UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
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, 2002
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
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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)
(630) 898-2500
Registrant's telephone number, including area code
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 registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act). Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Common Stock, $0.01 Par Value - 45,907,065 shares at November 1, 2002
Class B Common Stock, $0.01 Par Value - 19,014,869 shares at November 1, 2002
This Amendment on Form 10-Q/A constitutes Amendment No. 2 to the Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 2002 (the
"Quarterly Report") of Westell Technologies, Inc. In connection with the filing
of this Amendment and pursuant to Rule 12b-15, we are including certain
currently dated certifications. This Amendment speaks as of the original filing
date of the Quarterly Report and, except as indicated, has not been updated to
reflect events occurring subsequent to the original filing date. For the
convenience of the reader, we have restated the Form 10-Q in its entirety.
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, 2002 and September 30, 2002 (unaudited)
Condensed Consolidated Statements of Operations (unaudited) 4
- Three months ended September 30, 2001 and 2002
- Six months ended September 30, 2001 and 2002
Condensed Consolidated Statements of Cash Flows (unaudited) 5
- Six months ended September 30, 2001 and 2002
Notes to the Condensed Consolidated Financial Statements
(unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about Market Risks 15
Item 4. Controls and Procedures 15
PART II OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K 17
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", "continue," "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, 2002. 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.
WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, September 30,
2002 2002
---------------- ----------------
(unaudited)
(in thousands)
Current assets:
Cash and cash equivalents........................................... $6,687 $8,358
Accounts receivable (net of allowance of $1,531 and $1,290, 25,266 28,559
respectively).......................................................
Inventories......................................................... 18,174 13,807
Prepaid expenses and other current assets........................... 2,169 1,439
Deferred income tax asset........................................... 7,830 7,830
Land held for sale.................................................. 2,052 -
---------------- ----------------
Total current assets............................................ 62,178 59,993
---------------- ----------------
Property and equipment:
Machinery and equipment............................................. 45,148 44,193
Office, computer and research equipment............................. 30,873 26,984
Leasehold improvements.............................................. 7,634 7,711
---------------- ----------------
83,655 78,888
Less accumulated depreciation and amortization...................... 54,029 54,679
---------------- ----------------
Property and equipment, net........................................ 29,626 24,209
---------------- ----------------
Goodwill.............................................................. 5,938 5,938
Intangibles, net...................................................... 10,374 9,596
Deferred income tax asset and other assets............................ 18,037 17,809
---------------- ----------------
Total assets.................................................... $ 126,153 $117,545
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $15,702 $13,893
Accrued expenses.................................................... 16,105 11,816
Notes payable....................................................... - 27,252
Accrued compensation................................................ 2,374 2,005
Current portion of long-term debt................................... 11,186 11,137
---------------- ----------------
Total current liabilities.......................................... 45,367 66,103
---------------- ----------------
Long-term debt........................................................ 39,469 7,852
Other long-term liabilities........................................... 5,044 6,151
---------------- ----------------
Total liabilities.................................................. 89,880 80,106
---------------- ----------------
Stockholders' equity:
Class A common stock, par $0.01....................................... 459 459
Authorized - 109,000,000 shares
Issued and outstanding - 45,907,065 shares at March 31, 2002 and
September 30, 2002
Class B common stock, par $0.01....................................... 190 190
Authorized - 25,000,000 shares
Issued and outstanding - 19,014,869 shares at March 31, 2002 and
September 30, 2002
Preferred stock, par $0.01............................................ -- --
Authorized - 1,000,000 shares
Issued and outstanding - none
Deferred compensation................................................. 46 46
Additional paid-in capital............................................ 364,566 364,566
Treasury stock at cost - 93,000 shares................................ (247) (247)
Cumulative translation adjustment..................................... (18) (107)
Accumulated deficit................................................... (328,723) (327,468)
---------------- ----------------
Total stockholders' equity...................................... 36,273 37,439
---------------- ----------------
Total liabilities and stockholders' equity.................... $ 126,153 $ 117,545
================ ================
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
September 30, September 30,
---------------------------- ----------------------------
2001 2002 2001 2002
------------ ------------ ------------ ------------
(unaudited)
(in thousands, except per share data)
Equipment sales............................... $ 46,319 $ 46,235 $ 96,527 $ 85,265
Services...................................... 13,102 9,936 26,193 20,711
------------ ------------ ------------ ------------
Total revenues.............................. 59,421 56,171 122,720 105,976
Cost of equipment sales....................... 40,637 32,717 83,743 61,673
Cost of services.............................. 8,579 6,984 16,454 13,822
------------ ------------ ------------ ------------
Total cost of goods sold.................... 49,216 39,701 100,197 75,495
------------ ------------ ------------ ------------
Gross margin............................... 10,205 16,470 22,523 30,481
Operating expenses:
Sales and marketing......................... 4,806 4,615 10,720 8,948
Research and development.................... 5,935 4,178 13,925 7,624
General and administrative.................. 6,207 4,126 11,887 8,777
Restructuring............................... 2,200 1,742 2,200 1,742
Goodwill and intangible amortization........ 7,953 389 15,906 778
------------ ------------ ------------ ------------
Total operating expenses.................. 27,101 15,050 54,638 27,869
------------ ------------ ------------ ------------
Operating income (loss)....................... (16,896) 1,420 (32,115) 2,612
Other (income) expense, net................... 16 (61) 273 (111)
Interest expense.............................. 1,208 685 2,567 1,468
------------ ------------ ------------ ------------
Income (loss) before tax benefit.............. (18,120) 796 (34,955) 1,255
Income taxes.................................. -- -- -- --
------------ ------------ ------------ ------------
Net income (loss)............................. $ (18,120) $ 796 $ (34,955) $ 1,255
============ ============ ============ ============
Net income (loss) per common share:...........
Basic............................ $ (0.28) $ 0.01 $ (0.55) $ 0.02
============ ============ ============ ============
Diluted.......................... $ (0.28) $ 0.01 $ (0.55) $ 0.02
============ ============ ============ ============
Weighted average number of common shares
outstanding:................................
Basic............................ 64,846 64,921 63,743 64,921
============ ============ ============ ============
Diluted.......................... 64,846 64,967 63,743 64,969
============ ============ ============ ============
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements
WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
September 30,
-----------------------------------------
2001 2002
----------------- -----------------
(unaudited)
(in thousands)
Cash flows from operating activities:
Net income (loss).................................................. $ (34,955) $ 1,255
Reconciliation of net income (loss) to net cash provided by
operating activities:
Depreciation and amortization.................................... 23,217 6,915
Deferred compensation............................................ 24 --
Restructuring ................................................... (279) 105
Loss on sale of fixed assets..................................... 244 111
Changes in assets and liabilities:
Accounts receivable.............................................. (1,243) (3,383)
Inventory........................................................ 28,678 4,367
Prepaid expenses and deposits.................................... 133 730
Other assets..................................................... (255) 228
Accounts payable and accrued expenses............................ (6,291) (5,110)
Accrued compensation............................................. (1,564) (369)
----------------- -----------------
Net cash provided by operating activities..................... 7,709 4,849
----------------- -----------------
Cash flows from investing activities:
Purchases of property and equipment.............................. (6,542) (756)
Proceeds from sale of land, building and equipment............... 932 1,978
----------------- -----------------
Net cash provided by (used in) investing activities........... (5,610) 1,222
----------------- -----------------
Cash flows from financing activities:
Net borrowing (repayment) under revolving promissory notes....... (7,954) 1,162
Borrowing of long-term debt and leases payable................... 1,499 --
--
Repayment of long-term debt and leases payable................... (185) (5,576)
Proceeds from the issuance of common stock....................... 5,955 --
----------------- -----------------
Net cash used in financing activities......................... (685) (4,414)
----------------- -----------------
Effect of exchange rate changes on cash............................ 32 14
Net increase in cash.......................................... 1,446 1,671
Cash and cash equivalents, beginning of period..................... 405 6,687
----------------- -----------------
Cash and cash equivalents, end of period........................... $ 1,851 $ 8,358
================= =================
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. It is suggested that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended March 31, 2002.
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,
2002, and for all periods presented. The results of operations for the three or
six month periods ended September 30, 2002 are not necessarily indicative of the
results that may be expected for the fiscal year ending March 31, 2003 ("fiscal
year 2003").
NOTE 2. COMPUTATION OF NET LOSS 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 effect of this computation on the number of outstanding shares is
antidilutive for the period ended September 30, 2001 and therefore the net loss
per basic and diluted earnings per share are the same.
NOTE 3. RESTRUCTURING CHARGE
The Company recognized a restructuring charge of $2.9 million in the
three months ended March 31, 2000. Approximately $2.4 million of the total
restructuring cost has been capitalized as part of the purchase of Teltrend Inc.
and primarily related to the termination of approximately 30 Teltrend Inc.
employees. The remaining $0.5 million of the restructuring costs has been
charged to operations and related to personnel, legal, and other related costs
incurred in order to eliminate redundant employees due to the acquisition of
Teltrend Inc. The goal of the restructuring plan was to combine and streamline
the operations of the two companies and to achieve synergies related to the
manufacture and distribution of common product lines. As of March 31, 2002, $2.0
million of these restructuring costs had been paid leaving a balance of
approximately $0.9 million. As of September 30, 2002, $2.3 million of these
restructuring costs have been paid.
The Company recognized a restructuring charge of $6.3 million in fiscal
year 2002. The purpose of the fiscal 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. As of March 31, 2002, $3.0 million of the fiscal 2002 restructuring
costs had been paid leaving a balance of approximately $3.3 million. During the
six months ended September 30, 2002, the Company paid approximately $1.3 million
of these accrued restructuring costs.
The Company recognized a restructuring charge of $1.7 million in
September 2002. This charge included personnel and facility costs related
primarily to the closing of a Conference Plus, Inc. facility. Approximately 25
employees were impacted by this closing. As of September 30, 2002, none of these
costs have been paid.
The Company's restructuring balances and their utilization are
presented in the following table:
Charged Utilized
Balance through through Balance
March 31, September 30, September 30, September 30,
(IN THOUSANDS) 2002 2002 2002 2002
----------------------------------------------------------------------------------------------------------
Employee costs....................... $ 2,039 $ 351 $ 1,298 $ 1,092
Legal, facility & other costs........ 2,174 1,391 339 3,226
----------------------------------------------------------------------------------------------------------
Total................................ $ 4,213 $ 1,742 $ 1,637 $ 4,318
==========================================================================================================
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 strategy. They consist of:
1) A telecommunications equipment manufacturer of local
loop access products, and
2) A multi-point telecommunications service bureau
specializing in audio teleconferencing, multi-point
video conferencing, broadcast fax and multimedia
teleconference services.
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, 2001 and
2002, are as follows:
Telecom Telecom
(In thousands) Equipment Services Total
------------ ------------ ---------
Three months ended September 30, 2001
Revenues.......................... $46,319 $ 13,102 $ 59,421
Operating income (loss)........... (18,541) 1,645 (16,896)
Depreciation and amortization..... 10,571 1,130 11,701
Total assets...................... 248,767 22,626 271,393
Three months ended September 30, 2002
Revenues.......................... $46,235 $ 9,936 $ 56,171
Operating income (loss)........... 2,516 (1,096) 1,420
Depreciation and amortization..... 2,181 1,140 3,321
Total assets...................... 100,131 17,414 117,545
Six months ended September 30, 2001
Revenues.......................... $96,527 $26,193 $ 122,720
Operating income (loss)........... (36,410) 4,295 (32,115)
Depreciation and amortization..... 21,122 2,095 23,217
Total assets...................... 248,767 22,626 271,393
Six months ended September 30, 2002
Revenues.......................... $85,265 $20,711 $105,976
Operating income.................. 2,345 267 2,612
Depreciation and amortization..... 4,638 2,277 6,915
Total assets...................... 100,131 17,414 117,545
Reconciliation of Operating income (loss) from continuing operations
for the reportable segments to Income (loss) from continuing operations before
income taxes:
Three months ended Six months ended
September 30, September 30,
2001 2002 2001 2002
---------- ---------- ---------- ----------
(In thousands)
Operating income (loss) ............................... $ (16,896) $ 1,420 $ (32,115) $ 2,612
Other (income) expense, net............................ 16 (61) 273 (111)
Interest expense....................................... 1,208 685 2,567 1,468
---------- ----------- ---------- -----------
Income (loss) before taxes ............................ $ (18,120) $ 796 $ (34,955) $ 1,255
========== ========== ========== ===========
NOTE 5. ADOPTION OF NEW ACCOUNTING POLICIES
On April 1, 2002, the Company adopted the Financial Accounting
Standards Board Statements of Financial Accounting Standards (FASB) No. 141,
Business Combinations, and No. 142, Goodwill and Other Intangible Assets. Under
the new rules, goodwill and other indefinite-lived intangibles are no longer
amortized but subject to annual impairment tests. Other intangible assets will
continue to be amortized over their useful lives. Goodwill amortization expense
in fiscal years 2000, 2001 and 2002 was $1.3 million, $31.8 million and $25.5
million, respectively. Upon adoption of this standard, the Company was required
to perform an impairment test of goodwill. This test showed no impairment of
goodwill. The adoption of the provisions for amortization of intangible assets
did not impact the Company's amortization of these assets. The following table
discloses pro forma results for net income and earnings per share as if the
non-amortization of goodwill provisions of FASB Statement No. 142 were adopted
at the beginning of fiscal year 2002.
Three months ended Six months ended September
September 30, 30,
----------------------------- -------------------------------
(in thousands, except per share amounts) 2001 2002 2001 2002
------------- ------------ ------------- -------------
Reported Net income (loss).................... $(18,120) $ 796 $(34,955) $1,255
Add back: Goodwill amortization............... 3,915 7,829
------------- ------------ ------------- -------------
Adjusted Net income (loss).................... $(14,205) $ 796 $(27,126) $1,255
============= ============ ============= =============
Reported basic and diluted earnings per share. $ (0.28) $0.01 $ (0.55) $0.02
Add back: Goodwill amortization per share..... .06 0.12
------------- ------------ ------------- -------------
Adjusted basic and diluted earnings per share. $ (0.22) $0.01 $ (0.43) $0.02
============= ============ ============= =============
As of September 30, 2002, the Company had finite lived intangible
assets with an original carrying value of $32.9 million, accumulated
amortization of $19.9 million and impairment expense of $3.4 million. These
assets consist of product technology acquired from Teltrend Inc. on March 17,
2000. At September 30, 2002, the net carrying value of these assets was $9.5
million. These intangibles are being amortized over a period of 5 to 7 years.
Intangible amortization included in expense for the three and six months ended
September 30, 2002 was $0.4 million and $0.8 million respectively. The remaining
amortization expense for fiscal 2003 is $0.8 million. The estimated amortization
expense for the next four years is $1.6 million per year.
NOTE 6. COMPREHENSIVE INCOME:
The disclosure of comprehensive income (loss), which encompasses net
income (loss) and foreign currency translation adjustments, is as follows:
Three months ended Six months ended September
September 30, 30,
----------------------------- -----------------------------
(in thousands) 2001 2002 2001 2002
------------ ------------ ------------ ------------
Net income (loss)............................. $(18,120) $796 $(34,955) $1,255
Other comprehensive Income (loss)
Foreign currency translation adjustment.. (38) 6 5 (89)
------------ ------------ ------------ ------------
Comprehensive income (loss).................. $(18,158) $802 $(34,950) $1,166
============ ============ ============ ============
NOTE 7. INVENTORIES
The components of inventories are as follows:
March 31, September 30,
---------------- ---------------
(in thousands) 2002 2002
---------------- ---------------
Raw material ................................. $ 22,721 $ 13,866
Work in process............................... 39 52
Finished goods................................ 14,889 9,312
Reserve for excess and obsolete inventory and net
realizable value.............................. (19,475) (9,423)
---------------- ---------------
$ 18,174 $ 13,807
================ ===============
NOTE 8. NEW ACCOUNTING PRONOUNCEMENTS
In June 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, effective for exit or disposal
activities initiated after December 31, 2002. The Company's current
restructuring plan, initiated in September of 2002, was not accounted for under
SFAS 146. The Company accrued a pre-tax charge of $1.7 million when Company
management approved the current restructuring plan. If the Company had accounted
for this restructuring plan under SFAS 146, $1.3 million of the $1.7 million
charge would have been recognized as incurred and not accrued in the second
quarter of fiscal 2003.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
-----------------------------------------------------------------------
OVERVIEW
Through its four broadband access product lines in its equipment
manufacturer segment, the Company offers 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 four
product lines include:
o Customer Networking Equipment(CNE): Westell Customer Networking Equipment
products and solutions enable residential, small business and Small Office
Home Office (SOHO) users to network multiple computers, telephones and
other devices to access the Internet through the power of broadband xDSL
solutions.
o Carrier Transport & Multiplexer(CTM): Westell's Carrier Transport and
Multiplexer products enable our customers to deliver and manage a range of
broadband services from the telephone company central office with
interfaces with other carriers such as wireless as well as enterprise
customers.
o Carrier Service Access(CSA): Westell Carrier Service Access products enable
telephone company transmission, maintenance, and troubleshooting of
multiple broadband solutions (telephone company services such as, Network
Interface Units , DS1, DS3, HDSL2, HDSL4 , DDS and ISDN) from the customer
access point to the serving telephone company central office.
o OSP, Enclosures & Accessories(OSP): Westell Outside Plant products and
solutions focus on facilities equipment linking the telephone company's
central office to the communications subscriber through various
transmission technologies, such as analog, digital data, traditional
repeatered T1, HDSL, HDSL2, and HDSL4.
The Company tracks revenue from these four product lines by two main
groups: Broadband Products and Telephone Company Access Products ("TAP").
Broadband products include CNE and CTM product lines and TAP products include
CSA and OSP product lines.
The Company's services segment provides teleconferencing, multipoint
video conferencing, broadcast fax, and multimedia teleconferencing services to
various customers through its subsidiary called Conference Plus Inc.
Below is a table that compares equipment and service revenues for the
three and six month periods ended September 30, 2001 with the three and six
month periods ended September 30, 2002 by product group. See Note 4 Interim
Segment Information under Notes to Condensed Consolidated Financial Statements
for presentation of operating income (loss).
Three months ended September 30, Six months ended September 30,
--------------------------------------------- --------------------------------------------
(in thousands) 2001 % 2002 % 2001 % 2002 %
--------------------- ---------------------- -------------------- ---------------------
TAP.................... $ 23,268 39.2% $ 16,158 28.8% $50,172 40.9% $31,817 30.0%
Broadband.............. 23,051 38.8% 30,077 53.5% 46,355 37.8% 53,448 50.5%
-------------- -------------- ------------ --------------
Total equipment........ 46,319 78.0% 46,235 82.3% 96,527 78.7% 85,265 80.5%
Services............... 13,102 22.0% 9,936 17.7% 26,193 21.3% 20,711 19.5%
-------------- -------------- ------------ --------------
Total revenues......... $ 59,421 $ 56,171 $122,720 $105,976
============== ============== ============ ==============
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 and service providers.
Increasing competition, in terms of the number of entrants and their size, and
increasing size of the Company's customers because of mergers, continues to
exert downward pressure on prices for the Company's products. The Company has
also elected to eliminate some products and exit some markets based on an
analysis of current and future prospects.
The Company expects to continue to evaluate new product opportunities
and engage in extensive research and development activities. This will require
the Company to continue to invest 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.
In addition, revenues from TAP products such as NIUs have declined in recent
years as telephone companies continue to move 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.
As a result of the recession, the Company has experienced competitive
pricing pressures and less than anticipated sales in both of its business
segments. Telephone companies have reduced spending on low speed TAP
transmission products although the Company believes that spending on Customer
Network Equipment is not currently impacted by the economic downturn. A
reorganization of the Company occurred in the second quarter of fiscal year
2002. Certain products, projects and a customer relationship were discontinued.
The Company had excess inventory and less than anticipated customer sales during
that period. The decline in product prices in fiscal year 2002 due to the
recession in the telecommunications industry resulted in portions of the
Company's inventory to be stated above the estimated selling prices less cost to
sell. Accordingly, the Company recognized an inventory adjustment to net
realizable value, charges for excess and obsolete inventory, and the write off
of fixed assets of $14.5 million in fiscal year 2002. The Company incurred a
reorganization charge of $6.3 million in fiscal 2002 in its efforts to realign
the Company's operating expenses with its revenues. To offset the effects of the
recession in the telecommunications industry and the discontinued customer
relationship, in the first six months of fiscal year 2003, the Company has
maintained a lower level of inventory, adjusted its forecasting process to
account for the impact of the recession and continued to reduce costs. If the
Company has not adjusted its operations to adequately take into account the
impact of the continued recession or if the recession worsens, then the Company
could experience less than anticipated unit sales and increased inventory
balances, which would adversely affect the Company's business. In addition, in
the first six months of fiscal 2003, the Company's operating results were
negatively impacted by the loss of a significant customer in the Company's
services segment. Additional customer losses or the inability to add new
customers could negatively impact the Company's financial condition.
RESULTS OF OPERATIONS. PERIOD ENDED SEPTEMBER 30, 2002 COMPARED TO PERIODS
ENDED SEPTEMBER 30, 2001
Revenues. The Company's revenues decreased 5.5% from $59.4 million in
the three months ended September 30, 2001 to $56.2 million in the three months
ended September 30, 2002. This revenue decrease was due to decreased equipment
revenue from the Company's TAP products of $7.1 million and a decrease in
teleconference service revenue of $3.1 million when compared with the same
period of the prior year. Equipment revenue from the Company's Broadband
products increased by $7.0 million when compared with the same three-month
period of the prior year. The decrease in revenues from TAP products was due
primarily to lower unit volume. The decrease in service revenue is attributable
to a reduction in call minutes at the Company's subsidiary Conference Plus, Inc.
The increase in revenue from Broadband products is due to higher unit volume.
The Company's revenues decreased 13.6% from $122.7 million in the six
months ended September 30, 2001 to $106.0 million in the six months ended
September 30, 2002. This revenue decrease was primarily due to decreased
equipment revenue from the Company's TAP products of $18.3 million when compared
with the same period of the prior year. Equipment revenue from the Company's
Broadband products increased by $7.1 million when compared with the same
six-month period of the prior year. The decrease in revenue from TAP products
was due to overall unit volume decreases. The increase in revenue from Broadband
products is due to earning a one-time product royalty of $1.7 million as well as
to higher unit volume. Service revenue decreased in the six month period by $5.5
million when compared with the same period of the prior year due to a reduction
in call minutes at the Company's Conference Plus, Inc. subsidiary.
Gross Margin. Gross margin as a percentage of revenue increased from
17.2% in the three months ended September 30, 2001 to 29.3% in the three months
ended September 30, 2002 and increased from 18.4% in the six months ended
September 30, 2001 to 28.8% in the six months ended September 30, 2002. The
increased margins in the three and six month periods ended September 30, 2002
were primarily due to reduced material, labor and handling costs, particularly
in our broadband product lines, a reversal of $2.0 million excess and obsolete
inventory reserve, and the recording of a $1.7 million product royalty. For the
three and six month periods ended September 30, 2001, gross margins were
adversely impacted by the Company's recognition of inventory charges for excess
and obsolete inventory of $4.3 million related to an acceleration of the
technological obsolescence of certain of the Company's products due to
competitive actions. The increase in gross margins for the three and six month
periods ended September 30, 2002 was offset in part by decreased margin dollars
of $1.6 million and $2.9 million generated by the Company's Conference Plus,
Inc. subsidiary for the three and six months periods ended September 30, 2002,
respectively. Excluding the one-time royalty and the reversal of excess and
obsolete inventory reserves, gross margin as a percentage of revenue would have
been 25.8% and 25.3% in the three and six months ended September 30, 2002. The
Company believes that continued pricing pressures and the continued recession in
the telecommunications industry affecting its equipment segment will adversely
impact margins in the future. The Company expects that these anticipated price
reductions will be offset in part with continued cost reductions and
efficiencies.
Sales and Marketing. Sales and marketing expenses decreased 4.0%, or
$191,000, to $4.6 million in the three months ended September 30, 2002 and
decreased 16.5%, or $1.8 million, to $8.9 million in the six months ended
September 30, 2002 when compared to the same period last year. Sales and
marketing expenses increased as a percentage of revenues from 8.1% in the three
months ended September 30, 2001 to 8.2% in the three months ended September 30,
2002. Sales and marketing expenses decreased as a percentage of revenues from
8.7% in the six months ended September 30, 2001 to 8.4% in the six months ended
September 30, 2002. The decrease in sales and marketing expenses was primarily
due to the fiscal 2002 reorganizations, which reduced employee related expenses
and outside consulting expenses, and other cost-cutting measures that were taken
due to the recession in the telecommunications industry. 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.
Research and Development. Research and development expenses decreased
29.6%, or $1.8 million, to $4.2 million in the three months ended September 30,
2002 and decreased 45.2%, or $6.3 million, to $7.6 million in the six months
ended September 30, 2002 when compared to the same period last year. Research
and development expenses decreased as a percentage of revenues from 10.0% in the
three months ended September 30, 2001 to 7.4% in the three months ended
September 30, 2002. Research and development expenses also decreased as a
percentage of revenues from 11.3% in the six months ended September 30, 2001 to
7.2% in the six months ended September 30, 2002. The decrease in research and
development expense is primarily a result of the fiscal 2002 reorganizations,
which reduced employee related expenses and outside consulting expenses, and
other cost-cutting measures that were taken due to the recession in the
telecommunications industry. To a lesser extent, research and development
expenses decreased because the Company earned $250,000 in the three months ended
June 30, 2002 from a customer to fund engineering projects which were offset
against research and development expenses. The Company believes that research
and development expenses in the future will continue to be a significant percent
of revenue and will be required for the Company to remain competitive.
General and Administrative. General and administrative expenses
decreased 33.5%, from $6.2 million in the three months ended September 30, 2001
to $4.1 million in the three months ended September 30, 2002. General and
administrative expenses decreased 26.2%, from $11.9 million in the six months
ended September 30, 2001 to $8.8 million in the six months ended September 30,
2002. General and administrative expenses decreased as a percentage of revenues
from 10.4% in the three months ended September 30, 2001 to 7.3% in the three
months ended September 30, 2002. General and administrative expenses also
decreased as a percentage of revenues from 9.7% in the six months ended
September 30, 2001 to 8.3% in the six months ended September 30, 2002. The
decrease in general and administrative expenses was primarily due to the fiscal
2002 reorganizations, which were a result of the recession in the
telecommunications industry. The Company does not expect that the decrease in
general and administrative expenses will have material adverse effect on the
Company's operations.
Goodwill and intangible amortization. Goodwill and intangible
amortization expense decreased due to adoption of the Statements of Financial
Accounting Standards (SFAS) 142 issued by the Financial Accounting Standards
Board (FASB). Under the new rules, goodwill and other indefinite lived
intangibles are no longer amortized but are subject to annual impairment tests.
The Company performed the first impairment test as of April 1, 2002 and no write
down was required. The amortization of other identifiable intangible assets was
approximately $389,000 and $778,000 in the three and six month periods ended
September 30, 2002.
Other (income) expense, net. Other (income) expense, net changed from a
loss of $16,000 in the three months ended September 30, 2001 to income of
$61,000 in the three months ended September 30, 2002 and changed from a loss of
$273,000 in the six months ended September 30, 2001 to income of $111,000 in the
six months ended September 30, 2002. Other (income) expense is primarily
comprised of interest income earned on temporary cash investments and the
elimination of minority interest and unrealized gains or losses on intercompany
balances denominated in foreign currency. The expense for the fiscal 2001
periods was primarily due to the recognition of foreign currency losses on
intercompany balances.
Interest expense. Interest expense decreased from $1.2 million in the
three months ended September 30, 2001 to $685,000 in the three months ended
September 30, 2002 and decreased from $2.6 million in the six months ended
September 30, 2001 to $1.5 million in the six months ended September 30, 2002.
Interest expense during the current period is a result of interest incurred on
net obligations outstanding during the period under promissory notes, capital
leases, and vendor debt. The reduction in interest expense for the three and six
month periods were due to lower debt and lower interest rates on debt.
Income taxes. There was no benefit or expense for income taxes recorded
for either the three or the six month periods ended September 30, 2001 and 2002.
The Company reversed valuation reserves for the entire expense generated during
the three and six month periods ended September 30, 2002 of $0.5 million and
$0.8 million, respectively. The Company will evaluate on a quarterly basis its
ability to utilize deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2002, the Company had $8.4 million in cash and cash
equivalents consisting primarily of federal government agency instruments and
the highest rated grade corporate commercial paper. As of September 30, 2002,
the Company had $5.0 million outstanding under its term loan and $22.3 million
outstanding and $6.3 million available under its secured revolving credit
facility. These amounts are shown as notes payable on the balance sheet.
The Company's revolving credit facility, as amended on June 28, 2002,
provides for a $5 million non-amortizing term loan and a $30 million asset based
revolving credit facility, both due June 30, 2003. If the amendment had not been
effected, the Company would not have been in compliance with the EBITDA covenant
of the credit facility on June 29, 2002. The amended asset based revolving
credit facility provides for total borrowing based upon 85% of eligible accounts
receivable and 30% of eligible inventory not to exceed $7.3 million as of
September 30, 2002. The $7.3 million inventory limitation is reduced by $0.1
million on the first day of each month. Borrowings under this facility provide
for the interest to be paid by the Company at the prime rate plus 1%. The term
loan is secured by, among other things, a security interest in certain
collateral granted by certain stockholders consisting of trusts of Robert C.
Penny III and other family members. Trusts of Robert C. Penny III and other
Penny family members are participants to the amended revolving credit facility.
The Company paid a $350,000 restructuring fee to the lenders in connection with
the amendments to the credit facility. The amended credit facility requires the
revolving loan to be paid in full before any payments are applied to the term
loan. This credit facility contains covenants regarding EBITDA, tangible net
worth and maximum capital expenditures. The Company was in compliance with the
covenants contained in the credit facility at September 30, 2002. Management
expects to be in compliance with the covenants for the term of the credit
facility.
On May 30, 2002, the Company signed two subordinated promissory notes
with Solectron Technology SDN BHD. One note in the amount of $5.0 million is for
the payment of inventory held by Solectron that the Company is committed to buy.
The second note in the amount of $16.6 million is for the payment of accounts
payable and accrued interest. Both notes require a weekly principal and monthly
interest payment and are payable over 2.3 years. A third subordinated secured
promissory note in the amount of $1.3 million made by the Company and payable to
Solectron Technology SDN BHD was entered into on June 3, 2002 and is payable
monthly over one year. This note was part of the settlement of litigation with
Celsian Technologies, Inc. All three notes bear interest at the prime rate plus
2.5%. As of September 30, 2002, $17.7 million was outstanding under these notes.
At September 30, 2002 the Company had various operating leases for
facilities and equipment. The total minimum future rental payments are $5.3
million, $4.3 million, $3.5 million, $3.5 million, $3.4 million and $26.0
million for fiscal years 2003, 2004, 2005, 2006, 2007 and thereafter,
respectively.
The Company's operating activities provided cash of $4.8 million in the
six months ended September 30, 2002. This resulted primarily from net income of
$1.2 million, non cash depreciation and amortization of $6.9 million, and
reductions in inventory of $4.3 million at the Company's telecom equipment
segment offset in part by decreases in accounts payable and accrued expenses of
$5.1 million and increases in account receivable of $3.4 million. The Company's
operating activities provided for cash of $7.7 million for the six month period
ended September 30, 2001. This resulted primarily from cash sources created from
the reduction of inventory in the amount of $28.7 million at the Company's
telecom equipment segment offset in part by uses of cash resulting from net
losses net of depreciation and amortization of $11.7 million, reduction in
accounts payable and accrued expenses of $7.9 million and increases in accounts
receivable of $1.2 million. The inventory reductions were achieved for the
periods ended September 30, 2002 and 2001 by selling products throughout the
year that were in inventory at March 31, 2002 and March 31, 2001, respectively,
in the Company's telecom equipment segment. The Company believes that its
current inventory level is necessary to satisfy ongoing business operations.
Capital expenditures for the six month period ended September 30, 2002
were approximately $0.8 million compared with $6.5 million for the six months
ended September 30, 2001. The reduction in capital expenditures is due primarily
to the Company's decreased need to spend on bridge equipment used to run
conference calls in the telecom services segment in the amount of $5.1 million.
The Company expects to spend approximately $3.5 million for capital expenditures
for the remainder of fiscal year 2003 related primarily for machinery, computer
and research equipment purchases.
At September 30, 2002, the Company's principle sources of liquidity
were $8.4 million of cash and the secured revolving credit facility under which
the Company was eligible to borrow up to an additional $6.3 million based upon
receivables and inventory levels. 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 that future cash requirements will be satisfied by cash
generated from operations and its current credit facility for the next twelve
months.
The Company had a deferred tax asset of approximately $92.4 million at
September 30, 2002. The Company has recorded a valuation allowance reserve of
$67.0 million to reduce the recorded deferred tax asset to $25.4 million. The
net operating loss carryforward begins 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.
Although realization of the deferred tax asset is not assured as the Company has
incurred operating losses for the 2000, 2001 and 2002 fiscal years, management
believes that it is more likely than not that it will generate taxable income
sufficient to realize a portion of the tax benefit. Portions of these deferred
tax assets are expected to be utilized, prior to their expiration, through a tax
planning strategy available to the Company. The tax planning strategy that the
Company is relying upon involves the potential sale of the Company's 91% owned
Conference Plus Inc. subsidiary. The estimated gain generated by the sales of
this business would generate sufficient taxable income to offset the recorded
deferred tax assets. The Company obtains an annual independent appraisal of the
value of the business in the fourth quarter of each fiscal year. This appraisal,
which is based on discounted future cash flows, is used in the Company's
evaluation of the recorded net deferred tax assets. If the appraised value of
Conference Plus, Inc. is not sufficient to generate taxable income to recover
the deferred tax benefit recorded, an increase in the valuation allowance will
be required through a charge to the income tax provision. However, if the
Company achieves sufficient profitability or has available additional tax
planning strategies to utilize a greater portion of the deferred tax asset, an
income tax benefit would be recorded to decrease the valuation allowance.
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. The Company's future primary exposure is to changes in
exchange rates for the U.S. dollar versus the British pound and the Irish pound.
As of September 30, 2002, the net balance in the cumulative foreign
currency translation adjustment account, which is a component of stockholders'
equity, was an unrealized loss of $107,000.
The Company does not have significant exposure to interest rate risk
related to its debt obligations, which are primarily U.S. Dollar denominated.
The Company's market risk is the potential loss arising from adverse changes in
interest rates. As further described in Note 1 of the Company's 10-K for the
period ended March 31, 2002, the Company's debt consists primarily of a
floating-rate bank line-of credit. 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 6.50% to approximately 7.15%) of the
average interest rate on the Company's debt. If such an increase occurred, the
Company would incur approximately $195,000 per annum in additional interest
expense based on the average debt borrowed during the twelve months ended
September 30, 2002. The 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.
ITEM 4. CONTROLS AND PROCEDURES.
-----------------------
Our Chief Executive Officer and Chief Financial Officer have concluded,
based on their evaluation within 90 days of the filing date of this report, that
our disclosure controls and procedures are effective to ensure 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 significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the previously mentioned evaluation.
PART II. OTHER INFORMATION
--------------------------
ITEM 1. LEGAL PROCEEDINGS
-------------------------
Westell Technologies, Inc. and certain of its officers and directors
have been named in In re Westell Technologies, Inc. Securities Litigation, No 00
C 6735 (cons. complaint filed February 1, 2001), filed in the United States
District Court for the Northern District of Illinois. This case is a
consolidation of eleven cases filed against Westell and certain of its officers
and directors in the United States District Court of the Northern District of
Illinois in 2000. The case alleges generally that the defendants violated the
antifraud provisions of the federal securities laws by allegedly issuing
material false and misleading statements and/or allegedly omitting material
facts necessary to make the statements made not misleading, thereby allegedly
inflating the price of Westell stock for certain time periods. The case claims
that, in 2001, certain officers of Westell allegedly reassured analysts that
Westell's sales were on track to meet forecasts for the second quarter of fiscal
2001, when they knew that Westell was experiencing a substantial shortfall in
second quarter modem sales due to decreased orders from a major customer, SBC
Communications, Inc. The case seeks damages allegedly sustained by plaintiffs
and the class by reason of the acts and transactions alleged in the complaints
as well as interest on any damage award, reasonable attorneys' fees, expert
fees, and other costs. The parties are engaged in discovery and settlement
negotiations. The case is set for trial on November 3, 2003.
Certain of Westell's officers and directors have been named in a
derivative action titled Dollens and Vukovich v. Zionts, et al., No. 01C2826,
filed December 4, 2001 in the United States District Court for the Northern
District of Illinois. The case alleges generally that the defendants issued
material false and misleading statements and/or allegedly omitted material facts
necessary to make the statements made not misleading thereby inflating the price
of Westell stock for certain time periods, engaged in insider trading, and
misappropriated corporate information. The allegations in support of the claims
are identical to the allegations in the Federal case described above. The case
seeks damages allegedly sustained by Westell by reason of the acts and
transactions alleged in the complaint, a constructive trust for the amount of
profits the individual defendants made on insider sales, reasonable attorneys'
fees, expert fees and other costs. The case is a consolidation of four cases
filed against Westell and certain of its officers and directors in 2000 and
2001. The parties are engaged in discovery and settlement negotiations. The case
is set for trial on November 3, 2003.
The Company was named in a declaratory judgment action in the Circuit
Court of DuPage County, Wheaton, Illinois entitled WTI (IL) QRS 12-36, Inc.
("Landlord") v. Westell, Inc. and Westell Technologies, Inc. Landlord is the
lessor of the Company's leased facilities in Aurora, Illinois. The covenants
under the lease agreement incorporate the covenants under the Company's credit
facility. Any amendments to the credit facility are deemed accepted by Landlord
as long as Landlord receives a corresponding fee based upon any amendment
consideration paid to the lenders by the Company. Landlord claims that it is
entitled to additional consideration in connection with the June 29, 2001
amendment of Westell's credit agreement due to the Penny family trusts'
guarantee entered into on that date. Further, the Landlord claims that it is
therefore not bound by the amendments on that date, and that the Company is
consequently in breach of its covenants under the lease. Landlord seeks
declaratory judgment that Landlord is due a $4,981,3000 secured guaranty by the
Penny family members, and that Landlord may declare the lease in default and
pursue any defaults remedies available thereunder. The Company has filed a
motion to dismiss on the grounds that the guaranties at issue have been released
by the senior lender.
In May 2002, the Company filed a patent infringement lawsuit against
HyperEdge Corporation in the U.S. District Court for the Northern District of
Illinois (Civil Action No. 02-C-3496). The complaint charges HyperEdge with
infringing Westell's U.S. Patent Number 5,444,776, which relates to an
innovative bridge circuit technology often used in a network interface unit and
seeks injunctive relief and $6 million in damages. HyperEdge has filed
affirmative defenses, counterclaims that include unfair competition, laches and
estoppel, and invalidity of the patent claims. The case is currently in
discovery.
In the opinion of the Company, although the outcome of any legal
proceedings set forth above cannot be predicted with certainty, the liability of
the Company in connection with its legal proceedings could have a material
effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDS.
-------------------------------------------------
On September 26, 2002, our annual meeting of stockholders was held and
the following matter was voted on:
1. The following individuals were elected to the board of directors to
serve until the 2003 annual meeting of shareholders and thereafter
until their successors are duly elected and qualified:
Nominee Votes For Votes abstained
------- --------- ---------------
John W. Seazholtz............................... 115,244,235 457,952
Paul A. Dwyer, Jr............................... 115,243,335 458,852
E. Van Cullens.................................. 112,513,793 3,188,394
Robert C. Penny III............................. 115,240,435 455,752
Roger L. Plummer................................ 115,241,735 460,452
Thomas A. Reynolds, III......................... 115,159,265 542,922
Bernard E. Sergesketter......................... 115,243,212 458,974
Melvin J. Simon................................. 115,160,065 542,122
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
Exhibit 99.1 Certification by the Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 99.2 Certification by the Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
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: May 23, 2002
By: /s/ E. VAN CULLENS
-------------------
E. VAN CULLENS
Chief Executive Officer
By: /s/ NICHOLAS C. HINDMAN
------------------------
NICHOLAS C. HINDMAN
Senior Vice President and Chief Financial Officer
I, E. Van Cullens, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Westell
Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during
the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior
to the filing date of this quarterly report (the
"Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: May 23, 2003
/s/ E. Van Cullens
-----------------------
E. Van Cullens,
President and Chief Executive Officer
I, Nicholas C. Hindman, Sr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Westell
Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during
the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior
to the filing date of this quarterly report (the
"Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: May 23, 2003
/s/ Nicholas C. Hindman, Sr.
------------------------
Nicholas C. Hindman, Sr.
Senior Vice President and
Chief Financial Officer