ViaSat, Inc.
VIASAT INC (Form: 10-Q, Received: 02/08/2012 17:11:50)
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 30, 2011.

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 (000-21767)

 

 

ViaSat, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   33-0174996

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

6155 El Camino Real

Carlsbad, California 92009

(760) 476-2200

(Address of principal executive offices and telephone number)

 

 

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   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨   (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x

The number of shares outstanding of the registrant’s common stock, $0.0001 par value, as of February 1, 2012 was 42,838,630.

 

 

 


Table of Contents

VIASAT, INC.

TABLE OF CONTENTS

 

     Page  

PART I. FINANCIAL INFORMATION

  

Item 1. Financial Statements (Unaudited)

     3   

Condensed Consolidated Balance Sheets

     3   

Condensed Consolidated Statements of Operations

     4   

Condensed Consolidated Statements of Cash Flows

     5   

Condensed Consolidated Statement of Equity and Comprehensive Income

     6   

Notes to the Condensed Consolidated Financial Statements

     7   

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     34   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     53   

Item 4. Controls and Procedures

     53   

PART II. OTHER INFORMATION

  

Item 1. Legal Proceedings

     54   

Item 1A. Risk Factors

     54   

Item 6. Exhibits

     54   

Signatures

     55   

 

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

VIASAT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

     As of
December 30, 2011
    As of
April 1, 2011
 
     (In thousands)  
ASSETS     

Current assets:

    

Cash and cash equivalents

   $ 45,842      $ 40,490   

Accounts receivable, net

     184,299        191,889   

Inventories

     129,763        98,555   

Deferred income taxes

     18,581        18,805   

Prepaid expenses and other current assets

     51,411        21,141   
  

 

 

   

 

 

 

Total current assets

     429,896        370,880   

Satellites, net

     597,236        533,000   

Property and equipment, net

     275,598        233,139   

Other acquired intangible assets, net

     67,226        81,889   

Goodwill

     83,151        83,532   

Other assets

     126,556        103,308   
  

 

 

   

 

 

 

Total assets

   $ 1,579,663      $ 1,405,748   
  

 

 

   

 

 

 
LIABILITIES AND EQUITY     

Current liabilities:

    

Accounts payable

   $ 62,880      $ 71,712   

Accrued liabilities

     139,360        130,583   

Current portion of other long-term debt

     1,226        1,128   
  

 

 

   

 

 

 

Total current liabilities

     203,466        203,423   

Senior Notes due 2016, net

     272,667        272,296   

Other long-term debt

     171,089        61,946   

Other liabilities

     45,242        23,842   
  

 

 

   

 

 

 

Total liabilities

     692,464        561,507   
  

 

 

   

 

 

 

Commitments and contingencies (Note 8)

    

Equity:

    

ViaSat, Inc. stockholders’ equity

    

Common stock

     4        4   

Paid-in capital

     637,616        601,029   

Retained earnings

     269,596        254,722   

Common stock held in treasury

     (24,898     (17,907

Accumulated other comprehensive income

     758        2,277   
  

 

 

   

 

 

 

Total ViaSat, Inc. stockholders’ equity

     883,076        840,125   

Noncontrolling interest in subsidiary

     4,123        4,116   
  

 

 

   

 

 

 

Total equity

     887,199        844,241   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 1,579,663      $ 1,405,748   
  

 

 

   

 

 

 

See accompanying notes to the condensed consolidated financial statements.

 

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VIASAT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

     Three Months Ended     Nine Months Ended  
     December 30, 2011     December 31, 2010     December 30, 2011     December 31, 2010  
     (In thousands, except per share data)  

Revenues:

        

Product revenues

   $ 121,862      $ 126,434      $ 391,019      $ 379,022   

Service revenues

     83,102        69,507        232,070        206,812   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     204,964        195,941        623,089        585,834   

Operating expenses:

        

Cost of product revenues

     89,463        95,009        289,657        278,174   

Cost of service revenues

     57,318        41,923        160,838        122,682   

Selling, general and administrative

     45,640        40,413        131,752        121,286   

Independent research and development

     5,999        6,661        18,502        21,597   

Amortization of acquired intangible assets

     4,752        4,923        14,291        14,627   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     1,792        7,012        8,049        27,468   

Other income (expense):

        

Interest income

     20        46        59        248   

Interest expense

     (331     (60     (542     (3,151
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     1,481        6,998        7,566        24,565   

(Benefit from) provision for income taxes

     (3,637     (5,929     (7,315     437   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     5,118        12,927        14,881        24,128   

Less: Net (loss) income attributable to the noncontrolling interest, net of tax

     (22     3        7        157   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to ViaSat, Inc.

   $ 5,140      $ 12,924      $ 14,874      $ 23,971   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic net income per share attributable to ViaSat, Inc. common stockholders

   $ 0.12      $ 0.31      $ 0.35      $ 0.59   

Diluted net income per share attributable to ViaSat, Inc. common stockholders

   $ 0.12      $ 0.30      $ 0.34      $ 0.56   

Shares used in computing basic net income per share

     42,452        41,205        42,132        40,604   

Shares used in computing diluted net income per share

     44,333        43,352        44,015        42,799   

See accompanying notes to the condensed consolidated financial statements.

 

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VIASAT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

     Nine Months Ended  
     December 30, 2011     December 31, 2010  
     (In thousands)  

Cash flows from operating activities:

    

Net income

   $ 14,881      $ 24,128   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation

     71,762        61,980   

Amortization of intangible assets

     17,476        14,628   

Deferred income taxes

     (7,385     246   

Stock-based compensation expense

     14,778        12,690   

Loss on disposition of fixed assets

     3,697        4,895   

Other non-cash adjustments

     892        943   

Increase (decrease) in cash resulting from changes in operating assets and liabilities, net of effect of acquisition

    

Accounts receivable

     6,531        1,901   

Inventories

     (28,197     (11,273

Other assets

     (13,075     (422

Accounts payable

     (6,682     (6,112

Accrued liabilities

     (10,940     17,124   

Other liabilities

     1,227        2,584   
  

 

 

   

 

 

 

Net cash provided by operating activities

     64,965        123,312   

Cash flows from investing activities:

    

Purchase of property, equipment and satellites, net

     (159,167     (151,730

Cash paid for patents, licenses and other assets

     (17,104     (11,524

Payment related to acquisition of business, net of cash acquired

     —          (13,456
  

 

 

   

 

 

 

Net cash used in investing activities

     (176,271     (176,710

Cash flows from financing activities:

    

Proceeds from line of credit borrowings

     130,000        30,000   

Payments on line of credit

     (20,000     (40,000

Proceeds from issuance of common stock under equity plans

     14,369        24,391   

Purchase of common stock in treasury

     (6,991     (5,505

Payments on capital lease

     (762     —     
  

 

 

   

 

 

 

Net cash provided by financing activities

     116,616        8,886   

Effect of exchange rate changes on cash

     42        245   
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     5,352        (44,267

Cash and cash equivalents at beginning of period

     40,490        89,631   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 45,842      $ 45,364   
  

 

 

   

 

 

 

Non-cash investing and financing activities:

    

Issuance of common stock in satisfaction of certain accrued employee compensation liabilities

   $ 6,340      $ 5,096   

Issuance of common stock in connection with acquisition

   $ —        $ 4,630   

Equipment acquired under capital lease

   $ —        $ 2,751   

See accompanying notes to the condensed consolidated financial statements.

 

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VIASAT, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY AND COMPREHENSIVE INCOME

(UNAUDITED)

(In thousands, except share data)

 

    ViaSat, Inc. Stockholders                    
    Common Stock                 Common Stock Held     Accumulated
Other
Comprehensive
Income (Loss)
                   
    Number of
Shares
Issued
                      in Treasury       Noncontrolling
Interest in
Subsidiary
             
      Amount     Paid-in
Capital
    Retained
Earnings
    Number of
Shares
    Amount         Total     Comprehensive
Income
 

Balance at April 1, 2011

    42,225,130      $ 4      $ 601,029      $ 254,722        (560,363   $ (17,907   $ 2,277      $ 4,116      $ 844,241     

Exercise of stock options

    558,088        —          9,709        —          —          —          —          —          9,709     

Issuance of stock under Employee Stock Purchase Plan

    126,302        —          4,660        —          —          —          —          —          4,660     

Stock-based compensation expense

    —          —          15,878        —          —          —          —          —          15,878     

Shares issued in settlement of certain accrued employee compensation liabilities

    156,825        —          6,340        —          —          —          —          —          6,340     

RSU awards vesting

    443,607        —          —          —          —          —          —          —          —       

Purchase of treasury shares pursuant to vesting of certain RSU agreements

    —          —          —          —          (157,183     (6,991     —          —          (6,991  

Net income

    —          —          —          14,874        —          —          —          7        14,881      $ 14,881   

Hedging transactions, net of tax

    —          —          —          —          —          —          (584     —          (584     (584

Foreign currency translation, net of tax

    —          —          —          —          —          —          (935     —          (935     (935
                   

 

 

 

Comprehensive income

                    $ 13,362   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 30, 2011

    43,509,952      $ 4      $ 637,616      $ 269,596        (717,546   $ (24,898   $ 758      $ 4,123      $ 887,199     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

See accompanying notes to the 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 at December 30, 2011, the condensed consolidated statements of operations for the three and nine months ended December 30, 2011 and December 31, 2010, the condensed consolidated statements of cash flows for the nine months ended December 30, 2011 and December 31, 2010, and the condensed consolidated statement of equity and comprehensive income for the nine months ended December 30, 2011 have been prepared by the management of ViaSat, Inc. (also referred to hereafter as the Company or ViaSat), and have not been audited. These financial statements have been prepared on the same basis as the audited consolidated financial statements for the fiscal year ended April 1, 2011 and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the Company’s results for the periods presented. These financial statements should be read in conjunction with the financial statements and notes thereto for the fiscal year ended April 1, 2011 included in the Company’s Annual Report on Form 10-K. Interim operating results are not necessarily indicative of operating results for the full year. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP).

The Company’s condensed consolidated financial statements include the assets, liabilities and results of operations of ViaSat, its wholly owned subsidiaries and TrellisWare Technologies, Inc. (TrellisWare), a majority-owned subsidiary. All significant intercompany amounts have been eliminated.

The Company’s fiscal year is the 52 or 53 weeks ending on the Friday closest to March 31 of the specified year. For example, references to fiscal year 2012 refer to the fiscal year ending on March 30, 2012. The Company’s quarters for fiscal year 2012 end on July 1, 2011, September 30, 2011, December 30, 2011 and March 30, 2012. This results in a 53 week fiscal year approximately every four to five years. Fiscal years 2012 and 2011 are both 52-week years.

During the second quarter of fiscal year 2011, the Company completed the acquisition of Stonewood Group Limited (Stonewood), a privately held company registered in England and Wales. This acquisition was accounted for as a purchase and, accordingly, the condensed consolidated financial statements include the operating results of Stonewood from the date of acquisition (see Note 10).

The preparation of financial statements in conformity with GAAP 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, stock-based compensation, self-insurance reserves, allowance for doubtful accounts, warranty accrual, valuation of goodwill and other intangible assets, patents, orbital slots and other licenses, software development, property, equipment and satellites, long-lived assets, derivatives, contingencies and income taxes including the valuation allowance on deferred tax assets.

Revenue recognition

A substantial portion of the Company’s revenues are derived from long-term contracts requiring development and delivery of complex equipment built to customer specifications. Sales related to long-term contracts are accounted for under the authoritative guidance for the percentage-of-completion method of accounting (Accounting Standards Codification (ASC) 605-35). Sales and earnings under these contracts are recorded either based on the ratio of actual costs incurred to date to total estimated costs expected to be incurred related to the contract, or as products are shipped under the units-of-delivery method. Anticipated losses on contracts are recognized in full in the period in which losses become probable and estimable. Changes in estimates of profit or loss on contracts are included in earnings on a cumulative basis in the period the estimate is changed.

During the three months ended December 30, 2011 and December 31, 2010, the Company recorded losses of approximately $0.5 million and $2.3 million, respectively, related to loss contracts. In the first quarter of fiscal year 2011, the Company recorded an additional forward loss of $8.5 million on a government satellite communication program due to the significant additional labor and material costs for rework and testing required to complete the program requirements and specifications. Including this program, during the nine months ended December 30, 2011 and December 31, 2010, the Company recorded losses of approximately $1.2 million and $11.5 million, respectively, related to loss contracts.

 

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VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

The Company also derives a substantial portion of its revenues from contracts and purchase orders where revenue is recorded on delivery of products or performance of services in accordance with the authoritative guidance for revenue recognition (ASC 605). Under this standard, the Company recognizes revenue when an arrangement exists, prices are determinable, collectability is reasonably assured and the goods or services have been delivered.

The Company also enters into certain leasing arrangements with customers and evaluates the contracts in accordance with the authoritative guidance for leases (ASC 840). The Company’s accounting for equipment leases involves specific determinations under the authoritative guidance for leases, which often involve complex provisions and significant judgments. In accordance with the authoritative guidance for leases, the Company classifies the transactions as sales type or operating leases based on (1) review for transfers of ownership of the equipment to the lessee by the end of the lease term, (2) review of the lease terms to determine if it contains an option to purchase the leased equipment for a price which is sufficiently lower than the expected fair value of the equipment at the date of the option, (3) review of the lease term to determine if it is equal to or greater than 75% of the economic life of the equipment, and (4) review of the present value of the minimum lease payments to determine if they are equal to or greater than 90% of the fair market value of the equipment at the inception of the lease. Additionally, the Company considers the cancelability of the contract and any related uncertainty of collections or risk in recoverability of the lease investment at lease inception. Revenue from sales type leases is recognized at the inception of the lease or when the equipment has been delivered and installed at the customer site, if installation is required. Revenues from equipment rentals under operating leases are recognized as earned over the lease term, which is generally on a straight-line basis.

Beginning in the first quarter of fiscal year 2012, the Company adopted Accounting Standards Update (ASU) 2009-13 (ASU 2009-13), Revenue Recognition (ASC 605) Multiple-Deliverable Revenue Arrangements, which updates ASC 605-25, Revenue Recognition-Multiple element arrangements, of the Financial Accounting Standards Board (FASB) codification. ASU 2009-13 amended accounting guidance for revenue recognition to eliminate the use of the residual method and requires entities to allocate revenue using the relative selling price method. For substantially all of the arrangements with multiple deliverables, the Company allocates revenue to each element based on a selling price hierarchy at the arrangement inception. The selling price for each element is based upon the following selling price hierarchy: vendor specific objective evidence (VSOE) if available, third party evidence (TPE) if VSOE is not available, or estimated selling price (ESP) if neither VSOE nor TPE are available (a description as to how the Company determines VSOE, TPE and ESP is provided below). If a tangible hardware systems product includes software, the Company determines whether the tangible hardware systems product and the software work together to deliver the product’s essential functionality and, if so, the entire product is treated as a nonsoftware deliverable. The total arrangement consideration is allocated to each separate unit of accounting for each of the nonsoftware deliverables using the relative selling prices of each unit based on the aforementioned selling price hierarchy. Revenue for each separate unit of accounting is recognized when the applicable revenue recognition criteria for each element have been met.

To determine the selling price in multiple-element arrangements, the Company establishes VSOE of the selling price using the price charged for a deliverable when sold separately and for software license updates and product support and hardware systems support, based on the renewal rates offered to customers. For nonsoftware multiple-element arrangements, TPE is established by evaluating similar and/or interchangeable competitor products or services in standalone arrangements with similarly situated customers and/or agreements. If the Company is unable to determine the selling price because VSOE or TPE doesn’t exist, the Company determines ESP for the purposes of allocating the arrangement by reviewing historical transactions, including transactions whereby the deliverable was sold on a standalone basis and considers several other external and internal factors including, but not limited to, pricing practices including discounting, margin objectives, competition, the geographies in which the Company offers its products and services, the type of customer (i.e., distributor, value added reseller, government agency or direct end user, among others) and the stage of the product lifecycle. The determination of ESP considers the Company’s pricing model and go-to-market strategy. As the Company, or its competitors’, pricing and go-to-market strategies evolve, the Company may modify its pricing practices in the future, which could result in changes to its determination of VSOE, TPE and ESP. As a result, the Company’s future revenue recognition for multiple-element arrangements could differ materially from those in the current period. The Company adopted this authoritative guidance in the first quarter of fiscal year 2012 without a material impact on its consolidated financial statements and disclosures.

In accordance with the authoritative guidance for shipping and handling fees and costs (ASC 605-45), the Company records shipping and handling costs billed to customers as a component of revenues, and shipping and handling costs incurred by the Company for inbound and outbound freight are recorded as a component of cost of revenues.

Collections in excess of revenues and deferred revenues represent cash collected from customers in advance of revenue recognition and are recorded in accrued liabilities for obligations within the next twelve months. Amounts for obligations extending beyond twelve months are recorded within other liabilities in the condensed consolidated financial statements.

Contract costs on U.S. government contracts are subject to audit and negotiations with U.S. government representatives. The Company’s incurred cost audits by the Defense Contract Audit Agency (DCAA) have not been completed for fiscal year 2003 and subsequent fiscal years. Although the Company has recorded contract revenues subsequent to fiscal year 2002 based upon an estimate

 

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VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

of costs that the Company believes will be approved upon final audit or review, the Company does not know the outcome of any ongoing or future audits or reviews and adjustments, and if future adjustments exceed the Company’s estimates, its profitability would be adversely affected. As of December 30, 2011 and April 1, 2011, the Company had $6.7 million in contract-related reserves for its estimate of potential refunds to customers for potential cost adjustments on several multi-year U.S. government cost reimbursable contracts (see Note 8).

Property, equipment and satellites

Equipment, computers and software, furniture and fixtures, the Company’s ViaSat-1 high-capacity satellite, and related gateway and networking equipment under construction are recorded at cost, net of accumulated depreciation. The Company computes depreciation using the straight-line method over the estimated useful lives of the assets ranging from two to twenty-four years. Leasehold improvements are capitalized and amortized using the straight-line method over the shorter of the lease term or the life of the improvement. Costs incurred for additions to property, equipment and satellites, together with major renewals and betterments, are capitalized and depreciated over the remaining life of the underlying asset. Costs incurred for maintenance, repairs and minor renewals and betterments are charged to expense as incurred. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is recognized in operations.

Satellite costs, including launch services and insurance, are generally procured under long-term contracts that provide for payments over the contract periods and are capitalized as incurred. The Company is also constructing gateway facilities and network operations systems to support the ViaSat-1 satellite, which are also capitalized as incurred.

On October 19, 2011, the Company’s new high-capacity Ka-band spot-beam satellite, ViaSat-1, was successfully launched into orbit. The satellite manufacturer handed over operation of the satellite to the Company in December 2011, following the successful completion of the manufacturer’s in-orbit testing. In January 2012, subsequent to the quarter end, the Company commenced ViaSat-1 commercial services.

The Company’s contract with the manufacturer of ViaSat-1 requires the Company to make monthly in-orbit performance incentive payments, including interest, over a fifteen-year period, commencing from the transfer of title of the satellite to the Company, subject to the continued satisfactory performance of the satellite. The Company recorded the net present value of these expected future payments as a liability and as a component of the cost of the satellite. As of December 30, 2011, the Company recorded an estimated liability of $22.3 million relating to satellite performance incentives in the condensed consolidated balance sheets, of which $1.6 million and $20.7 million have been classified as current in accounts payable and non-current in other liabilities, respectively. If all performance incentives are earned as scheduled in the agreement, the Company could be required to pay a total of $39.4 million in in-orbit incentive payments, including accrued interest, over the fifteen-year period.

Interest expense is capitalized on the carrying value of property, equipment and satellites under construction until they are placed in service, in accordance with the authoritative guidance for the capitalization of interest (ASC 835-20). With respect to ViaSat-1, certain related gateway and networking equipment and other assets currently under construction, the Company capitalized $8.1 million and $23.4 million of interest expense during the three and nine months ended December 30, 2011, respectively, and $7.8 million and $20.5 million of interest expense during the three and nine months ended December 31, 2010, respectively. As a result of the acquisition of WildBlue Holding, Inc. (WildBlue) in December 2009, the Company acquired the WildBlue-1 satellite (which was placed into service in March 2007), an exclusive prepaid lifetime capital lease of Ka-band capacity over the continental United States on Telesat Canada’s Anik F2 satellite (which was placed into service in April 2005) and related gateway and networking equipment on both satellites. The acquired assets also included the indoor and outdoor customer premise equipment (CPE) units leased to subscribers under a retail leasing program. The Company depreciates the satellites, gateway and networking equipment, CPE units and related installation costs over their estimated useful lives. The total cost and accumulated depreciation of CPE units included in property and equipment, net, as of December 30, 2011 were $73.8 million and $29.9 million, respectively. The total cost and accumulated depreciation of CPE units included in property and equipment, net, as of April 1, 2011 were $61.6 million and $19.2 million, respectively.

Occasionally, the Company may enter into capital lease arrangements for various machinery, equipment, computer-related equipment, software, furniture or fixtures. As of December 30, 2011, assets under capital leases totaled approximately $3.1 million and accumulated amortization related to such capital leases was $0.6 million. As of April 1, 2011, assets under capital leases totaled approximately $3.1 million and accumulated amortization related to such capital leases was immaterial. The Company records amortization of assets leased under capital lease arrangements within depreciation expense.

Patents, orbital slots and other licenses

The Company capitalizes the costs of obtaining or acquiring patents, orbital slots and other licenses. Amortization of intangible assets that have finite lives is provided for by the straight-line method over the shorter of the legal or estimated economic life. Total capitalized costs of $3.2 million related to patents were included in other assets as of December 30, 2011 and April 1, 2011. The

 

9


Table of Contents

VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Company has capitalized costs of $8.4 million and $5.7 million related to acquiring and obtaining orbital slots and other licenses, included in other assets as of December 30, 2011 and April 1, 2011, respectively. Accumulated amortization related to these assets was approximately $0.4 million and $0.3 million as of December 30, 2011 and April 1, 2011, respectively. Amortization expense related to these assets was an immaterial amount for the three and nine months ended December 30, 2011 and December 31, 2010. If a patent, orbital slot or orbital license is rejected, abandoned or otherwise invalidated, the unamortized cost is expensed in that period. During the three and nine months ended December 30, 2011 and December 31, 2010, the Company did not write off any material costs due to abandonment or impairment.

Software development

Costs of developing software for sale are charged to research and development expense when incurred, until technological feasibility has been established. Software development costs incurred from the time technological feasibility is reached until the product is available for general release to customers are capitalized and reported at the lower of unamortized cost or net realizable value. Once the product is available for general release, the software development costs are amortized based on the ratio of current to future revenue for each product with an annual minimum equal to straight-line amortization over the remaining estimated economic life of the product, generally within five years. Capitalized costs, net, of $37.1 million and $24.5 million related to software developed for resale were included in other assets as of December 30, 2011 and April 1, 2011, respectively. The Company capitalized $6.5 million and $15.8 million of costs related to software developed for resale for the three and nine months ended December 30, 2011, respectively. The Company capitalized $3.4 million and $11.4 million of costs related to software developed for resale for the three and nine months ended December 31, 2010, respectively. Amortization expense for software development costs was $0.8 million and $3.2 million for the three and nine months ended December 30, 2011, respectively. There was no amortization expense of software development costs for the three and nine months ended December 31, 2010.

Self-insurance liabilities

The Company has self-insurance plans to retain a portion of the exposure for losses related to employee medical benefits and workers’ compensation. The self-insurance policies provide for both specific and aggregate stop-loss limits. The Company utilizes internal actuarial methods as well as other historical information for the purpose of estimating ultimate costs for a particular policy year. Based on these actuarial methods, along with currently available information and insurance industry statistics, the Company’s self-insurance liability for the plans was $1.6 million and $1.5 million as of December 30, 2011 and April 1, 2011, respectively. The Company’s estimate, which is subject to inherent variability, is based on average claims experience in the Company’s industry and its own experience in terms of frequency and severity of claims, including asserted and unasserted claims incurred but not reported, with no explicit provision for adverse fluctuation from year to year. This variability may lead to ultimate payments being either greater or less than the amounts presented above. Self-insurance liabilities have been classified as a current liability in accrued liabilities in accordance with the estimated timing of the projected payments.

Indemnification provisions

In the ordinary course of business, the Company includes indemnification provisions in certain of its contracts, generally relating to parties with which the Company has commercial relations. Pursuant to these agreements, the Company will indemnify, hold harmless and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party, including but not limited to losses relating to third-party intellectual property claims. To date, there have not been any material costs incurred in connection with such indemnification clauses. The Company’s insurance policies do not necessarily cover the cost of defending indemnification claims or providing indemnification, so if a claim was filed against the Company by any party that the Company has agreed to indemnify, the Company could incur substantial legal costs and damages. A claim would be accrued when a loss is considered probable and the amount can be reasonably estimated. At December 30, 2011 and April 1, 2011, no such amounts were accrued related to the aforementioned provisions.

The Company entered into an indemnification agreement dated September 30, 2009 (the Indemnification Agreement) with several of the former stockholders of WildBlue (the Indemnitors) in connection with the Company’s acquisition of WildBlue. Pursuant to the terms of the Indemnification Agreement, the Indemnitors agreed to indemnify the Company for any damages relating to, among other things, an existing appraisal action involving WildBlue’s 2008 recapitalization (the Action). During the third quarter of fiscal year 2012, the parties to the Action entered into a settlement agreement whereby the parties agreed to release all claims in exchange for a payment of $20.5 million by WildBlue to the plaintiffs. Payment of this amount by WildBlue was expressly conditioned upon the Indemnitors fully funding all amounts other than the $0.5 million the Company was obligated to pay under the Indemnification Agreement. Accordingly, the Company recorded an additional $20.0 million liability related to the probable settlement of the Action and corresponding indemnification receivable of $20.0 million pursuant to the Indemnification Agreement in the condensed consolidated balance sheets as of December 30, 2011 as an element of current accrued liabilities and prepaid expenses and other current assets, respectively. Subsequent to the quarter end, in January 2012, in accordance with the terms of the settlement agreement, the Company received $20.0 million in cash from the Indemnitors and paid $20.5 million to the plaintiffs in the Action.

 

10


Table of Contents

VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Noncontrolling interest

A noncontrolling interest represents the equity interest in a subsidiary that is not attributable, either directly or indirectly, to the Company and is reported as equity of the Company, separately from the Company’s controlling interest. Revenues, expenses, gains, losses, net income or loss and other comprehensive income are reported in the condensed consolidated financial statements at the consolidated amounts, which include the amounts attributable to both the controlling and noncontrolling interest.

Common stock held in treasury

During the first nine months of fiscal year 2012 and 2011, the Company issued 443,607 and 409,642 shares of common stock, respectively, based on the vesting terms of certain restricted stock unit agreements. In order for employees to satisfy minimum statutory employee tax withholding requirements related to the issuance of common stock underlying these restricted stock unit agreements, the Company repurchased 157,183 and 144,871 shares of common stock with a total value of $7.0 million and $5.5 million during the first nine months of fiscal year 2012 and 2011, respectively. Repurchased shares of common stock of 717,546 and 560,363 were held in treasury as of December 30, 2011 and April 1, 2011, respectively.

Derivatives

The Company enters into foreign currency forward and option contracts from time to time to hedge certain forecasted foreign currency transactions. Gains and losses arising from foreign currency forward and option contracts not designated as hedging instruments are recorded in other income (expense) as gains (losses) on derivative instruments. Gains and losses arising from the effective portion of foreign currency forward and option contracts which are designated as cash-flow hedging instruments are recorded in accumulated other comprehensive income (loss) as unrealized gains (losses) on derivative instruments until the underlying transaction affects the Company’s earnings, at which time they are then recorded in the same income statement line as the underlying transaction.

The fair values of the Company’s outstanding foreign currency forward contracts as of December 30, 2011 and April 1, 2011 were as follows:

 

     December 30, 2011      April 1, 2011  

Derivatives designated as hedging instruments

   Other current
assets
     Accrued liabilities      Other current
assets
     Accrued liabilities  
     (In thousands)  

Foreign currency forward contracts

   $ —         $ 669      $ 182       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives designated as hedging instruments

   $ —         $ 669      $ 182       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

The notional value of foreign currency forward contracts outstanding as of December 30, 2011 and April 1, 2011 was $10.8 million and $4.6 million, respectively.

The effects of foreign currency forward contracts in cash flow hedging relationships during the three months ended December 30, 2011 were as follows:

 

Derivatives in Cash Flow Hedging Relationships

   Amount
of Gain or
(Loss)
Recognized
in Accumulated
OCI
on
Derivatives
(Effective
Portion)
    Location of
Gain or
(Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)
     Amount of
Gain or
(Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)
    Location of Gain
or (Loss)
Recognized in
Income on
Derivatives
(Ineffective
Portion and
Amount Excluded
from Effectiveness
Testing)
     Amount of
Gain or
(Loss)
Recognized
in Income on
Derivatives
(Ineffective
Portion and
Amount
Excluded
from
Effectiveness
Testing)
 
     (In thousands)  

Foreign currency forward contracts

   $ (243     Cost of product revenues       $ (112     Not applicable       $ —     
  

 

 

      

 

 

      

 

 

 

Total

   $ (243      $ (112      $ —     
  

 

 

      

 

 

      

 

 

 

 

11


Table of Contents

VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

The effects of foreign currency forward contracts in cash flow hedging relationships during the nine months ended December 30, 2011 were as follows:

 

Derivatives in Cash Flow Hedging Relationships

   Amount
of Gain or
(Loss)
Recognized
in Accumulated
OCI
on
Derivatives
(Effective
Portion)
    Location of
Gain or
(Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)
     Amount of
Gain or
(Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)
    Location of Gain
or (Loss)
Recognized in
Income on
Derivatives
(Ineffective
Portion and
Amount Excluded
from Effectiveness
Testing)
     Amount of
Gain or
(Loss)
Recognized
in Income on
Derivatives
(Ineffective
Portion and
Amount
Excluded
from
Effectiveness
Testing)
 
     (In thousands)  

Foreign currency forward contracts

   $ (880     Cost of product revenues       $ (29     Not applicable       $ —     
  

 

 

      

 

 

      

 

 

 

Total

   $ (880      $ (29      $ —     
  

 

 

      

 

 

      

 

 

 

The effects of foreign currency forward contracts in cash flow hedging relationships during the three months ended December 31, 2010 were as follows:

 

 

Derivatives in Cash Flow Hedging Relationships

   Amount
of Gain or
(Loss)
Recognized
in Accumulated
OCI
on
Derivatives
(Effective
Portion)
    Location of
Gain or
(Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)
     Amount of
Gain or
(Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)
     Location of Gain
or (Loss)
Recognized in
Income on
Derivatives
(Ineffective
Portion and
Amount Excluded
from Effectiveness
Testing)
     Amount of
Gain or
(Loss)
Recognized
in Income on
Derivatives
(Ineffective
Portion and
Amount
Excluded
from
Effectiveness
Testing)
 
     (In thousands)  

Foreign currency forward contracts

   $ (120     Cost of product revenues       $ 399         Not applicable       $ —     
  

 

 

      

 

 

       

 

 

 

Total

   $ (120      $ 399          $ —     
  

 

 

      

 

 

       

 

 

 

The effects of foreign currency forward contracts in cash flow hedging relationships during the nine months ended December 31, 2010 were as follows:

 

Derivatives in Cash Flow Hedging Relationships

   Amount
of Gain or
(Loss)
Recognized
in Accumulated
OCI
on
Derivatives
(Effective
Portion)
     Location of
Gain or
(Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)
     Amount of
Gain or
(Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)
     Location of Gain
or (Loss)
Recognized in
Income on
Derivatives
(Ineffective
Portion and
Amount Excluded
from Effectiveness
Testing)
     Amount of
Gain or
(Loss)
Recognized
in Income on
Derivatives
(Ineffective
Portion and
Amount
Excluded
from
Effectiveness
Testing)
 
     (In thousands)  

Foreign currency forward contracts

   $ 160         Cost of product revenues       $ 601         Not applicable       $ —     
  

 

 

       

 

 

       

 

 

 

Total

   $ 160          $ 601          $ —     
  

 

 

       

 

 

       

 

 

 

At December 30, 2011, the estimated net amount of unrealized gains or losses on foreign currency cash flow hedges that is expected to be reclassified to earnings within the next twelve months is approximately $0.6 million. Foreign currency forward contracts usually mature within approximately fifteen months from their inception. There were no gains or losses from ineffectiveness of these derivative instruments recorded for the three and nine months ended December 30, 2011 and December 31, 2010.

 

12


Table of Contents

VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Stock-based compensation

In accordance with the authoritative guidance for share-based payments (ASC 718), the Company measures stock-based compensation cost at the grant date, based on the estimated fair value of the award, and recognizes expense on a straight-line basis over the requisite service period of the employee’s award. Stock-based compensation expense is recognized in the condensed consolidated statement of operations for the three and nine months ended December 30, 2011 and December 31, 2010 only for those awards ultimately expected to vest, with forfeitures estimated at the date of grant. The authoritative guidance for share-based payments requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company recognized $5.8 million and $14.8 million of stock-based compensation expense for the three and nine months ended December 30, 2011, respectively, and $4.4 million and $12.7 million of stock-based compensation expense for the three and nine months ended December 31, 2010, respectively.

For the nine months ended December 30, 2011 and December 31, 2010, the Company recorded no incremental tax benefits from stock options exercised and restricted stock unit award vesting as the excess tax benefit from stock options exercised and restricted stock unit award vesting increased the Company’s net operating loss carryforward.

Income taxes

Accruals for uncertain tax positions are provided for in accordance with the authoritative guidance for accounting for uncertainty in income taxes (ASC 740). The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The authoritative guidance for accounting for uncertainty in income taxes also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures. The Company’s policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense.

Ordinarily, the effective tax rate at the end of an interim period is calculated using an estimate of the annual effective tax rate expected to be applicable for the full fiscal year. However, when a reliable estimate cannot be made, the Company computes its provision for income taxes using the actual effective tax rate for the year-to-date period. A deferred income tax asset or liability is established for the expected future tax consequences resulting from differences in the financial reporting and tax bases of assets and liabilities and for the expected future tax benefit to be derived from tax credit and loss carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred income tax expense (benefit) is the net change during the year in the deferred income tax asset or liability.

Recent authoritative guidance

In October 2009, the FASB issued authoritative guidance for revenue recognition with multiple deliverables (ASU 2009-13, which updated ASC 605-25). This new guidance impacts the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting. Additionally, this authoritative guidance modifies the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. The Company adopted this authoritative guidance in the first quarter of fiscal year 2012 without a material impact on its consolidated financial statements and disclosures.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (ASC 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards (IFRS). The new authoritative guidance results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between GAAP and IFRS. While many of the amendments to GAAP are not expected to have a significant effect on practice, the new guidance changes some fair value measurement principles and disclosure requirements. This authoritative guidance is effective for the Company beginning in the fourth quarter of fiscal year 2012. Adoption of this authoritative guidance is not expected to have a material impact on the Company’s consolidated financial statements and disclosures.

        In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (ASC 220): Presentation of Comprehensive Income. The new authoritative guidance requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The new authoritative guidance eliminates the option to present the components of other comprehensive income as part of the statement of equity. In December 2011, the FASB further amended its guidance to defer changes related to the presentation of reclassification adjustments indefinitely as a result of concerns raised by stakeholders that the new presentation requirements would be difficult for preparers and add unnecessary complexity to financial statements. The authoritative guidance (other than the portion regarding the presentation of reclassification adjustments which, as noted above, has been deferred indefinitely) will be effective for the Company beginning in the first quarter of fiscal year 2013 and should be applied retrospectively; however, early adoption is permitted. The authoritative guidance, as amended, will impact the presentation of the financial statements but will not impact the Company’s financial position, results of operations or cash flows.

 

13


Table of Contents

VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

In September 2011, the FASB issued ASU 2011-08, Intangibles—Goodwill and Other (ASC 350): Testing Goodwill for Impairment. The new authoritative guidance simplifies how an entity tests goodwill for impairment. The new authoritative guidance allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. The two-step quantitative impairment test is required only if, based on its qualitative assessment, an entity determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This authoritative guidance is effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted if an entity’s financial statements for the more recent interim and annual period have not yet been issued. The Company will early adopt this authoritative guidance in the fourth quarter of fiscal year 2012. Adoption of this authoritative guidance is not expected to have a material impact on the Company’s consolidated financial statements and disclosures.

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (ASC 210): Disclosures about offsetting Assets and Liabilities. The new authoritative guidance requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments and derivative instruments in the scope of this authoritative guidance. This authoritative guidance will be effective for the Company beginning in the first quarter of fiscal year 2014 and should be applied retrospectively for all comparative periods presented. The Company is currently evaluating the impact that this authoritative guidance may have on its consolidated financial statements and disclosures.

Note 2 — Composition of Certain Balance Sheet Captions

 

 

    As of
December 30, 2011
    As of
April 1, 2011
 
    (In thousands)  

Accounts receivable, net:

   

Billed

  $ 92,931      $ 100,863   

Unbilled

    92,392        91,519   

Allowance for doubtful accounts

    (1,024     (493
 

 

 

   

 

 

 
  $ 184,299      $ 191,889   
 

 

 

   

 

 

 

Inventories:

   

Raw materials

  $ 52,200      $ 46,651   

Work in process

    23,751        18,713   

Finished goods

    53,812        33,191   
 

 

 

   

 

 

 
  $ 129,763      $ 98,555   
 

 

 

   

 

 

 

Prepaid expenses and other current assets:

   

Prepaid expenses

  $ 25,961      $ 18,235   

Indemnification receivable

    20,000        —     

Income tax receivable

    230        26   

Other

    5,220        2,880   
 

 

 

   

 

 

 
  $ 51,411      $ 21,141   
 

 

 

   

 

 

 

Satellites, net:

   

Satellite — WildBlue-1 (estimated useful life of 10 years)

  $ 195,890      $ 195,890   

Capital lease of satellite capacity — Anik F2 (estimated useful life of 10 years)

    99,090        99,090   

Satellite — ViaSat-1 (under construction)

    362,711        276,418   
 

 

 

   

 

 

 
    657,691        571,398   

Less accumulated depreciation and amortization

    (60,455     (38,398
 

 

 

   

 

 

 
  $ 597,236      $ 533,000   
 

 

 

   

 

 

 

Property and equipment, net:

   

Machinery and equipment (estimated useful life of 2-5 years)

  $ 151,371      $ 122,113   

Computer equipment and software (estimated useful life of 2-7 years)

    99,515        66,768   

CPE leased equipment (estimated useful life of 3-5 years)

    73,814        61,610   

Furniture and fixtures (estimated useful life of 7 years)

    13,357        13,053   

Leasehold improvements (estimated useful life of 2-15 years)

    24,810        24,550   

Building (estimated useful life of 24 years)

    8,923        8,923   

Land

    4,384        4,384   

Construction in progress

    91,838        80,976   
 

 

 

   

 

 

 
    468,012        382,377   

Less accumulated depreciation and amortization

    (192,414     (149,238
 

 

 

   

 

 

 
  $ 275,598      $ 233,139   
 

 

 

   

 

 

 

 

14


Table of Contents

VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

     As of
December 30, 2011
    As of
April 1, 2011
 
     (In thousands)  

Other acquired intangible assets, net:

    

Technology (weighted average useful life of 6 years)

   $ 53,895      $ 54,344   

Contracts and customer relationships (weighted average useful life of 7 years)

     88,739        88,834   

Non-compete agreements (weighted average useful life of 4 years)

     9,319        9,332   

Satellite co-location rights (weighted average useful life of 9 years)

     8,600        8,600   

Trade name (weighted average useful life of 3 years)

     5,680        5,680   

Other (weighted average useful life of 6 years)

     9,330        9,331   
  

 

 

   

 

 

 
     175,563        176,121   

Less accumulated amortization

     (108,337     (94,232
  

 

 

   

 

 

 
   $ 67,226      $ 81,889   
  

 

 

   

 

 

 

Accrued liabilities:

    

Accrued vacation

   $ 15,867      $ 15,600   

Accrued employee compensation

     13,642        18,804   

Collections in excess of revenues and deferred revenues

     54,408        61,916   

Accrued settlement liability

     20,500        500   

Warranty reserve, current portion

     7,245        8,014   

Other

     27,698        25,749   
  

 

 

   

 

 

 
   $ 139,360      $ 130,583   
  

 

 

   

 

 

 

Other liabilities:

    

Unrecognized tax position liabilities

   $ 2,217      $ 2,217   

Deferred rent, long-term portion

     7,185        6,267   

Deferred revenue, long-term portion

     7,624        6,960   

Deferred income taxes, long-term portion

     2,786        3,374   

Warranty reserve, long-term portion

     4,713        4,928   

Other

     20,717        96   
  

 

 

   

 

 

 
   $ 45,242      $ 23,842   
  

 

 

   

 

 

 

Note 3 — Fair Value Measurements

In accordance with the authoritative guidance for financial assets and liabilities measured at fair value on a recurring basis (ASC 820), the Company prioritizes the inputs used to measure fair value from market-based assumptions to entity specific assumptions:

 

   

Level 1 — Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date.

 

   

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

   

Level 3 — Inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instruments valuation.

The following tables present the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 30, 2011 and April 1, 2011:

 

     Fair Value as of
December 30, 2011
     Level 1      Level 2      Level 3  
     (In thousands)  

Assets

           

Cash equivalents

   $ 2,083       $ 2,083       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets measured at fair value on a recurring basis

   $ 2,083       $ 2,083       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Foreign currency forward contracts

   $ 669       $ —         $ 669       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities measured at fair value on a recurring basis

   $ 669       $ —         $ 669       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

 

     Fair Value as of
April 1, 2011
     Level 1      Level 2      Level 3  
     (In thousands)  

Assets

           

Cash equivalents

   $ 4,488       $ 4,488       $ —         $ —     

Foreign currency forward contracts

     182         —           182         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets measured at fair value on a recurring basis

   $ 4,670       $ 4,488       $ 182       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

The following section describes the valuation methodologies the Company uses to measure financial instruments at fair value:

Cash equivalents — The Company’s cash equivalents consist of money market funds. Money market funds are valued using quoted prices for identical assets in an active market with sufficient volume and frequency of transactions.

Foreign currency forward contracts — The Company uses derivative financial instruments to manage foreign currency risk relating to foreign exchange rates. The Company does not use these instruments for speculative or trading purposes. The Company’s objective is to reduce the risk to earnings and cash flows associated with changes in foreign currency exchange rates. Derivative instruments are recognized as either assets or liabilities in the accompanying condensed consolidated financial statements and are measured at fair value. Gains and losses resulting from changes in the fair values of those derivative instruments are recorded to earnings or other comprehensive income (loss) depending on the use of the derivative instrument and whether it qualifies for hedge accounting. The Company’s foreign currency forward contracts are valued using quoted prices for similar assets and liabilities in active markets or other inputs that are observable or can be corroborated by observable market data.

Long-term debt — The Company’s long-term debt consists of borrowings under (1) the revolving credit facility (the Credit Facility) reported at the borrowed outstanding amount, (2) capital lease obligations reported at the present value of future minimum lease payments with current accrued interest, and (3) the Company’s 8.875% Senior Notes due 2016 (the Notes) reported at amortized cost. However, for disclosure purposes, the Company is required to measure the fair value of outstanding debt on a recurring basis. The fair value of the Company’s outstanding long-term debt related to the Notes is determined using quoted prices in active markets and was approximately $281.9 million and $293.6 million as of December 30, 2011 and April 1, 2011, respectively. The fair value of the Company’s long-term debt related to the Credit Facility approximates its carrying amount due to its variable interest rate on the revolving line of credit, which approximates a market interest rate.

Orbital performance incentives — The Company’s contract with the manufacturer of ViaSat-1 requires the Company to make monthly in-orbit performance incentive payments, including interest at 7.00%, over a fifteen-year period, commencing from the transfer of title of the satellite to the Company, subject to the continued satisfactory performance of the satellite. The Company recorded the net present value of these expected future payments as a liability and as a component of the cost of the satellite. However, for disclosure purposes, the Company is required to measure the fair value of outstanding orbital performance incentives on a recurring basis. The fair value of the Company’s outstanding orbital performance incentives approximates its carrying amount.

Note 4 — Shares Used In Computing Diluted Net Income Per Share

 

 

    Three Months Ended     Nine Months Ended  
    December 30, 2011     December 31, 2010     December 30, 2011     December 31, 2010  
    (In thousands)  

Weighted average:

       

Common shares outstanding used in calculating basic net income per share attributable to ViaSat, Inc. common stockholders

    42,452        41,205        42,132        40,604   

Options to purchase common stock as determined by application of the treasury stock method

    1,352        1,636        1,371        1,638   

Restricted stock units to acquire common stock as determined by application of the treasury stock method

    422        392        407        422   

Potentially issuable shares in connection with certain terms of the amended ViaSat 401(k) Profit Sharing Plan and Employee Stock Purchase Plan equivalents

    107        119        105        135   
 

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in computing diluted net income per share attributable to ViaSat, Inc. common stockholders

    44,333        43,352        44,015        42,799   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

16


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VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Antidilutive shares relating to stock options excluded from the calculation were 432,272 and 308,349 shares for the three and nine months ended December 30, 2011, respectively, and for the three and nine months ended December 31, 2010 antidilutive shares relating to stock options excluded from the calculation were 165,000 and 56,099 shares, respectively.

Antidilutive shares relating to restricted stock units excluded from the calculation were 641 and 118,121 for the three and nine months ended December 30, 2011, respectively, and for the three and nine months ended December 31, 2010 antidilutive shares relating to restricted stock units excluded from the calculation were zero and 109,652, respectively.

Note 5 — Goodwill and Acquired Intangible Assets

During fiscal year 2012, the Company’s goodwill decreased by approximately $0.4 million related to the effects of foreign currency translation recorded within the Company’s government systems and commercial networks segments. Other acquired intangible assets are amortized using the straight-line method over their estimated useful lives of eight months to ten years. Amortization expense related to other acquired intangible assets was $4.8 million and $4.9 million for the three months ended December 30, 2011 and December 31, 2010, respectively, and $14.3 million and $14.6 million for the nine months ended December 30, 2011 and December 31, 2010, respectively.

 

17


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VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

The expected amortization expense of amortizable acquired intangible assets may change due to the effects of foreign currency fluctuations as a result of international businesses acquired. Current and expected amortization expense for acquired intangible assets for each of the following periods is as follows:

 

     Amortization  
     (In thousands)  

For the nine months ended December 30, 2011

   $ 14,291   

Expected for the remainder of fiscal year 2012

   $ 4,427   

Expected for fiscal year 2013

     15,527   

Expected for fiscal year 2014

     13,784   

Expected for fiscal year 2015

     13,708   

Expected for fiscal year 2016

     10,173   

Thereafter

     9,607   
  

 

 

 
   $ 67,226   
  

 

 

 

Note 6 — Senior Notes and Other Long-Term Debt

Total long-term debt consisted of the following as of December 30, 2011 and April 1, 2011:

 

     As of
December 30, 2011
    As of
April 1, 2011
 
     (In thousands)  

Senior Notes due 2016 (the Notes)

    

Notes

   $ 275,000      $ 275,000   

Unamortized discount on the Notes

     (2,333     (2,704
  

 

 

   

 

 

 

Total Notes, net of discount

     272,667        272,296   

Less: current portion of the Notes

     —          —     
  

 

 

   

 

 

 

Total Notes long-term, net

     272,667        272,296   

Other Long-Term Debt

    

Line of credit

     170,000        60,000   

Capital lease obligations

     2,315        3,074   
  

 

 

   

 

 

 

Total other long-term debt

     172,315        63,074   

Less: current portion of other long-term debt

     1,226        1,128   
  

 

 

   

 

 

 

Other long-term debt, net

     171,089        61,946   

Total debt

     444,982        335,370   

Less: current portion

     1,226        1,128   
  

 

 

   

 

 

 

Long-term debt, net

   $ 443,756      $ 334,242   
  

 

 

   

 

 

 

Senior Notes due 2016

In October 2009, the Company issued $275.0 million in principal amount of Notes in a private placement to institutional buyers, which Notes were exchanged in May 2010 for substantially identical Notes that had been registered with the Securities and Exchange Commission (SEC). The Notes bear interest at the rate of 8.875% per year, payable semi-annually in cash in arrears, which interest payments commenced in March 2010. The Notes were issued with an original issue discount of 1.24%, or $3.4 million. The Notes are recorded as long-term debt, net of original issue discount, in the Company’s consolidated financial statements. The original issue discount and deferred financing cost associated with the issuance of the Notes is amortized to interest expense on a straight-line basis over the term of the Notes.

The Notes are guaranteed on an unsecured senior basis by each of the Company’s existing and future subsidiaries that guarantees the Credit Facility (the Guarantor Subsidiaries). The Notes and the guarantees are the Company’s and the Guarantor Subsidiaries’ general senior unsecured obligations and rank equally in right of payment with all of the Company’s existing and future unsecured unsubordinated debt. The Notes and the guarantees are effectively junior in right of payment to their existing and future secured debt, including under the Credit Facility (to the extent of the value of the assets securing such debt), are structurally subordinated to all existing and future liabilities (including trade payables) of the Company’s subsidiaries that are not guarantors of the Notes, and are senior in right of payment to all of their existing and future subordinated indebtedness.

 

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VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

The indenture governing the Notes limits, among other things, the Company’s and its restricted subsidiaries’ ability to: incur, assume or guarantee additional debt; issue redeemable stock and preferred stock; pay dividends, make distributions or redeem or repurchase capital stock; prepay, redeem or repurchase subordinated debt; make loans and investments; grant or incur liens; restrict dividends, loans or asset transfers from restricted subsidiaries; sell or otherwise dispose of assets; enter into transactions with affiliates; reduce the Company’s satellite insurance; and consolidate or merge with, or sell substantially all of their assets to, another person.

Prior to September 15, 2012, the Company may redeem a portion of the Notes at the redemption price specified in the indenture, plus accrued and unpaid interest, if any, thereon to the redemption date, from the net cash proceeds of specified equity offerings. The Company may also redeem the Notes prior to September 15, 2012, in whole or in part, at a redemption price equal to the principal amount thereof plus the applicable “make-whole” premium and any accrued and unpaid interest, if any, thereon to the redemption date. The Notes may be redeemed, in whole or in part, at any time from September 15, 2012 at a fixed redemption price that declines ratably over time, plus accrued and unpaid interest, if any, thereon to the redemption date. For more information regarding the applicable redemption prices, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” of this Quarterly Report.

In the event a change of control occurs (as defined in the indenture), each holder will have the right to require the Company to repurchase all or any part of such holder’s Notes at a purchase price in cash equal to 101% of the aggregate principal amount of the Notes repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).

Credit Facility

As of December 30, 2011, the Credit Facility, as amended, provided a revolving line of credit of $325.0 million (including up to $35.0 million of letters of credit), with a maturity date of January 25, 2016. Borrowings under the Credit Facility bear interest, at the Company’s option, at either (1) the highest of the Federal Funds rate plus 0.50%, the Eurodollar rate plus 1.00% or the administrative agent’s prime rate as announced from time to time, or (2) at the Eurodollar rate plus, in the case of each of (1) and (2), an applicable margin that is based on the ratio of the Company’s debt to earnings before interest, taxes, depreciation and amortization (EBITDA) as defined in the Credit Facility. At December 30, 2011, the weighted average effective interest rate on the Company’s outstanding borrowings under the Credit Facility was 3.79%. The Company has capitalized certain amounts of interest expense on the Credit Facility in connection with the construction of ViaSat-1, certain related gateway and networking equipment and other assets currently under construction. The Credit Facility is guaranteed by certain of the Company’s domestic subsidiaries and collateralized by substantially all of the Company’s and the Guarantor Subsidiaries’ assets. On October 31, 2011, the Company amended the Credit Facility to revise the definition of EBITDA for certain earnings impacts related to the delay in the launch of its ViaSat-1 satellite.

The Credit Facility contains financial covenants regarding a maximum leverage ratio, a maximum senior secured leverage ratio and a minimum interest coverage ratio. In addition, the Credit Facility contains covenants that restrict, among other things, the Company’s ability to sell assets, make investments and acquisitions, make capital expenditures, grant liens, pay dividends and make certain other restricted payments.

The Company was in compliance with its financial covenants under the Credit Facility as of December 30, 2011. At December 30, 2011, the Company had $170.0 million in principal amount of outstanding borrowings under the Credit Facility and $13.0 million outstanding under standby letters of credit, leaving borrowing availability under the Credit Facility as of December 30, 2011 of $142.0 million.

Capital leases

Occasionally, the Company may enter into capital lease agreements for various machinery, equipment, computer-related equipment, software, furniture or fixtures. As of December 30, 2011 and April 1, 2011, the Company had approximately $2.3 million and $3.1 million, respectively, outstanding under capital leases payable over a weighted average period of 36 months, due fiscal years 2014 through 2015. These lease agreements bear interest at a weighted average rate of 4.64% and can be extended on a month-to-month basis after the original term.

 

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VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Note 7 — Product Warranty

The Company provides limited warranties on its products for periods of up to five years. The Company records a liability for its warranty obligations when products are shipped or they are included in long-term construction contracts based upon an estimate of expected warranty costs. Amounts expected to be incurred within twelve months are classified as a current liability. For mature products, the warranty cost estimates are based on historical experience with the particular product. For newer products that do not have a history of warranty cost, the Company bases its estimates on its experience with the technology involved and the type of failures that may occur. It is possible that the Company’s underlying assumptions will not reflect the actual experience and in that case, future adjustments will be made to the recorded warranty obligation. The following table reflects the change in the Company’s warranty accrual during the nine months ended December 30, 2011 and December 31, 2010.

 

 

     Nine Months Ended  
     December 30, 2011     December 31, 2010  
     (In thousands)  

Balance, beginning of period

   $ 12,942      $ 11,208   

Change in liability for warranties issued in period

     4,147        5,903   

Settlements made (in cash or in kind) during the period

     (5,131     (4,042
  

 

 

   

 

 

 

Balance, end of period

   $ 11,958      $ 13,069   
  

 

 

   

 

 

 

Note 8 — Commitments and Contingencies

The Company is involved in a variety of claims, suits, investigations and proceedings arising in the ordinary course of business, including actions with respect to intellectual property claims, breach of contract claims, labor and employment claims, tax and other matters. Although claims, suits, investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty, the Company believes that the resolution of its current pending matters will not have a material adverse effect on its business, financial condition, results of operations or liquidity.

The Company entered into the Indemnification Agreement with the Indemnitors in connection with the Company’s acquisition of WildBlue. Pursuant to the terms of the Indemnification Agreement, the Indemnitors agreed to indemnify the Company for any damages relating to, among other things, the Action. During the third quarter of fiscal year 2012, the parties to the Action entered into a settlement agreement whereby the parties agreed to release all claims in exchange for a payment of $20.5 million by WildBlue to the plaintiffs. Payment of this amount by WildBlue was expressly conditioned upon the Indemnitors fully funding all amounts other than the $0.5 million the Company was obligated to pay under the Indemnification Agreement. Accordingly, the Company recorded an additional $20.0 million liability related to the probable settlement of the Action and corresponding indemnification receivable of $20.0 million pursuant to the Indemnification Agreement in the condensed consolidated balance sheets as of December 30, 2011 as an element of current accrued liabilities and prepaid expenses and other current assets, respectively. Subsequent to the quarter end, in January 2012, in accordance with the terms of the settlement agreement, the Company received $20.0 million in cash from the Indemnitors and paid $20.5 million to the plaintiffs in the Action.

The Company has contracts with various U.S. government agencies. Accordingly, the Company is routinely subject to audit and review by the DCAA and other U.S. government agencies for its performance on government contracts, indirect rates and pricing practices, accounting and management internal control systems, and compliance with applicable contracting and procurement laws, regulations and standards. Such audits or reviews could result in significant customer refunds, penalties and sanctions against the Company, and could adversely affect the Company’s ability to compete for contracts, perform contracts or receive timely payment on contracts. The Company’s incurred cost audits by the DCAA have not been completed for fiscal year 2003 and subsequent fiscal years. Although the Company has recorded contract revenues subsequent to fiscal year 2002 based upon an estimate of costs that the Company believes will be approved upon final audit or review, the Company does not know the outcome of any ongoing or future audits or reviews and adjustments, and if future adjustments exceed the Company’s estimates, its profitability would be adversely affected. As of December 30, 2011 and April 1, 2011, the Company had $6.7 million in contract-related reserves for its estimate of potential refunds to customers for potential cost adjustments on several multi-year U.S. government cost reimbursable contracts. This reserve is classified as either an element of accrued liabilities or as a reduction of unbilled accounts receivable based on status of the related contracts.

Note 9 — Income Taxes

Ordinarily, the effective tax rate at the end of an interim period is calculated using an estimate of the annual effective tax rate expected to be applicable for the full fiscal year. However, when a reliable estimate cannot be made, the Company computes its provision for income taxes using the actual effective tax rate for the year-to-date period. The Company’s effective tax rate is highly

 

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Table of Contents

VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

influenced by the amount of its federal and state research and development tax credits. A small change in estimated annual pretax income (loss) can produce a significant variance in the annual effective tax rate given the Company’s expected amount of research and development tax credits. This variability provides an unreliable estimate of the annual effective tax rate. As a result, and in accordance with the authoritative guidance for accounting for income taxes in interim periods, the Company has computed its provision for income taxes for the three and nine months ended December 30, 2011, by applying the actual effective tax rate to the year-to-date income for the nine-month period.

For the three and nine months ended December 30, 2011, the Company’s gross unrecognized tax benefits decreased by $2.0 million and increased by $1.1 million, respectively. In the next twelve months, it is reasonably possible that the amount of unrecognized tax benefits will decrease by up to approximately $2.7 million as a result of the expiration of the statute of limitations or settlements with tax authorities for previously filed tax returns.

 

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Table of Contents

VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Note 10 — Acquisition

On July 8, 2010, the Company completed the acquisition of all outstanding shares of the parent company of Stonewood. Stonewood is a leader in the design, manufacture and delivery of data at rest encryption products and services. Stonewood products are used to encrypt data on computer hard drives so that a lost or stolen laptop does not result in the compromise of classified information or the loss of intellectual property. These products enhance the Company’s current encryption security offerings within the Company’s information assurance products in the government systems segment. The purchase price of approximately $18.8 million was comprised of $4.6 million related to the fair value of 144,962 shares of the Company’s common stock issued at the closing and $14.2 million in cash consideration paid to former Stonewood stockholders. The $14.2 million in cash consideration paid to the former Stonewood stockholders less cash acquired of $0.7 million resulted in a net cash outlay of approximately $13.5 million. The acquisition was accounted for as a purchase and accordingly, the condensed consolidated financial statements include the operating results of Stonewood from the date of acquisition.

Note 11 — Segment Information

The Company’s reporting segments, comprised of the government systems, commercial networks and satellite services segments, are primarily distinguished by the type of customer and the related contractual requirements. The Company’s government systems segment develops and produces network-centric, IP-based secure government communications systems, products and solutions. The more regulated government environment is subject to unique contractual requirements and possesses economic characteristics which differ from the commercial networks and satellite services segments. The Company’s commercial networks segment develops and produces a variety of advanced end-to-end satellite communication systems and ground networking equipment and products. The Company’s satellite services segment complements primarily the commercial networks segment by providing wholesale and retail satellite-based broadband internet services in the United States via the Company’s satellite and capacity agreements, as well as managed network services for the satellite communication systems of the Company’s consumer, enterprise and mobile broadband customers. The Company’s segments are determined consistent with the way management currently organizes and evaluates financial information internally for making operating decisions and assessing performance.

As discussed further in Note 1, included in the government systems segment operating profit for the nine months ended December 31, 2010 is an $8.5 million forward loss recorded on a government satellite communications program. Segment revenues and operating profits (losses) for the three and nine months ended December 30, 2011 and December 31, 2010 were as follows:

 

     Three Months Ended     Nine Months Ended  
     December 30, 2011     December 31, 2010     December 30, 2011     December 31, 2010  
     (In thousands)  

Revenues

        

Government Systems

        

Product

   $ 72,036      $ 89,640      $ 233,256      $ 258,002   

Service

     22,829        7,921        51,188        23,341   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     94,865        97,561        284,444        281,343   

Commercial Networks

        

Product

     49,092        34,849        155,451        116,898   

Service

     5,357        4,199        15,266        12,081   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     54,449        39,048        170,717        128,979   

Satellite Services

        

Product

     734        1,945        2,312        4,122   

Service

     54,916        57,387        165,616        171,390   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     55,650        59,332        167,928        175,512   

Elimination of intersegment revenues

     —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

   $ 204,964      $ 195,941      $ 623,089      $ 585,834   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating profits (losses)

        

Government Systems

   $ 13,062      $ 8,166      $ 34,775      $ 22,632   

Commercial Networks

     (5,159     (4,160     (11,270     (7,677

Satellite Services

     (1,359     7,929        (1,165     27,096   

Elimination of intersegment operating profits

     —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment operating profit before corporate and amortization of acquired intangible assets

     6,544        11,935        22,340        42,051   

Corporate

     —          —          —          44   

Amortization of acquired intangible assets

     (4,752     (4,923     (14,291     (14,627
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

   $ 1,792      $ 7,012      $ 8,049      $ 27,468   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

22


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VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Assets identifiable to segments include: accounts receivable, unbilled accounts receivable, inventory, acquired intangible assets and goodwill. The Company’s property, plant and equipment, including its satellites, gateways and other networking equipment, are assigned to corporate assets as they are available for use by the various segments throughout their estimated useful lives. Segment assets as of December 30, 2011 and April 1, 2011 were as follows:

 

     As of
December 30, 2011
     As of
April 1, 2011
 
     (In thousands)  

Segment assets

     

Government Systems

   $ 225,226       $ 228,194   

Commercial Networks

     143,394         133,158   

Satellite Services

     95,325         93,857   
  

 

 

    

 

 

 

Total segment assets

     463,945         455,209   

Corporate assets

     1,115,718         950,539   
  

 

 

    

 

 

 

Total assets

   $ 1,579,663       $ 1,405,748   
  

 

 

    

 

 

 

Other acquired intangible assets, net and goodwill included in segment assets as of December 30, 2011 and April 1, 2011 were as follows:

 

     Other Acquired Intangible
Assets, Net
     Goodwill  
     December 30, 2011      April 1, 2011      December 30, 2011      April 1, 2011  
     (In thousands)  

Government Systems

   $ 8,845       $ 11,157       $ 29,680       $ 30,023   

Commercial Networks

     2,754         5,391         43,662         43,700   

Satellite Services

     55,627         65,341         9,809         9,809   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 67,226       $ 81,889       $ 83,151       $ 83,532   
  

 

 

    

 

 

    

 

 

    

 

 

 

Amortization of acquired intangible assets by segment for the three and nine months ended December 30, 2011 and December 31, 2010 was as follows:

 

     Three Months Ended      Nine Months Ended  
     December 30, 2011      December 31, 2010      December 30, 2011      December 31, 2010  
     (In thousands)  

Government Systems

   $ 631       $ 714       $ 1,927       $ 1,806   

Commercial Networks

     883         971         2,650         3,107   

Satellite Services

     3,238         3,238         9,714         9,714   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total amortization of acquired intangible assets

   $ 4,752       $ 4,923       $ 14,291       $ 14,627   
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenue information by geographic area for the three and nine months ended December 30, 2011 and December 31, 2010 was as follows:

 

     Three Months Ended      Nine Months Ended  
     December 30, 2011      December 31, 2010      December 30, 2011      December 31, 2010  
     (In thousands)  

United States

   $ 165,660       $ 165,763       $ 495,621       $ 493,863   

Europe, Middle East and Africa

     25,107         20,301         82,347         62,502   

Asia, Pacific

     4,586         5,870         16,583         18,715   

North America other than United States

     7,763         2,370         17,476         5,469   

Central and Latin America

     1,848         1,637         11,062         5,285   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

   $ 204,964       $ 195,941       $ 623,089       $ 585,834   
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company distinguishes revenues from external customers by geographic area based on customer location.

The net book value of long-lived assets located outside the United States was $9.1 million and $7.9 million at December 30, 2011 and April 1, 2011, respectively.

 

23


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VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Note 12 — Certain Relationships and Related-Party Transactions

Michael Targoff, a director of the Company since February 2003, currently serves as the Chief Executive Officer and the Vice Chairman of the board of directors of Loral Space & Communications, Inc. (Loral), the parent of Space Systems/Loral, Inc. (SS/L), and is also a director of Telesat Holdings, Inc., a joint venture company formed by Loral and the Public Sector Pension Investment Board to acquire Telesat Canada in October 2007. John Stenbit, a director of the Company since August 2004, also currently serves on the board of directors of Loral.

In January 2008, the Company entered into a satellite construction contract with SS/L under which the Company purchased a new high-capacity Ka-band spot-beam satellite (ViaSat-1) designed by the Company and constructed by SS/L for approximately $209.1 million, subject to purchase price adjustments based on satellite performance. In addition, the Company entered into a beam sharing agreement with Loral, whereby Loral is responsible for contributing 15% of the total costs (estimated at approximately $57.6 million) associated with the ViaSat-1 satellite project. The Company’s purchase of the ViaSat-1 satellite from SS/L was approved by the disinterested members of the Company’s Board of Directors, after a determination by the disinterested members of the Company’s Board that the terms and conditions of the purchase were fair to and in the best interests of the Company and its stockholders. On March 1, 2011, Loral entered into agreements with Telesat Canada pursuant to which Loral assigned to Telesat Canada and Telesat Canada assumed from Loral all of Loral’s rights and obligations with respect to the Canadian beams on ViaSat-1. Material amounts related to the satellite construction contract with SS/L are disclosed in the tables below.

In addition, from time to time, the Company enters into various contracts in the ordinary course of business with SS/L and Telesat Canada. Material amounts related to these contracts are disclosed in the tables below.

Current payables included in accounts payable, collection in excess of revenues and deferred revenues included in accrued liabilities and long-term payables included in other liabilities as of December 30, 2011 and April 1, 2011 were as follows:

 

     As of
December 30, 2011
    As of
April 1, 2011
 
     (In thousands)  

Payables, current

    

Loral – satellite construction contract

   $ 2,867      $ —     

Collections in excess of revenues and deferred revenues

    

Loral – ordinary course of business

           1,376   

Payables, long-term

    

Loral – satellite construction contract (estimated in-orbit performance incentives)

     20,716        —     

 

*

Amounts related to SS/L and Telesat Canada under the ViaSat-1 satellite construction contract, and SS/L and Telesat Canada in the ordinary course of business, were not meaningful.

Revenue and expense for the three and nine months ended December 30, 2011 and December 31, 2010 were as follows:

 

    Three Months Ended     Nine Months Ended  
    December 30, 2011     December 31, 2010     December 30, 2011     December 31, 2010  
    (In thousands)  

Revenue

       

Loral – ordinary course of business

  $ 2,251      $ 1,223      $ 3,768      $ 1,380   

Expense

       

Telesat Canada – ordinary course of business

                1,986        2,687   

 

*

Amounts related to SS/L and Telesat Canada under the ViaSat-1 satellite construction contract, and SS/L and Telesat Canada in the ordinary course of business, were not meaningful.

 

24


Table of Contents

VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Cash received and cash paid during the nine months ended December 30, 2011 and December 31, 2010 were as follows:

 

     Nine Months Ended  
     December 30, 2011     December 31, 2010  
     (In thousands)  

Cash received

    

Loral – Beam Sharing Agreement

   $ 3,845      $ 8,230   

Telesat Canada – Beam Sharing Agreement

     8,085        —     

Loral – ordinary course of business

              3,876   

Telesat Canada – ordinary course of business

     2,843        1,166   

Cash paid

    

Loral – satellite construction contract

     2,566        23,096   

Telesat Canada – ordinary course of business

     5,707        6,046   

 

*

Amounts related to SS/L and Telesat Canada under the ViaSat-1 satellite construction contract, and SS/L and Telesat Canada in the ordinary course of business, were not meaningful.

As discussed in Note 1, the Company entered into the Indemnification Agreement with the Indemnitors in connection with the Company’s acquisition of WildBlue. Pursuant to the terms of the Indemnification Agreement, the Indemnitors agreed to indemnify the Company for any damages relating to, among other things, the Action. During the third quarter of fiscal year 2012, the parties to the Action entered into a settlement agreement whereby the parties agreed to release all claims in exchange for a payment of $20.5 million by WildBlue to the plaintiffs. Payment of this amount by WildBlue was expressly conditioned upon the Indemnitors fully funding an escrow account covering all amounts other than the $0.5 million the Company was obligated to pay under the Indemnification Agreement. Subsequent to the quarter end, in January 2012, in accordance with the terms of the settlement agreement, the Company received $20.0 million in cash from the Indemnitors and paid $20.5 million to the plaintiffs in the Action. One of the former WildBlue stockholders and plaintiffs in the Action was TimesArrow Capital I, LLC. Thomas Moore, Senior Vice President of the Company, served as the administrative member of, and held 33.3% of the equity interests in, TimesArrow. Of the $20.5 million paid to the plaintiffs in the Action, TimesArrow and Mr. Moore received $3.0 million and $1.0 million, respectively.

Subsequent to the quarter end, on February 1, 2012, the Company filed a complaint against SS/L in the United States District Court for the Southern District of California for patent infringement and breach of contract relating to the manufacture of ViaSat-1. For more information regarding the complaint, see “Part II—Item 1. Legal Proceedings” of this Quarterly Report.

Note 13 — Financial Statements of Parent and Subsidiary Guarantors

In October 2009, the Company issued $275.0 million in principal amount of Notes in a private placement to institutional buyers. The Notes were exchanged in May 2010 for substantially identical Notes that had been registered with the SEC. The Notes are jointly and severally guaranteed on a full and unconditional basis by each of the Guarantor Subsidiaries, which are 100% owned by the Company. The indenture governing the Notes limits, among other things, the Company’s and its restricted subsidiaries’ ability to: incur, assume or guarantee additional debt; issue redeemable stock and preferred stock; pay dividends, make distributions or redeem or repurchase capital stock; prepay, redeem or repurchase subordinated debt; make loans and investments; grant or incur liens; restrict dividends, loans or asset transfers from restricted subsidiaries; sell or otherwise dispose of assets; enter into transactions with affiliates; reduce the Company’s satellite insurance; and consolidate or merge with, or sell substantially all of their assets to, another person.

The following supplemental financial information sets forth, on a condensed consolidating basis, the balance sheets, statements of operations and statements of cash flows for the Company (as “Issuing Parent Company”), the Guarantor Subsidiaries, the non-guarantor subsidiaries and total consolidated Company and subsidiaries as of December 30, 2011 and April 1, 2011 and for the three and nine months ended December 30, 2011 and December 31, 2010.

 

25


Table of Contents

VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Condensed Consolidated Balance Sheet as of December 30, 2011

 

     Issuing  Parent
Company
     Guarantor
Subsidiaries
     Non-Guarantor
Subsidiaries
     Consolidation  and
Elimination

Adjustments
    Consolidated  
     (Unaudited, in thousands)  
ASSETS              

Current assets:

             

Cash and cash equivalents

   $ 38,218       $ 175       $ 7,449       $ —        $ 45,842   

Accounts receivable, net

     167,431         9,291         7,577         —          184,299   

Inventories

     108,859         14,533         6,371         —          129,763   

Deferred income taxes

     16,696         1,723         162         —          18,581   

Prepaid expenses and other current assets

     23,637         27,017         757         —          51,411   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current assets

     354,841         52,739         22,316         —          429,896   

Satellites, net

     362,711         234,525         —           —          597,236   

Property and equipment, net

     173,070         96,908         5,620         —          275,598   

Other acquired intangible assets, net

     3,292         55,627         8,307         —          67,226   

Goodwill

     63,939         9,687         9,525         —          83,151   

Investments in subsidiaries and intercompany receivables

     452,910         2,363         654         (455,927     —     

Other assets

     108,426         17,534         596         —          126,556   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 1,519,189       $ 469,383       $ 47,018       $ (455,927   $ 1,579,663   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
LIABILITIES AND EQUITY              

Current liabilities:

             

Accounts payable

   $ 54,227       $ 7,814       $ 839       $ —        $ 62,880   

Accrued liabilities

     92,571         43,214         3,575         —          139,360   

Current portion of other long-term debt

     128         1,098         —           —          1,226   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current liabilities

     146,926         52,126         4,414         —          203,466   

Senior Notes due 2016, net

     272,667         —           —           —          272,667   

Other long-term debt

     170,107         982         —           —          171,089   

Intercompany payables

     9,937         —           10,446         (20,383     —     

Other liabilities

     36,476         6,249         2,517         —          45,242   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     636,113         59,357         17,377         (20,383     692,464   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Equity:

             

ViaSat, Inc. stockholders’ equity

             

Total ViaSat, Inc. stockholders’ equity

     883,076         410,026         29,641         (439,667     883,076   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Noncontrolling interest in subsidiary

     —           —           —           4,123        4,123   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total equity

     883,076         410,026         29,641         (435,544     887,199   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities and equity

   $ 1,519,189       $ 469,383       $ 47,018       $ (455,927   $ 1,579,663   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

26


Table of Contents

VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Condensed Consolidated Balance Sheet as of April 1, 2011

 

     Issuing  Parent
Company
     Guarantor
Subsidiaries
     Non-Guarantor
Subsidiaries
     Consolidation and
Elimination
Adjustments
    Consolidated  
     (Unaudited, in thousands)  
ASSETS              

Current assets:

             

Cash and cash equivalents

   $ 24,347       $ 7,600       $ 8,543       $ —        $ 40,490   

Accounts receivable, net

     171,183         10,644         10,062         —          191,889   

Inventories

     88,542         7,484         2,932         (403     98,555   

Deferred income taxes

     16,428         1,723         162         492        18,805   

Prepaid expenses and other current assets

     15,236         4,745         1,160         —          21,141   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current assets

     315,736         32,196         22,859         89        370,880   

Satellites, net

     276,418         256,582         —           —          533,000   

Property and equipment, net

     122,945         103,410         7,785         (1,001     233,139   

Other acquired intangible assets, net

     6,201         65,341         10,347         —          81,889   

Goodwill

     63,939         9,686         9,907         —          83,532   

Investments in subsidiaries and intercompany receivables

     490,288         2,246         404         (492,938     —     

Other assets

     89,834         12,922         552         —          103,308   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 1,365,361       $ 482,383       $ 51,854       $ (493,850   $ 1,405,748   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
LIABILITIES AND EQUITY              

Current liabilities:

             

Accounts payable

   $ 62,465       $ 8,164       $ 1,083       $ —        $ 71,712   

Accrued liabilities

     100,749         25,691         4,143         —          130,583   

Current portion of other long-term debt

     116         1,012         —           —          1,128   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current liabilities

     163,330         34,867         5,226         —          203,423   

Senior Notes due 2016, net

     272,296         —           —           —          272,296   

Other long-term debt

     60,203         1,743         —           —          61,946   

Intercompany payables

     14,606         —           11,945         (26,551     —     

Other liabilities

     16,464         4,321         3,057         —          23,842   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     526,899         40,931         20,228         (26,551     561,507   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Equity:

             

ViaSat, Inc. stockholders’ equity

             

Total ViaSat, Inc. stockholders’ equity

     838,462         441,452         31,626         (471,415     840,125   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Noncontrolling interest in subsidiary

     —           —           —           4,116        4,116   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total equity

     838,462         441,452         31,626         (467,299     844,241   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities and equity

   $ 1,365,361       $ 482,383       $ 51,854       $ (493,850   $ 1,405,748   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

27


Table of Contents

VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Condensed Consolidated Statement of Operations for the Three Months Ended December 30, 2011

 

     Issuing  Parent
Company
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Consolidation  and
Elimination
Adjustments
    Consolidated  
     (Unaudited, in thousands)  

Revenues:

          

Product revenues

   $ 115,537      $ 735      $ 5,651      $ (61   $ 121,862   

Service revenues

     30,438        50,864        2,211        (411     83,102   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     145,975        51,599        7,862        (472     204,964   

Operating expenses:

          

Cost of product revenues

     85,440        854        3,230        (61     89,463   

Cost of service revenues

     17,781        38,200        1,760        (423     57,318   

Selling, general and administrative

     31,801        11,767        2,057        15       45,640   

Independent research and development

     5,821        —          181        (3     5,999   

Amortization of acquired intangible assets

     971        3,238        543        —          4,752   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     4,161        (2,460     91        —          1,792   

Other income (expense):

          

Interest income

     19        —          1        —          20   

Interest expense

     (305     (26     —          —          (331
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     3,875        (2,486     92        —          1,481   

Provision for (benefit from) income taxes

     (1,901     (1,318     (418     —          (3,637

Equity in net income (loss) of consolidated subsidiaries

     (636     —          —          636        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     5,140        (1,168     510        636        5,118   

Less: Net income (loss) attributable to noncontrolling interest, net of tax

     —          —          —          (22     (22
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to ViaSat, Inc.

   $ 5,140      $ (1,168   $ 510      $ 658      $ 5,140   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

28


Table of Contents

VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Condensed Consolidated Statement of Operations for the Nine Months Ended December 30, 2011

 

     Issuing  Parent
Company
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Consolidation  and
Elimination
Adjustments
    Consolidated  
     (Unaudited, in thousands)  

Revenues:

          

Product revenues

   $ 370,293      $ 2,313      $ 18,818      $ (405   $ 391,019   

Service revenues

     70,123        155,853        7,624        (1,530     232,070   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     440,416        158,166        26,442        (1,935     623,089   

Operating expenses:

          

Cost of product revenues

     275,370        2,396        13,695        (1,804     289,657   

Cost of service revenues

     43,253        113,657        5,419        (1,491     160,838   

Selling, general and administrative

     88,335        36,827        6,578        12        131,752   

Independent research and development

     17,778        —          753        (29     18,502   

Amortization of acquired intangible assets

     2,911        9,715        1,665        —          14,291   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     12,769        (4,429     (1,668     1,377        8,049   

Other income (expense):

          

Interest income

     264        —          5        (210     59   

Interest expense

     (457     (85     (210     210        (542
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     12,576        (4,514     (1,873     1,377        7,566   

Provision for (benefit from) income taxes

     (5,364     (2,140     (303     492        (7,315

Equity in net income (loss) of consolidated subsidiaries

     (3,951     —          —          3,951        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     13,989        (2,374     (1,570     4,836        14,881   

Less: Net income (loss) attributable to noncontrolling interest, net of tax

     —          —          —          7        7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to ViaSat, Inc.

   $ 13,989      $ (2,374   $ (1,570   $ 4,829      $ 14,874   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

29


Table of Contents

VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Condensed Consolidated Statement of Operations for the Three Months Ended December 31, 2010

 

     Issuing  Parent
Company
    Guarantor
Subsidiaries
     Non-Guarantor
Subsidiaries
    Consolidation  and
Elimination
Adjustments
    Consolidated  
     (Unaudited, in thousands)  

Revenues:

           

Product revenues

   $ 119,849      $ 1,944       $ 4,733      $ (92   $ 126,434   

Service revenues

     13,757        53,976         2,188        (414     69,507   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total revenues

     133,606        55,920         6,921        (506     195,941   

Operating expenses:

           

Cost of product revenues

     88,745        3,347         3,015        (98     95,009   

Cost of service revenues

     8,604        31,769         1,964        (414     41,923   

Selling, general and administrative

     26,081        11,571         2,777        (16     40,413   

Independent research and development

     6,546        —           119        (4     6,661   

Amortization of acquired intangible assets

     1,189        3,238         496        —          4,923   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     2,441        5,995         (1,450     26        7,012   

Other income (expense):

           

Interest income

     140        —           2        (96     46   

Interest expense

     (58     —           (98     96        (60
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     2,523        5,995         (1,546     26        6,998   

Provision for (benefit from) income taxes

     (5,952     27         (4     —          (5,929

Equity in net income (loss) of consolidated subsidiaries

     4,423        —           —          (4,423     —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net income (loss)

     12,898        5,968         (1,542     (4,397     12,927   

Less: Net income (loss) attributable to noncontrolling interest, net of tax

     —          —           —          3        3   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to ViaSat, Inc.

   $ 12,898      $ 5,968       $ (1,542   $ (4,400   $ 12,924   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

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VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Condensed Consolidated Statement of Operations for the Nine Months Ended December 31, 2010

 

     Issuing  Parent
Company
    Guarantor
Subsidiaries
     Non-Guarantor
Subsidiaries
    Consolidation  and
Elimination
Adjustments
    Consolidated  
     (Unaudited, in thousands)  

Revenues:

           

Product revenues

   $ 367,629      $ 4,124       $ 10,118      $ (2,849   $ 379,022   

Service revenues

     39,227        160,984         7,865        (1,264     206,812   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total revenues

     406,856        165,108         17,983        (4,113     585,834   

Operating expenses:

           

Cost of product revenues

     269,181        5,337         6,367        (2,711     278,174   

Cost of service revenues

     26,431        91,476         5,999        (1,224     122,682   

Selling, general and administrative

     77,078        38,109         6,135        (36     121,286   

Independent research and development

     21,191        —           412        (6     21,597   

Amortization of acquired intangible assets

     3,682        9,715         1,230        —          14,627   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     9,293        20,471         (2,160     (136     27,468   

Other income (expense):

           

Interest income

     520        —           7        (279     248   

Interest expense

     (3,149     —           (281     279        (3,151
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     6,664        20,471         (2,434     (136     24,565   

Provision for (benefit from) income taxes

     (5,578     5,779         236        —          437   

Equity in net income (loss) of consolidated subsidiaries

     11,865        —           —          (11,865     —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net income (loss)

     24,107        14,692         (2,670     (12,001     24,128   

Less: Net income (loss) attributable to noncontrolling interest, net of tax

     —          —           —          157        157   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to ViaSat, Inc.

   $ 24,107      $ 14,692       $ (2,670   $ (12,158   $ 23,971   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

31


Table of Contents

VIASAT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Condensed Consolidated Statement of Cash Flows for the Nine Months Ended December 30, 2011

 

     Issuing  Parent
Company
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Consolidation and
Elimination
Adjustments
    Consolidated  
     (Unaudited, in thousands)  

Cash flows from operating activities:

          

Net cash provided by (used in) operating activities

   $ 10,692      $ 51,853      $ 4,365      $ (1,945   $ 64,965   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

          

Purchase of property, equipment and satellites, net

     (130,843     (28,069     (2,200     1,945        (159,167

Cash paid for patents, licenses and other assets

     (17,068     —          (36     —          (17,104

Long-term intercompany notes and investments

     3,265        —          —          (3,265     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (144,646     (28,069     (2,236     (1,320     (176,271

Cash flows from financing activities:

          

Proceeds from line of credit borrowings

     130,000        —          —          —          130,000   

Payments on line of credit

     (20,000     —          —          —          (20,000

Proceeds from issuance of common stock under equity plans

     14,369        —          —          —          14,369   

Purchase of common stock in treasury

     (6,991     —          —          —          (6,991

Payments on capital lease

     (84     (678     —          —          (762

Long-term intercompany financing

     30,531        (30,531     (3,265     3,265        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     147,825        (31,209     (3,265     3,265        116,616   

Effect of exchange rate changes on cash

     —          —          42        —          42