<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 DECEMBER 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 JANUARY 26, 1996, SCIENTIFIC-ATLANTA, INC. HAD OUTSTANDING
76,410,954 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 Six Months Ended
------------------------------ -----------------------------
December 29, December 30, December 29, December 30,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SALES $261,100 $269,690 $503,293 $494,666
COSTS AND EXPENSES
Cost of sales 193,383 195,880 374,499 353,433
Sales and administrative 33,663 32,601 66,389 63,937
Research and development 23,871 20,057 46,638 39,102
Interest expense 220 190 367 418
Interest (income) (223) (617) (974) (1,503)
Other (income) expense, net 479 (1,222) 658 (1,188)
-------- -------- -------- --------
Total costs and expenses 251,393 246,889 487,577 454,199
EARNINGS FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 9,707 22,801 15,716 40,467
PROVISION (BENEFIT) FOR INCOME TAXES
Current 4,331 9,015 4,881 15,433
Deferred (1,225) (1,719) 148 (2,484)
-------- -------- -------- --------
NET EARNINGS FROM CONTINUING
OPERATIONS 6,601 15,505 10,687 27,518
LOSS FROM DISCONTINUED
OPERATIONS NET OF TAX -- (492) (1,038) (396)
ESTIMATED LOSS ON SALE OF
DISCONTINUED OPERATIONS
NET OF TAX -- -- (12,172) --
-------- -------- -------- --------
NET EARNINGS (LOSS) $ 6,601 $ 15,013 $ (2,523) $ 27,122
======== ======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE
AND COMMON EQUIVALENT SHARE
PRIMARY
CONTINUING OPERATIONS $ 0.09 $ 0.20 $0.14 $ 0.36
DISCONTINUED OPERATIONS -- (0.01) (0.17) (0.01)
-------- -------- -------- --------
NET EARNINGS (LOSS) $ 0.09 $ 0.19 $ (0.03) $ 0.35
======== ======== ======== ========
FULLY DILUTED $ 0.09 $ 0.19 $ (0.03) $ 0.35
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES AND COMMON
EQUIVALENT SHARES OUTSTANDING
PRIMARY 76,379 78,231 76,699 77,923
======== ======== ======== ========
FULLY DILUTED 76,379 78,251 76,699 78,032
======== ======== ======== ========
DIVIDENDS PER SHARE PAID $ 0.015 $ 0.03 $ 0.03 $ 0.03
======== ======== ======== ========
</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
------------------------------------
December 29, June 30,
1995 1995
------------ ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 22,802 $ 80,311
Receivables, less allowance for doubtful
accounts of $3,514,000 at December 29
and $3,823,000 at June 30 215,500 243,420
Inventories 246,348 257,427
Deferred income taxes 38,719 28,271
Other current assets 19,472 5,950
-------- --------
TOTAL CURRENT ASSETS 542,841 615,379
-------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost
Land and improvements 7,027 7,005
Buildings and improvements 40,616 36,847
Machinery and equipment 147,442 145,301
-------- --------
195,085 189,153
Less-Accumulated depreciation and amortization 61,629 64,539
-------- --------
133,456 124,614
-------- --------
COST IN EXCESS OF NET ASSETS ACQUIRED 6,565 6,940
-------- --------
OTHER ASSETS 38,560 38,331
-------- --------
TOTAL ASSETS $721,422 $785,264
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 11,154 $ 1,071
Current maturities of long-term debt 318 315
Accounts payable 89,253 148,260
Accrued liabilities 101,123 113,947
Income taxes currently payable 17,007 12,121
-------- --------
TOTAL CURRENT LIABILITIES 218,855 275,714
-------- --------
LONG-TERM DEBT, less current maturities 739 773
-------- --------
OTHER LIABILITIES 39,685 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
December 29 and 76,950,029 shares at June 30 38,628 38,475
Additional paid-in capital 163,442 160,206
Retained earnings 270,018 274,840
Accumulated translation adjustments 677 668
-------- --------
472,765 474,189
-------- --------
Less - Treasury stock, at cost (879,524 shares) 10,622 --
-------- --------
462,143 474,189
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $721,422 $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>
Six Months Ended
----------------
December 29, December 30,
1995 1994
------------ ------------
<S> <C> <C>
NET CASH USED BY OPERATING ACTIVITIES: $(22,661) $(28,884)
-------- --------
INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (29,704) (27,241)
Proceeds from sale of investment in joint venture -- 4,214
Other (1,973) (3,909)
-------- --------
Net cash used by investing activities (31,677) (26,936)
-------- --------
FINANCING ACTIVITIES:
Net short-term borrowings 10,083 86
Principal payments on long-term debt (31) (32)
Dividends paid (2,299) (2,278)
Issuance of common stock 1,487 3,757
Treasury shares acquired (12,411) --
-------- --------
Net cash provided (used) by financing activities (3,171) 1,533
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (57,509) (54,287)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 80,311 123,387
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 22,802 $ 69,100
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 306 $ 438
======== ========
Income taxes paid, net $ 3,580 $ 17,082
======== ========
</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 and six months ended December
29,1995 were computed based on the weighted average number of
shares of common stock outstanding. Earnings per share for
the three and six months ended December 30, 1994, 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:
<TABLE>
<CAPTION>
December 29, June 30,
1995 1995
------------ ----------
<S> <C> <C>
Raw materials and work-in-process $128,632 $142,418
Finished goods 117,716 115,009
-------- --------
Total inventory $246,348 $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. Sales and
losses from discontinued operations were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
December 29, December 30, December 29, December 30,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $7,495 $7,703 $12,515 $15,028
Loss from discontinued
operations, net of tax $ -- $ (492) $(1,038) $ (396)
Tax benefit $ -- $ 231 $ 488 $ 185
</TABLE>
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 and re-issued 130,476 shares under
the company's stock option plan, voluntary employee retirement
and investment 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 $462.1 million and cash
on hand was $22.8 million at December 29, 1995. Cash decreased $57.5 million
during the six months ended December 29, 1995 as expenditures for inventories,
equipment, expansion of manufacturing capacity and the repurchase of 1,010,000
shares of the company's common stock exceeded cash generated from earnings,
accounts receivable collections and short-term borrowings under a senior credit
facility. The current ratio was 2.5:1 at December 29, 1995, compared to 2.2:1
at June 30, 1995. At December 29, 1995, total debt was $12.2 million or less
than 3 percent of total capital invested. Short-term debt consists of a $10.0
million borrowing under a senior credit facility and 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 December 29, 1995 were $261.1 million,
down 3 percent from the prior year's sales of $269.7 million. Sales for the
six months ended December 29, 1995 were $503.3 million, up 2 percent from the
prior year's sales of $494.7 million. Higher sales volume of transmission
products, digital set-tops and Sega game adapters were offset by declines in
most Broadband product lines. Sales of satellite systems were lower in the
quarter and six months ended December 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 in the three and six months ended December 29, 1995 were
negatively impacted by reduced levels of spending by domestic cable operators
and telephone companies. The company believes that customer uncertainty over
the types of communications technology to be deployed in advanced networks, the
fact that many of the products to be utilized in these networks are still under
development by the industry and not yet ready for commercial production, and
delays in the passage of telecommunications reform legislation recently
enacted, were significant factors in the reduced spending.
Gross margins of 25.9 percent and 25.6 percent for the three and six
months ended December 29, 1995 declined 1.5 and 3.0 percentage points,
respectively, from the prior year primarily as the result of unfavorable
exchange rate changes in Japanese yen. 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 one year.
Research and development costs were up $3.8 million, or 19 percent,
and $7.5 million, or 19 percent, for the three and six months ended December
29, 1995, respectively, over the comparable periods of the prior year due to
increased research and development activity, particularly development of
digital products and cable telephony. The company anticipates that spending
during the second half of fiscal 1996 will increase over the prior year at a
slightly lower rate than the first half of fiscal 1996.
Selling and administrative expense increased approximately 4 percent
from the prior year. Increased expenses reflect costs associated with ongoing
investments to support expansion into international markets and the
introduction of new products.
Other expense for the three and six months ended December 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 the first six
months of fiscal 1996. Other income of $1.2 million for the quarter ended
December 30, 1994, included net gains of $0.6 million from partnership
activities and net gains of $0.6 million from foreign currency transactions,
rental income and other miscellaneous items. Other income of $1.2 million for
the six months ended December 30, 1994, included net gains of $0.3 million from
foreign currency transactions, $0.3 million of rental income and net gains of
$0.6 million from royalty income, partnership activities and other
miscellaneous items.
6 of 17
<PAGE> 7
The company's effective income tax rate was 32 percent, unchanged from
the prior year.
Net earnings from continuing operations were $6.6 million for the
quarter ended December 29, 1995, down $8.9 million from the prior year. Net
earnings for the six months ended December 29, 1995 was $10.7 million, down
$16.8 million from the prior year. Net earnings in the quarter and for the
first half were negatively impacted by the exchange rate for the yen, higher
spending for research and development and investment in sales and marketing to
support the company's international growth. The net loss of $2.5 million
for the first half of fiscal 1996 included a charge of $13.2 million, net of
tax, for losses related to discontinued operations and the estimated loss on
the sale of discontinued operations.
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<PAGE> 8
PART II - OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders
The following information is furnished with respect to matters
submitted to a vote of security holders through the solicitation of
proxies:
(a) The matters described below were submitted to a vote of
security holders at the Annual Meeting of Shareholders held on
November 8, 1995.
(b) Election of directors:
<TABLE>
<CAPTION>
Votes For Withhold Authority
---------- ------------------
<S> <C> <C>
Wilbur B. King 65,245,261 1,268,350
Alonzo L. McDonald 66,025,724 487,887
James F. McDonald 65,970,940 542,671
</TABLE>
Marion H. Antonini, William E. Kassling, Mylle Bell Mangum,
David J. McLaughlin, James V. Napier and Sidney Topol
continue as directors.
(c) (i) Approval of Stock Plan for Non-Employee Directors
<TABLE>
<CAPTION>
Votes For Votes Against Abstain
---------- ------------- -------
<S> <C> <C>
54,422,754 11,712,740 378,117
</TABLE>
(ii) Selection of Arthur Andersen LLP as independent
auditors
<TABLE>
<CAPTION>
Votes For Votes Against Abstain
---------- ------------- -------
<S> <C> <C>
66,199,344 201,434 112,833
</TABLE>
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
10.1 Stock Plan for Non-Employee Directors (incorporated
by reference to Exhibit number 4 to the Form S-8
Registration Statement filed on November 8, 1995)
10.2 Amendment Number One to the Non-Employee
Directors Stock Option
10.3 Amended and Restated Scientific-Atlanta, Inc.
Retirement Plan for Non-Employee Directors
10.4 Amended and Restated Deferred Compensation Plan
for Non-Employee Directors of Scientific-Atlanta, Inc.
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
December 29, 1995.
Date: February 12, 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)
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<PAGE> 1
EXHIBIT 10.2
AMENDMENT NUMBER ONE TO THE
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
WHEREAS, Section 4(b) of Scientific-Atlanta, Inc.'s (the "Corporation's")
Non-Employee Directors Stock Option Plan (the "Option Plan") provides for the
grant of an option for 10,000 shares of the Corporation's common stock to a
non-employee director upon commencing service on the Corporation's Board of
Directors;
WHEREAS, Section 4(c) of the Option Plan provides for the grant of options for
2,500 shares of the Corporation's common stock to each non-employee director at
each Board meeting held on the date of the annual meeting of shareholders each
year; and
WHEREAS, pursuant to Section 6 of the Option Plan, as a result of stock splits
declared by the Corporation since the adoption of the Option Plan, the initial
option grant has increased to 30,000 shares and the annual option grant has
increased to 7,500 shares;
NOW, THEREFORE, Sections 4(b) and 4(c) of the Stock Option Plan are hereby
amended to read in their entirety as follows:
(b) INITIAL GRANT. Each Non-Employee Director will receive an
initial grant of 20,000 shares upon approval by the Board of
this plan or upon the initial appointment or election to the
Board.
(c) AUTOMATIC GRANTS. An Option to Purchase 5,000 shares of
Common Stock shall be granted at the annual meeting of the
Board held on the date of the Annual Meeting of Shareholders
beginning in 1995 and at each succeeding Board meeting held on
that date provided the Non-Employee Director continues in
office after the Board meeting date on which the Option is
granted.
All other sections and provisions of the Option Plan shall remain in full force
and effect as written, without amendment.
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<PAGE> 2
To record the adoption of this Amendment by the Board on November 8, 1995, the
Company has caused its authorized officers to execute this Amendment and affix
the corporate name and seal hereto.
SCIENTIFIC-ATLANTA, INC.
By:
-------------------------------------
Name: Brian C. Koenig
-----------------------------------
Title: Vice President Human Resources
----------------------------------
By:
-------------------------------------
Name: William E. Eason, Jr.
-----------------------------------
Title: Secretary
----------------------------------
[Seal]
10 of 17
<PAGE> 1
[LOGO
SCIENTIFIC-
ATLANTA]
EXHIBIT 10.3
SCIENTIFIC-ATLANTA, INC.
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS
As Amended November 8, 1995
1. PURPOSE
The purpose of this plan ("Plan") is to enhance the ability of
Scientific-Atlanta, Inc. ("Company") to attract and retain the service of
experienced, able and knowledgeable persons to serve as members of the
Company's board of directors ("Board") over a substantial period of years
during which the full benefit of their capabilities can be realized to further
the growth and profitability of the Company and return to the shareholders.
2. ADMINISTRATION
The Plan shall be administered by a Plan Administrator, who shall be
appointed by the Board. In addition to the duties stated elsewhere in the
Plan, the Plan Administrator shall have full authority, consistent with the
Plan, to interpret the Plan and to make all determinations necessary or
desirable for the administration of the Plan.
3. ELIGIBLE PARTICIPANTS
Each person who is or becomes a member of the Board on or after the
effective date of this Plan and who has never been a participant in an employee
retirement plan of the Company shall be deemed a Participant in this Plan after
having been a member of the Board for thirty-six consecutive months.
4. RETIREMENT DATES
(a) A Participant's "Normal Retirement Date" is the first day of
the calendar month in which a Participant attains the age of sixty-five (65)
years and is no longer a member of the Board or any subsequent month
designated by a Participant in accordance with paragraph 6 below.
(b) A Participant's "Early Retirement Date" is the first day of
the calendar month designated by a Participant in accordance with paragraph 6
below, prior to the Normal Retirement Date, on or after the month in which a
Participant attains the age of fifty-five (55) years.
5. RETIREMENT BENEFIT
(a) The annual retirement benefit payable to any Participant who
retires on the Normal Retirement Date, or any date thereafter, will be an
amount equal to (i) the regular annual retainer
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<PAGE> 2
paid by the Company to each director for the last fiscal year of the Company
that the Participant served as a director, plus (ii) the value, as of the date
of grant, of the shares of the Company's Common Stock granted to the
Participant as a "Stock Award" under the Company's Stock Plan for Non-Employee
Directors during the last fiscal year of the Company that the Participant
served as a director. The "regular annual retainer" as used in the preceding
sentence means the annual retainer received by each director of the Company,
excluding any committee chair annual retainer, meeting fees and other fees
received by a director; and, if the Participant elects to receive all or a
portion of his or her annual retainer in the form of shares of the Company's
common stock under the Company's Stock Plan for Non-Employee Directors, any
portion of such annual retainer received in shares shall be included in the
definition of "regular annual retainer."
(b) The annual early retirement benefit payable to any Participant
who retires on the Early Retirement Date will be the amount specified in 5(a)
above, reduced by the following early retirement factors:
<TABLE>
<CAPTION>
Age at
Commencement Factor
------------ ------
<S> <C>
64 .933
63 .867
62 .800
61 .733
60 .667
59 .633
58 .600
57 .567
56 .533
55 .500
</TABLE>
If a Participant's age at the Early Retirement Date falls between any
two of these ages, these factors shall be adjusted by straight-line
interpolation.
(c) No retirement benefit will be payable to any person who is a
member of the Board for less than thirty-six (36) consecutive months.
6. BENEFIT PAYMENTS
A Participant may retire by written notice to the Plan Administrator
or the Secretary of the Company, designating a retirement date in accordance
with paragraph 4 above. Retirement benefit payments will be payable on the
first day of each calendar quarter following retirement or in accordance with
such other schedule of payments as may be requested by the Participant and
approved by the Board. Benefit payments will continue to be paid to the
Participant for the remainder of the Participant's life. Notwithstanding the
foregoing, in lieu of the normal form of
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<PAGE> 3
payment otherwise provided under this Plan, the Plan Administrator may direct,
in its sole and absolute discretion, that benefits shall be paid in a single
sum that is the actuarial equivalent of the annual benefit payable to the
Participant or, in the event of the Participant's death, to his or her
surviving spouse.
7. SPOUSAL BENEFITS
Should a Participant die before retirement benefits have begun to be
paid to the Participant under this Plan, the Participant shall be deemed to
retire on the later of (i) the day before his/her death, or (ii) the first day
of the first calendar month thereafter in which the Participant would have
attained the age of fifty-five (55), and the Participant's surviving spouse, if
any, shall be entitled to a benefit equal to the benefit that would have been
paid to the Participant. If the Participant dies after retirement benefits
have commenced, the Participant's surviving spouse shall be entitled to annual
benefit payments equal to the annual benefit previously payable to the
Participant. In each case, the benefit shall continue for the lesser of (i)
ten years or (ii) a number of years equal to the number of years that the
Participant was a member of the Board; provided, however, that payments shall
not continue after the death of the spouse.
8. DISABILITY
Should a Participant become totally and permanently disabled prior to
retirement for a period of six (6) consecutive months while a member of the
Board and the Board determines that such disability will continue, the
Participant will be deemed to have retired on the first day of the calendar
month following the month in which the Board makes such determination and the
age of the Participant on such retirement date shall be deemed the older of (i)
fifty-five (55), or (ii) the Participant's actual age on that date. Payments
will be made on the same basis as described in Sections 5, 6, and 7 above.
9. CHANGE OF CONTROL
Notwithstanding anything contained in this Plan to the contrary, the
provisions of this paragraph 9 shall apply to any Participant whose membership
on the Board ends before a Change of Control occurs or who is a member of the
Board on the date that a Change of Control occurs and who ceases within
twenty-four (24) months after a Change of Control to be a member of the Board
for any reason.
(a) Each such Participant shall be immediately vested in his or
her retirement benefit payable under this Plan.
(b) The Company shall contribute to the trust maintained pursuant
to the Scientific-Atlanta, Inc. Benefits Protection Trust Agreement a lump sum
amount equal to the then-present value of the Participant's retirement benefit.
This lump sum payment to the trust shall be due on the later of (i) the date
when the Change of Control occurs or (ii) the date the Participant ceases to be
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<PAGE> 4
a member of the Board. The retirement benefit of a Participant who ceases to
be a member of the Board within twenty-four (24) months after a Change of
Control shall be computed as if the Participant would retire on the first day
that he or she is eligible to retire (whether an Early Retirement Date or a
Normal Retirement Date) following the Change of Control and the end of his or
her membership on the Board. Any retirement benefits to which the Participant
is entitled under the terms of this Plan shall be payable from the trust,
except to the extent that the benefits are paid from the general assets of the
Company.
(c) Notwithstanding the foregoing, in lieu of the form of payment
otherwise provided for in this paragraph 9, the Plan Administrator may direct,
in its sole and absolute discretion, that upon a Change of Control benefits
under this Plan shall be paid in a single lump sum that is the actuarial
equivalent of the annual benefits payable to the Participant or, in the event
of the Participant's death, to his or her surviving spouse.
(d) "Change of Control" means a change of twenty-five percent
(25%) or more of the membership of the Board (excluding membership changes
resulting from normal retirement of directors) within a twenty-four (24) month
period following the acquisition of beneficial ownership by any person or
entity, or group of persons or entities and their affiliates acting in concert,
of twenty percent (20%) or more of the voting securities of the Company.
"Affiliates" and "beneficial ownership" shall be defined in accordance with
Rules 12b-2 and 13d-3 of the Securities and Exchange Commission, as the same
may from time to time be amended.
10. TERMINATION AND AMENDMENT OF THE PLAN
The Board may terminate the Plan at any time and may amend the Plan
from time to time but no such termination and amendment shall adversely affect
the rights of Participants under the Plan, which shall be deemed fully vested
and irrevocable on the date that a director becomes a Participant in accordance
with paragraph 3 above.
11. EFFECTIVE DATE
The effective date of this Plan is February 15, 1989.
14 of 17
<PAGE> 5
To record the adoption of the Plan (as amended and restated) by the Board on
November 8, 1995, the Company has caused its authorized officers to execute
this Plan and affix the corporate name and seal hereto.
SCIENTIFIC-ATLANTA, INC.
By: /s/ Brian C. Koenig
-------------------------------------
Name: Brian C. Koenig
-----------------------------------
Title: Vice President Human Resources
----------------------------------
By: /s/ William E. Eason, Jr.
-------------------------------------
Name: William E. Eason, Jr.
-----------------------------------
Title: Secretary
----------------------------------
[Seal]
15 of 17
<PAGE> 1
EXHIBIT 10.4
RESOLUTION AMENDING
DEFERRED COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS OF SCIENTIFIC-ATLANTA, INC.
WHEREAS, the Board of Directors of the Corporation approved the Stock Plan for
Non-Employee Directors (the "Stock Plan") at its August 24, 1995, meeting,
subject to shareholder approval of the Stock Plan;
WHEREAS, the shareholders of the Corporation approved the Stock Plan on
November 8, 1995;
WHEREAS, under the Stock Plan, non-employee directors will receive a grant of
shares of the Corporation's common stock on an annual basis and will be
entitled, at their election, to receive shares of the Corporation's common
stock in lieu of receiving cash compensation for their service on the Board and
its Committees;
WHEREAS, the Board desires to amend the Deferred Compensation Plan for
Non-Employee Directors of Scientific-Atlanta, Inc. (the "Plan") to allow
non-employee directors to defer the receipt of shares of the Corporation's
common stock granted under the Stock Plan; and
WHEREAS, under Paragraph 9.1 of the Plan, the Board has the power and authority
to amend the Plan;
NOW, THEREFORE, BE IT RESOLVED, that the amended and restated "Deferred
Compensation Plan for Non-Employee Directors of Scientific-Atlanta, Inc."
attached to this resolution is hereby adopted and approved by the Board in its
entirety and that such amended and restated Plan replaces the current Plan.
16 of 17
<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 Six Months Ended
----------------------------- ----------------------------
December 29, December 30, December 29, December 30,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 76,379 76,019 76,699 75,800
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 969 2,212 1,297 2,123
------- ------- ------- -------
NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 77,348 78,231 77,996 77,923
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 50 20 20 109
------- ------- ------- -------
NUMBER OF SHARES OUTSTANDING
ASSUMING FULL DILUTION 77,398 78,251 78,016 78,032
======= ======= ======= =======
NET EARNINGS (LOSS) FOR PRIMARY
AND FULLY DILUTED COMPUTATION
Continuing Operations $ 6,601 $15,505 $10,687 $27,518
Discontinued Operations -- (492) (13,210) (396)
------- ------- ------- -------
Net Earnings (Loss) $ 6,601 $15,013 $(2,523) $27,122
======= ======= ======= =======
EARNINGS (LOSS) PER COMMON SHARE
AND COMMON EQUIVALENT SHARE
PRIMARY
Continuing Operations $ 0.09 $ 0.20 $ 0.14 $ 0.36
Discontinued Operations -- $ (0.01) $ (0.17) $ (0.01)
------- ------- ------- -------
Net Earnings (Loss) $ 0.09 $ 0.19 $ (0.03) $ 0.35
======= ======= ======= =======
FULLY DILUTED
Continuing Operations $ 0.09 $ 0.20 $ 0.14 $ 0.36
Discontinued Operations -- (0.01) (0.17) (0.01)
------- ------- ------- -------
Net Earnings (Loss) $ 0.09 $ 0.19 $ (0.03) $ 0.35
======= ======= ======= =======
</TABLE>
Note: In the three and six months ended December 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.
17 of 17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 29, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-28-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-29-1995
<CASH> 22,802
<SECURITIES> 0
<RECEIVABLES> 215,500
<ALLOWANCES> 3,514
<INVENTORY> 246,348
<CURRENT-ASSETS> 542,841
<PP&E> 195,085
<DEPRECIATION> 61,629
<TOTAL-ASSETS> 721,422
<CURRENT-LIABILITIES> 207,383
<BONDS> 11,472
0
0
<COMMON> 38,628
<OTHER-SE> 423,515
<TOTAL-LIABILITY-AND-EQUITY> 721,422
<SALES> 503,293
<TOTAL-REVENUES> 503,293
<CGS> 374,499
<TOTAL-COSTS> 374,499
<OTHER-EXPENSES> 46,638
<LOSS-PROVISION> 405
<INTEREST-EXPENSE> 367
<INCOME-PRETAX> 15,716
<INCOME-TAX> 5,029
<INCOME-CONTINUING> 10,687
<DISCONTINUED> (13,210)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,523)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
