-----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, A3zR2v/1HTIrzy6Ue9CSxoyw7f1kewz5DeT+HCCHnhxM+JW27OCbk0zyJcGfqD5S 1jYhwmVX6KdnJMciprNcSQ== 0000950144-96-007758.txt : 19961127 0000950144-96-007758.hdr.sgml : 19961127 ACCESSION NUMBER: 0000950144-96-007758 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960927 FILED AS OF DATE: 19961108 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: 96656885 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 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 SEPTEMBER 27, 1996 ------------------------------------------------- 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 25, 1996, SCIENTIFIC-ATLANTA, INC. HAD OUTSTANDING 77,304,775 SHARES OF COMMON STOCK. 1 of 10 2 PART I - FINANCIAL INFORMATION SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
Three Months Ended ----------------------------- September 27, September 29, 1996 1995 ------------- ------------- SALES $261,664 $242,193 -------- -------- COSTS AND EXPENSES Cost of sales 182,894 181,116 Sales and administrative 35,433 32,726 Research and development 28,033 22,767 Interest expense 134 147 Interest (income) (539) (751) Other (income) expense, net (189) 179 -------- -------- Total costs and expenses 245,766 236,184 -------- -------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 15,898 6,009 PROVISION (BENEFIT) FOR INCOME TAXES Current (10,215) 550 Deferred 15,302 1,373 -------- -------- NET EARNINGS FROM CONTINUING OPERATIONS 10,811 4,086 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 (LOSS) $ 14,211 $ (9,124) ======== ======== EARNINGS (LOSS) PER COMMON SHARE AND COMMON EQUIVALENT SHARE PRIMARY CONTINUING OPERATIONS $ 0.14 $ 0.05 DISCONTINUED OPERATIONS 0.04 (0.17) -------- -------- NET EARNINGS (LOSS) $ 0.18 (0.12) ======== ======== FULLY DILUTED $ 0.18 $ (0.12) ======== ======== WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND COMMON EQUIVALENT SHARES OUTSTANDING PRIMARY 77,670 77,019 ======== ======== FULLY DILUTED 77,837 77,019 ======== ======== DIVIDENDS PER SHARE PAID $ 0.015 $ 0.015 ======== ========
SEE ACCOMPANYING NOTES 2 of 10 3 SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
In Thousands ---------------------------- September 27, June 28, 1996 1996 ------------- --------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 50,146 $ 20,930 Receivables, less allowance for doubtful accounts of $3,884,000 at September 27 and $3,826,000 at June 28 230,356 252,882 Inventories 198,784 215,767 Deferred income taxes 34,011 50,979 Other current assets 9,674 22,413 --------- --------- TOTAL CURRENT ASSETS 522,971 562,971 --------- --------- PROPERTY, PLANT AND EQUIPMENT, at cost Land and improvements 20,369 18,173 Buildings and improvements 37,772 38,628 Machinery and equipment 175,341 162,073 --------- --------- 233,482 218,874 Less-Accumulated depreciation and amortization 75,201 68,275 --------- --------- 158,281 150,599 --------- --------- COST IN EXCESS OF NET ASSETS ACQUIRED 6,004 6,191 --------- --------- OTHER ASSETS 46,007 43,561 --------- --------- TOTAL ASSETS $ 733,263 $ 763,322 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Short-term debt and current maturities of long-term debt $ 1,565 $ 1,600 Accounts payable 85,540 106,542 Accrued liabilities 111,482 127,546 Income taxes currently payable 17,711 26,229 --------- --------- TOTAL CURRENT LIABILITIES 216,298 261,917 --------- --------- LONG-TERM DEBT, less current maturities 400 400 --------- --------- OTHER LIABILITIES 40,941 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 77,372,128 shares at September 27 and 77,255,528 shares at June 28 38,686 38,628 Additional paid-in capital 161,927 163,143 Retained earnings 277,259 264,206 Accumulated translation adjustments 746 740 --------- --------- 478,618 466,717 Less - Treasury stock, at cost (237,298 shares at September 27 and 265,640 shares at June 28) 2,994 3,065 --------- --------- 475,624 463,652 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 733,263 $ 763,322 ========= =========
SEE ACCOMPANYING NOTES 3 of 10 4 SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Three Months Ended ------------------ September 27, September 29, 1996 1995 ------------- ------------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: $26,823 $(15,616) ------- -------- INVESTING ACTIVITIES: Purchases of property, plant, and equipment (15,861) (14,020) Proceeds from sale of discontinued operations 19,036 -- Other 1,359 190 ------- -------- Net cash provided (used) by investing activities 4,534 (13,830) ------- -------- FINANCING ACTIVITIES: Net short-term borrowings (35) (347) Principal payments on long-term debt -- (16) Dividends paid (1,158) (1,155) Issuance of common stock 71 1,144 Treasury shares acquired (1,019) -- ------- -------- Net cash used by financing activities (2,141) (374) ------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 29,216 (29,820) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 20,930 80,311 ------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $50,146 $ 50,491 ======= ======== SUPPLEMENTAL CASH FLOW DISCLOSURES Interest paid $ 106 $ 218 ======= ======== Income taxes paid, net $ 124 $ 1,630 ======= ========
SEE ACCOMPANYING NOTES 4 of 10 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 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 months ended September 27, 1996 and September 29,1995 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. C. Inventories consist of the following:
September 27, June 28, 1996 1996 ------------- --------- Raw materials and work-in-process $ 122,415 $ 131,762 Finished goods 76,369 84,005 --------- --------- Total inventory $ 198,784 $ 215,767 ========= =========
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. 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. 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. After recording the pre-tax gain of $5,000, the company had a reserve of approximately $8,200 at September 27, 1996 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 losses from discontinued operations were as follows:
1997 1996 ------- ------- Sales $ 1,920 $ 5,020 Losses from discontinued operations, net of tax $ 817 $ 1,038 Tax benefit $ 385 $ 488
E. In October 1995, the company announced that it had adopted a stock buyback program for the purchase of up to five million shares of its common stock. During the quarter ended September 27, 1996, the company purchased 80,000 shares at an aggregate cost of $1,019. 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. 5 of 10 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION Scientific-Atlanta had stockholders' equity of $475.6 million and cash on hand was $50.1 million at September 27, 1996. Cash increased $29.2 million during the quarter as cash generated from earnings, accounts receivable collections, reductions in inventory levels and the sale of discontinued operations exceeded expenditures for equipment, expansion of manufacturing capacity and reductions in payables. The current ratio of 2.4:1 at September 27, 1996, compared to 2.1:1 at June 28, 1996. At September 27, 1996, total debt was $2.0 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 September 27, 1996, were $261.7 million, up 8 percent over the prior year's sales of $242.2 million. Higher sales volume of transmission products was the primary factor in the year-to-year sales increase. Sales volume of addressable converter products and Sega game adapters declined as compared to the prior year. Increased sales of satellite systems, primarily PowerVu(TM) digital video systems and VSAT (Very Small Aperture Terminal) data networks, also contributed to the year-to-year increase. International sales accounted for 35 percent of total sales for the quarter ended September 27, 1996, as compared to 34 percent of total sales in the prior year. Gross margins were 30.1 percent, up 4.9 percentage points over the prior year, reflecting the impact of internal programs to improve quality and cost structure, the ramp-up of the Juarez, Mexico manufacturing facility and favorable product mix. 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 $5.3 million, or 23 percent, over the prior year reflecting the company's continued investment in research and development programs to support new product initiatives. The company plans to launch three major digital system categories during fiscal 1997: high speed data including cable modems, cable telephony and digital video including broadcast and interactive set-tops. The company expects to continue significant research and development investments and anticipates start-up costs as these new products are rolled out. Selling and administrative expense increased $2.7 million, or 8 percent, from the prior year. Increased selling expenses reflect costs associated with higher sales volumes, ongoing investments to support expansion into international markets 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 declined as the company continued efforts to improve internal processes and systems to enhance quality and the overall cost structure. Other (income) expense for the quarters ended September 27, 1996 and September 29, 1995, 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 27, 1996 or September 29, 1995. The company's effective income tax rate was 32 percent for the quarter, unchanged from the prior year. Net earnings from continuing operations for the quarter ended September 27, 1996 were $10.8 million, up $6.7 million over the prior year. Higher sales volume and improved gross margins were offset partially by increased research and development expenses and selling expenses. Lower gross margins more than offset earnings from higher sales volumes in the quarter ended September 29, 1995. 6 of 10 7 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. 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 quarter ended September 27, 1996 were $14.2 million, including an after-tax gain of $3.4 million related to the sale of discontinued operations, compared to a net loss in the prior year of $9.1 million, 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. 7 of 10 8 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 (for SEC use only) 99 Cautionary Statements (b) No reports on Form 8-K were filed during the quarter ended September 27, 1996. 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 8, 1996 /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 1 EXHIBIT 11 SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
Three Months Ended ------------------------------ September 27, September 29, 1996 1995 ------------- ------------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 77,127 77,019 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 543 1,625 -------- -------- NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 77,670 78,644 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 167 -- -------- -------- NUMBER OF SHARES OUTSTANDING ASSUMING FULL DILUTION 77,837 78,644 ======== ======== NET EARNINGS (LOSS) FOR PRIMARY AND FULLY DILUTED COMPUTATION Continuing Operations $ 10,811 $ 4,086 Discontinued Operations 3,400 (13,210) -------- -------- Net Earnings (Loss) $ 14,211 $ (9,124) ======== ======== EARNINGS (LOSS) PER COMMON SHARE AND COMMON EQUIVALENT SHARE PRIMARY Continuing Operations $ 0.14 $ 0.05 Discontinued Operations 0.04 (0.17) -------- -------- Net Earnings (Loss) $ 0.18 $ (0.12) ======== ======== FULLY DILUTED Continuing Operations $ 0.14 $ 0.05 Discontinued Operations 0.04 (0.17) -------- -------- Net Earnings (Loss) $ 0.18 $ (0.12) ======== ========
Note: In the three months ended September 29, 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 10 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 27, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JUN-27-1997 JUN-29-1996 SEP-27-1996 50,146 0 234,240 3,884 198,784 522,971 233,482 75,201 733,263 216,298 400 0 0 38,686 436,938 733,263 261,664 261,664 182,894 182,894 28,033 66 134 15,898 5,087 10,811 3,400 0 0 14,211 0.18 0.18
EX-99 4 CAUTIONARY STATEMENTS 1 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 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. 10 of 10 -----END PRIVACY-ENHANCED MESSAGE-----