-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DZzIrBdsUxYbTTabny91B+IyDOys/WdNw1zw9sYSsenJI0XY1iLUJc4ppF6EHJWE U1lm79EbdyAH9R3zGye+Aw== 0000931763-97-001924.txt : 19971114 0000931763-97-001924.hdr.sgml : 19971114 ACCESSION NUMBER: 0000931763-97-001924 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970926 FILED AS OF DATE: 19971112 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCIENTIFIC ATLANTA INC CENTRAL INDEX KEY: 0000087777 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 580612397 STATE OF INCORPORATION: GA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-05517 FILM NUMBER: 97713375 BUSINESS ADDRESS: STREET 1: ONE TECHNOLOGY PKWY S CITY: NORCROSS STATE: GA ZIP: 30092-2967 BUSINESS PHONE: 7709035000 MAIL ADDRESS: STREET 1: ONE TECHNOLOGY PKWY S CITY: NORCROSS STATE: GA ZIP: 30092-2967 FORMER COMPANY: FORMER CONFORMED NAME: SCIENTIFIC ASSOCIATES INC DATE OF NAME CHANGE: 19671024 10-Q/A 1 FORM 10-Q/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 26, 1997 ------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO -------------- -------------- COMMISSION FILE NUMBER 1-5517 SCIENTIFIC-ATLANTA, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) GEORGIA 58-0612397 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) ONE TECHNOLOGY PARKWAY, SOUTH NORCROSS, GEORGIA 30092-2967 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) 770-903-5000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO ----- ----- AS OF OCTOBER 24, 1997, SCIENTIFIC-ATLANTA, INC. HAD OUTSTANDING 78,886,872 SHARES OF COMMON STOCK. 1 of 10 PART I - FINANCIAL INFORMATION SCIENTIFIC-ATLANTA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) Three Months Ended ----------------------------- September 26, September 27, 1997 1996 ------------- ------------- SALES $294,501 $261,664 -------- -------- COSTS AND EXPENSES Cost of sales 204,273 182,894 Sales and administrative 41,099 35,433 Research and development 26,750 28,033 Interest expense 115 134 Interest (income) (1,101) (539) Other (income) expense, net (185) (189) -------- -------- Total costs and expenses 270,951 245,766 -------- -------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 23,550 15,898 PROVISION (BENEFIT) FOR INCOME TAXES Current 6,971 (10,215) Deferred 94 15,302 -------- -------- NET EARNINGS FROM CONTINUING OPERATIONS 16,485 10,811 GAIN ON SALE OF DISCONTINUED OPERATIONS, NET OF TAX -- 3,400 -------- -------- NET EARNINGS $ 16,485 $ 14,211 ======== ======== EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT SHARE PRIMARY CONTINUING OPERATIONS $ 0.21 $ 0.14 DISCONTINUED OPERATIONS -- 0.04 -------- -------- NET EARNINGS $ 0.21 $ 0.18 ======== ======== FULLY DILUTED $ 0.21 $ 0.18 ======== ======== WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND COMMON EQUIVALENT SHARES OUTSTANDING PRIMARY 79,926 77,670 ======== ======== FULLY DILUTED 80,015 77,837 ======== ======== DIVIDENDS PER SHARE PAID $ 0.015 $ 0.015 ======== ======== SEE ACCOMPANYING NOTES 2 of 10 SCIENTIFIC-ATLANTA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED) In Thousands ----------------------- September 26, June 27, 1997 1997 ------------- -------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 84,454 $107,143 Receivables, less allowance for doubtful accounts of $4,266,000 at September 26 and $4,202,000 at June 27 241,207 238,179 Inventories 222,461 209,570 Deferred income taxes 29,940 31,323 Other current assets 12,569 10,886 -------- -------- TOTAL CURRENT ASSETS 590,631 597,101 -------- -------- PROPERTY, PLANT AND EQUIPMENT, at cost Land and improvements 19,854 19,854 Buildings and improvements 32,475 32,229 Machinery and equipment 216,450 206,760 -------- -------- 268,779 258,843 Less-Accumulated depreciation and amortization 101,595 92,423 -------- -------- 167,184 166,420 -------- -------- COST IN EXCESS OF NET ASSETS ACQUIRED 10,991 11,263 -------- -------- OTHER ASSETS 53,909 48,831 -------- -------- TOTAL ASSETS $822,715 $823,615 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ 835 $ 842 Accounts payable 109,279 123,675 Accrued liabilities 94,910 111,737 Income taxes currently payable 10,839 13,507 -------- -------- TOTAL CURRENT LIABILITIES 215,863 249,761 -------- -------- LONG-TERM DEBT, less current maturities 1,570 1,810 -------- -------- OTHER LIABILITIES 42,666 39,394 -------- -------- STOCKHOLDERS' EQUITY Preferred stock, authorized 50,000,000 shares; no shares issued -- -- Common stock, $0.50 par value, authorized 350,000,000 shares; issued 78,909,852 shares at September 26 and 77,995,475 shares at June 27 39,455 38,998 Additional paid-in capital 186,871 171,857 Retained earnings 338,917 323,608 Accumulated translation adjustments 279 (186) -------- -------- 565,522 534,277 Less - Treasury stock, at cost (180,006 shares at September 26 and 113,000 shares at June 27) 2,906 1,627 -------- -------- 562,616 532,650 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $822,715 $823,615 ======== ======== SEE ACCOMPANYING NOTES 3 of 10 SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Three Months Ended ------------------------------- September 26, September 27, 1997 1996 ------------- ------------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $(19,448) $ 26,823 -------- -------- INVESTING ACTIVITIES: Purchases of property, plant, and equipment (10,518) (15,861) Proceeds from sale of discontinued operations -- 19,036 Other (110) 1,359 -------- -------- Net cash provided (used) by investing activities (10,628) 4,534 -------- -------- FINANCING ACTIVITIES: Net short-term borrowings -- (35) Principal payments on long-term debt (240) -- Dividends paid (1,176) (1,158) Issuance of common stock 8,803 71 Treasury shares acquired -- (1,019) -------- -------- Net cash provided (used) by financing activities 7,387 (2,141) -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (22,689) 29,216 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 107,143 20,930 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 84,454 $ 50,146 ======== ======== SUPPLEMENTAL CASH FLOW DISCLOSURES Interest paid $ 111 $ 106 ======== ======== Income taxes paid, net $ 6,243 $ 124 ======== ========
SEE ACCOMPANYING NOTES 4 of 10 NOTES: (Amounts in thousands, except share data). A. The accompanying consolidated financial statements include the accounts of the company and all subsidiaries after elimination of all material intercompany accounts and transactions. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These condensed financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the company's 1997 Form 10-K. The financial information presented in the accompanying statements reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the periods indicated. All such adjustments are of a normal recurring nature. B. Earnings per share for the three months ended September 26, 1997 and September 27,1996 were computed based on the weighted average number of shares of common stock outstanding and the equivalent shares derived from dilutive stock options. See Exhibit 11. In February 1997, the Financial Accounting Standards Board issued Statement 128 "Earnings Per Share" superseding Accounting Principles Board Opinion No. 15, "Earnings Per Share". The company plans to adopt SFAS No. 128 in the second quarter of fiscal 1998. Earnings per share computed under the provisions of SFAS No. 128 were the same as those computed under Opinion No. 15 for the first quarters of fiscal 1998 and 1997. C. Inventories consist of the following: September 26, June 27, 1997 1997 ------------- -------- Raw materials and work-in-process $132,555 $136,699 Finished goods 89,906 72,871 -------- -------- Total inventory $222,461 $209,570 ======== ======== D. During the quarter ended September 29, 1995, the company decided to discontinue its defense-related businesses in San Diego, California, because these businesses were not aligned with the company's core business strategies, and recorded a one-time charge of $12,172, net of a tax benefit of $5,728, for the estimated loss on sale of discontinued operations. During the quarter ended September 27, 1996, the company completed negotiations with a prime contractor, for whom the defense- related businesses had performed work as a subcontractor, to settle issues related to the pricing of unexercised options for additional products. The company also completed the sale of its defense-related businesses to Global Associates, Ltd. (Global) for cash of $13,142 and secured and unsecured notes aggregating approximately $4,700. The net realizable value of the assets of the defense-related businesses and the settlement with the prime contractor were more favorable than the company had anticipated when it decided to exit these businesses; accordingly, the company recognized a pre-tax gain of $5,000 from these transactions in the first quarter of fiscal 1997. Sales and losses, net of tax, from discontinued operations were $1,920 and $817, respectively, for the quarter ended September 27, 1996. At September 26, 1997, the company had a reserve of approximately $7,200 for potential sales price adjustments, indemnifications provided to Global, legal, severance and other miscellaneous expenses related to the sale and the settlement with the prime contractor. Global is currently in default under its promissory notes to the company and under promissory notes to Global's senior lenders. The company is working with Global and its senior lenders in an attempt to resolve the default situation. If a satisfactory resolution of the situation is not reached, the company believes it has adequate reserves to cover any potential losses related to Global's default on the promissory notes. E. During the quarter ended September 27, 1996, the company purchased 80,000 shares of its common stock pursuant to a stock buyback program at an aggregate cost of $1,019. During the quarter ended September 26, 1997, the company obtained an additional 70,006 shares of its common stock, primarily from the cancellation of unvested, restricted stock grants. The company re-issues these shares under the company's stock option plans, 401(k) plan, employee stock purchase plan and other stock-based employee compensation arrangements. F. Income taxes paid of $6,243 in the first quarter of fiscal 1998 included approximately $4,900 of payments in connection with the filing of amended federal income tax returns. 5 of 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION - ------------------- Scientific-Atlanta had stockholders' equity of $562.6 million and cash on hand was $84.5 million at September 26, 1997. Cash decreased $22.7 million during the quarter as lower accounts receivable collections, increases in inventory levels, reductions in payables and expenditures for equipment exceeded cash generated from earnings and the issuance of common stock. The current ratio of 2.7:1 at September 26, 1997, compared to 2.4:1 at June 27, 1997. At September 26, 1997, total debt was $2.4 million or less than one percent of total capital invested. The company believes that funds generated from operations, existing cash balances and its available senior credit facility will be sufficient to support growth and planned expansion of manufacturing capacity. RESULTS OF OPERATIONS - --------------------- Sales of Subscriber Network Systems products increased 15 percent over the prior year, primarily from higher sales volume of advanced analog settops, and such sales accounted for 33 percent of the company's total sales in the first quarter of fiscal 1998, approximately the same as the prior year. Sales of Terrestrial Network Systems products increased 9 percent over the prior year as a result of strong sales of opto-electronic equipment, and such sales accounted for 38 percent of the company's total sales in the first quarter of fiscal 1998, approximately the same as the prior year. Sales of RF products were down in the quarter as compared to last year due to timing issues related to the availability of product and a slowdown in orders from the Pacific-Rim. Increased sales of Satellite Network Systems, primarily telephony networks, also contributed to the year-to-year increase. International sales accounted for 40 percent of total sales for the quarter ended September 26, 1997, as compared to 35 percent of total sales in the prior year. Orders booked in the first quarter of fiscal 1998 were $262.5 million, compared to the prior year's $285.0 million, a decline of 8 percent. Lower orders in the first quarter of fiscal 1998 reflected a decline in business in the Pacific Rim resulting from currency issues in the region, which made the company's products more expensive, and a slowdown of a cable system roll-out in Australia and a softening of the market in the United Kingdom. These declines were offset partially by strong growth in orders booked in North America and Latin America. Gross margins were 30.6 percent, up 0.5 percentage points over the prior year, due primarily to favorable exchange rates on Japanese yen compared to the prior year. Improved margins also reflect the continuing impact of internal programs to improve quality and cost structure. Certain material purchases are denominated in Japanese yen and, accordingly, the purchase price in U.S. dollars is subject to change based on exchange rate fluctuations. The company has forward exchange contracts to purchase yen to hedge a portion of its exposure on purchase commitments for a period of approximately twelve months. Research and development costs were $26.7 million, or 9 percent of sales, reflecting the company's continued investment in research and development programs to support new product initiatives. Research and development costs in the first quarter of fiscal 1998 were lower than the prior year due primarily to decreased research and development efforts related to cable telephony products. In addition, the company capitalized $1.0 million of software development costs and $3.0 million of non-recurring engineering costs during the quarter ended September 26, 1997. There were no material software development costs or non- recurring engineering costs incurred, and accordingly, none were capitalized during the quarter ended September 27, 1996. 6 of 10 Selling and administrative expense increased $5.7 million, or 16 percent, over the prior year. Increased selling expenses reflect costs associated with higher sales volumes, ongoing investments to support expansion into international markets, particularly in the Latin American region, and to support the introduction of new products and a build-up in the infrastructure to handle the growth the company has experienced. Administrative expenses increased as higher consulting fees, the addition of administrative expenses of Arcodan A/S which was acquired in February 1997, and other miscellaneous items more than offset cost reduction from internal processes and systems improvements. Other (income) expense for the quarters ended September 26, 1997 and September 27, 1996, included the results of foreign currency transactions and partnership activities and net gains from rental income and other miscellaneous items. There were no significant items in other (income) expense in the quarters ended September 26, 1997 or September 27, 1996. The company's effective income tax rate was 30 percent for the quarter, two percentage points lower than the rate in the prior year. The lower effective income tax rate in fiscal 1998, as compared to fiscal 1997, is due to increased benefits from the company's foreign sales corporation (FSC) and a decrease in foreign earnings taxed at different rates. Earnings from continuing operations for the quarter ended September 26, 1997 were $23.6 million, up $7.7 million over the prior year. Higher sales volume and improved gross margins were offset partially by increased selling and administrative expenses. In October 1995, the company announced its intent to sell its defense- related businesses in San Diego, California and recorded a one-time, after-tax charge of $13.2 million in the quarter ended September 29, 1995. During the quarter ended September 27, 1996, the company completed negotiations with a prime contractor, for whom the defense-related businesses had performed work as a subcontractor, to settle issues related to the pricing of unexercised options for additional products. The company also completed the sale of its defense- related businesses to Global Associates, Ltd. (Global) for cash of $13.1 million and secured and unsecured notes aggregating approximately $4.7 million. The net realizable value of the assets of the defense-related businesses and the settlement with the prime contractor were more favorable than the company had anticipated when it decided to exit these businesses; accordingly, the company recognized a pre-tax gain of $5.0 million from these transactions in the quarter ended September 27, 1996. Global is currently in default under its promissory notes to the company and under promissory notes to Global's senior lenders. The company is working with Global and its senior lenders in an attempt to resolve the default situation. If a satisfactory resolution of the situation is not reached, the company believes it has adequate reserves to cover any potential losses related to Global's default on the promissory notes. Net earnings for the quarter ended September 26, 1997 were $16.5 million compared to $14.2 million, in the prior year, which included an after-tax gain of $3.4 million related to the sale of discontinued operations. Any of the above statements that are not statements about historical facts are forward-looking statements. Such forward-looking statements are based upon current expectations but involve risks and uncertainties. Investors are referred to the Cautionary Statements contained in Exhibit 99 to this Form 10-Q/A for a description of the various risks and uncertainties that could cause the company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the company's forward- looking statements. Such Exhibit 99 is hereby incorporated by reference into Management's Discussion and Analysis of Financial Condition and Results of Operations. 7 of 10 PART II - OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K. - ------ (a) Exhibits. EXHIBIT NO. DESCRIPTION ----------- ----------- 11 Computation of Earnings Per Share 27 Financial Data Schedule 99 Cautionary Statements (b) No reports on Form 8-K were filed during the quarter ended September 26, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SCIENTIFIC-ATLANTA, INC. ------------------------ (Registrant) Date: November 11, 1997 /s/ Harvey Wagner ------------------ ----------------- Harvey A. Wagner Senior Vice President, Finance Chief Financial Officer and Treasurer (Principal Financial Officer and duly authorized signatory of the Registrant) 8 of 10 EX-11 2 COMPUTATION OF EARNINGS PER SHARE Exhibit 11 SCIENTIFIC-ATLANTA, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) Three Months Ended ---------------------------- September 26, September 27, 1997 1996 ------------- ------------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 78,248 77,127 Add - Additional shares of common stock assumed issued upon exercise of options using the "treasury stock" method as it applies to the computation of primary earnings per share 1,678 543 ------- ------- NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 79,926 77,670 Add - Additional shares of common stock assumed issued upon exercise of options using the "treasury stock" method as it applies to the computation of fully diluted earnings per share 89 167 ------- ------- NUMBER OF SHARES OUTSTANDING ASSUMING FULL DILUTION 80,015 77,837 ======= ======= NET EARNINGS FOR PRIMARY AND FULLY DILUTED COMPUTATION Continuing Operations $16,485 $10,811 Discontinued Operations -- 3,400 ------- ------- Net Earnings $16,485 $14,211 ======= ======= EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT SHARE PRIMARY Continuing Operations $ 0.21 $ 0.14 Discontinued Operations -- 0.04 ------- ------- Net Earnings $ 0.21 $ 0.18 ======= ======= FULLY DILUTED Continuing Operations $ 0.21 $ 0.14 Discontinued Operations -- 0.04 ------- ------- Net Earnings $ 0.21 $ 0.18 ======= ======= 9 of 10 EX-99 3 CAUTIONARY STATEMENTS Exhibit 99 CAUTIONARY STATEMENTS From time to time, the company may publish, verbally or in written form, forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. In fact, this Form 10-Q/A (or any other periodic reporting documents required by the 1934 Act) may contain forward-looking statements reflecting the current views of the company concerning potential future events or developments. The Private Securities Litigation Reform Act of 1995 (the "Act") provides a "safe harbor" for forward-looking statements. These Cautionary Statements are being made pursuant to the provisions of the Act and with the intention of obtaining the benefits of the "safe harbor" provisions of the Act. In order to comply with the terms of the "safe harbor," the company cautions investors that any forward- looking statements made by the company are not guarantees of future performance and that a variety of factors could cause the company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the company's forward-looking statements. The risks and uncertainties which may affect the operations, performance, development and results of the company's business include, but are not limited to, the following: uncertainties relating to economic conditions; uncertainties relating to government and regulatory policies; uncertainties relating to customer plans and commitments; the company's dependence on the cable television industry and cable television spending; signal security; the pricing and availability of equipment, materials and inventories; technological developments; performance issues with key suppliers and subcontractors; governmental export and import policies; global trade policies; worldwide political stability and economic growth; regulatory uncertainties; delays in testing of new products; rapid technology changes; the highly competitive environment in which the company operates; the entry of new, well-capitalized competitors into the company's markets; changes in the financial markets relating to the company's capital structure and cost of capital; uncertainties inherent in international operations; and foreign currency fluctuations. The words "believe," "expect," "anticipate," "project," "plan" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward- looking statements, which speak only as of the date the statement was made. 10 of 10 EX-27 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Form 10-Q/A for the quarter ended September 26, 1997, and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS JUN-26-1998 JUN-28-1997 SEP-27-1997 84,454 0 245,473 4,266 222,461 590,631 268,779 101,595 822,715 215,863 1,810 0 0 39,455 523,161 822,715 294,501 294,501 204,273 204,273 26,750 109 115 23,550 7,065 16,485 0 0 0 16,485 0.21 0.21
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