-----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, LOTBzsVnzkvXTCNAAxO9FY9gFWp6Bs732e1GHgNnB3Je+52stZgCpW9FItL7sBXD mkPI7D08ghzbPUZ0wj9nDg== 0000950144-96-002001.txt : 19960510 0000950144-96-002001.hdr.sgml : 19960510 ACCESSION NUMBER: 0000950144-96-002001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960329 FILED AS OF DATE: 19960509 SROS: BSE SROS: CSE SROS: CSX SROS: NYSE SROS: PHLX 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: 96558474 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 SCIENTIFIC-ATLANTA, INC 10-Q 1 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 29, 1996 ------------------------------------------------- OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXHANGE 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 26, 1996, SCIENTIFIC-ATLANTA, INC. HAD OUTSTANDING 76,746,101 SHARES OF COMMON STOCK. 1 of 9 2 PART I - FINANCIAL INFORMATION SCIENTIFIC-ATLANTA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
Three Months Ended Nine Months Ended -------------------- -------------------- March 29, March 31, March 29, March 31, 1996 1995 1996 1995 --------- --------- --------- --------- SALES $271,883 $309,112 $775,176 $803,778 COSTS AND EXPENSES Cost of sales 196,673 225,095 571,172 578,528 Sales and administrative 35,045 35,781 101,434 99,718 Research and development 24,028 22,717 70,666 61,819 Interest expense 206 165 573 583 Interest (income) (447) (466) (1,421) (1,969) Other (income) expense, net (571) (421) 87 (1,609) -------- -------- -------- -------- Total costs and expenses 254,934 282,871 742,511 737,070 EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 16,949 26,241 32,665 66,708 PROVISION (BENEFIT) FOR INCOME TAXES Current 5,448 6,372 20,777 21,807 Deferred (24) 2,024 (10,324) (460) -------- -------- -------- -------- NET EARNINGS FROM CONTINUING OPERATIONS 11,525 17,845 22,212 45,361 LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX -- (2,174) (1,038) (2,570) ESTIMATED LOSS ON SALE OF DISCONTINUED OPERATIONS, NET OF TAX -- -- (12,172) -- -------- -------- -------- -------- NET EARNINGS $ 11,525 $ 15,671 $ 9,002 $ 42,791 ======== ======== ======== ======== EARNINGS (LOSS) PER COMMON SHARE PRIMARY CONTINUING OPERATIONS $ 0.15 $ 0.23 $ 0.29 $ 0.59 DISCONTINUED OPERATIONS -- (0.02) (0.17) (0.03) -------- -------- -------- -------- NET EARNINGS $ 0.15 $ 0.21 $ 0.12 $ 0.56 ======== ======== ======== ======== FULLY DILUTED $ 0.15 $ 0.21 $ 0.12 $ 0.56 ======== ======== ======== ======== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING PRIMARY 76,464 76,403 76,621 76,001 ======== ======== ======== ======== FULLY DILUTED 76,464 76,403 76,621 76,001 ======== ======== ======== ======== DIVIDENDS PER SHARE PAID $ 0.015 $ 0.015 $ 0.045 $ 0.045 ======== ======== ======== ========
SEE ACCOMPANYING NOTES 2 of 9 3 SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
In Thousands ------------------------------ March 29, June 30, 1996 1995 ------------ ------------ ASSETS CURRENT ASSETS Cash and cash equivalents $ 29,064 $ 80,311 Receivables, less allowance for doubtful accounts of $3,460,000 at March 29 and $3,823,000 at June 30 217,454 243,420 Inventories 226,476 257,427 Deferred income taxes 39,197 28,271 Other current assets 26,244 5,950 -------- -------- TOTAL CURRENT ASSETS 538,435 615,379 -------- -------- PROPERTY, PLANT AND EQUIPMENT, at cost Land and improvements 16,002 7,005 Buildings and improvements 36,955 36,847 Machinery and equipment 155,709 145,301 -------- -------- 208,666 189,153 Less-Accumulated depreciation and amortization 66,602 64,539 -------- -------- 142,064 124,614 -------- -------- COST IN EXCESS OF NET ASSETS ACQUIRED 6,378 6,940 -------- -------- OTHER ASSETS 41,580 38,331 -------- -------- TOTAL ASSETS $728,457 $785,264 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Short-term debt and current maturities of long-term debt $ 2,175 $ 1,386 Accounts payable 88,051 148,260 Accrued liabilities 100,282 113,947 Income taxes currently payable 20,351 12,121 -------- -------- TOTAL CURRENT LIABILITIES 210,859 275,714 -------- -------- LONG-TERM DEBT, less current maturities 650 773 -------- -------- OTHER LIABILITIES 39,868 34,588 -------- -------- STOCKHOLDERS' EQUITY Preferred stock, authorized 50,000,000 shares; no shares issued -- -- Common stock, $0.50 par value, authorized 350,000,000 shares; issued 77,255,528 shares at March 29 and 76,950,029 shares at June 30 38,628 38,475 Additional paid-in capital 162,355 160,206 Retained earnings 280,395 274,840 Accumulated translation adjustments 1,306 668 -------- -------- 482,684 474,189 -------- -------- Less - Treasury stock, at cost (548,384 shares) 5,604 -- -------- -------- 477,080 474,189 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $728,457 $785,264 ======== ========
SEE ACCOMPANYING NOTES 3 of 9 4 SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Nine Months Ended ----------------- March 29, March 31, 1996 1995 -------- --------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: $18,355 $(14,410) ------- -------- INVESTING ACTIVITIES: Purchases of property, plant, and equipment (53,080) (44,865) Proceeds from sale of property, plant and equipment 2,312 61 Increase in net assets of discontinued operations (2,459) (2,768) Proceeds from sale of investment in joint venture -- 4,214 Other (4,321) (4,194) ------- -------- Net cash used by investing activities (57,548) (47,552) ------- -------- FINANCING ACTIVITIES: Net short-term borrowings 789 (4,461) Principal payments on long-term debt (123) (48) Dividends paid (3,447) (3,427) Issuance of common stock 3,138 6,919 Treasury shares acquired (12,411) -- ------- -------- Net cash used by financing activities (12,054) (1,017) ------- -------- DECREASE IN CASH AND CASH EQUIVALENTS (51,247) (62,979) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 80,311 123,387 ------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $29,064 $ 60,408 ======= ======== SUPPLEMENTAL CASH FLOW DISCLOSURES Interest paid $ 567 $ 792 ======= ======== Income taxes paid, net $ 5,057 $ 25,321 ======= ========
SEE ACCOMPANYING NOTES 4 of 9 5 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 1995 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 29,1996 and March 31, 1995 were computed based on the weighted average number of shares of common stock outstanding. See Exhibit 11. C. Inventories consist of the following:
March 29, June 30, 1996 1995 -------- -------- Raw materials and work-in-process $116,014 $142,418 Finished goods 110,462 115,009 -------- -------- Total inventory $226,476 $257,427 ======== ========
D. During the quarter ended September 29, 1995, the company decided to discontinue its defense-related businesses in San Diego, California because these businesses are not aligned with the company's core business strategies. The company anticipates that the sale of the net assets of the defense-related businesses will be completed within one year. A one-time charge of $12,172, net of a tax benefit of $5,728, for the estimated loss on the sale of discontinued operations was recorded in the quarter ended September 29, 1995. Sales and losses from discontinued operations were as follows:
Three Months Ended Nine Months Ended -------------------- -------------------- March 29, March 31, March 29, March 31, 1996 1995 1996 1995 -------- -------- -------- -------- Sales $6,012 $ 4,398 $18,457 $19,426 Loss from discontinued operations, net of tax $ -- $(2,174) $(1,038) $(2,570) Tax benefit $ -- $ 1,023 $ 488 $ 1,208
The net assets of the discontinued operations include inventory, accounts receivable, machinery and equipment, accounts payable, and accrued expenses and are included in other current assets in the Consolidated Statement of Financial Position. E. In October 1995, the company announced that it had adopted a stock buyback program for the purchase of up to 5,000,000 shares of its common stock. During the quarter ended December 29, 1995, the company repurchased 1,010,000 shares at an aggregate cost of $12,411. During fiscal 1996, the company reissued 461,616 shares under the company's stock option plan, voluntary employee retirement and investment plan, and employee stock purchase plan. 5 of 9 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION Scientific-Atlanta had stockholders' equity of $477.1 million and cash on hand was $29.1 million at March 29, 1996. Cash decreased $51.2 million during the nine months ended March 29, 1996, as expenditures for equipment, expansion of manufacturing capacity, purchase of land for future expansion, the repurchase of 1,010,000 shares of the company's common stock and reductions in payables exceeded cash generated from earnings, accounts receivable collections and inventory reductions. The current ratio was 2.6:1 at March 29, 1996, compared to 2.2:1 at June 30, 1995. At March 29, 1996, total debt was $2.8 million or less than 1 percent of total capital invested. Short-term debt consists primarily of borrowings by the company's international operations to support their working capital requirements. 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 quarter ended March 29, 1996 were $271.9 million, down 12 percent from the prior year's sales of $309.1 million. Sales for the nine months ended March 29, 1996 were $775.2 million, down 4 percent from the prior year's sales of $803.8 million. Higher sales volumes of transmission products and digital set-tops were offset by declines in most other Broadband product lines. Sales of satellite systems during the quarter ended March 29, 1996 were flat as compared to the prior year. Sales for the nine months ended March 29, 1996 were lower as compared to the prior year due to substantial completion of deliveries of equipment to Orbit Communications Company for its direct to home satellite services in fiscal 1995. Sales in the three and nine months ended March 29, 1996 were negatively impacted by reduced levels of orders from domestic cable operators and telephone companies. The company believes that capital spending in telecommunications markets has been affected as cable television operators and telephone companies develop strategies to take advantage of provisions in the recently enacted Telecommunications Act of 1996, and by the fact that many of the products service providers wish to use in advanced communications networks are still under development and not commercially available. Gross margins for the quarter ended March 29, 1996 were 27.7 percent, up 0.5 percentage points from a year ago. Cost reduction efforts were offset partially by unfavorable exchange rate changes in the Japanese yen. Gross margins for the nine months ended March 26, 1996 were 26.3 percent, down 1.7 percentage points from the prior year. The unfavorable exchange rate changes in the yen have resulted in a decline in gross margins of approximately $14.8 million, or 1.9 percentage points in the nine months ended March 29, 1996. Continued strength of the yen would also adversely affect gross margins. 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 up $1.3 million, or 6 percent, and $8.8 million, or 14 percent, respectively, for the three and nine months ended March 29, 1996, respectively, over the comparable periods of the prior year due to increased research and development activity, particularly development of digital products and cable telephony products. The company anticipates that spending on research and development will continue at approximately the same level as the first nine months of fiscal 1996. Selling and administrative expenses in the quarter and nine months ended March 29, 1996 were flat compared to the prior year. Reduced selling expenses, reflecting the lower sales volume in the third quarter, were offset partially by higher administrative costs, primarily professional fees related to on-going arbitration and litigation. In the nine months ended March 29, 1996, increased selling expenses associated with ongoing investments to support expansion into international markets and the introduction of new products were offset partially by lower administrative expenses. 6 of 9 7 In February 1996, the company announced it had filed a patent infringement suit in U.S. District Court for the Northern District of Georgia against StarSight Telecast, Inc. and Philips Electronics North America Corporation. In the suit the company maintains that products manufactured and sold by or on behalf of StarSight and Philips which receive StarSight's interactive electronic program guide infringe at least three Scientific-Atlanta patents. The suit seeks damages as well as an injunction against continued infringement. Interactive electronic program guides provide television schedule information which is regularly updated, and permit the viewer to search for, select and record programs using a cursor on the remote control. The company also reported that StarSight Telecast, Inc. previously commenced an arbitration proceeding in April 1995 in California in which it asserts that Scientific-Atlanta failed to comply with the terms of a License and Technical Assistance Agreement between the two companies relating to the StarSight program guide, and that Scientific-Atlanta made unauthorized use of StarSight intellectual property to develop its own program guide. Scientific-Atlanta has denied StarSight's allegations and is vigorously defending the action. Other income and 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. There were no significant items in other income and expense during the three and nine months ended March 31, 1995. The company's effective income tax rate was 32 percent for the quarter, unchanged from the prior year. Net earnings from continuing operations were $11.5 million for the quarter ended March 29, 1996, down $6.3 million from the prior year. Net earnings in the three and 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. Net earnings of $9 million for the nine months ended March 29, 1996, included a charge of $13.2 million, net of tax, for losses related to discontinued operations based in San Diego and the estimated loss on the sale of such discontinued operations. 7 of 9 8 PART II - OTHER INFORMATION Item 1 Legal Proceedings The information provided under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part I concerning the pending arbitration proceeding involving StarSight Telecast, Inc. and concerning the pending patent infringement suit brought by the company against StarSight Telecast, Inc. and Philips Electronics North America Corporation is incorporated into this item by reference. Item 6 Exhibits and Reports on Form 8-K (a) Exhibits.
EXHIBIT NO. DESCRIPTION ----------- ----------- 11 Computation of Earnings Per Share 27 Financial Data Schedule (for SEC use only).
(b) No reports on Form 8-K were filed during the quarter ended March 29, 1996. Date: May 9, 1996 /s/ Harvey A. Wagner ------------------------- ------------------------------- Harvey A. Wagner Senior Vice President Chief Financial Officer and Treasurer (Principal Financial Officer and duly authorized signatory of the Registrant) 8 of 9 EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 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 29, March 31, March 29, March 31, 1996 1995 1996 1995 --------- --------- --------- --------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 76,464 76,403 76,621 76,001 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 -- -- -- -- --------- --------- --------- --------- NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 76,464 76,403 76,621 76,001 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 -- -- -- -- --------- --------- --------- --------- NUMBER OF SHARES OUTSTANDING ASSUMING FULL DILUTION 76,464 76,403 76,621 76,001 ========= ========= ========= ========= NET EARNINGS (LOSS) FOR PRIMARY AND FULLY DILUTED COMPUTATION Continuing Operations $ 11,525 $ 17,845 $ 22,212 $ 45,361 Discontinued Operations -- (2,174) (13,210) (2,570) --------- --------- --------- --------- Net Earnings $ 11,525 $ 15,671 $ 9,002 $ 42,791 ========= ========= ========= ========= EARNINGS (LOSS) PER COMMON SHARE AND COMMON EQUIVALENT SHARE PRIMARY Continuing Operations $ 0.15 $ 0.23 $ 0.29 $ 0.59 Discontinued Operations -- (0.02) (0.17) (0.03) --------- --------- --------- --------- Net Earnings $ 0.15 $ 0.21 $ 0.12 $ 0.56 ========= ========= ========= ========= FULLY DILUTED Continuing Operations $ 0.15 $ 0.23 $ 0.29 $ 0.59 Discontinued Operations -- (0.02) (0.17) (0.03) --------- --------- --------- --------- Net Earnings $ 0.15 $ 0.21 $ 0.12 $ 0.56 ========= ========= ========= =========
Note: In the three and six months ended March 29, 1996 and March 31, 1995, 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. 9 of 9 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE QUARTER ENDED MARCH 29, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JUN-28-1996 JUL-01-1995 MAR-29-1996 29,064 0 217,454 3,460 226,476 538,435 208,666 66,602 728,457 210,859 2,175 0 0 38,628 438,452 728,457 775,176 775,176 571,172 571,172 70,666 43 573 32,665 10,453 22,212 (13,210) 0 0 9,002 0.12 0.12
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