Quarterly report pursuant to Section 13 or 15(d)

Interim Segment Information

v2.4.0.6
Interim Segment Information
 6 Months Ended
Sep. 30, 2012
Interim Segment Information [Abstract]  
Interim Segment Information

Note 4. 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. Traditional 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 the power distribution and remote monitoring products which were designed through 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 sales in Canada of Westell products.

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 continues 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 activity 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 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 six months ended September 30, 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 six months ended September 30, 2012 and 2011 is set forth below:

 

                                 
    Three Months Ended September 30, 2012  
(in thousands)   Westell     CNS     Unallocated     Total  

Revenue

   $ 9,854     $ 68     $ —       $ 9,922  

Cost of goods sold

     6,405       69       —         6,474  
   

 

 

    

 

 

    

 

 

    

 

 

  

Gross profit

     3,449       (1 )      —         3,448  

Gross margin

     35.0 %     (1.5 )%     —         34.8 %

Operating expenses:

                                

Sales and marketing

     1,831       (7 )      —         1,824  

Research and development

     1,436       498       —         1,934  

General and administrative

     1,046       540       1,077       2,663  

Restructuring

     57       —         —         57  

Intangible amortization

     210       1       —         211  
   

 

 

    

 

 

    

 

 

    

 

 

  

Operating expenses

     4,580       1,032       1,077       6,689  
   

 

 

    

 

 

    

 

 

    

 

 

  

Operating income (loss) from continuing operations

   $ (1,131 )    $ (1,033 )      (1,077 )      (3,241 ) 
   

 

 

    

 

 

                  

Other income (expense)

                     7       7  
                   

 

 

    

 

 

  

Income (loss) from continuing operations before tax

                     (1,070 )      (3,234 ) 

Income tax benefit (expense)

                     1,059       1,059  
                   

 

 

    

 

 

  

Net income (loss) from continuing operations

                   $ (11 )    $ (2,175 ) 
                   

 

 

    

 

 

  
   
    Three Months Ended September 30, 2011  
(in thousands)   Westell     CNS     Unallocated     Total  

Revenue

   $ 10,401     $ 10,327     $ —       $ 20,728  

Cost of goods sold

     6,469       8,038       —         14,507  
   

 

 

    

 

 

    

 

 

    

 

 

  

Gross profit

     3,932       2,289       —         6,221  

Gross margin

     37.8 %     22.2 %     —         30.0 %

Operating expenses:

                                

Sales and marketing

     1,446       249       —         1,695  

Research and development

     1,342       649       —         1,991  

General and administrative

     604       256       905       1,765  

Restructuring

     —         32       —         32  

Intangible amortization

     137       1       —         138  
   

 

 

    

 

 

    

 

 

    

 

 

  

Operating expenses

     3,529       1,187       905       5,621  
   

 

 

    

 

 

    

 

 

    

 

 

  

Operating income (loss) from continuing operations

   $ 403     $ 1,102       (905 )      600  
   

 

 

    

 

 

                  

Gain on CNS asset sale

                     46       46  

Other income (expense)

                     77       77  

Interest (expense)

                     (5 )      (5 ) 
                   

 

 

    

 

 

  

Income (loss) from continuing operations before tax

                     (787 )      718  

Income tax benefit (expense)

                     1,852       1,852  
                   

 

 

    

 

 

  

Net income (loss) from continuing operations

                   $ 1,065     $ 2,570  
                   

 

 

    

 

 

  

 

                                 
    Six Months Ended September 30, 2012  
(in thousands)   Westell     CNS     Unallocated     Total  

Revenue

   $ 19,272     $ 1,180     $ —       $ 20,452  

Cost of goods sold

     13,050       158       —         13,208  
   

 

 

    

 

 

    

 

 

    

 

 

  

Gross profit

     6,222       1,022       —         7,244  

Gross margin

     32.3 %     86.6 %     —         35.4 %

Operating expenses:

                                

Sales and marketing

     3,706       2       —         3,708  

Research and development

     2,885       876       —         3,761  

General and administrative

     2,294       542       2,408       5,244  

Restructuring

     149       —         —         149  

Intangible amortization

     418       2       —         420  
   

 

 

    

 

 

    

 

 

    

 

 

  

Operating expenses

     9,452       1,422       2,408       13,282  
   

 

 

    

 

 

    

 

 

    

 

 

  

Operating income (loss) from continuing operations

   $ (3,230 )    $ (400 )      (2,408 )      (6,038 ) 
   

 

 

    

 

 

                  

Other income (expense), net

                     91       91  
                   

 

 

    

 

 

  

Income (loss) from continuing operations before tax

                     (2,317 )      (5,947 ) 

Income tax benefit (expense)

                     2,032       2,032  
                   

 

 

    

 

 

  

Net income (loss) from continuing operations

                   $ (285 )    $ (3,915 ) 
                   

 

 

    

 

 

  
   
    Six Months Ended September 30, 2011  
(in thousands)   Westell     CNS     Unallocated     Total  

Revenue

   $ 25,246     $ 18,683     $ —       $ 43,929  

Cost of goods sold

     14,806       14,536       —         29,342  
   

 

 

    

 

 

    

 

 

    

 

 

  

Gross profit

     10,440       4,147       —         14,587  

Gross margin

     41.4 %     22.2 %     —         33.2 %

Operating expenses:

                                

Sales and marketing

     2,928       766       —         3,694  

Research and development

     2,606       1,462       —         4,068  

General and administrative

     1,422       551       1,945       3,918  

Restructuring

     —         277       —         277  

Intangible amortization

     275       2       —         277  
   

 

 

    

 

 

    

 

 

    

 

 

  

Operating expenses

     7,231       3,058       1,945       12,234  
   

 

 

    

 

 

    

 

 

    

 

 

  

Operating income (loss) from continuing operations

   $ 3,209     $ 1,089       (1,945 )      2,353  
   

 

 

    

 

 

                  

Gain on CNS asset sale

                     31,654       31,654  

Other income (expenses)

                     95       95  

Interest (expense)

                     (5 )      (5 ) 
                   

 

 

    

 

 

  

Income (loss) from continuing operations before tax

                     29,799       34,097  

Income tax benefit (expense)

                     (11,376 )      (11,376 ) 
                   

 

 

    

 

 

  

Net income (loss) from continuing operations

                   $ 18,423     $ 22,721