<PAGE> 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, 1998.
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 November 2, 1998 was 7,985,919.
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VIASAT, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheet at September 30, 1998 and
March 31, 1998 3
Condensed Statement of Income for the three and six months
ended September 30, 1998 and 1997 4
Condensed Statement of Cash Flows for the six months
ended September 30, 1998 and 1997 5
Condensed Statement of Stockholders' Equity for the
six months ended September 30, 1998 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 13
PART II. OTHER INFORMATION
Item 4. Submissions of Matters to a Vote of Security
Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
2
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VIASAT, INC.
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1998 1998
------------- -----------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,722,000 $ 3,290,000
Short-term investments 10,611,000 5,918,000
Accounts receivable 17,883,000 19,056,000
Inventory 5,061,000 4,687,000
Deferred income taxes 1,824,000 1,548,000
Other current assets 281,000 479,000
----------- -----------
Total current assets 38,382,000 34,978,000
Property and equipment, net 7,378,000 6,986,000
Other assets 754,000 829,000
----------- -----------
Total assets $46,514,000 $42,793,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,949,000 $ 4,555,000
Accrued liabilities 4,608,000 5,087,000
Current portion of notes payable 1,438,000 1,060,000
----------- -----------
Total current liabilities 10,995,000 10,702,000
----------- -----------
Notes payable 1,760,000 1,544,000
Other liabilities 818,000 937,000
----------- -----------
Total long-term liabilities 2,578,000 2,481,000
----------- -----------
Contingencies (Note 7)
Stockholders' equity:
Common stock 81,000 81,000
Paid in capital 17,233,000 16,668,000
Retained earnings 15,627,000 12,861,000
----------- -----------
Total stockholders' equity 32,941,000 29,610,000
----------- -----------
Total liabilities and stockholders' $46,514,000 $42,793,000
equity =========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
3
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VIASAT, INC.
CONDENSED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- ---------------------------
1998 1997 1998 1997
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $18,037,000 $15,931,000 $34,341,000 $30,407,000
Cost of revenues 11,228,000 10,513,000 21,060,000 19,872,000
---------- ---------- ---------- ----------
Gross profit 6,809,000 5,418,000 13,281,000 10,535,000
Operating expenses:
Selling, general and
administrative 2,520,000 1,826,000 4,875,000 3,616,000
Independent research and
development 2,162,000 1,832,000 4,102,000 3,453,000
---------- ---------- ---------- ----------
Income from operations 2,127,000 1,760,000 4,304,000 3,466,000
Other income (expense):
Interest income 268,000 206,000 408,000 415,000
Interest expense (66,000) (52,000) (136,000) (102,000)
----------- ----------- ----------- -----------
Income before income taxes 2,329,000 1,914,000 4,576,000 3,779,000
Provision for income taxes 952,000 711,000 1,810,000 1,401,000
---------- ---------- ---------- ----------
Net income $1,377,000 $1,203,000 $2,766,000 $2,378,000
========== ========== ========== ==========
Basic net income per share $ .17 $ .15 $ .35 $ .31
========== ========== ========== ==========
Diluted net income per share $ .17 $ .15 $ .34 $ .29
========== ========== ========== ==========
Shares used in basic net income
per share computation 7,974,103 7,792,402 7,947,843 7,768,262
========== ========== ========== ==========
Shares used in diluted net income
per share computation 8,192,121 8,201,546 8,197,548 8,129,196
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
4
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VIASAT, INC.
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,766,000 $ 2,378,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 1,357,000 974,000
Deferred income taxes (341,000) (382,000)
Increase (decrease) in cash resulting from
changes in:
Accounts receivable 1,173,000 (3,079,000)
Inventory (374,000) (1,258,000)
Other assets 336,000 1,315,000
Accounts payable 394,000 295,000
Accrued liabilities (479,000) 1,815,000
Other liabilities (119,000) 174,000
------------ -----------
Net cash provided by operating activities 4,713,000 2,232,000
----------- -----------
Cash flows from investing activities:
Purchases of short-term investments, net (4,693,000) --
Purchases of property and equipment (1,747,000) (1,625,000)
------------ ------------
Net cash used in investing activities (6,440,000) (1,625,000)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of notes payable 1,092,000 524,000
Repayment of notes payable (498,000) (865,000)
Proceeds from issuance of common stock 565,000 360,000
----------- -----------
Net cash provided by financing activities 1,159,000 19,000
----------- -----------
Net increase(decrease) in cash and cash (568,000) 626,000
equivalents
Cash and cash equivalents at beginning of period 3,290,000 12,673,000
----------- -----------
Cash and cash equivalents at end of period $ 2,722,000 $13,299,000
=========== ===========
Supplemental information:
Cash paid for interest $ 136,000 $ 102,000
=========== ===========
Cash paid for income taxes $ 2,187,000 $ 1,744,000
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
5
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VIASAT, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------
NUMBER OF PAID IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at March 31, 1998 7,920,639 $ 81,000 $16,668,000 $12,861,000
Exercise of stock options 43,093 304,000
Issuance of shares for
Employee Stock Purchase Plan 22,187 261,000
Net Income 2,766,000
--------- -------- ----------- -----------
Balance at September 30, 1998 7,985,919 $ 81,000 $17,233,000 $15,627,000
========= ======== =========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
6
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VIASAT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying condensed balance sheet as of September 30, 1998, the condensed
statement of income for the three and six month periods ended September 30, 1998
and 1997, the condensed statement of cash flows for the six month periods ended
September 30, 1998 and 1997, and the statement of stockholders' equity for the
six months ended September 30, 1998 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, 1998 included in the Company's 1998 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. Estimates
have been prepared on the basis of the most current and best available
information, and 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 1995. 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 218,018 and 409,144 shares for the three months
ended September 30, 1998 and 1997, respectively, and 249,705 and 360,934 for the
six months ended September 30, 1998 and 1997, respectively, were used to
calculate diluted earnings per share. Antidilutive shares excluded from the
calculation were 249,065 and 1,217 shares for the three months ended September
30, 1998 and 1997, respectively. Antidilutive shares excluded from the
calculation were 146,443 and 5,962 shares for the six months ended September 30,
1998 and 1997, respectively. Common stock equivalents are primarily comprised of
options granted under the Company's stock option plan. There are no reconciling
items in calculating the numerator for basic and diluted earnings per share for
any of the periods presented.
7
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VIASAT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 -- COMPOSITION OF CERTAIN BALANCE SHEET CAPTIONS
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1998 1998
------------- -------------
(UNAUDITED)
<S> <C> <C>
Accounts receivable:
Billed $10,176,000 $12,077,000
Unbilled 7,707,000 6,979,000
----------- -----------
$17,883,000 $19,056,000
=========== ===========
Inventory:
Raw materials $ 2,040,000 $ 1,564,000
Work in process 2,066,000 2,372,000
Finished goods 955,000 751,000
----------- -----------
$ 5,061,000 $ 4,687,000
=========== ===========
Accrued liabilities:
Current portion of warranty $ 1,528,000 $ 1,279,000
reserve
Accrued vacation 944,000 974,000
Income taxes payable 10,000 309,000
Collections in excess of 125,000 930,000
revenues
Accrued 401(k) matching 452,000 671,000
contribution
Accrued bonus 335,000 500,000
Other 1,214,000 424,000
----------- -----------
$ 4,608,000 $ 5,087,000
=========== ===========
</TABLE>
NOTE 6 -- 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 certain 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.
8
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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 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. 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 "Risk Factors" in the Company's Annual Report on Form 10-K for its
fiscal year ended March 31, 1998 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.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenue 100.0% 100.0% 100.0% 100.0%
Cost of revenue 62.2 66.0 61.3 65.47
Gross profit 37.8 34.0 38.7 34.6
Operating expenses:
Selling, general, and administrative 14.0 11.5 14.2 11.9
Independent research and development 12.0 11.5 11.9 11.4
Income from operations 11.8 11.0 12.5 11.4
Income before income taxes 12.9 12.0 13.3 12.4
Net income 7.6 7.6 8.1 7.8
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1998 VS. THREE MONTHS ENDED SEPTEMBER 30, 1997
Revenues. Revenues increased 13.2% from $15.9 million for the three months
ended September 30, 1997 to $18.0 million for the three months ended September
30, 1998. This increase was primarily due to increases in revenues generated by
several product lines including JCS (Joint Communication Simulator) and MIDS
(Multifunction Information Distribution System) and UHF DAMA modems. These
increases were partially offset by a decrease in revenues derived from UHF DAMA
network control stations and from commercial products.
Gross Profit. Gross profit increased 25.7% from $5.4 million (34% of
revenues) for the three months ended September 30, 1997 to $6.8 million (37.8%
of revenues) for the three months ended September 30, 1998. The Company's sales
for the three months ended September 30, 1998 were 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 38% from $1.8 million (11.5% of
revenues) for the three months ended September 30, 1997 to $2.5 million (14% of
revenues) for the three months ended September 30, 1998. The increase in SG&A
expenses as a percentage of revenues reflects increased expenditures relating to
marketing of commercial products, increased business development and bid and
proposal efforts 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
9
<PAGE> 10
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 18% from $1.8 million (11.5% of revenues) for the
three months ended September 30, 1997 to $2.2 million (12% of revenues) for the
three months ended September 30, 1998. This increase resulted primarily from
higher IR&D expenses related to the Company's defense products.
Interest Expense. Interest expense increased from $52,000 for the three
months ended September 30, 1997 to $66,000 for the three months ended September
30, 1998. 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 $2.2 million at
September 30, 1997 and $3.2 million at September 30, 1998. There were no
outstanding borrowings under the Company's line of credit as of September 30,
1997 and 1998.
Interest Income. Interest income increased from $206,000 for the three
months ended September 30, 1997 to $268,000 for the three months ended September
30, 1998. This increase was primarily the result of interest received from the
U.S. Government on overdue receivables. Interest income relates largely to
interest earned on short-term deposits of cash.
Provision for Income Taxes. The Company's effective income tax rate
increased from 37.1% for the three months ended September 30, 1997 to 40.9% for
the three months ended September 30, 1998. The tax provision was calculated
without allowance for the federal research and development tax credit, which was
expired on September 30, 1998. The R&D tax credit has been subsequently
reinstated, which will impact the tax rate favorably in future quarters.
SIX MONTHS ENDED SEPTEMBER 30, 1998 VS. SIX MONTHS ENDED SEPTEMBER 30, 1997
Revenues. Revenues increased 12.9% from $30.4 million for the six months
ended September 30, 1997 to $34.3 million for the six months ended September 30,
1998. This increase was primarily due to increases in revenues generated by
several product lines including JCS (Joint Communication Simulator) and MIDS
(Multifunction Information Distribution System) and UHF DAMA modems. These
increases were partially offset by a decrease in revenues derived from UHF DAMA
network control stations and from commercial products.
Gross Profit. Gross profit increased 26.1% from $10.5 million (34.7% of
revenues) for the six months ended September 30, 1997 to $13.3 million (38.7% of
revenues) for the six months ended September 30, 1998. The Company's sales for
the six months ended September 30, 1998 were comprised of higher margin products
relative to the same period of the prior year.
Selling, General and Administrative Expenses. SG&A expenses increased 34.8%
from $3.6 million (11.9% of revenues) for the six months ended September 30,
1997 to $4.9 million (14.2% of revenues) for the six months ended September 30,
1998. The increase in SG&A expenses reflects increased expenditures relating to
marketing of commercial products, increased business development and bid and
proposal efforts for defense programs, and additional administrative staffing to
support the Company's growth.
Independent Research and Development. IR&D expenses increased 18.8% from
$3.5 million (11.4% of revenues) for the six months ended September 30, 1997 to
$4.1 million (11.9% of revenues) for the six months ended September 30, 1998.
This increase resulted primarily from higher IR&D expenses related to the
Company's defense products.
Interest Expense. Interest expense increased from $102,000 for the six
months ended September 30, 1997 to $136,000 for the six months ended September
30, 1998. 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. There were no outstanding borrowings under the Company's
line of credit as of September 30, 1997 and 1998.
10
<PAGE> 11
Interest Income. Interest income decreased from $415,000 for the six months
ended September 30, 1997 to $408,000 for the six months ended September 30,
1998. This decrease resulted from lower cash balances during the period, and
from a lower yield on invested balances, offset by interest payments from the
U.S. Government on overdue receivables. Interest income relates to interest
earned on short-term deposits of cash.
Provision for Income Taxes. The Company's effective income tax rate
increased from 37.1% for the six months ended September 30, 1997 to 39.6% for
the six months ended September 30, 1998. The tax provision was calculated
without allowance for the federal research and development tax credit, which had
expired on September 30, 1998.
BACKLOG
At September 30, 1998, the Company had firm backlog of $57.7 million, of which
$46.7 million was funded. The firm backlog of $57.7 million does not include
contract options of $28.4 million. Of the $57.7 million in firm backlog,
approximately $26.2 million is expected to be delivered in the fiscal year
ending March 31, 1999, $20.7 million is expected to be delivered in the fiscal
year ending March 31, 2000 and the balance is expected to be delivered in the
fiscal year ending March 31, 2001 and thereafter. The Company had firm backlog
of $72.7 million, of which $48.0 million was funded, not including options of
$24.3 million, at March 31, 1998. 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. 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.
11
<PAGE> 12
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 by operating activities for the six
months ended September 30, 1998 and 1997 was $4.7 million and $2.2 million,
respectively. The relative increase in cash provided by operating activities for
the six months ended September 30, 1998 compared to the same period of the prior
year was primarily due to the timing of receivable collections which were offset
by decreased levels of accounts payable.
Cash used in investing activities for the six months ended September 30, 1998
and 1997 was $6.4 million and $1.6 million, respectively. The Company purchased
$1.7 million and $1.6 million of property and equipment during the six months
ended September 30, 1998 and 1997, respectively. The Company's purchases of
property and equipment primarily consist of test equipment and computers. During
the six months ended September 30,1998, $4.6 million in cash equivalents matured
and were reinvested in short-term investments.
Cash provided by financing activities for the three months ended September 30,
1998 and 1997 was $1.2 million and $19,000, respectively. This increase was
primarily the result of borrowings for equipment financing and proceeds from the
sale of common stock through the Company's employee stock option and purchase
plans.
At September 30, 1998, the Company had $13.3 million in cash, cash equivalents
and short-term investments, $27.4 million in working capital and $3.2 million in
long-term debt, which consisted of equipment financing. The Company had a zero
balance under its line of credit at September 30, 1998.
The Company's credit facility with Union Bank of California 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 bank's LIBOR rate plus 1.75%.
The credit facility expires on November 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.
YEAR 2000 ISSUE
Many computer programs have been written using two digits rather than four to
define the applicable year. This poses a problem at the end of the century when
1/1/00 could represent either year 2000 or year 1900. This, in turn, could
result in major system failures or miscalculations, and is generally referred to
as the "Year 2000 issue." The Company has formulated a Year 2000 Plan to address
the Company's Year 2000 issues. Because the Company's fiscal year 2000 begins on
April 1, 1999, applications which depend upon the fiscal year instead of the
calendar year must be free of any Year 2000 issues by April 1,1999.
The Company's internal business systems and PC applications will be a primary
area of focus. The Company is currently evaluating its software applications,
including, but not limited to, its business systems software, personal
computers, computerized manufacturing equipment and embedded chips to identify
any Year 2000 issues that could significantly disrupt the Company's operations.
12
<PAGE> 13
The Company's Year 2000 Plan contemplates four phases -- evaluation,
implementation of any required changes, testing and release/installation. The
evaluation phase includes a determination of which systems rely on the fiscal
year and which use the calendar year. The Company is currently in the evaluation
phase on most systems. The Company plans to have completed the evaluation of all
critical systems by December 31, 1998, and plans to be Year 2000 compliant on
all critical systems which rely on the fiscal year before March 31, 1999. The
Company expects to be Year 2000 compliant on all critical systems which rely on
the calendar year before December 31, 1999. Some non-critical systems may not be
addressed until after January 2000, however, the Company believes such systems
will not disrupt the Company's operations significantly.
The Company has conducted evaluations of its products to determine if they are
Year 2000 compliant. The Company does not believe that there are any material
Year 2000 defects in its products. The Company has been asked by some customers
to complete tests on many of its products to determine if there are any Year
2000 issues. The products have passed these tests. The Company does not believe
that any Year 2000 compliance issues related to its products will result in a
material adverse effect on the financial performance or results of operations of
the Company.
The Company has begun the evaluation of the Year 2000 status of critical
suppliers, and anticipates initiating more extensive inquiries with significant
suppliers and selected customers during the third quarter of 1998 to determine
the extent to which the Company is vulnerable to those third parties' failure to
remedy their own Year 2000 issues. The Company does not believe that any Year
2000 compliance issues related to its suppliers will result in a material
adverse effect on the business operations or financial performance of the
Company.
The Company currently estimates that the total cost of implementing its Year
2000 Plan will not exceed $1.0 million. This preliminary estimate is based on
available information and will be updated as the Company continues its
assessment and proceeds with the implementation.
The Company anticipates that the Year 2000 issue will not have a material
adverse effect on the financial position or results of operations of the
Company. There can be no assurances, however, that the systems of other
companies or the U.S. Government, on which the Company relies for supplies, cash
payments, and future business, will be timely converted, or that a failure to
convert by another company or the U.S. Government, would not have a material
adverse effect on the financial position or results of operations of the
Company. If third party service providers and vendors, due to the Year 2000
issue, fail to provide the Company with components or materials which are
necessary to manufacture its products, with sufficient electrical power and
other utilities to sustain its manufacturing process, or with adequate, reliable
means of transporting its products to its customers worldwide, then any such
failure could have a material adverse effect on the Company's ability to conduct
business, as well as the Company's financial position and results of operations.
The foregoing discussion of Year 2000 issues contains forward-looking statements
and should be read in conjunction with the Company's disclosures in the first
paragraph under the caption "Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations" above.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held its Annual Meeting of Stockholders on September 2,
1998.
(b) Not applicable.
(c) The matters voted upon at the meeting and the votes cast with respect
thereto were as follows:
<TABLE>
<CAPTION>
Votes Votes Broker
For Against/Withheld Abstentions Non-Votes
--------- ---------------- ----------- ---------
<S> <C> <C> <C> <C>
Election of Directors:
Jeffrey M. Nash 6,755,931 19,538 -- --
B. Allen Lay 6,752,706 22,763 -- --
Approval of Equity 3,338,512 567,518 -- 2,869,439
Participation Plan
</TABLE>
(d) Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27.1 -- Financial Data Schedule
(b) The Company filed no reports on Form 8-K during the quarter ended September
30, 1998.
14
<PAGE> 15
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: November 5, 1998 /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
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE VIASAT,
INC. FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN
FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,722
<SECURITIES> 10,611
<RECEIVABLES> 17,883
<ALLOWANCES> 0
<INVENTORY> 5,061
<CURRENT-ASSETS> 38,382
<PP&E> 14,347
<DEPRECIATION> 6,969
<TOTAL-ASSETS> 46,514
<CURRENT-LIABILITIES> 10,995
<BONDS> 0
0
0
<COMMON> 81
<OTHER-SE> 32,860
<TOTAL-LIABILITY-AND-EQUITY> 46,514
<SALES> 34,341
<TOTAL-REVENUES> 34,341
<CGS> 21,060
<TOTAL-COSTS> 21,060
<OTHER-EXPENSES> 8,977
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (136)
<INCOME-PRETAX> 4,576
<INCOME-TAX> 1,810
<INCOME-CONTINUING> 2,766
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,766
<EPS-PRIMARY> .35
<EPS-DILUTED> .34
</TABLE>
