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 September 30, 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 November 13, 2000 was 21,846,921.
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VIASAT, INC.
INDEX
PAGE
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PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
Condensed Consolidated Balance Sheet at March 31, 2000
and September 30, 2000 3
Condensed Consolidated Statement of Income for the three
and six months ended September 30, 1999 and 2000 4
Condensed Consolidated Statement of Cash Flows for the
six months ended September 30, 1999 and 2000 5
Condensed Consolidated Statement of Stockholders' Equity
for the six months ended September 30, 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 4.Submission of Matters to Vote of Security Holders 16
Item 6.Exhibits and Reports on Form 8-K 16
Signatures 17
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VIASAT, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, SEPTEMBER 30,
2000 2000
------------ -------------
ASSETS (UNAUDITED)
- ------
Current assets:
Cash and cash equivalents $ 19,520,000 $ 20,443,000
Short-term investments 121,000 -
Accounts receivable 26,268,000 67,009,000
Inventory 3,122,000 17,252,000
Deferred income taxes 1,813,000 1,808,000
Other current assets 2,167,000 2,676,000
------------ ------------
Total current assets 53,011,000 109,188,000
Property and equipment, net 8,164,000 17,600,000
Intangible assets, net - 22,150,000
Other assets 755,000 2,553,000
------------ ------------
Total assets $ 61,930,000 $151,491,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,934,000 $ 13,274,000
Accrued liabilities 5,001,000 10,531,000
Current portion of notes payable 907,000 726,000
------------ ------------
Total current liabilities 14,842,000 24,531,000
------------ ------------
Notes payable 336,000 -
Other liabilities 755,000 766,000
------------ ------------
Total long-term liabilities 1,091,000 766,000
------------ ------------
Contingencies (Note 6)
Minority interest in consolidated subsidiary - 301,000
Stockholders' equity:
Common stock 2,000 2,000
Paid in capital 18,932,000 94,439,000
Retained earnings 27,063,000 31,452,000
------------ ------------
Total stockholders' equity 45,997,000 125,893,000
------------ ------------
Total liabilities and stockholders' equity $ 61,930,000 $151,491,000
============ ============
See accompanying notes to condensed consolidated financial statements.
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VIASAT, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------- ----------------------------------
1999 2000 1999 2000
------------ ------------ ------------ ------------
Revenues $ 17,017,000 $ 39,730,000 $ 34,052,000 $ 76,356,000
Cost of revenues 9,558,000 27,366,000 19,267,000 51,345,000
------------ ------------ ------------ ------------
Gross profit 7,459,000 12,364,000 14,785,000 25,011,000
Operating expenses:
Selling, general and
administrative 2,433,000 6,626,000 5,381,000 12,390,000
Independent research and
development 2,290,000 1,712,000 3,880,000 3,366,000
Acquired in-process research and
development -- -- -- 2,193,000
Amortization of intangible assets -- 825,000 -- 1,375,000
------------ ------------ ------------ ------------
Income from operations 2,736,000 3,201,000 5,524,000 5,687,000
Other income (expense):
Interest income 223,000 519,000 479,000 1,026,000
Interest expense (42,000) (33,000) (89,000) (65,000)
Minority interest -- 2,000 -- 2,000
------------ ------------ ------------ ------------
Income before income taxes 2,917,000 3,689,000 5,914,000 6,650,000
Provision for income taxes 1,113,000 1,255,000 2,305,000 2,261,000
------------ ------------ ------------ ------------
Net income $ 1,804,000 $ 2,434,000 $ 3,609,000 $ 4,389,000
============ ============ ============ ============
Basic net income per share $ .11 $ .11 $ .22 $ .21
============ ============ ============ ============
Diluted net income per share $ .11 $ .11 $ .22 $ .19
============ ============ ============ ============
Shares used in basic net income per
share computation 16,151,674 21,796,911 16,158,720 21,336,337
============ ============ ============ ============
Shares used in diluted net income
per share computation 16,758,502 23,006,414 16,596,972 22,528,190
============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
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VIASAT, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
SEPTEMBER 30,
-------------------------------
1999 2000
------------ ------------
Cash flows from operating activities:
Net income $ 3,609,000 $ 4,389,000
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 1,731,000 3,886,000
Acquired in-process research and development - 2,193,000
Deferred taxes 321,000 (1,076,000)
Minority interest in consolidated subsidiary - 301,000
Non-cash compensation - 134,000
Increase (decrease) in cash resulting from
changes in assets and liabilities (net of effect of
acquisition):
Accounts receivable (5,053,000) (21,980,000)
Inventory (617,000) (5,587,000)
Other assets (133,000) (1,226,000)
Accounts payable 195,000 921,000
Accrued liabilities (1,002,000) 5,530,000
Other liabilities 148,000 11,000
------------ ------------
Net cash used in operating activities (801,000) (12,504,000)
------------ ------------
Cash flows from investing activities:
Acquisition of a business - (59,411,000)
Proceeds from sale of short-term investments 8,582,000 121,000
Purchases of property and equipment (984,000) (924,000)
------------ ------------
Net cash provided by (used in) investing activities 7,598,000 (60,214,000)
------------ ------------
Cash flows from financing activities:
Repayment of notes payable (702,000) (517,000)
Proceeds from issuance of common stock, net of
issuance costs 382,000 74,158,000
------------ ------------
Net cash (used in) provided by financing activities (320,000) 73,641,000
------------ ------------
Net increase in cash and cash equivalents 6,477,000 923,000
Cash and cash equivalents at beginning of period 6,005,000 19,520,000
------------ ------------
Cash and cash equivalents at end of period $ 12,482,000 $ 20,443,000
============ ============
Supplemental information:
Cash paid for interest $ 89,000 $ 33,000
============ ============
Cash paid for income taxes $ 2,017,000 $ 4,534,000
============ ============
See accompanying notes to condensed consolidated financial statements.
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VIASAT, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
COMMON STOCK
---------------------------
NUMBER OF PAID IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
----------- ------- ---------- ------------
Balance at March 31, 2000 16,393,208 $ 2,000 $18,932,000 $27,063,000
Exercise of stock options 175,515 645,000
Issuance of shares for Employee Stock
Purchase Plan 17,338 364,000
Issuance of shares for secondary
public offering, net of issuance costs
of $903,000 5,224,150 73,149,000
Issuance of warrants to purchase 100,000
shares of common stock 1,215,000
Non-cash compensation related to stock
options 134,000
Net income 4,389,000
----------- ------- ---------- -----------
Balance at September 30, 2000 21,810,211 $ 2,000 $94,439,000 $31,452,000
=========== ======= =========== ===========
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 September 30, 2000,
the condensed consolidated statements of income for the three and six month
periods ended September 30, 1999 and 2000, the condensed consolidated statement
of cash flows for the six month periods ended September 30, 1999 and 2000, and
the condensed consolidated statement of stockholders' equity for the six months
ended September 30, 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 an equity
interest acquired from TrellisWare Technologies, Inc. that exceeds a 50%
interest. 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 affiliates.
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 have been adjusted to reflect the stock split on a retroactive basis.
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 $59.4 million in cash (including
post-closing adjustments), 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.
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
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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
completion of final valuation studies. In connection with this acquisition, a
charge of $2.2 million for acquired in process research and development was
included in our first quarter results. This charge represented 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 $18,761,000
Inventory 8,478,000
Property, plant and equipment 10,934,000
Intangible assets 23,679,000
Acquired in-process research and development 2,193,000
Liabilities (3,419,000)
-----------
Total $60,626,000
===========
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 six
month periods ended September 30, 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 six month periods ended
September 30, 1999 and 2000 with the Satellite Networks Business' unaudited
income statement for the three and six month periods ended September 30, 1999
and 2000.
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ------------------------------
1999 2000 1999 2000
------------ ------------ ------------ -------------
Revenues $41,154,000 $39,730,000 $76,491,000 $83,739,000
Net income 544,000 2,434,000 1,822,000 4,844,000
Earnings per share
Basic .03 .11 .09 .23
Diluted .02 .11 .09 .22
Weighted average number of shares*
Basic 21,375,824 21,796,911 20,947,525 21,336,337
Diluted 21,982,652 23,006,414 21,385,777 22,528,190
*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 1996. 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 606,828 and 1,209,503 shares for the three months
ended September 30, 1999 and 2000, respectively, and 438,252 and 1,191,853 for
the six months ended September 30, 1999 and 2000 respectively, were used to
calculate diluted earnings per share. Antidilutive shares excluded from the
calculation were 122,348 and 339,809 shares for the three months ended September
30, 1999 and 2000, respectively. Antidilutive shares excluded from the
calculation were 546,572 and 319,570 shares for the six months ended September
30, 1999 and 2000, respectively. Common stock equivalents are primarily
comprised of options granted under the our stock option plan.
NOTE 5 - COMPOSITION OF CERTAIN BALANCE SHEET CAPTIONS
MARCH 31, SEPTEMBER 30,
2000 2000
------------ ------------
(UNAUDITED)
Accounts receivable:
Billed $ 13,031,000 $ 47,407,000
Unbilled 13,237,000 19,602,000
------------ ------------
$ 26,268,000 $ 67,009,000
============ ============
Inventory:
Raw materials $ 2,263,000 $ 8,957,000
Work in process 484,000 3,659,000
Finished goods 375,000 4,636,000
------------ ------------
$ 3,122,000 $ 17,252,000
============ ============
Intangible assets:
Technology - $ 8,987,000
Contracts and relationships - 8,987,000
Acquired work force - 5,551,000
Accumulated amortization - (1,375,000)
------------ ------------
- $ 22,150,000
============ ============
Accrued liabilities:
Current portion of warranty
reserve $ 799,000 $ 1,622,000
Accrued vacation 1,188,000 1,572,000
Accrued bonus 1,004,000 888,000
Accrued 401(k) matching
contribution 917,000 466,000
Collections in excess of revenues 694,000 5,765,000
Other 399,000 218,000
------------ ------------
$ 5,001,000 $ 10,531,000
============ ============
NOTE 6 - CONTINGENCIES
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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 September 30, 2000.
Accounts receivable-billed $4,540,000
Accounts receivable-unbilled 106,000
Inventory 212,000
-----------
Total $4,858,000
===========
In addition, we have committed purchase orders with vendors in the amount of
$341,000. 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 recorded a reserve 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 in 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 based on the basis of products with commercial and
defense communication applications, represented by ViaSat Satellite Networks
which operates primarily in the commercial market and 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 six month periods ended September 30, 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 SIX MONTHS ENDED
------------------- -----------------
SEPTEMBER 30, 2000
(UNAUDITED)
Revenues
ViaSat Satellite Networks $ 22,910,000 $ 45,454,000
Electronic Systems Group 16,820,000 30,902,000
------------ ------------
Total revenues 39,730,000 76,356,000
Operating profits
ViaSat Satellite Networks 1,388,000 3,589,000
Electronic Systems Group 3,035,000 6,422,000
------------ ------------
Segment operating profit before corporate 4,423,000 10,011,000
Corporate (397,000) (756,000)
Amortization of intangibles (825,000) (1,375,000)
Acquired in-process research and
development -- (2,193,000)
------------ ------------
Total operating profits $ 3,201,000 $ 5,687,000
============ ============
Revenue information by geographic area for the three and six months ended
September 30, 2000 is as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------- -----------------
SEPTEMBER 30, 2000
(UNAUDITED)
North America $32,298,000 $61,523,000
Europe 3,235,000 7,187,000
Asia Pacific 4,035,000 6,530,000
Latin America 162,000 1,116,000
----------- ------------
$39,730,000 $ 76,356,000
=========== ============
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
$37,000 at September 30, 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 SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1999 2000 1999 2000
----- ----- ----- -----
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 56.2 68.9 56.6 67.2
----- ----- ----- -----
Gross profit 43.8 31.1 43.4 32.8
Operating expenses:
Selling, general and administrative 14.3 16.7 15.8 16.2
Independent research and development 13.4 4.3 11.4 4.4
Acquired in-process research and
development -- -- -- 2.9
Amortization of intangible assets -- 2.1 -- 1.8
----- ----- ----- -----
Income from operations 16.1 8.0 16.2 7.5
Income before income taxes 17.1 9.3 17.4 8.7
Net income 10.6 6.1 10.6 5.7
THREE MONTHS ENDED SEPTEMBER 30, 1999 VS. THREE MONTHS ENDED SEPTEMBER 30, 2000
Revenues. Revenues increased 133.5% from $17.0 million for the three months
ended September 30, 1999 to $39.7 million for the three months ended September
30, 2000. This increase was primarily due to the acquisition of the Satellite
Networks Business as well as improvements in revenues generated by commercial
sales 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 UHF modem
production contracts.
Gross Profit. Gross profit increased 65.8% from $7.5 million (43.8% of
revenues) for the three months ended September 30, 1999 to $12.4 million (31.1%
of revenues) for the three months ended September 30, 2000. This increase was
primarily due to higher volumes related to the acquisition of the Satellite
Networks Business. The decrease as a percentage of revenues resulted from lower
volumes of high margin defense products and increased volumes of lower margin
development projects offset in part by improvements in the margins on commercial
products.
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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased 172.3% from $2.4 million (14.3% of
revenues) for the three months ended September 30, 1999 to $6.6 million (16.7%
of revenues) for the three months ended September 30, 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 25.2% from $2.3 million (13.4% of revenues) for the
three months ended September 30, 1999, to $1.7 million (4.3% of revenues) for
the three months ended September 30, 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
September 30, 2000, amortization expense was $825,000.
Interest Expense. Interest expense decreased from $42,000 for the three
months ended September 30, 1999 to $33,000 for the three months ended September
30, 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 $1.8 million at September
30, 1999, and $726,000 at September 30, 2000. There were no outstanding
borrowings under our line of credit as of September 30, 1999 or 2000.
Interest Income. Interest income increased from $223,000 for the three months
ended September 30, 1999 to $519,000 for the three months ended September 30,
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
38.2% for the three months ended September 30, 1999 to 34.0% for the three
months September 30, 2000. The difference relates primarily to increases in
research and development tax credits.
SIX MONTHS ENDED SEPTEMBER 30, 2000 VS. SIX MONTHS ENDED SEPTEMBER 30, 1999
Revenues. Revenues increased 124.2% from $34.1 million for the six months
ended September 30, 1999 to $76.4 million for the six months ended September 30,
2000. This increase was primarily due to the acquisition of the Satellite
Networks Business as well as improvements in revenues generated by commercial
sales 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 UHF modem
production contracts.
Gross Profit. Gross profit increased 69.2% from $14.8 million (43.4% of
revenues) for the six months ended September 30, 1999 to $25.0 million (32.8% of
revenues) for the six months ended September 30, 2000. This increase was
primarily due to higher volumes related to the acquisition of the Satellite
Networks Business. The decrease as a percentage of revenues resulted from lower
volumes of high margin defense products and increased volumes of lower margin
development projects offset in part by improvements in the margins on commercial
products.
Selling, General and Administrative Expenses. SG&A expenses increased 130.3%
from $5.4 million (15.8% of revenues) for the six months ended September 30,
1999 to $12.4 million (16.2% of revenues) for the six months ended September 30,
2000. The increase in SG&A 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. 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 SG&A expenses
are difficult to predict and vary based on specific government and commercial
sales opportunities.
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Independent Research and Development. IR&D expenses decreased 13.2% from $3.9
million (11.4% of revenues) for the six months ended September 30, 1999 to $3.4
million (4.4% of revenues) for the six months ended September 30, 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 $2.2 million for
purchased in-process research and development was included in our first quarter
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 six months ended
September 30, 2000, amortization expense was $1.4 million for the period from
April 25, 2000 to September 30, 2000.
Interest Expense. Interest expense decreased from $89,000 for the six months
ended September 30, 1999 to $65,000 for the six months ended September 30, 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 $1.8 million at September 30, 1999, and
$726,000 at September 30, 2000. There were no outstanding borrowings under our
line of credit as of September 30, 1999 or 2000.
Interest Income. Interest income increased from $479,000 for the six months
ended September 30, 1999 to $1.0 million for the six months ended September 30,
2000. This increase resulted from higher average invested cash balances.
Provision for Income Taxes. Our effective income tax rate decreased from
39.0% for the six months ended September 30, 1999 to 34.0% for the six months
ended September 30, 2000. The decrease relates primarily to increases in
research and development tax credits.
BACKLOG
At September 30, 2000 we had firm backlog of $161.0 million of which $147.0
million was funded. The firm backlog of $161.0 million does not include contract
options of $58.5 million. Of the $161.0 million in firm backlog, approximately
$62.3 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 used in operating activities for the six
months ended September 30, 1999 was $801,000 and cash used in operating
activities for the six months ended September 30, 2000 was $12.5 million.
Increases in accounts receivable and inventories due to the new business were
offset by increases in accrued liabilities.
Cash provided by investing activities for the six months ended September 30,
1999 was $7.6 million and cash used in investing activities for the six months
ended September 30, 2000 was $60.2 million. During the six months ended
September 30, 2000, we acquired the Satellite Networks Business for cash of
$59.4 million plus warrants to purchase 100,000 shares of common stock valued at
$1.2 million. In addition, we acquired $924,000 in equipment in the six months
ended September 30, 2000 compared to $984,000 of equipment during the six months
ended September 30, 1999, excluding the acquisition of the Satellite Networks
Business.
Cash used in financing activities for the six months ended September 30, 1999
was $320,000 and cash provided by financing activities for the six months ended
September 30, 2000 was $73.6 million. This increase was primarily the result of
completing a secondary public stock offering for $73.1 million.
At September 30, 2000, we had $20.4 million in cash, cash equivalents and
short-term investments, $84.7 million in working capital and $726,000 in
equipment financing. We had no outstanding borrowings under our line of credit
at September 30, 2000.
We received a commitment from Union Bank of California and Washington Mutual
Bank to provide a total credit facility of $50.0 million for the acquisition of
the Satellite Networks Business. This facility also provided for a secured
revolving credit facility of $25.0 million for general working capital. We did
not elect to use the financing for the acquisition and are now in the process of
negotiating the terms of the $25.0 million revolving line of credit facility.
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 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
(a) We held our Annual Meeting of Stockholders on September 26, 2000.
(b) See paragraph (c) below.
(c) The matters voted upon at the meeting and the votes cast with
respect thereto were as follows:
Votes Votes Broker
For Against/Withheld Abstentions Non-Votes
--- ----------------- ----------- ---------
Election of Directors
Robert W. Johnson 14,517,050 -0- 216,534 -0-
William A. Owens 14,522,590 -0- 210,994 -0-
Amendment of The 1996 Equity
Participation Plan 11,268,120 3,440,246 25,218 -0-
Amendment of Certificate of
Incorporation to Increase
Authorized Shares 11,659,330 3,065,476 8,978 -0-
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 3.1 - Second Amended and Restated Certificate of Incorporation
of ViaSat, Inc.
Exhibit 10.1 - The Amended and Restated 1996 Equity Participation Plan of
ViaSat, Inc.
Exhibit 10.2 - Terminal Development, Production and Purchase Agreement by
and between Astrolink International LLC and ViaSat, Inc.,
dated October 20, 2000.
Exhibit 10.3 - Memorandum of Agreement between Astrolink International LLC
and ViaSat, Inc., dated October 20, 2000.
Exhibit 27.1 - Financial Data Schedule
(b) We filed no reports on Form 8-K during the quarter ended September 30, 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.
November 14, 2000
/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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