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, 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of January 27, 2005:
Class A Common Stock, $0.01 Par Value - 53,767,459 shares
Class B Common Stock, $0.01 Par Value - 14,741,872 shares
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 December 31, 2004 (unaudited)
Condensed Consolidated Statements of Operations (unaudited) 4
- Three months ended December 31, 2003 and 2004
- Nine months ended December 31, 2003 and 2004
Condensed Consolidated Statements of Cash Flows (unaudited) 5
- Nine months ended December 31, 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 6. Exhibits 18
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 and other words of
similar meaning, are forward looking statements. Such forward-looking statements
include risks and uncertainties, and 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, Dec. 31,
2004 2004
--------------- ---------------
(unaudited)
(in thousands)
Current assets:
Cash and cash equivalents......................................... $ 11,241 $ 21,659
Accounts receivable (net of allowance of $662,000 and $621,000
respectively)..................................................... 23,807 28,477
Inventories....................................................... 16,075 28,083
Prepaid expenses and other current assets......................... 2,340 3,022
Deferred income tax asset......................................... 7,200 4,139
--------------- ---------------
Total current assets.......................................... 60,663 85,380
--------------- ---------------
Property and equipment:
Machinery and equipment.......................................... 42,462 42,552
Office, computer and research equipment.......................... 23,414 24,960
Leasehold improvements........................................... 7,832 8,151
--------------- ---------------
73,708 75,663
Less accumulated depreciation and amortization.................... 56,099 60,241
--------------- ---------------
Property and equipment, net...................................... 17,609 15,422
--------------- ---------------
Goodwill............................................................ 6,990 6,990
Intangibles, net.................................................... 6,954 6,939
Deferred income tax asset and other assets.......................... 37,565 33,730
--------------- ---------------
Total assets.................................................. $ 129,781 $ 148,461
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $14,163 $ 23,458
Accrued expenses.................................................. 10,105 10,440
Accrued compensation.............................................. 6,808 4,742
Current portion of long-term debt................................. 3,416 490
--------------- ---------------
Total current liabilities........................................ 34,492 39,130
Long-term debt...................................................... 326 --
Other long-term liabilities......................................... 1,179 1,630
--------------- ---------------
Total liabilities............................................. 35,997 40,760
Minority Interest 2,019 2,347
Stockholders' equity:
Class A common stock, par $0.01..................................... 532 537
Authorized - 109,000,000 shares
Issued and outstanding - 53,266,058 shares at March 31, 2004
and 53,738,389 shares at December 31, 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 December 31, 2004
Preferred stock, par $0.01.......................................... -- --
Authorized - 1,000,000 shares
Issued and outstanding - none
Additional paid-in capital.......................................... 378,390 380,887
Treasury stock at cost - 93,000 shares.............................. (247) (247)
Cumulative translation adjustment................................... (485) (718)
Accumulated deficit................................................. (286,572) (275,252)
--------------- ---------------
Total stockholders' equity.................................... 91,765 105,354
--------------- ---------------
Total liabilities and stockholders' equity.................. $ 129,781 $ 148,461
=============== ===============
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 Nine Months Ended
December 31, December 31,
---------------------------- ----------------------------
2003 2004 2003 2004
------------ ------------ ------------ ------------
(unaudited)
(in thousands, except per share data)
Equipment sales............................... $ 49,203 $ 63,574 $ 139,830 $ 159,076
Services...................................... 10,775 10,877 33,810 32,946
------------ ------------ ------------ ------------
Total revenues.............................. 59,978 74,451 173,640 192,022
Cost of equipment sales....................... 33,167 48,484 93,996 117,086
Cost of services.............................. 7,693 5,409 21,231 16,553
------------ ------------ ------------ ------------
Total cost of goods sold.................... 40,860 53,893 115,227 133,639
------------ ------------ ------------ ------------
Gross margin............................... 19,118 20,558 58,413 58,383
Operating expenses:
Sales and marketing......................... 4,647 5,740 14,857 16,622
Research and development.................... 3,874 4,053 12,630 11,155
General and administrative.................. 4,545 4,446 14,014 13,222
Restructuring............................... -- -- -- (452)
Intangible amortization..................... 364 324 1,091 1,012
------------ ------------ ------------ ------------
Total operating expenses.................. 13,430 14,563 42,592 41,559
Gain on sale of product line.................. -- -- -- 1,453
------------ ------------ ------------ ------------
Operating income.............................. 5,688 5,995 15,821 18,277
Other income, net............................. 212 395 402 788
Interest expense.............................. (127) (7) (683) (58)
------------ ------------ ------------ ------------
Income before minority interest and income 5,773 6,383 15,540 19,007
taxes.........................................
Income taxes.................................. -- 2,614 -- 7,364
Minority interest............................. 23 106 255 323
------------ ------------ ------------ ------------
Net income.................................... $ 5,750 $ 3,663 $ 15,285 $ 11,320
============ ============ ============ ============
Net income per common share:..................
Basic............................ $ 0.09 $ 0.05 $ 0.23 $ 0.17
============ ============ ============ ============
Diluted.......................... $ 0.08 $ 0.05 $ 0.22 $ 0.16
============ ============ ============ ============
Weighted average number of common shares
outstanding:................................
Basic............................ 67,373 68,421 66,569 68,364
============ ============ ============ ============
Diluted.......................... 70,897 71,081 70,502 70,874
============ ============ ============ ============
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
Nine Months Ended
December 31,
-----------------------------------------
2003 2004
----------------- -----------------
(unaudited)
(in thousands)
Cash flows from operating activities:
Net income......................................................... $ 15,285 $ 11,320
Reconciliation of net income to net cash provided by
operating activities:
Loss on sale of fixed asset...................................... 253 55
Gain on sale of product technology............................... -- (2,053)
Depreciation and amortization.................................... 7,050 6,624
Restructuring.................................................... (733) (1,337)
Deferred Taxes................................................... 7,036
Minority interest................................................ 329
Tax benefit received on stock option exercises................... 329
Changes in assets and liabilities:
Accounts receivable.............................................. 24 (4,711)
Inventory........................................................ (594) (12,009)
Prepaid expenses and other current assets........................ (1,223) (682)
Capitalization of software development costs..................... -- (1,436)
Other assets..................................................... 33 (139)
Accounts payable and accrued expenses............................ 2,865 11,782
Accrued compensation............................................. 681 (2,067)
----------------- -----------------
Net cash provided by operating activities..................... 23,641 13,041
----------------- -----------------
Cash flows from investing activities:
Purchases of property and equipment.............................. (3,112) (3,486)
Proceeds from sale of land, building and equipment............... 17 5
Proceeds from the gain on sale of product line -- 2,000
----------------- -----------------
Net cash used in investing activities (3,095) (1,481)
----------------- -----------------
Cash flows from financing activities:
Net repayment under revolving promissory notes................... (19,956) --
Repayment of long-term debt and leases payable................... (8,471) (3,251)
Proceeds from the issuance of common stock....................... 7,095 2,172
----------------- -----------------
Net cash used in financing activities.............................. (21,332) (1,079)
----------------- -----------------
Effect of exchange rate changes on cash............................ (10) (63)
Net (decrease) increase in cash.................................... (796) 10,418
Cash and cash equivalents, beginning of period..................... 11,474 11,241
----------------- -----------------
Cash and cash equivalents, end of period........................... $10,678 $ 21,659
================= =================
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 December 31, 2004 and
for all periods presented. The results of operations for the three month period
ended December 31, 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 Nine months ended
December 31, December 31,
---------------------------- -----------------------------
Dollars in thousands, except per share
amounts 2003 2004 2003 2004
------------ ------------ ------------ -------------
BASIC EARNINGS PER SHARE:
Net income $5,750 $3,663 $15,285 $11,320
Average basic shares outstanding 67,373 68,421 66,569 68,364
Basic net income per share $0.09 $0.05 $0.23 $0.17
DILUTED EARNINGS PER SHARE:
Net income $5,750 $3,663 $15,285 $11,320
Average basic shares outstanding 67,373 68,421 66,569 68,364
Effect of dilutive securities: stock
options and warrants 3,524 2,660 3,933 2,510
------------ ------------ ------------ -------------
Average diluted shares outstanding 70,897 71,081 70,502 70,874
------------ ------------ ------------ -------------
Diluted net income per share $0.08 $0.05 $0.22 $0.16
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 December 31, 2004, the Company paid approximately $1.8
million of these accrued restructuring costs leaving a balance of $322,000.
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 $428,000 of these costs as of December
31, 2004 leaving a balance of $270,000.
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 Dec. 31, 2004 Dec. 31, 2004 Dec. 31, 2004
- -----------------------------------------------------------------------------------------------------
Employee costs....................... $ 698 $ -- $ 415 $ 283
Legal, facility & other costs........ 1,231 (452) 470 309
- -----------------------------------------------------------------------------------------------------
Total................................ $ 1,929 $ (452) $ 885 $ 592
=====================================================================================================
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 nine month periods ended December 31, 2003 and 2004, are as follows:
Telecom Telecom
(in thousands) Equipment Services Total
------------ ------------ ---------
Three months ended December 31, 2003
Revenues.......................... $ 49,203 $ 10,775 $ 59,978
Operating income.................. 5,600 88 5,688
Depreciation and amortization..... 1,310 978 2,288
Total assets...................... 86,154 19,820 105,974
Three months ended December 31, 2004
Revenues.......................... $ 63,574 $ 10,877 $ 74,451
Operating income.................. 4,179 1,816 5,995
Depreciation and amortization..... 1,316 890 2,206
Total assets...................... 131,030 17,431 148,461
Nine months ended December 31, 2003
Revenues.......................... $ 139,830 $ 33,810 $ 173,640
Operating income.................. 13,063 2,758 15,821
Depreciation and amortization..... 4,027 3,023 7,050
Total assets...................... 86,154 19,820 105,974
Nine months ended December 31, 2004
Revenues.......................... $ 159,076 $ 32,946 $ 192,022
Operating income.................. 12,513 5,764 18,277
Depreciation and amortization..... 3,899 2,725 6,624
Total assets...................... 131,030 17,431 148,461
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 Nine months ended
December 31, December 31,
------------------------------- -------------------------------
(in thousands) 2003 2004 2003 2004
------------ ------------- ------------- -----------
Operating income ........................ $ 5,688 $ 5,995 $ 15,821 $ 18,277
Other income, net........................ 212 395 402 788
Interest expense......................... (127) (7) (683) (58)
------------ ------------- ------------- -----------
Income before income taxes and minority
interest ............................... $ 5,773 $ 6,383 $ 15,540 $ 19,007
============ ============= ============= ===========
NOTE 5. COMPREHENSIVE INCOME
The disclosure of comprehensive income, which encompasses net income and
foreign currency translation adjustments, is as follows:
Three months ended Nine months ended
December 31, December 31,
------------------------------ -------------------------------
(in thousands) 2003 2004 2003 2004
------------ ------------- ------------- ------------
Net income ................................... $ 5,750 $ 3,663 $ 15,285 $ 11,320
Other comprehensive income
Foreign currency translation adjustment..... (145) (268) (258) (233)
------------ ------------- ------------- ------------
Comprehensive Income ........................ $ 5,605 $ 3,395 $ 15,027 $ 11,087
============ ============= ============= ============
NOTE 6. INVENTORIES
The components of inventories are as follows:
March 31, December 31,
---------------- -----------------
(in thousands) 2004 2004
---------------- -----------------
Raw material ................................. $ 12,374 $ 17,295
Work in process............................... 14 63
Finished goods................................ 8,051 14,536
Reserve for excess and obsolete inventory
and net realizable value.................. (4,364) (3,811)
---------------- -----------------
$ 16,075 $ 28,083
================ =================
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 Nine months ended
December 31, December 31,
------------------------------- -----------------------------
(in thousands, except per-share amounts) 2003 2004 2003 2004
-------------- -------------- ------------- --------------
Net income, as reported ................................ $ 5,750 $ 3,663 $ 15,285 $ 11,320
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 ................. (443) (608) (1,398) (1,812)
-------------- -------------- ------------- --------------
Pro forma net income.................................... $ 5,307 $3,055 $13,887 $9,508
Earnings per common share:
As reported........................................ $0.09 $0.05 $0.23 $0.17
Pro forma .......................................... $0.08 $0.04 $0.21 $0.14
Earnings per common share, assuming dilution:
As reported ........................................ $0.08 $0.05 $0.22 $0.16
Pro forma .......................................... $0.07 $0.04 $0.20 $0.13
The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model. The estimate for fiscal year 2005 grants
assumes, among other things, a risk-free interest rate of 3.5%, no dividend
yield, expected volatility of 95% and an expected life of 5 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:
Nine months ended
December 31,
-----------------------------------
(in millions) 2003 2004
--------------- ----------------
Total product warranty reserve at the
beginning of the period.............. $ 1,520 $ 1,670
Warranty expense........................ 1,551 1,533
Charged to other accounts............... -- --
Deductions.............................. (1,551) (1,314)
--------------- ----------------
Total product warranty reserve at the
end of the period.................... $1,520 $1,889
=============== ================
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 assessed 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
December 31, 2004 and the Company has recorded a $1.2 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
In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement No. 123 (revised 2004) Share-Based payment, which is a revision of
FASB Statement No. 123, Accounting for Stock-Based Compensation. Statement 123
(R) supersedes Accounting Principal Board Opinion (APB) No. 25, Accounting for
Stock Issued to Employees, and amends FASB No. 95, Statement of Cash Flows.
Generally, the approach to accounting in Statement 123 (R) requires all
share-based payments to employees, including grants of employee stock options,
to be recognized in the financial statements based on their fair values.
Currently the Company accounts for these payments under the intrinsic value
provisions of APB No. 25 with no expense recognition in the financial
statements. Statement 123 (R) is effective for the Company beginning July 1,
2005. The Company is currently evaluating Statement 123(R), but has not yet
determined the impact to the Company's results of operations.
In November 2004, the FASB issued Statement of Financial Accounting
Standards No. 151 ("SFAS No. 151"), Inventory Costs , an amendment of APB No.
43, Chapter 4. The amendments made by SFAS No. 151 will improve financial
reporting by requiring that abnormal amounts of idle facility expense, freight,
handling costs, and wasted materials (spoilage) be recognized as current-period
charges and by requiring the allocation of fixed production overheads to
inventory based on the normal capacity of production facilities. SFAS No. 151 is
effective for inventory costs incurred during fiscal years beginning after June
15, 2005. Earlier application is permitted for inventory costs incurred during
fiscal years beginning after November 24, 2004. The Company is currently
evaluating the impact that the adoption of SFAS No. 151 will have on its
financial position and results of operations, but does not expect significant
impact.
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 December 31, 2003 with the quarter ended December 31, 2004 by
product line.
Three months ended December 31, Nine months ended December 31,
------------------------------------------------- ---------------------------------------------
(in thousands) 2003 % 2004 % 2003 % 2004 %
-------------------------- --------------------- --------------------- ---------------------
CNE.................... $ 35,761 59.6% $ 54,484 73.2% $ 97,805 56.3% 125,592 65.4%
NSA.................... 13,442 22.4% 9,090 12.2% 42,025 24.2% 33,484 17.4%
-------------------------- --------------------- --------------------- ---------------------
Total equipment........ 49,203 82.0% 63,574 85.4% 139,830 80.5% 159,076 82.8%
Services............... 10,775 18.0% 10,877 14.6% 33,810 19.5% 32,946 17.2%
-------------------------- --------------------- --------------------- ---------------------
Total revenues......... $ 59,978 $ 74,451 $ 173,640 $ 192,022
================= ============= ============= =============
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.
On January 31, 2005, SBC and AT&T announced that they had entered into an
agreement for SBC to acquire AT&T. SBC and AT&T indicated that the acquisition
is subject to approval by AT&T's shareholders and regulatory authorities, and
other customary closing conditions and is expected to close by the first half of
2006. In the nine months ended December 31, 2004, sales to SBC generated
approximately 12% of the Company's total revenues, 4% for the equipment segment
(primarily NSA products) and 8% for the services segment. SBC is the largest
customer of Conference Plus. AT&T offers services similar to Conference Plus.
12
The Company is unable to predict how the merger will impact the Company's
results of operations in the future.
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.
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. 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. 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 primarily to reduced
demand resulting from the migration by telephone companies to high-speed digital
transmission products and the sale of Data Station Termination product lines
that occurred in the first quarter of fiscal 2005.
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 with Verizon
to develop Verizon OneTM a multimedia access device using DSL broadband
technology that the Company expects Verizon to introduce in fiscal 2006. The
Company is also focusing on expanding existing and new products into the
international markets.
The Company expects its revenues to remain flat in the fourth quarter of
fiscal 2005 compared to the third quarter of fiscal 2005. As a result of
VersaLinkTM sales in the quarters ended September 30, 2004 and December 31,
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 March 31, 2005 at lower amounts and are expected to continue to
negatively impact margins. 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
newer applications 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. 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 24.1% from $60.0 million in the three
months ended December 31, 2003 to $74.5 million in the three months ended
December 31, 2004. This revenue increase was due to increased equipment revenue
of $14.4 million. The increased equipment revenue was due primarily to increased
sales of the Company's broadband products which in the quarter ended December
31, 2004 increased to $54.5 million compared to $35.8 million in the same
quarter one year ago. The increase in revenues from broadband products is due
primarily to 31% higher unit volume and 15% average price per unit increases.
13
The price increase is a result of selling the VersaLinkTM product in the quarter
ended December 31, 2004 which has a higher average selling price per unit than
traditional modems and accounted for over 50% of broadband revenue. Revenue from
the Company's NSA products in the equipment segment decreased from $13.4 million
in the three months ended December 31, 2003 to $9.1 million in the three months
ended December 31, 2004. The overall decrease in NSA product revenue is due
primarily to reduced demand resulting from the migration by telephone companies
to high-speed digital transmission products and the sale of Data Station
Termination product lines that occurred in the first quarter of fiscal 2005. The
Company's revenues increased 10.6% from $173.6 million in the nine months ended
December 31, 2003 to $192.0 million in the nine months ended December 31, 2004.
This revenue increase was due to increased equipment revenue of $19.2 million
and was offset by a decrease in teleconference service revenue of $864,000. The
increased equipment revenue was due primarily to increased sales of the
Company's broadband products which in the nine months ended December 31, 2004,
increased to $125.6 million compared to $97.8 million in the same period one
year ago. The increase in revenues from broadband products is due primarily to
42% higher unit volume offset by price reductions of 12%. Revenue from the
Company's NSA products in the equipment segment decreased from $42.0 million in
the nine months ended December 31, 2003 to $33.5 million in the nine months
ended December 31, 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 and the sale of Data Station Termination product
lines that occurred in the first quarter of fiscal 2005. 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
31.9% in the three months ended December 31, 2003 to 27.6% in the three months
ended December 31, 2004. Margin in the equipment segment decreased from 32.6% in
the three month period ended December 31, 2003 to 23.7% in the three months
ended December 31, 2004. This decrease in equipment segment gross margin
percentage is due primarily to expediting and other costs related to the
introduction of the VersaLinkTM product. Teleconference service gross margin
increased from 28.6% in the three months ended December 31, 2003 to 50.3% in the
three months ended December 31, 2004. Teleconference margins in the December 31,
2003 period were negatively impacted by a $775,000 charge taken for an early
contract termination penalty of a long distance contract. The Company believes
continued pricing pressures and continued reduction of NSA sales affecting its
equipment segment and expediting and other costs related to the introduction of
the VersaLinkTM product 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.
Overall gross margin as a percentage of revenue decreased from 33.6% in the nine
months ended December 31, 2003 to 30.4% in the nine months ended December 31,
2004. Margin in the equipment segment decreased from 32.8% in the nine month
period ended December 31, 2003 to 26.4% in the nine months ended December 31,
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 along with expediting and other
costs related to the introduction of the VersaLinkTM product. Teleconference
service gross margin increased from 37.2% in the nine months ended December 31,
2003 to 49.8% in the nine months ended December 31, 2004. Teleconference margins
in the December 31, 2003 period were negatively impacted by a $775,000 charge
taken for an early contract termination penalty of a long distance contract.
Teleconference service segment gross margin percent improvement is also impacted
by reduced telecommunications costs in the nine month period ended December 31,
2004 compared to the same period in the prior year. 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.
Sales and Marketing. Sales and marketing expense increased 23.5% from $4.6
million to $5.7 million in the three months ended December 31, 2004, and
increased 11.9% from $14.9 million to $16.6 million in the nine months ended
December 31, 2004 when compared to the same period last year. Sales and
marketing expenses as a percentage of revenues was 7.7% in both the three months
ended December 31, 2003 and December 31, 2004. The equipment segment sales and
marketing expenses increased by $625,000 and $716,000 in the three and nine
months periods ended December 31, 2004 compared to the same periods in the prior
year. The increase resulted primarily from increased use of temporary labor and
14
an increased warranty reserve required due to increased unit broadband product
sales. Sales and marketing expenses increase by $467,000 and $1 million in
Company's services segment for the three and nine months periods ended December
31, 2004 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 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 increased 4.6%, from
$3.9 million to $4.1 million in the three months ended December 31, 2004, and
decreased 11.7%, from $12.6 million to $11.2 million in the nine months ended
December 31, 2004 when compared to the same period last year. The decrease in
research and development expense in the nine month period 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 $506,000 and $1.4 million of engineering expenses as an
intangible asset for EnVoyTM software in the three and nine months ended
December 31, 2004, respectively. The Company believes that research and
development expenses will increase in the fourth quarter 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 decreased 2.2%,
from $4.5 million in the three months ended December 31, 2003 to $4.4 million in
the three months ended December 31, 2004. General and administrative expenses
decreased 5.7%, from $14.0 million in the nine months ended December 31, 2003 to
$13.2 million in the nine months ended December 31, 2004. General and
administrative expenses decreased by $233,000 and $826,000 in the Company's
equipment segment in the three and nine months ended December 31, 2004
respectively when compared with the same periods in the prior year. This
decrease is due primarily to lower legal expenses resulting from the settlement
of litigation. General and administrative expenses increased by $124,000 and
$34,000 in the Company's service segment in the three and nine month periods
ended December 31, 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 December 31, 2003 and 2004, respectively. Intangible amortization was $1.1
million and $1.0 million in the nine months ended December 31, 2003 and 2004,
respectively.
Gain on sales product line. The Company sold its Data Station Termination
product lines and specified related 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 $212,000 and $395,000 in the three
months and $403,000 and $788,000 in the nine months ended December 31, 2003 and
2004, respectively. Other income, net in the nine months ended December 31, 2004
contains a $400,000 legal settlement. The remainder of other income, net for the
three and nine month period ended December 31, 2004 and all of the period ended
December 31, 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 $127,000 in the three months
ended December 31, 2003 to $7,000 in the three months ended December 31, 2004
and decreased from $683,000 in the nine months ended December 31, 2003 to
$58,000 in the nine months ended December 31, 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 $7.4 million of income tax
expense in the three and nine months December 31, 2004 based on an estimated tax
rate for the year of approximately 40%. In the three and nine month periods
ended December 31, 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 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.
15
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2004, the Company had $21.7 million in cash and cash
equivalents consisting primarily of the highest rated grade corporate commercial
paper. At December 31, 2004, the Company had nothing outstanding and $27.5
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 $4.3 million as of
December 31, 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
December 31, 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 December 31, 2004,
there was $332,000 outstanding under these notes.
The Company's operating activities generated cash of $13.0 million in the
nine months ended December 31, 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 component accumulation to meet
the anticipated demand for the VersaLinkTM product and the advance purchase of
flash and SDRAM memory components, which are used in the Company's modem
products. 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 nine month period ended December 31, 2004 were
approximately $3.5 million. Approximately $2.9 million of the expenditures was
in the equipment segment with $606,000 spent in the services segment. The
Company expects to spend approximately $2.5 million and $400,000 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 Verizon
OneTM.
At December 31, 2004 the Company's principle sources of liquidity were
$21.7 million of cash and available borrowings under its facility. Cash in
excess of operating requirements, if any, will be used to invest on a short-term
basis in 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 December 31, 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..... 166 324 -- -- -- -- 490
Purchase obligations........ 21,834 22,144 1,887 236 -- -- 46,101
Future minimum lease
payments for operating
leases................... 2,855 3,283 3,058 3,048 2,940 20,175 35,359
---------- ---------- --------- --------- --------- ------------ -----------
Future obligations and
commitments.............. 24,855 25,751 4,945 3,284 2,940 20,175 81,950
========== ========== ========= ========= ========= ============ ===========
The Company had net deferred tax assets of approximately $72.8 million at
December 31, 2004. The Company has recorded a valuation allowance reserve of
$35.9 million to reduce the recorded net deferred tax asset to $36.9 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 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 $613,000
in additional other expense based on the ending intercompany balance outstanding
at December 31, 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 December 31, 2004, the balance in the cumulative foreign currency
translation adjustment account, which is a component of stockholders' equity,
was an unrealized loss of $718,000.
The Company does not have significant exposure to interest rate risk
related to its debt obligations due to its 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 $12,000 per annum in additional interest expense based on the
average debt borrowed during the twelve months ended December 31, 2004. The
Company does not feel such additional expense is significant. The Company does
17
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 control 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 6. EXHIBITS
- ----------------
Exhibit 10.26 Form of Restricted Stock Award under the Westell Technologies,
Inc. 2004 Stock Incentive Plan (incorporated by reference to
Exhibit 10.26 to the Company's Current Report on Form 8-K filed
with the Securities and Exchange Commission on January 3, 2005)
Exhibit 10.27 Form of Stock Option Award under the Westell Technologies, Inc.
2004 Stock Incentive Plan
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
18
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 9, 2005 By: /s/ E. VAN CULLENS
-------------------
E. VAN CULLENS
Chief Executive Officer
By: /s/ NICHOLAS C. HINDMAN, Sr.
------------------------------
NICHOLAS C. HINDMAN, Sr.
Chief Financial Officer
19