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, 1996.
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.)
2290 COSMOS COURT, CARLSBAD, CALIFORNIA, CA 92009
(619)438-8099
(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 January 31, 1997 was 7,740,698.
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VIASAT, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheet at December 31, 1996 and
March 31, 1996 3
Condensed Statement of Income for the three months and
nine months ended December 31, 1996 and 1995 4
Condensed Statement of Cash Flows for the nine months
ended December 31, 1996 and 1995 5
Condensed Statement of Stockholders' Equity for the nine
months ended December 31, 1996 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
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VIASAT, INC.
CONDENSED BALANCE SHEET
DECEMBER 31, MARCH 31,
1996 1996
------------ -----------
(UNAUDITED)
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 13,823,000 $ 2,297,000
Accounts receivable 7,699,000 6,171,000
Inventory 4,961,000 1,223,000
Deferred income taxes 669,000 484,000
Other current assets 422,000 170,000
------------ -----------
Total current assets 27,574,000 10,345,000
Property and equipment, net 3,831,000 2,789,000
Other assets 465,000 128,000
------------ -----------
Total assets $ 31,870,000 $13,262,000
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 2,778,000 $ 2,774,000
Accrued liabilities 3,420,000 2,157,000
Current portion of notes payable 1,042,000 763,000
------------ -----------
Total current liabilities 7,240,000 5,694,000
------------ -----------
Notes payable 1,365,000 1,747,000
Other liabilities 976,000 604,000
------------ -----------
Total long-term liabilities 2,341,000 2,351,000
------------ -----------
Commitments and Contingencies(Notes 12 & 13)
Stockholders' equity:
Series A, convertible preferred stock, $.0001 par
value; 5,000,000,and 3,225,000 shares
authorized; no shares and 3,225,0000 shares
issued and outstanding at December 31, 1996
and March 31,1996, respectively 32,000
Common stock, $.0001 par value, 25,000,000 and
7,335,000 shares authorized; 7,740,698 and
3,509,804 issued and outstanding at December
31, 1996 and March 31, 1996, respectively 80,000 46,000
Paid in capital 16,065,000 737,000
Stockholders' notes receivable (193,000) --
Retained earnings 6,337,000 4,402,000
------------ -----------
Total stockholders' equity 22,289,000 5,217,000
------------ -----------
Total liabilities and stockholders'
equity $ 31,870,000 $13,262,000
============ ===========
See accompanying notes to financial statements
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VIASAT, INC.
CONDENSED STATEMENT OF INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
---------------------------- -----------------------------
1996 1995 1996 1995
------------ ----------- ------------ ------------
Revenues $ 12,079,000 $ 5,755,000 $ 33,661,000 $ 19,911,000
Cost of revenues 8,247,000 4,042,000 23,580,000 14,152,000
------------ ----------- ------------ ------------
Gross profit 3,832,000 1,713,000 10,081,000 5,759,000
Operating expenses:
Selling, general and
administrative 1,160,000 815,000 3,472,000 2,577,000
Independent research and
development 1,384,000 769,000 3,602,000 1,955,000
------------ ----------- ------------ ------------
Income from operations 1,288,000 129,000 3,007,000 1,227,000
Other income (expense):
Interest income 80,000 2,000 149,000 20,000
Interest expense (61,000) (63,000) (187,000) (167,000)
------------ ----------- ------------ ------------
Income before income taxes 1,307,000 68,000 2,969,000 1,080,000
Provision (benefit) for income
taxes 454,000 (2,000) 1,034,000 (34,000)
------------ ----------- ------------ ------------
Net income $ 853,000 $ 70,000 $ 1,935,000 $ 1,114,000
============ =========== ============ ============
Pro forma net income per share $ .13 $ .01 $ .31 $ .19
============ =========== ============ ============
Pro forma common equivalent shares 6,652,228 5,922,908 6,290,700 5,845,492
============ =========== ============ ============
See accompanying notes to financial statements.
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VIASAT, INC.
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------ -----------
Cash flows from operating activities:
Net income $ 1,935,000 $ 1,114,000
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation 972,000 694,000
Deferred income taxes (560,000) 134,000
Increase (decrease) in cash resulting from changes in:
Accounts receivable (1,528,000) (2,637,000)
Inventory (3,738,000) (734,000)
Other assets (216,000) (396,000)
Accounts payable 4,000 (545,000)
Accrued liabilities 1,263,000 (801,000)
Other liabilities 372,000 (53,000)
------------ -----------
Net cash used in operating activities (1,496,000) (3,224,000)
------------ -----------
Cash flows from investing activities:
Purchases of property and equipment (2,012,000) (1,548,000)
------------ -----------
Cash flows from financing activities:
Proceeds from short-term bank borrowings 1,400,000
Proceeds from issuance of notes payable 462,000 1,304,000
Repayment of notes payable (565,000) (402,000)
Proceeds from issuance of common stock 15,137,000 165,000
------------ -----------
Net cash provided by financing activities 15,034,000 2,467,000
------------ -----------
Net increase(decrease) in cash and cash equivalents 11,526,000 (2,305,000)
Cash and cash equivalents at beginning of period 2,297,000 2,731,000
------------ -----------
Cash and cash equivalents at end of period $ 13,823,000 $ 426,000
============ ===========
Supplemental information:
Cash paid for interest $ 187,000 $ 167,000
============ ===========
Cash paid for income taxes $ 1,291,000 $ 455,000
============ ===========
See accompanying notes to financial statements
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VIASAT, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
PREFERRED STOCK COMMON STOCK
--------------- ------------ STOCKHOLDERS'
NUMBER OF NUMBER OF PAID IN NOTES RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE EARNINGS
---------- ---------- --------- -------- ----------- ----------- -----------
Balance at March 31, 1996 3,225,000 $ 32,000 3,342,101 $ 46,000 $ 737,000 $ 4,402,000
Issuance of common
stock 2,033,059 2,000 15,328,000
Conversion of preferred
stock to common stock (3,225,000) (32,000) 2,365,538 32,000
Shares subscribed $ (193,000)
Net income 1,935,000
---------- ---------- --------- -------- ----------- ----------- -----------
Balance at December 31,
1996 -- $ -- 7,740,698 $ 80,000 $16,065,000 $ (193,000) $ 6,337,000
========== ========== ========= ======== =========== =========== ===========
See accompanying notes to financial statements.
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VIASAT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying condensed balance sheet as of December 31, 1996 and the
condensed statements of income, of cash flows and of stockholders' equity for
the nine month periods ended December 31, 1996 and 1995 have been prepared by
ViaSat, Inc. ("the Company"), 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, 1996
included in the Company's Registration Statement on Form S-1 (File No.
333-13183). Interim operating results are not necessarily indicative of
operating results for the full year.
NOTE 2 - COMPLETION OF INITIAL PUBLIC OFFERING
On December 3, 1996, the Company completed its initial public offering for the
sale of 2,400,000 shares of common stock (of which 1,850,000 shares were sold by
the Company and 550,000 shares were sold by certain stockholders) at a price to
the public of $9 per share, which resulted in net proceeds to the Company of
$15,484,500 after payment of the underwriters' commissions but before deduction
of offering expenses.
NOTE 3 - MANAGEMENT ESTIMATES AND ASSUMPTIONS
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.
Actual results could differ from those estimates.
NOTE 4 - REVENUE RECOGNITION
The majority of the Company's revenues are derived from services performed for
the United States Government and its prime contractors under a variety of
contracts including cost-plus-fixed fee, fixed-price, and time and materials
type contracts. Generally, revenues are recognized as services 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. The Company provides for anticipated losses on contracts by
a charge to income during the period in which they are first identified.
Contract costs, including indirect costs, are subject to audit and negotiations
with Government representatives. These audits have been completed and agreed
upon through fiscal year 1994. Contract revenues and accounts receivable are
stated at amounts which are expected to be realized upon final settlement.
NOTE 5 - PRO FORMA NET INCOME PER SHARE
Pro forma net income per share is computed based on the weighted average number
of common shares and common stock equivalents, using the treasury stock method,
outstanding during the respective periods after giving retroactive effect to the
conversion, which occurred upon the closing of the Company's initial public
offering, of all outstanding shares of preferred stock into 2,365,538 shares of
common stock. Historical earnings per share are not presented because such
amounts are not deemed meaningful due to the significant change in the Company's
capital structure that occurred in connection with the Company's initial public
offering.
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VIASAT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 6 - INVESTMENTS
At December 31, 1996, the Company held investments in investment grade
securities with maturities of three months or less. Management determines the
appropriate classification of its investments in debt securities at the time of
purchase and reevaluates such designation as of each balance sheet date. The
Company has included these securities, net of amortization, in cash and cash
equivalents and has designated them as held to maturity.
NOTE 7 - RECAPITALIZATION
In November 1996, the Company filed an Amended and Restated Certificate of
Incorporation to effect a .7335 for 1 reverse stock split of all outstanding
shares of common stock and stock options. All shares and per share data in the
accompanying financial statements have been adjusted retroactively to give
effect to the reverse stock split. The Amended and Restated Certificate of
Incorporation increases the authorized stock of the Company such that the
Company is authorized to issue 5,000,000 shares of $0.0001 par value preferred
stock, and 25,000,000 shares of $0.0001 par value common stock. Concurrently,
the conversion ratio of the Company's preferred stock was changed to .7335 for
1.
NOTE 8 - COMPOSITION OF CERTAIN BALANCE SHEET CAPTIONS
DECEMBER 31, MARCH 31,
1996 1996
Accounts receivable:
Billed $4,785,000 $5,653,000
Unbilled 2,914,000 518,000
---------- ----------
$7,699,000 $6,171,000
========== ==========
Inventory:
Raw materials $1,331,000 $ 753,000
Work in process 3,469,000 402,000
Finished goods 161,000 68,000
---------- ----------
$4,961,000 $1,223,000
========== ==========
Accrued liabilities:
Accrued vacation $ 695,000 $ 591,000
Accrued 401(k) matching contribution 432,000 444,000
Current portion of warranty reserve 825,000 413,000
Accrued bonus 541,000 347,000
Collections in excess of revenues 277,000 237,000
Income taxes payable 406,000 40,000
Other 244,000 85,000
---------- ----------
$3,420,000 $2,157,000
========== ==========
NOTE 9 - PRINCIPAL MATURITIES OF NOTES PAYABLE
Annual principal installments for long-term notes payable in each fiscal year
from 1997 through 2000 are $763,000, $932,000, $623,000, and $192,000,
respectively.
NOTE 10 - COMMON STOCK AND OPTIONS
In November 1996, the Company adopted the ViaSat, Inc. 1996 Equity Participation
Plan (the "1996 Equity Participation Plan") designed to update and replace the
1993 Stock Option Plan. The 1996 Equity Participation Plan provides for the
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VIASAT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
grant to executive officers, other key employees, consultants and non-employee
directors of the Company a broad variety of stock-based compensation
alternatives such as nonqualified stock options, incentive stock options,
restricted stock and performance awards. A maximum of 750,000 shares are
reserved for issuance under the 1996 Equity Participation Plan. As of December
31, 1996 the Company has granted 30,000 options to purchase common stock under
this plan.
In November 1996, the Company adopted the ViaSat, Inc. Employee Stock Purchase
Plan (the "Employee Stock Purchase Plan") to assist employees of the Company in
acquiring a stock ownership interest in the Company and to encourage them to
remain in the employment of the Company. The Employee Stock Purchase Plan is
intended to qualify under Section 423 of the Internal Revenue Code. A maximum of
250,000 shares of common stock are reserved for issuance under the Employee
Stock Purchase Plan. The Employee Stock Purchase Plan permits eligible employees
to purchase common stock at a discount through payroll deductions during
specified six-month offering periods. No employee may purchase more than $25,000
worth of stock in any calendar year. The price of shares purchased under the
Employee Stock Purchase Plan will be equal to 85% of the fair market value of
the common stock on the first or last day of the offering period, whichever is
lower.
NOTE 11 - INCOME TAXES
The provision (benefit) for income taxes is as follows:
NINE MONTHS ENDED DECEMBER 31,
------------------------------
1996 1995
----------- ---------
Current tax provision:
Federal $ 1,291,000 $ 235,000
State 304,000 6,000
----------- ---------
1,595,000 241,000
----------- ---------
Deferred tax provision:
Federal (443,000) (212,000)
State (118,000) (63,000)
----------- ---------
(561,000) (275,000)
----------- ---------
Total provision (benefit) for
income taxes $ 1,034,000 $ (34,000)
=========== =========
Significant components of the Company's deferred tax assets and liabilities are
as follows:
DECEMBER 31, MARCH 31,
1996 1996
----------- ---------
Deferred tax assets:
Warranty reserve $ 566,000 $ 219,000
Accrued vacation 209,000 190,000
Other 373,000 142,000
----------- ---------
Total deferred tax assets 1,148,000 551,000
Deferred tax liabilities:
Depreciation (51,000) (14,000)
----------- ---------
Net deferred tax assets $ 1,097,000 $ 537,000
=========== =========
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VIASAT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 12 - COMMITMENTS
The Company leases office facilities under noncancelable operating leases with
terms ranging from one to five years which expire between March 1997 and August
1999. Certain of the Company's facilities leases contain option provisions which
allow for extension of the lease terms. Annual minimum lease payments in each
fiscal year from 1997 through 2000 are $655,000, $650,000, $335,000, and
$135,000, respectively.
Additionally, the Company enters into long term purchase commitments with
certain of its vendors to purchase materials used to manufacture products
delivered under long term contracts. At March 31, 1996, the Company had
commitments to purchase $2,689,000 and $11,000 of materials in fiscal 1997 and
1998, respectively. Purchases under these contracts totaled $692,000 during the
year ended March 31, 1996.
NOTE 13 - CONTINGENCIES
The Company is currently a party to various government and commercial contracts
which require the Company to meet performance covenants and project milestones.
Under the terms of these contracts, failure by the Company 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. The Company is currently not in compliance, or in the past was not in
compliance with the performance or milestone requirements of many of these
contracts. Historically, the Company's customers have not elected to terminate
such contracts or seek liquidated damages from the Company and management does
not believe that its existing customers will do so; therefore, the Company has
not accrued for any potential liquidated damages or penalties.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
When used in this discussion, the words "believes," "anticipated" and similar
expressions are intended to identify forward-looking statements. 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. The Company undertakes 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 the
Company which attempt to advise interested parties of the factors which affect
the Company's business, including without limitation the disclosures made under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in this report, as well as under the caption "Risk
Factors" in the Company's Registration Statement on Form S-1(file no. 333-13183)
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,
1996 1995 1996 1995
----- ----- ----- -----
Revenue 100.0 100.0 100.0 100.0
Cost of revenue 68.3 70.2 70.1 71.1
----- ----- ----- -----
Gross profits 31.7 29.8 29.9 28.9
Operating expenses:
Selling, general, and administrative 9.6 14.2 10.3 12.9
Independent research and development 11.5 13.4 10.7 9.8
----- ----- ----- -----
Income from operations 10.7 2.2 8.9 6.2
Income before income taxes 10.8 1.2 8.8 5.4
Net income 7.1 1.2 5.7 5.6
THREE MONTHS ENDED DECEMBER 31, 1996 VS. THREE MONTHS ENDED DECEMBER 31, 1995
Revenues. Revenues increased 109.9% from $5.8 million for the three months ended
December 31, 1995 to $12.1 million for the three months ended December 31, 1996.
This increase was primarily due to increases in revenues generated by UHF DAMA
network control stations and modems, and Enhanced Manpack UHF Terminal ("EMUT")
DAMA modem production.
Gross Profit. Gross profit increased 123.7% from $1.7 million (29.8% of
revenues) for the three months ended December 31, 1995 to $3.8 million (31.7% of
revenues) for the three months ended December 31, 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased 42.3% from $815,000 (14.2% of
revenues) for the three months ended December 31, 1995 to $1.2 million (9.6% of
revenues) for the three months ended December 31, 1996. This decrease in SG&A
expenses as a percentage of revenues reflects an increased expense in connection
with bid and proposal efforts and increased expenditures relating to the
introduction and marketing of the StarWire(TM) DAMA product line during the
three months ended December 31, 1995 and the impact of a 109.9% growth in
revenues between the two periods. SG&A expenses consist primarily of personnel
costs and expenses for business development, marketing and sales, bid and
proposal, finance, contract administration and general
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management. Certain SG&A 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 increased 80% from $769,000 (13.4% of revenues) for the three
months ended December 31, 1995 to $1.4 million (11.5% of revenues) for the three
months ended December 31, 1996. This increase resulted primarily from higher
IR&D expenses related to the Company's StarWire(TM) DAMA product, which
represented approximately 80% of total IR&D for the three months ended December
31, 1996.
Interest Expense. Interest expense decreased 3.2% from $63,000 for the three
months ended December 31, 1995 to $61,000 for the three months ended December
31, 1996. Interest expense relates to loans for the purchase of capital
equipment, which are generally four year fixed-rate term loans, and to
short-term borrowings under the Company's line of credit to cover working
capital requirements. Total outstanding equipment loans were $2.6 million at
December 31, 1995 and $2.4 million at December 31, 1996. The Company had a $1.4
million balance on its line of credit as of December 31, 1995 and a zero balance
as of December 31, 1996.
Interest Income. Interest income increased from $2,000 for the three months
ended December 31, 1995 to $80,000 for the three months ended December 31, 1996.
Provision (Benefit) for Income Taxes. The income tax benefit in the three months
ended December 31, 1995 was primarily attributable to the utilization of
research and development credits generated during the period and the impact of a
United States Federal judicial decision which clarified the tax law related to
the utilization of research and development credits generated from funded
research and development. As of December 31, 1996, the unutilized income tax
benefit was zero. The Company's effective tax rate for the three months ended
December 31, 1996 was 34.7% which includes the utilization of research and
development credits generated in the current period.
NINE MONTHS ENDED DECEMBER 31, 1996 VS. NINE MONTHS ENDED DECEMBER 31, 1995
Revenues. Revenues increased 69.1% from $19.9 million for the nine months ended
December 31, 1995 to $33.7 million for the nine months ended December 31, 1996.
This increase was primarily due to increases in revenues generated by UHF DAMA
network control stations and modems, and EMUT DAMA modem production.
Gross Profit. Gross profit increased 75.1% from $5.8 million (28.9% of revenues)
for the nine months ended December 31, 1995 to $10.1 million (29.9% of revenues)
for the nine months ended December 31, 1996.
Selling, General and Administrative Expenses. SG&A expenses increased 34.7% from
$2.6 million (12.9% of revenues) for the nine months ended December 31, 1995 to
$3.5 million (10.3% of revenues) for the nine months ended December 31, 1996.
This decrease in SG&A expenses as a percentage of revenues reflects an increased
expense in connection with bid and proposal efforts and increased expenditures
relating to the introduction and marketing of the StarWire(TM) DAMA product line
in the nine months ended December 31, 1995 and the impact of a 69.1% growth in
revenues between the two periods.
Independent Research and Development. IR&D expenses increased 84.3% from $2.0
million (9.8% of revenues) for the nine months ended December 31, 1995 to $3.6
million (10.7% of revenues) for the nine months ended December 31, 1996. This
increase resulted primarily from higher IR&D expenses related to the Company's
StarWire(TM) DAMA product, which represented approximately 90% of total IR&D for
the nine months ended December 31, 1996.
Interest Expense. Interest expense increased 12.0% from $167,000 for the nine
months ended December 31, 1995 to $187,000 for the nine months ended December
31, 1996.
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Interest Income. Interest income increased from $20,000 for the nine months
ended December 31, 1995 to $149,000 for the nine months ended December 31, 1996.
Interest income is comprised of interest earned on cash and cash equivalents.
Provision (Benefit) for Income Taxes. The income tax benefit in the nine months
ended December 31, 1995 was primarily attributable to the utilization of
research and development credits generated during the period and the impact of a
United States Federal judicial decision which clarified the tax law related to
the utilization of research and development credits generated from funded
research and development. As of December 31, 1996, the unutilized income tax
benefit was zero. The Company's effective tax rate for the nine months ended
December 31, 1996 was 34.8% which includes the utilization of research and
development credits generated in the current period.
BACKLOG
At December 31, 1996, the Company had firm backlog of $58.0 million, of which
$37.3 million was funded. The firm backlog of $58 million does not include
contract options of $25.3 million. Of the $58 million in firm backlog,
approximately $14.0 million is expected to be delivered in the fiscal year
ending March 31, 1997, $31.0 million is expected to be delivered in the fiscal
year ending March 31, 1998 and the balance is expected to be delivered in the
fiscal years ending March 31, 1999 and March 31, 2000. The Company had firm
backlog of $28.7 million, not including contract options of $28.0 million, at
March 31, 1996. The Company includes in its backlog only those orders for which
it has accepted purchase orders. However, backlog is not necessarily indicative
of future sales. A majority of the Company's backlog scheduled for delivery can
be terminated at the convenience of the government since orders are often made
substantially in advance of delivery, and the Company's 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 the
Company 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. Contract options represent
additional contract amounts which terms have been negotiated as part of the
respective contract but have not yet been awarded. The Company's customers
allocate funds for expenditures on long-term contracts on a periodic basis. The
Company is committed to produce products under its contracts to the extent funds
are provided. The ability of the Company to realize revenues from government
contracts in backlog is dependent upon adequate funding for such contracts.
Although funding of its government contracts is not within the Company's
control, the Company's experience indicates that actual contract fundings have
ultimately been approximately equal to the aggregate amounts of the contracts.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date primarily from cash flow from
operations, bank line of credit financing and loans for the purchase of capital
equipment. Cash used in operating activities for the nine months ended December
31, 1996 and 1995 was $1.5 million and $3.2 million, respectively. The relative
decrease in cash used for operating activities for the nine months ended
December 31, 1996 compared to same period of the prior year was primarily due to
a $821,000 increase in net income and higher levels of accounts payable and
accrued liabilities which were partially offset by higher levels of receivables
and inventories. The increase in accounts receivable, accounts payable, and
accrued liabilities resulted from an increase in the Company's revenues. The
growing share of revenues from production contracts led to the need to build
inventory levels to support production demands. The Company anticipates that in
future periods the level of inventories will be higher than historical levels.
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Cash used in investing activities for the nine months ended December 31, 1996
and 1995 was $2.0 million and $1.5 million, respectively. The increase was the
result of purchases of property and equipment, primarily consisting of test
equipment and computers.
Cash provided by financing activities for the nine months ended December 31,
1996 and 1995 was $15.0 million and $2.5 million, respectively. This increase
was the result of $15.1 million of capital raised in the Company's initial
public offering which closed in December 1996. This relative increase was offset
by lower net financing provided by the Company's equipment line of credit.
At December 31, 1996, the Company had $13.8 million in cash and cash
equivalents, $20.3 million in working capital and $2.4 million in long-term debt
which consisted of equipment financing. The Company had a zero balance under its
line of credit at December 31, 1996.
The Company's credit facility with Union Bank includes a $4.0 million line of
credit and $4.0 million in commitments for equipment financing. The line of
credit allows the Company to borrow, for general working capital purposes, the
greater of $1.0 million or 80.0% of eligible accounts receivable plus 50.0% of
the Company's eligible inventory. It accrues interest at the bank's prime rate,
which was 8.6% at December 31, 1996, and expires on September 15, 1997. The
Company is required to pay a fee equal to 0.25% of the unused portion of the
line of credit on an annual basis.
In October 1996, the Company received a commitment for a new credit facility
with Union Bank, which includes a $6.0 million line of credit and $4.5 million
in commitments for equipment financing. The line of credit allows the Company to
borrow, for general working capital purposes, the greater of $2.0 million or
80.0% of eligible accounts receivable, plus 50.0% of the Company's eligible
inventory to a maximum of $2.0 million. It is an interest only loan which
matures on September 15, 1998. The equipment line consists of two loans, each of
which limits borrowings to an 80.0% advance against the purchase price, net of
sales tax, delivery and insurance. All borrowings under the first loan, which
may not exceed $2.0 million, must be made before September 15, 1997, at which
time all unpaid principal under such loan will be converted into a fully
amortizing loan for a period of 36 months with a maturity date of September 15,
2000. All borrowings under the second loan, which may not exceed $2.5 million,
must be made before September 15, 1998, at which time all unpaid principal under
such loan will be converted into a fully amortizing loan for a period of 36
months with a maturity date of September 15, 2001. The Company is currently
renegotiating the terms of the commitment to conform with its short-term capital
requirements.
The Company's future capital requirements, which management anticipates will not
exceed $10.0 million over the next 12 months, will depend upon many factors,
including the progress of the Company's research and development efforts,
expansion of the Company's marketing efforts, and the nature and timing of
commercial orders. The Company believes that its current cash balances, amounts
available under its credit facilities and net cash expected to be provided by
operating activities, will be sufficient to meet its working capital and capital
expenditure requirements for at least the next 12 months. Management intends to
invest the Company's cash in excess of current operating requirements in
short-term, interest-bearing, investment-grade securities.
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15
PART II - OTHER INFORMATION
Item 6. Exhibits
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(a) Exhibit 11.1 - Calculation of Pro Forma Earnings Per Share
Exhibit 27.1 - Financial Data Schedule
(b) The Company filed no reports on Form 8-K during the quarter ended
December 31, 1996.
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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.
Date: February 13, 1997 /s/ Mark D. Dankberg
---------------------------------
MARK D. DANKBERG
President
Chief Executive Officer
/s/ Gregory D. Monahan
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GREGORY D. MONAHAN
Vice President & General Counsel
Chief Financial Officer
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