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, 2002. | ||
| 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.
| Delaware (State or other jurisdiction of incorporation or organization) |
33-0174996 (I.R.S. Employer 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 registrant’s Common Stock, $.0001 par value, as of November 11, 2002 was 26,018,338.
VIASAT, INC.
INDEX
| Page | ||||||||
| PART I. |
Financial Information | |||||||
| Item 1. |
Financial Statements | |||||||
| Condensed Consolidated Balance Sheets at March 31, 2002 and September 30, 2002 | 3 | |||||||
| Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2001 and 2002 | 4 | |||||||
| Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2001 and 2002 | 5 | |||||||
| Condensed Consolidated Statement of Stockholders’ Equity for the six months ended September 30, 2002 | 6 | |||||||
| Notes to Condensed Consolidated Financial Statements | 7 | |||||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 | ||||||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 33 | ||||||
| Item 4. |
Controls and Procedures | 33 | ||||||
| PART II. |
Other Information | |||||||
| Item 4. |
Submission of Matters to a Vote of Security Holders | 35 | ||||||
| Item 6. |
Exhibits and Reports on Form 8-K | 35 | ||||||
| Signatures | 36 | |||||||
| Certifications | 37 | |||||||
2
VIASAT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| March 31, 2002 | September 30, 2002 | |||||||||
| (Unaudited) | ||||||||||
Assets |
||||||||||
Current assets: |
||||||||||
Cash and cash equivalents |
$ | 6,464 | $ | 7,950 | ||||||
Short-term investments |
156 | 157 | ||||||||
Accounts receivable, net |
80,170 | 74,483 | ||||||||
Inventory |
30,116 | 31,248 | ||||||||
Deferred income taxes |
2,974 | 3,189 | ||||||||
Prepaid expenses and other current assets |
7,343 | 11,242 | ||||||||
Total current assets |
127,223 | 128,269 | ||||||||
Goodwill |
19,456 | 19,480 | ||||||||
Other intangible assets, net |
43,922 | 39,697 | ||||||||
Property and equipment, net |
31,117 | 32,427 | ||||||||
Other assets |
16,949 | 19,972 | ||||||||
Total assets |
$ | 238,667 | $ | 239,845 | ||||||
Liabilities and Stockholders’ Equity |
||||||||||
Current liabilities: |
||||||||||
Accounts payable |
$ | 16,069 | $ | 18,085 | ||||||
Accrued liabilities |
17,796 | 14,003 | ||||||||
Line of credit |
9,900 | 18,350 | ||||||||
Total current liabilities |
43,765 | 50,438 | ||||||||
Other liabilities |
2,549 | 2,150 | ||||||||
Total liabilities |
46,314 | 52,588 | ||||||||
Contingencies (Note 7) |
||||||||||
Minority interest in consolidated subsidiary |
414 | 414 | ||||||||
Stockholders’ equity: |
||||||||||
Common stock |
2 | 3 | ||||||||
Paid in capital |
152,775 | 153,492 | ||||||||
Retained earnings |
39,485 | 33,748 | ||||||||
Unearned compensation |
(138 | ) | (87 | ) | ||||||
Accumulated other comprehensive income (loss) |
(185 | ) | (313 | ) | ||||||
Total stockholders’ equity |
191,939 | 186,843 | ||||||||
Total liabilities and stockholders’ equity |
$ | 238,667 | $ | 239,845 | ||||||
See accompanying notes to condensed consolidated financial statements.
3
VIASAT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except share data)
| Three Months Ended | Six Months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2001 | 2002 | 2001 | 2002 | |||||||||||||||
Revenues |
$ | 49,524 | $ | 39,497 | $ | 98,358 | $ | 82,360 | ||||||||||
Cost of revenues |
33,978 | 31,914 | 67,920 | 61,278 | ||||||||||||||
Gross profit |
15,546 | 7,583 | 30,438 | 21,082 | ||||||||||||||
Operating expenses: |
||||||||||||||||||
Selling, general and administrative |
8,370 | 8,888 | 16,365 | 17,626 | ||||||||||||||
Independent research and development |
1,831 | 3,489 | 3,111 | 9,187 | ||||||||||||||
Acquired in-process research and
development |
2,500 | — | 2,500 | — | ||||||||||||||
Amortization of intangible assets |
1,117 | 2,112 | 1,715 | 4,223 | ||||||||||||||
Amortization of goodwill |
436 | — | 872 | — | ||||||||||||||
Income (loss) from operations |
1,292 | (6,906 | ) | 5,875 | (9,954 | ) | ||||||||||||
Other income (expense): |
||||||||||||||||||
Interest income |
188 | 16 | 406 | 30 | ||||||||||||||
Interest expense |
(92 | ) | (184 | ) | (97 | ) | (309 | ) | ||||||||||
Minority interest |
(13 | ) | (12 | ) | (90 | ) | (16 | ) | ||||||||||
Equity in loss of joint venture |
(716 | ) | (630 | ) | (1,440 | ) | (1,159 | ) | ||||||||||
Income (loss) before income taxes |
659 | (7,716 | ) | 4,654 | (11,408 | ) | ||||||||||||
Provision (benefit) for income taxes |
212 | (3,561 | ) | 1,503 | (5,671 | ) | ||||||||||||
Net income (loss) |
$ | 447 | $ | (4,155 | ) | $ | 3,151 | $ | (5,737 | ) | ||||||||
Basic net income (loss) per share |
$ | .02 | $ | (.16 | ) | $ | .14 | $ | (.22 | ) | ||||||||
Diluted net income (loss) per share |
$ | .02 | $ | (.16 | ) | $ | .14 | $ | (.22 | ) | ||||||||
Shares used in basic net income (loss)
per share computation |
22,475,866 | 26,008,006 | 22,253,529 | 25,959,822 | ||||||||||||||
Shares used in diluted net income (loss)
per share computation |
23,427,209 | 26,008,006 | 23,188,651 | 25,959,822 | ||||||||||||||
See accompanying notes to condensed consolidated financial statements.
4
VIASAT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
| Six Months Ended September 30, | |||||||||||
| 2001 | 2002 | ||||||||||
Cash flows from operating activities: |
|||||||||||
Net income (loss) |
$ | 3,151 | $ | (5,737 | ) | ||||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
|||||||||||
Depreciation |
3,263 | 5,135 | |||||||||
Amortization of goodwill, intangible assets and software |
2,614 | 4,753 | |||||||||
Acquired in-process research and development |
2,500 | — | |||||||||
Deferred income taxes |
(354 | ) | (362 | ) | |||||||
Equity in loss of joint venture |
1,440 | 1,159 | |||||||||
Minority interest in consolidated subsidiary |
52 | — | |||||||||
Non-cash compensation |
— | 51 | |||||||||
Increase (decrease) in cash resulting from changes in,
net of effects of acquisitions: |
|||||||||||
Accounts receivable |
(880 | ) | 5,701 | ||||||||
Inventory |
(6,436 | ) | (1,319 | ) | |||||||
Other assets |
8,659 | (3,770 | ) | ||||||||
Accounts payable |
(2,390 | ) | 2,015 | ||||||||
Accrued liabilities |
3,236 | (3,804 | ) | ||||||||
Other liabilities |
936 | (333 | ) | ||||||||
Net cash provided by operating activities |
15,791 | 3,489 | |||||||||
Cash flows from investing activities: |
|||||||||||
Acquisition of a business |
(11,424 | ) | — | ||||||||
Investment in joint venture |
(1,440 | ) | (1,159 | ) | |||||||
Purchases of short-term investments, net |
(153 | ) | (1 | ) | |||||||
Investment in capitalized software |
(4,253 | ) | (3,559 | ) | |||||||
Purchases of property and equipment, net |
(9,409 | ) | (6,445 | ) | |||||||
Net cash used in investing activities |
(26,679 | ) | (11,164 | ) | |||||||
Cash flows from financing activities: |
|||||||||||
Proceeds from line of credit |
5,518 | 8,450 | |||||||||
Repayment of notes payable |
(336 | ) | — | ||||||||
Net proceeds from issuance of common stock, net of
issuance costs |
866 | 718 | |||||||||
Net cash provided by financing activities |
6,048 | 9,168 | |||||||||
Effect of exchange rate changes on cash |
(96 | ) | (7 | ) | |||||||
Net (decrease) increase in cash and cash equivalents |
(4,936 | ) | 1,486 | ||||||||
Cash and cash equivalents at beginning of period |
17,721 | 6,464 | |||||||||
Cash and cash equivalents at end of period |
$ | 12,785 | $ | 7,950 | |||||||
See accompanying notes to condensed consolidated financial statements.
5
VIASAT, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(In thousands, except share data)
| Common Stock | Accumulated | ||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||
| Number of | Paid in | Retained | Unearned | Comprehensive | Comprehensive | ||||||||||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Compensation | Income (Loss) | Total | Income (Loss) | ||||||||||||||||||||||||||
Balance at March 31, 2002 |
25,908,373 | $ | 2 | $ | 152,775 | $ | 39,485 | $ | (138 | ) | $ | (185 | ) | $ | 191,939 | ||||||||||||||||||
Exercise of stock options |
11,668 | 48 | 48 | ||||||||||||||||||||||||||||||
Issuance of stock under Employee Stock Purchase Plan |
93,297 | 1 | 669 | 670 | |||||||||||||||||||||||||||||
Amortization of stock based compensation |
51 | 51 | |||||||||||||||||||||||||||||||
Net (loss) |
(5,737 | ) | (5,737 | ) | $ | (5,737 | ) | ||||||||||||||||||||||||||
Foreign currency translation |
(128 | ) | (128 | ) | (128 | ) | |||||||||||||||||||||||||||
Comprehensive (loss) |
$ | (5,865 | ) | ||||||||||||||||||||||||||||||
Balance at September 30, 2002 |
26,013,338 | $ | 3 | $ | 153,492 | $ | 33,748 | $ | (87 | ) | $ | (313 | ) | $ | 186,843 | ||||||||||||||||||
See accompanying notes to condensed consolidated financial statements
6
VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 — Basis of Presentation
The accompanying condensed consolidated balance sheet as of September 30, 2002, the condensed consolidated statements of operations for the three and six months ended September 30, 2001 and 2002, the condensed consolidated statements of cash flows for the six months ended September 30, 2001 and 2002, and the condensed consolidated statement of stockholders’ equity for the six months ended September 30, 2002 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 adjustments) 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, 2002 included in our 2002 Annual Report on Form 10-K. Interim operating results are not necessarily indicative of operating results for the full year.
Our consolidated financial statements include the assets, liabilities and results of operations of TrellisWare Technologies, Inc., a majority owned subsidiary of ViaSat. All significant intercompany amounts have been eliminated.
Certain prior period amounts have been reclassified to conform to the current period presentation.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Significant estimates made by management include revenue recognition, capitalized software, allowance for doubtful accounts, warranty reserves and valuation of goodwill and other intangible assets.
In July 2002, the FASB issued SFAS No. 146 — Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 provides guidance on the recognition and measurement of liabilities associated with exit and disposal activities. Under SFAS No. 146, liabilities for costs associated with exit or disposal activities should be recognized when the liabilities are incurred and measured at fair value. This statement is effective prospectively for exit or disposal activities initiated after December 31, 2002. The adoption is not expected to have a material effect on the consolidated financial statements.
Note 2 — Revenue Recognition
The majority of our revenues are derived from 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 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. 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 Government representatives. These audits have been completed and agreed upon through fiscal year 1998. Contract revenues and accounts receivable are stated at amounts which are expected to be realized upon final settlement.
Note 3 — Earnings Per Share
Common stock equivalents of 951,343 shares for the three months ended September 30, 2001 and 935,122 for the six months ended September 30, 2001 respectively, were used to calculate diluted earnings per share. Potentially dilutive securities excluded from the calculation were 2,083,022 and 4,321,525 shares for the three months ended September 30, 2001 and 2002, respectively. Potentially dilutive securities excluded from the calculation were 2,006,749 and 4,327,631 shares for the six months ended September 30, 2001 and 2002, respectively. Common stock equivalents are primarily comprised of options granted under our stock option plan.
7
VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 4 — Composition of Certain Balance Sheet Captions (in thousands)