1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended December 31, 2000.
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 ( 0-21767 )
VIASAT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0174996
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6155 EL CAMINO REAL, CARLSBAD, CALIFORNIA 92009
(760) 476-2200
(Address, including zip code, and telephone number, including area code,
of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 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 [ ]
The number of shares outstanding of the issuer's common stock, $.0001 par
value, as of February 8, 2001 was 21,975,742.
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VIASAT, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet at March 31, 2000
and December 31, 2000 3
Condensed Consolidated Statement of Income for the three
and nine months ended December 31, 1999 and 2000 4
Condensed Consolidated Statement of Cash Flows for the
nine months ended December 31, 1999 and 2000 5
Condensed Consolidated Statement of Stockholders' Equity
for the nine months ended December 31, 2000 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
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VIASAT, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, DECEMBER 31,
2000 2000
------------- -------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 19,520,000 $ 24,504,000
Short-term investments 121,000 --
Accounts receivable 26,268,000 59,449,000
Inventory 3,122,000 21,778,000
Deferred income taxes 1,813,000 3,536,000
Other current assets 2,167,000 11,371,000
------------- -------------
Total current assets 53,011,000 120,638,000
Property and equipment, net 8,164,000 17,297,000
Intangible assets, net -- 22,654,000
Other assets 755,000 2,541,000
------------- -------------
Total assets $ 61,930,000 $ 163,130,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,934,000 $ 18,909,000
Accrued liabilities 5,001,000 13,215,000
Current portion of notes payable 907,000 504,000
------------- -------------
Total current liabilities 14,842,000 32,628,000
------------- -------------
Notes payable 336,000 --
Other liabilities 755,000 229,000
------------- -------------
Total long-term liabilities 1,091,000 229,000
------------- -------------
Contingencies (Note 6)
Minority interest in consolidated subsidiary -- 332,000
Stockholders' equity:
Common stock 2,000 2,000
Paid in capital 18,932,000 95,867,000
Retained earnings 27,063,000 34,167,000
Accumulated other comprehensive income (loss) -- (95,000)
------------- -------------
Total stockholders' equity 45,997,000 129,941,000
------------- -------------
Total liabilities and stockholders' equity $ 61,930,000 $ 163,130,000
============= =============
See accompanying notes to Condensed Consolidated Financial Statements.
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VIASAT, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
--------------------------------- ---------------------------------
1999 2000 1999 2000
------------- ------------- ------------- -------------
Revenues $ 18,041,000 $ 43,093,000 $ 52,093,000 $ 119,449,000
Cost of revenues 10,493,000 29,466,000 29,760,000 80,811,000
------------- ------------- ------------- -------------
Gross profit 7,548,000 13,627,000 22,333,000 38,638,000
Operating expenses:
Selling, general and administrative 2,845,000 7,675,000 8,226,000 20,065,000
Independent research and
development 2,087,000 1,589,000 5,967,000 4,955,000
Acquired in-process research and
development -- 141,000 -- 2,334,000
Amortization of intangible assets -- 967,000 -- 2,342,000
------------- ------------- ------------- -------------
Income from operations 2,616,000 3,255,000 8,140,000 8,942,000
Other income (expense):
Interest income 283,000 304,000 762,000 1,330,000
Interest expense (37,000) (15,000) (126,000) (80,000)
Minority interest -- (46,000) -- (44,000)
------------- ------------- ------------- -------------
Income before income taxes 2,862,000 3,498,000 8,776,000 10,148,000
Provision for income taxes 855,000 783,000 3,160,000 3,044,000
------------- ------------- ------------- -------------
Net income $ 2,007,000 $ 2,715,000 $ 5,616,000 $ 7,104,000
============= ============= ============= =============
Basic net income per share $ .12 $ .12 $ .35 $ .34
============= ============= ============= =============
Diluted net income per share $ .12 $ .12 $ .33 $ .32
============= ============= ============= =============
Shares used in basic net income per
share computation 16,226,932 21,836,429 16,188,562 21,187,133
============= ============= ============= =============
Shares used in diluted net income per
share computation 17,413,910 22,875,989 16,981,572 22,416,498
============= ============= ============= =============
See accompanying notes to Condensed Consolidated Financial Statements.
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VIASAT, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
DECEMBER 31,
-------------------------------
1999 2000
------------ ------------
Cash flows from operating activities:
Net income $ 5,616,000 $ 7,104,000
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization 2,531,000 5,723,000
Acquired in-process research and development -- 2,334,000
Deferred taxes 424,000 (1,795,000)
Tax benefit from exercise of stock options 68,000 478,000
Minority interest in consolidated subsidiary -- 332,000
Non-cash compensation -- 134,000
Increase (decrease) in cash resulting from changes in
assets and liabilities (net of effect of acquisition):
Accounts receivable (6,155,000) (15,311,000)
Inventory (664,000) (11,199,000)
Other assets (15,000) (10,539,000)
Accounts payable 365,000 10,115,000
Accrued liabilities (693,000) 3,956,000
Other liabilities 200,000 (723,000)
------------ ------------
Net cash provided by (used in) operating activities 1,677,000 (9,391,000)
------------ ------------
Cash flows from investing activities:
Acquisition of a business -- (57,114,000)
Proceeds from sale of short-term investments 12,213,000 121,000
Purchases of property and equipment (2,912,000) (2,973,000)
------------ ------------
Net cash provided by (used in) investing activities 9,301,000 (59,966,000)
------------ ------------
Cash flows from financing activities:
Repayment of notes payable (961,000) (739,000)
Proceeds from issuance of common stock, net of
issuance costs 562,000 75,107,000
------------ ------------
Net cash (used in) provided by financing activities (399,000) 74,368,000
Effect of exchange rate changes on cash -- (27,000)
------------ ------------
Net increase in cash and cash equivalents 10,579,000 4,984,000
Cash and cash equivalents at beginning of period 6,005,000 19,520,000
------------ ------------
Cash and cash equivalents at end of period $ 16,584,000 $ 24,504,000
============ ============
Supplemental information:
Cash paid for interest $ 126,000 $ 15,000
============ ============
Cash paid for income taxes $ 3,347,000 $ 4,545,000
============ ============
See accompanying notes to Condensed Consolidated Financial Statements.
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VIASAT, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
COMMON STOCK ACCUMULATED
----------------------------- OTHER
NUMBER OF PAID IN RETAINED COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS INCOME(LOSS) TOTAL
------------- ------------- ------------- ------------- ------------- -------------
Balance at March 31, 2000 16,393,208 $ 2,000 $ 18,932,000 $ 27,063,000 $ 45,997,000
Tax benefit from exercise of
stock options 478,000 478,000
Exercise of stock options 243,594 1,049,000 1,049,000
Issuance of shares for
Employee Stock Purchase
Plan 66,216 910,000 910,000
Issuance of shares for
secondary public offering,
net of issuance costs of
$903,000 5,224,150 73,149,000 73,149,000
Issuance of warrants to
purchase 100,000 shares of
common stock 1,215,000 1,215,000
Non-cash compensation
related to stock options 134,000 134,000
Foreign currency translation $ (95,000) (95,000)
Net income 7,104,000 7,104,000
------------- ------------- ------------- ------------- ------------- -------------
Balance at December 31, 2000 21,927,168 $ 2,000 $ 95,867,000 $ 34,167,000 $ (95,000) $ 129,941,000
============= ============= ============= ============= ============= =============
See accompanying notes to Condensed Consolidated Financial Statements.
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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying condensed consolidated balance sheet as of December 31, 2000,
the condensed consolidated statement of income for the three and nine month
periods ended December 31, 1999 and 2000, the condensed consolidated statement
of cash flows for the nine month periods ended December 31, 1999 and 2000, and
the condensed consolidated statement of stockholders' equity for the nine months
ended December 31, 2000 have been prepared by the management of ViaSat, Inc.,
and have not been audited. These financial statements, in the opinion of
management, include all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of the financial position, results
of operations and cash flows for all periods presented. These financial
statements should be read in conjunction with the financial statements and notes
thereto for the year ended March 31, 2000 included in our 2000 Annual Report on
Form 10-K. Interim operating results are not necessarily indicative of operating
results for the full year.
The accompanying condensed consolidated financial statements include the results
of TrellisWare Technologies, Inc., a majority owned subsidiary of ViaSat. All
significant intercompany amounts have been eliminated. This equity interest is
accounted for under the equity method of accounting as we exercise significant
influence. This investment is recorded initially at cost and subsequently
adjusted for net equity in income (loss) and cash contributions and
distributions. Ownership of the preferred stock of TrellisWare entitles us to
substantially all of the economic benefits in the preferred stock affiliate.
On July 28, 2000 the Board of Directors declared a two-for-one stock split of
our common stock in the form of a stock dividend. The stock dividend was
distributed at the close of business on August 31, 2000 to stockholders of
record on August 21, 2000. All share and per share information in the financial
statements has been adjusted to reflect the stock split on a retroactive basis.
In general, the functional currency of a foreign operation is deemed to be the
local country's currency. Consequently, assets and liabilities of operations
outside the United States are generally translated into United States dollars,
and the effects of foreign currency translation adjustments are included as a
component of stockholders' equity.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Estimates
have been prepared on the basis of the most current and best available
information, and actual results could differ from those estimates.
NOTE 2 - SECONDARY PUBLIC STOCK OFFERING AND ACQUISITION OF SATELLITE NETWORKS
BUSINESS
On April 24, 2000, we completed a secondary public stock offering for the sale
of 5,224,150 shares of common stock for net proceeds of approximately $73.1
million.
On April, 25, 2000, we completed the acquisition of the satellite networks
business (the "Satellite Networks Business") of Scientific-Atlanta, Inc. for an
aggregate purchase price of approximately $57.1 million in cash (which reflects
adjustments to the purchase price in accordance with the purchase agreement),
plus warrants to purchase 100,000 shares of common stock valued at $1.2 million.
The Satellite Networks Business is a significant DAMA-based VSAT supplier with
additional product lines addressing the non-DAMA VSAT market, the gateway
market, the asset tracking and meter reading market, and the telemetry and
antenna systems market. In addition, the Satellite Networks Business brings us a
larger and more experienced commercial sales force, a significant customer base,
additional research and development, and engineering capabilities. We have moved
the headquarters of our commercial business to the Satellite Networks Business
facilities in Norcross, Georgia.
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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The acquisition has been accounted for by the purchase method of accounting as
defined in APB Opinion No. 16. The purchase price of the acquisition has been
allocated to the estimated fair value of the tangible and intangible assets
acquired and liabilities assumed of the Satellite Networks Business. The
purchase price allocation for certain assets is preliminary and further
refinements are likely to be made on the completion of final valuation studies.
In connection with this acquisition, a charge of $2.3 million for acquired in
process research and development is included in our results. This charge
represents the fair value of certain acquired research and development projects
that were determined to have not reached technological feasibility and have no
alternative future use. The estimated fair value of assets acquired and
liabilities assumed, which is subject to further refinement, is as follows:
Accounts receivable $ 17,870,000
Inventory 7,515,000
Property, plant and equipment 9,540,000
Intangible assets 24,996,000
Acquired in-process research and development 2,334,000
Other assets 326,000
Liabilities (4,252,000)
------------
Total $ 58,329,000
============
The following unaudited pro forma condensed combined financial information gives
effect to the acquisition as of April 1, 1999. Because the Satellite Networks
Business had been operated as a division of Scientific-Atlanta, its results may
not reflect those that would have resulted had it operated as an independent
entity or as a part of ViaSat. The pro forma information for the three and nine
month periods ended December 31, 1999 and 2000 does not reflect the effects of
anticipated post-acquisition cost savings or restructuring efficiencies.
The pro forma condensed combined financial information combines information from
ViaSat's unaudited income statement for the three and nine month periods ended
December 31, 1999 and 2000 with the Satellite Networks Business' unaudited
income statement for the three and nine month periods ended December 31, 1999
and 2000.
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
---------------------------- ----------------------------
1999 2000 1999 2000
------------ ------------ ------------ ------------
Revenues $ 39,561,000 $ 43,093,000 $116,052,000 $126,832,000
Net income 798,000 2,715,000 2,620,000 7,559,000
Earnings per share
Basic .04 .12 .13 .36
Diluted .04 .12 .12 .34
Weighted average number of shares*
Basic 21,451,082 21,836,429 20,928,994 21,187,133
Diluted 21,638,060 22,875,989 21,722,004 22,416,498
*The weighted average number of shares includes 5,224,150 shares related to the
secondary public offering.
The unaudited pro forma financial information presented is not necessarily
indicative of either the results of operations that would have occurred had the
acquisition taken place on April 1, 1999 or the future results of operations of
the combined entities.
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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - REVENUE RECOGNITION
The majority of our revenues are derived from products and services performed
under a variety of contracts including cost-plus-fixed fee, fixed-price, and
time and materials type contracts. Generally, revenues are recognized as
contracts are performed using the percentage of completion method, measured
primarily by costs incurred to date compared with total estimated costs at
completion or based on the number of units delivered. We provide for anticipated
losses on contracts by a charge to income during the period in which they are
first identified.
Contract costs with the U.S. Government and its prime contractors, including
indirect costs, are subject to audit and negotiations with U.S. Government
representatives. These audits have been completed and agreed upon through fiscal
year 1997. Contract revenues and accounts receivable are stated at amounts which
are expected to be realized upon final settlement.
NOTE 4 - EARNINGS PER SHARE
Common stock equivalents of 1,186,978 and 1,039,559 shares for the three months
ended December 31, 1999 and 2000, respectively, and 793,010 and 1,229,366 shares
for the nine months ended December 31, 1999 and 2000 respectively, were used to
calculate diluted earnings per share. Antidilutive shares excluded from the
calculation were zero and 1,933,405 shares for the three months ended December
31, 1999 and 2000, respectively. Antidilutive shares excluded from the
calculation were 21,040 and 864,943 shares for the nine months ended December
31, 1999 and 2000, respectively. Common stock equivalents are primarily
comprised of options granted under our stock option plans.
NOTE 5 - COMPOSITION OF CERTAIN BALANCE SHEET CAPTIONS
MARCH 31, DECEMBER 31,
2000 2000
------------ ------------
(UNAUDITED)
Accounts receivable:
Billed $ 13,031,000 $ 37,898,000
Unbilled 13,237,000 21,551,000
------------ ------------
$ 26,268,000 $ 59,449,000
============ ============
Inventory:
Raw materials $ 2,263,000 $ 14,190,000
Work in process 484,000 4,368,000
Finished goods 375,000 3,220,000
------------ ------------
$ 3,122,000 $ 21,778,000
============ ============
Intangible assets:
Technology -- $ 9,754,000
Contracts and relationships -- 9,650,000
Acquired work force -- 5,592,000
Accumulated amortization -- (2,342,000)
------------ ------------
-- $ 22,654,000
============ ============
Accrued liabilities:
Current portion of warranty reserve $ 799,000 $ 1,405,000
Accrued vacation 1,188,000 2,195,000
Accrued bonus 1,004,000 1,544,000
Accrued 401(k) matching contribution 917,000 1,419,000
Collections in excess of revenues 694,000 5,343,000
Other 399,000 1,309,000
------------ ------------
$ 5,001,000 $ 13,215,000
============ ============
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NOTE 6 - CONTINGENCIES
VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On September 15, 2000 ORBCOMM Global, L.P. (ORBCOMM) and seven of its
subsidiaries filed a voluntary petition for Chapter 11 relief in the United
States Bankruptcy Court for the District of Delaware as part of its efforts to
restructure and reorganize its business. ORBCOMM has continued its efforts to
maintain and operate its network of low-Earth orbit (LEO) satellites and related
ground facilities while it restructures its operations. The following table
summarizes our assets related to ORBCOMM at December 31, 2000.
Accounts receivable-billed $4,611,000
Accounts receivable-unbilled 136,000
Inventory 130,000
----------
Total $4,877,000
==========
We cannot make assurances that the assets listed above will be fully recovered.
If ORBCOMM is unable to successfully restructure its operations it could cause
ViaSat to incur losses which could harm our business; however, we have not made
any adjustments to the recorded amount as it is not possible at this time to
reasonably estimate or determine what loss, if any, will be incurred.
We are currently a party to various government and commercial contracts which
require us to meet performance covenants and project milestones. Under the terms
of these contracts, failure by us to meet such performance covenants and
milestones permit the other party to terminate the contract and, under certain
circumstances, recover liquidated damages or other penalties. We are currently
not in compliance, or in the past were not in compliance, with the performance
or milestone requirements of certain of these contracts. Historically, our
customers have not elected to terminate such contracts or seek liquidated
damages from us and management does not believe that its existing customers will
do so; therefore, we have not accrued for any potential liquidated damages or
penalties.
We may be involved in legal proceedings arising in the ordinary course of
business, none of which is expected to have a material adverse effect on our
business, financial condition, results of operations or cash flows.
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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 - SEGMENT INFORMATION
We are organized primarily on the basis of products with commercial and defense
communication applications, represented by ViaSat Satellite Networks which
operates primarily in the commercial market and Communication (formerly
Electronic) Systems Group which operates primarily in the defense market.
The following table summarizes revenues and operating profits by operating
segment for the three and nine month periods ended December 31, 2000. The
acquisition of the Satellite Networks Business resulted in a second operating
segment. Certain corporate general and administrative costs, amortization of
intangible assets and the charge of acquired in-process research and development
are not allocated to either segment and accordingly, are shown as reconciling
items from segment operating profit and consolidated operating profit.
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
DECEMBER 31, 2000
(UNAUDITED)
Revenues
ViaSat Satellite Networks $ 26,114,000 $ 71,568,000
Communication Systems Group 16,979,000 47,881,000
------------- -------------
Total revenues 43,093,000 119,449,000
Operating profits
ViaSat Satellite Networks 2,445,000 6,034,000
Communication Systems Group 2,156,000 8,578,000
------------- -------------
Segment operating profit before corporate and other 4,601,000 14,612,000
Corporate (238,000) (994,000)
Amortization of intangibles (967,000) (2,342,000)
Acquired in-process research and development (141,000) (2,334,000)
------------- -------------
Total operating profits $ 3,255,000 $ 8,942,000
============= =============
Revenue information by geographic area for the three and nine months ended
December 31, 2000 is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
DECEMBER 31, 2000
(UNAUDITED)
North America $ 34,542,000 $ 96,065,000
Europe 3,673,000 10,860,000
Asia Pacific 4,447,000 10,977,000
Latin America 431,000 1,547,000
------------ ------------
$ 43,093,000 $119,449,000
============ ============
We distinguish revenues from external customers by geographic areas based on
customer location.
The net book value of long-lived assets located outside North America was
$39,000 at December 31, 2000.
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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
When used in this discussion, the words "believes," "anticipates," "expects,"
"intends" and similar expressions are intended to identify forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such statements are subject to certain risks and uncertainties which could
cause actual results to differ materially from those projected. Readers are
cautioned not to place undue reliance on these forward-looking statements which
speak only as of the date hereof. We undertake no obligation to republish
revised forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events. Readers are
also urged to carefully review and consider the various disclosures made by us
which attempt to advise interested parties of the factors which affect our
business, including without limitation the disclosures made under Item 1.
Business - "Factors That May Affect Future Performance" in our Annual Report on
Form 10-K for our fiscal year ended March 31, 2000, filed with the Securities
and Exchange Commission.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of total revenues, certain
income data for the periods indicated.
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------ ------------------
1999 2000 1999 2000
------ ------ ------ ------
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 58.2 68.4 57.1 67.6
------ ------ ------ ------
Gross profit 41.8 31.6 42.9 32.4
Operating expenses:
Selling, general and administrative 15.8 17.8 15.8 16.8
Independent research and development 11.6 3.7 11.5 4.1
Acquired in-process research and development -- .3 -- 2.0
Amortization of intangible assets -- 2.2 -- 2.0
------ ------ ------ ------
Income from operations 14.5 7.6 15.6 7.5
Income before income taxes 15.9 8.1 16.8 8.5
Net income 11.1 6.3 10.8 5.9
THREE MONTHS ENDED DECEMBER 31, 1999 VS. THREE MONTHS ENDED DECEMBER 31, 2000
Revenues. Revenues increased 138.9% from $18.0 million for the three months
ended December 31, 1999 to $43.1 million for the three months ended December 31,
2000. This increase was primarily due to the acquisition of the Satellite
Networks Business as well as improvements in revenues generated by commercial
broadband and other development programs including the multifunction information
distribution system (MIDS). These increases were partially offset by a decrease
in revenues resulting from completion of various production contracts.
Gross Profit. Gross profit increased 80.5% from $7.5 million (41.8% of
revenues) for the three months ended December 31, 1999 to $13.6 million (31.6%
of revenues) for the three months ended December 31, 2000. This increase was
primarily due to higher volumes related to the acquisition of the Satellite
Networks Business and broadband development programs. The decrease as a
percentage of revenues resulted from lower volumes of high margin defense
products and increased volumes of lower margin development projects.
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Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased 169.8% from $2.8 million (15.8% of
revenues) for the three months ended December 31, 1999 to $7.7 million (17.8% of
revenues) for the three months ended December 31, 2000. The increase was
primarily due to the additional costs from the Satellite Networks Business,
transition costs related to the acquisition and efforts related to pursuing
broadband business. SG&A expenses consist primarily of personnel costs and
expenses for business development, marketing and sales, bid and proposal,
finance, contract administration and general management. Certain of these
expenses are difficult to predict and vary based on specific government and
commercial sales opportunities.
Independent Research and Development. Independent research and development
("IR&D") expenses decreased 23.9% from $2.1 million (11.6% of revenues) for the
three months ended December 31, 1999, to $1.6 million (3.7% of revenues) for the
three months ended December 31, 2000. This decrease resulted from a higher level
of funded development programs.
Amortization of Intangible Assets. Intangible assets are being amortized over
useful lives ranging from three to nine years. For the three months ended
December 31, 2000, amortization expense was $967,000.
Interest Expense. Interest expense decreased from $37,000 for the three
months ended December 31, 1999 to $15,000 for the three months ended December
31, 2000. Interest expense relates to loans for the purchase of capital
equipment, which are generally three year variable rate term loans, and to
short-term borrowings under our line of credit to cover working capital
requirements. Total outstanding equipment loans were $1.5 million at December
31, 1999, and $504,000 at December 31, 2000. There were no outstanding
borrowings under our line of credit as of December 31, 1999 or 2000.
Interest Income. Interest income increased from $283,000 for the three months
ended December 31, 1999 to $304,000 for the three months ended December 31,
2000. This increase resulted from increased invested balances. Interest income
relates largely to interest earned on short-term deposits of cash.
Provision for Income Taxes. Our effective income tax rate decreased from
29.9% for the three months ended December 31, 1999 to 22.4% for the three months
December 31, 2000. The difference relates primarily to increases in estimates of
prior period research and development tax credits.
NINE MONTHS ENDED DECEMBER 31, 1999 VS. NINE MONTHS ENDED DECEMBER 31, 2000
Revenues. Revenues increased 129.3% from $52.1 million for the nine months
ended December 31, 1999 to $119.4 million for the nine months ended December 31,
2000. This increase was primarily due to the acquisition of the Satellite
Networks Business as well as improvements in revenues generated by commercial
broadband and other development programs including the multifunction information
distribution system (MIDS). These increases were partially offset by a decrease
in revenues resulting from completion of simulator systems and various
production contracts.
Gross Profit. Gross profit increased 73.0% from $22.3 million (42.9% of
revenues) for the nine months ended December 31, 1999 to $38.6 million (32.4% of
revenues) for the nine months ended December 31, 2000. This increase was
primarily due to higher volumes related to the acquisition of the Satellite
Networks Business and broadband development programs. The decrease as a
percentage of revenues resulted from lower volumes of various high margin
products and increased volumes of lower margin development projects.
Selling, General and Administrative Expenses. SG&A expenses increased 143.9%
from $8.2 million (15.8% of revenues) for the nine months ended December 31,
1999 to $20.1 million (16.8% of revenues) for the nine months ended December 31,
2000. The increase in SG&A expenses was primarily due to the additional costs
from the Satellite Networks Business, transition costs related to the
acquisition, marketing of commercial products, increased business development
and bid and proposal efforts for defense programs, and additional administrative
staffing to support our growth.
Independent Research and Development. IR&D expenses decreased 17.0% from $6.0
million (11.5% of revenues) for the nine months ended December 31, 1999 to $5.0
million (4.1% of revenues) for the nine
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months ended December 31, 2000. This decrease resulted from the award of funded
development contracts related to both our defense and commercial products.
Acquired In-Process Research and Development. The acquisition of the
Satellite Networks Business was accounted for by the purchase method of
accounting. In connection with this acquisition, a charge of $2.3 million for
purchased in-process research and development was included in our results. This
charge represented the fair value of certain acquired research and development
projects that were determined to have not reached technological feasibility.
Amortization of Intangible Assets. Intangible assets are being amortized over
useful lives ranging from three to nine years. For the nine months ended
December 31, 2000, amortization expense was $2.3 million for the period from
April 25, 2000 to December 31, 2000.
Interest Expense. Interest expense decreased from $126,000 for the nine
months ended December 31, 1999 to $80,000 for the nine months ended December 31,
2000. Total outstanding equipment loans were $1.5 million at December 31, 1999,
and $504,000 at December 31, 2000. There were no outstanding borrowings under
our line of credit as of December 31, 1999 or 2000.
Interest Income. Interest income increased from $762,000 for the nine months
ended December 31, 1999 to $1.3 million for the nine months ended December 31,
2000. This increase resulted from higher average invested cash balances.
Provision for Income Taxes. Our effective income tax rate decreased from
36.0% for the nine months ended December 31, 1999 to 30.0% for the nine months
ended December 31, 2000. The decrease relates primarily to increases in
estimates of prior period research and development tax credits.
BACKLOG
At December 31, 2000 we had firm backlog of $221.7 million of which $207.9
million was funded. The firm backlog of $221.7 million does not include contract
options of $58.7 million. Of the $221.7 million in firm backlog, approximately
$35.9 million is expected to be delivered in the fiscal year ending March 31,
2001, and the balance is expected to be delivered in the fiscal year ending
March 31, 2002 and thereafter. At March 31, 2000 we had firm backlog of $88.2
million, of which $58.6 million was funded, not including options of $53.3
million. We include in our backlog only those orders for which we have accepted
purchase orders. However, backlog is not necessarily indicative of future sales.
A majority of our government backlog scheduled for delivery can be terminated at
the convenience of the government since orders are often made substantially in
advance of delivery, and our contracts typically provide that orders may be
terminated with limited or no penalties. In addition, purchase orders may set
forth product specifications that would require us to complete additional
product development. A failure to develop products meeting such specifications
could lead to a termination of the related purchase order.
The backlog amounts as presented are comprised of funded and unfunded
components. Funded backlog represents the sum of contract amounts for which
funds have been specifically obligated by customers to contracts. Unfunded
backlog represents future amounts that customers may obligate over the specified
contract performance periods. Our government customers allocate funds for
expenditures on long-term contracts on a periodic basis. Our ability to realize
revenues from government contracts in backlog is dependent upon adequate funding
for such contracts. Although funding of government contracts is not within our
control, our experience indicates that actual contract fundings have ultimately
been approximately equal to the aggregate amounts of the contracts.
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LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations to date primarily with cash flows from
operations, bank line of credit financing, equity financing and loans for the
purchase of capital equipment. Cash provided by operating activities for the
nine months ended December 31, 1999 was $1.7 million and cash used in operating
activities for the nine months ended December 31, 2000 was $9.4 million.
Increases in accounts receivable and inventories due to the new business were
offset by increases in accounts payable.
Cash provided by investing activities for the nine months ended December 31,
1999 was $9.3 million and cash used in investing activities for the nine months
ended December 31, 2000 was $64.7 million. During the nine months ended December
31, 2000, we acquired the Satellite Networks Business for cash of $57.1 million
plus warrants to purchase 100,000 shares of common stock valued at $1.2 million.
In addition, we acquired $3.0 million in equipment in the nine months ended
December 31, 2000 compared to $2.9 million of equipment during the nine months
ended December 31, 1999, excluding the acquisition of the Satellite Networks
Business.
Cash used in financing activities for the nine months ended December 31, 1999
was $399,000 and cash provided by financing activities for the nine months ended
December 31, 2000 was $74.4 million. This increase was primarily the result of
completing a secondary public stock offering for $73.1 million.
At December 31, 2000, we had $24.5 million in cash, cash equivalents and
short-term investments, $88.0 million in working capital and $504,000 in
equipment financing. We had no outstanding borrowings under our line of credit
at December 31, 2000.
We are in the process of negotiating the terms of a $25.0 million revolving line
of credit facility with a bank.
Our future capital requirements will depend upon many factors, including the
progress of our research and development efforts, expansion of our marketing
efforts, and the nature and timing of orders. We believe that our current cash
balances and net cash expected to be provided by operating activities will be
sufficient to meet our working capital and capital expenditure requirements for
at least the next 12 months. We invest our cash in excess of current operating
requirements in short-term, interest-bearing, investment-grade securities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 10.1 - Gateway Terminal Development, Production and Purchase
Agreement by and between Astrolink International LLC and ViaSat, Inc., dated
December 28, 2000
(b) We filed no reports on Form 8-K during the quarter ended December 31, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VIASAT, INC.
February 14, 2001
/s/ MARK D. DANKBERG
-----------------------------------------------
Mark D. Dankberg
Chairman of the Board, President and Chief
Executive Officer (Principal Executive Officer)
/s/ RICHARD A. BALDRIDGE
-----------------------------------------------
Richard A. Baldridge
Executive Vice President, Chief Financial
Officer and Chief Operating Officer
(Principal Financial and Accounting Officer)
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