sv3asr
As
filed with the Securities and Exchange Commission on January
27, 2010
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ViaSat, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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33-0174996 |
(State or other jurisdiction
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(I.R.S. Employer |
of incorporation or organization)
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Identification Number) |
6155 El Camino Real
Carlsbad, California 92009
(760) 476-2200
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
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Agent for Service:
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Copies to: |
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Keven K. Lippert
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Craig M. Garner |
ViaSat, Inc.
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Latham & Watkins LLP |
6155 El Camino Real
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12636 High Bluff Drive, Suite 400 |
Carlsbad, California 92009
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San Diego, California 92130 |
(760) 476-2200
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(858) 523-5400 |
Approximate date of commencement of proposed sale to the public: From time to time after the
effective date of this registration statement.
If the only securities being registered on this Form are being offered pursuant to dividend or
interest reinvestment plans, please check the following box. o
If any of the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment plans, check the following
box.
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If this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. o
If this Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with the Commission
pursuant to Rule 462(e) under the Securities Act, check the following box. þ
If this Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.D. filed to register additional securities or additional classes of
securities pursuant to Rule 413(b) under the Securities Act, check the following box. o
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Large accelerated filer þ |
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Non-accelerated filer o
(Do not check if a smaller reporting company) |
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Smaller reporting company o |
CALCULATION OF REGISTRATION FEE
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Proposed |
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Proposed Maximum |
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Amount |
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Maximum |
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Aggregate |
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Amount of |
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Title of Securities |
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to be |
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Offering Price |
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Offering |
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Registration |
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to be Registered |
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Registered |
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Per Share (1) |
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Price (1) |
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Fee |
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Common Stock,
par value $0.0001
per share |
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4,034,519 |
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$27.99 |
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$112,926,186.81 |
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$8,051.64 |
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(1) |
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Estimated solely for the purpose of calculating the registration fee in accordance with
Rule 457(c) based on the average of the high and low reported sales prices on the Nasdaq
Global Select Market on January 25, 2010. |
PROSPECTUS
ViaSat, Inc.
4,034,519 Shares of Common Stock
This prospectus relates to the offer and sale of up to 4,034,519 shares of our common stock by
the selling stockholders identified in this prospectus. The shares offered by the selling
stockholders in this prospectus were originally issued by us to the selling stockholders in
connection with our acquisition of all of the outstanding capital stock of WildBlue Holding, Inc.
(WildBlue) under the terms of an agreement and plan of merger dated as of September 30, 2009. The
selling stockholders may offer and sell from time to time all or any portion of such shares in
amounts and on terms to be determined at the time of sale. We will not receive any of the proceeds
from the sale of shares of our common stock by the selling stockholders.
Our common stock is listed on the Nasdaq Global Select Market under the symbol VSAT. On
January 26, 2010, the last reported sale price of our common stock on the Nasdaq Global Select
Market was $27.76 per share.
Before investing in shares of our common stock, please refer to the section in this prospectus
entitled Risk Factors beginning on page 3.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The
date of this prospectus is January 27, 2010.
You should rely only on the information contained or incorporated by reference in this
prospectus. Neither we nor the selling stockholders have authorized any other person to provide you
with different information. If anyone provides you with different or inconsistent information, you
should not rely on it. The selling stockholders are not making an offer to sell these securities in
any jurisdiction where the offer or sale is not permitted. You should assume that the information
appearing in this prospectus is accurate as of the date on the front cover of this prospectus only.
Our business, financial condition, results of operations and prospects may have subsequently
changed.
TABLE OF CONTENTS
Whenever we refer to ViaSat, we, our or us in this prospectus, we mean ViaSat, Inc. and its
consolidated subsidiaries, unless the context suggests otherwise. When we refer to you or
yours, we mean the persons to whom offers are made hereunder. Our 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 2009 refer to the fiscal year ended April 3, 2009.
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PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus and does not contain all of
the information that you should consider before buying shares in this offering. You should read the
entire prospectus carefully, especially Risk Factors and the financial statements incorporated by
reference herein, before deciding to invest in shares of our common stock.
Our Company
We are a leading provider of advanced satellite and wireless communications and secure
networking systems, products and services. We have leveraged our success developing complex
satellite communication systems and equipment for the U.S. government and select commercial
customers to develop end-to-end satellite network solutions for a wide array of applications and
customers. Our product and systems offerings are often linked through common underlying
technologies, customer applications and market relationships. We believe that our portfolio of
products, combined with our ability to effectively cross-deploy technologies between government and
commercial segments and across different geographic markets, provides us with a strong foundation
to sustain and enhance our leadership in advanced communications and networking technologies. Our
customers, including the U.S. government, leading aerospace and defense prime contractors, network
integrators and communications service providers, rely on our solutions to meet their complex
communications and networking requirements. In addition, following our recent acquisition of
WildBlue, we are a leading provider of satellite broadband internet services in the United States.
We conduct our business through three segments: government systems, commercial networks and
satellite services. These segments represented approximately 62%, 37% and 1%, respectively, of our
consolidated fiscal year 2009 revenues. With effect from the third quarter of fiscal year 2010, our
satellite services segment will also include our WildBlue business, and as a result, we expect that
our segment revenue mix will change.
Government systems. Our government systems segment develops and produces network-centric
internet protocol (IP)-based secure government communications systems, products and solutions,
which are designed to enable the collection and dissemination of secure real-time digital
information between command centers, communications nodes and air defense systems. Customers of our
government systems segment include tactical armed forces, public safety first-responders and remote
government employees.
Commercial networks. Our commercial networks segment develops and produces a variety of
advanced end-to-end satellite communication systems and ground networking equipment and products
that address five key market segments: enterprise, consumer, in-flight, maritime and ground mobile
applications. These communication systems, networking equipment and products are generally
developed through a combination of customer and discretionary internal research and development
funding.
Satellite services. Our satellite services segment complements our commercial networks segment
by providing managed network services for the satellite communication systems of our enterprise and
mobile broadband customers. In addition, our recently acquired WildBlue business provides wholesale
and retail satellite-based broadband internet services in the United States via our WildBlue-1
satellite and Telesat Canadas (Telesats) Anik F2 satellite. In 2008, we began construction of a
high-capacity Ka-band spot-beam satellite, ViaSat-1, which is planned for launch in early 2011.
Commencing in 2011, we expect this segment to also include wholesale broadband services utilizing
ViaSat-1.
Our financial performance benefits from the stability of long-term contracts and the high
visibility afforded through our funded backlog, which as of October 2, 2009 was $495.2 million. In
addition, we possess sufficient scale to compete for major government and commercial contracts and
benefit from R&D expenditures which are predominantly funded by our customers. We generated
revenues of $628.2 million and net income of $38.3 million in fiscal year 2009.
Corporate Information
We were incorporated in California in 1986 and reincorporated in Delaware in 1996. Our
principal executive offices are located at 6155 El Camino Real, Carlsbad, California 92009, and our
telephone number is (760) 476-2200.
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The Offering
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Common stock offered by the
selling stockholders
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4,034,519 shares |
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Common stock outstanding
before the offering
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36,314,406 shares |
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Common stock outstanding
after the offering
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36,314,406 shares |
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Use of
proceeds
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We will not receive any proceeds from this offering. |
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Registration
Rights
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We have agreed to keep the registration statement of
which this prospectus is a part effective until the
earlier of (1) the date on which the shares
registered on this registration statement have been
sold pursuant to this registration statement or Rule
144 under the Securities Act of 1933, as amended
(Securities Act), and (2) the two-year anniversary
of the effective date of this registration
statement, subject to extension under certain
circumstances. |
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Trading
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Our common stock is listed for trading on the Nasdaq
Global Select Market under the symbol VSAT. |
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Risk Factors
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See Risk Factors and the other information in this
prospectus for a discussion of the factors you
should carefully consider before deciding to invest
in our common stock. |
The outstanding share information shown above is based on our shares outstanding as of January
25, 2010, and this information excludes:
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5,008,394 shares of common stock reserved for issuance upon the exercise of
outstanding stock options at a weighted average exercise price of
$20.89; |
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1,296,058 shares of common stock reserved for issuance upon the vesting of
restricted stock unit awards; |
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an aggregate of 479,872 shares of common stock available for future issuance
under the 1996 Equity Participation Plan of ViaSat, Inc.; and |
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an aggregate of 699,086 shares of common stock available for future issuance
under the ViaSat, Inc. Employee Stock Purchase Plan. |
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RISK FACTORS
An investment in the common stock offered by this prospectus involves a high degree of
risk. In addition to the other information in this prospectus, you should carefully consider the
following risks before making an investment decision. The risks and uncertainties described below
are not the only ones we face. Additional risks and uncertainties not presently known to us or that
we currently consider immaterial may also impair our business operations. If any of the following
risks actually occur, our business and financial results could be harmed. In that case, the trading
price of our common stock could decline. You should also refer to the other information set forth
in our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the
Securities and Exchange Commission (SEC), including our financial statements and the related notes,
as well as our other filings with the SEC.
Risks Related to Our Business and Industry
Owning and Operating Satellites Involve Considerable Risks
In December 2009, we acquired WildBlue and as a result of such acquisition we now own and
operate WildBlues Ka-band satellite (WildBlue-1) and hold an exclusive lifetime lease of Ka-band
capacity on Telesats Anik F2 satellite in the contiguous United States. In January 2008, we
executed an agreement to purchase ViaSat-1, our new high-capacity broadband satellite. We currently
plan to launch ViaSat-1 in early 2011 and introduce service on this satellite later in 2011. We may
acquire or use one or more additional satellites in the future. We also plan to develop next
generation broadband ground infrastructure and terminals for use with these satellites. If we are
unable to continue to operate WildBlue-1, or have manufactured or successfully launch a satellite
in a timely manner or at all, as a result of any of the following risks or otherwise, we may be
unable to realize the anticipated benefits from our satellite and associated services business, and
our business, financial condition and results of operations could be materially adversely affected:
Business Plan. We may be unsuccessful in implementing our business plan for the WildBlue
business and our satellite services segment as a whole, or we may not be able to achieve the
revenue that we expect from our satellite services segment. A failure to attract a sufficient
number of distributors or customers would result in lower revenues than anticipated.
In-Orbit Risks. The existing satellites supporting our WildBlue business are, and any future
satellite we acquire will be, subject to potential satellite failures or performance
degradations. Satellites are subject to in-orbit risks including malfunctions, commonly referred
to as anomalies, interference from electrostatic storms, and collisions with meteoroids,
decommissioned spacecraft or other space debris. Anomalies occur as a result of various factors,
such as satellite manufacturing errors, problems with the power systems or control systems of the
satellites and general failures resulting from operating satellites in the harsh environment of
space. To the extent there is an anomaly or other in-orbit failure with respect to WildBlue-1,
Anik F2, ViaSat-1 or any other satellite we may acquire or use, this could have a material
adverse effect on our operations and our relationships with current customers and distributors,
and we may not have or be able to finance or procure a replacement satellite or backup
transponder capacity on reasonable economic terms or at all.
Cost and Schedule Risks. The cost of completing satellites and developing the associated next
generation SurfBeam 2® ground infrastructure may be more than we anticipated and there may be
delays in completing satellites and SurfBeam 2 infrastructure within the expected timeframe. We
may be required to spend in excess of our current forecast for the completion, launch and launch
insurance of ViaSat-1, or for the development associated with the SurfBeam 2 equipment. The
construction and launch of satellites are often subject to delays, including satellite and launch
vehicle construction delays, cost overruns, periodic unavailability of reliable launch
opportunities and delays in obtaining regulatory approvals. If the satellite construction
schedule is not met, there may be even further delays because there can be no assurance that a
launch opportunity will be available at the time the satellite is ready to be launched, and we
may not be able to obtain or maintain regulatory authority or International Telecommunication
Union (ITU) priority necessary to implement the satellite as proposed.
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Launch Risks. There are risks associated with the launch of satellites, including launch
failure, damage or destruction during launch and improper orbital placement. Launch vehicles may
under-perform, in which case the satellite may still be placed into service by using its onboard
propulsion systems to reach the desired orbital location, resulting in a reduction in its service
life. Launch failures result in significant delays in the deployment
of satellites because of the need both to construct replacement satellites, which can take up to
36 months, and obtain other launch opportunities. The overall historical loss rate in the
satellite industry for all launches of commercial satellites in fixed orbits in the last five
years is estimated by some industry participants to be approximately 10% but could at any time be
higher.
Satellite Life. Our ability to earn revenue depends on the usefulness of WildBlue-1,
ViaSat-1, Anik F2 and any other satellite we may acquire in the future. Each satellite has a
limited useful life. The period of time during which a satellite is expected to function in
accordance with its specifications is referred to as such satellites design life. The design
life of ViaSat-1 is 15 years from launch. The design life of WildBlue-1 was 12 years from launch,
ending in 2018, and the design life of Telesats Anik F2 satellite was 15 years from launch,
ending in 2019. A number of factors affect the useful lives of the satellites, including, among
other things, the quality of their design and construction, the durability of their component
parts and back-up units, the ability to continue to maintain proper orbit and control over the
satellites functions, the efficiency of the launch vehicle used, the remaining on-board fuel
following orbit insertion, the occurrence of any anomaly or series of anomalies affecting the
satellite, and the launch risks and in-orbit risks described above. There can be no assurance
that the actual useful life of ViaSat-1, WildBlue-1, Anik F2 or any other satellite that we may
acquire will equal its design life. In addition, continued improvements in satellite technology
may make obsolete ViaSat-1 or any other satellite we may acquire prior to the end of its life.
Insurance Risks. We currently hold in-orbit insurance for WildBlue-1 and Anik F2, and intend
to seek launch and in-orbit insurance for ViaSat-1 and for any other satellite we may acquire,
but we may not be able to obtain insurance, or renew existing insurance, on reasonable economic
terms or at all. If we are able to obtain or renew our insurance, it will contain customary
exclusions and will not likely cover the full cost of constructing and launching or replacing the
satellites, nor will it cover business interruptions or similar losses. In addition, the
occurrence of any anomalies on other satellites, including other Ka-band satellites, or any
failures of a satellite using similar components or failures of a similar launch vehicle to the
launch vehicle we expect to use to launch ViaSat-1, may materially adversely affect our ability
to insure the satellites at commercially reasonable premiums, if at all.
Joint Venture Risks. We may own or operate future satellites through joint ventures which we
do not control. If we were to enter into any such joint venture, we would be exposed to certain
risks and uncertainties, including the risk of the joint venture or applicable entity failing to
satisfy its obligations, which may result in certain liabilities to us for guarantees and other
commitments, challenges in achieving strategic objectives and expected benefits of the business
arrangement, the risk of conflicts arising between us and our partners and the difficulty of
managing and resolving such conflicts, and the difficulty of managing or otherwise monitoring
such business arrangements. In addition, our operating results would be affected by the
performance of businesses over which we do not exercise unilateral control and, if any other
members of such joint venture were to file for bankruptcy or otherwise fail to perform its
obligations or to manage the joint venture effectively, this could cause us to lose our
investment in any such joint venture entity.
We May be Unable to Obtain or Maintain Required Authorizations or Contractual Arrangements
Governmental authorizations are required in connection with the products and services that we
provide. In order to maintain these authorizations, compliance with specific conditions of those
authorizations, certain laws and regulations, and the payment of annual regulatory fees may be
required. Failure to comply with such requirements, or comply in a timely manner, could lead to
the loss of such authorizations and could have a material adverse impact on our business, financial
condition or results of operations. We currently hold authorizations to, among other things,
operate various satellite earth stations, including but not limited to user terminals, gateway
facilities, and network hubs. While we anticipate that these licenses will be renewed in the
ordinary course, or replaced by licenses covering more advanced facilities, we can provide no
assurance that this will be the case. The inability to timely obtain required authorizations for
future operations could delay or preclude our provision of new products and services. Further,
changes to the regulations under which we operate could adversely affect our ability to obtain or
maintain authorizations. Either circumstance could have a material adverse impact on our business.
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Our operations also rely upon authorizations held by other entities, with which we have
contractual arrangements. The failure of those entities to maintain their respective
authorizations, or the termination or expiration of our contractual arrangements with those
entities, could have a material adverse impact on our business. For example, in order to provide
our WildBlue service, we use Ka-band capacity on the Anik F2 satellite under an agreement with
Telesat Canada, and we may do so until the end of the useful life of that satellite. Telesat
operates
that satellite under authority granted to it by the government of Canada. We also currently
use the WildBlue-1 satellite, which we own, and which is co-located with Anik F2 under authority
granted to Telesat by the government of Canada, and pursuant to an agreement we have with Telesat
Canada that expires upon the end of the useful life of Anik F2. While the end of useful life of
Anik F2 is not expected to occur before 2019, there can be no assurance that will be the case. We
also intend to use our ViaSat-1 satellite, which is expected to be launched in 2011, to provide
WildBlue service. That satellite will operate under authority granted to ManSat Limited by the
governments of the Isle of Man and the United Kingdom, and pursuant to contractual arrangements we
have with ManSat Limited that extend past the expected useful life of ViaSat-1. The failure of
Telesat Canada or ManSat Limited to maintain their respective authorizations, or the termination or
expiration of our contractual arrangements with those entities (including as a result of the
premature end of life of Anik F2), could require us to seek alternative satellite capacity for our
customers, which may not be available, or which may require the costly and time-consuming process
of repointing the antennas of our customers.
Our Operating Results Are Difficult to Predict and the Market Price of Our Common Stock May Be
Volatile
Our operating results have varied significantly from quarter to quarter in the past and may
continue to do so in the future. The factors that cause our quarter-to-quarter operating results to
be unpredictable include:
a complex and lengthy procurement process for most of our customers or potential customers;
changes in the levels of research and development spending, including the effects of
associated tax credits;
cost overruns on fixed-price development contracts;
the difficulty in estimating costs over the life of a contract, which may require adjustment
in future periods;
the timing, quantity and mix of products and services sold;
price discounts given to some customers;
market acceptance and the timing of availability of our new products;
the timing of customer payments for significant contracts;
one-time charges to operating income arising from items such as acquisition expenses,
impairment of assets and write-offs of assets related to customer non-payments or obsolescence;
the failure to receive an expected order or a deferral of an order to a later period; and
general economic and political conditions.
Any of the foregoing factors, or any other factors discussed elsewhere herein, could have a
material adverse effect on our business, results of operations and financial condition that could
adversely affect our stock price. In addition, it is likely that in one or more future quarters our
results may fall below the expectations of analysts and investors, which would likely cause our
stock price to decrease.
Our Reliance on U.S. Government Contracts Exposes Us to Significant Risks
Our government systems segment revenues were approximately 62% of our revenues in fiscal year
2009, 56% of our revenues in fiscal year 2008 and 54% of our revenues in fiscal year 2007, and were
derived from U.S. government applications. Therefore, any significant disruption or deterioration
of our relationship with the U.S. government would significantly reduce our revenue. U.S.
government business exposes us to various risks, including:
unexpected contract or project terminations or suspensions;
unpredictable order placements, reductions or cancellations;
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reductions in government funds available for our projects due to government policy changes,
budget cuts and contract adjustments;
the ability of competitors to protest contractual awards;
penalties arising from post-award contract audits;
the reduction in the value of our contracts as a result of the routine audit and
investigation of our costs by U.S. government agencies;
higher-than-expected final costs, particularly relating to software and hardware development,
for work performed under contracts where we commit to specified deliveries for a fixed price;
limited profitability from cost-reimbursement contracts under which the amount of profit is
limited to a specified amount;
unpredictable cash collections of unbilled receivables that may be subject to acceptance of
contract deliverables by the customer and contract close-out procedures, including government
approval of final indirect rates;
competition with programs managed by other government contractors for limited resources and
for uncertain levels of funding;
changes in governmental procurement legislation and regulations and other policies which may
reflect military and political developments;
significant changes in contract scheduling or program structure, which generally result in
delays or reductions in deliveries; and
intense competition for available U.S. government business necessitating increases in time
and investment for design and development.
We must comply with and are affected by laws and regulations relating to the award,
administration and performance of U.S. government contracts. Government contract laws and
regulations affect how we do business with our customers and, in some instances, impose added costs
on our business, including the establishment of compliance procedures. A violation of specific laws
and regulations could result in the imposition of fines and penalties, the termination of our
contracts or debarment from bidding on contracts.
Our total funded backlog was $495.2 million at October 2, 2009. Substantially all of our U.S.
government backlog scheduled for delivery can be terminated at the convenience of the U.S.
government because our contracts with the U.S. government typically provide that orders may be
terminated with limited or no penalties. If we are unable to address any of the risks described
above, or if we were to lose all or a substantial portion of our sales to the U.S. government, it
could materially harm our business and impair the value of our common stock.
The funding of U.S. government programs is subject to congressional appropriations. Congress
generally appropriates funds on a fiscal year basis even though a program may extend over several
fiscal years. Consequently, programs are often only partially funded initially and additional funds
are committed only as Congress makes further appropriations. In the event that appropriations for
one of our programs become unavailable, or are reduced or delayed, our contract or subcontract
under such program may be terminated or adjusted by the government, which could have a negative
impact on our future sales under such contract or subcontract. From time to time, when a formal
appropriation bill has not been signed into law before the end of the U.S. governments fiscal
year, Congress may pass a continuing resolution that authorizes agencies of the U.S. government to
continue to operate, generally at the same funding levels from the prior year, but does not
authorize new spending initiatives, during a certain period. During such period (or until the
regular appropriation bills are passed), delays can occur in procurement of products and services
due to lack of funding, and such delays can affect our results of operations during the period of
delay.
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Our Business Could Be Adversely Affected by a Negative Audit by the U.S. Government
As a government contractor, we are subject to routine audits and investigations by the U.S.
government agencies such as the Defense Contracting Management Agency (DCMA) and the Defense
Contract Audit Agency (DCAA). These agencies review a contractors performance under its contracts,
cost structure and compliance with applicable laws, regulations and standards. The DCAA also
reviews the adequacy of and a contractors compliance with its internal control systems and
policies, including the contractors purchasing, property, estimating, compensation and management
information systems. Any costs found to be improperly allocated to a specific contract will not be
reimbursed or must be refunded if already reimbursed. If an audit uncovers improper or illegal
activities, we may be subject to civil and criminal penalties and administrative sanctions, which
may include termination of contracts, forfeiture of profits, suspension of payments, fines and
suspension, or prohibition from doing business with the U.S. government. In addition, we could
suffer serious harm to our reputation if allegations of impropriety were made against us.
The Recent Global Business Environment Could Negatively Affect Our Business, Results of Operations
and Financial Condition
Our business and operating results have been and will continue to be affected by worldwide
economic conditions. The banking system and financial markets have been experiencing unprecedented
levels of volatility and disruption. The possibility that certain financial institutions may go out
of business has resulted in a tightening of the credit markets, lower levels of liquidity in many
financial markets, and extreme volatility in fixed income, credit, currency and equity markets.
This market turmoil and the recent disruptions in the credit markets have led to reduced levels of
capital expenditures, an increase in commercial and consumer delinquencies, rising unemployment,
declining consumer and business confidence, bankruptcies and a widespread reduction of business
activity generally. These conditions, combined with continued concerns about the systemic impact of
potential long-term and widespread economic recession, volatile energy costs, geopolitical issues,
unstable housing and mortgage markets, labor and healthcare costs, and other macroeconomic factors
affecting spending behavior have contributed to diminished expectations for the U.S. and global
economy.
A continued economic downturn and market turbulence may materially adversely affect our
business and financial performance in a number of ways. As a result of slowing global economic
growth, our customers may experience deterioration of their businesses, cash flow shortages,
difficulty obtaining financing or insolvency. Uncertainty about current global economic conditions
poses a risk as existing or potential customers may reduce or postpone spending in response to
tighter credit, negative financial news or declines in income or asset values, which could have a
material negative effect on the demand for our products and services. In addition, a continued
economic downturn and tight credit conditions may adversely impact our vendors, which may impact
their ability to fulfill their obligations to us. There could be a number of follow-on effects from
the credit crisis on our business, including insolvency of key suppliers resulting in product
delays, inability of customers to obtain credit to finance purchases of our products, customer
insolvencies and failure of derivative counterparties and other financial institutions negatively
impacting our treasury operations. If the global economic slowdown continues for a significant
period or there is significant further deterioration in the U.S. or global economy, our results of
operations, financial position and cash flows could be materially adversely affected.
In addition, general economic conditions have significantly affected the ability of many
companies to raise additional funding in the capital markets. For example, U.S. credit markets have
experienced significant dislocations and liquidity disruptions which have caused the spreads on
prospective debt financings to widen considerably. These circumstances have materially impacted
liquidity in the debt markets, making financing terms for borrowers less attractive and resulting
in the general unavailability of many forms of debt financing. Continued uncertainty in the credit
markets may negatively impact our ability to access additional debt financing or to refinance
existing indebtedness in the future on favorable terms or at all. These general economic conditions
have also adversely affected the trading prices of equity securities of many U.S. companies,
including ViaSat, and could significantly limit our ability to raise additional capital through the
issuance of common stock, preferred stock or other equity securities. If we require additional
capital to fund any activities we elect to pursue in addition to our current business expansion
efforts and were unable to obtain such capital on terms that we found acceptable or at all, we
would likely reduce our investments in such activities or re-direct capital otherwise available for
our business expansion efforts. Any of these risks could impair our ability to fund our operations
or limit our ability to expand our business, which could have a material adverse effect on our
business, financial condition and results of operations.
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A Significant Portion of Our Revenues Is Derived from a Few of Our Contracts
A small number of our contracts account for a significant percentage of our revenues. Our
largest revenue producing contracts are related to our tactical data links products, including our
Multifunctional Information Distribution System (MIDS) terminals, which generated approximately 21%
of our revenues in fiscal year 2009, 24% of our revenues in fiscal year 2008 and 23% of our
revenues in fiscal year 2007. Our five largest contracts generated approximately 35% of our
revenues in fiscal year 2009, 44% of our revenues in fiscal year 2008 and 46% of our revenues in
fiscal year 2007. Further, we derived approximately 6% of our revenues in fiscal year 2009, 7% of
our revenues in fiscal year 2008 and 15% of our revenues in fiscal year 2007 from sales of
enterprise communications networks. The failure of these customers to place additional orders or to
maintain these contracts with us for any reason, including any downturn in their business or
financial condition or our inability to renew our contracts with these customers or obtain new
contracts when they expire, could materially harm our business and impair the value of our common
stock. WildBlue, which we acquired in December 2009, generated approximately 8% of our revenues in
fiscal year 2009 in its capacity as our customer.
A number of our commercial customers have in the past, and may in the future, experience
financial difficulties. Many of our commercial customers face risks that are similar to those we
encounter, including risks associated with market growth, product defects, acceptance by the market
of products and services, and the ability to obtain sufficient capital. Further, many of our
customers that provide satellite-based services (including Telesat, Intelsat, Thaicom and Eutelsat)
could be materially affected by a satellite failure as well as by partial satellite failure,
satellite performance degradation, satellite manufacturing errors and other failures resulting from
operating satellites in the harsh environment of space. We cannot assure you that our customers
will be successful in managing these risks. If our customers do not successfully manage these types
of risks, it could impair our ability to generate revenues and collect amounts due from these
customers and materially harm our business. Major communications infrastructure programs, such as
proposed satellite communications systems, are important sources of our current and planned future
revenues. We also participate in a number of defense programs. Programs of these types often cannot
proceed unless the customer can raise substantial funds from either governmental or private
sources. As a result, our expected revenues can be adversely affected by political developments or
by conditions in private and public capital markets. They can also be adversely affected if capital
markets are not receptive to a customers proposed business plans.
Our Development Contracts May Be Difficult for Us to Comply with and May Expose Us to Third-Party
Claims for Damages
We are often party to government and commercial contracts involving the development of new
products. We derived approximately 20% of our revenues in both fiscal years 2009 and 2008, and 24%
of our revenues in fiscal year 2007 from these development contracts. These contracts typically
contain strict performance obligations and project milestones. We cannot assure you we will comply
with these performance obligations or meet these project milestones in the future. If we are unable
to comply with these performance obligations or meet these milestones, our customers may terminate
these contracts and, under some circumstances, recover damages or other penalties from us. We are
not currently, nor have we always been, in compliance with all outstanding performance obligations
and project milestones in our contracts. We cannot assure you that the other parties to any such
contract will not terminate the contract or seek damages from us. If other parties elect to
terminate their contracts or seek damages from us, it could materially harm our business and impair
the value of our common stock.
Our Success Depends on the Investment in and Development of New Satellite and Wireless
Communications and Secure Networking Products and Our Ability to Gain Acceptance of these Products
The wireless and satellite communications and secure networking markets are subject to rapid
technological change, frequent new and enhanced product introductions, product obsolescence and
changes in user requirements. Our ability to compete successfully in these markets depends on our
success in applying our expertise and technology to existing and emerging satellite and wireless
communications and secure networking markets, as well as our ability to successfully develop,
introduce and sell new products and enhancements on a timely and cost-effective basis that respond
to ever-changing customer requirements, which depends on several factors, including:
our ability to enhance our offerings by adding innovative features that differentiate our
offerings from those of our competitors;
successful integration of various elements of our complex technologies and system
architectures;
timely completion and introduction of new product designs;
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achievement of acceptable product costs;
timely and efficient implementation of our manufacturing and assembly processes and cost
reduction efforts;
establishment of close working relationships with major customers for the design of their new
wireless communications systems incorporating our products;
development of competitive products and technologies by competitors;
marketing and pricing strategies of our competitors with respect to competitive products; and
market acceptance of our new products.
We cannot assure you our product or technology development efforts for communications products
will be successful or any new products and technologies we develop, will achieve sufficient market
acceptance. We may experience difficulties that could delay or prevent us from successfully
selecting, developing, manufacturing or marketing new products or enhancements and these efforts
could divert our attention and resources from other projects, and we cannot be sure that such
efforts and expenditures will ultimately lead to the timely development of new offerings and
technologies. Due to the design complexity of our products, we may in the future experience delays
in completing the development and introduction of new products. Any delays could result in
increased costs of development or deflect resources from other projects. In addition, defects may
be found in our products after we begin deliveries that could result in the delay or loss of market
acceptance. If we are unable to design, manufacture, integrate and market profitable new products
for existing or emerging communications markets, it could materially harm our business, financial
condition and results of operations, and impair the value of our common stock.
In addition, we believe that significant investments in next generation broadband satellites
and associated infrastructure will be required for satellite-based technologies to compete more
effectively with terrestrial-based technologies in the consumer and enterprise markets. We are
constantly evaluating the opportunities and investments related to the development of these next
generation broadband systems. In the event we determine to make a significant investment in the
development of such next generation systems, it may require us to undertake debt financing and/or
the issuance of additional equity, which could expose us to increased risks and impair the value of
our common stock. In addition, if we are unable to effectively or profitably design, manufacture,
integrate and market such next generation technologies, it could materially harm our business,
financial condition and results of operations, and impair the value of our common stock.
Because Our Products Are Complex and Are Deployed in Complex Environments, Our Products May Have
Defects that We Discover Only After Full Deployment, which Could Seriously Harm Our Business
We produce highly complex products that incorporate leading-edge technology, including both
hardware and software. Software typically contains defects or programming flaws that can
unexpectedly interfere with expected operations. In addition, our products are complex and are
designed to be deployed across complex networks. Because of the nature of these products, there is
no assurance that our pre-shipment testing programs will be adequate to detect all defects. As a
result, our customers may discover errors or defects in our hardware or software or our products
may not operate as expected after they have been fully deployed. If we are unable to cure a product
defect, we could experience damage to our reputation, reduced customer satisfaction, loss of
existing customers and failure to attract new customers, failure to achieve market acceptance,
cancellation of orders, loss of revenue, reduction in backlog and market share, increased service
and warranty costs, diversion of development resources, legal actions by our customers, product
returns or recalls, issuance of credit to customers and increased insurance costs. Defects,
integration issues or other performance problems in our products could also result in financial or
other damages to our customers. Our customers could seek damages for related losses from us, which
could seriously harm our business, financial condition and results of operations. A product
liability claim brought against us, even if unsuccessful, would likely be time consuming and
costly. The occurrence of any of these problems would seriously harm our business, financial
condition and results of operations.
9
We May Experience Losses from Our Fixed-Price Contracts
Approximately 86% of our revenues in both fiscal years 2009 and 2008, and 84% of our revenues
in fiscal year 2007 were derived from government and commercial contracts with fixed prices. These
contracts allow us to benefit
from cost savings, but they carry the risk of potential cost overruns because we assume all of
the cost burden. We assume greater financial risk on fixed-price contracts than on other types of
contracts because if we do not anticipate technical problems, estimate costs accurately or control
costs during performance of a fixed-price contract, it may significantly reduce our net profit or
cause a loss on the contract. In the past, we have experienced significant cost overruns and losses
on fixed-price contracts. Because many of these contracts involve new technologies and applications
and can last for years, unforeseen events, such as technological difficulties, fluctuations in the
price of raw materials, problems with our suppliers and cost overruns, can result in the
contractual price becoming less favorable or even unprofitable to us over time. Furthermore, if we
do not meet contract deadlines or specifications, we may need to renegotiate contracts on less
favorable terms, be forced to pay penalties or liquidated damages or suffer major losses if the
customer exercises its right to terminate. We believe a high percentage of our contracts will be at
fixed prices in the future. Although we attempt to accurately estimate costs for fixed-price
contracts, we cannot assure you our estimates will be adequate or that substantial losses on
fixed-price contracts will not occur in the future. If we are unable to address any of the risks
described above, it could materially harm our business, financial condition and results of
operations, and impair the value of our common stock.
Our Reliance on a Limited Number of Third Parties to Manufacture and Supply Our Products and the
Components Contained therein Exposes Us to Various Risks
Our internal manufacturing capacity is limited and we do not intend to expand our capability
in the foreseeable future. We rely on a limited number of contract manufacturers to produce our
products and expect to rely increasingly on these manufacturers in the future. In addition, some
components, subassemblies and services necessary for the manufacture of our products are obtained
from a sole source supplier or a limited group of suppliers.
Our reliance on contract manufacturers and on sole source suppliers or a limited group of
suppliers involves several risks. We may not be able to obtain an adequate supply of required
components, and our control over the price, timely delivery, reliability and quality of finished
products may be reduced. The process of manufacturing our products and some of our components and
subassemblies is extremely complex. We have in the past experienced and may in the future
experience delays in the delivery of and quality problems with products and components and
subassemblies from vendors. Some of the suppliers we rely upon have relatively limited financial
and other resources. Some of our vendors have manufacturing facilities in areas that may be prone
to natural disasters and other natural occurrences that may affect their ability to perform and
deliver under our contract. If we are not able to obtain timely deliveries of components and
subassemblies of acceptable quality or if we are otherwise required to seek alternative sources of
supply or to substitute alternative technology, or to manufacture our finished products or
components and subassemblies internally, our ability to satisfactorily and timely complete our
customer obligations could be negatively impacted which could result in reduced sales, termination
of contracts and damage to our reputation and relationships with our customers. This failure could
also result in a customer terminating our contract for default. A default termination could expose
us to liability and have a material adverse effect on our ability to compete for future contracts
and orders. In addition, a delay in our ability to obtain components and equipment parts from our
suppliers may affect our ability to meet our customers needs and may have an adverse effect upon
our profitability.
Satellite Failures or Degradations in Satellite Performance Could Affect Our Business, Financial
Condition and Results of Operations
We utilize capacity on our WildBlue-1 satellite and Telesats Anik F2 satellite to support our
WildBlue® service. Satellites are subject to in-orbit risks including malfunctions, commonly
referred to as anomalies, interference from electrostatic storms, and collisions with meteoroids,
decommissioned spacecraft or other space debris. Anomalies occur as a result of various factors,
such as satellite manufacturing errors, problems with the power systems or control systems of the
satellites and general failures resulting from operating satellites in the harsh environment of
space. If any of the foregoing were to occur on either WildBlue-1 or Anik F2, this could have a
material adverse effect on our operations, our ability to generate revenues in our satellite
services segment, and our relationships with current customers and distributors, as well as our
ability to attract new customers for our satellite broadband services. Anomalies may also reduce
the expected useful life of a satellite, thereby creating additional expenses due to the need to
provide replacement or backup capacity and potentially reduce revenues if service is interrupted on
the satellites we utilize. We may not be able to obtain backup transponder capacity or a
replacement satellite on reasonable economic terms or at all. In addition, an increased frequency
of anomalies could impact market acceptance of our services.
10
The Markets We Serve Are Highly Competitive and Our Competitors May Have Greater Resources than Us
The wireless and satellite communications and secure networking industries are highly
competitive and competition is increasing. In addition, because the markets in which we operate are
constantly evolving and characterized by rapid technological change, it is difficult for us to
predict whether, when and who may introduce new competing technologies, products or services into
our markets. Currently, we face substantial competition from domestic and international wireless,
satellite and terrestrial-based communications service providers in the commercial and government
industries, including BAE Systems, General Dynamics, Gilat, Harris, Hughes Communications, iDirect
Technologies, L-3 Communications and Rockwell Collins. Many of our competitors and potential
competitors have significant competitive advantages, including strong customer relationships, more
experience with regulatory compliance, greater financial and management resources, control over
central communications networks and access to technologies not available to us. In addition, some
of our customers continuously evaluate whether to develop and manufacture their own products and
could elect to compete with us at any time. Our ability to compete may be adversely affected by
limits on our capital resources and our ability to invest in maintaining and expanding our market
share.
Any Failure to Successfully Integrate our WildBlue Acquisition and any future Strategic
Acquisitions Could Adversely Affect Our Business
Our future performance will depend in part on whether we can successfully integrate our
recently acquired WildBlue business with our satellite services segment in an effective and
efficient manner. Integrating our satellite services segment with the WildBlue business will be a
complex, time-consuming and expensive process and involve a number of risks and uncertainties. In
addition, in order to position ourselves to take advantage of growth opportunities, we have made,
and may continue to make, other strategic acquisitions that involve significant risks and
uncertainties. Such risks and uncertainties include:
the difficulty in integrating the WildBlue business and any other newly acquired businesses
and operations in an efficient and effective manner;
the challenges in achieving strategic objectives, cost savings and other benefits expected
from the WildBlue acquisition and any future acquisitions;
the risk of diverting our resources and the attention of our senior management from the
operations of our business;
additional demands on management related to the increase in the size and scope of our company
following the acquisition;
the risk our markets do not evolve as anticipated and the technologies acquired do not prove
to be those needed to be successful in those markets;
difficulties in combining corporate cultures;
difficulties in the assimilation and retention of key employees;
difficulties in maintaining relationships with present and potential customers, distributors
and suppliers of the acquired business;
costs and expenses associated with any undisclosed or potential liabilities of WildBlue or
any future acquired business;
difficulties in converting the acquired business information systems to our systems;
difficulties in the integration, assimilation, implementation or modification of platforms,
systems, functions, technologies and infrastructure to support the combined business, as well as
maintaining uniform standards, controls (including internal accounting controls), procedures and
policies;
the risks of entering markets in which we have less experience; and
the risks of potential disputes concerning indemnities and other obligations that could
result in substantial costs.
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Delays or unexpected difficulties or additional costs in the integration process could have a
material adverse effect on our business, financial condition and results of operations. Even if we
are able to integrate the WildBlue business or any future acquisition successfully, this
integration may not result in the realization of the full benefits of synergies, cost savings,
revenue enhancements, growth, operational efficiencies and other benefits that we expect. We cannot
assure you that we will successfully integrate the WildBlue business or any future acquisition with
our business or achieve the desired benefits from the WildBlue or any future acquisition within a
reasonable period of time or at all.
Furthermore, to complete future acquisitions we may issue equity securities, incur debt,
assume contingent liabilities or have amortization expenses and write-downs of acquired assets,
which could cause our earnings per share to decline. We face the risk that the returns on
acquisitions will not support the expenditures or indebtedness incurred to acquire such businesses
or the capital expenditures needed to develop such businesses. Mergers and acquisitions are
inherently risky and subject to many factors outside of our control, and we cannot be certain that
our previous or future acquisitions will be successful and will not materially adversely affect our
business, operating results or financial condition. We do not know whether we will be able to
successfully integrate the businesses, products, technologies or personnel that we might acquire in
the future or that any strategic investments we make will meet our financial or other investment
objectives. Any failure to do so could seriously harm our business, financial condition and results
of operations.
The WildBlue Business Has a History of Losses and May Continue to Experience Losses in the Future
WildBlue experienced net losses of $28.2 million for the nine months ended September 30, 2009
and $80.6 million, $126.9 million and $115.5 million for the years ended December 31, 2008, 2007
and 2006, respectively. We cannot assure you that the WildBlue business will generate net income in
the future on a consistent basis or at all. We cannot estimate with any certainty whether demand
for our broadband satellite services will be sufficient for us to maintain or increase the number
of WildBlue subscribers. If the WildBlue business fails to achieve profitability, that failure
could have a material adverse effect on our business, financial condition and results of
operations.
Our Level of Indebtedness May Adversely Affect Our Ability to Operate Our Business, Remain in
Compliance with Debt Covenants, React to Changes in Our Business or the Industry in which we
Operate, or Prevent Us from Making Payments on Our Indebtedness
As of October 2, 2009, we had $80.0 million in principal amount of outstanding borrowings
under our revolving credit facility and $6.9 million outstanding under standby letters of credit.
On October 22, 2009, we issued $275.0 million in aggregate principal amount of 8.875% senior notes
due 2016. In order to complete our acquisition of WildBlue, our borrowings under our revolving
credit facility increased to $140.0 million.
This level of indebtedness could have important consequences for you. For example, it could:
make it more difficult for us to satisfy our debt obligations;
increase our vulnerability to general adverse economic and industry conditions;
impair our ability to obtain additional debt or equity financing in the future for working
capital, capital expenditures, product development, satellite construction, acquisitions or
general corporate or other purposes;
require us to dedicate a material portion of our cash flows from operations to the payment of
principal and interest on our indebtedness, thereby reducing the availability of our cash flows
to fund working capital needs, capital expenditures, product development, satellite construction,
acquisitions and other general corporate purposes;
limit our flexibility in planning for, or reacting to, changes in our business and the
industry in which we operate;
place us at a disadvantage compared to our competitors that have less indebtedness; and
limit our ability to adjust to changing market conditions.
Any of these risks could materially impact our ability to fund our operations or limit our
ability to expand our business, which could have a material adverse effect on our business,
financial condition and results of operations.
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We May Incur Additional Indebtedness, which Could Further Increase the Risks Associated with Our
Leverage
We may incur additional indebtedness in the future, which may include financing relating to
ViaSat-1, other potential acquisitions, working capital, capital expenditures or general corporate
purposes. If new indebtedness is added to our current level of indebtedness, the related risks
that we now face could intensify. In April 2007, we filed an additional universal shelf
registration statement with the SEC for the future sale of up to an additional $200.0 million of
debt securities, common stock, preferred stock, depositary shares and warrants, bringing the
aggregate available under our universal shelf registration statements to up to $400.0 million. The
securities may be offered from time to time, separately or together, directly by us or through
underwriters at amounts, prices, interest rates and other terms to be determined at the time of the
offering.
We May Not Be Able to Generate Sufficient Cash to Service All of Our Indebtedness and Fund Our
Working Capital and Capital Expenditures, and May Be Forced to Take Other Actions to Satisfy Our
Obligations under Our Indebtedness, which May Not Be Successful
Our ability to make scheduled payments on our indebtedness will depend upon our future
operating performance and on our ability to generate cash flow in the future, which is subject to
general economic, financial, business, competitive, legislative, regulatory and other factors that
are beyond our control. We cannot assure you that our business will generate sufficient cash flow
from operations, or that future borrowings, including borrowings under our revolving credit
facility, will be available to us in an amount sufficient to enable us to pay our indebtedness or
to fund our other liquidity needs. If our cash flows and capital resources are insufficient to
fund our debt service obligations, we could face substantial liquidity problems and could be forced
to reduce or delay investment and capital expenditures or to dispose of material assets or
operations, seek additional equity capital or restructure or refinance our indebtedness. We may not
be able to effect any such alternative measures, if necessary, on commercially reasonable terms or
at all and, even if successful, such alternative actions may not allow us to meet our scheduled
debt service obligations. If we cannot make scheduled payments on our debt, we will be in default
and, as a result, the holders of our senior notes due 2016 and the lenders under our revolving
credit facility could declare all outstanding principal and interest to be due and payable, the
lenders under our revolving credit facility could terminate their commitments to loan money and
foreclose against the assets securing the borrowings under our revolving credit facility, and we
could be forced into bankruptcy or liquidation.
We May Be Unable to Refinance Our Indebtedness
We may need to refinance all or a portion of our indebtedness before maturity, including
indebtedness under the indenture governing our senior notes due 2016 and any indebtedness under our
revolving credit facility. There can be no assurance that we will be able to obtain sufficient
funds to enable us to repay or refinance our debt obligations on commercially reasonable terms, or
at all.
Covenants in Our Debt Agreements Restrict Our Business and Could Limit Our Ability to Implement Our
Business Plan
Our revolving credit facility and the indenture governing our senior notes due 2016 contain
covenants that may restrict our ability to implement our business plan, finance future operations,
respond to changing business and economic conditions, secure additional financing, and engage in
opportunistic transactions, such as strategic acquisitions. In addition, if we fail to satisfy the
covenants contained in our revolving credit facility, our ability to borrow under our revolving
credit facility may be restricted. Our revolving credit facility and the indenture governing our
senior notes due 2016 include covenants restricting, among other things, our ability to do the
following:
incur, assume or guarantee additional indebtedness;
issue redeemable stock and preferred stock;
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grant or incur liens;
sell or otherwise dispose of assets, including capital stock of subsidiaries;
make loans and investments;
pay dividends, make distributions or redeem or repurchase capital stock;
enter into transactions with affiliates;
reduce our satellite insurance; and
consolidate or merge with or into, or sell substantially all of our assets to, another person.
The covenants in our revolving credit facility are generally more restrictive than the
indenture governing our senior notes due 2016. In addition, our revolving credit facility requires
us to comply with certain financial covenants, including a maximum senior secured leverage ratio, a
maximum leverage ratio and minimum interest coverage ratio.
If we default under our revolving credit facility or the indenture governing our senior notes
due 2016 because of a covenant breach or otherwise, all outstanding amounts thereunder could become
immediately due and payable. In the past we have violated our revolving credit facility covenants
and received waivers for these violations. We cannot assure you that we will be able to comply with
our financial or other covenants under our revolving credit facility or the indenture governing our
senior notes due 2016 or that any covenant violations will be waived in the future. Any violation
that is not waived could result in an event of default, permitting our lenders to declare
outstanding indebtedness and interest thereon due and payable, and permitting the lenders under our
revolving credit facility to suspend commitments to make any advance or to require any outstanding
letters of credit to be collateralized by an interest bearing cash account, any or all of which
could have a material adverse effect on our business, financial condition and results of
operations. In addition, if we fail to comply with our financial or other covenants under our
revolving credit facility or the indenture governing our senior notes due 2016, we may need
additional financing in order to service or extinguish our indebtedness. We may not be able to
obtain financing or refinancing on terms acceptable to us, if at all. We cannot assure you that we
would have sufficient funds to repay all the outstanding amounts under our revolving credit
facility or the indenture governing our senior notes due 2016, and any acceleration of amounts due
would have a material adverse effect on our liquidity and financial condition.
We Depend on a Limited Number of Key Employees who Would Be Difficult to Replace
We depend on a limited number of key technical, marketing and management personnel to manage
and operate our business. In particular, we believe our success depends to a significant degree on
our ability to attract and retain highly skilled personnel, including our Chairman and Chief
Executive Officer, Mark D. Dankberg, and those highly skilled design, process and test engineers
involved in the manufacture of existing products and the development of new products and processes.
The competition for these types of personnel is intense, and the loss of key employees could
materially harm our business and impair the value of our common stock. To the extent that the
demand for qualified personnel exceeds supply, we could experience higher labor, recruiting or
training costs in order to attract and retain such employees, or could experience difficulties in
performing under our contracts if our needs for such employees were unmet.
Because We Conduct Business Internationally, We Face Additional Risks Related to Global Political
and Economic Conditions and Currency Fluctuations
Approximately 16% of our revenues in fiscal year 2009, 18% of our revenues in fiscal year 2008
and 16% of our revenues in fiscal year 2007 were derived from international sales. We anticipate
international sales will account for an increasing percentage of our revenues over the next several
years. Many of these international sales may be denominated in foreign currencies. Because we do
not currently engage in, nor do we anticipate engaging in, material foreign currency hedging
transactions related to international sales, a decrease in the value of foreign currencies relative
to the U.S. dollar could result in losses from transactions denominated in foreign currencies. This
decrease in value could also make our products less price-competitive.
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There are additional risks in conducting business internationally, including:
unexpected changes in laws, policies and regulatory requirements, including but not limited
to regulations related to import-export control;
increased cost of localizing systems in foreign countries;
increased sales and marketing and research and development expenses;
availability of suitable export financing;
timing and availability of export licenses;
imposition of taxes, tariffs, embargoes and other trade barriers;
political and economic instability;
fluctuations in currency exchange rates;
compliance with a variety of international laws and U.S. laws affecting the activities of
U.S. companies abroad;
challenges in staffing and managing foreign operations;
difficulties in managing distributors;
potentially adverse tax consequences;
potential difficulty in making adequate payment arrangements; and
potential difficulty in collecting accounts receivable.
In addition, some of our customer purchase agreements are governed by foreign laws, which may
differ significantly from U.S. laws. We may be limited in our ability to enforce our rights under
these agreements and to collect damages, if awarded. If we are unable to address any of the risks
described above, it could materially harm our business and impair the value of our common stock.
We Expect to Incur Research and Development Costs, which Could Significantly Reduce Our
Profitability
Our future growth depends on penetrating new markets, adapting existing communications and
networking products to new applications and introducing new communications and networking products
that achieve market acceptance. Accordingly, we are actively applying our communications and
networking expertise to design and develop new hardware and software products and enhance existing
products. We spent $29.6 million in fiscal year 2009, $32.3 million in fiscal year 2008 and $21.6
million in fiscal year 2007 in research and development activities. We expect to continue to spend
discretionary funds on research and development in the near future. The amount of funds spent on
research and development projects is dependent on the amount and mix of customer-funded
development, the types of technology being developed and the affordability of the technology being
developed. Because we account for research and development as an operating expense, these
expenditures will adversely affect our earnings in the near future. Our research and development
program may not produce successful results, which could materially harm our business and impair the
value of our common stock.
Our Ability to Protect Our Proprietary Technology Is Limited
Our success depends significantly on our ability to protect our proprietary rights to the
technologies we use in our products and services. We generally rely on a combination of copyrights,
patents, trademarks and trade secret laws and contractual rights to protect our intellectual
property rights. We also enter into confidentiality and assignment of intellectual property
agreements with our employees, consultants and corporate partners, and control access to and
distribution of our proprietary information. Despite our efforts to protect our proprietary rights,
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unauthorized parties may attempt to copy or otherwise obtain and use our products or
technology. If we are unable to protect our proprietary rights adequately, our competitors could
use the intellectual property we have developed to enhance their own products and services, which
could materially harm our business and impair the value of our common stock. Monitoring and
preventing unauthorized use of our technology is difficult. From time to time, we undertake actions
to prevent unauthorized use of our technology, including sending cease and desist letters. In
addition, we may be required to commence litigation to protect our intellectual property rights. If
we are unsuccessful in such litigation, our rights to enforce such intellectual property may be
impaired or we could lose some or all of our rights to such intellectual property. We do not know
whether the steps we have taken will prevent unauthorized use of our technology, including in
foreign countries where the laws may not protect our proprietary rights as extensively as in the
United States. If we are unable to protect our proprietary rights, we may find ourselves at a
competitive disadvantage to others who need not incur the substantial expense, time and effort
required to create the innovative products. Also, we have delivered certain technical data and
information to the U.S. government under procurement contracts, and it may have unlimited rights to
use that technical data and information. There can be no assurance that the U.S. government will
not authorize others to use that data and information to compete with us.
We may be party to intellectual property infringement claims that are costly and time
consuming and may materially adversely affect our business, financial condition and results of
operations. Litigation may be necessary to protect our intellectual property rights and trade
secrets, to determine the validity and scope of the proprietary rights of others or to defend
against claims of infringement or invalidity. For example, in May 2009 we and certain other
equipment manufacturers were sued by Applied Signal Technology in the United States District Court
for the Northern District of California for alleged infringement of certain patents. We have
developed and maintain a portfolio of patents in the same field of technology as the plaintiffs
patents, and intend to vigorously defend against this suit. We may be subject to infringement,
invalidity, right to use or ownership claims by third parties or claims for indemnification
resulting from infringement claims in the future. Asserted claims or initiated litigation can
include claims against us or our manufacturers, suppliers or customers alleging infringement of
their proprietary rights with respect to our existing or future products, or components of those
products. Regardless of the merit of these claims, intellectual property litigation can be time
consuming and result in costly litigation and diversion of technical and management personnel. An
adverse result in any litigation could have a material adverse effect on our business, financial
condition and results of operations. If our products are found to infringe upon the rights of third
parties, we may be forced to (1) seek licenses or royalty arrangements from such third parties, (2)
stop selling, incorporating or using products that included the challenged intellectual property,
or (3) incur substantial costs to redesign those products that use the technology. We cannot assure
you we would be able to obtain any such licenses or royalty arrangements on reasonable terms or at
all or to develop redesigned products or, if these redesigned products were developed, they would
perform as required or be accepted in the applicable markets.
We Rely on the Availability of Third-Party Licenses
Many of our products are designed to include software or other intellectual property licensed
from third parties. It may be necessary in the future to seek or renew licenses relating to various
elements of the technology used to develop these products. We cannot assure you that our existing
and future third-party licenses will be available to us on commercially reasonable terms, if at
all. Our inability to maintain or obtain any third-party license required to sell or develop our
products and product enhancements could require us to obtain substitute technology of lower quality
or performance standards, or at greater cost.
Adverse Resolution of Litigation May Harm Our Operating Results or Financial Condition
We are a party to various lawsuits and claims in the normal course of our business. Litigation
can be expensive, lengthy and disruptive to normal business operations. Moreover, the results of
complex legal proceedings are difficult to predict. An unfavorable resolution of a particular
lawsuit could have a material adverse effect on our business, financial condition and results of
operations.
Our International Sales and Operations are Subject to Applicable Laws Relating to Trade, Export
Controls and Foreign Corrupt Practices, the Violation of Which Could Adversely Affect Our
Operations
We must comply with all applicable export control laws and regulations of the United States
and other countries. United States laws and regulations applicable to us include the Arms Export
Control Act, the International Traffic in Arms Regulations (ITAR), the Export Administration
Regulations (EAR) and the trade sanctions laws and regulations administered by the United States
Department of the Treasurys Office of Foreign Assets Control
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(OFAC). The export of certain satellite hardware, services and technical data relating to
satellites is regulated by the United States Department of State under ITAR. Other items are
controlled for export by the United States Department of Commerce under the EAR. We cannot provide
services to certain countries subject to United States trade sanctions unless we first obtain the
necessary authorizations from OFAC. In addition, we are subject to the Foreign Corrupt Practices
Act, which generally bars bribes or unreasonable gifts to foreign governments or officials.
Violations of these laws or regulations could result in significant additional sanctions including
fines, more onerous compliance requirements, more extensive debarments from export privileges or
loss of authorizations needed to conduct aspects of our international business. A violation of ITAR
or the other regulations enumerated above could materially adversely affect our business, financial
condition and results of operations.
Changes in the Regulatory Environment Could Have a Material Adverse Impact on Our Competitive
Position, Growth and Financial Performance
The provision of communications services is highly regulated. Our business is subject to the
regulatory authority of the jurisdictions in which we operate, including the United States and
other jurisdictions around the world. Those authorities regulate, among other things, the launch
and operation of satellites, the use of radio spectrum, the licensing of earth stations and other
radio transmitters, the provision of communications services, and the design, manufacture and
marketing of communications systems and networking infrastructure. Failure to comply with
applicable laws or regulations could result in the imposition of financial penalties against us,
the adverse modification or cancellation of required authorizations, or other material adverse
actions.
Laws and regulations affecting the communications industry are subject to change in response
to industry developments, new technology, and political considerations. Legislators and regulatory
authorities in various countries are considering, and may in the future adopt, new laws, policies
and regulations, as well as changes to existing regulations, regarding a variety of matters that
could, directly or indirectly, affect our operations or the operations of our distribution
partners, and increase the cost of providing our products and services. See BusinessRegulatory
Environment for a more detailed discussion. These changes could materially harm our business by
(1) affecting our ability to obtain or retain required governmental authorizations, (2) restricting
our ability to provide certain products or services, (3) restricting development efforts by us and
our customers, (4) making our current products and services less attractive or obsolete, (5)
increasing our operational costs, or (6) making it easier or less expensive for our competitors to
compete with us. Changes in, or our failure to comply with, applicable regulations could
materially harm our business and impair the value of our common stock.
Risks Related to Our Common Stock
Our Executive Officers and Directors Own a Large Percentage of Our Common Stock and Exert
Significant Influence over Matters Requiring Stockholder Approval
As of January 1, 2010, our executive officers and directors and their affiliates
beneficially owned an aggregate of approximately 14% of our common stock. Accordingly, these
stockholders may be able to influence substantially all matters requiring approval by our
stockholders, including the election of directors and the approval of mergers or other business
combination transactions. Circumstances may arise in which the interests of these stockholders
could conflict with the interests of our other stockholders. These stockholders could delay or
prevent a change in control of our company even if such a transaction would be beneficial to our
other stockholders.
We Have Implemented Anti-Takeover Provisions that Could Prevent an Acquisition of Our Business at a
Premium Price
Some of the provisions of our certificate of incorporation, our bylaws and Delaware law could
discourage, delay or prevent an acquisition of our business, even if a change in control of ViaSat
would be beneficial to the interests of our stockholders and was made at a premium price. These
provisions:
permit the Board of Directors to increase its own size and fill the resulting vacancies;
provide for a Board comprised of three classes of directors with each class serving a
staggered three-year term;
authorize the issuance of blank check preferred stock in one or more series; and
prohibit stockholder action by written consent.
In addition, Section 203 of the Delaware General Corporation Law imposes restrictions on
mergers and other business combinations between us and any holder of 15% or more of our common
stock.
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Future Sales of Our Common Stock Could Lower Our Stock Price and Dilute Existing Stockholders
We may, in the future, sell additional shares of common stock in subsequent public or private
offerings. In April 2007, we filed an additional universal shelf registration statement with the
SEC for the future sale of up to an additional $200.0 million of debt securities, common stock,
preferred stock, depositary shares and warrants, bringing the aggregate available under our
universal shelf registration statements to up to $400.0 million. The securities may be offered from
time to time, separately or together, directly by us or through underwriters at amounts, prices,
interest rates and other terms to be determined at the time of the offering.
We may also issue additional shares of common stock to finance future acquisitions through the
use of equity. For example, during the third quarter of fiscal 2010 we issued approximately 4.29 million
shares of our common stock to the selling stockholders in connection with our acquisition of WildBlue,
certain of which are subject to lock-up agreements restricting their transfer. Sales of such shares upon
the expiration of the period prohibiting transfers pursuant to the lock-up agreements could cause our stock
price to decrease. See Plan of Distribution for a detailed description of the lock-up agreements.
Additionally, a substantial number of shares of our common stock are available for
future sale pursuant to stock options, warrants or issuance pursuant to our 1996 Equity
Participation Plan of ViaSat, Inc. and ViaSat, Inc. Employee Stock Purchase Plan. We cannot predict
the size of future issuances of our common stock or the effect, if any, that future sales and
issuances of shares of our common stock will have on the market price of our common stock. Sales of
substantial amounts of our common stock (including shares issued upon the exercise of stock options
and warrants or in connection with acquisition financing), or the perception that such sales could
occur, may adversely affect prevailing market prices for our common stock. In addition, these sales
may be dilutive to existing stockholders.
We Expect Our Stock Price to Be Volatile, and You May Lose All or Some of Your Investment
The market price of our common stock has been volatile in the past. For example, since April
2, 2001, the market price of our common stock has ranged from $3.91 to $36.49. Trading prices may
continue to fluctuate in response to a number of events and factors, including the following:
quarterly variations in operating results and announcements of innovations;
new products, services and strategic developments by us or our competitors;
developments in our relationships with our customers, distributors and suppliers;
regulatory developments;
changes in our revenues, expense levels or profitability;
changes in financial estimates and recommendations by securities analysts;
failure to meet the expectations of securities analysts;
changes in the satellite and wireless communications and secure networking industries; and
changes in the economy.
Any of these events may cause the market price of our common stock to fall. In addition, the
stock market in general and the market prices for technology companies in particular have
experienced significant volatility that often has been unrelated to the operating performance of
these companies. These broad market and industry fluctuations may adversely affect the market price
of our common stock, regardless of our operating performance.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains and incorporates by reference forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of
1934, as amended (Exchange Act). These forward-looking statements include, but are not limited to,
statements about our plans, objectives, expectations and intentions and other statements contained
in this prospectus that are not historical facts. When used in this prospectus, the words
anticipates, believes, could, estimates, expects, intends, may, plans, seeks,
should, will and similar expressions are generally intended to identify forward-looking
statements. These forward-looking statements are subject to a number of risks, uncertainties and
assumptions about us, including, among other things:
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uncertainties associated with the performance of the WildBlue business and integration
risks and costs; |
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our ability to have manufactured or successfully launch ViaSat-1 or implement the
related broadband satellite services on our anticipated timeline or at all; |
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continued turmoil in global financial markets and economies; |
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the availability and cost of credit; |
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reliance on U.S. government contracts and our reliance on a small number of contracts
which account for a significant percentage of our revenues; |
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our ability to successfully develop, introduce and sell new technologies, products and
enhancements; |
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reduced demand for products as a result of continued constraints on capital spending by
customers; |
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changes in relationships with, or the financial condition of, key customers or
suppliers; |
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reliance on a limited number of third parties to manufacture and supply our products; |
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increased competition and other factors affecting the communications industry generally; |
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the effect of adverse regulatory changes on our ability to sell products; |
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our ability to comply with the covenants in any credit agreement, indenture or similar
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other factors affecting the communications industry generally. |
We have described other risks concerning us under the caption entitled Risk Factors. We
undertake no obligation to publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. In light of these risks and uncertainties,
the forward-looking events and circumstances discussed in this prospectus may not occur and actual
results could differ materially from those anticipated or implied in the forward-looking
statements.
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USE OF PROCEEDS
We are registering these shares pursuant to the registration rights granted to the selling
stockholders in connection with our acquisition of all of the outstanding capital stock of WildBlue
under the terms of an agreement and plan of merger dated September 30, 2009. We are not selling any
securities under this prospectus and will not receive any proceeds from sales of the shares of
common stock sold from time to time under this prospectus by the selling stockholders.
We have agreed to pay all costs, expenses and fees relating to registering the shares of our
common stock referenced in this prospectus. The selling stockholders have agreed to pay any
brokerage commissions or similar charges incurred for the sale of such shares of our common stock.
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BUSINESS
Company Overview
We are a leading provider of advanced satellite and wireless communications and secure
networking systems, products and services. We have leveraged our success developing complex
satellite communication systems and equipment for the U.S. government and select commercial
customers to develop end-to-end satellite network solutions for a wide array of applications and
customers. Our product and systems offerings are often linked through common underlying
technologies, customer applications and market relationships. We believe that our portfolio of
products, combined with our ability to effectively cross-deploy technologies between government and
commercial segments and across different geographic markets, provides us with a strong foundation
to sustain and enhance our leadership in advanced communications and networking technologies. Our
customers, including the U.S. government, leading aerospace and defense prime contractors, network
integrators and communications service providers, rely on our solutions to meet their complex
communications and networking requirements. In addition, following our recent acquisition of
WildBlue, we are a leading provider of satellite broadband internet services in the United States.
ViaSat was incorporated in California in 1986, and reincorporated as a Delaware corporation in
1996.
ViaSat operates in three segments: government systems, commercial networks and satellite
services. Financial information regarding our reporting segments and the geographic areas in which
we operate is included in the consolidated financial statements and notes thereto, which are
included in our annual and quarterly reports incorporated by reference herein.
Recent Transactions
On December 15, 2009, we consummated our acquisition of WildBlue, a leading Ka-band satellite
broadband internet service provider. In connection with the acquisition, we paid approximately $442.7
million in cash and issued approximately 4.29 million shares of ViaSat common stock to WildBlue
equity and debt holders. ViaSat retained approximately $64.7 million of WildBlues cash on hand. To
finance in part the cash payment made to WildBlue equity and debt holders, in October 2009 we
issued $275.0 million in aggregate principal amount of 8.875% senior notes due 2016. To provide
additional liquidity and flexibility in connection with the WildBlue acquisition, in October 2009
we also increased the amount of our revolving line of credit to $210.0 million.
Government Systems
Our government systems segment develops and produces network-centric IP-based secure
government communications systems, products and solutions, which are designed to enable the
collection and dissemination of secure real-time digital information between command centers,
communications nodes and air defense systems. Customers of our government systems segment include
tactical armed forces, public safety first-responders and remote government employees.
We believe our strong track record of developing complex, secure, high-capacity wireless and
satellite networking communications technologies for both government and commercial customers,
combined with our ability to integrate and leverage technologies developed across our various
business segments, provides us with significant opportunities for continued growth in this segment.
The U.S. militarys increasing emphasis on network-centric highly mobile warfare over
geographically dispersed areas requires the development and deployment of secure, IP-based
communications networks and products capable of supporting real-time dissemination of data using
multiple transmission media. Satellite-based systems are increasingly seen as the most reliable
method of connecting rapidly moving forces who may out-run the range of terrestrial radio links. In
addition, we anticipate that government demand for bandwidth will continue to grow in order to
support this increased use of IP-based network-centric applications at all organizational levels.
We also expect that over the next five to ten years many of the previous generation of the U.S.
Department of Defenses (DoDs) defense communications satellite networks will expire or become
obsolete, and new programs are underway or in planning to define, develop, procure and deploy
replacement systems. We believe these new programs present greater opportunities for bidding on new
contracts than we have seen historically. Our existing and evolving portfolio of systems, products
and solutions is well-positioned to take advantage of these significant and pervasive trends, and
accordingly we believe that these trends will continue to drive growth opportunities for our
government systems segment over the next several years.
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The primary products and services of our government systems segment include:
Tactical Data Links. We develop and produce advanced tactical radio and information
distribution systems that enable real-time collection and dissemination of video and data using
secure, jam-resistant transmission links from manned aircraft, unmanned aerial vehicles (UAV),
ground mobile vehicles and other remote platforms to networked communication and command centers.
Key products in this category include: our MIDS terminals for military fighter jets and their
successor, MIDS Joint Tactical Radio System (MIDS-J) terminals, which we expect will be available
in 2010; disposable weapon data links; portable small tactical terminals; and our
EnerLinksTM digital video data links for intelligence, surveillance and reconnaissance
from UAVs and ground systems.
Information Assurance. Our information security and assurance products provide advanced,
high-speed IP-based Type 1 and High Assurance Internet Protocol Encryption (HAIPE®)-compliant
encryption solutions that enable military and government users to communicate information securely
over networks, and that secure data stored on computers and storage devices. Our encryption modules
use a programmable, high-assurance architecture that can be easily upgraded in the field or
integrated into existing communication networks, and are available both on a stand-alone basis and
as embedded modules within our tactical radio, information distribution and other satellite
communication systems and products.
Government Satellite Communication Systems. Our government satellite communication business
offers an array of portable and fixed broadband modems, terminals, network access control systems
and antenna systems using a range of satellite frequency bands. Our systems and products are
designed to support high-capacity broadband data links, to increase available bandwidth using
existing satellite capacity, and to withstand certain catastrophic events. Our range of broadband
modems, terminals and systems support high-speed broadband and multimedia transmissions over
point-to-point, mesh and hub-and-spoke satellite networking systems, and include products designed
for manpacks, aircraft, seagoing vessels, ground mobile vehicles and fixed applications.
Commercial Networks
Our commercial networks segment develops and produces a variety of advanced end-to-end
satellite communication systems and ground networking equipment and products that address five key
market segments: enterprise, consumer, in-flight, maritime and ground mobile applications. These
communication systems, networking equipment and products are generally developed through a
combination of customer and discretionary internal research and development funding.
Our networking equipment and products include radio frequency gateways, network infrastructure
and end-user equipment and terminals. With expertise in commercial satellite network engineering,
gateway construction and remote terminal manufacturing for various types of interactive
communication services, combined with our advanced satellite technology and systems integration
experience, we have the ability to design, build, initially operate and then hand over on a turnkey
basis fully operational, customized satellite communication systems capable of serving a variety of
markets and applications. In addition, the strength of our core government systems business
provides us with an effective platform to continue to design and develop new equipment and
products, as we adapt and customize communication systems and products designed for the government
systems segment to commercial use and vice versa.
We believe growth of the commercial satellite market will continue to be driven in coming
years by a number of factors, including: (1) the continued growth in worldwide demand for
communications services and, in particular, the rise in both consumer and enterprise demand for
broadband internet access, (2) the improving cost-effectiveness of satellite communications for
many uses, and (3) recent technological advancements that broaden applications for and increase the
capacity and efficiency of satellite-based networks. As satellite communications equipment becomes
less expensive and new capabilities emerge in satellite communications technology, we believe that
the market for satellite communications will offer additional growth opportunities, as service
providers seek to rapidly and cost-efficiently deploy broadband communications services across wide
geographic areas, both in suburban and rural areas in the developed world and in developing
countries where the deployment of terrestrial high-capacity solutions such as fiber-optic cable is
neither cost-effective nor practicable. Satellite communications also provide cost-effective
augmentation capability for existing terrestrial networks or broadband service providers to address
network congestion caused by the continued exponential increase in the volume of multimedia content
accessed via the internet.
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Our satellite communication systems, ground networking equipment and products cater to a wide
range of domestic and international commercial customers and include:
Mobile Broadband Satellite Communication Systems. Our ArcLight® Ku-band mobile satellite
systems and related products provide high-speed, cost-efficient broadband access while on the move
via small transceivers, and are designed for use in aircraft, seagoing vessels and high-speed
trains. We also sell our ArcLight mobile satellite systems to government customers as part of our
government satellite communication systems business.
Consumer Broadband. We are a leading network technology supplier for the consumer satellite
market. Our SurfBeam network systems and modems enable satellite broadband access for residential
or home office customers. In addition, we recently designed and developed next-generation satellite
network infrastructure and ground terminals to access Ka-band broadband and high-capacity
satellites, including ViaSat-1 (which is planned for launch in early 2011). During fiscal year
2009, we received our first order to produce Ka-band gateway baseband and antenna infrastructure
for KA-SAT, Eutelsats new high-capacity Ka-band satellite, which is scheduled for launch in late
2010. In October 2009, we received a $46 million contract award from Yahsat for SurfBeam network
infrastructure and initial customer premises terminals with respect to Yahsats new Ka-band
satellite, which is expected to launch in the second half of 2011. We anticipate growing demand for
Ka-band network infrastructure and ground terminals driven by increasing consumer, enterprise and
government demand for low-cost, high-capacity bandwidth over Ka-band satellites.
Satellite Networking Systems Design and Technology Development. Through our Comsat Labs
division, we offer design and technology services covering all aspects of satellite communication
system architecture and technology, including the analysis, design, and specification of satellites
and ground systems, ASIC and MMIC design and production, and wide area network (WAN) compression
for enterprise networks.
Enterprise VSAT Networks and Products. Our enterprise Very Small Aperture Terminal (VSAT)
networks and products comprise VSAT satellite systems and products designed to provide enterprises
with broadband access to the internet or private networks in order to support retail point-of-sale,
voice-over-IP, distance learning and other web-centric or network applications. We also offer
enterprise customers related products and services to address bandwidth constraints, latency and
other issues, such as our AcceleNet® WAN optimization product, which enables enterprise customers
to optimize cloud computing services and other applications delivered over WANs. In developing
countries, we also supply our enterprise VSAT networks and products to carriers to provide cellular
backhaul and telephony services in under-served areas.
Antenna Systems. We develop, design, produce, test and install turnkey ground terminals and
antennas for terrestrial and satellite applications, specializing in small, low-profile, multi-band
antennas for mobile satellite communications.
Satellite Services
Our satellite services segment complements our commercial networks segment by providing
managed network services for the satellite communication systems of our enterprise and mobile
broadband customers. In addition, our recently acquired WildBlue business provides wholesale and
retail satellite-based broadband internet services in the United States via our WildBlue-1
satellite and Telesats Anik F2 satellite.
Commencing in 2011, we expect this segment to also include wholesale broadband services using
our new high-capacity Ka-band spot-beam satellite, ViaSat-1, which is planned for launch in early
2011. In recent years, satellite operators have invested in and launched next-generation spot-beam
satellites specifically designed for low-cost broadband access. However, we do not believe that
these satellites are equipped to deliver acceptable levels of service or data throughputs at
sufficiently high speeds and volumes to address anticipated bandwidth demand. As a result, in
January 2008 we announced our plans to develop and launch ViaSat-1, which is intended to provide
low-cost high-capacity broadband access in North America. At the time of launch, ViaSat-1 is
expected to be the highest capacity, most cost-efficient satellite in the world. We currently
estimate that the total data throughput of ViaSat-1 will be approximately 125 Gigabytes per second.
With the market demonstrating increasing demand for satellite broadband services, ViaSat-1 is
designed to significantly expand the quality, capability and availability of high-speed broadband
satellite services for North American consumers and enterprises. In addition, we anticipate that
our government systems and commercial networks segments will be able to leverage the launch of
ViaSat-1 through the increased sale of next-generation satellite communication systems, ground
networking equipment and products that operate on Ka-band frequencies.
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The primary services offered by our satellite services segment comprise:
Mobile Broadband Service. Our mobile broadband service, YonderTM, comprises
network management services for customers who use our on-the-move ArcLight-based mobile satellite
systems. Initially limited to the United States, we expanded our Yonder service internationally
during fiscal 2009 and aim to offer our Yonder service globally by the end of 2010.
Managed Broadband Service. For everyday enterprise networking or backup protection for
primary networks, our full-service managed broadband service provides reliable, high-quality
broadband wireless service to enterprise customers using a combination of terrestrial and satellite
connections, supported by a 24x7 call center and our network management center.
Wholesale and Retail Broadband Services. Our WildBlue service provides two-way
satellite-based broadband internet access to consumers and small businesses in the United States.
We offer a range of WildBlue service plans to both wholesale and retail customers, with pricing
based on maximum downstream/upstream data speeds. As of December 31, 2009, we provided WildBlue
service to approximately 420,000 subscribers. In addition, following the launch of ViaSat-1, we
expect to provide wholesale broadband service over ViaSat-1 in the United States at speeds and
volumes that provide a broadband experience that is comparable to or better than terrestrial
broadband alternatives such as cable modems and DSL connections. We expect this service to become
available in 2011. We plan to offer wholesale broadband services via ViaSat-1 to national and
regional distribution partners, including retail service providers and communications companies.
Our Strengths
We believe the following strengths position our business to capitalize on the attractive
growth opportunities presented in each of our segments:
Leading Satellite and Wireless Technology Platform. We believe our ability to design and
deliver cost-effective satellite and wireless communications and networking solutions, covering
both the supply of advanced communications systems, ground network equipment and end-user
terminals, and the provision of managed network services, enables us to provide our government and
commercial customers with a diverse portfolio of leading applications and solutions. Our product
and systems offerings are often linked through common underlying technologies, customer
applications and market relationships. We believe that many of the market segments in which we
compete have significant barriers to entry relating to the complexity of technology, the amount of
required developmental funding and the importance of existing customer relationships. We believe
our history of developing complex secure satellite and wireless networking and communications
technologies demonstrates that we possess the expertise and credibility required to serve the
evolving technology needs of our government and commercial customers. In addition, our acquisition
of WildBlue provides us with significant expertise in network management and operational and
business systems support for large-scale consumer deployments.
Blue-Chip Customer Base Supporting Substantial Backlog Growth. We generated 62% of our
revenues from our government systems segment and 38% of our revenues from commercial networks and
satellite services segments in fiscal 2009. Our customers include the DoD, civil agencies, defense
contractors, allied foreign governments, satellite network integrators, large communications
service providers and enterprises requiring complex communications and networking solutions. The
credit strength of our key customers, including the U.S. government and leading aerospace and
defense prime contractors, supports our consistent financial performance. Despite the recent
economic downturn, our funded backlog has demonstrated significant growth. From fiscal 2006 through
fiscal 2009, the compound annual growth rate, or CAGR, of our total funded backlog was 8%, with our
government systems, commercial networks and satellite services segments funded backlog CAGRs at
16%, 1% and 1%, respectively. The growth in our funded backlog demonstrates the continued demand
for our advanced satellite and wireless communications and networking solutions.
Strong Balance Sheet and Equity Capitalization. We are well-capitalized with shareholders
equity as of October 2, 2009 of $494.7 million, or 86% of our total capitalization. In July 2009,
we increased our existing revolving line of credit from $85.0 million to $170.0 million and extended
the maturity until July 2012, and in October 2009 further increased the size of our existing
revolving line of credit to $210.0 million. This increase in financial flexibility along with the
significant cash flow generated from our operations provides us with the liquidity to finance our
ongoing capital expenditures, as well as our investment in ViaSat-1, for at least the next twelve
months.
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Experienced Management Team. Our Chief Executive Officer, Mark Dankberg, and our Chief
Technology Officers have been with the company since its inception in 1986. Mr. Dankberg is
considered to be a leading expert in the field of wireless and satellite communications. In 2008,
Mr. Dankberg received the prestigious AIAA Aerospace International Communication award, which
recognized him for shepherding ViaSat into a leading satellite communications company through
outstanding leadership and technical expertise.
Innovation of Next-Generation Satellite Technology. ViaSat-1, our high-capacity Ka-band
spot-beam satellite planned for launch in early 2011, is currently under construction. At the time
of launch, we believe ViaSat-1 will be the highest capacity, most cost-efficient satellite in the
world. With the market demonstrating increasing demand for satellite broadband services, ViaSat-1
and our associated next-generation ground segment technology are designed to significantly expand
the quality, capability and availability of high-speed broadband satellite services for consumers
and enterprises. In addition, we expect that our recently acquired WildBlue business will
facilitate our deployment of broadband services in the United States using ViaSat-1, as well as
provide a platform for the provision of network management services to international providers of
satellite broadband services.
Innovative Product Development and Cost-Efficient Business Model. Maintaining technological
competencies and innovative new product development has been one of our hallmarks and continues to
be critical to our success. Our research and development efforts are supported by an employee base
of over 1,000 engineers and a culture that deeply values innovation. We balance an emphasis on new
product development with efficient management of our capital. For example, the majority of our
research and development efforts with respect to the development of new products or applications
are funded by customers. In addition, we drive capital efficiencies by outsourcing a significant
portion of our manufacturing to subcontractors with whom we collaborate to ensure quality control
and superior finished products.
Our Strategy
Our objective is to leverage our advanced technology and capabilities to (1) increase our role
as the U.S. government increases its emphasis on IP-based, highly secure, highly mobile,
network-centric warfare, (2) develop high-performance, feature-rich, low-cost technology to grow
the size of the consumer satellite broadband, commercial enterprise and networking markets, while
also capturing a significant share of these growing markets, and (3) maintain a leadership
position, while reducing costs and increasing profitability, in our satellite and wireless
communications markets. The principal elements of our strategy include:
Address Increasingly Larger Markets. We have focused on addressing larger markets since our
inception. As we have grown our revenues, we are able to target larger opportunities and markets
more credibly and more successfully. We consider several factors in selecting new market
opportunities, including whether (1) there are meaningful entry barriers for new competitors (for
example, specialized technologies or relationships), (2) the new market is the right size and
consistent with our growth objectives, and (3) the customers in the market value our technology
competence and focus, which makes us an attractive partner.
Evolve into Adjacent Technologies and Markets. We anticipate continued organic growth into
adjacent technologies and markets. We seek to increase our share in the market segments we address
by selling existing or customized versions of technologies we developed for one customer base to a
different marketfor instance, to different segments of the government market or between
government and commercial markets. In addition, we seek to expand the breadth of technologies and
products we offer by selling new, but related, technologies and products to existing customers.
Enhance International Growth. International revenues represented approximately 16% of our
fiscal year 2009 revenue. We believe growth in international markets represents an attractive
opportunity, as we believe our comprehensive offering of satellite communications products, systems
and services will be attractive to government and commercial customers on an international basis.
In addition, we expect that our WildBlue business will provide a platform for the provision of
network management and back-office services to international providers of satellite broadband
services, capitalizing on both the strength of WildBlues reputation in the satellite industry
globally and WildBlues operational expertise with respect to the commercial provision of satellite
broadband services.
Pursue Growth Through Strategic Alliances and Relationships. We have regularly entered into
teaming arrangements with other government contractors to more effectively capture complex
government programs, and we expect to continue to actively seek strategic relationships and
ventures with companies whose financial, marketing,
operational or technological resources can accelerate the introduction of new technologies and
the penetration of new markets. We have also engaged in strategic relationships with companies that
have innovative technologies and products, highly skilled personnel, market presence, or customer
relationships and distribution channels that complement our strategy. We may continue to evaluate
acquisitions of, or investments in, complementary companies, businesses, products or technologies
to supplement our internal growth.
25
Our Customers
Initially, we focused primarily on developing satellite communication systems and equipment
for the U.S. government, and our U.S. government contracts remain a core part of our business.
However, we have also successfully diversified into other related wireless communications and
secure networking markets serving a range of government and commercial customers, and over the past
few years we have significantly expanded our customer base both domestically and internationally.
In addition, in December 2009 we expanded the scope of our satellite services segment through the
acquisition of WildBlue, a leading satellite broadband internet service provider.
Our customers include the DoD, U.S. National Security Agency, the U.S. Department of Homeland
Security, allied foreign governments, select other U.S. federal, state and local government
agencies, defense contractors, satellite network integrators, large communications service
providers and enterprises requiring complex communications and networking solutions. We enter into
government contracts either directly with U.S. or foreign governments or indirectly through
domestic or international prime contractors. For our commercial contracts, we also act as both a
prime contractor and subcontractor for the sale of equipment and services. Customers of our
WildBlue service include residential customers and small businesses in the United States, as well
as wholesale distribution partners such as DirecTV, EchoStar and the National Rural
Telecommunications Cooperative.
Our significant customers include the U.S. government, Boeing, Eutelsat, Harris, Northrop
Grumman and Raytheon. Revenues from the U.S. government comprised approximately 36%, 30% and 31% of
total revenues for fiscal years 2009, 2008 and 2007, respectively. In addition, two commercial
customers each comprised approximately 10% and 8% of total revenues in fiscal year 2009, 7% and 9%
of total revenues in fiscal year 2008, and 8% and 16% of total revenues in fiscal year 2007,
respectively. The smaller of these two commercial customers, however, was WildBlue, which we
acquired in December 2009.
Government Contracts
Substantial portions of our revenues are generated from contracts and subcontracts with the
DoD and other federal government agencies. Many of our contracts are subject to a competitive bid
process and are awarded on the basis of technical merit, personnel qualifications, experience and
price. We also receive some contract awards involving special technical capabilities on a
negotiated, noncompetitive basis due to our unique technical capabilities in special areas. The
Federal Acquisition Streamlining Act of 1994 has encouraged the use of commercial type pricing,
such as firm fixed-price contracts, on dual use products. Our future revenues and income could be
materially affected by changes in procurement policies, a reduction in expenditures for the
products and services we provide and other risks generally associated with federal government
contracts.
We provide products under federal government contracts that usually require performance over a
period of several months to five years. Long-term contracts may be conditioned upon continued
availability of congressional appropriations. Variances between anticipated budget and
congressional appropriations may result in a delay, reduction or termination of these contracts.
Our federal government contracts are performed under cost-reimbursement contracts,
time-and-materials contracts and fixed-price contracts. Cost-reimbursement contracts provide for
reimbursement of costs and payment of a fee. The fee may be either fixed by the contract or
variable, based upon cost control, quality, delivery and the customers subjective evaluation of
the work. Under time-and-materials contracts, we receive a fixed amount by labor category for
services performed and are reimbursed for the cost of materials purchased to perform the contract.
Under a fixed-price contract, we agree to perform specific work for a fixed price and, accordingly,
realize the benefit or detriment to the extent that the actual cost of performing the work differs
from the contract price. In fiscal year 2009, approximately 22% of our total government revenues
were generated from cost-reimbursement contracts with the federal government or our prime
contractors, 1% from time-and-materials contracts and approximately 78% from fixed-price contracts.
26
Our allowable federal government contract costs and fees are subject to audit by the DCMA and
DCAA. Audits may result in non-reimbursement of some contract costs and fees and delays in payments
for work performed. While the government reserves the right to conduct further audits, audits
conducted for periods through fiscal year 2002 have resulted in no material cost recovery
disallowances for us. See Risk FactorsOur Business Could Be Adversely Affected by a Negative
Audit by the U.S. Government.
Our federal government contracts may be terminated, in whole or in part, at the convenience of
the U.S. government. If a termination for convenience occurs, the U.S. government generally is
obligated to pay the cost incurred by us under the contract plus a pro rata fee based upon the work
completed. Contracts with prime contractors may have negotiated termination schedules that apply.
When we participate as a subcontractor, we are at risk if the prime contractor does not perform its
contract. Similarly, when we act as a prime contractor employing subcontractors, we are at risk if
a subcontractor does not perform its subcontract.
Some of our federal government contracts contain options that are exercisable at the
discretion of the customer. An option may extend the period of performance for one or more years
for additional consideration on terms and conditions similar to those contained in the original
contract. An option may also increase the level of effort and assign new tasks to us. In our
experience, options are exercised more often than not.
Our eligibility to perform under our federal government contracts requires us to maintain
adequate security measures. We have implemented security procedures that we believe adequately
satisfy the requirements of our federal government contracts.
Research and Development
The industries in which we compete are subject to rapid technological developments, evolving
standards, changes in customer requirements and continuing developments in the communications and
networking environment. Our continuing ability to adapt to these changes, and to develop new and
enhanced products, is a significant factor in maintaining or improving our competitive position and
our prospects for growth. Therefore, we continue to make significant investments in product
development.
We conduct the majority of our research and product development activities in-house and have a
research and development and engineering staff, which includes over 1,000 engineers. Our product
development activities focus on products that we consider viable revenue opportunities to support
all of our business segments. A significant portion of our research and development efforts have
generally been conducted in direct response to the specific requirements of a customers order and,
accordingly, these amounts are included in the cost of sales when incurred and the related funding
is included in revenues at that time.
The portion of our contract revenues which includes research and development funded by
government and commercial customers was approximately $126.7 million, $112.2 million and $122.9
million during fiscal years 2009, 2008 and 2007, respectively. In addition, we incurred $29.6
million, $32.3 million and $21.6 million during fiscal years 2009, 2008 and 2007, respectively, on
independent research and development, which comprises research and development not directly funded
by a third party. Funded research and development contains a profit component and is therefore not
directly comparable to independent research and development. As a government contractor, we also
are able to recover a portion of our independent research and development expenses, consisting
primarily of salaries and other personnel-related expenses, supplies and prototype materials
related to research and development programs.
Intellectual Property
We seek to establish and maintain our proprietary rights in our technology and products
through a combination of patents, copyrights, trademarks, trade secret laws and contractual rights.
We also seek to maintain our trade secrets and confidential information through nondisclosure
policies, the use of appropriate confidentiality agreements and other security measures. We have
registered a number of patents and trademarks in the U.S. and in other countries and have a
substantial number of patent filings pending determination. There can be no assurance, however,
that these rights can be successfully enforced against competitive products in any particular
jurisdiction. Although we believe the protection afforded by our patents, copyrights, trademarks,
trade secrets and contracts has value, the rapidly changing technology in the networking, satellite
and wireless communications industries and uncertainties in the legal process make our future
success dependent primarily on the innovative skills, technological expertise and management
abilities of our employees rather than on the protections afforded by patent, copyright,
trademark and trade secret laws and contractual rights. Accordingly, while these legal
protections are important, they must be supported by other factors such as the expanding knowledge,
ability and experience of our personnel, and the continued development of new products and product
enhancements.
27
Certain of our products include software or other intellectual property licensed from third
parties. While it may be necessary in the future to seek or renew licenses relating to various
aspects of our products, we believe, based upon past experience and standard industry practice,
that such licenses generally could be obtained on commercially reasonable terms. Nonetheless, there
can be no assurance that the necessary licenses would be available on acceptable terms, if at all.
Our inability to obtain these licenses or other rights or to obtain such licenses or rights on
favorable terms, or the need to engage in litigation regarding these matters, could have a material
adverse effect on our business, operating results and financial condition.
The industry in which we compete is characterized by rapidly changing technology, a large
number of patents, and frequent claims and related litigation regarding patent and other
intellectual property rights. We cannot assure you that our patents and other proprietary rights
will not be challenged, invalidated or circumvented, that others will not assert intellectual
property rights to technologies that are relevant to us, or that our rights will give us a
competitive advantage. In addition, the laws of some foreign countries may not protect our
proprietary rights to the same extent as the laws of the United States.
Sales and Marketing
We have a sales presence in various domestic and foreign locations, and we sell our products
and services both directly and indirectly through channel partners, as described below:
Government Sales Organization. Our government sales organization consists of both direct
sales personnel who sell our standard products, and business development personnel who work with
engineers, program managers, marketing managers and contract managers to identify business
opportunities, develop customer relationships, develop solutions for customers needs, prepare
proposals and negotiate contractual arrangements. The period of time from initial contact through
the point of product sale and delivery can take over three years for more complex product
developments. Products already in production can usually be delivered to a customer between 90 to
180 days from the point of product sale.
Commercial Networks Sales Organization. Our commercial networks sales organization consists
of sales managers and sales engineers, who act as the primary interface to establish account
relationships and determine technical requirements for customer networks. In addition to our sales
force, we maintain a highly trained service staff to provide technical product and service support
to our customers. The sales cycle in the commercial network market is lengthy and it is not unusual
for a sale to take up to 18 months from the initial contact through the execution of the agreement.
The sales process often includes several network design iterations, network demonstrations and
pilot networks consisting of a few sites.
Satellite Services Sales Organization. Our satellite services sales organization includes
exclusive wholesale distribution relationships with DirecTV, EchoStar and the National Rural
Telecommunications Cooperative for our WildBlue satellite broadband internet service, as well as
our own retail distribution channel, which sells directly to residential customers.
Strategic Partners. To augment our direct sales efforts, we seek to develop key strategic
relationships to market and sell our products and services. We direct our sales and marketing
efforts to our strategic partners, primarily through our senior management relationships. In some
cases a strategic ally may be the prime contractor for a system or network installation and will
subcontract a portion of the project to us. In other cases, the strategic ally may recommend us as
the prime contractor for the design and integration of the network. We seek strategic relationships
and partners based on many factors, including financial resources, technical capability, geographic
location and market presence.
Our marketing team works closely with our sales, research and product development
organizations and our customers to increase the awareness of the ViaSat brand through a mix of
positive program performance and our customers recommendation as well as public relations,
advertising, trade show participation and conference speaking engagements by providing
communications that keep the market current on our products and features. Our marketing team also
identifies and sizes new target markets for our products, creates awareness of our company and
products, and generates contacts and leads within these targeted markets.
28
Competition
The markets in which we compete are characterized by rapid change, converging technologies and
a migration to solutions that offer superior advantages. These market factors represent both an
opportunity and a competitive threat to us.
Within our government systems segment, we generally compete with manufacturers of defense
electronics products, systems or subsystems, such as BAE Systems, General Dynamics, Harris, L-3
Communications, Rockwell Collins and similar companies. We may also occasionally compete directly
with the largest defense prime contractors, including Boeing, Lockheed Martin, Northrop Grumman or
Raytheon Systems. These companies, while competitors, can also be our customers or partners on
government projects. Accordingly, maintaining an open and cooperative relationship is important.
Almost all of the companies we compete with in the government systems segment are substantially
larger than us and may have more extensive engineering, manufacturing and marketing capabilities
than we do. As a result, these competitors may be able to adapt more quickly to changing technology
or market conditions or may be able to devote greater resources to the development, promotion and
sale of their products.
In our commercial networks and satellite services segments, we compete with Gilat, Hughes
Communications and iDirect Technologies, each of which offers a broad range of satellite
communications products and services, and with other terrestrial-based internet service providers
in areas where such competing services are available. Our principal competitors in the supply of
antenna systems are Andrew Corporation, General Dynamics (VertexRSI) and L-3 Titan.
The overall number of our competitors may increase, and the identity and composition of
competitors may change. As we continue to expand our sales globally, we may see new competition in
different geographic regions. Many of our competitors have significant competitive advantages,
including strong customer relationships, more experience with regulatory compliance, greater
financial and management resources and control over central communications networks.
To compete with these providers, we emphasize:
the innovative and flexible features integrated into our products;
the increased bandwidth efficiency offered by our networks and products;
our network management experience;
the cost-effectiveness of our products and services;
our end-to-end network implementation capabilities;
the distinct advantages of satellite data networks;
technical advantages and advanced features of our antenna systems as compared to our
competitors offerings;
the overall cost of our antenna systems and satellite networks, which can include equipment,
installation and bandwidth costs, as compared to products offered by terrestrial and other
satellite service providers; and
our proven designs and network integration services for complex, customized network needs.
While we believe we compete successfully in each of these factors, we expect to face intense
competition in each of our markets.
Manufacturing
Our manufacturing objective is to produce high-quality products that conform to specifications
at the lowest possible manufacturing cost. We primarily utilize a range of contract manufacturers,
based on the volume and
complexity of the production, to reduce the costs of products and to support rapid increases
in delivery rates when needed. As part of our manufacturing process, we conduct extensive testing
and quality control procedures for all products before they are delivered to customers.
29
Contract manufacturers produce products for many different customers and are able to pass on
the benefits of large scale manufacturing to their customers. These manufacturers are able to
achieve high quality products with lower levels of costs by (1) exercising their high-volume
purchasing power, (2) employing advanced and efficient production equipment and capital intensive
systems whose costs are leveraged across their broad customer base, and (3) using a cost-effective
skilled workforce. Our primary contract manufacturers include Benchmark, EADS, Harris, IEC
Electronics, MTI, Secure Communications and Spectral Response.
Our experienced management team facilitates an efficient contract manufacturing process
through the development of strong relationships with a number of different domestic and off-shore
contract manufacturers. By negotiating beneficial contract provisions and purchasing some of the
equipment needed to manufacture our products, we retain the ability to move the production of our
products from one contract manufacturing source to another if required. Our operations management
has experience in the successful transition from in-house production to contract manufacturing. The
degree to which we employ contract manufacturing depends on the maturity of the product. We intend
to limit our internal manufacturing capacity to new product development support and customized
products that need to be manufactured in strict accordance with a customers specifications and
delivery schedule. Therefore, our internal manufacturing capability for standard products has been,
and is expected to continue to be, very limited and we intend to rely on contract manufacturers for
large-scale manufacturing.
We also rely on outside vendors to manufacture specific components and subassemblies used in
the production of our products. Some components, subassemblies and services necessary for the
manufacture of our products are obtained from a sole source supplier or a limited group of
suppliers.
Regulatory Environment
We are required to comply with the laws and regulations of, and often obtain approvals from,
national and local authorities in connection with the services that we provide. In particular, we
provide a number of services that rely on the use of radio frequencies, and the provision of such
services is highly regulated. National authorities generally require that the satellites they
authorize be operated in a manner consistent with the regulations and procedures of the ITU, which
require the coordination of the operation of satellite systems in certain circumstances, and more
generally are intended to avoid the occurrence of harmful interference among different users of the
radio spectrum.
We also produce a variety of communications systems and networking equipment, the design,
manufacture, and marketing of which are subject to the laws and regulations of the jurisdictions in
which we sell such equipment. We are subject to export control laws and regulations, and trade and
economic sanctions laws and regulations, with respect to the export of such systems and equipment.
As a government contractor, we are subject to United States procurement laws and regulations. We
also participate in joint ventures that may be subject to foreign regulation.
Radio Frequency Regulation
The commercial use of radio frequencies in the United States is subject to the jurisdiction of
the FCC under the Communications Act of 1934, as amended (Communications Act). The FCC is
responsible for licensing the operation of satellite earth stations and spacecraft, and for
regulating the technical and other aspects of the operation of these facilities.
Earth Stations. The Communications Act requires a license for the operation of satellite
earth station facilities in the United States. We currently hold licenses authorizing us to
operate various earth stations within the United States, including but not limited to user
terminals, gateway facilities and network hubs. These licenses typically are granted for 10 to
15 year terms, and renewed in the ordinary course. Material changes in these operations would
require prior approval by the FCC. The operation of our earth stations is subject to various
license conditions, as well as the technical and operational requirements of the FCCs rules and
regulations.
Space Stations. In the United States, the FCC authorizes the launch and operation of
commercial spacecraft, and also authorizes non-U.S.-licensed spacecraft to be used to serve the
United States. The FCC has authorized the use of the Anik F2, WildBlue-1 and ViaSat-1 spacecraft
to serve the United States. The use of these spacecraft in our business is subject to various
conditions in the underlying authorizations, as well as the technical and operational
requirements of the FCCs rules and regulations. For example, in granting such authorization
with respect to ViaSat-1, which is not yet operational, the FCC imposed specific implementation
milestones that we must satisfy in order to maintain that authorization. Specifically, the
authorization requires that we: (1) enter into a binding non-contingent contract to construct the
licensed satellite system by August 18, 2010, (2) complete critical design review by August 18,
2011, (3) begin construction by August 18, 2012, and (4) launch and operate by August 18, 2014. We
believe that we have satisfied the first three of these milestones, and plan to satisfy the fourth
of these milestones in 2011, well in advance of the deadline.
30
Universal Service. Certain of our services may constitute the provision of telecommunications
to, from or within the United States, and may require us to contribute a percentage of our revenues
from such services to universal service support mechanisms that subsidize the provision of services
to low-income consumers, high-cost areas, schools, libraries and rural health care providers. This
percentage is set each calendar quarter by the FCC, and currently is 14.1%. Current FCC rules
permit us to pass this universal service contribution through to our customers. The FCC also is
considering whether and how to alter the regulatory framework governing federal universal service
support mechanisms. Some proposals being considered would expand the contribution base for the
universal service and similar programs to include revenues from the provision of broadband internet
access services such as our WildBlue service. The adoption of such proposals would expand
significantly the percentage of our revenues subject to such assessments, and could have a material
adverse impact on our business.
CALEA. We are obligated to comply with the requirements of the Federal Communications
Assistance for Law Enforcement Act (CALEA), which requires telecommunications providers and
broadband internet access providers to ensure that law enforcement agencies are able to conduct
lawfully-authorized surveillance of users of their services.
Net Neutrality. In October 2009, the FCC proposed and sought public comment on rules intended
to preserve the openness of the internet, a concept generally referred to as net neutrality. The
proposed rules would, among other things, prohibit facilities-based broadband internet access
service providers from preventing end-user customers from accessing lawful content or running
applications of their choice over the internet, and from connecting and using devices that do not
harm the network; they also would require facilities-based broadband internet access service
providers to treat lawful content, applications, and services in a nondiscriminatory manner, and to
make certain disclosures concerning their practices as they relate to the openness of their
networks. However, the FCCs proposal would permit us to employ reasonable techniques to manage
traffic on our network. In addition, the FCCs proposal would exempt from these rules (1) services
provided to national or homeland security authorities, and (2) certain managed or specialized
services provided to enterprise customers. Many of our services could fall within these categories
of exempt services, and we do not believe that these rules as proposed would likely have a material
impact on our operations. If the FCC were to adopt different rules, though, or construe narrowly
or eliminate its proposed exemptions, the impact of any final rules on our operations could be
different.
Foreign Licensing
The spacecraft we use or are planning to use are subject to the regulatory authority of, and
conditions imposed by, foreign governments. Anik F2 and WildBlue-1 operate under authority granted
by the government of Canada. ViaSat-1 operates under authority granted by the governments of the
Isle of Man and the United Kingdom. The use of these spacecraft in our business is subject to
various conditions in their underlying authorizations, as well as the technical and operational
requirements of the rules and regulations of those jurisdictions.
Equipment Design, Manufacture, and Marketing
We must comply with the applicable laws and regulations and, where required, obtain the
approval of the regulatory authority of each country in which we design, manufacture, or market our
communications systems and networking equipment. Applicable laws and regulatory requirements vary
from country to country, and jurisdiction to jurisdiction. The increasing demand for wireless
communications has exerted pressure on regulatory bodies worldwide to adopt new standards for these
products, generally following extensive investigation and deliberation over competing technologies.
The delays inherent in this government approval process have in the past caused and may in the
future cause the cancellation, postponement or rescheduling of the installation of communication
systems by our customers, which in turn may have a material adverse impact on the sale of our
products to the customers.
Equipment Testing and Verification. In the United States, certain equipment that we
manufacture must comply with applicable technical requirements intended to minimize radio
interference to other communications services
and ensure product safety. In the United States, the FCC is responsible for ensuring that
communications devices comply with technical requirements for minimizing radio interference and
human exposure to radio emissions. The FCC requires that equipment be tested either by the
manufacturer or by a private testing organization to ensure compliance with the applicable
technical requirements. For other classes of device, the FCC requires submission of an application,
which must be approved by the FCC, or in some instances may be approved by a private testing
organization.
31
Export Controls. Due to the nature and sophistication of our communications products, we must
comply with applicable U.S. government and other agency regulations regarding the handling and
export of certain of our products. This often requires extra or special handling of these products
and could increase our costs. Failure to comply with these regulations could result in substantial
harm to the company, including fines, penalties and the forfeiture of future rights to sell or
export these products.
Other Regulations
As a defense contractor, our contract costs are audited and reviewed by the DCAA. Audits and
investigations are conducted from time to time to determine if the performance and administration
of our U.S. government contracts are in compliance with applicable contractual requirements and
procurement regulations and other applicable federal statutes and regulations. Under current U.S.
government procurement regulations, a contractor, if indicted or deemed in violation of procurement
or other federal civil laws, could be subject to fines, penalties, repayments or other damages.
U.S. government regulations also provide that certain findings against a contractor may lead to
suspension or debarment from eligibility for awards of new U.S. government contracts.
We are also subject to a variety of local, state and federal government regulations relating
to the storage, discharge, handling, emission, generation, manufacture and disposal of toxic or
other hazardous substances used to manufacture our products. The failure to comply with current or
future regulations could result in the imposition of substantial fines on us, suspension of
production, alteration of our manufacturing processes or cessation of operations. To date, these
regulations have not had a material effect on our business, as we have neither incurred significant
costs to maintain compliance nor to remedy past noncompliance, and we do not expect such
regulations to have a material effect on our business in the current fiscal year.
Employees
As of January 1, 2010, we employed approximately 2,000 individuals worldwide. We consider the
relationships with our employees to be positive. Competition for technical personnel in our
industry is intense. We believe our future success depends in part on our continued ability to
hire, assimilate and retain qualified personnel. To date, we believe we have been successful in
recruiting qualified employees, but there is no assurance we will continue to be successful in the
future.
Properties
Our worldwide headquarters are located at our Carlsbad, California campus, consisting of
approximately 425,000 square feet, under leases expiring between fiscal year 2017 and fiscal year
2019. In addition to our Carlsbad campus, we have facilities consisting of (1) approximately 20,000
square feet in San Diego, California under a lease expiring in 2015, (2) approximately 63,000
square feet in Denver, Colorado under a lease expiring in 2011, (3) approximately 146,000 square
feet in Duluth, Georgia under a lease expiring in 2016, (4) approximately 48,000 square feet in
Germantown, Maryland with a lease expiring in 2011, (5) approximately 44,000 square feet in
Gilbert, Arizona under a lease expiring in 2014 and (6) approximately 34,000 square feet in
Cleveland, Ohio under a lease expiring in 2016. We also maintain offices or a sales presence in
Arlington (Virginia), Boston (Massachusetts), Denver (Colorado), Linthicum Heights (Maryland),
Tampa (Florida), Australia, Canada, China, India, Italy, Spain and Switzerland, and operate seven
gateway ground stations supporting our WildBlue service across the United States and Canada.
Although we believe that our existing facilities are suitable and adequate for our present
purposes, we anticipate operating additional regional sales offices in fiscal year 2010 and beyond.
Each of our segments uses each of these facilities.
Legal Proceedings
From time to time, we are 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, we believe that the
resolution of our current pending matters will not have a material adverse effect on our business,
financial condition, results of operations or liquidity. Regardless of the outcome, litigation can
have an adverse impact on us because of defense costs, diversion of management resources and other
factors. In addition, it is possible that an unfavorable resolution of one or more such proceedings
could in the future materially and adversely affect our business, financial condition, results of
operations or liquidity in a particular period.
32
SELLING STOCKHOLDERS
WildBlue Acquisition. Under the terms of an agreement and plan of merger dated as of September
30, 2009, we acquired all of the outstanding capital stock of WildBlue. WildBlue is now our wholly
owned subsidiary. As part of the aggregate purchase price, we issued to WildBlues equity and debt
holders an aggregate of 4,286,250 shares of our common stock, certain of which are subject to
lock-up agreements restricting their transfer. We also agreed to register for resale the shares of
our common stock offered by the selling stockholders in this prospectus.
The following table sets forth information with respect to the shares beneficially owned by
the selling stockholders as of January 25, 2010. The information regarding shares owned after the
offering assumes the sale of all shares offered by the selling stockholders. Other than: (1) as
described above, in the footnotes to the table below, in our Current Report on Form 8-K and the
exhibits thereto filed with the SEC on December 18, 2009, or in our Current Report on Form 8-K/A
and the exhibits thereto filed with the SEC on January 7, 2010, or (2) in their capacity as a
lender to WildBlue and its subsidiaries and/or as a stockholder of WildBlue, in each case prior to
our acquisition of WildBlue, none of the selling stockholders has held a position or office or had
a material relationship with us or any of our affiliates within the past three years other than as
a result of the ownership of our common stock.
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Number of |
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Shares |
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Shares Beneficially Owned |
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Beneficially |
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After Offering |
Name of |
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Owned Prior to |
|
Number of Shares |
|
|
|
|
Selling Stockholder |
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the Offering |
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Being Offered |
|
Number |
|
Percentage |
Liberty Satellite, LLC(1) |
|
|
1,837,182 |
|
|
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1,837,182 |
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|
|
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* |
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Intelsat USA Sales Corp.(2) |
|
|
646,780 |
|
|
|
646,780 |
|
|
|
|
|
|
|
* |
|
National Rural Telecommunications Cooperative(3) |
|
|
449,256 |
|
|
|
449,256 |
|
|
|
|
|
|
|
* |
|
Special Value Opportunities Fund, LLC(4) |
|
|
317,977 |
|
|
|
317,977 |
|
|
|
|
|
|
|
* |
|
Tennenbaum Opportunities Partners V, LP(4) |
|
|
198,923 |
|
|
|
198,923 |
|
|
|
|
|
|
|
* |
|
KPCB Holdings Inc., as nominee(5) |
|
|
179,967 |
|
|
|
179,967 |
|
|
|
|
|
|
|
* |
|
Special Value Continuation Partners, LP(4) |
|
|
177,476 |
|
|
|
177,476 |
|
|
|
|
|
|
|
* |
|
Special Value Expansion Fund, LLC(4) |
|
|
134,144 |
|
|
|
134,144 |
|
|
|
|
|
|
|
* |
|
CanPartners Investments IV, LLC |
|
|
54,437 |
|
|
|
54,437 |
|
|
|
|
|
|
|
* |
|
New York Life Investment Management Mezzanine Partners, LP(6) |
|
|
25,881 |
|
|
|
25,881 |
|
|
|
|
|
|
|
* |
|
NYLIM Mezzanine Partners Parallel Fund, LP(6) |
|
|
11,944 |
|
|
|
11,944 |
|
|
|
|
|
|
|
* |
|
Karen Luly |
|
|
400 |
|
|
|
400 |
|
|
|
|
|
|
|
* |
|
YAS Broadband Ventures LLC |
|
|
152 |
|
|
|
152 |
|
|
|
|
|
|
|
* |
|
|
|
|
* |
|
Less than 1.0% |
|
(1) |
|
Prior to our acquisition of WildBlue, Liberty Satellite, LLC had the right to designate two
persons as directors of WildBlue and an employee of Liberty Media Corporation, an affiliate of
Liberty Satellite, LLC, served as chairman of the board of directors of WildBlue. The agreement
and plan of merger dated September 30, 2009 provides that, in the event we issued shares of our
common stock in connection with the merger representing at least 10% of our issued and outstanding
shares of common stock, we would take all necessary and appropriate actions to cause an
individual designated by the selling stockholders and reasonably acceptable to our board of
directors to be nominated and appointed to our board of directors immediately following the closing
of the merger and would take all necessary and appropriate actions to cause such designee to be
nominated to our board of directors at the next annual meeting of our stockholders convened to
elect directors of the class in which such designee then serves. By agreement among the selling
stockholders, such director nominee would be designated by Liberty Media Corporation. In addition,
during the past three years, Liberty Media Corporation and its affiliates were parties to the
following transactions with WildBlue: (a) Liberty Media Corporation acted as an arranger of both of
WildBlues senior secured credit facilities (for which it received no compensation other than
certain warrants to acquire WildBlue common stock issued upon the first borrowing under WildBlues
second senior secured credit facility) and was a participant in those credit facilities; and (b)
certain affiliates of Liberty Media Corporation were parties to the recapitalization transaction
effective July 22, 2008 (Recapitalization Transaction) pursuant to which WildBlue was formed, and
acquired through a stock exchange 100% of the outstanding shares of common and preferred stock of
WildBlue Communications, Inc., a wholly owned subsidiary of WildBlue. |
33
|
|
|
(2) |
|
On January 4, 2010, we repurchased 251,731 of the shares of common stock issued to Intelsat USA
Sales Corp. in connection with the settlement of a contractual dispute. From time to time, we have
entered into agreements with Intelsat USA Sales Corp. and it affiliates in the ordinary course of
business, including, but not limited to, agreements relating to the provision of equipment and
services as a customer or supplier, the provision of host station services, and the grant of rights
regarding orbital locations. Prior to our acquisition of WildBlue, Intelsat USA Sales Corp. had
the right to designate two persons as directors of WildBlue. In addition, Intelsat USA Sales Corp.
was a party to the Recapitalization Transaction. |
|
(3) |
|
From time to time, we have entered into distribution and other agreements with the National
Rural Telecommunications Cooperative, including, but not limited to, agreements relating to the
provision of equipment and services as a customer, vendor or supplier, and the distribution of the
WildBlue service in the United States. Prior to our acquisition of WildBlue, National Rural
Telecommunications Cooperative had the right to designate one person as a director of WildBlue. In
addition, during the past three years, National Rural Telecommunications Cooperative was a party to
the following transactions with WildBlue: (a) National Rural Telecommunications Cooperative was a
participant in WildBlues initial senior secured credit facility; and (b) National Rural
Telecommunications Cooperative was a party to the Recapitalization Transaction. |
|
(4) |
|
Tennenbaum Capital Partners, LLC is the investment manager of each of these selling
stockholders, and may be deemed to be the beneficial owner of the shares of common stock held by
such selling stockholders. Tennenbaum Capital Partners, LLC, however, disclaims beneficial
ownership of these shares, except to the extent of its pecuniary interest therein. Prior to our
acquisition of WildBlue, Tennenbaum Capital Partners, LLC had the right to designate one person as
a director of WildBlue. In addition, during the past three years, certain affiliates of Tennenbaum
Capital Partners, LLC were parties to the following transactions with WildBlue: (a) certain
affiliates of Tennenbaum Capital Partners, LLC were participants in each of WildBlues senior
secured credit facilities; and (b) certain affiliates of Tennenbaum Capital Partners, LLC were
parties to the Recapitalization Transaction. |
|
(5) |
|
KPCB Holdings Inc. holds these shares as nominee on behalf of Kleiner Perkins Caufield & Byers
IX-A, L.P., Kleiner Perkins Caufield & Byers IX-B, L.P., Brook H. Byers, Kevin R. Compton, Trustee,
Compton Family Trust DTD 4/19/96, James A. Davidson, Trustee, The Davidson Living Trust Under
Agreement DTD 1/22/96, L. John Doerr as Trustee of the Vallejo Ventures Trust, Pamela K. Hagenah,
William R. Hearst III, Glenn H. Hutchins
VKG Associates, Joseph S. Lacob as Trustee of the Joseph S. Lacob Revocable Trust created UTA Dated
7/19/07, Laurie K. Lacob as Trustee of the Laurie K. Lacob Revocable Trust UTA Dated 8/31/07,
Douglas J. Mackenzie
Roger B. McNamee & Ann K. McNamee, as Trustees of the McNamee Trust U/T/A/D 3/27/96, John A.
Powell, TTEE, John A. Powell Revocable Trust DTD 10/14/04, Paula Robichaud Revocable Trust, David
Roux, Trustee, The David & Barbara Roux Trust Dated 8/11/99, Ted E. & Linda S. Schlein, TTEES,
Schlein Family Trust DTD 4/20/099, Russell L. Siegelman, and The David & Lisa Whorton Trust, David
G. Whorton, Trustee which may have shared voting or investment power over the shares of common
stock held by KPCB Holdings Inc. Prior to our acquisition of WildBlue, KPCB Holdings Inc., as
nominee, had the right to designate one person as a director of WildBlue. |
|
(6) |
|
NYLIM Mezzanine Partners GenPar LP is the general partner of New York Life Investment
Management Mezzanine Partners, LP (NYLIM Mezzanine) and NYLIM Mezzanine Partners Parallel Fund, LP
(NYLIM Mezzanine Parallel), and NYLIM Mezzanine Partners GenPar GP, LLC is the general partner of
NYLIM Mezzanine Partners GenPar LP, and therefore both entities may be deemed to be the beneficial
owner of the shares of common stock held by NYLIM Mezzanine and NYLIM Mezzanine Parallel. NYLCAP
Manager LLC is the investment
manager of each of NYLIM Mezzanine and NYLIM Mezzanine Parallel, and may be deemed to be the
beneficial owner of the shares of common stock held by such selling stockholders. |
The selling stockholders listed in the above table may have sold or transferred, in
transactions pursuant to this prospectus or exempt from the registration requirements of the
Securities Act, some or all of their shares since the date as of which the information is presented
in the above table. Information concerning the selling stockholders may change from time to time
and any such changed information will be set forth in supplements to this prospectus or amendments
to the registration statement of which this prospectus is a part if and when necessary.
34
PLAN OF DISTRIBUTION
The selling stockholders, which as used herein includes donees, pledgees, transferees or other
successorsininterest selling shares received after the date of this prospectus from a selling
stockholder as a gift, pledge, partnership distribution or other transfer, may, from time to time,
sell, transfer or otherwise dispose of any or all of their shares on any stock exchange, market or
trading facility on which the shares are traded or in private transactions. These dispositions may
be at fixed prices, at prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.
The selling stockholders may use any one or more of the following methods when disposing of
shares:
|
|
|
ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers; |
|
|
|
|
block trades in which the broker-dealer will attempt to sell the shares as agent,
but may position and resell a portion of the block as principal to facilitate the
transaction; |
|
|
|
|
purchases by a broker-dealer as principal and resale by the broker-dealer for its
account; |
|
|
|
|
an exchange distribution in accordance with the rules of the applicable exchange; |
|
|
|
|
privately negotiated transactions; |
|
|
|
|
short sales effected after the date the registration statement of which this
prospectus is a part is declared effective by the SEC; |
|
|
|
|
through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise; |
|
|
|
|
broker-dealers may agree with the selling stockholders to sell a specified number
of such shares at a stipulated price per share; |
|
|
|
|
a combination of any such methods of sale; or |
|
|
|
|
any other method permitted pursuant to applicable law. |
The selling stockholders may also sell shares under Rule 144 under the Securities Act, if
available, rather than under this prospectus. The selling stockholders are not obligated to, and
there is no assurance that the selling stockholders will, sell all or any of the shares we are
registering. The selling stockholders may transfer, devise or gift such shares by other means not
described in this prospectus.
In connection with the sale of our shares, the selling stockholders may enter into hedging
transactions with broker-dealers or other financial institutions, which may in turn engage in short
sales of the common stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our common stock short and deliver these securities to close
out their short positions, or loan or pledge the common stock to broker-dealers that in turn may
sell these securities. The selling stockholders may also enter into option or other transactions
with broker-dealers or other financial institutions or the creation of one or more derivative
securities which require the delivery to such broker-dealer or other financial institution of
shares offered by this prospectus, which shares such broker-dealer or other financial institution
may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The aggregate proceeds to the selling stockholders from the sale of the common stock offered
by them will be the purchase price of the common stock less discounts or commissions, if any. Each
of the selling stockholders reserves the right to accept and, together with their agents from time
to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly
or through agents. We will not receive any of the proceeds from this offering. We are required to
pay certain fees and expenses incurred by us incident to the registration of the shares.
35
Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the selling
stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions
and discounts to exceed what is customary in the types of transactions involved. Any profits on the
resale of shares by a broker-dealer acting as principal might be deemed to be underwriting
discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar
selling expenses, if any, attributable to the sale of shares will be borne by the respective
selling stockholders. The selling stockholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the shares if liabilities are
imposed on that person under the Securities Act.
The selling stockholders, broker-dealers or agents that participate in the sale of the common
stock may be underwriters within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any resale of the shares may be
underwriting discounts and commissions under the Securities Act. Selling stockholders who are
underwriters within the meaning of Section 2(11) of the Securities Act will be subject to the
prospectus delivery requirements of the Securities Act. There is no underwriter acting in
connection with the proposed sale of the resale shares by the selling stockholders; however, a
selling stockholder may enter into agreements, understandings, or arrangements with an underwriter
or broker-dealer regarding the sale of their shares in the future.
The selling stockholders may from time to time pledge or grant a security interest in some or
all of the shares owned by them and, if they default in the performance of any of their secured
obligations, the pledgees or secured parties may offer and sell the shares from time to time under
this prospectus as it may be supplemented from time to time, or under an amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the
list of selling stockholders to include the pledgee, transferee or other successors in interest as
selling stockholders under this prospectus.
To the extent required, the shares to be sold, the names of the selling stockholders, the
respective purchase prices and public offering prices, the names of any agents, dealer or
underwriter, any applicable commissions or discounts with respect to a particular offer will be set
forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to
the registration statement that includes this prospectus.
In order to comply with the securities laws of some states, if applicable, the common stock
may be sold in these jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states the common stock may not be sold unless it has been registered or
qualified for sale or an exemption from registration or qualification requirements is available and
is complied with.
The anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of
shares in the market and to the activities of the selling stockholders and their affiliates. In
addition, we will make copies of this prospectus (as it may be supplemented or amended from time to
time) available to the selling stockholders for the purpose of satisfying the prospectus delivery
requirements of the Securities Act. The selling stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.
Pursuant to the registration rights agreement we entered into in connection with the
transactions contemplated by the agreement and plan of merger dated September 30, 2009, we agreed
with the selling stockholders to keep the registration statement of which this prospectus is a part
effective until the earlier of (1) the date on which the shares registered on this registration
statement have been sold pursuant to this registration statement or pursuant to Rule 144 under the
Securities Act, and (2) the two-year anniversary of the effective date of this registration
statement, subject to extension under certain circumstances. We will bear all fees and
expenses incurred in connection with the filing of the registration statement of which this
prospectus is a part. In addition, we have agreed to indemnify the selling stockholders and
certain related persons against certain losses caused by any untrue statement or alleged untrue
statement of a material fact contained in the registration statement of which this prospectus is a
part or any omission or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading or by any violation by
us of the Securities Act or state securities laws or rules thereunder relating to any action or
inaction by us in connection with such registration. In addition we entered into lock-up
agreements with certain selling stockholders. Subject to certain exceptions, such lock-up
agreements prohibit transfers of shares of common stock issued in connection with the transactions
contemplated by the agreement and plan of merger for a period of 60 days following the closing of
the merger on December 15, 2009, and thereafter limit transfers of such shares, other than approved
block sales, to an aggregate of
100,000 shares per day and 1,250,000 shares during any 30-day period,
until early November 2010.
36
DESCRIPTION OF CAPITAL STOCK
General
This prospectus describes the general terms of our capital stock. For a more
detailed description of these securities, you should read the applicable provisions of Delaware law
and our certificate of incorporation and bylaws.
Under our certificate of incorporation, the total number of shares of all
classes of stock that we have authority to issue is 105,000,000, consisting of 5,000,000 shares of
preferred stock, par value $0.0001 per share, and 100,000,000 shares of common stock, par value
$0.0001 per share.
Common Stock
As
of January 25, 2010, we had 36,314,406 shares of common stock outstanding. The
holders of our common stock are entitled to one vote for each share on all matters voted on by
stockholders. The holders of our common stock do not have cumulative voting rights, which mean that
holders of more than one-half of the shares voting for the election of directors can elect all of
the directors then being elected. Subject to the preferences of any of our outstanding preferred
stock, the holders of our common stock are entitled to a proportional distribution of any dividends
that may be declared by the board of directors. In the event of our liquidation or dissolution, the
holders of our common stock are entitled to share equally in all assets remaining after payment of
liabilities and any payments due to holders of any outstanding shares of our preferred stock. The
outstanding shares of our common stock are fully paid and nonassessable. The rights, preferences
and privileges of holders of our common stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any of our outstanding preferred stock.
Preferred Stock
We currently have no outstanding shares of preferred stock. Under our certificate of
incorporation, our board of directors is authorized to issue shares of our preferred stock from
time to time, in one or more classes or series, without stockholder approval. Prior to the issuance
of shares of each series, the board of directors is required by the General Corporation Law of the
State of Delaware, known as the DGCL, and our certificate of incorporation to adopt resolutions and
file a certificate of designation with the Secretary of State of the State of Delaware. The
certificate of designation fixes for each class or series the designations, powers, preferences,
rights, qualifications, limitations and restrictions, including the following:
|
|
|
the number of shares constituting each class or series; |
|
|
|
|
voting rights; |
|
|
|
|
rights and terms of redemption, including sinking fund provisions; |
|
|
|
|
dividend rights and rates; |
|
|
|
|
dissolution; |
|
|
|
|
terms concerning the distribution of assets; |
|
|
|
|
conversion or exchange terms; |
|
|
|
|
redemption prices; and |
|
|
|
|
liquidation preferences. |
37
Anti-Takeover Provisions
As a corporation organized under the laws of the State of Delaware, we are subject to
Section 203 of the DGCL, which restricts our ability to enter into business combinations with an
interested stockholder or a stockholder owning 15% or more of our outstanding voting stock, or that
stockholders affiliates or associates, for a period of three years. These restrictions do not
apply if:
|
|
|
prior to becoming an interested stockholder, our board of directors approves
either the business combination or the transaction in which the stockholder becomes an
interested stockholder; |
|
|
|
|
upon consummation of the transaction in which the stockholder becomes an
interested stockholder, the interested stockholder owns at least 85% of our voting stock
outstanding at the time the transaction commenced, subject to exceptions; or |
|
|
|
|
on or after the date a stockholder becomes an interested stockholder, the
business combination is both approved by our board of directors and authorized at an annual
or special meeting of our stockholders by the affirmative vote of at least two-thirds of
the outstanding voting stock not owned by the interested stockholder. |
Some provisions of our certificate of incorporation and bylaws could also have
anti-takeover effects. These provisions:
|
|
|
permit the board of directors to increase its own size and fill the resulting
vacancies; |
|
|
|
|
provide for a board comprised of three classes of directors with each class
serving a staggered three-year term; |
|
|
|
|
authorize the issuance of preferred stock in one or more series; and |
|
|
|
|
prohibit stockholder action by written consent. |
These provisions are intended to enhance the likelihood of continuity and
stability in the composition of the policies formulated by the board of directors. In addition,
these provisions are intended to ensure that the board of directors will have sufficient time to
act in what it believes to be in the best interests of us and our stockholders. These provisions
also are designed to reduce our vulnerability to an unsolicited proposal for a takeover of us that
does not contemplate the acquisition of all of our outstanding shares or an unsolicited proposal
for the restructuring or sale of all or part of us. The provisions are also intended to discourage
some tactics that may be used in proxy fights.
Classified Board of Directors
The certificate of incorporation provides for the board of directors to be divided into
three classes of directors, with each class as nearly equal in number as possible, serving
staggered three-year terms. As a result, approximately one-third of the board of directors will be
elected each year. The classified board provision will help to assure the continuity and stability
of the board of directors and our business strategies and policies as determined by the board of
directors. The classified board provision could have the effect of discouraging a third party from
making a tender offer or attempting to obtain control of us. In addition, the classified board
provision could delay stockholders who do not agree with the policies of the board of directors
from removing a majority of the board of directors for two years.
38
No Stockholder Action by Written Consent; Special Meetings
The certificate of incorporation provides that stockholder action can only be taken at an
annual or special meeting of stockholders and prohibits stockholder action by written consent in
lieu of a meeting.
The certificate of incorporation also provides that special meetings of
stockholders may be called only by the board of directors, its chairman, our president or
secretary. Stockholders are not permitted to call a special meeting of stockholders or to require
that the board of directors call a special meeting.
Number of Directors; Removal; Filling Vacancies
The certificate of incorporation provides that the board of directors will consist of
between four and eleven members, the exact number to be fixed by resolution adopted by affirmative
vote of a majority of the board of directors. The board of directors currently consists of seven
directors. Further, the certificate of incorporation authorizes the board of directors to fill
newly created directorships. Accordingly, this provision could prevent a stockholder from obtaining
majority representation on the board of directors by permitting the board of directors to enlarge
the size of the board and fill the new directorships with its own nominees. A director so elected
by the board of directors holds office until the next election of the class for which the director
has been chosen and until his or her successor is elected and qualified. The certificate of
incorporation also provides that directors may be removed only for cause and only by the
affirmative vote of holders of a majority of the total voting power of all outstanding securities.
The effect of these provisions is to preclude a stockholder from removing incumbent directors
without cause and simultaneously gaining control of the board of directors by filling the
vacancies created by the removal with its own nominees.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Computershare Investor Services
LLC.
LEGAL MATTERS
Latham & Watkins LLP, San Diego, California, will pass upon the validity of the securities
being offered by this prospectus.
EXPERTS
The consolidated financial statements and managements assessment of the effectiveness of
internal control over financial reporting (which is included in Managements Report on Internal
Control over financial reporting) incorporated in this prospectus by reference to the Annual Report
on Form 10-K of ViaSat, Inc. for the year ended April 3, 2009 have been so incorporated in reliance
on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm,
given on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of WildBlue Holding, Inc. as of December 31, 2007 and 2008, and for each of the years in the three-year period ended December 31, 2008, have been incorporated by reference herein and in the registration statement, in reliance upon the report of KPMG LLP, independent auditors, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other information with the
SEC. You may read and copy this information at the SECs public reference room at 100 F Street,
N.E., Washington, D.C. 20549. You may obtain information on the operation of the SECs public
reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet website
that contains reports, proxy and information statements and other information about issuers that
file electronically with the SEC. The address of the SECs website is www.sec.gov.
39
The SEC allows us to incorporate by reference information into this prospectus, which means
that we can disclose important information to you by referring you to another document filed
separately with the SEC. Any information that we reference this way is considered part of this
prospectus. The information in this prospectus supersedes information incorporated by reference
that we have filed with the SEC prior to the date of this prospectus, while information that we
file with the SEC after the date of this prospectus that is incorporated by reference will
automatically update and supersede this information.
We incorporate by reference the following documents we have filed, or may file, with the SEC:
|
|
|
Our Annual Report on Form 10-K for the fiscal year ended April 3, 2009 filed with the
SEC on May 28, 2009; |
|
|
|
|
Amendment No. 1 to our Annual Report on Form 10-K for the fiscal year ended April 3,
2009 filed with the SEC on July 31, 2009; |
|
|
|
|
Our Quarterly Reports on Form 10-Q filed with the SEC on August 12, 2009 and November
10, 2009; |
|
|
|
|
Our Current Reports on Form 8-K filed with the SEC on July 2, 2009, October 2, 2009,
October 5, 2009, October 9, 2009, October 13, 2009, October 20, 2009, October 22, 2009 and
December 18, 2009; |
|
|
|
|
Our Current Reports on Form 8-K/A filed with the SEC on
January 7, 2010 and January 27, 2010; |
|
|
|
|
The description of our common stock contained in our registration statement on Form 8-A
filed with the SEC on November 20, 1996; and |
|
|
|
|
All documents filed by us with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this prospectus and before the termination of this offering. |
To the extent that any information contained in any Current Report on Form 8-K, or any exhibit
thereto, was furnished to, rather than filed with, the SEC, such information or exhibit is
specifically not incorporated by reference in this prospectus.
You may request a free copy of any of the documents incorporated by reference in this
prospectus by writing or telephoning us at the following address:
ViaSat, Inc.
6155 El Camino Real
Carlsbad, California 92009
(760) 476-2200
Attention: Investor Relations
40
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Our estimated expenses in connection with the distribution of the securities being registered
are as set forth in the table below. ViaSat will pay all expenses identified below.
|
|
|
|
|
SEC Registration Fee |
|
$ |
8,051.64 |
|
Printing and Mailing Costs |
|
$ |
2,000.00 |
* |
Legal Fees and Expenses |
|
$ |
25,000.00 |
* |
Accounting Fees and Expenses |
|
$ |
10,000.00 |
* |
Miscellaneous |
|
$ |
4,948.36 |
* |
Total |
|
$ |
50,000.00 |
* |
Item 15. Indemnification of Directors and Officers
Our officers and directors are covered by certain provisions of the DGCL, our certificate of
incorporation, our bylaws and insurance policies that serve to limit and, in certain instances, to
indemnify them against certain liabilities that they may incur in such capacities. These various
provisions are described below.
In June 1986, Delaware enacted legislation that authorizes corporations to limit or eliminate
the personal liability of directors to corporations and their stockholders for monetary damages for
breach of directors fiduciary duty of care. This duty of care requires that, when acting on behalf
of the corporation, directors must exercise an informed business judgment based on all significant
information reasonably available to them. Absent the limitations now authorized by such
legislation, directors are accountable to corporations and their stockholders for monetary damages
for conduct constituting negligence or gross negligence in the exercise of their duty of care.
Although the statute does not change directors duty of care, it enables corporations to limit
available relief to equitable remedies such as injunction or rescission. Our certificate of
incorporation limits the liability of our directors to ViaSat or its stockholders (in their
capacity as directors but not in their capacity as officers) to the fullest extent permitted by
such legislation. Specifically, our directors will not be personally liable for monetary damages
for breach of a directors fiduciary duty as director, except for liability: (1) for any breach of
the directors duty of loyalty to ViaSat or its stockholders, (2) for acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law, (3) for unlawful
payments of dividends or unlawful share repurchases or redemptions as provided in Section 174 of
the DGCL, or (4) for any transaction from which the director derived an improper personal benefit.
As a Delaware corporation, ViaSat has the power, under specified circumstances generally
requiring the director or officer to act in good faith and in a manner he reasonably believes to be
in or not opposed to ViaSats best interests, to indemnify its directors and officers in connection
with actions, suits or proceedings brought against them by a third party or in the name of ViaSat,
by reason of the fact that they were or are such directors or officers, against expenses,
judgments, fines and amounts paid in settlement in connection with any such action, suit or
proceeding. The bylaws generally provide for mandatory indemnification of ViaSats directors and
officers to the full extent provided by Delaware corporate law. In addition, ViaSat has entered
into indemnification agreements with its directors and officers that generally provide for
mandatory indemnification under circumstances for which indemnification would otherwise be
discretionary under Delaware law.
ViaSat maintains insurance on behalf of any person who is or was a director or officer of
ViaSat, or is or was a director or officer of ViaSat serving at the request of ViaSat as a
director, officer, employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise against any liability asserted against him and incurred
by him in any such capacity, or arising out of his status as such, whether or not ViaSat would have
the power or obligation to indemnify him against such liability under the provisions of the bylaws.
II-1
Item 16. Exhibits
A list of exhibits filed with this registration statement is set forth on the Exhibit Index
and is incorporated herein by reference.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that which was registered) and
any deviation from the low or high end of the estimated maximum offering range may be reflected in
the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than 20 percent change in the maximum aggregate offering
price set forth in the Calculation of Registration Fee table in the effective registration
statement; and
(iii) To include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to such information in
this registration statement;
provided, however, that subparagraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) above do not apply if
the registration statement is on Form S-3 or Form F-3 and the information required to be included
in a post-effective amendment by those paragraphs is contained in reports filed with or furnished
to the SEC by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in this registration statement, or is contained in a
form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering.
(b) The undersigned registrant hereby further undertakes that, for the purposes of determining
any liability under the Securities Act of 1933, each filing of the registrants annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant pursuant to existing
provisions or otherwise, the registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities Act of 1933 and will
be governed by the final adjudication of such issue.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ViaSat, Inc. certifies that it has
reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Carlsbad, State of California, on
January 27, 2010.
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ViaSat, Inc.
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By: |
/s/ Mark D. Dankberg |
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Mark D. Dankberg |
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Chairman and Chief Executive Officer |
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POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates indicated. Each person
whose signature appears below authorizes Mark D. Dankberg and Ronald G. Wangerin, and either of
them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact,
for him in any and all capacities, to sign any amendments (including post-effective amendments or
supplements) to this registration statement and to file the same, with exhibits thereto, and other
documents in connection therewith, with the SEC.
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Signature |
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Title |
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Date |
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Chairman of the Board and
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January 27, 2010 |
/s/ Mark D. Dankberg
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Chief Executive Officer |
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Mark D. Dankberg
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(Principal Executive Officer) |
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/s/ Ronald G. Wangerin
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Vice President and
Chief Financial Officer
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January 27, 2010 |
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Ronald G. Wangerin
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(Principal Financial and
Accounting Officer) |
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/s/ Robert W. Johnson
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Robert W. Johnson
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Director
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January 27, 2010 |
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/s/ B. Allen Lay
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Director
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January 27, 2010 |
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/s/ Jeffrey M. Nash
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Director
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January 27, 2010 |
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/s/ John P. Stenbit
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Director
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January 27, 2010 |
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/s/ Michael B. Targoff
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Director
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January 27, 2010 |
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/s/ Harvey P. White
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Director
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January 27, 2010 |
II-3
EXHIBIT INDEX
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Incorporated by Reference |
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Filed or |
Exhibit |
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Furnished |
Number |
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Exhibit Description |
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Form |
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File No. |
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Exhibit |
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Filing Date |
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Herewith |
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3.1 |
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Second Amended and Restated Certificate of Incorporation of
ViaSat, Inc.
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10-Q
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000-21767
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3.1 |
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11/14/2000 |
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3.2 |
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First Amended and Restated Bylaws of ViaSat, Inc.
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S-3
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333-116468
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3.2 |
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06/14/2004 |
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4.1 |
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Form of Common Stock Certificate.
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S-1/A
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333-13183
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4.1 |
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11/05/1996 |
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4.2 |
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Registration Rights Agreement, dated as of December 15, 2009,
among ViaSat, Inc. and the selling stockholders.
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8-K
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000-21767
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10.1 |
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12/18/2009 |
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4.3 |
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Lock-up Agreement entered into with certain selling stockholders.
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SC 13D
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005-49903
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7 |
(c) |
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01/11/2010 |
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5.1 |
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Opinion of Latham & Watkins LLP
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X |
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23.1 |
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Consent of Latham & Watkins LLP (reference is made to Exhibit
5.1)
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X |
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23.2 |
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Consent of PricewaterhouseCoopers LLP, independent registered
public accounting firm
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X |
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23.3 |
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Consent of KPMG LLP, independent auditors
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X |
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24.1 |
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Powers of Attorney (contained on the signature page of this
registration statement)
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X |