Business Segments

6 Months Ended

Sep. 24, 2017

Operating Segment

Operating Segment

Note 8. Business Segments

Beginning with the first quarter of fiscal year 2018, the Company modified the structure of its internal organization in an effort to better serve the market place. Retail inventory typically has a shorter more defined life cycle and is, typically, ultimately used by individual end users. Commercial inventory typically has a life cycle that tends to be tied to changes in regulation or technology and includes products typically used by business entities or governments. Reflective of these differences, our sales and product teams have been reorganized and will each now report to either a retail or commercial leader. The Company concluded that corresponding changes to its reportable segments are warranted and now evaluates its business within two segments: commercial and retail. The commercial segment consists of the following customer markets:  (1) public carriers, that are generally responsible for building and maintaining the infrastructure system and provide airtime service to individual subscribers; (2) government including federal agencies and state and local governments that run wireless networks for their own use as well as value-added resellers who specialize in selling to the government;  (3) private system operators including commercial entities such as enterprise customers, major utilities and transportation companies; and (4) value-added resellers that sell, install and/or service cellular telephone, wireless networking, broadband and two-way radio communications equipment primarily for the enterprise market. The retail segment consists of the market which includes retailers, independent dealer agents and carriers. All prior financial periods presented in this Quarterly Report on Form 10-Q reflect this change.

During the first quarter of fiscal year 2018, in conjunction with the, modification of the structure of the internal organization of the Company, as described above, the Company reviewed several customer types, including a large repair center customer, and reclassified them from the private system operators market to either the value-added resellers market or the retail market, based on their purchase history. The Company has restated prior periods reflected in this Quarterly Report on Form 10-Q to reflect these changes.

The Company evaluates goodwill at the reporting unit level. In conjunction with the change in segments, the Company evaluated its goodwill using Level 3 fair value input, and no impairment indicators were identified.

To provide investors with better visibility, the Company also discloses revenue and gross profit by its four product categories:

· Base station infrastructure products are used to build, repair and upgrade wireless telecommunications systems. Products include base station antennas, cable and transmission lines, small towers, lightning protection devices, connectors, power systems, miscellaneous hardware, and mobile antennas. Base station infrastructure service offerings include connector installation, custom jumper assembly, site kitting and logistics integration.

· Network systems products are used to build and upgrade computing and internet networks.  Products include fixed and mobile broadband equipment, distributed antenna systems (DAS), wireless networking, filtering systems, two-way radios and security and surveillance products.  This product category also includes training classes, technical support and engineering design services. 

· Installation, test and maintenance products are used to install, tune, maintain and repair wireless communications equipment. Products include sophisticated analysis equipment and various

frequency-, voltage- and power-measuring devices, as well as an assortment of tools, hardware, GPS, safety and replacement and component parts and supplies required by service technicians.  

· Mobile device accessories include cellular phone and data device accessories such as replacement batteries, cases, speakers, mobile amplifiers, power supplies, headsets, mounts, car antennas, music accessories and data and memory cards. Retail merchandising displays, promotional programs, customized order fulfillment services and affinity-marketing programs, including private label internet sites, complement our mobile devices and accessory product offering.

The Company evaluates revenue, gross profit, and income before provision for income taxes at the segment level.  Certain cost of sales and other applicable expenses have been allocated to each segment based on a percentage of revenues and/or gross profit, where appropriate.

Segment activity for the second quarter and first six months of fiscal years 2018 and 2017 are as follows (in thousands):

	Three Months Ended
	September 24, 2017						September 25, 2016
	Commercial		Retail				Commercial		Retail
	Segment		Segment		Total		Segment		Segment		Total
Revenues
Public Carrier	$	27,423	$	—	$	27,423	$	18,532	$		$	18,532
Government		11,025		—		11,025		8,990				8,990
Private System Operators		24,207		—		24,207		20,990				20,990
Value-Added Resellers		34,951		—		34,951		33,409				33,409
Retail		—		47,478		47,478				52,713		52,713
Total revenues	$	97,606	$	47,478	$	145,084	$	81,921	$	52,713	$	134,634
Gross Profit
Public Carrier	$	3,777	$	—	$	3,777	$	3,236	$		$	3,236
Government		2,412		—		2,412		2,092				2,092
Private System Operators		5,054		—		5,054		4,613				4,613
Value-Added Resellers		8,942		—		8,942		9,223				9,223
Retail		—		9,738		9,738				9,592		9,592
Total gross profit	$	20,185	$	9,738	$	29,923	$	19,164	$	9,592	$	28,756
Directly allocable expenses		7,796		3,716		11,512		7,910		4,240		12,150
Segment net profit contribution	$	12,389	$	6,022		18,411	$	11,254	$	5,352		16,606
Corporate support expenses						15,319						14,577
Income before provision for income taxes					$	3,092					$	2,029

	Six Months Ended
	September 24, 2017						September 25, 2016
	Commercial		Retail				Commercial		Retail
	Segment		Segment		Total		Segment		Segment		Total
Revenues
Public Carrier	$	54,021	$	—	$	54,021	$	35,110	$	—	$	35,110
Government		19,470		—		19,470		18,842		—		18,842
Private System Operators		45,249		—		45,249		41,295		—		41,295
Value-Added Resellers		69,990		—		69,990		67,700		—		67,700
Retail		—		96,364		96,364		—		100,547		100,547
Total revenues	$	188,730	$	96,364	$	285,094	$	162,947	$	100,547	$	263,494
Gross Profit
Public Carrier	$	7,905	$	—	$	7,905	$	6,253	$	—	$	6,253
Government		4,416		—		4,416		4,232		—		4,232
Private System Operators		9,661		—		9,661		9,179		—		9,179
Value-Added Resellers		17,903		—		17,903		18,506		—		18,506
Retail		—		19,205		19,205		—		17,692		17,692
Total gross profit	$	39,885	$	19,205	$	59,090	$	38,170	$	17,692	$	55,862
Directly allocable expenses		16,318		7,466		23,784		16,245		7,758		24,003
Segment net profit contribution	$	23,567	$	11,739		35,306	$	21,925	$	9,934		31,859
Corporate support expenses						30,997						29,691
Income before provision for income taxes					$	4,309					$	2,168

Supplemental revenue and gross profit information by product category for the second quarter and first six months of fiscal years 2018 and 2017 are as follows (in thousands):

	Three Months Ended
	September 24, 2017		September 25, 2016
Revenues
Base station infrastructure	$	59,448	$	52,502
Network systems		29,180		21,461
Installation, test and maintenance		7,679		6,881
Mobile device accessories		48,777		53,790
Total revenues	$	145,084	$	134,634
Gross Profit
Base station infrastructure	$	14,086	$	13,453
Network systems		3,921		3,421
Installation, test and maintenance		1,433		1,376
Mobile device accessories		10,483		10,506
Total gross profit	$	29,923	$	28,756

	Six Months Ended
	September 24, 2017		September 25, 2016
Revenues
Base station infrastructure	$	118,518	$	104,897
Network systems		53,017		39,891
Installation, test and maintenance		14,671		15,636
Mobile device accessories		98,888		103,070
Total revenues	$	285,094	$	263,494
Gross Profit
Base station infrastructure	$	28,143	$	26,881
Network systems		7,750		6,319
Installation, test and maintenance		2,852		2,944
Mobile device accessories		20,345		19,718
Total gross profit	$	59,090	$	55,862