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 June 30, 1997.
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 92009
(760) 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 July 31, 1997 was 7,799,260.
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VIASAT, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheet at June 30, 1997 and
March 31, 1997 2
Condensed Statement of Income for the three months
ended June 30, 1997 and 1996 3
Condensed Statement of Cash Flows for the three months
ended June 30, 1997 and 1996 4
Condensed Statement of Stockholders' Equity for the three
months ended June 30, 1997 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
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VIASAT, INC.
CONDENSED BALANCE SHEET
JUNE 30, MARCH 31,
1997 1997
----------- -----------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $12,852,000 $12,673,000
Accounts receivable 12,026,000 10,315,000
Inventory 5,527,000 4,478,000
Deferred income taxes 1,008,000 863,000
Other current assets 753,000 1,825,000
----------- -----------
Total current assets 32,166,000 30,154,000
Property and equipment, net 5,311,000 5,085,000
Other assets 470,000 435,000
----------- -----------
Total assets $37,947,000 $35,674,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,789,000 $ 4,844,000
Accrued liabilities 5,127,000 3,769,000
Current portion of notes payable 907,000 1,135,000
----------- -----------
Total current liabilities 10,823,000 9,748,000
----------- -----------
Notes payable 1,151,000 1,428,000
Other liabilities 861,000 879,000
----------- -----------
Total long-term liabilities 2,012,000 2,307,000
----------- -----------
Contingencies (Note 9)
Stockholders' equity:
Common stock 81,000 81,000
Paid in capital 16,282,000 16,044,000
Stockholders' notes receivable (80,000)
Retained earnings 8,749,000 7,574,000
----------- -----------
Total stockholders' equity 25,112,000 23,619,000
----------- -----------
Total liabilities and stockholders'
equity $37,947,000 $35,674,000
=========== ===========
See accompanying notes to financial statements
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VIASAT, INC.
CONDENSED STATEMENT OF INCOME
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30,
---------------------------------
1997 1996
--------------- ---------------
Revenues $ 14,476,000 $ 9,732,000
Cost of revenues 9,359,000 6,862,000
------------ ------------
Gross profit 5,117,000 2,870,000
Operating expenses:
Selling, general and administrative 1,790,000 1,040,000
Independent research and development 1,621,000 1,058,000
------------ ------------
Income from operations 1,706,000 772,000
Other income (expense):
Interest income 209,000 30,000
Interest expense (50,000) (62,000)
------------- -------------
Income before income taxes 1,865,000 740,000
Provision for income taxes 690,000 262,000
------------ ------------
Net income $ 1,175,000 $ 478,000
============ ============
Net income per share $ .15
============
Pro forma net income per share $ .08
============
Shares used in computing net income per share 8,051,934 6,003,110
============ ============
See accompanying notes to financial statements.
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VIASAT, INC.
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30,
------------------------------
1997 1996
------------ -----------
Cash flows from operating activities:
Net income $ 1,175,000 $ 478,000
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation 469,000 299,000
Deferred income taxes (160,000) (74,000)
Increase (decrease) in cash resulting
from changes in:
Accounts receivable (1,711,000) 248,000
Inventory (1,049,000) (253,000)
Other assets 1,050,000 (383,000)
Accounts payable (55,000) (386,000)
Accrued liabilities 1,358,000 (157,000)
Other liabilities (18,000) 116,000
------------ -----------
Net cash provided by (used in) operating
activities 1,059,000 (112,000)
----------- ------------
Cash flows from investing activities:
Purchases of property and equipment (693,000) (387,000)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of notes payable 160,000 75,000
Repayment of notes payable (665,000) (157,000)
Proceeds from issuance of common stock 318,000 17,000
----------- -----------
Net cash used in financing activities (187,000) (65,000)
------------ ------------
Net increase (decrease) in cash and cash
equivalents 179,000 (564,000)
Cash and cash equivalents at beginning of period 12,673,000 2,297,000
----------- -----------
Cash and cash equivalents at end of period $12,852,000 $ 1,733,000
=========== ===========
Supplemental information:
Cash paid for interest $ 50,000 $ 62,000
=========== ===========
Cash paid for income taxes $ 541,000 $ 210,000
=========== ===========
See accompanying notes to financial statements
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VIASAT, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
COMMON STOCK
------------------------ STOCKHOLDERS'
NUMBER OF PAID IN NOTES RETAINED
SHARES AMOUNT CAPITAL RECEIVABLE EARNINGS
--------- ----------- ----------- ----------- -----------
Balance at March 31, 1997 7,742,274 $ 81,000 $16,044,000 $ (80,000) $ 7,574,000
Issuance of common stock 33,885 238,000
Shares subscribed 80,000
Net income 1,175,000
--------- ----------- ----------- ----------- -----------
Balance at June 30, 1997 7,776,159 $ 81,000 $16,282,000 $ $ 8,749,000
========= =========== =========== =========== ===========
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 June 30, 1997 and the condensed
statements of income, of cash flows and of stockholders' equity for the three
month periods ended June 30, 1997 and 1996 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, 1997 included in the Company's 1997 Annual
Report on Form 10-K. Interim operating results are not necessarily indicative of
operating results for the full year.
NOTE 2 - 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 3 - 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 4 - INVESTMENTS
At June 30, 1997, 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.
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VIASAT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 - COMPOSITION OF CERTAIN BALANCE SHEET CAPTIONS
JUNE 30, MARCH 31,
1997 1997
------------- ------------
Accounts receivable:
Billed $ 8,575,000 $ 6,860,000
Unbilled 3,451,000 3,455,000
------------- ------------
$ 12,026,000 $ 10,315,000
============= ============
Inventory:
Raw materials $ 1,646,000 $ 1,418,000
Work in process 3,344,000 2,662,000
Finished goods 537,000 398,000
------------- ------------
$ 5,527,000 $ 4,478,000
============= ============
Accrued liabilities:
Collections in excess of
revenues $ 2,181,000 $ 355,000
Current portion of warranty
reserve 1,123,000 806,000
Accrued vacation 893,000 821,000
Income taxes payable 557,000 252,000
Accrued 401(k) matching
contribution 164,000 553,000
Accrued bonus 163,000 762,000
Other 46,000 220,000
------------- ------------
$ 5,127,000 $ 3,769,000
============= ============
NOTE 6 - INCOME TAXES
The provision (benefit) for income taxes is as follows:
THREE MONTHS ENDED JUNE 30,
---------------------------
1997 1996
----------- -----------
Current tax provision:
Federal $ 666,000 $ 420,000
State 182,000 25,000
----------- -----------
848,000 445,000
----------- -----------
Deferred tax provision:
Federal (122,000) (141,000)
State (36,000) (42,000)
----------- -----------
(158,000) (183,000)
----------- -----------
Total provision for
income taxes $ 690,000 $ 262,000
=========== ===========
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VIASAT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 6 - INCOME TAXES (CONT.)
Significant components of the Company's deferred tax assets and liabilities are
as follows:
JUNE 30, MARCH 31,
1997 1997
------------ ------------
Deferred tax assets:
Warranty reserve $ 650,000 $ 528,000
Accrued vacation 269,000 247,000
Inventory reserve 300,000 280,000
Other 262,000 260,000
------------ ------------
Total deferred tax
assets 1,481,000 1,315,000
Deferred tax liabilities:
Depreciation (63,000) (57,000)
------------- ------------
Net deferred tax assets $ 1,418,000 $ 1,258,000
============ ============
NOTE 7 - 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 Annual Report on Form 10-K for its fiscal year ended
March 31, 1997 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
JUNE 30,
----------------------
1997 1996
----- -----
Revenue 100.0 100.0
Cost of revenue 64.7 70.5
----- -----
Gross profit 35.3 29.5
Operating expenses:
Selling, general, and administrative 12.4 10.7
Independent research and development 11.2 10.9
----- -----
Income from operations 11.8 7.9
Income before income taxes 12.9 7.6
Net income 8.1 4.9
THREE MONTHS ENDED JUNE 30, 1997 VS. THREE MONTHS ENDED JUNE 30, 1996
Revenues. Revenues increased 48.8% from $9.7 million for the three months
ended June 30, 1996 to $14.5 million for the three months ended June 30, 1997.
This increase was primarily due to increases in revenues generated by UHF DAMA
network control stations and modems, and Joint Communication Simulator ("JCS")
products. UHF DAMA business area revenues grew from $6.8 million for the three
months ended June 30, 1996 to $9.1 million for the three months ended June 30,
1997. JCS business area revenues grew from $850,000 for the three months ended
June 30, 1996 to $3.2 million for the three months ended June 30, 1997.
Gross Profit. Gross profit increased 78.3% from $2.9 million (29.5% of
revenues) for the three months ended June 30, 1996 to $5.1 million (35.3% of
revenues) for the three months ended June 30, 1997. Gross profit increased as a
result of certain long-term contracts realizing higher profits then initial
estimates used to recognize revenue on a percent complete basis. In addition,
the Company's sales for the three months ended June 30, 1997 was comprised of
higher margin products relative to the same quarter of the prior year.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased 72.1% from $1.0 million (10.7% of
revenues) for the three months ended June 30, 1996 to $1.8 million (12.4% of
revenues) for the three months ended June 30, 1997. The increase in SG&A
expenses as a percentage of revenues reflects increased expenditures relating to
the introduction and marketing of the StarWire(TM) DAMA product line, increased
business development staff for defense programs, and additional administrative
staffing to support the Company's growth. SG&A expenses consist primarily of
personnel costs and expenses for business development, marketing and sales, bid
and proposal, finance, contract
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administration and general 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 53.2% from $1.1 million (10.9% of revenues) for the
three months ended June 30, 1996 to $1.6 million (11.2% of revenues) for the
three months ended June 30, 1997. This increase resulted primarily from higher
IR&D expenses related to the Company's StarWire(TM) DAMA product, which
represented approximately 89% of total IR&D for the three months ended June 30,
1997.
Interest Expense. Interest expense decreased 19.4% from $62,000 for the three
months ended June 30, 1996 to $50,000 for the three months ended June 30, 1997.
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 $2.4 million at June 30, 1996 and $2.1 million
at June 30, 1997. There were no outstanding borrowings under the Company's line
of credit as of June 30, 1996 and 1997.
Interest Income. Interest income increased from $30,000 for the three months
ended June 30, 1996 to $209,000 for the three months ended June 30, 1997.
Interest income relates to interest earned on short-term deposits of cash.
Provision for Income Taxes. The Company's effective income tax rate has
increased from 35% for the three months ended June 30, 1996 to 37% for the three
months ended June 30, 1997. The Company's effective income tax rate increased
due to a limitation on qualified research and development expenditures used to
calculate the Company's research and development tax credit.
BACKLOG
At June 30, 1997, the Company had firm backlog of $71.5 million, of which $60.1
million was funded. The firm backlog of $71.5 million does not include contract
options of $24.9 million. Of the $71.5 million in firm backlog, approximately
$39.8 million is expected to be delivered in the fiscal year ending March 31,
1998, $13.2 million is expected to be delivered in the fiscal year ending March
31, 1999 and the balance is expected to be delivered in the fiscal year ending
March 31, 2000 and thereafter. The Company had firm backlog of $78.4 million, of
which $67.6 million was funded, not including options of $24.9 million, at March
31, 1997. 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 contract or option amounts that customers may obligate
over the specified contract performance periods. The Company's customers
allocate funds for expenditures on long-term contracts on a periodic basis. 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, equity financing and loans for the
purchase of capital equipment. Cash provided/(used) by operating activities for
the three months ended June 30, 1997 and 1996 was $1.1 million and ($112,000),
respectively. The relative increase in cash provided by operating activities for
the three months ended June
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30, 1997 compared to same period of the prior year was primarily due to a
$697,000 increase in net income and higher levels of accrued liabilities and
lower levels of other assets which were partially offset by higher levels of
receivables and inventories. Accrued liabilities increased primarily as a result
of an advance received from a customer. Other assets decreased primarily due to
the collection of a non-trade receivable. The increase in accounts receivable
resulted from an increase in the Company's revenues. Inventory levels increased
due to the growing share of revenues derived from production contracts which
required the Company 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.
Cash used in investing activities for the three months ended June 30, 1997 and
1996 was $693,000 and $387,000, respectively. The increase was the result of
purchases of property and equipment, primarily consisting of test equipment and
computers.
Cash used by financing activities for the three months ended June 30, 1997 and
1996 was $187,000 and $65,000, respectively. This increase was primarily the
result of $665,000 in repayments of notes payable which was partially offset by
$318,000 received for the purchase of the Company's Common Stock.
At June 30, 1997, the Company had $12.9 million in cash and cash equivalents,
$21.3 million in working capital and $2.1 million in long-term debt which
consisted of equipment financing. The Company had a zero balance under its line
of credit at June 30, 1997.
The Company's credit facility with Union Bank 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% of eligible accounts receivable plus 50% of the
Company's eligible inventory. At the Company's option interest accrues either at
the bank's prime rate or at the banks LIBOR rate plus 1.75%. The credit facility
expires on September 15, 1998. The Company is required to pay a fee equal to
0.09% of the unused portion of the line of credit on a quarterly basis.
The Company's future capital requirements 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.
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 11.1 - Computation of Earnings Per Share
Exhibit 27.1 - Financial Data Schedule
(b) The Company filed no reports on Form 8-K during the quarter ended June
30, 1997.
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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: August 13, 1997 /s/ Mark D. Dankberg
-----------------------------
MARK D. DANKBERG
President
Chief Executive Officer
/s/ Gregory D. Monahan
-----------------------------
GREGORY D. MONAHAN
Vice President & General
Counsel Chief Financial
Officer
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1
EXHIBIT 11.1
VIASAT, INC.
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30,
----------------------------
1997 1996 (1)
------------ ------------
Net Income $ 1,175,000 $ 478,000
============ ============
Weighted average number of common shares outstanding 7,744,119 3,386,396
Assumed conversion of preferred shares 2,365,538
Common stock equivalent shares 307,815 76,021
Effect of shares issued and options granted at less
than the offering price 175,156
----------- -----------
Total number of shares for computing primary earnings
per share 8,051,934 6,003,110
Incremental shares for computing fully diluted
earnings per share 47,948
----------- -----------
Total number of shares for computing fully diluted
earnings per share 8,099,882 6,003,110
=========== ===========
Primary earnings per share $ .15 $ .08
=========== ===========
Fully diluted earnings per share $ .15 $ .08
=========== ===========
- ----------
(1) Earnings per share calculations are pro forma.
14
5
1,000
3-MOS
MAR-31-1998
APR-01-1997
JUN-30-1997
12,852
0
12,026
0
5,527
32,166
9,281
3,970
37,947
10,823
0
0
0
81
25,031
37,947
14,476
14,476
9,359
9,359
3,411
0
(159)
1,865
690
1,175
0
0
0
1,175
0.15
0.15
