SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission File Number 0-27266
WESTELL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3154957
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
750 NORTH COMMONS DRIVE, AURORA, IL 60504
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (630) 898-2500
FORMER ADDRESS: 101 KENDALL POINT DRIVE, OSWEGO, IL 60543
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check or mark whether the registrant (1) has filed all documents and
reports required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or period for such shorter period
that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes X No .
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Common Stock, $0.01 Par Value -- 14,975,794 shares at January 31, 1997
Class B Common Stock, $0.01 Par Value -- 21,338,913 shares at January 31, 1997
WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
PART I FINANCIAL INFORMATION: Page No.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (unaudited) 3
- As of March 31, 1996 and December 31, 1996
Condensed Consolidated Statements of Operations (unaudited) 4
- Three months ended December 31, 1995 and 1996
- Nine months ended December 31, 1995 and 1996
Condensed Consolidated Statements of Cash Flows (unaudited) 5
- Nine months ended December 31, 1995 and 1996
Notes to the Condensed Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SAFE HARBOR STATEMENT
Certain statements contained under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in this 10-Q, and other risks
detailed in the Company's Securities and Exchange Commission filings, including
its Form 10-K for the fiscal year ended March 31, 1996, which are not historical
facts (including, without limitation, statements about our confidence and
strategies and our expectations about new and existing products, technologies,
opportunities, market growth, demand and acceptance of new and existing products
and future commercial deployment of the Company's products such as its DSL
modem), are forward looking statements that involve risks and uncertainties.
These risks include product demand and market acceptance risks (including the
future commercial acceptance of the Company's DSL products by telephone
companies and other customers), the impact of competitive products and
technologies (such as cable modems and fiber optic cable), competitive pricing
pressures, product development, commercialization and technological delays or
difficulties (including delays or difficulties in developing, producing, testing
and selling new products and technologies, such as DSL modems), the effect of
the Company's accounting policies, the effect of economic conditions and trade,
legal, social, and economic risks (such as import, licensing and trade
restrictions).
WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1996
(unaudited)
(in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 21,789 $ 45,317
Accounts receivable (net of allowance of $462,000 and $566,000, 10,217 10,462
respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,684 9,722
Prepaid expenses and deposits . . . . . . . . . . . . . . . . . . 745 707
Refundable income taxes . . . . . . . . . . . . . . . . . . . . . 444 444
Deferred income tax asset . . . . . . . . . . . . . . . . . . . . 1,868 9,003
Land and building construction held for sale . . . . . . . . . . . 4,431 14,544
Total current assets . . . . . . . . . . . . . . . . . . . . . 50,178 90,199
Property and equipment:
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . 9,933 14,126
Office, computer and research equipment . . . . . . . . . . . . . 11,520 12,119
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . 1,387 1,984
22,840 28,229
Less accumulated depreciation and amortization . . . . . . . . . . 11,188 14,548
Property and equipment, net . . . . . . . . . . . . . . . . . . . 11,652 13,681
Deferred income tax asset and other assets . . . . . . . . . . . . 2,618 2,592
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 64,448 $ 106,472
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1996 1996
(unaudited)
(in thousands)
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,643 $ 6,529
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . 3,899 2,575
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . 2,995 2,414
Current portion of long-term debt . . . . . . . . . . . . . . . . 1,591 1,518
Construction financing . . . . . . . . . . . . . . . . . . . . . . 2,968 -
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . 2,341 531
Total current liabilities . . . . . . . . . . . . . . . . . . 21,437 13,567
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . 2,836 1,657
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . 1,040 646
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . 150 150
Commitments and contingencies
Stockholders' equity:
Class A common stock, par $0.01 . . . . . . . . . . . . . . . . . . 128 150
Authorized - 43,500,000 shares
Issued and outstanding - 12,801,606 shares at March 31, 1996 and
14,975,794 shares at December 31, 1996
Class B common stock, par $0.01 . . . . . . . . . . . . . . . . . . 218 213
Authorized - 25,000,000 shares
Issued and outstanding - 21,838,376 shares at March 31, 1996 and
21,338,913 shares at December 31, 1996
Preferred stock, par $0.01 . . . . . . . . . . . . . . . . . . . . - -
Authorized - 1,000,000 shares
Issued and outstanding - none
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . 34,285 96,201
Cumulative translation adjustment . . . . . . . . . . . . . . . . . (59) (155)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 4,413 (5,957)
Total stockholders' equity . . . . . . . . . . . . . . . . . . 38,985 90,452
Total liabilities and stockholders' equity . . . . . . . . . $ 64,448 $ 106,472
The accompanying notes are an integral part of these
Condensed Consolidated Financial Statements.
</TABLE>
WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1995 1996 1995 1996
(unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . $21,346 $18,057 $ 64,294 $ 59,367
Cost of goods sold . . . . . . . . . . . . 13,225 16,920 38,659 44,000
Gross margin . . . . . . . . . . . . . . . 8,121 1,137 25,635 15,367
Operating expenses:
Sales and marketing . . . . . . . . . . . . 3,671 4,200 10,785 11,750
Research and development . . . . . . . . . 3,252 5,851 9,634 14,810
General and administrative . . . . . . . . 2,236 2,730 6,322 7,068
Total operating expenses . . . . . . . . 9,159 12,781 26,741 33,628
Operating loss from continuing
operations . . . . . . . . . . . . . . . (1,038) (11,644) (1,106) (18,261)
Other income (expense), net . . . . . . . . 82 631 (121) 1,332
Interest expense . . . . . . . . . . . . . 290 30 811 226
Loss from continuing operations
before taxes . . . . . . . . . . . . . (1,246) (11,043) (2,038) (17,155)
Benefit for income taxes . . . . . . . . . (617) (4,295) (1,175) (6,790)
Loss from continuing operations . . . . . . (629) (6,748) (863) (10,365)
Loss from discontinued operations
(net of tax benefits of $ 15,000, $ 0,
$ 391,000, and $ 3,000, respectively) (24) - (617) (5)
Net loss . . . . . . . . . . . . . . . . . $ (653) $(6,748) $ (1,480) $(10,370)
Loss per share:
Continuing operations . . . . . . . . . . . $(0.02) $ (0.19) $ (0.03) $ (0.29)
Discontinued operations . . . . . . . . . . (0.00) (0.00) (0.02) (0.00)
Net loss per share . . . . . . . . . . . . $(0.02) $ (0.19) $ (0.05) $ (0.29)
Average number of common shares
outstanding . . . . . . . . . . . . . . . . 30,848 36,310 29,584 35,815
The accompanying notes are an integral part of these Condensed
Consolidated Financial Statements
</TABLE>
WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
1995 1996
(unaudited)
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,480) $ (10,370)
Reconciliation of net income to net cash provided by
(used in) operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . 2,882 4,166
Stock awards . . . . . . . . . . . . . . . . . . . . . . . 215 53
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . (1,226) (6,747)
Changes in assets and liabilities:
Increase in accounts receivable . . . . . . . . . . . . . . (3,225) (752)
Decrease in inventory . . . . . . . . . . . . . . . . . . . 628 905
Decrease in prepaid expenses and deposits . . . . . . . . . 521 7
Increase (decrease) in accounts payable and
accrued expenses . . . . . . . . . . . . . . . . . . . . . 596 (2,591)
Decrease in accrued compensation . . . . . . . . . . . . . (523) (581)
Increase (decrease) in deferred revenues . . . . . . . . . 5,756 (1,810)
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . . . . . . 4,144 (17,720)
Cash flows from investing activities:
Purchases of property and equipment . . . . . . . . . . . . (3,172) (6,419)
Decrease in other assets . . . . . . . . . . . . . . . . . 42 4
Land and building construction held for sale . . . . . . . (1,437) (13,081)
Net cash used in investing activities . . . . . . . . . . (4,567) (19,496)
Cash flows from financing activities:
Net repayment under revolving promissory notes . . . . . . (11,090) -
Repayment of long-term debt and leases payable . . . . . . (698) (1,187)
Proceeds from the issuance of common stock . . . . . . . . 33,256 61,880
Net cash provided by financing activities . . . . . . . . 21,468 60,693
Effect of exchange rate changes on cash . . . . . . . . . . . . (35) 51
Net increase in cash . . . . . . . . . . . . . . . . . . 21,010 23,528
Cash and cash equivalents, beginning of period . . . . . . . . 450 21,789
Cash and cash equivalents, end of period . . . . . . . . . . . $ 21,460 $ 45,317
The accompanying notes are an integral part of these Condensed
Consolidated Financial Statements
</TABLE>
WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. It is suggested that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended March 31, 1996.
In the opinion of management, the unaudited interim financial statements
included herein reflect all adjustments, consisting of normal recurring
adjustments, necessary to present fairly the Company's consolidated financial
position and the results of operations and cash flows at December 31, 1996, and
for all periods presented. The results of operations for the nine month period
ended December 31, 1996 are not necessarily indicative of the results that may
be expected for the fiscal year ending March 31, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
OVERVIEW
Westell Technologies, Inc. ("Westell" or the "Company") derives most of its
revenues from the sale of telecommunication products that enable
telecommunication services over copper telephone wires. The Company's
telecommunication products can be categorized in three product groups: (i)
products based on digital subscriber line technologies ("DSL products"),
including Asymmetric Digital Subscriber Line ("ADSL"), Rate Adaptive Digital
Subscriber Line ("RADSL") and High bit-rate Digital Subscriber Line ("HDSL")
systems, which enable telephone companies to provide interactive multimedia
services over copper telephone wires, such as high speed Internet access, video
on demand, medical imaging, video conferencing and telecommuting, while
simultaneously carrying traditional telephone services, (ii) Digital Signal
Hierarchy Level 1 based products ("DS1 products"), which are used by telephone
companies to enable high speed digital T-1 transmission at approximately 1.5
mega bits per second and (iii) Digital Signal Hierarchy Level 0 based products
("DS0 products"), which are used by telephone companies to deliver digital
services at speeds ranging from approximately 2.4 to 64 kilo bits per second and
analog services over a 4 kilohertz bandwidth. Westell's net revenues decreased
15.4% in the three months ended December 31, 1996, and decreased by 7.7% in the
nine months ended December 31, 1996 when compared to the same periods of the
prior year. The decrease in revenue in the three and nine month periods was
primarily due to the absence of $3.5 million and $14.0 million in revenue,
respectively, recorded in the corresponding fiscal 1995 periods related to ADSL
video dial tone trial shipments to two foreign telephone operators. In both the
three and nine month periods of the current fiscal year, the majority of the DSL
revenue has been generated by data dial tone ADSL shipments. Customer focus has
migrated from video dial tone applications (i.e., video on demand, distance
learning, etc.) to data dial tone applications (i.e., Internet access, work at
home, etc.) due to the growth in users accessing the World Wide Web through the
Internet and the need to increase the transmission speed when downloading large
text, graphics, and video files. The decrease in DSL revenue for the nine month
period was offset in part by an increase in DS1 revenues of 14.0% when compared
to the corresponding nine month period of the prior year. Historically, revenue
from DS1 and DS0 products provided most of the Company's revenue.
The Company expects to continue to evaluate new product opportunities and
engage in extensive research and development activities. This will require the
Company to continue to invest heavily in research and development and sales and
marketing, which could adversely affect short-term results of operations. The
Company believes that its future revenue growth and profitability will
principally depend on its success in increasing sales of ADSL products and
developing new and enhanced DS1 products and other DSL products, such as RADSL.
In view of the Company's reliance on the emerging ADSL market for growth and the
unpredictability of orders and subsequent revenues, the Company believes that
period to period comparisons of its financial results are not necessarily
meaningful and should not be relied upon as an indication of future performance.
Revenues from DS0 products have declined in recent years as telephone companies
("telcos") continue to move from analog to digital transmission services. The
Company also expects that revenues from Network Interface Unit ("NIU") products
in its DS1 product group may decline as telcos increase the use of alternative
technologies such as HDSL. Failure to increase revenues from new products,
whether due to lack of market acceptance, competition, technological change or
otherwise, would have a material adverse effect on the Company's business and
results of operations.
RESULTS OF OPERATIONS - Periods ended December 31, 1996 compared to periods
ended December 31, 1995
Revenues. The Company's revenues decreased 15.4% from $21.4 million in the three
months ended December 31, 1995 to $18.1 million in the three months ended
December 31, 1996. In the nine months ended December 31, 1996, revenues
decreased 7.7% from $64.3 million to $59.4 million when compared to the same
nine month period in the preceding year. The revenue decreases were principally
due to decreases in DSL revenue of $4.0 million and $11.7 million for the three
and nine month periods ended December 31, 1996, respectively, when compared to
the same periods in the prior year. The decrease in DSL revenue was due to the
absence of $3.5 million and $14.0 million of revenue recorded during the three
and nine month periods ended December 31, 1995, respectively, related to ADSL
video dial tone trial shipments to two foreign telephone operators. Unit
shipments of DSL products have increased in both the three and nine month
periods, but have a lower average sales price when compared to the DSL unit
shipments made in the corresponding period of the prior year. The lower average
sales price of DSL units is primarily a result of product integration efforts.
DS0 revenue remained relatively unchanged when compared to the corresponding
three and nine month periods of the preceding year. Slightly higher DS0 unit
shipments were offset by lower average unit sales prices brought about by
continued competitive pricing pressures and changes in product sales mix. DS1
revenues increased $171,000 and $4.4 million for the three and nine month
periods ended December 31, 1996, respectively. DS1 revenues for the three
months ended December 31, 1996 increased slightly due to higher average unit
sales prices as a result of change in product sales mix, offset in part by lower
unit volume and continued competitive pressure on unit sales prices in certain
products in the DS1 product family. The increase in DS1 revenues for the nine
months ended December 31, 1996 was due to overall unit volume increases and
slightly higher unit sales prices as a result of changes in product sales mix,
offset in part by continued competitive pressures on unit sales prices. Other
revenue increased by $568,000 and $2.3 million for the three and nine month
periods, respectively, when compared to the same periods in the preceding year.
This increase is due primarily to increases in teleconference service revenue
and video teleconference equipment sales from the Company's Conference Plus
subsidiary.
Gross Margin. Gross margin as a percentage of revenue decreased from 38.0% in
the three months ended December 31, 1995 to 6.3% in the three months ended
December 31, 1996 and decreased from 39.9% in the nine months ended December 31,
1995 to 25.9% for the nine months ended December 31, 1996. The decrease in
gross profit margin was due primarily to a reserve taken for ADSL Phase III
piece part inventories in the amount of $5.0 million during the three month
period ended December 31, 1996. This inventory reserve is the result of the new
generation RADSL platform (2 mega-bit by 1 mega-bit) reducing demand for the
prior generation FlexCap Phase III ADSL products. Excluding the impact of this
inventory reserve, the gross profit margin as a percentage of revenue would have
been 33.7% and 34.2% for the three and nine month periods ended December 31,
1996, respectively. The decrease in gross profit margin was also impacted by
higher margins received on video dial tone trial units shipped internationally
to two foreign telephone operators in the comparable prior periods, change in
product mix, and continued competitive pricing pressures in both the DS0 and DS1
product families. The gross margin for the nine months ended December 31, 1996
was additionally impacted by a large video teleconference equipment OEM sale
with a lower margin than the Company's equipment sales.
Sales and Marketing. Sales and marketing expenses increased 14.4% from $3.7
million in the three months ended December 31, 1995 to $4.2 million in the three
months ended December 31, 1996, and increased 8.9% from $10.8 million in the
nine months ended December 31, 1995 to $11.8 million in the nine months ended
December 31, 1996. Sales and marketing expenses increased as a percentage of
revenues from 17.2% in the three months ended December 31, 1995 to 23.3% in the
three months ended December 31, 1996 and increased as a percentage of revenues
from 16.8% in the nine month period ended December 31, 1995 to 19.8% for the
nine month period ended December 31, 1996. The increases in sales and marketing
expenses during the periods were due to staff additions, in both international
and domestic markets, to support and promote the Company's product lines,
particularly the Company's ADSL products. The Company believes that continued
investment in sales and marketing will be required to expand its product lines,
bring new products to market and to service customers. The Company anticipates
that sales and marketing expenses will continue to increase in absolute dollars.
Research and Development. Research and development expenses increased 79.9%,
from $3.3 million in the three months ended December 31, 1995 to $5.9 million in
the three months ended December 31, 1996 and increased 53.7%, from $9.6 million
in the nine months ended December 31, 1995 to $14.8 million in the nine months
ended December 31, 1996. Research and development expenses increased as a
percentage of revenues from 15.2% in the three months ended December 31, 1995 to
32.4% in the three months ended December 31, 1996 and increased as a percentage
of revenues from 15.0% in the nine months ended December 31, 1995 to 25.0% in
the nine months ended December 31, 1996. The increase in research and
development expenses for the three and nine month periods was primarily due to
costs associated with additional hiring and increased prototype material costs
to support new product development activities. Furthermore, the Company had
received non-recurring engineering project funding of $500,000 and $1,500,000 in
the three and nine month periods ended December 31, 1995, respectively, for a
customer-sponsored research and development project that was not present in the
three and nine month periods ended December 31, 1996. The Company believes that
a continued commitment to research and development will be required for the
Company to remain competitive and anticipates that research and development
costs will continue to increase in absolute dollars.
General and Administrative. General and administrative expenses increased 22.1%,
from $2.2 million in the three months ended December 31, 1995 to $2.7 million in
the three months ended December 31, 1996 and increased 11.8% from $6.3 million
in the nine months ended December 31, 1995 to $7.1 million in the nine months
ended December 31, 1996. General and administrative expenses increased as a
percentage of revenues from 10.5% in the three months ended December 31, 1995 to
15.1% in the three months ended December 31, 1996. For the nine month period
ended December 31,1996, general and administrative expenses increased as a
percentage of revenue from 9.8% to 11.9% when compared to the same period in the
preceding year. The dollar increase in general and administrative expenses was
due to additional personnel to handle expanded corporate infrastructure
functions in domestic and international markets. The Company anticipates that
general and administrative costs will continue to increase in absolute dollars
as the Company hires additional personnel.
Other income (expense), net. Other income (expense), net increased from income
of $82,000 in the three months ended December 31, 1995 to income of $631,000 in
the three months ended December 31, 1996 and increased from an expense of
$121,000 in the nine months ended December 31, 1995 to income of $1,332,000 in
the nine months ended December 31, 1996. The income for the three and nine
month periods ended December 31, 1996 was due to interest income earned on
temporary cash investments made as a result of investing available funds
generated in the Company's initial public offering of Class A Common Stock
completed in early December 1995 and the secondary public offering of Class A
Common Stock completed in late June 1996. The income for the nine month period
ended December 31, 1996 was partially off set by a $400,000 out of court
settlement to resolve a claim for wrongful termination and breach of contract
alleged in January 1995 by a former officer of a discontinued subsidiary. The
expense for the nine month period ended December 31, 1995 was primarily due to a
reserve of $270,000 established for fluctuations in foreign currency rate on
receivables.
Interest expense. Interest expense decreased from $290,000 in the three months
ended December 31, 1995 to $30,000 in the three months ended December 31, 1996
and decreased from $811,000 in the nine months ended December 31, 1995 to
$226,000 in the nine months ended December 31, 1996. Interest expense decreased
as a result the Company utilizing approximately $11.1 million of the proceeds
generated in the Company's initial public offering of Class A Common Stock in
December 1995 to repay amounts outstanding under the Company's revolving
promissory notes used to finance working capital requirements.
Benefit for income taxes. Benefit for income taxes represents the tax benefit
generated by the loss before income taxes and tax credits primarily generated by
increasing research and development activities.
LIQUIDITY AND CAPITAL RESOURCES
The Company's initial public offering of Class A Common Stock in early December
1995 generated $33.3 million in funds. Proceeds from the stock sale were used
to pay down approximately $11.1 million in bank borrowings under the Company's
revolving promissory notes. The Company also completed a secondary public
offering of Class A Common Stock in June 1996 which generated $61.6 million in
funds. As of December 31, 1996, the Company had $45.3 million in cash which is
being invested in short-term cash investments consisting of federal government
agency instruments and the highest rated grade corporate commercial paper.
The Company's operating activities used cash of approximately $17.7 million in
the nine months ended December 31, 1996, which resulted primarily from a loss
from continuing operations before income taxes of $13.0 million (net of
depreciation) and working capital required by an increase in accounts receivable
and decreases in accounts payable, accrued compensation and deferred revenue.
Capital expenditures for the nine month period ended December 31, 1996 were $6.4
million, all of which was funded by available cash. The Company expects to
spend approximately $1.5 million in the remainder of fiscal year 1997 for
capital equipment expenditures.
The Company has a 60% ownership interest in a limited liability corporation (the
"LLC") with a real estate developer for the purpose of developing a 16.4 acre
site in Aurora, Illinois into a 173,000 square foot facility to house
manufacturing, engineering, sales, marketing and administration. During fiscal
1996, the LLC began construction of a new facility which the Company began
occupying in December 1996. As of December 31, 1996, approximately $14.5
million of construction costs were incurred. The construction costs incurred
are currently being funded by the Company. Pursuant to terms of the LLC, the
Company will have the option to sell its interest in the LLC or to buy out the
other investor in the LLC. Upon the Company's sale of its interests in the LLC,
the construction funding provided by the Company will be refunded to the
Company. The LLC is currently seeking bids for the Company's interest in the
LLC. The Company anticipates that it will sell its interest in the LLC and
lease the facility; therefore construction costs are presented as Land and
Building Construction Held for Sale in the Company's condensed consolidated
financial statements.
At December 31, 1996, the Company's principal sources of liquidity were $45.3
million of cash and cash equivalents, and $14.5 million and $7.1 million
available under its secured revolving promissory notes and equipment borrowing
facilities, respectively. Cash and cash equivalents, anticipated funds from
operations, refunding of building construction costs, along with available
credit lines and other resources, are expected to be sufficient to meet cash
requirements for the next twelve months. Cash in excess of operating
requirements will continue to be invested on a short-term basis in federal
government agency instruments and the highest rated grade commercial paper.
The Company had a deferred tax asset of approximately $11.6 million at December
31, 1996. Management has not recorded a valuation allowance and believes that
the deferred tax asset will be fully realized based upon current estimates of
future taxable income, future reversals of existing taxable temporary
differences or available tax planning strategies.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) The following documents are furnished as an exhibit and numbered pursuant
to Item 601 of regulation S-K:
Exhibit 27: Financial Data Schedule
b) The registrant filed a report on Form 8-K dated October 24, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
WESTELL TECHNOLOGIES, INC.
(Registrant)
DATE: February 14, 1997 By: GARY F. SEAMANS
GARY F. SEAMANS
Chairman of the Board
and Chief Executive Officer
By: STEPHEN J. HAWRYSZ
STEPHEN J. HAWRYSZ
Chief Financial Officer, Vice
President, Secretary and Treasurer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 45,317
<SECURITIES> 0
<RECEIVABLES> 10,462
<ALLOWANCES> (566)
<INVENTORY> 9,722
<CURRENT-ASSETS> 90,199
<PP&E> 28,299
<DEPRECIATION> (14,548)
<TOTAL-ASSETS> 106,472
<CURRENT-LIABILITIES> 13,567
<BONDS> 0
0
0
<COMMON> 363
<OTHER-SE> 90,089
<TOTAL-LIABILITY-AND-EQUITY> 106,472
<SALES> 0<F1>
<TOTAL-REVENUES> 59,367
<CGS> 44,000
<TOTAL-COSTS> 33,628
<OTHER-EXPENSES> (1,332)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 226
<INCOME-PRETAX> (17,155)
<INCOME-TAX> (6,790)
<INCOME-CONTINUING> (10,365)
<DISCONTINUED> (5)
<EXTRAORDINARY> 0
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<NET-INCOME> (10,370)
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<F1>Not applicable.
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