Business Segments

9 Months Ended

Dec. 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 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 inputs, 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 third quarter and first nine months of fiscal years 2018 and 2017 are as follows (in thousands):

	Three Months Ended
	December 24, 2017						December 25, 2016
	Commercial		Retail				Commercial		Retail
	Segment		Segment		Total		Segment		Segment		Total
Revenues
Public Carrier	$	22,721	$	—	$	22,721	$	25,851	$	—	$	25,851
Government		10,680		—		10,680		8,250		—		8,250
Private System Operators		24,844		—		24,844		22,927		—		22,927
Value-Added Resellers		33,557		—		33,557		31,069		—		31,069
Retail		—		54,458		54,458		—		59,101		59,101
Total revenues	$	91,802	$	54,458	$	146,260	$	88,097	$	59,101	$	147,198
Gross Profit
Public Carrier	$	3,178	$	—	$	3,178	$	4,070	$	—	$	4,070
Government		2,256		—		2,256		1,843		—		1,843
Private System Operators		5,305		—		5,305		4,902		—		4,902
Value-Added Resellers		8,512		—		8,512		8,712		—		8,712
Retail		—		10,349		10,349		—		10,442		10,442
Total gross profit	$	19,251	$	10,349	$	29,600	$	19,527	$	10,442	$	29,969
Directly allocable expenses		7,418		3,899		11,317		8,256		4,656		12,912
Segment net profit contribution	$	11,833	$	6,450		18,283	$	11,271	$	5,786		17,057
Corporate support expenses						16,211						14,986
Income before provision for income taxes					$	2,072					$	2,071

	Nine Months Ended
	December 24, 2017						December 25, 2016
	Commercial		Retail				Commercial		Retail
	Segment		Segment		Total		Segment		Segment		Total
Revenues
Public Carrier	$	76,742	$	—	$	76,742	$	60,961	$	—	$	60,961
Government		30,150		—		30,150		27,092		—		27,092
Private System Operators		70,093		—		70,093		64,222		—		64,222
Value-Added Resellers		103,548		—		103,548		98,769		—		98,769
Retail		—		150,822		150,822		—		159,648		159,648
Total revenues	$	280,533	$	150,822	$	431,355	$	251,044	$	159,648	$	410,692
Gross Profit
Public Carrier	$	11,083	$	—	$	11,083	$	10,323	$	—	$	10,323
Government		6,672		—		6,672		6,075		—		6,075
Private System Operators		14,966		—		14,966		14,081		—		14,081
Value-Added Resellers		26,415		—		26,415		27,218		—		27,218
Retail		—		29,554		29,554		—		28,133		28,133
Total gross profit	$	59,136	$	29,554	$	88,690	$	57,697	$	28,133	$	85,830
Directly allocable expenses		23,736		11,365		35,101		24,501		12,414		36,915
Segment net profit contribution	$	35,400	$	18,189		53,589	$	33,196	$	15,719		48,915
Corporate support expenses						47,208						44,676
Income before provision for income taxes					$	6,381					$	4,239

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

	Three Months Ended
	December 24, 2017		December 25, 2016
Revenues
Base station infrastructure	$	57,282	$	52,193
Network systems		24,024		25,242
Installation, test and maintenance		9,255		9,633
Mobile device accessories		55,699		60,130
Total revenues	$	146,260	$	147,198
Gross Profit
Base station infrastructure	$	13,280	$	13,857
Network systems		3,420		3,186
Installation, test and maintenance		1,759		1,594
Mobile device accessories		11,141		11,332
Total gross profit	$	29,600	$	29,969

	Nine Months Ended
	December 24, 2017		December 25, 2016
Revenues
Base station infrastructure	$	175,800	$	157,090
Network systems		77,041		65,133
Installation, test and maintenance		23,927		25,269
Mobile device accessories		154,587		163,200
Total revenues	$	431,355	$	410,692
Gross Profit
Base station infrastructure	$	41,423	$	40,738
Network systems		11,170		9,505
Installation, test and maintenance		4,611		4,538
Mobile device accessories		31,486		31,049
Total gross profit	$	88,690	$	85,830