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Westell Technologies Inc. Reports Operating Results (10-Q)

November 12, 2009 | About:
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10qk

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Westell Technologies Inc. (WSTL) filed Quarterly Report for the period ended 2009-09-30.

Westell Technologies Inc. designs, manufactures, markets and services a broad range of digital and analog products used by telcos to deliver services primarily over existing copper telephone wires that connect end users to a telco's central office. The company also markets its products and services to other telecommunications and information service providers seeking direct access to end-user customers. The company's customersinclude all the Regional Bell Operating Companies as well as GTE and other carriers. Westell Technologies Inc. has a market cap of $81.8 million; its shares were traded at around $1.19 with a P/E ratio of 59.5 and P/S ratio of 0.5.

Highlight of Business Operations:

Sales and marketing expense in the OSP segment decreased 11.5% and 9.2 % in the three and six months ended September 30, 2009, respectively, compared to the same periods ended September 30, 2008. The $163,000 and $259,000 three and six month decreases were due primarily to a reduction of employees resulting from past reorganizations, lower bonus targets for remaining employees and in the elimination of a 401(k) match that collectively resulted in $102,000 and $180,000 less personnel-related expense, respectively. The remaining sales and marketing expense reductions of $61,000 and $79,000 in each period resulted from overall lower spending across most sales and marketing expense categories.

Sales and marketing expense decreased 24.9% and 22.6% in the ConferencePlus segment when comparing the three and six months ended September 30, 2009, respectively, compared to the same periods ended September 30, 2008. The $611,000 and $1.2 million three and six month decreases were due primarily to the reduction of employees resulting from past reorganizations, lower bonus targets for remaining employees and in the elimination of the 401(k) match that collectively resulted in lower personnel-related costs of $350,000 and $620,000 and lower expenses of $45,000 and $115,000 related to travel, meeting and tradeshows. The remaining three and six month sales and marketing expense reductions of $216,000 and $465,000 in each period resulted primarily from lower international sales expense, lower royalties and less advertising expense.

Research and development expense in the OSP segment decreased by 27.3% and 16.9% in the three and six months ended September 30, 2009 as compared to the same periods from the prior year. The $225,000 and $242,000 three and six month reductions were due primarily to decreased consulting expense of $77,000 and $92,000, product certification reductions of $119,000 and $108,000 and other research and development expense reductions $29,000 and 42,000.

The ConferencePlus segment general and administrative expense decreased by 27.5% and 22.1% in the three and six months ended September 30, 2009, respectively, compared to the same periods in fiscal year 2009. The $551,000 and $882,000 decrease in the three and six months resulted in part from the reduction of employees which caused a $319,000 and $450,000 decrease in personnel-related expense. The remaining three and six month reductions of $232,000 and $432,000 were due to reductions across most general and administrative expense categories including depreciation and bad debt.

Restructuring The Company had a reduction in force across all business units in the first quarter of fiscal 2010 that resulted in a total restructuring charge of $609,000, of which $414,000, $46,000 and $149,000 was related to the CNS, OSP and ConferencePlus segments, respectively. A $58,000 reversal was recorded in the period ended June 30, 2008 and a $2,000 charge in the period ended September 30, 2008 was made to record a change in estimate for severance and outplacement.

Intangible assets amortization Intangible assets amortization was $160,000 and $458,000 for the three months and $317,000 and $917,000 for the six months ended September 30, 2009 and 2008, respectively. The intangibles consist of product technology and customer relationships from previous acquisitions. The intangible amortization that related to the OSP segment was $132,000 and $458,000 for the three months and $261,000 and $917,000 for the six months ended September 30, 2009 and 2008, respectively. The intangible amortization related to the ConferencePlus segment was $28,000 and $56,000 for the three and six months ended September 30, 2009.

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