Company Reports Sequential Improvements as Service Revenue Climbs 55% AURORA, Ill., May 20 /PRNewswire/ -- Westell Technologies, Inc. (Nasdaq: WSTL) today announced results for its fourth quarter and fiscal year ended March 31, 1999. For the three months ended March 31, 1999, total revenues were $24.1 million, representing a 1.8% increase over revenues of $23.7 million in the same period last year. Service revenue for the quarter increased 54.6% to $6.7 million while combined DSO and DS1 revenue declined 13.8% as lower average selling price offset unit sales. DSL revenues declined 0.6% on unit volume increases of slightly over 73%. The operating loss was $7.9 million including a one-time charge of $800,000 related to restructuring of global operations. This compares to a loss of $6.8 million in the same quarter last year and a loss of $9.7 million in the December 31 quarter. Excluding the restructuring charge, operating expense decreased $1.4 million or 11.6% over the previous quarter. The net loss per common share for the fourth quarter, excluding the restructuring charge was 21 cents (23 cents including restructuring) representing an improvement from 26 cents and 28 cents in the prior two quarters. For the same period last year, net loss was 18 cents per share. The gross margin for the quarter was 30.1%, up from 26.0% and 20.3% in the prior two quarters. For the same period last year, gross margin was 32.8%. Cost reductions efforts continue throughout the Company. DSL pricing is expected to remain highly competitive. For the fiscal year ended March 31, 1999, total revenues were $93.2 million, an increase of 7.9% over the previous fiscal year. This includes an increase in service revenue of 50.7% to $21.3 million. DSL revenue declined 2.8% to $12.1 million as unit volume increased 20.5% as lower average selling prices offset increased unit sales. DS0 and DS1 revenue fell 1.3% to $56.9 million as lower average selling prices offset increased unit sales. Operating expenses for the year were $60.0 million dollars and, excluding restructuring charges of $800,000 in 1999 and $1.4 million in 1998, fell as a percentage of revenues by 7.1% versus 1998. The net loss in fiscal year 1999, was $35.0 million or 96 cents per common share. This compares with a loss, excluding a one-time benefit of $12.0 million (break-up fee from Texas Instruments related to the proposed Westell/Amati merger) of $25.9 million or 71 cents per common share last year. The increased loss per common share was due primarily to lower gross profit on DSL sales related to forward pricing of products, set earlier in the year, and pricing pressures on DSO and DS1 products. Recent developments include: -- The completion of our convertible debentures to enhance the balance sheet -- The receipt of contract from Bell Atlantic and Quality Award (GTE) for our Telephone Access Business -- A DSL Agreement Extension with Bell Atlantic -- The development and funding (BIRD foundation) for the Communications Portal(TM) -- The expansion of Conference Plus Inc. (CPI's) facilities to Dublin, Ireland. Westell Technologies, Inc, headquartered in Aurora, Ill., is a holding company for Westell, Inc. and Conference Plus, Inc. Westell, Inc. manufactures and licenses DSL systems and value added CPE, and manufactures telecommunications access products. Conference Plus, Inc. is a multi-point telecommunications service bureau specializing in audio teleconferencing, multi-point video conferencing, broadcast fax, and IP multimedia conferencing services. Additional information can be obtained by visiting Westell's Web site at http://www.westell.com. "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: Certain statements contained herein including, without limitation, "to enhance the balance sheet", are forward looking statements that involve risks and uncertainties. These risks include, but are not limited to, product demand and market acceptance risks (including the future commercial acceptance of Westell's ADSL systems by telephone companies and other customers), the impact of competitive products and technologies (such as cable modems and fiber optic cable), competitive pricing pressures, product development, excess and obsolete inventory due to new product development, commercialization and technological delays or difficulties (including delays or difficulties in developing, producing, testing and selling new products and technologies, such as ADSL systems), the effect of Westell's accounting policies, the effect of economic conditions and trade, legal, social, and economic risks (such as import, licensing and trade restrictions) and other risks more fully described in Westell's Annual Report on Form 10-K for the fiscal year ended March 31, 1998 under the section "Risk Factors". Westell undertakes no obligation to release publicly the result of any revisions to these forward looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. /FROM PR NEWSWIRE CHICAGO 888-776-6551/ [STK] WSTL [IN] CPR [SU] ERN This should be sent with CGTH067. TO BUSINESS EDITOR: /FIRST AND FINAL ADD -- CGTH067 -- Westell Earnings/ Westell Technologies, Inc. Comparative Financial Results (Dollars in thousands except footnotes and per share amounts) Three Months ended Twelve Months ended March 31, March 31, 1999 1998 %Change 1999 1998 %Change Revenues (unaudited) (unaudited) DS0 $664 $1,149 -42.2% $3,707 $5,235 -29.2% DS1 13,016 14,724 -11.6% 53,232 52,481 1.4% DSL 3,004 3,023 -0.6% 12,099 12,448 -2.8% Services 6,728 4,352 54.6% 21,318 14,145 50.7% Other revenue 711 454 56.5% 2,824 2,042 38.3% Total revenues 24,123 23,702 1.8% 93,180 86,351 7.9% Gross profit 7,261(A) 7,780 -6.7% 24,864(A) 27,492 -9.6% Gross margin 30.1% 32.8% 26.7% 31.8% Operating expenses Sales & marketing 4,036 4,122 -2.1% 19,441 19,296 0.8% Expense to revenue 16.7% 17.4% 20.9% 22.3% General & administrative 3,424 3,811 -10.2% 13,117 13,151 -0.3% Expense to revenue 14.2% 16.1% 14.1% 15.2% Restructuring charge 800(B) 800(B) 1,383(B) Research & development 6,922 6,680 3.6% 26,606 26,558 0.2% Expense to revenue 28.7% 28.2% 28.6% 30.8% Total operating expenses 15,182 14,613 3.9% 59,964 60,388 -0.7% Expense to revenue 62.9% 61.7% 64.4% 69.9% Operating loss (7,921) (6,833) 15.9% (35,100) (32,896) 6.7% Other income (520) 720 NM 405 14,290(C) NM Interest expense 25 255 -90.2% 296 502 -41.0% Income (loss) before tax (8,466) (6,368) NM (34,991) (19,108) NM Provision (benefit) for income taxes -(D) - NM -(D) (5,137) NM Effective tax rate 0.0% 0.0% 0.0% 26.9% Net income (loss) $(8,466) $(6,368) NM $(34,991) $ (13,971) NM Basic and diluted income (loss) per common share (0.23) (0.18) NM (0.96) (0.38) NM Average number of common shares outstanding Basic & Diluted(E) 36,442 36,375 36,427 36,348 Footnotes: (A) After an impact of approximately $200,000 and $2.7 million related to forward pricing of DSL orders received during the current quarter and year to date periods ended March 31, 1999, respectively. (B) One time charge related to Company restructuring DSL global operations. (C) Includes a one time benefit of $12.0 million, net of expenses, for a break-up fee received from Texas Instruments related to the proposed Westell/Amati merger. (D) A valuation reserve of $1.7 and $12.3 million was recorded during the current quarter and year to date periods, respectively, since the resulting gross deferred tax asset would have exceeded the value of tax planning strategies available to the company. (E) Loss year impact of dilution is antidilutive, therefore dilutive presentation is not applicable. Key Balance Sheet Data March 31, March 31, 1999 1998 (000's) (unaudited) Cash and Short term Investments 6,715 44,199 Receivables 14,131 12,399 Inventory 10,376 9,428 Total current assets 33,390 68,734 Total current liabilities 21,178 21,253 Shareholders' Equity 39,124 73,141  