<PAGE> 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 29, 1995
-------------------------------------------------
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 OCTOBER 27, 1995, SCIENTIFIC-ATLANTA, INC. HAD OUTSTANDING 76,241,403
SHARES OF COMMON STOCK.
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<PAGE> 2
PART I - FINANCIAL INFORMATION
SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------
September 29, September 30,
1995 1994
-------------- ---------------
<S> <C> <C>
SALES $ 242,193 $ 224,976
---------- ----------
COSTS AND EXPENSES
Cost of sales 181,116 157,553
Sales and administrative 32,726 31,336
Research and development 22,767 19,045
Interest expense 147 228
Interest (income) (751) (886)
Other expense, net 179 34
---------- ----------
Total costs and expenses 236,184 207,310
---------- ----------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 6,009 17,666
PROVISION (BENEFIT) FOR INCOME TAXES
Current 550 6,418
Deferred 1,373 (765)
---------- ----------
NET EARNINGS FROM CONTINUING OPERATIONS 4,086 12,013
EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS,
NET OF TAX (1,038) 96
ESTIMATED LOSS ON SALE OF DISCONTINUED
OPERATIONS, NET OF TAX (12,172) --
---------- ----------
NET EARNINGS (LOSS) $ (9,124) $ 12,109
========= ==========
EARNINGS (LOSS) PER COMMON SHARE
AND COMMON EQUIVALENT SHARE
PRIMARY
CONTINUING OPERATIONS $ 0.05 $ 0.16
DISCONTINUED OPERATIONS (0.17) --
--------- ----------
NET EARNINGS (LOSS) $ (0.12) 0.16
========= ==========
FULLY DILUTED $ (0.12) $ 0.16
========= ==========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES AND COMMON
EQUIVALENT SHARES OUTSTANDING
PRIMARY 77,019 77,910
========= ==========
FULLY DILUTED 77,019 77,978
========= ==========
DIVIDENDS PER SHARE PAID $ .015 $ --
========= ==========
</TABLE>
SEE ACCOMPANYING NOTES
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<PAGE> 3
SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
<TABLE>
<CAPTION>
In Thousands
------------------------------------
September 29, June 30,
1995 1995
------------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 50,491 $ 80,311
Receivables, less allowance for doubtful
accounts of $ $3,705,000 at September 29
and $3,823,000 at June 30 207,932 243,420
Inventories 269,473 257,427
Deferred income taxes 41,219 28,271
Other current assets 15,464 5,950
---------- ---------
TOTAL CURRENT ASSETS 584,579 615,379
---------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost
Land and improvements 7,027 7,005
Buildings and improvements 39,583 36,847
Machinery and equipment 136,516 145,301
---------- ---------
183,126 189,153
Less-Accumulated depreciation and amortization 57,090 64,539
---------- ---------
126,036 124,614
---------- ---------
COST IN EXCESS OF NET ASSETS ACQUIRED 6,752 6,940
---------- ---------
OTHER ASSETS 36,132 38,331
---------- ---------
TOTAL ASSETS $ 753,499 $ 785,264
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt and current maturities of
long-term debt $ 1,040 $ 1,386
Accounts payable 124,422 148,260
Accrued liabilities 104,526 113,947
Income taxes currently payable 17,195 12,121
---------- ---------
TOTAL CURRENT LIABILITIES 247,183 275,714
--------- ---------
LONG-TERM DEBT, less current maturities 756 773
---------- ---------
OTHER LIABILITIES 38,116 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 77,248,253 shares at
September 29 and 76,950,029 shares at June 30 38,624 38,475
Additional paid-in capital 163,451 160,206
Retained earnings 264,561 274,840
Accumulated translation adjustments 808 668
---------- ---------
467,444 474,189
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 753,499 $ 785,264
---------- =========
</TABLE>
SEE ACCOMPANYING NOTES
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<PAGE> 4
SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------
September 29, September 30,
1995 1994
------------- -------------
<S> <C> <C>
NET CASH USED BY OPERATING ACTIVITIES: $ (15,616) $ (17,462)
---------- ---------
INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (14,020) (8,015)
Other 190 (2,210)
---------- ---------
Net cash used by investing activities (13,830) (10,225)
---------- ---------
FINANCING ACTIVITIES:
Net short-term borrowings (347) 1,663
Principal payments on long-term debt (16) (19)
Dividends paid (1,155) --
Issuance of common stock 1,144 2,226
---------- ---------
Net cash provided (used) by financing activities (374) 3,870
---------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (29,820) (23,817)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 80,311 123,387
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 50,491 $ 99,570
========== =========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 218 $ 262
========== =========
Income taxes paid, net $ 1,630 $ 12,446
========== =========
</TABLE>
SEE ACCOMPANYING NOTES
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<PAGE> 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 months ended September 29, 1995
was computed based on the weighted average number of shares of
common stock outstanding. Earnings per share for the three months
ended September 30, 1994, was 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:
<TABLE>
<CAPTION>
September 29, June 30,
1995 1995
---- ----
<S> <C> <C>
Raw materials and work-in-process $ 136,420 $ 142,418
Finished goods 133,053 115,009
------- -------
Total inventory $ 269,473 $ 257,427
======= =======
</TABLE>
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 sale of
discontinued operations was recorded in the quarter ended
September 29, 1995. During the quarter ended September 29, 1995
the loss from discontinued operations was $1,038, net of a tax
benefit of $488. Earnings from discontinued operations were $96,
net of tax expense of $46 for the quarter ended September 30,
1994. Sales of discontinued operations were $5,020 and $7,325 in
the first quarter of fiscal 1996 and 1995, respectively. 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 five million shares of
its common stock. As of October 27, 1995, the company had
purchased 1,010,000 shares at an aggregate cost of $12,411. The
company will re-issue these shares under the company's stock
option plan, 401 (k) plan and employee stock purchase plan.
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<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Scientific-Atlanta had stockholders' equity of $467.4 million and cash
on hand was $50.5 million at September 29, 1995. Cash decreased $29.8 million
during the quarter as expenditures for inventories, equipment and expansion of
manufacturing capacity exceeded cash generated from earnings and accounts
receivable collections. The current ratio of 2.4:1 at September 29, 1995,
compared to 2.2:1 at June 30, 1995. At September 29, 1995, total debt was $1.8
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 it will use a
portion of its senior credit facility to supplement funds generated internally
to support growth and planned expansion of manufacturing capacity prior to the
end of the fiscal year.
RESULTS OF OPERATIONS
Sales for the quarter ended September 29, 1995, were $242.2 million,
up 8 percent from the prior year's sales of $225.0 million. Higher sales
volume of transmission and addressable converter products and Sega game
adapters contributed to the year-to-year sales increase. Sales of satellite
systems were lower in the quarter ended September 29, 1995 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 growth decreased from 48 percent in fiscal 1995 to 8 percent in
the first quarter of fiscal 1996 due to the slowdown in the US market for cable
equipment. The company earlier had indicated that delays in the passage of
telecommunications legislation by Congress and the continuing uncertainty
regarding the timing and form of legislation, along with uncertainties
regarding technology to be deployed in telecommunications network construction
projects, were factors contributing to the delay in spending by customers.
Gross margins were 25.2 percent, down 4.8 percentage points from a
year ago. Unfavorable exchange rate changes in Japanese yen, product mix and
cost issues offset gains from increased volumes in transmission products.
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 its exposure on purchase commitments for a period of
approximately ten months.
Research and development costs were up $3.7 million, or 20 percent,
over the prior year due to increased research and development activity,
particularly development of digital products. The company anticipates that
spending will continue at this level.
Selling and administrative expense increased $1.4 million, or 4
percent, from the prior year. Increased expenses reflect costs associated with
ongoing investments to support expansion into international markets, the
introduction of new products and a build-up in the infrastructure to handle the
growth the company is experiencing.
Other expense for the quarter ended September 29, 1995, included net
losses from foreign currency transactions and partnership activities and net
gains from rental income and other miscellaneous items. There were no
significant items in other income and expense in 1995. Other expense for the
quarter ended September 30, 1994, included net losses of $0.5 million from
partnership activities and net gains of $0.5 million from royalty income,
rental income and other miscellaneous items.
The company's effective income tax rate was 32 percent for the
quarter, unchanged from the prior year.
Net earnings from continuing operations were $4.1 million, down $7.9
million from the prior year. Lower gross margins more than offset earnings
from higher sales volumes in the quarter ended September 29, 1995. 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. This charge for discontinued
operations resulted in a net loss of $9.1 million in the quarter ended
September 29, 1995 as compared to net earnings of $12.1 million in the prior
year.
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<PAGE> 7
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
11 Computation of Earnings Per Share
27 Financial Data Schedule (for SEC use only)
</TABLE>
(b) No reports on Form 8-K were filed during the quarter ended
September 29, 1995.
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: Novmeber 8, 1995 /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)
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<PAGE> 1
Exhibit 11
SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------
September 29, September 30,
1995 1994
------------- -------------
<S> <C> <C>
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 77,019 75,580
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 1,625 2,330
----------- ---------
NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 78,644 77,910
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 -- 68
----------- ---------
NUMBER OF SHARES OUTSTANDING
ASSUMING FULL DILUTION 78,644 77,978
=========== =========
NET EARNINGS (LOSS) FOR PRIMARY
AND FULLY DILUTED COMPUTATION
Continuing Operations $ 4,086 $ 12,013
Discontinued Operations (13,210) 96
----------- ---------
Net Earnings (Loss) $ (9,124) $ 12,109
=========== =========
EARNINGS (LOSS) PER COMMON SHARE
AND COMMON EQUIVALENT SHARE
PRIMARY
Continuing Operations $ 0.05 $ 0.16
Discontinued Operations (0.17) --
----------- ---------
Net Earnings (Loss) $ (0.12) $ 0.16
=========== =========
FULLY DILUTED
Continuing Operations $ 0.05 $ 0.16
Discontinued Operations (0.17) --
----------- ---------
Net Earnings (Loss) $ (0.12) $ 0.16
=========== =========
</TABLE>
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.
8 of 8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 29, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-28-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-29-1995
<CASH> 50,491
<SECURITIES> 0
<RECEIVABLES> 211,637
<ALLOWANCES> 3,705
<INVENTORY> 269,473
<CURRENT-ASSETS> 584,579
<PP&E> 183,126
<DEPRECIATION> 57,090
<TOTAL-ASSETS> 753,499
<CURRENT-LIABILITIES> 247,183
<BONDS> 756
<COMMON> 38,624
0
0
<OTHER-SE> 428,820
<TOTAL-LIABILITY-AND-EQUITY> 753,499
<SALES> 242,193
<TOTAL-REVENUES> 242,193
<CGS> 181,116
<TOTAL-COSTS> 181,116
<OTHER-EXPENSES> 22,767
<LOSS-PROVISION> 331
<INTEREST-EXPENSE> 147
<INCOME-PRETAX> 6,009
<INCOME-TAX> 1,923
<INCOME-CONTINUING> 4,086
<DISCONTINUED> (13,210)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,124)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
