 
 
 
 
268

 
268

Net income (loss) from continuing operations
 
 
 
 
$
(521
)
 
$
(452
)

 
Nine months ended December 31, 2012
(in thousands)
Westell
 
CNS
 
Unallocated
 
Total
Revenue
$
28,145

 
$
1,235

 
$
—

 
$
29,380

Cost of goods sold
18,833

 
160

 
—

 
18,993

Gross profit
9,312

 
1,075

 
—

 
10,387

Gross margin
33.1
%
 
87.0
%
 
—

 
35.4
%
Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
5,568

 
(53
)
 
—

 
5,515

Research and development
4,216

 
1,299

 
—

 
5,515

General and administrative
3,232

 
531

 
3,605

 
7,368

Restructuring
149

 
—

 
—

 
149

Intangible amortization
652

 
4

 
—

 
656

Total operating expenses
13,817

 
1,781

 
3,605

 
19,203

Operating income (loss)
$
(4,505
)
 
$
(706
)
 
(3,605
)
 
(8,816
)
Other income
 
 
 
 
134

 
134

Income (loss) before income taxes and discontinued operations
 
 
 
 
(3,471
)
 
(8,682
)
Income tax benefit (expense)
 
 
 
 
3,431

 
3,431

Net income (loss) from continuing operations
 
 
 
 
$
(40
)
 
$
(5,251
)
 
 
 
 
 
 
 
 
 
Nine months ended December 31, 2011
(in thousands)
Westell
 
CNS
 
Unallocated
 
Total
Revenue
$
32,920

 
$
25,401

 
$
—

 
$
58,321

Cost of goods sold
19,830

 
19,641

 
—

 
39,471

Gross profit
13,090


5,760

 
—

 
18,850

Gross margin
39.8
%
 
22.7
%
 
—

 
32.3
%
Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
4,197

 
911

 
—

 
5,108

Research and development
3,829

 
2,036

 
—

 
5,865

General and administrative
2,071

 
751

 
2,803

 
5,625

Restructuring
—

 
275

 
—

 
275

Intangible amortization
410

 
3

 
—

 
413

Total operating expenses
10,507

 
3,976

 
2,803

 
17,286

Operating income (loss)
$
2,583

 
$
1,784

 
(2,803
)
 
1,564

Gain on CNS asset sale
 
 
 
 
31,654

 
31,654

Other income
 
 
 
 
201

 
201

Interest (expense)
 
 
 
 
(42
)
 
(42
)
Income (loss) before income taxes and discontinued operations
 
 
 
 
29,010

 
33,377

Income tax benefit (expense)
 
 
 
 
(11,108
)
 
(11,108
)
Net income (loss) from continuing operations
 
 
 
 
$
17,902

 
$
22,269