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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 September 30, 2004
OR
[ ] TRANSITION 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 N. COMMONS DRIVE, AURORA, IL 60504
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (630) 898-2500
NOT APPLICABLE
(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 reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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 by check mark whether the registrant is an accelerated filer as defined
be rule 12b-2 of the Act.
Yes X No
The number of shares outstanding of each of the issuer's classes of common stock
are:
Class A Common Stock, $0.01 Par Value - 53,653,388 shares at November 1, 2004
Class B Common Stock, $0.01 Par Value - 14,741,872 shares at November 1, 2004
WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
PART I FINANCIAL INFORMATION: Page No.
--------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
-As of March 31, 2004 and September 30, 2004
(unaudited)
Condensed Consolidated Statements of Operations
(unaudited) 4
-Three months ended September 30, 2003 and 2004
-Six months ended September 30, 2003 and 2004
Condensed Consolidated Statements of Cash Flows
(unaudited) 5
-Six months ended September 30, 2003 and 2004
Notes to the Condensed Consolidated Financial
Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About
Market Risks 17
Item 4. Controls and Procedures 18
PART II OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 6. Exhibits 19
SAFE HARBOR STATEMENT
Certain statements contained in this Quarterly Report of Form 10-Q regarding
matters that are not historical facts or that contain the words "believe",
"expect", "intend", "anticipate" or derivatives thereof, are forward looking
statements. Because such forward-looking statements include risks and
uncertainties, actual results may differ materially from those expressed in or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to, those discussed
under "Risk Factors" set forth in Westell Technologies, Inc.'s Annual Report on
Form 10-K for the fiscal year ended March 31, 2004. Our actual results may
differ from these forward-looking statements. Westell Technologies, Inc.
undertakes no obligation to publicly update these forward-looking statements to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events or otherwise.
2
WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, Sept. 30,
2004 2004
--------------- ---------------
(unaudited)
(in
thousands)
Current assets:
Cash and cash equivalents......................................... $ 11,241 $ 17,206
Accounts receivable (net of allowance of $662,000 and $686,000
respectively)..................................................... 23,807 29,119
Inventories....................................................... 16,075 23,744
Prepaid expenses and other current assets......................... 2,340 2,692
Deferred income tax asset......................................... 7,200 4,138
--------------- ---------------
Total current assets.......................................... 60,663 76,899
--------------- ---------------
Property and equipment:
Machinery and equipment.......................................... 42,462 42,271
Office, computer and research equipment.......................... 23,414 23,901
Leasehold improvements........................................... 7,832 7,829
--------------- ---------------
73,708 74,001
Less accumulated depreciation and amortization.................... 56,099 59,321
--------------- ---------------
Property and equipment, net...................................... 17,609 14,680
--------------- ---------------
Goodwill............................................................ 6,990 6,990
Intangibles, net.................................................... 6,954 6,756
Deferred income tax asset and other assets.......................... 37,565 35,982
--------------- ---------------
Total assets.................................................. $ 129,781 $ 141,307
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $14,163 $ 21,321
Accrued expenses.................................................. 10,105 9,547
Accrued compensation.............................................. 6,808 4,451
Current portion of long-term debt................................. 3,416 562
--------------- ---------------
Total current liabilities........................................ 34,492 35,881
Long-term debt...................................................... 326 95
Other long-term liabilities......................................... 1,179 1,505
--------------- ---------------
Total liabilities............................................. 35,997 37,481
Minority Interest 2,019 2,236
Stockholders' equity:
Class A common stock, par $0.01..................................... 532 536
Authorized - 109,000,000 shares
Issued and outstanding - 53,266,058 shares at March 31, 2004
and 53,648,038 shares at September 30, 2004
Class B common stock, par $0.01..................................... 147 147
Authorized - 25,000,000 shares
Issued and outstanding - 14,741,872 shares at March 31, 2004
and September 30, 2004
Preferred stock, par $0.01.......................................... -- --
Authorized - 1,000,000 shares
Issued and outstanding - none
Additional paid-in capital.......................................... 378,390 380,519
Treasury stock at cost - 93,000 shares.............................. (247) (247)
Cumulative translation adjustment................................... (485) (450)
Accumulated deficit................................................. (286,572) (278,915)
--------------- ---------------
Total stockholders' equity.................................... 91,765 101,590
--------------- ---------------
Total liabilities and stockholders' equity.................. $ 129,781 $ 141,307
=============== ===============
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
3
WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
September 30, September 30,
---------------------------- ----------------------------
2003 2004 2003 2004
------------ ------------ ------------ ------------
(unaudited)
(in thousands, except per share data)
Equipment sales............................... $ 46,921 $ 50,582 $ 90,627 $ 95,502
Services...................................... 11,455 10,817 23,035 22,069
------------ ------------ ------------ ------------
Total revenues.............................. 58,376 61,399 113,662 117,571
Cost of equipment sales....................... 32,568 36,964 60,829 68,602
Cost of services.............................. 6,783 5,156 13,538 11,144
------------ ------------ ------------ ------------
Total cost of goods sold.................... 39,351 42,120 74,367 79,746
------------ ------------ ------------ ------------
Gross margin............................... 19,025 19,279 39,295 37,825
Operating expenses:
Sales and marketing......................... 4,783 5,530 10,209 10,882
Research and development.................... 4,321 3,528 8,756 7,102
General and administrative.................. 4,335 4,762 9,469 8,776
Restructuring............................... -- (452) -- (452)
Intangible amortization..................... 364 324 728 688
------------ ------------ ------------ ------------
Total operating expenses.................. 13,803 13,692 29,162 26,996
Gain on sale of product line.................. -- 1,453 -- 1,453
------------ ------------ ------------ ------------
Operating income.............................. 5,222 7,040 10,133 12,282
Other income, net............................. 35 32 191 393
Interest expense.............................. (197) (15) (556) (51)
------------ ------------ ------------ ------------
Income before minority interest and income 5,060 7,057 9,768 12,624
taxes.........................................
Income taxes.................................. -- 2,567 -- 4,750
Minority interest............................. 121 120 233 217
------------ ------------ ------------ ------------
Net income.................................... $ 4,939 $ 4,370 $ 9,535 $ 7,657
============ ============ ============ ============
Net income per common share:..................
Basic............................ $ 0.07 $ 0.06 $ 0.14 $ 0.11
============
============ ============ ============
Diluted.......................... $ 0.07 $ 0.06 $ 0.14 $ 0.11
============ ============ ============ ============
Weighted average number of common shares
outstanding:................................
Basic............................ 66,840 68,379 66,167 68,336
============ ============ ============ ============
Diluted.......................... 70,879 70,420 70,345 70,805
============ ============ ============ ============
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements
4
WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
Sept. 30,
-----------------------------------------
2003 2004
----------------- -----------------
(unaudited)
(in thousands)
Cash flows from operating activities:
Net income......................................................... $ 9,535 $ 7,657
Reconciliation of net income to net cash provided by
operating activities:
Loss on sale of fixed asset...................................... 5 47
Sale of product technology....................................... -- (2,052)
Depreciation and amortization.................................... 4,762 4,418
Restructuring.................................................... (505) (1,261)
Deferred Taxes................................................... -- 4,884
Minority interest................................................ -- 217
Tax benefit received on stock option exercises................... -- 199
Changes in assets and liabilities:
Accounts receivable.............................................. (1,076) (5,084)
Inventory........................................................ 498 (7,669)
Prepaid expenses and other current assets........................ (19) (352)
Capitalization of software development costs..................... -- (929)
Other assets..................................................... 31 (239)
Accounts payable and accrued expenses............................ 854 8,502
Accrued compensation............................................. 354 (2,357)
----------------- -----------------
Net cash provided by operating activities..................... 14,439 5,981
----------------- -----------------
Cash flows from investing activities:
Purchases of property and equipment.............................. (1,275) (849)
Proceeds from sale of land, building and equipment............... 4 --
Proceeds from sale of product line -- 2,000
----------------- -----------------
Net cash provided by (used in) investing activities (1,271) 1,151
----------------- -----------------
Cash flows from financing activities:
Net repayment under revolving promissory notes................... (13,956) --
Net repayment of long-term debt and leases payable............... (5,648) (3,086)
Proceeds from the issuance of common stock....................... 5,673 1,934
----------------- -----------------
Net cash used in financing activities.............................. (13,931) (1,152)
----------------- -----------------
Effect of exchange rate changes on cash............................ 11 (15)
Net (decrease) increase in cash.................................... (752) 5,965
Cash and cash equivalents, beginning of period..................... 11,474 11,241
----------------- -----------------
Cash and cash equivalents, end of period........................... $ 10,722 $ 17,206
================= =================
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements
5
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
in the United States 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, 2004.
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 September 30,
2004 and for all periods presented. The results of operations for the three
month period ended September 30, 2004 are not necessarily indicative of the
results that may be expected for the fiscal year ending March 31, 2005 ("fiscal
year 2005").
NOTE 2. COMPUTATION OF INCOME PER SHARE
The computation of basic earnings per share is computed using the
weighted average number of common shares outstanding during the period. Diluted
earnings per share includes the number of additional common shares that would
have been outstanding if the dilutive potential common shares had been issued.
The following table sets forth the computation of basic and diluted earnings per
share:
Three months ended Six months ended
September 30, September 30,
---------------------------- -----------------------------
Dollars in thousands, except per share
amounts 2003 2004 2003 2004
------------ ------------ ------------ -------------
BASIC EARNINGS PER SHARE:
Net income $ 4,939 $ 4,370 $ 9,535 $ 7,657
Average basic shares outstanding 66,840 68,379 66,167 68,336
Basic net income per share $ 0.07 $ 0.06 $ 0.14 $ 0.11
DILUTED EARNINGS PER SHARE:
Net income $ 4,939 $ 4,370 $ 9,535 $ 7,657
Average basic shares outstanding 66,840 68,379 66,167 68,336
Effect of dilutive securities: stock
options and warrants 4,039 2,041 4,178 2,469
------------ ------------ ------------ -------------
Average diluted shares outstanding 70,879 70,420 70,345 70,805
------------ ------------ ------------ -------------
Diluted net income per share $ 0.07 $ 0.06 $ 0.14 $ 0.11
NOTE 3. RESTRUCTURING CHARGE
The Company recognized a restructuring charge of $6.3 million in fiscal
year 2002. These charges included personnel, facility and certain development
contract costs. The purpose of the fiscal year 2002 restructuring plan was to
decrease costs primarily by a workforce reduction of approximately 200 employees
and to realign the Company's cost structure with the Company's anticipated
business outlook. During fiscal year 2003, a portion of a leased facility
previously vacated was sublet resulting in a reversal of $0.9 million of
facility lease costs accrued in fiscal year 2002. As of March 31, 2004 all of
these restructuring costs had been paid.
6
WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Company recognized a net restructuring expense of $1.7 million in
fiscal year 2003 consisting of a charge of $2.6 million offset by the $0.9
million described above. This charge included personnel and facility costs
related primarily to the closing of a Conference Plus, Inc. facility and
personnel and facility charges at Westell Limited. Approximately 25 employees
were impacted by these reorganizations. In September 2004, the Company
terminated a lease that was partially reserved for in the 2003 restructuring.
This termination resulted in the reversal of $452,000 of restructuring for
facility costs. As of September 30, 2004, the Company paid approximately $1.7
million of these accrued restructuring costs leaving a balance of $396,000.
The Company recognized a restructuring expense of $698,000 in fiscal
year 2004. This restructuring resulted from realigning the product focus at
Westell Limited which caused or will cause a workforce reduction of
approximately 14 employees. The Company paid approximately $426,000 of these
costs as of September 30, 2004 leaving a balance of $272,000.
The Company's restructuring accrual balances and activity are presented
in the following table:
Reversed
Balance though Paid through Balance
(in thousands) Mar. 31,2004 Sept. 30, 2004 Sept. 30, 2004 Sept. 30, 2004
- -----------------------------------------------------------------------------------------------------
Employee costs....................... $ 698 -- $ 413 $ 285
Legal, facility & other costs........ 1,231 (452) 396 383
- -----------------------------------------------------------------------------------------------------
Total................................ $ 1,929 $ (452) $ 809 $ 668
=====================================================================================================
NOTE 4. INTERIM SEGMENT INFORMATION
Westell's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and market strategies. They consist of:
1) A telecommunications equipment manufacturer of broadband
products, and
2) A multi-point telecommunications service bureau specializing in
audio teleconferencing, multi-point video conferencing, broadcast
fax and multimedia teleconference services.
7
Performance of these segments is evaluated utilizing revenue, operating
income and total asset measurements. The accounting policies of the segments are
the same as those for Westell Technologies, Inc. Segment information for the
three and six month periods ended September 30, 2003 and 2004, are as follows:
Telecom Telecom
(In thousands) Equipment Services Total
--------- -------- -----
Three months ended September 30, 2003
Revenues.......................... $ 46,921 $ 11,455 $ 58,376
Operating income.................. 3,792 1,430 5,222
Depreciation and amortization..... 1,288 1,005 2,293
Total assets...................... 86,664 19,013 105,677
Three months ended September 30, 2004
Revenues.......................... $ 50,582 $ 10,817 $ 61,399
Operating income.................. 4,695 2,345 7,040
Depreciation and amortization..... 1,267 876 2,143
Total assets...................... 123,364 17,943 141,307
Six months ended September 30, 2003
Revenues.......................... $ 90,627 $ 23,035 $ 113,662
Operating income.................. 7,463 2,670 10,133
Depreciation and amortization..... 2,717 2,045 4,762
Total assets...................... 86,664 19,013 105,677
Six months ended September 30, 2004
Revenues.......................... $ 95,502 $ 22,069 $ 117,571
Operating income.................. 8,334 3,948 12,282
Depreciation and amortization..... 2,583 1,835 4,418
Total assets...................... 123,364 17,943 141,307
8
WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Reconciliation of Operating income for the reportable segments to
income before income taxes and minority interest:
Three months ended Six months ended
September 30, September 30,
------------------------------- -------------------------------
(in thousands) 2003 2004 2003 2004
------------ ------------- ------------- -----------
Operating income ........................ $ 5,222 $ 7,040 $ 10,133 $ 12,282
Other income, net........................ 35 32 191 393
Interest expense......................... (197) (15) (556) (51)
------------ ------------- ------------- -----------
Income before income taxes and minority
interest ............................... $ 5,060 $ 7,057 $ 9,768 $ 12,624
============ ============= ============= ===========
NOTE 5. COMPREHENSIVE INCOME
The disclosure of comprehensive income, which encompasses net income
and foreign currency translation adjustments, is as follows:
Three months ended Six months ended
September 30, September 30,
------------------------------ -------------------------------
(in thousands) 2003 2004 2003 2004
------------ ------------- ------------- ------------
Net income ................................... $ 4,939 $ 4,370 $ 9,535 $ 7,657
Other comprehensive income
Foreign currency translation adjustment..... (8) (14) (113) 35
------------ ------------- ------------- ------------
Comprehensive Income ........................ $ 4,931 $ 4,356 $ 9,422 $ 7,692
============ ============= ============= ============
NOTE 6. INVENTORIES
The components of inventories are as follows:
March 31, September 30,
---------------- -----------------
(in thousands) 2004 2004
---------------- -----------------
Raw material ................................. $ 12,374 $ 22,046
Work in process............................... 14 46
Finished goods................................ 8,051 5,662
Reserve for excess and obsolete inventory
and net realizable value.................. (4,364) (4,010)
---------------- -----------------
$ 16,075 $ 23,744
================ =================
9
WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7. STOCK OPTIONS
The Company has elected to follow Accounting Principle Board Opinion
No. 25 "Accounting for Stock Issued to Employees" (APB No. 25) and related
interpretations in accounting for its employee stock options and awards. Under
APB No. 25, employee stock options are valued using the intrinsic method, and no
compensation expense is recognized since the exercise price of the options
equals or is greater than the fair market value of the underlying stock as of
the date of the grant. The following table shows the effect on net income and
income per share if the Company had applied the fair value recognition
provisions of FASB Statement NO. 123, "Accounting for Stock Based Compensation."
Three months ended Six months ended
September 30, September 30,
-------------------------------- -------------------------------
(in thousands, except per-share amounts) 2003 2004 2003 2004
----------------- ----------- ------------- ---------------
Net income, as reported ................................ $ 4,939 $ 4,370 $ 9,535 $ 7,657
Stock-based employee compensation expense included in
reported net earnings, net of related tax effects.. -- -- -- --
Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects ................. (400) (606) (955) (1,205)
----------------- ----------- ------------- ---------------
Pro forma net income.................................... $ 4,539 $ 3,764 $ 8,580 $ 6,452
Earnings per common share:
As reported........................................ $ 0.07 $ 0.06 $ 0.14 $ 0.11
Pro forma .......................................... $ 0.07 $ 0.06 $ 0.13 $ 0.09
Earnings per common share, assuming dilution:
As reported ........................................ $ 0.06 $ 0.05 $ 0.14 $ 0.11
Pro forma .......................................... $ 0.06 $ 0.05 $ 0.12 $ 0.09
The fair value of each option is estimated on the date of grant using
the Black-Scholes option pricing model. The estimate assumes, among other
things, a risk-free interest rate of 2.8%, no dividend yield, expected
volatility of 98% and an expected life of 7 years.
NOTE 8. WARRANTY RESERVE
Most of the Company's products carry a limited warranty ranging from
one to seven years. The specific terms and conditions of those warranties vary
depending upon the product sold. Factors that enter into our estimate of our
warranty reserve include the number of units shipped historical and anticipated
rates of warranty claims, and cost per claim. The Company periodically assesses
the adequacy of its recorded warranty liability and adjusts the reserve as
necessary. The Company reports warranty reserve as both current and long term
liabilities. The following table presents the changes in our product warranty
reserve:
Six months ended
-----------------------------------
(In millions) 9/30/04 9/30/03
--------------- ----------------
Total product warranty reserve at the
beginning of the period.............. $ 1,670 $ 1,520
Warranty expense........................ 638 615
Charged to other accounts............... -- --
Deductions.............................. 591 615
--------------- ----------------
Total product warranty reserve at the
end of the period.................... $ 1,717 $ 1,520
--------------- ----------------
10
NOTE 9. SALE OF PRODUCT LINE
On July 1, 2004, the Company sold its Data Station Termination product
lines and specified fixed assets for $2.2 million to Enginuity Communications
Corporation (Enginuity). The Company received $2.0 million in cash, $200,000 in
the form of a note receivable and provided an unconditional guarantee in the
amount of $1.62 million relating to a 10 year term Enginuity note payable to a
third party lender that financed the transaction. This guarantee will stay in
place until the note is paid in full. The Company must pay all amounts due under
the note payable upon demand from the lender. The Company accessed its
obligation under this guarantee pursuant to the provisions of FIN 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" and recorded a $300,000 liability
for the value of the guarantee. The transaction resulted in a net gain on the
sale of a product line in the amount of $1.5 million.
NOTE 10. DEFERRED COMPENSATION
The Company has a deferred compensation program with an executive that
is funded through a rabbi trust. The rabbi trust qualifies as a Variable
Interest Entity under FASB Interpretation No. 46, Consolidation of Variable
Interest Entities and as such is consolidated in the Company's financial
statements. Approximately $615,000 of cash has been funded into the rabbi trust
as of September 30, 2004 and the Company has recorded a $1.1 million long term
liability to accrue for the deferred compensation liability. The rabbi trust is
subject to the creditors of the Company. All amounts deferred under this
compensation program vest on the earlier of March 31, 2006, the executive's
death, permanent disability or a change in control of the Company.
NOTE 11. NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standard Board ("FASB") issued an exposure
draft entitled "Share-Based Payment, an Amendment of FASB Statements Nos. 123
and 95." This exposure draft would require stock-based compensation to employees
to be recognized as a cost in the financial statements and that such cost be
measured according to the fair value of the stock options. In the absence of an
observable market price for the stock awards, the fair value of the stock
options would be based upon a valuation methodology that takes into
consideration various factors, including the exercise price of the option, the
expected term of the option, the current price of the underlying shares, the
expected volatility of the underlying share price, the expected dividends on the
underlying shares and the risk-free interest rate. The proposed requirements in
the exposure draft would be effective for the first fiscal year beginning after
June 15, 2005. The FASB intends to issue a final Statement in late 2004. The
Company will continue to monitor communications on this subject from the FASB in
order to determine the impact on our consolidated financial statements.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
--------------------------------------------------------------------
AND RESULTS OF OPERATION
- ------------------------
OVERVIEW
The Company is comprised of two segments: telecommunications equipment
manufacturer and teleconference services bureau. The equipment manufacturing
segment consists of two product lines: Customer Networking Equipment (CNE)
products and Network Service Access (NSA) products. The CNE product line
includes broadband and digital subscriber line (DSL) technology products that
allow the transport of high-speed data over the local loop and enable
telecommunications companies to provide broadband services over existing copper
infrastructure. The Company's NSA product line consists of manageable and
non-manageable T1 transmission equipment, associated mountings and special
service plugs for the legacy copper telephone network. Westell realizes the
majority of its revenues from the North American market.
The Company's teleconference service segment is comprised of a 91.5% owned
subsidiary, Conference Plus, Inc. Conference Plus provides audio, video, and web
conferencing services. Businesses and individuals use these services to hold
voice, video or web conferences with many people at the same time. Conference
Plus sells its services directly to large customers, including Fortune 1000
companies, and serves other customers indirectly through its private label
reseller program.
The equipment manufacturing segment of the Company's business consists of
two product lines, offering a broad range of products that facilitate the
broadband transmission of high-speed digital and analog data between a telephone
company's central office and end-user customers. These two product lines are:
o Customer Networking Equipment (CNE): Westell's family of broadband products
enable the transport of high-speed data over existing local telephone lines
and allow telecommunications companies to provide broadband services using
their current copper infrastructure. The Company's broadband products also
enable residential, small business and Small Office Home Office (SOHO)
users to network multiple computers, telephones and other devices to access
the Internet. Digital Subscriber Lines (DSL) products make up the majority
of the revenue in this product group.
o Network Service Access (NSA): Westell's NSA product family consists of
manageable and non-manageable T1 transmission equipment for telephone
services, and an array of mounting products used for connecting telephone
wires and cables, and special service plugs. The T1 transmission equipment
termed Network Interface Units (NIU) and the associated NIU mounting
products make up the majority of revenue from this product group.
Below is a table that compares equipment and service revenues for the
quarter ended September 30, 2003 with the quarter ended September 30, 2004 by
product line.
Three months ended September 30, Six months ended September 30,
------------------------------------------------- ---------------------------------------------
(in thousands) 2003 % 2004 % 2003 % 2004 %
-------------------------- --------------------- --------------------- ---------------------
CNE.................... $31,884 54.6% $ 39,305 64.0% $62,044 54.6% $ 71,108 60.5%
NSA.................... 15,037 25.8% 11,277 18.4% 28,583 25.1% 24,394 20.7%
-------------------------- --------------------- --------------------- ---------------------
Total equipment........ 46,921 80.4% 50,582 82.4% 90,627 79.7% 95,502 81.2%
Services............... 11,455 19.6% 10,817 17.6% 23,035 20.3% 22,069 18.8%
-------------------------- --------------------- --------------------- ---------------------
Total revenues......... $58,376 $ 61,399 $ 113,662 $117,571
================= ============= ============= =============
The prices for the products within each market group vary based upon
volume, customer specifications and other criteria and are subject to change due
to competition among telecommunications manufacturers. Increasing competition,
in terms of the number of entrants and their size, and increasing size of the
Company's customers because of past mergers, continues to exert downward
pressure on prices for the Company's products.
The Company reached profitability and positive cash flow from
operations for the first time as a public company in fiscal 2003. In fiscal
2004, the Company improved its profitability primarily due to gains achieved
from volume efficiencies, productivity improvements and favorable component
pricing in the CNE product line of the equipment manufacturing segment. The
transition to higher speed digital transmission services continued to negatively
impact the NSA product line of the equipment segment.
12
The Company's customer base is comprised primarily of the Regional Bell
Operating Companies (RBOCs), independent domestic local exchange carriers and
public telephone administrations located outside the U.S. Due to the stringent
quality specifications of its customers and the regulated environment in which
its customers operate, the Company must undergo lengthy approval and procurement
processes prior to selling its products. Accordingly, the Company must make
significant upfront investments in product and market development prior to
actual commencement of sales of new products.
In addition, to remain competitive, the Company must continue to invest
in new product development and invest in targeted sales and marketing efforts to
cover new product lines. The Company expects to continue to evaluate new product
opportunities and engage in extensive research and development activities. The
Company is focusing on expanding its product offerings in the equipment segment
from basic high speed broadband to more sophisticated applications such as
networking, wireless and managed services. This will require the Company to
continue to invest in research and development and sales and marketing, which
could adversely affect short-term results of operations. In view of the
Company's reliance on the DSL market for revenues and the unpredictability of
orders and pricing pressures, 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 NSA
products such as NIUs have declined in recent years due to price reductions and
the transition by telephone companies to networks that deliver higher speed
digital transmission services. 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.
In the equipment manufacturing segment, the Company is focusing on new
product opportunities in the DSL wireless gateway, voice/media-over-IP, managed
services, and vertical applications. The Company has introduced new products
including UltralineTM, ProLineTM, VersaLinkTM , TriLinkTM and EnVoyTM which are
targeted at the home networking, small office/home office (SOHO) and small
business markets. In addition, the Company announced a partnership to develop
multimedia access device using DSL broadband technology that it expects to
introduce in fiscal 2006. The Company is also focusing on expanding existing and
new products into the international markets. The Company started to sell the
VersaLinkTM and ProLineTM products in the quarter ended September 30, 2004.
The Company expects its revenues to increase in the third quarter of
fiscal 2005. This predicted revenue growth is due primarily to the anticipated
sales of VersaLink product in the Company's equipment segment of the business,
which has a higher average selling price than traditional modems. As a result of
VersaLink sales in the quarter ended September 30, 2004, the Company incurred
expediting and new product introduction costs which resulted in depressed
margins. These costs are expected to continue in the quarter ended December 31,
2004 and will continue to negatively impact margin. A cost reduction in the
VersaLink product is anticipated in the fourth quarter of fiscal 2005. The
Company believes that its customers continue to expect growth in the broadband
market that the Company's CNE products serve. More users are subscribing to DSL
services and some subscribers currently using DSL technology desire new DSL
technology as the older modems cannot deliver new applications such as music,
photo sharing, movies and games that require higher broadband speed. The NSA
market continues to decline as the transition to high-speed digital service
continues. The Company's goal is to increase market share in mountings and NIUs
in the NSA market to offset in part reduced prices for NIUs and mountings. In
the quarter ended September 30, 2004, the Company continued to eliminate less
strategic products and transition them to partners. In the quarter ended
September 30, 2004, the Company recognized a $1.5 million gain from the sale of
a certain NSA product line and associated assets that the Company had determined
no longer fit its business strategies. The Company is investing in new products
in the NSA product line that complement the broadband market products such as
PowerSpan which may support the deployment of VoIP in residential markets.
Revenues. The Company's revenues increased 5.2% from $58.4 million in
the three months ended September 30, 2003 to $61.4 million in the three months
ended September 30, 2004. This revenue increase was due to increased equipment
revenue of $3.7 million and was offset in part by a decrease in teleconference
service revenue of $638,000. The increased equipment revenue was due primarily
to increased sales of the Company's broadband products which in the quarter
ended September 30, 2004, increased to $39.3 million compared to $31.9 million
in the same quarter one year ago. The increase in revenues from broadband
products is due primarily to 47% higher unit volume offset in part by 21% price
reductions. Revenue from the Company's NSA products in the equipment segment
decreased from $15.0 million in the three months ended September 30, 2003 to
$11.3 million in the three months ended September 30, 2004. The overall decrease
in NSA product revenue is due primarily to reduced demand resulting from the
13
migration by telephone companies to high-speed digital transmission products as
well as price reductions. The Company sold a product line which resulted in a
revenue reduction of approximately $700,000 in the September 30, 2004 compared
to the September 30, 2003 quarter. The decrease in revenue in the services
segment is attributable to less revenue per call minute offset in part by an
increase in minutes at the Company's Conference Plus, Inc. subsidiary.
The Company's revenues increased 3.4% from $113.7 million in the six months
ended September 30, 2003 to $117.6 million in the six months ended September 30,
2004. This revenue increase was due to increased equipment revenue of $4.9
million and was offset by a decrease in teleconference service revenue of $1.0
million. The increased equipment revenue was due primarily to increased sales of
the Company's broadband products which in the six months ended September 30,
2004, increased to $71.1 million compared to $62.0 million in the same period
one year ago. The increase in revenues from broadband products is due primarily
to 49% higher unit volume offset by 26% of price reductions. Revenue from the
Company's NSA products in the equipment segment decreased from $28.6 million in
the six months ended September 30, 2003 to $24.4 million in the six months ended
September 30, 2004. NSA product revenue in the June 30, 2004 quarter included an
$883,000 contractual settlement from a customer. Revenues from NSA products such
as NIUs have declined in recent years due to price reductions and the transition
by telephone companies to networks that deliver higher speed digital
transmission services. The decrease in revenue in the services segment is
attributable to less revenue per call minute offset in part by an increase in
minutes at the Company's Conference Plus, Inc. subsidiary.
Gross Margin. Overall gross margin as a percentage of revenue decreased from
32.6% in the three months ended September 30, 2003 to 31.4% in the three months
ended September 30, 2004. Margin in the equipment segment decreased from 30.6%
in the three month period ended September 30, 2003 to 26.9% in the three months
ended September 30, 2004. This decrease in equipment segment gross margin
percentage is due primarily to price reductions in broadband products along with
expediting and other costs related to the introduction of the VersaLink product.
Teleconference service gross margin increased from 40.8% in the three months
ended September 30, 2003 to 52.3% in the three months ended September 30, 2004.
This increase in service segment gross margin percent is due to reduced
telecommunications costs. The Company believes continued pricing pressures and
continued reduction of NSA sales affecting its equipment segment could continue
to adversely impact margins in the future. It is the Company's strategy to
offset the effects of these anticipated price reductions with continued cost
reductions and introducing new products that have higher sales prices and
margins.
Overall gross margin as a percentage of revenue decreased from 34.6% in the six
months ended September 30, 2003 to 32.2% in the six months ended September 30,
2004. Margin in the equipment segment decreased from 32.9% in the six month
period ended September 30, 2003 to 28.2% in the three months ended September 30,
2004. The June 30, 2004 margin includes the $833,000 contractual settlement
mentioned above. This decrease in equipment segment gross margin percentage is
due to price reductions in broadband products. Teleconference service gross
margin increased from 41.2% in the six months ended September 30, 2003 to 49.5%
in the six months ended September 30, 2004. This increase in service segment
gross margin percent is due to reduced telecommunications costs. The Company
believes continued pricing pressures and continued reduction of NSA sales
affecting its equipment segment could continue to adversely impact margins in
the future. It is the Company's strategy to offset the effects of these
anticipated price reductions with continued cost reductions and introducing new
products that have higher sales prices and margins
Sales and Marketing. Sales and marketing expense increased 15.6% from $4.8
million to $5.5 million in the three months ended September 30, 2004, and
increased 6.6% from $10.2 million to $10.9 million in the six months ended
September 30, 2004 when compared to the same period last year. Sales and
marketing expenses increased as a percentage of revenues from 8.2% in the three
months ended September 30, 2003 to 9.0% in the three months ended September 30,
2004. The equipment segment sales and marketing expenses increased by $391,000
and $60,000 in the three and six months periods ended September 30, 3004
compared to the same periods in the prior year. The increase resulted primarily
from expense recorded for annual bonus and profit sharing plans. No bonus or
profit sharing was recorded in the three months ended June 30, 2004 due to the
Company's estimated annual performance did not meet the bonus plan criteria. Due
to second quarter results and improved forecasts for the remainder of fiscal
2005, the Company now expects to meet bonus criteria. Sales and marketing
expenses increase by $360,000 and $600,000 in Company's services segment for the
three and six months periods ended September 30, 3004 compared to the same
periods in the prior year. This increase was primarily a result of more sales
and marketing employees at Conference Plus. The Company believes that sales and
14
marketing expense in the future will continue to be a significant percent of
revenue and will be required to expand its product lines, bring new products to
market and service customers. The Company is planning to increase sales and
marketing expense in the equipment segment of the business to sell its CNE
equipment in Europe.
Research and Development. Research and development expenses decreased 18.4%,
from $4.3 million to $3.5 million in the three months ended September 30, 2004,
and decreased 18.9%, from $8.8 million to $7.1 million in the six months ended
September 30, 2004 when compared to the same period last year. The decrease in
research and development expense is primarily a result of $900,000 recorded for
customer reimbursed engineering costs offset in part by a $300,000 expense for
engineering performed by a third party. In addition, the Company capitalized
$570,000 and $929,000 of engineering expenses as an intangible asset for EnVoyTM
software in the three and six months ended September 30, 2004, respectively. The
Company believes that research and development expenses will increase in the
second half of fiscal year 2005 as the Company intends to continue to expand its
product offerings to include networking, wireless, managed services and other
broadband applications.
General and Administrative. General and administrative expenses increased 9.9%,
from $4.3 million in the three months ended September 30, 2003 to $4.8 million
in the three months ended September 30, 2004. General and administrative
expenses decreased 7.3%, from $9.5 million in the six months ended September 30,
2003 to $8.8 million in the six months ended September 30, 2004. General and
administrative expenses increased by $300,000 in the Company's equipment segment
in the three months ended September 30, 2004 and decreased by $600,000 in the
six months ended September 30, 2004 when compared with the same periods in the
prior year. The increase in general and administrative expenses in the three
month period resulted primarily from expense recorded for annual bonus and
profit sharing plans. No bonus or profit sharing was recorded in the three
months ended June 30, 2004 due to the Company's estimates of annual performance
not meeting the bonus plan criteria. Due to second quarter results and improved
forecasts for the remainder of fiscal 2005, the Company now expects to meet
bonus criteria. The decrease in the six month period was due to legal expenses
and bad debt expense in the September 2004 period which were $272,000 and
$310,000 lower than in the September 2003 period, respectively. General and
administrative expenses increased by $140,000 and decreased by $91,000 in the
Company's service segment in the three and six month periods ended September 30,
2004 when compared to the same periods in the prior year.
Intangible amortization. Intangible assets include product technology related to
the March 17, 2000 acquisition of Teltrend Inc. valued at $213.6 million.
Intangible amortization expense was $364,000 and $324,000 for the three months
ended September 30, 2003 and 2004, respectively. Intangible amortization was
$727,000 and $688,000 in the six months ended September 30, 2003 and 2004,
respectively.
Gain on sales product line. The Company sold a product line and specified fixed
assets and related intangibles for $2.2 million. This sale resulted in a gain of
$1.5 million in the three months ended September 30, 2004.
Other income, net. Other income, net was $32,000 and $35,000 in the three months
and $191,000 and $393,000 in the six months ended September 30, 2003 and 2004,
respectively. Other income, net in the six months ended September 30, 2004
contains a $400,000 legal settlement. The remainder of other income, net for the
three and six month period ended September 30, 2004 and all of the period ended
September 30, 2003 was comprised of a interest income earned on temporary cash
investments and unrealized gains or losses on intercompany balances denominated
in foreign currency.
Interest expense. Interest expense decreased from $197,000 in the three months
ended September 30, 2003 to $15,000 in the three months ended September 30, 2004
and decreased from $556,000 in the six months ended September 30, 2003 to
$51,000 in the six months ended September 30, 2004. The decrease in interest
expense during the current period is a result of lower net obligations
outstanding during the period under promissory notes, capital leases, and vendor
debt.
Income taxes. The Company recorded $2.6 million and $4.8 million of income tax
expense in the three and six months ended September 30, 2004 based on an
estimate tax rate for the year of approximately 40%. In the three and six month
periods ended September 30, 2003, no tax provision was recorded since net
operating loss carryforwards were available to offset taxable income that were
fully reserved by valuation allowances. Deferred tax assets continue to offset
taxable income in fiscal 2005, but the utilization now results in income tax
expense since the valuation allowance of deferred tax assets was reduced in the
15
fourth quarter of fiscal 2004. This resulted from management's belief that is it
was more likely than not these deferred assets would be realized through the
generation of taxable income.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2004, the Company had $17.2 million in cash and cash
equivalents consisting primarily of federal government agency instruments and
the highest rated grade corporate commercial paper. At September 30, 2004, the
Company had nothing outstanding and $28.6 million available under its secured
revolving credit facility.
The Company's revolving credit facility ("facility") provides for
maximum borrowings of up to $30 million. The term of the facility expires on
June 30, 2006 and provides for total borrowings based upon 85% of eligible
accounts receivable and 30% of eligible inventory not to exceed $4.6 million as
of September 30, 2004. The $4.6 million inventory limitation is reduced by $0.1
million on the first day of each month. Borrowings under this facility accrue
interest to be paid by the Company at the prime rate or Libor rate plus 2.5%.
The facility contains covenants regarding EBITDA, tangible net worth and maximum
capital expenditures. The Company was in compliance with these covenants on
September 30, 2004 and expects to comply with these covenants for the term of
the facility.
In connection with the Company's management changes implemented at its
subsidiary Conference Plus, Inc., in fiscal year 2003, the Company purchased
3.2% of the outstanding shares of common stock of Conference Plus, Inc. from
former officers of Conference Plus, Inc. for approximately $1.6 million which
was financed in part by notes payable. The purchase price was based upon the
minority interest value set forth in an appraisal of Conference Plus, Inc. that
was completed by an independent financial advisor. As of September 30, 2004,
there was $419,000 outstanding under these notes.
The Company's operating activities generated cash of $6.0 million in
the six months ended September 30, 2004. This resulted primarily from net
income, non-cash depreciation and amortization and increased accounts payable
and accrued expense, offset by increases in inventory and accounts receivable.
The increase in inventory was primarily a result of the advance purchase of
flash and SDRAM memory components, which are used in the Company's modem
products and are in high market demand. The increase in accounts payable is a
result of increased inventory and the timing of vendor payments. The increase in
accounts receivable is due to increased revenue.
Capital expenditures for the six month period ended September 30, 2004
were approximately $847,000. Approximately $703,000 of the expenditures was in
the equipment segment with $144,000 spent in the services segment. The Company
expects to spend approximately $5.5 million and $1.5 million for capital
expenditures for the remainder of fiscal year 2005 in the equipment and services
segments related primarily for machinery, computer and research equipment
purchases needed to produce products such as ProLineTM, , TriLinkTM, and the
Westell-Mitel advanced multimedia access device.
At September 30, 2004 the Company's principle sources of liquidity were
$17.2 million of cash and available borrowings under its the credit facility.
Cash in excess of operating requirements, if any, will be used to pay down debt
or invested on a short-term basis in federal government agency instruments and
the highest rated grade commercial paper. The Company believes its future cash
requirements for the next twelve months will be satisfied by cash generated from
operations and its current credit facility.
The Company has various future obligations and commitments consisting
primarily of facility operating leases, obligations to purchase raw material in
the equipment segment and local and long distance telephone service commitments
in the services segment. The purchase obligations arise in the normal course of
business operations. A September 30, 2004 the Company had future obligations and
commitments as follows:
16
Payments due by fiscal year
----------------------------------------------------------------------------------
(in thousands) 2005 2006 2007 2008 2009 Thereafter Total
- ----------------------------- ---------- ---------- --------- --------- --------- ------------ -----------
Debt and capital leases..... $ 562 $ 95 $-- $-- $-- $-- $657
Purchase obligations 30,697 3,298 1,887 223 -- -- 36,105
Future minimum lease
payments for operating
leases................... 2,854 3,282 3,058 3,048 2,938 20,175 35,355
---------- ---------- --------- --------- --------- ------------ -----------
Future obligations and
commitments.............. $34,113 $6,675 $4,945 $3,271 $2,938 $20,175 $72,117
========== ========== ========= ========= ========= ============ ===========
The Company had net deferred tax assets of approximately $75.1 million
at September 30, 2004. The Company has recorded a valuation allowance reserve of
$35.9 million to reduce the recorded net deferred tax asset to $39.2 million.
The net operating loss carryforwards begin to expire in 2012.
Realization of deferred tax assets associated with the Company's future
deductible temporary differences, net operating loss carryforwards and tax
credit carryforwards is dependent upon generating sufficient taxable income
prior to their expiration. The Company uses estimates of future taxable income
and a tax planning strategy that involves the potential sale of the Company's
91.5% subsidiary Conference Plus, Inc. to access the valuation allowance
required against deferred tax assets. Management periodically evaluates the
recoverability of the deferred tax assets and will adjust the valuation
allowance against deferred tax assets accordingly.
The Company sold its Data Station Termination Product lines and
specified fixed assets for $2.2 million to Enginuity Communications Corporation
(Enginuity). The Company received $2.0 million in cash, $200,000 in the form of
a note receivable and provided an unconditional guarantee in the amount of $1.62
million relating to a 10 year term Enginuity note payable to a third party
lender used to finance this sale. This guarantee will stay in place until the
note is paid in full. The Company must pay all amounts due under the note
payable upon demand from the lender.
CRITICAL ACCOUNTING POLICIES
There were no changes in critical accounting policies during the
quarter.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
- ---------------------------------------------------------------------
Westell is subject to certain market risks, including foreign currency
and interest rates. The Company has foreign subsidiaries in the United Kingdom
and Ireland that develop and sell products and services in those respective
countries. The Company is exposed to potential gains and losses from foreign
currency fluctuations affecting net investments and earnings denominated in
foreign currencies. Market risk is estimated as the potential decrease in pretax
earnings resulting from a hypothetical decrease in the ending exchange rate of
10%. If such a decrease occurred, the Company would incur approximately $505,000
in additional other expense based on the ending intercompany balance outstanding
at September 30, 2004. The Company's future primary exposure is to changes in
exchange rates for the U.S. dollar versus the British pound and the Euro.
As of September 30, 2004, the balance in the cumulative foreign
currency translation adjustment account, which is a component of stockholders'
equity, was an unrealized loss of $450,000.
The Company does not have significant exposure to interest rate risk
related to its debt obligations due to low levels of debt. The Company's debt
obligations are primarily U.S. Dollar denominated. The Company's market risk is
the potential loss arising from adverse changes in interest rates. The Company's
debt consists primarily of a floating-rate bank line-of credit and subordinated
term notes. Market risk is estimated as the potential decrease in pretax
earnings resulting from a hypothetical increase in interest rates of 10% (i.e.
from approximately 6.3% to approximately 6.9%) average interest rate on the
Company's debt. If such an increase occurred, the Company would incur
approximately $21,000 per annum in additional interest expense based on the
average debt borrowed during the twelve months ended September 30, 2004. The
17
Company does not feel such additional expense is significant. The Company does
not currently use any derivative financial instruments relating to the risk
associated with changes in interest rates or foreign currency.
ITEM 4. CONTROLS AND PROCEDURES
- --------------------------------
Our Chief Executive Officer and Chief Financial Officer have concluded,
based on their evaluation as of the end of the period covered by this report,
that the Company's disclosure controls and procedures are effective in all
material respects in ensuring that information required to be disclosed in the
reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commission's rules and forms. There have been no
changes in the Company's internal controls over financial reporting during the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, our internal controls over financial reporting.
PART II. OTHER INFORMATION
- --------------------------
ITEM 1. LEGAL PROCEEDINGS
- -------------------------
The Company is involved in various other legal proceedings incidental
to the Company's business. Management believes that the outcome of such
proceedings will not have a material adverse effect on our consolidated
operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
On September 23, 2004, the Company held its annual meeting of stockholders.
Matters put before vote of the security holders were:
1. The election of directors.
2. To vote upon a proposal to adopt the Westell Technologies, Inc. 2004 Stock
Incentive Plan;
3. To vote upon a proposal to amend the Westell Technologies, Inc. Employee
Stock Purchase Plan to increase the number of shares available under the
plan by 300,000;
4. To vote on a proposal to ratify the appointment of independent auditors
The results were as follows:
Nominee
- ------- VOTES FOR VOTES WITHHELD
John W. Seazholtz.............................. 100,662,343 2,399,443
E. Van Cullens................................. 102,144,863 916,923
Paul A. Dwyer.................................. 99,844,953 3,216,833
Eileen A. Kamerick............................. 102,127,733 934,053
Robert C. Penny III............................ 99,752,169 3,309,617
Roger L. Plummer............................... 99,965,786 3,096,000
Bernard F. Sergesketter........................ 102,123,507 938,279
Melvin J. Simon................................ 102,124,614 937,172
VOTES FOR VOTES AGAINST
Approval of the Westell Technologies, Inc.
2004 Stock Incentive Plan 96,170,837 6,890,953
Approval to increase the shares available
under the Westell Technologies, Inc. Stock
Purchase Plan 102,126,061 935,730
Appointment of independent auditors 102,974,060 87,731
18
ITEM 6. EXHIBITS
- ----------------
Exhibit 31.1 Certification by the Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2 Certification by the Chief Financial Officer Pursuant to Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1 Certification by the Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
19
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: November 9, 2004 By: /s/ E. VAN CULLENS
------------------
E. VAN CULLENS Chief
Executive Officer
By: /s/ NICHOLAS C. HINDMAN, Sr.
----------------------------
NICHOLAS C. HINDMAN, Sr.
Chief Financial Officer
20