Westell Technologies Inc. has a market cap of $118.1 million; its shares were traded at around $1.75 with a P/E ratio of 10.9 and P/S ratio of 0.7. WSTL is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations:The Company recorded a $473,000 net tax benefit in the three months period ended June 30, 2010. The net benefit included a $345,000 benefit related to a contingent tax position. The Company no longer needed a reserve against the uncertain tax position because the statute of limitations related to the position expired during the quarter. The net benefit also included a $178,000 benefit related to the Company's ability to fully offset alternative minimum taxable income with alternative minimum net operating loss carryforwards that were generated in fiscal year 2008. The net benefit was offset, in part, by $50,000 of tax expense that was recorded using an effective tax rate of 1.2% based on projected income for the fiscal year. Tax expense resulted from foreign and state tax. The Company was able to utilize its reserved net operating loss carryforwards to offset federal taxable income and federal alternative minimum taxable income. In the quarter ended June 30, 2009, the Company recorded a tax expense of $155,000 using an effective tax rate of 7.0%. The Company will continue to reassess realizability of the deferred tax assets going forward.
At June 30, 2010, the Company had $61.8 million in cash and cash equivalents, consisting of bank deposits and money market funds. At June 30, 2010, the Company had no amounts outstanding and $12.0 million available under its secured revolving credit facility.
The Company entered into a Credit Agreement with The Private Bank and Trust Company as of March 5, 2009 (the Credit Agreement) and subsequently entered into a first amendment to its Credit agreement to extend the maturity date to March 31, 2011. The Credit Agreement is an asset-based revolving credit facility in an amount up to $12.0 million based on 80% of eligible accounts receivable plus the lesser of 30% of eligible inventory or $3.0 million. The obligations of the Company under the Credit Agreement are secured by a guaranty from certain direct and indirect domestic subsidiaries of the Company, and by substantially all of the assets of the Company.
The Companys operating activities provided cash of $1.0 million in the three months ended June 30, 2010. Cash was provided primarily from net income of $4.6 million plus non-cash items of $1.1 million consisting of depreciation, amortization and stock-based compensation, but was partially offset by a cash use of $3.2 million in accounts payable and a $2.0 million reduction in accrued compensation. The Companys investing activities used $142,000 for capital expenditures primarily in the ConferencePlus services segment. In the three months ended June 30, 2010, the Companys financing activities used $322,000 of cash primarily for the purchase of treasury stock.
Future obligations and commitments increased $8.1 million in the first quarter ended June 30, 2010 to $81.8 million up from $73.7 million at March 31, 2010, due primarily to an increase in inventory purchase obligations in the CNS equipment segment.
As of June 30, 2010, the Company had deferred tax assets of approximately $61.6 million before a valuation allowance of $55.9 million, which reduced the recorded net deferred tax asset to $5.7 million. The remaining deferred tax asset is fully reserved by a FIN 48 liability recorded in other long-term liabilities.
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