Annual report pursuant to Section 13 and 15(d)

Segment Information

v2.4.0.6
Segment Information
 12 Months Ended
Mar. 31, 2013
Segment Reporting [Abstract]  
Interim Segment Information
Segment and Related Information:
Segment information is presented in accordance with a “management approach,” which designates the internal reporting used by the chief operating decision-maker for making decisions and assessing performance as the source of the Company's reportable segments. 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 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; cell site antenna-sharing products for cell site optimization; and custom systems integration 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 production of 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 Regina, 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. During the first three quarters of 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 no CNS activity with that retained customer going forward. The Company also retained the Homecloud product development program. 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. The Company is actively marketing the Homecloud technology for sale and expects limited CNS expense in fiscal year 2014.
The ConferencePlus segment was sold in fiscal year 2012. It is reported as discontinued operations and therefore excluded from current segment reporting.
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”) expenses. In fiscal years 2012 and 2011, certain operating expenses were allocated between the Westell and CNS segments, including rent, information technology costs, and accounting. The Westell segment was allocated 72% and 38% of these resource costs and the CNS segment was allocated 28% and 62% of the costs in fiscal years 2012 and 2011, respectively. No allocations were done in fiscal 2013 and the Westell segment carried all costs. 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 Consolidated Financial Statements.
Segment information for the fiscal years ended March 31, 2013, 2012 and 2011, is set forth below:
 
Fiscal Year Ended March 31, 2013
(in thousands)
Westell
 
CNS
 
Unallocated
 
Total
Revenue
$
38,808

 
$
1,236

 
$
—

 
$
40,044

Gross profit
13,325

 
999

 
—

 
14,324

Gross margin
34.3
%
 
80.8
%
 
—

 
35.8
%
Operating expenses:
 
 
 
 
 
 
 
Sales & marketing
7,492

 
(53
)
 
—

 
7,439

Research & development
5,725

 
1,601

 
—

 
7,326

General & administrative
4,401

 
600

 
4,909

 
9,910

Intangible amortization
887

 
5

 
—

 
892

Restructuring
149

 
—

 
—

 
149

Goodwill impairment
2,884

 
—

 
—

 
2,884

Operating expenses
21,538


2,153

 
4,909

 
28,600

Operating income (loss)
$
(8,213
)
 
$
(1,154
)
 
(4,909
)
 
(14,276
)
Other income (expense), net
 
 
 
 
175

 
175

Income tax (expense) benefit
 
 
 
 
(29,392
)
 
(29,392
)
Net income (loss) from continuing operations
 
 
 
 
$
(34,126
)
 
$
(43,493
)
 
 
 
 
 
 
 
 
 
Fiscal Year Ended March 31, 2012
(in thousands)
Westell
 
CNS
 
Unallocated
 
Total
Revenue
$
43,629

 
$
26,026

 
$
—

 
$
69,655

Gross profit
17,272

 
5,985

 
—

 
23,257

Gross margin
39.6
%
 
23.0
%
 
—

 
33.4
%
Operating expenses:
 
 
 
 
 
 
 
Sales & marketing
5,573

 
923

 
—

 
6,496

Research & development
5,117

 
2,610

 
—

 
7,727

General & administrative
2,834

 
976

 
3,805

 
7,615

Intangible amortization
544

 
4

 
—

 
548

Restructuring
275

 
275

 
—

 
550

Operating expenses
14,343

 
4,788

 
3,805

 
22,936

Operating income (loss)
$
2,929

 
$
1,197

 
(3,805
)
 
321

Gain on CNS asset sale
 
 
 
 
31,654

 
31,654

Other income (expense), net
 
 
 
 
331

 
331

Income tax (expense) benefit
 
 
 
 
(12,875
)
 
(12,875
)
Net income (loss) from continuing operations
 
 
 
 
$
15,305

 
$
19,431

 
Fiscal Year Ended March 31, 2011
(in thousands)
Westell
 
CNS
 
Unallocated
 
Total
Revenue
$
58,770

 
$
89,079

 
$
—

 
$
147,849

Gross profit
25,667

 
15,885

 
—

 
41,552

Gross margin
43.7
%
 
17.8
%
 
—

 
28.1
%
Operating expenses:
 
 
 
 
 
 
 
Sales & marketing
5,922

 
4,891

 
—

 
10,813

Research & development
3,825

 
7,949

 
—

 
11,774

General & administrative
2,023

 
3,365

 
3,235

 
8,623

Intangible amortization
540

 
5

 
—

 
545

Restructuring
—

 
—

 
—

 
—

Operating expenses
12,310

 
16,210

 
3,235

 
31,755

Operating income (loss)
$
13,357

 
$
(325
)
 
(3,235
)
 
9,797

Other income (expense), net
 
 
 
 
20

 
20

Income tax (expense) benefit
 
 
 
 
53,304

 
53,304

Net income (loss) from continuing operations
 
 
 
 
$
50,089

 
$
63,121

 
Depreciation and amortization
Fiscal Year Ended March 31,
(in thousands)
2013
 
2012
 
2011
Westell depreciation and amortization
$
1,342

 
$
955

 
$
809

CNS depreciation and amortization
39

 
121

 
428

Total depreciation and amortization
$
1,381

 
$
1,076

 
$
1,237


The Westell and CNS segments use many of the same assets. The Company does not allocate assets between the Westell and CNS segments as such information is not used in measuring segment performance or allocating resources between segments. Therefore, total asset and capital expenditure information by each of these segments is not meaningful.
Enterprise-wide Information
More than 90% of the Company’s revenues were generated in the United States in fiscal years 2013, 2012 and 2011.
Significant Customers and Concentration of Credit
The Company is dependent on certain major companies operating in telecommunications markets that represent more than 10% of the total revenue. Sales to major customers and successor companies that exceed 10% of total revenue are as follows:
 
Fiscal Year Ended March 31,
 
2013
 
2012
 
2011
Verizon
19.7
%
 
45.4
%
 
39.4
%
CenturyLink
6.8
%
 
6.0
%
 
11.4
%
Frontier
2.4
%
 
3.1
%
 
10.8
%
Telamon
12.0
%
 
8.9
%
 
5.3
%
Time Warner Cable
10.1
%
 
2.0
%
 
0.6
%

Major companies operating in telecommunications markets comprise a significant portion of the Company’s trade receivables. Receivables from major customers that exceed 10% of total accounts receivable balance are as follows:
 
Fiscal Year Ended March 31,
 
2013
 
2012
Verizon
11.4
%
 
22.4
%
Telamon
12.6
%
 
13.6
%
Time Warner Cable
19.8
%
 
14.8
%

Geographic Information
The Company’s financial information by geographic area was as follows for the fiscal years ended March 31:
(in thousands)
Domestic
 
International
 
Total
2013
 
 
 
 
 
Revenue
$
38,069

 
$
1,975

 
$
40,044

Operating income (loss)
(13,410
)
 
(866
)
 
(14,276
)
Total assets
143,441

 
1,731

 
145,172

2012
 
 
 
 
 
Revenue
$
63,974

 
$
5,681

 
$
69,655

Operating income (loss)
798

 
(477
)
 
321

Total assets
192,137

 
5,289

 
197,426

2011
 
 
 
 
 
Revenue
$
140,848

 
$
7,001

 
$
147,849

Operating income (loss)
9,491

 
306

 
9,797

Total assets
192,457

 
8,930

 
201,387

International identifiable assets, revenues and operating income (loss) are related to Noran Tel, Inc. which is located in Regina, Saskatchewan, Canada. International identifiable assets for fiscal year 2011 also include the assets of Conference Plus Global Services, Ltd., which was located in Dublin, Ireland, and London, England. Conference Plus Global Services, Ltd. was sold on December 31, 2011, with ConferencePlus.