<PAGE>
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 25, 1998
------------------
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 30, 1998, SCIENTIFIC-ATLANTA, INC. HAD OUTSTANDING 74,946,685
SHARES OF COMMON STOCK.
1 of 12
<PAGE>
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 25, September 26,
1998 1997
------------ ------------
<S> <C> <C>
SALES $257,478 $294,501
-------- --------
COSTS AND EXPENSES
Cost of sales 187,109 204,273
Sales and administrative 38,789 41,099
Research and development 29,291 26,750
Interest expense 167 115
Interest (income) (2,102) (1,101)
Other (income) expense, net (17,196) (185)
-------- --------
Total costs and expenses 236,058 270,951
-------- --------
EARNINGS BEFORE INCOME TAXES 21,420 23,550
PROVISION (BENEFIT) FOR INCOME TAXES
Current (6,487) 6,971
Deferred 12,913 94
-------- --------
NET EARNINGS $ 14,994 $ 16,485
======== ========
EARNINGS PER COMMON SHARE
BASIC $ 0.19 $ 0.21
======== ========
DILUTED $ 0.19 $ 0.21
======== ========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING
BASIC 79,216 78,248
======== ========
DILUTED 80,649 79,926
======== ========
DIVIDENDS PER SHARE PAID $ 0.015 $ 0.015
======== ========
</TABLE>
SEE ACCOMPANYING NOTES
2 of 12
<PAGE>
SCIENTIFIC-ATLANTA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
<TABLE>
<CAPTION>
In Thousands
----------------------------
September 25, June 26,
1998 1998
------------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $147,605 $175,392
Marketable securities 113,631 95,947
Receivables, less allowance for doubtful
accounts of $9,996,000 at September 25
and $10,052,000 at June 26 254,201 254,419
Inventories 181,908 159,545
Deferred income taxes 3,578 18,062
Other current assets 18,689 13,133
-------- --------
TOTAL CURRENT ASSETS 719,612 716,498
-------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost
Land and improvements 21,488 20,621
Buildings and improvements 39,235 37,316
Machinery and equipment 201,560 193,894
-------- --------
262,283 251,831
Less-Accumulated depreciation and amortization 100,019 91,804
-------- --------
162,264 160,027
-------- --------
COST IN EXCESS OF NET ASSETS ACQUIRED 8,600 8,825
-------- --------
OTHER ASSETS 57,082 54,792
-------- --------
TOTAL ASSETS $947,558 $940,142
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt and current maturities of long-term debt $ 1,294 $ 726
Accounts payable 118,749 103,629
Accrued liabilities 130,828 139,011
Income taxes currently payable 3,338 15,302
-------- --------
TOTAL CURRENT LIABILITIES 254,209 258,668
-------- --------
LONG-TERM DEBT, less current maturities 819 983
-------- --------
OTHER LIABILITIES 52,069 48,495
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock, authorized 50,000,000 shares;
no shares issued -- --
Common stock, $0.50 par value, authorized
350,000,000 shares; issued 79,610,337 shares at
September 25 and 79,207,004 shares at June 26 39,805 39,604
Additional paid-in capital 200,915 195,446
Retained earnings 413,481 399,678
Accumulated translation adjustments 709 (204)
-------- --------
654,910 634,524
Less - Treasury stock, at cost
(743,163 shares at September 25 and
122,418 shares at June 26) 14,449 2,528
-------- --------
640,461 631,996
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $947,558 $940,142
======== ========
</TABLE>
SEE ACCOMPANYING NOTES
3 of 12
<PAGE>
SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------
September 25, September 26,
1998 1997
------------- -------------
<S> <C> <C>
NET CASH USED BY OPERATING ACTIVITIES $ (5,821) $(19,448)
-------- --------
INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (13,219) (10,518)
Other 149 (110)
-------- --------
Net cash used by investing activities (13,070) (10,628)
-------- --------
FINANCING ACTIVITIES:
Net short-term borrowings 537 --
Principal payments on long-term debt (133) (240)
Dividends paid (1,191) (1,176)
Issuance of common stock 3,314 8,803
Treasury shares acquired (11,423) --
-------- ---------
Net cash provided (used) by financing activities (8,896) 7,387
-------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (27,787) (22,689)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 175,392 107,143
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $147,605 $ 84,454
======== =========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 154 $ 111
======== =========
Income taxes paid, net $ 4,629 $ 6,243
======== =========
</TABLE>
SEE ACCOMPANYING NOTES
4 of 12
<PAGE>
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 company's 1998 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. Basic earnings per share were computed based on the weighted average
number of shares outstanding. Diluted earnings per share were computed
based on the weighted average number of dilutive shares of common stock
outstanding. See Exhibit 11.
C. Inventories consist of the following: September 25, June 26,
1998 1998
------------ --------
Raw materials and work-in-process $123,333 $113,703
Finished goods 58,576 45,842
-------- --------
Total inventory $181,908 $159,545
======== ========
D. During the quarter ended September 25, 1998, the company acquired 601,000
shares of its common stock for $11,423 and acquired an additional 38,111
shares primarily from the payment in stock rather than cash by employees
of tax withholdings on restricted stock which vested. Subsequent to the
end of the first quarter, the company acquired an additional 4,047,000
shares for $53,805. During the quarter ended September 26, 1997, the
company obtained 70,006 shares of its common stock, primarily from the
cancellation of unvested, restricted stock grants. The company re-issues
these shares under the company's stock option plans, 401(k) plan,
employee stock purchase plan and other stock-based employee compensation
arrangements.
E. Income taxes paid of $6,243 in the first quarter of fiscal 1998 included
approximately $4,900 of payments in connection with the filing of amended
federal income tax returns.
F. Other (income) expense for the quarter ended September 25, 1998 included
an $18,000 pre-tax gain from the adjustment of the company's investment
in Broadcom Corporation (Broadcom) to market value as required by
generally accepted accounting principles, and the results of foreign
currency transactions and partnership activities and net gains from
rental income and other miscellaneous items. Subsequent to the end of the
quarter, the company sold one million shares of its Broadcom investment
at an average price per share that was less than the per share market
value as of September 25, 1998, resulting in a pre-tax loss of $10,880 or
approximately $0.10 per Scientific-Atlanta share in the second quarter.
The valuation associated with this event will be recorded in the
company's second quarter results. Management is not currently able to
estimate the amount to be realized from the ultimate sale of the
company's remaining investment in Broadcom. There were no significant
items in other (income) expense in the quarter ended September 26, 1997.
5 of 12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
- -------------------
Scientific-Atlanta had stockholders' equity of $640.5 million and cash on
hand was $147.6 million at September 25, 1998. Cash decreased $27.8 million
during the quarter as increases in inventory levels, reductions in accrued
expenses and income taxes payable, expenditures for equipment and the
acquisition of shares of the company's common stock exceeded cash generated from
earnings and the issuance of common stock. The current ratio was 2.8:1 at
September 25, 1998, unchanged from June 26, 1998. At September 25, 1998, total
debt was $2.1 million or less than one percent of total capital invested. 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 25, 1998 were $257.5 million, or 13
percent lower than last year's first quarter sales, as weakness in international
markets and delays in customers' roll-outs of their digital cable networks
continued to negatively impact sales. International sales were approximately $54
million, or 21 percent of total sales, compared with $116 million, or 40 percent
of total sales, in last year's first quarter. Compared to last year's first
quarter, International sales were down $62 million, or 54 percent, with major
declines in all non-domestic regions, including a $38 million decline in Asia
Pacific. Domestic sales grew approximately $24 million year over year, or 13
percent, but the growth was not sufficient to overcome the decline in
international sales. The reduction in international sales was due primarily to
softness in Satellite and Transmission Network Systems. The shortfall in
Satellite Network Systems was caused by delays in shipments of PowerVu(R)
digital compression systems in India, the loss or deferral of customer funding
for some orders in Eastern Europe and Asia Pacific, and by the slowness in cable
TV related satellite activities abroad. The company expects to continue to
experience softness in Satellite Network Systems because of its significant
reliance on international markets. The company's Transmission Network Systems
was impacted in Latin America, where continued delay in the issuance of cable
licenses in Brazil caused a delay in deployments in that country, and in Europe
where there were delays in certain new system deployments.
As anticipated and announced previously, sales of analog set-tops declined
in response to the introduction of two-way digital technology. The company
expected a decline in analog sales as cable operators establish the ideal mix of
analog and digital services in each cable system. However, the company had a
book to bill ratio greater than one in both the analog and digital businesses.
Sales of digital products increased, but the increase was not sufficient to
fully offset the anticipated reduction in analog sales, resulting in an
additional net decline in subscriber sector sales of $20 million over the fourth
quarter of fiscal 1998. Delays in customers' launch plans resulted in lower
than anticipated digital set-top shipments. These delays resulted from system
integration and implementation cycles that took longer than expected and a shift
in focus from sequential deployment of a limited number of cable systems, to
widespread simultaneous roll-outs of digital services. This shift resulted in
greater-than-expected sales of digital headends to major cities while postponing
the deployment of digital set-tops.
Gross margins were 27.3 percent, 3.3 percentage points lower than the prior
year. The main factors contributing to this margin erosion were reduced volumes
and the under-utilization of satellite manufacturing capacity.
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 $29.3 million, or 11 percent of sales,
reflecting the company's continued investment in research and development
programs to support new product initiatives. During the quarter ended September
25, 1998, the company capitalized $0.6 million of software development costs.
The company capitalized $1.0 million of software development costs and $3.0
million of non-recurring engineering costs during the quarter ended September
26, 1997. The company periodically allocates engineering resources from research
and development efforts for specific customer orders. The revenue from these
orders will be recognized in future periods and, accordingly, the related costs
have been capitalized as inventory. There were no material non-recurring
engineering costs incurred, and accordingly, none were capitalized during the
quarter ended September 25, 1998.
6 of 12
<PAGE>
Research and development spending, including non-recurring engineering and
software costs which were capitalized, was $29.9 million, down $0.9 million from
last year. The year-to-year decline was due primarily to lower spending in
fiscal 1999 on cable telephony and cable modems and reduced activity in
Satellite Network Systems.
Selling and administrative expense decreased $2.3 million, or 6 percent,
from the prior year. Reduced selling expenses reflect costs associated with
lower sales volumes for Transmission and Subscriber Network Systems in the
Europe and Asia Pacific regions and significantly reduced worldwide selling
expenses for Satellite Network Systems. Administrative expenses also declined
due to lower consulting and professional spending and reductions from sold or
discontinued business. These declines were offset partially by increased
marketing efforts for digital video products.
Other (income) expense for the quarter ended September 25, 1998 included an
$18.0 million pre-tax gain from the adjustment of the company's investment in
Broadcom Corporation (Broadcom) to market value as required by generally
accepted accounting principles, and the results of foreign currency transactions
and partnership activities and net gains from rental income and other
miscellaneous items. Subsequent to the end of the quarter, the company sold one
million shares of its Broadcom investment at an average price per share that was
less than the per share market value as of September 25, 1998, resulting in a
pre-tax loss of $10.9 million or approximately $0.10 per Scientific-Atlanta
share in the second quarter. The valuation associated with this event will be
recorded in the company's second quarter results. Management is not currently
able to estimate the amount to be realized from the ultimate sale of the
company's remaining investment in Broadcom. There were no significant items in
other (income) expense in the quarter ended September 26, 1997.
The company's effective income tax rate was 30 percent for the quarter,
unchanged from the prior year.
Net earnings for the quarter ended September 25, 1998 were $15.0 million
compared to $16.5 million in the prior year. Lower sales volume and lower
gross margins as a percent of sales, offset by the $18.0 million pre-tax gain
discussed above, were the primary factors in the year-to-year decline in net
earnings.
YEAR 2000
- ---------
The company, like most other major companies, is currently addressing a
universal problem commonly referred to as "Year 2000 Compliance," which
relates to the ability of computer programs and systems to properly recognize
and process date sensitive information before and after January 1, 2000. The
following discussion is based on information currently available to the company.
The company has analyzed and continues to analyze its internal information
technology ("IT") systems ("IT systems") to identify any computer programs
that are not Year 2000 compliant and implement any changes required to make such
systems Year 2000 compliant. The company believes that its critical IT systems
currently are capable of functioning without substantial Year 2000 Compliance
problems. Of the non-critical, but important, IT systems that are not currently
Year 2000 Compliant, the company believes such IT systems will be Year 2000
compliant in a time frame that will avoid any material adverse effect on the
company. Also, the company does not believe that the expenditures related to
replacing or upgrading any of its IT systems to make them Year 2000 compliant
will have a material adverse effect on the financial condition of the company.
The company has identified only two IT systems (E-mail and electronic calendar)
that must be replaced due to Year 2000 concerns, and the company already had
plans to replace these IT systems with one system providing increased
functionality.
The company has evaluated its critical equipment and critical systems that
contain embedded software, such as microcontrollers ("Non-IT systems"), and the
company believes that all of its critical Non-IT systems are capable of
functioning without substantial Year 2000 Compliance problems.
The company plans to test its IT systems and Non-IT systems, commencing in
the first calendar quarter of 1999.
7 of 12
<PAGE>
Certain products currently sold by the company contain computer programs
that perform date functions or date calculations. The company has evaluated most
of its products and is continuing to evaluate its other products, and, based on
its investigation to date, the company believes that the products it currently
sells (except the System Manager product currently being sold with the recently-
developed System Release 4.5 software) are Year 2000 compliant, provided that
they are upgraded to include all recommended engineering changes. However, the
company's products are often used by its customers in systems that contain third
party products or products supplied by the company in prior years, such as the
System Manager products. Therefore, even though the company's current products
may be Year 2000 compliant, the failure of such third party products or
historical company-supplied products to be Year 2000 compliant, or to properly
interface with the company's current products, may result in a system failure.
Certain products that the company no longer offers for sale are not Year 2000
compliant, and the company has no plans to upgrade them. However, the company
does have a plan for helping its customers upgrade their System Manager products
and related components to System Release 4.6 software which is currently in the
final stages of development. Such System Release 4.6 software is expected to
remedy the Year 2000 problems of System Manager products historically sold by
the company to its customers. Because some customers may be using obsolete
versions of the System Manager products, they may also need to purchase
equipment to solve their Year 2000 problems. A customer's failure to upgrade its
System Manager products and related equipment to System Release 4.6 software and
related equipment may result in such customer having critical Year 2000
problems. Under certain limited circumstances, the company may incur expense to
help remedy such customer's critical Year 2000 failure.
The company is investigating each of its significant vendors, suppliers,
financial service organizations, service providers and customers to confirm that
the company's operations will not be materially adversely affected by the
failure of any such third party to have Year 2000 compliant computer programs.
Regardless of the responses that the company receives from such third parties,
the company is establishing contingency plans to reduce the company's exposure
resulting from the non-compliance of third parties. First, the company plans to
build inventories of critical and/or important components prior to January 1,
2000, and thereby decrease the company's dependence on suppliers that are not
Year 2000 compliant. Second, the company plans to send hard copies of
"Schedules of Ordered Products and Delivery Dates" to its major customers,
commencing in the third calendar quarter of 1999. Such Schedules should enable
customers to accept ordered products after January 1, 2000, even if their
internal computer systems are not operating properly.
The company estimates that, through October 30, 1998, it has spent $250,000
to remediate Year 2000 issues in its IT systems, and the company estimates that
it will spend an additional $450,000 to remediate Year 2000 issues in its IT
systems. Additionally, the company is accelerating into fiscal 1999 the planned
replacement of its E-mail software and electronic calendar software because such
software has Year 2000 problems. The cost of the replacement software, including
installation and training related thereto, is estimated to be $1.8 million. For
the development and deployment of System Release 4.6 software to remedy Year
2000 problems of System Manager products sold by the company, the company has
spent, through October 30, 1998, $1,400,000 and estimates it will spend an
additional $1,567,000 to complete such software development and deployment. All
of such expenditures are included in the budgets of the various departments of
the company tasked with various aspects of the Year 2000 project. No IT projects
have been deferred due to IT's Year 2000 efforts.
The company has approached the Year 2000 project in phases. Phase I of the
project involved identification of all software used or sold by the company,
identification of all significant vendors, and establishment of a senior
management committee (composed of the General Counsel, the Chief Financial
Officer and the Chairman of the Corporate Operating Committee) to oversee the
project. Phase I was completed in the second calendar quarter of 1998. Phase II
of the project involves (a) evaluation of each significant vendor and evaluation
of major customers through letters and questionnaires (b) communication with
customers concerning any products currently or recently sold by the company that
have Year 2000 issues, and (c) evaluating the company's most reasonably likely
worst case Year 2000 scenarios and contingency planning related thereto. Phase
II is in process and most of the tasks described in subparagraphs (a) and (b)
above have been completed; Phase II is expected to be completed in the fourth
calendar quarter of 1998. Phase III involves testing of the company's IT systems
and Non-IT systems to confirm Year 2000 compliance and/or discover any
overlooked Year 2000 problems. Phase III should be completed in the first
calendar quarter of 1999. Last, Phase IV involves implementation of the
company's contingency plans. Such plans are expected to be implemented in the
third calendar quarter of 1999.
The company does not currently believe that any of the foregoing will have
a material adverse effect on its financial condition or its results of
operations. However, the process of evaluating the company's products and third
party products and systems is ongoing. Although not expected, failures of
critical suppliers, critical customers,
8 of 12
<PAGE>
critical IT systems, critical Non-IT systems, or products sold by the company
(including any delay in the deployment of System Releases 4.5 and 4.6) could
have a material adverse effect on the company's financial condition or results
of operations. As widely publicized, Year 2000 Compliance has many issues and
aspects, not all of which the company is able to accurately forecast or predict.
There is no way to assure that Year 2000 Compliance will not have adverse
effects on the company, some of which could be material.
Many of the company's statements related to Year 2000 are forward-looking
statements and actual results could differ materially from those anticipated
above. The company is relying on the investigations and statements of many
employees, consultants and third parties in making the above forward-looking
statements and such investigations or statements may not be accurate.
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 registered trademark of Scientific-Atlanta, Inc.
ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
- ------- ---------------------------------------------------------
The company enters into foreign exchange forward contracts to hedge certain
firm commitments and assets denominated in currencies other than the U.S.
dollar, primarily Japanese yen. These contracts are for periods consistent with
the exposure being hedged and generally have maturities of one year or less. To
qualify as a hedge, the item to be hedged must expose the company to inventory
pricing or asset devaluation risk and the related contract must reduce that
exposure and be designated by the company as a hedge. Gains and losses on
foreign exchange forward contracts, including cost of the contracts, are
deferred and recognized in income in the same period as the hedged transactions.
The company's foreign exchange forward contracts do not subject the company's
results of operations to risk due to exchange rate fluctuations because gains
and losses on these contracts generally offset losses and gains on the exposure
being hedged. The company does not enter into any foreign exchange forward
contracts for speculative trading purposes. If a foreign exchange forward
contract did not meet the criteria for a hedge, the company would recognize
unrealized gains and losses as they occur.
Firmly committed purchase exposure and related derivative contracts through
September 25, 1999 are as follows:
<TABLE>
<CAPTION>
JAPANESE CANADIAN
YEN DOLLAR
--------- ---------
(In thousands, except
per dollar amounts)
<S> <C> <C>
Firmly committed purchase
contracts 8,256,000 4,970
Notional amount of forward
exchange contracts 4,559,000 4,970
Average contract amount
(Foreign currency/
United States dollar) 130.87 1.49
</TABLE>
The company has no derivative exposure beyond September 25, 1999.
9 of 12
<PAGE>
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
99 Cautionary Statements
(b) No reports on Form 8-K were filed during the quarter ended September
25, 1998.
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 9, 1998 /s/ Wallace G. Haislip
---------------- ------------------
Wallace G. Haislip
Senior Vice President-Finance,
Chief Financial Officer and Treasurer
(Principal Financial Officer and
duly authorized signatory
of the Registrant)
10 of 12
<PAGE>
EXHIBIT 11
SCIENTIFIC-ATLANTA, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FISCAL 1999 FISCAL 1998
----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE PER SHARE
EARNINGS SHARES AMOUNT EARNINGS SHARES AMOUNT
-------- ---------- --------- -------- ---------- ---------
BASIC EARNINGS PER
COMMON SHARE
Net earnings $14,994 79,216 $ 0.19 $16,485 79,248 $ 0.21
======= ====== ===== ======= ====== ====
EFFECT OF DILUTIVE STOCK
OPTIONS $ - 1,433 $ - $ - 1,678 $ -
======= ====== ===== ======= ====== ====
DILUTED EARNINGS PER
COMMON SHARE
NET EARNINGS $14,994 80,649 $ 0.19 $16,485 79,926 $ 0.21
======= ====== ===== ======= ====== ====
</TABLE>
The following information pertains to options to purchase shares of common stock
which were not included in the computation of Diluted Earnings per Common Share
because the options' exercise price was greater than the average market price of
the common shares and inclusion of the options in the earnings per share
calculation would have been anti-dilutive:
1999 1998
- -------------------------------------------------------------------------------
Number of options outstanding 2,396 956
Weighted average exercise price $23.573 $23.356
11 of 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-Q
for the quarter ended September 25, 1998, 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> JUL-02-1999
<PERIOD-START> JUN-27-1998
<PERIOD-END> SEP-25-1998
<CASH> 147,605
<SECURITIES> 113,631
<RECEIVABLES> 264,197
<ALLOWANCES> 9,996
<INVENTORY> 181,908
<CURRENT-ASSETS> 719,612
<PP&E> 262,283
<DEPRECIATION> 100,019
<TOTAL-ASSETS> 947,558
<CURRENT-LIABILITIES> 254,209
<BONDS> 819
0
0
<COMMON> 39,805
<OTHER-SE> 600,656
<TOTAL-LIABILITY-AND-EQUITY> 947,558
<SALES> 257,478
<TOTAL-REVENUES> 257,478
<CGS> 187,109
<TOTAL-COSTS> 187,109
<OTHER-EXPENSES> 29,291
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 167
<INCOME-PRETAX> 21,420
<INCOME-TAX> 6,426
<INCOME-CONTINUING> 14,994
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,994
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</TABLE>
<PAGE>
EXHIBIT 99
CAUTIONARY STATEMENTS
From time to time, the company may publish, verbally or in written form,
forward-looking statements relating to such matters as anticipated financial
performance, business prospects, technological developments, new products,
research and development activities and similar matters. In fact, this Form 10-Q
(or any other periodic reporting documents required by the 1934 Act) may contain
forward-looking statements reflecting the current views of the company
concerning potential future events or developments. The Private Securities
Litigation Reform Act of 1995 (the "Act") provides a ''safe harbor'' for
forward-looking statements. These Cautionary Statements are being made pursuant
to the provisions of the Act and with the intention of obtaining the benefits of
the "safe harbor" provisions of the Act. In order to comply with the terms of
the "safe harbor," the company cautions investors that any forward-looking
statements made by the company are not guarantees of future performance and that
a variety of factors could cause the company's actual results and experience to
differ materially from the anticipated results or other expectations expressed
in the company's forward-looking statements. The risks and uncertainties which
may affect the operations, performance, development and results of the company's
business include, but are not limited to, the following: uncertainties relating
to the development and ownership of intellectual property; uncertainties
relating to the ability of the company and other companies to enforce their
intellectual property rights; uncertainties relating to economic conditions
(including, but not limited to, the continued weak economic conditions in the
Asia Pacific region and the Latin America region); 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 development and/or deployment of new
products, including digital set-top products and the applications to be used on
such digital set-top products; 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; reliance on software programs used by the company or its suppliers
containing problems related to computations that must be made in 1999, 2000, and
beyond ("Year 2000 Problems") and Year 2000 Problems that may exist in
products currently or historically sold to customers of the company; 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.
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