Attached files
| file | filename |
|---|---|
| EX-99.2 - PRESS RELEASE - WESTELL TECHNOLOGIES INC | dex992.htm |
| EX-99.1 - PRO FORMA FINANCIAL INFORMATION - WESTELL TECHNOLOGIES INC | dex991.htm |
| 8-K - FORM 8-K - WESTELL TECHNOLOGIES INC | d8k.htm |
 Westell Technologies, Inc.
Special Investor Presentation
Regarding CNS Sale
April 21, 2011
Westell Technologies, Inc.
Special Investor Presentation
Regarding CNS Sale
April 21, 2011
Exhibit 99.3 |
 2
2
Safe Harbor Language
Safe Harbor Language
Cautionary Statement Regarding Forward-Looking Information
Certain statements contained herein that are not historical facts or that contain
the words “believe”, “expect”, “intend”,
“anticipate”, “estimate”, “may”, “will”, “plan”, “should”, or derivatives
thereof and other words of similar meaning are forward-looking statements that
involve 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, product demand and market acceptance risks, need for
financing, a further economic weakness in the United States economy and
telecommunications market, the impact of competitive products or
technologies, competitive pricing pressures, customer product selection
decisions, product cost increases, component supply shortages, new product
development, excess and obsolete inventory, commercialization and technological
delays or difficulties (including delays or difficulties in developing,
producing, testing and selling new products and technologies), the effect of
Westell’s accounting policies, the need for additional capital, the
effect of economic conditions and trade, legal, social and economic risks (such as
import, licensing and trade restrictions), retention of key personnel and other
risks more fully described in the Company’s SEC filings, including the
Company’s Form 10-K for the fiscal year ended March 31, 2010 under
the section entitled Risk Factors. |
 3
Overview of CNS Transaction
Overview of CNS Transaction
Transaction: sale of substantially all assets of Customer Networking
Solutions (CNS) Division
•
Relates to revenue for the 12 months ended 12/31/10 of $39.5 million
Closing: April 15, 2011
Purchaser: NETGEAR, Inc.
Purchase consideration
•
$33.5 million purchase price
•
$32.9 million estimated ultimate net cash proceeds
Retained assets of CNS Division
•
Verizon customer relationship and contract
•
Applies to revenue for the 12 months ended 12/31/10 of $40.4 million
•
Substantial FY12 revenue, but in contract wind-down mode
•
Homecloud™
initiative |
 4
Transaction Rationale
Transaction Rationale
Sale captures significant value for Westell shareholders
•
CNS product lines are largely commoditized
•
CNS division made remarkable progress over two years but continues to face
borderline profitability and ongoing marketplace challenges
•
NETGEAR is better positioned to capitalize on recent CNS momentum
•
Sale
price
is
85%
of
TTM
revenue
addressed
by
the
sale
transaction
(a)
•
Tax on gain is mostly shielded by Westell NOL’s
(a) Trailing Twelve Months as of 12/31/10. TTM operating profit was
negative. 0
20
40
60
80
100
12 months ended March 31, 2009
12 months ended March 31, 2010
9 months ended December 31, 2010
Revenue Retained
Revenue Sold
CNS Revenue $ millions |
 5
Transaction Rationale
Transaction Rationale
Transaction allows Westell to focus on two profitable businesses
•
Outside Plant Systems (OSP) is a well-positioned, highly attractive platform
that the Company would like to invest in and grow, both organically and
inorganically •
Conference Plus (CP) is a well-run niche player which has generated steady
profits and cash flow
•
Homecloud remains a high-potential product development opportunity
(8)
(6)
(4)
(2)
0
2
4
6
8
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
CNS
OSP
CP
Consolidated
Operating Profit $ millions |
 6
Post-Closing Perspective
Post-Closing Perspective
CNS will continue as an operating division
•
Retained CNS business expected to generate significant, committed revenue
through approximately two-thirds of FY12
•
Gross margin on this revenue expected to be reasonably typical for CNS
•
Homecloud
expected
to
spend
about
$2.5
million
in FY12
as
a
CNS
initiative
Westell will receive payments for rent and transition services (at cost) from
NETGEAR, anticipated for 6-12 months.
NETGEAR will provide certain services to Westell, as needed, at cost
Westell costs formerly carried by the full CNS division otherwise will need to
be reduced or be absorbed by the remaining businesses
•
Fixed and semi-fixed costs borne by CNS in FY11 totaled approximately $4.3
million
•
Westell anticipates redeploying resources into OSP growth and reducing
additional costs over time |
 7
Pro Forma Financial Statements
Pro Forma Financial Statements
Pro forma schedules filed in Westell’s April 21, 2011 Form 8-K follow
proscribed SEC guidelines.
Unfortunately, management believes that the 8-K disclosures provide
limited information concerning the effects of the transaction on
Westell’s continuing business.
•
The guidelines do not deal effectively with the partial sale of a division like
CNS, which uses a significant amount of shared resources.
•
The guidelines limit pro forma adjustments to those that are directly attributable
to the transaction and are factually supportable (i.e., without
judgments). •
Guidelines do not allow for the pro forma effect of shared allocations or of
cost-saving actions that could have been taken by management.
•
As a result, all costs shared between the sold and retained businesses in the
prior periods are reflected with the retained businesses.
•
Guidelines allow for separate disclosure of the expected cost savings in the notes
to the pro forma financial statements. In Westell’s case:
•
Many associated resources were transferred directly to NETGEAR, including 25 CNS
employees.
There
is
also
expected
to
be
an
additional
reduction
of
10
employees
as
a
direct
result
of
the
transaction.
The
expected
reduction
in
the
annual
expense
run-rate
associated
with
these
35
people
is
approximately
$4.7
million.
•
Marketing
and
engineering/R&D
costs
can
generally
be
sized
to
the
business,
and
costs
are
expected
to
decline
with
reductions
in
the
CNS
business.
•
Other
costs
also
may
be
reduced,
either
immediately
or
over
time. |
 8
Westell’s Future Look
Westell’s Future Look
Outside Plant
Outside Plant
Systems
Systems
Conference
Conference
Plus
Plus
Homecloud
Homecloud |
 9
Westell Strategy for the Future
Westell Strategy for the Future
Grow Outside Plant Systems
•
Organic
growth
focused
on
cellular
backhaul,
eSmartAccess
family
of
Ethernet
products,
systems
integration,
customized
and
semi-customized
products,
and
extensions of product lines
•
Inorganic
growth
through
prudent
acquisitions
targeted
to
complement
OSP
customer, product and market strengths
Maintain Conference Plus contributions and momentum
Harvest retained CNS business
Develop and launch Homecloud
Size the remaining cost base to the business
Deploy cash prudently to:
•
Grow OSP
•
Return value to shareholders |