-----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, VuEVhwboxfIz1+SkXbzZeV486H206NxQBPduo2dgN9NaY6plGbzalD4AVnuimfLU R6Jbzw2wLQqfoTApf2cA/A== 0000931763-97-000738.txt : 19970512 0000931763-97-000738.hdr.sgml : 19970512 ACCESSION NUMBER: 0000931763-97-000738 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970328 FILED AS OF DATE: 19970509 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 SEC ACT: 1934 Act SEC FILE NUMBER: 001-05517 FILM NUMBER: 97599468 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 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 28, 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 APRIL 25, 1997, SCIENTIFIC-ATLANTA, INC. HAD OUTSTANDING 77,537,687 SHARES OF COMMON STOCK. PART I - FINANCIAL INFORMATION Item 1 FINANCIAL STATEMENTS - ------ -------------------- SCIENTIFIC-ATLANTA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
Three Months Ended Nine Months Ended ------------------------------ ---------------------------- March 28, March 29, March 28, March 29, 1997 1996 1997 1996 --------- --------- -------- -------- SALES $ 301,741 $ 271,883 $ 845,589 $ 775,176 COSTS AND EXPENSES Cost of sales 207,449 196,673 587,190 571,172 Sales and administrative 41,545 35,045 114,602 101,434 Research and development 29,566 24,028 86,707 70,666 Interest expense 90 206 344 573 Interest (income) (1,161) (447) (2,812) (1,421) Other (income) expense, net 45 (571) (770) 87 -------- ------- ------- ------- Total costs and expenses 277,534 254,934 785,261 742,511 EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 24,207 16,949 60,328 32,665 PROVISION (BENEFIT) FOR INCOME TAXES Current 11,547 5,448 10,813 20,777 Deferred (3,801) (24) 8,492 (10,324) -------- ------- ------- ------- NET EARNINGS FROM CONTINUING OPERATIONS 16,461 11,525 41,023 22,212 LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX -- -- -- (1,038) GAIN (LOSS) ON SALE OF DISCONTINUED OPERATIONS, NET OF TAX -- -- 3,400 (12,172) -------- ------- ------- ------- NET EARNINGS $ 16,461 $ 11,525 $ 44,423 $ 9,002 ======== ======== ======= ======= EARNINGS (LOSS) PER COMMON SHARE AND COMMON EQUIVALENT SHARE PRIMARY CONTINUING OPERATIONS $ 0.21 $ 0.15 $ 0.53 $ 0.29 DISCONTINUED OPERATIONS -- -- 0.04 (0.17) -------- -------- ------- ------- NET EARNINGS $ 0.21 $ 0.15 $ 0.57 $ 0.12 ======== ======== ======= ======= FULLY DILUTED $ 0.21 $ 0.15 $ 0.57 $ 0.12 ======== ======== ======= ======= WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND COMMON EQUIVALENT SHARES OUTSTANDING PRIMARY 78,259 76,464 77,945 76,621 ======== ======== ======== ======== FULLY DILUTED 78,259 76,464 78,128 76,621 ======== ======== ======== ======== DIVIDENDS PER SHARE PAID $ 0.015 $ 0.015 $ 0.045 $ 0.045 ======== ======== ======= =======
SEE ACCOMPANYING NOTES SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
In Thousands ------------------------ March 28, June 28, 1997 1996 ----------- ----------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 81,222 $ 20,930 Receivables, less allowance for doubtful accounts of $3,967,000 at March 28 and $3,826,000 at June 28 262,435 252,882 Inventories 194,611 215,767 Deferred income taxes 40,423 50,979 Other current assets 15,412 22,413 -------- -------- TOTAL CURRENT ASSETS 594,103 562,971 -------- -------- PROPERTY, PLANT AND EQUIPMENT, at cost Land and improvements 19,907 18,173 Buildings and improvements 31,400 38,628 Machinery and equipment 198,153 162,073 -------- -------- 249,460 218,874 Less-Accumulated depreciation and amortization 87,007 68,275 -------- -------- 162,453 150,599 -------- -------- COST IN EXCESS OF NET ASSETS ACQUIRED 11,339 6,191 -------- -------- OTHER ASSETS 50,585 43,561 -------- -------- TOTAL ASSETS $ 818,480 $ 763,322 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Short-term debt and current maturities of long-term debt $ 2,100 $ 1,600 Accounts payable 124,802 106,542 Accrued liabilities 119,467 127,546 Income taxes currently payable 20,482 26,229 -------- -------- TOTAL CURRENT LIABILITIES 266,851 261,917 -------- -------- LONG-TERM DEBT, less current maturities 2,390 400 -------- -------- OTHER LIABILITIES 42,694 37,353 -------- -------- STOCKHOLDERS' EQUITY Preferred stock, authorized 50,000,000 shares; no shares issued -- -- Common stock, $0.50 par value, authorized 350,000,000 shares; issued 77,504,640 shares at March 28 and 77,255,528 shares at June 28 38,752 38,628 Additional paid-in capital 163,939 163,143 Retained earnings 305,152 264,206 Accumulated translation adjustments 329 740 -------- -------- 508,172 466,717 -------- -------- Less - Treasury stock, at cost (113,000 shares at March 28 and 265,640 shares at June 28) 1,627 3,065 -------- -------- 506,545 463,652 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 818,480 $ 763,322 ======= ========
SEE ACCOMPANYING NOTES SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Nine Months Ended ----------------- March 28, March 29, 1997 1996 --------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES: $ 87,761 $ 18,355 ------ ------ INVESTING ACTIVITIES: Purchases of property, plant, and equipment (40,105) (53,080) Acquisition of business, net of cash acquired (11,066) -- Proceeds from sale of discontinued operations 18,483 -- Proceeds from sale of property, plant and equipment 13,142 2,312 Other (2,375) (6,780) ------- ------ Net cash used by investing activities (21,921) (57,548) ------- ------ FINANCING ACTIVITIES: Net short-term borrowings (repayments) (1,218) 789 Principal payments on long-term debt -- (123) Dividends paid (3,477) (3,447) Issuance of common stock 2,120 3,138 Treasury shares acquired (2,973) (12,411) ------ ------ Net cash used by financing activities (5,548) (12,054) ------ ------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 60,292 (51,247) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 20,930 80,311 ------ ------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 81,222 $ 29,064 ====== ====== SUPPLEMENTAL CASH FLOW DISCLOSURES Interest paid $ 285 $ 567 ====== ===== Income taxes paid, net $ 19,832 $ 5,057 ====== =====
SEE ACCOMPANYING NOTES 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 1996 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 and nine months ended March 28, 1997 and March 29, 1996, were computed based on the weighted average number of shares outstanding and equivalent shares derived from dilutive stock options. See Exhibit 11. C. Inventories consist of the following:
March 28, June 28, 1997 1996 --------- -------- Raw materials and work-in-process $140,476 $131,762 Finished goods 54,135 84,005 -------- -------- Total inventory $194,611 $215,767 ======== ========
D. On February 28, 1997, the Company acquired 100 percent of the outstanding stock of Arcodan A/S (Arcodan) for $15,000 in cash. Arcodan is a Danish manufacturer of advanced analog and digital headend systems, opto- electronics and RF distribution equipment. The acquisition was accounted for as a purchase and, accordingly, the acquired assets and liabilities were recorded at their estimated fair value at the date of acquisition. The purchase price has been allocated to the assets and liabilities acquired, including $5,709 to goodwill. E. 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. A one-time charge of $12,172, net of a tax benefit of $5,728, for the estimated loss on sale of discontinued operations was recorded 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. During the same quarter, the company 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. At March 28, 1997, the company had a reserve of approximately $7,500 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. . Sales and earnings (loss) from the discontinued operations of the defense-related businesses were as follows:
Three Months Ended Nine Months Ended --------------------- ---------------------- March 28, March 29, March 28, March 29, 1997 1996 1997 1996 --------- ---------- ---------- ---------- Sales $ -- $6,012 $1,920 $18,457 Losses from discontinued operations, net of tax $ -- $ (923) $ (817) $(1,702) Tax benefit $ -- $ (434) $ (385) $ (801)
At June 28, 1996, the net assets of the discontinued operations included inventory, accounts receivable, machinery and equipment, accounts payable, and accrued expenses and were included in other current assets in the Consolidated Statement of Financial Position. F. During the quarter ended March 28, 1997, the company decided to dispose of two business units, microwave and mobile, because these businesses were not aligned with the company's core business strategies. The company recorded a charge of $5,526 during the quarter ended March 28, 1997 to adjust the carrying amount of the net assets held for sale to net realizable value and to provide for estimated indemnifications to the purchaser, severance, closing costs and other miscellaneous expenses related to the sale. During the ordinary course of business, the company encounters certain risks and uncertainties related to the satisfactory performance under contracts which it evaluates periodically and provides reserves, if appropriate. The estimated loss on the sale of these businesses was computed on the basis that the company would sell the businesses at an amount that would allow the purchaser, with reasonable assurance, to complete the contracts at a reasonable margin. The charge was included in Other (income) expense. The company believes that it will complete the sale of these two business units within twelve months. Other (income) expense for the three and nine months ended March 28, 1997 also included a gain of $5,561 from the sale of land and a building in San Diego County, California not required for current operations. G. The company purchased 225,000 shares of its common stock at an aggregate cost of $2,973 during the nine months ended March 28, 1997, and 1,010,000 shares at an aggregate cost of $12,411 during the nine months ended March 29, 1996, under a stock buyback program for the purchase of up to 5,000,000 shares of its common stock. The company re-issues these shares under the company's stock option plan, 401(k) plan, employee stock purchase plan and other stock-based employee compensation plans. H. In February 1997, the Financial Accounting Standards Board issued Statement 128 "Earnings Per Share" superseding Opinion 15. The company believes the adoption of this standard will not have a material impact on the company's computation of earnings per share. Earnings per share computed under the provisions of Statement 128 were the same as those computed under Opinion 15 for the three and nine months ended March 28, 1997 and March 29, 1996. Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - ------ ----------------------------------------------------------------------- OF OPERATIONS ------------- FINANCIAL CONDITION - ------------------- Scientific-Atlanta had stockholders' equity of $506.5 million and cash on hand was $81.2 million at March 28, 1997. Cash increased $60.3 million during the nine months ended March 28, 1997 as cash generated from earnings, reductions in inventory levels and the sale of discontinued operations and land and building not required for current operations exceeded expenditures for equipment, expansion of manufacturing capacity and the acquisition of Arcodan A/S. Arcodan is a Danish manufacturer of advanced analog and digital headend systems, opto-electronics and RF distribution equipment. The current ratio was 2.2:1 at March 28, 1997, compared to 2.1:1 at June 28, 1996. At March 28, 1997, total debt was $4.5 million or less than one percent of total capital invested. Current debt at March 28, 1997 consisted of the current maturities of long-term debt. Short-term debt at June 28, 1996 consisted primarily of borrowings by the company's international operations to support their working capital requirements. There was no short-term debt at March 28, 1997. 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 for the three and nine months ended March 28, 1997, were $301.7 million and $845.6 million, respectively, up 11 and 9 percent, respectively, over the prior year. Higher domestic sales volume of subscriber products during the third quarter of fiscal 1997 was the primary factor in the year-to-year sales increase. Sales of satellite communications products, particularly international, were down during the third quarter from last year due primarily to temporary delays by customers in placing orders for standard network products and delays in customer financing. Higher domestic sales volumes of subscriber and transmission products during the first nine months of fiscal 1997 were the primary factors in the increase over fiscal 1996. Increased sales of satellite systems, primarily PowerVu/TM/ digital video systems, also contributed to the year-to-year increase during first nine months of fiscal 1997 over the prior year. Sales volume of Sega game adapters declined as compared to the prior year. International sales for the quarter declined slightly from the prior year and accounted for 34 percent of total sales. International sales for the nine months ended March 28, 1997, accounted for 37 percent of total sales, approximately the same as in the prior year. Gross margins of 31.2 percent and 30.6 percent, for the three and nine months ended March 28, 1997, improved 3.5 and 4.3 percentage points, respectively, over the prior year, reflecting the impact of internal programs to improve quality and reduce cost, the ramp-up of the Juarez, Mexico manufacturing facility, and favorable exchange rates on Japanese yen compared to the prior year. Favorable margin improvements were offset partially by increased volumes of certain subscriber products which have a lower margin than some of the company's other products. 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 increased $5.5 million and $16.0 million, respectively, or 23 percent, for the three and nine months ended March 28, 1997, over the comparable periods of the prior year reflecting the company's continued investment in research and development programs to support existing products and new product initiatives. New product initiatives include high speed cable data modems, cable telephony products, digital video broadcast and interactive settops and home automation products for the utility industry. The company expects to begin shipment of digital video broadcast and interactive settops during the first half of fiscal 1988. The company expects to continue significant research and development investments. The company periodically evaluates the strategic direction of the company including an assessment of the markets the company serves and alternative methods of generating revenues from its investments in research and development programs, such as licensing of software and hardware technology. Selling and administrative expense increased $6.5 million, or 19 percent, and $13.2 million, or 13 percent, respectively, for the three and nine months ended March 28, 1997, over the comparable periods of the prior year. Increased selling expenses reflect costs associated with higher sales volumes, ongoing investments to support expansion into international markets, particularly in the Asia Pacific and Latin American regions, and to support the introduction of new products and a build-up in the infrastructure to handle the growth the company is experiencing. Administrative expenses increased as higher consulting fees, administrative expenses of ATx Telecom Systems, Inc. acquired in June 1996 and other miscellaneous items more than offset cost reductions from internal processes and systems improvements. Other (income) expense for the three and nine months ended March 28, 1997 included a gain of $5.6 million from the sale of land and a building in San Diego County, California not required for current operations, the results of foreign currency transactions and partnership activities and net gains from rental income and other miscellaneous items. During the quarter ended March 28, 1997, the company decided to dispose of two business units, microwave and mobile, because these businesses were not aligned with the company's core business strategies. The company recorded a charge of $5.5 million during the quarter ended March 28, 1997 to adjust the carrying amount of the net assets held for sale to net realizable value and to provide for estimated indemnifications to the purchaser, severance, closing costs and other miscellaneous expenses related to the sale. During the ordinary course of business, the company encounters certain risks and uncertainties related to the satisfactory performance under contracts which it evaluates periodically and provides reserves, if appropriate. The estimated loss on the sale of these businesses was computed on the basis that the company would sell the businesses at an amount that would allow the purchaser, with reasonable assurance, to complete the contracts at a reasonable margin. The company believes that it will complete the sale of these two business units within twelve months. Other (income) expense for the three and nine months ended March 29, 1996 included a loss of $3.0 million from the settlement of yen-denominated foreign exchange contracts, a gain of $3.3 million from the sale of land and a building in San Diego County, California not required for current operations, and other miscellaneous items including other foreign currency transactions, partnership activities and rental income. The company's effective income tax rate was 32 percent, unchanged from the prior year. Net earnings from continuing operations were $16.5 million for the quarter ended March 28, 1997, up 43 percent over the prior year. Net earnings from continuing operations were $4l.0 million for the nine months ended March 28, 1997, up $18.8 million or 85 percent over the prior year. Higher sales volume and improved gross margins were offset partially by increased research and development expenses and increased selling and administrative expenses. Net earnings from continuing operations were $11.5 million and $22.2 million, respectively, for the three and nine months ended March 29, 1996. Net earnings in the quarter and for the nine months ended March 29, 1996 were negatively impacted by lower sales volume, unfavorable exchange rates for the yen and higher spending for research and development. The company periodically evaluates the contribution of its business units and products to the company's overall strategic direction. 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 strategy of being a provider of satellite and terrestrial based networks and applications. In October 1995, the company announced its intent to sell its defense-related businesses 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. 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. Net earnings for the three months ended March 28, 1997 were $16.5 million, up $4.9 million over the prior year. Net earnings for the nine months ended March 28, 1997 were $44.4 million, including an after-tax gain of $3.4 million related to the sale of discontinued operations, compared to $9.0 million in the prior year, which included an after-tax charge of $13.2 million related to 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 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. PowerVu is a trademark of Scientific-Atlanta, Inc. Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - ------ ---------------------------------------------------------- This information is not yet required, per the Instructions to Item 305 of Regulation S-K. PART II - OTHER INFORMATION Item 1 Legal Proceedings - ------ ----------------- In April 1997, StarSight Telecast, Inc. and Scientific-Atlanta, Inc. entered into a License and Settlement Agreement which resolved all outstanding disputes previously pending between the parties (including all pending litigation matters and arbitration matters) and established a new marketing relationship. The Agreement also provided for cross- licensing of technologies and called for an initial payment by Scientific-Atlanta to StarSight Telecast. Item 2 Changes in Securities - ------ --------------------- The information provided in the registrant's Form 8-K, filed on April 7, 1997, is incorporated by reference into this item. Item 6 Exhibits and Reports on Form 8-K - ------ -------------------------------- (a) Exhibits. Exhibit No. Description ----------- ----------- 4 Rights Agreement, dated as of February 23, 1997, between Scientific-Atlanta, Inc. and The Bank of New York, as Rights Agent, which includes as Exhibit A Preferences and Rights of Series A Junior Participating Preferred Stock and as Exhibit B thereto the Form of Rights Certificate, all incorporated by reference to registrant's Form 8-A Registration Statement, filed on April 7, 1997. 10.1 See Exhibit No. 4 above. 10.2 Non-Qualified Stock Option Agreement between Scientific-Atlanta, Inc. and Larry L. Enterline, incorporated by reference to the registrant's Form S-8 Registration Statement, filed on March 11, 1997. 10.3 Third Amendment, dated as of January 27, 1997, to the Credit Agreement, which Credit Agreement was filed as an exhibit to registrant's report on Form 10-K for the fiscal year ended June 30, 1995. 11 Computation of Earnings Per Share 27 Financial Data Schedule 99 Cautionary Statements (b) One report on Form 8-K was filed during the quarter ended March 28, 1997. Such Form 8-K was filed on April 7, 1997, to report the company's Rights Agreement which is incorporated by reference into Item 2 to this Part II. Date: May 9, 1997 /s/ Harvey A. Wagner ----------- ---------------- Harvey A. Wagner Senior Vice President, Finance Chief Financial Officer and Treasurer (Principal Financial Officer and duly authorized signatory of the Registrant) EX-10.3 2 THIRD AMENDEMENT TO CREDIT AGREEMENT EXHIBIT 10.3 EXECUTION COPY THIRD AMENDMENT TO CREDIT AGREEMENT THIS THIRD AMENDMENT TO CREDIT AGREEMENT dated as of January 27, 1997, by and among SCIENTIFIC-ATLANTA, INC. (the "Borrower"), each of the financial institutions party hereto (the "Lenders"), THE BANK OF NEW YORK and ABN AMRO BANK N.V., acting through its Atlanta Agency, as Co-Agents (the "Co-Agents"), and NATIONSBANK, N.A. (SOUTH), formerly known as NationsBank of Georgia, National Association, as Agent (the "Agent"). WHEREAS, the Borrower, the Lenders, the Co-Agents and the Agent are parties to that certain Credit Agreement dated as of May 11, 1995, as amended prior to the date hereof (the "Credit Agreement"); and WHEREAS, the parties hereto desire to amend certain provisions of the Credit Agreement on the terms and conditions contained herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties hereto hereby agree as follows: Section 1. Specific Amendment to Credit Agreement. -------------------------------------- (a) The definition of the term "Capital Expenditures" contained in Section 1.1 of the Credit Agreement is hereby amended by deleting the last sentence of such definition. (b) The definition of the term "Consolidated Net Income" contained in Section 1.1 of the Credit Agreement is hereby amended by replacing the last sentence of such definition with the following sentence: Each of the following shall be disregarded when determining Consolidated Net Income: (a) the amount of $9,916,000 representing in-progress research and development costs expensed by the Borrower for the fourth fiscal quarter of its 1996 Fiscal Year as a result of its acquisition of ATx Telecom Systems, Inc. from Amoco Technology Company and (b) the amount of $19,516,000 representing the charge to the Borrower's earnings resulting from the arbitration award in favor of StarSight Telecast, Inc. granted by a California arbitration panel on July 24, 1996. (c) The Credit Agreement is amended by deleting Section 9.1(b) and substituting in its place the following: (b) Minimum Fixed Charge Coverage Ratio. The ratio of (i) (A) ----------------------------------- Consolidated EBITDA for the Four-Quarter Period ending on the date of determination plus (B) Consolidated Operating Lease Expense for such Four- ---- Quarter Period to (ii) (A) Consolidated Interest Expense for such Four- Quarter Period plus (B) dividends declared by the Borrower (whether or not ---- paid) during such Four-Quarter Period plus (C) Consolidated Operating Lease ---- Expense for such Four-Quarter Period plus (D) Consolidated Current ---- Maturities for the Four-Quarter Period beginning on the date of determination, to be less than 3.0 to 1.0. Section 2. Representations of Borrower. The Borrower represents and --------------------------- warrants to the Agent and the Lenders that: (a) Authorization. The Borrower has the right and power, and has taken all ------------- necessary action to authorize it, to execute and deliver this Amendment and to perform its obligations under the Credit Agreement as amended by this Amendment, in accordance with its terms. This Amendment has been duly executed and delivered by a duly authorized officer of the Borrower and the Credit Agreement as amended by this Amendment, is a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms. (b) Compliance with Laws, etc. The execution and delivery by the Borrower ------------------------- of this Amendment and the performance by the Borrower of the Credit Agreement as amended by this Amendment, in accordance with its terms, do not and will not, by the passage of time, the giving of notice or otherwise: (i) require any Governmental Approval or violate any Applicable Law relating to the Borrower or any other Loan Party; (ii) conflict with, result in a breach of or constitute a default under the articles of incorporation or the bylaws of the Borrower or the organizational documents of any other Loan Party; (iii) conflict with, result in a breach of or constitute a default under any indenture, agreement or other instrument to which the Borrower or any other Loan Party is a party or by which it or any of its properties may be bound, which conflict, breach or default would have a Material Adverse Effect; or (iv) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by the Borrower or any other Loan Party other than in favor of the Agent for the benefit of the Lenders. Section 3. Certain References. Each reference to the Credit Agreement in ------------------ any of the Loan Documents shall be deemed to be a reference to the Credit Agreement as amended by this Amendment. Section 4. Benefits. This Amendment shall be binding upon and shall inure -------- to the benefit of the parties hereto and their respective successors and assigns. -2- Section 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND ------------- CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. Section 6. Effect. Except as expressly herein amended, the terms and ------ conditions of the Credit Agreement shall remain in full force and effect. Section 7. Effectiveness of Amendment. This Amendment shall not be -------------------------- effective until its execution and delivery by all of the parties hereto whereupon its shall be deemed effective as of the date first written above. Section 8. Counterparts. This Amendment may be executed in any number of ------------ counterparts, each of which shall be deemed to be an original and shall be binding upon all parties, their successors and assigns. Section 9. Definitions. All capitalized terms not otherwise defined ----------- herein are used herein with the respective definitions given them in the Credit Agreement. [Signatures on Next Page] -3- IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to Credit Agreement to be executed as of the date first above written. SCIENTIFIC-ATLANTA, INC. By: /s/ H. A. Wagner ------------------------------------- Name: H. A. wagner -------------------------------- Title: Senior Vice President, Finance ------------------------------- Chief Financial Officer and Treasurer NATIONSBANK, N.A. (SOUTH), individually and as Agent By: /s/ David J. Rabbitt ------------------------------------- Name: David J. Rabbitt -------------------------------- Title: Vice President ------------------------------- THE BANK OF NEW YORK, individually and as Co-Agent By: /s/ Gregory L. Batson ------------------------------------- Name: Gregory L. Batson -------------------------------- Title: Vice President ------------------------------- ABN AMRO BANK N.V., acting through its Atlanta Agency, individually and as Co-Agent By: /s/ Steven B. Farley ------------------------------------- Name: Steven B. Farley -------------------------------- Title: Vice President ------------------------------- By: /s/ Steven L. Hipsman ------------------------------------- Name: Steven L. Hipsman -------------------------------- Title: Vice President ------------------------------- [Signature Continued on Next Page] -4- [SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT DATED AS OF JANUARY 27, 1997 WITH SCIENTIFIC-ATLANTA, INC.] AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED By: /s/ Kyle Loughlin ------------------------------------- Name: K. Loughlin -------------------------------- Title: Vice President ------------------------------- WACHOVIA BANK OF GEORGIA, N.A. By: /s/ Karen H. McClain ------------------------------------- Name: Karen H. McClain -------------------------------- Title: Senior Vice President ------------------------------- TORONTO DOMINION (TEXAS), INC. By: /s/ Frederic Hawley ------------------------------------- Name: Frederic Hawley -------------------------------- Title: Vice President ------------------------------- THE BANK OF TOKYO LIMITED, ATLANTA AGENCY By: /s/ G. England ------------------------------------- Name: G. England -------------------------------- Title: V.P. & Manager ------------------------------- -5- EX-11 3 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 Nine Months Ended ---------------------- ---------------------- March 28, March 29, March 28, March 29, 1997 1996 1997 1996 ---------- ---------- ---------- ---------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 77,345 76,464 77,226 76,621 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 914 -- 719 -- ------- ------ --------- --------- NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 78,259 76,464 77,945 76,621 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 -- -- 183 -- ------- ------ --------- --------- NUMBER OF SHARES OUTSTANDING ASSUMING FULL DILUTION 78,259 76,464 78,128 76,621 ======= ====== ========= ========= NET EARNINGS (LOSS) FOR PRIMARY AND FULLY DILUTED COMPUTATION Continuing Operations $ 16,461 $ 11,525 $ 41,023 $ 22,212 Discontinued Operations -- -- 3,400 (13,210) ------- ------ --------- --------- Net Earnings $ 16,461 $ 11,525 $ 44,423 $ 9,002 ======= ====== ========= ========= EARNINGS (LOSS) PER COMMON SHARE AND COMMON EQUIVALENT SHARE PRIMARY Continuing Operations $ 0.21 $ 0.15 $ 0.53 $ 0.29 Discontinued Operations -- $ -- $ 0.04 $ (0.17) ------- ------ --------- --------- Net Earnings $ 0.21 $ 0.15 $ 0.57 $ 0.12 ======= ====== ========= ========= FULLY DILUTED Continuing Operations $ 0.21 $ 0.15 $ 0.53 $ 0.29 Discontinued Operations -- -- 0.04 (0.17) ------- ------ --------- --------- Net Earnings $ 0.21 $ 0.15 $ 0.57 $ 0.12 ======= ====== ========= =========
Note: In the three and nine months ended March 29, 1996, the dilutive effect of equivalent shares derived from stock options was less than 3 percent and therefore, the equivalent shares were not included in the computation of earnings per share. EX-27 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from form 10-Q for the quarter ended March 28, 1997, and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS JUN-27-1997 JUN-29-1996 MAR-28-1997 81,222 0 266,402 3,967 194,611 594,103 249,460 87,007 818,480 266,851 2,390 0 0 38,752 467,793 818,480 845,589 845,589 587,190 587,190 86,707 352 344 60,328 19,305 41,023 3,400 0 0 44,423 0.57 0.57
EX-99 5 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 (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 the development and ownership of intellectual property; uncertainties relating to the ability of the company and other companies to enforce their intellectual property rights; 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; and 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. -----END PRIVACY-ENHANCED MESSAGE-----