Quarterly report pursuant to Section 13 or 15(d)

Interim Segment Information

v2.4.0.6
Interim Segment Information
 9 Months Ended
Dec. 31, 2011
Interim Segment Information [Abstract]  
Interim Segment Information

Note 4. Interim Segment Information

In the third quarter of fiscal year 2012, the Company completed the sale of the business which contained the ConferencePlus segment. The Company's two remaining reportable segments are as follows:

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. Westell CNS products are typically installed in consumer residences or small businesses as a key component of broadband service packages. During the first quarter of fiscal year 2012, the Company completed the CNS asset sale. The Company retained a major CNS customer relationship and contract, and the Company completed the remaining product shipments under this contract by December 31, 2011. The Company also retained the Homecloud product development program.

OSP: The Company's Outside Plant Systems ("OSP") product family consists of next-generation indoor and outdoor cabinets, enclosures and mountings; power distribution products; network interface devices ("NIDs"); industrial switches and connectivity panels; T1 demarcation equipment; span powering equipment; remote monitoring devices; and customized systems integration ("CSI"). The Company's new eSmartAccess family of Ethernet NID solutions allows cellular backhaul providers to deliver native Ethernet from the same CellPak cabinet they are using today for T1 demarcation. These solutions are optimized for backhaul of cellular traffic, service delivery to business enterprises and a variety of industrial applications including smart grid, security and transportation. Traditional products are sold primarily into wireline markets, but the Company also is actively moving to develop revenues from wireless telecommunications products. The power distribution and remote monitoring products are designed and provided through the Company's Noran Tel subsidiary located in Regina, Saskatchewan, Canada.

Performance of these segments is primarily evaluated 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 direct expenses, including direct expenses from research and development expenses, sales and marketing expenses, and general and administrative ("G&A"). Certain operating expenses are allocated between the CNS and OSP segments, including rent, information technology costs, and accounting. The CNS segment received 28% and 62% of these resource costs and the OSP segment was allocated 72% and 38% of the costs in the three and nine months ended December 31, 2011 and 2010, respectively. Segment operating income (loss) excludes certain unallocated Westell, Inc. G&A costs. Rent associated with resources supporting the assets sold to NETGEAR was not reallocated between the segments and are reflected in unallocated corporate costs.

 

Segment information for the three and nine months ended December 31, 2011 and 2010, which excludes the results of the discontinued ConferencePlus segment, is set forth below:

 

     Three Months Ended December 31, 2011  
(in thousands)    CNS     OSP     Unallocated     Total  

Revenue

    $ 6,718     $ 7,674     $ —        $ 14,392  

Gross profit

      1,613       2,650       —          4,263  

Gross margin

      24.0 %     34.5 %     —          29.6 %

Operating expenses:

         

Sales and marketing

      145       1,269       —          1,414  

Research and development

      574       1,223       —          1,797  

General and administrative

      200       649       858       1,707  

Restructuring

      (2 )      —          —          (2 ) 

Intangible amortization

      1       135       —          136  
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating expenses

      918       3,276       858       5,052  
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income (loss)

    $ 695     $ (626 )      (858 )      (789 ) 

Other income (expense), net

          106       106  

Interest (expense)

          (37 )      (37 ) 

Income taxes

          268       268  
      

 

 

    

 

 

  

Net loss from continuing operations

        $ (521 )    $ (452 ) 
      

 

 

    

 

 

  

 

     Three Months Ended December 31, 2010  
(in thousands)    CNS     OSP     Unallocated     Total  

Revenue

    $ 26,168     $ 11,768     $ —        $ 37,936  

Gross profit

      4,744       5,087       —          9,831  

Gross margin

      18.1 %     43.2 %     —          25.9 %

Operating expenses:

         

Sales and marketing

      1,292       1,413       —          2,705  

Research and development

      2,005       945       —          2,950  

General and administrative

      803       452       749       2,004  

Intangible amortization

      2       135       —          137  
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating expenses

      4,102       2,945       749       7,796  
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income (loss)

    $ 642     $ 2,142       (749 )      2,035  

Other income (expense), net

          (24 )      (24 ) 

Interest (expense)

          (2 )      (2 ) 

Income taxes

          4       4  
      

 

 

    

 

 

  

Net income (loss) from continuing operations

        $ (771 )    $ 2,013  
      

 

 

    

 

 

  

 

     Nine Months Ended December 31, 2011  
(in thousands)    CNS     OSP     Unallocated     Total  

Revenue

    $ 25,401     $ 32,920     $ —        $ 58,321  

Gross profit

      5,760       13,090       —          18,850  

Gross margin

      22.7 %     39.8 %     —          32.3 %

Operating expenses:

         

Sales and marketing

      911       4,197       —          5,108  

Research and development

      2,036       3,829       —          5,865  

General and administrative

      751       2,071       2,803       5,625  

Restructuring

      275       —          —          275  

Intangible amortization

      3       410       —          413  
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating expenses

      3,976       10,507       2,803       17,286  
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income (loss)

    $ 1,784     $ 2,583       (2,803 )      1,564  

Other income (expense), net

          31,855       31,855  

Interest (expense)

          (42 )      (42 ) 

Income taxes

          (11,108 )      (11,108 ) 
      

 

 

    

 

 

  

Net income from continuing operations

        $ 17,902     $ 22,269  
      

 

 

    

 

 

  

 

     Nine Months Ended December 31, 2010  
(in thousands)    CNS     OSP     Unallocated     Total  

Revenue

    $ 65,788     $ 43,609     $ —        $ 109,397  

Gross profit

      12,343       19,324       —          31,667  

Gross margin

      18.8 %     44.3 %     —          28.9 %

Operating expenses:

         

Sales and marketing

      3,871       4,363       —          8,234  

Research and development

      5,881       2,847       —          8,728  

General and administrative

      2,231       1,545       2,029       5,805  

Intangible amortization

      4       403       —          407  
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating expenses

      11,987       9,158       2,029       23,174  
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income (loss)

    $ 356     $ 10,166       (2,029 )      8,493  
  

 

 

    

 

 

    

 

 

    

 

 

  

Other income (expense), net

          21       21  

Interest (expense)

          (8 )      (8 ) 

Income taxes

          444       444  
      

 

 

    

 

 

  

Net income (loss) from continuing operations

        $ (1,572 )    $ 8,950  
      

 

 

    

 

 

  

 

Depreciation and amortization

(in thousands)

    Three months  ended
December 31, 		     Nine months  ended
December 31, 		 
     2011      2010      2011      2010  

CNS depreciation and amortization

    $ 34       $ 64       $ 90       $ 362   

OSP depreciation and amortization

      251         195         708         622   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total depreciation and amortization

    $ 285       $ 259       $ 798       $ 984   
  

 

 

     

 

 

     

 

 

     

 

 

  

The CNS and OSP segments use many of the same assets. For internal reporting purposes, the Company does not allocate assets between the CNS and OSP segments and therefore no asset or capital expenditure information by each of these segments is available.