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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended July 1, 1994
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 incorporation (I.R.S. Employer Identification Number)
or organization)
One Technology Parkway, South
Atlanta, Georgia 30092-2967
(Address of principal executive offices) (Zip Code)
404-903-5000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
------------------- on which registered
Common Stock, par value -------------------
$0.50 per share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant at September 8, 1994 was approximately $1,675,447,261.
As of September 8, 1994, the registrant had outstanding 75,687,468 shares of
common stock (adjusted for the 2-for-1 stock split declared in August, 1994).
DOCUMENTS INCORPORATED BY REFERENCE:
Specified portions of the Proxy Statement for the registrant's 1994 Annual
Meeting of Shareholders are incorporated by reference to the extent indicated
in Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
GENERAL
Scientific-Atlanta, Inc. (the "Company") designs, manufactures and
markets a variety of standard and proprietary commercial electronic signal
generating and receiving equipment. The Company's products connect information
generators with information users via broadband terrestrial and satellite
networks, and include applications for the converging cable, telephone, and
data networks.
The Company identified Communications and Instrumentation as its major
business segments in prior years and provided business segment information
related to sales, operating profit, assets, capital expenditures, depreciation
and amortization and backlog. The customer base, marketing strategies,
technology to support new product development and manufacturing processes for
utility load management products and measurement and control systems have
recently become more closely aligned with those of the Communications segment
and, accordingly, management and operations which support these products and
services were moved into the Communications segment from the Instrumentation
segment.
In addition, sales of electronic equipment such as sonar and microwave
energy products, particularly sales of government and defense related products,
supplied by the Instrumentation segment have recently declined. As a result,
the Company now operates primarily in one business segment, Communications,
providing satellite and terrestial based networks to a range of customers and
applications and network management and systems integration to add value to
those networks. This segment represents approximately 90 percent of
consolidated sales, operating profit and identifiable assets.
The Company has evolved from a manufacturer of electronic test
equipment for antennas and electronics for the cable industry to a producer of
a wide variety of products for terrestrial and satellite communications
networks, including digital video, voice and data communications products. The
Company's products include receivers, transmitters, distribution amplifiers,
modulators, demodulators, signal encoders and decoders, controllers, signal
processors, set-top (home communications) terminals, digital audio terminals,
fiber optic distribution equipment, and satellite earth station antennas.
These products, and integrated systems and networks using these and other
products, are sold to CATV system operators, telephone companies,
communications carriers, communications network operators, and multi-facility
business organizations which use communications satellites for intracompany
communications. Sales are also made to independent system integrators,
distributors and dealers who resell to some of the above types of customers.
The Company sells modulators, demodulators and signal processors for
video and audio receiving stations (often referred to as "headend" systems),
products for distributing communications signals by coaxial cable and fiber
optics from headend systems to subscribers, set-top terminals that enable
television sets to receive all channels transmitted by system operators, and
interdiction equipment which enables connections, disconnections and changes in
service to be made from the headend. The Company's set-top terminals include
units which are addressable from the headend system so as to permit control of
channel authorizations, including authorizations for pay-per-view events,
impulse ordering and automatic recording of billing information at the cable
operator's central facility, and menu-driven volume controllable units. The
Company manufactures equipment for transmitting compact-disc quality music
programming via satellite and cable media.
Sales of set-top terminals constituted approximately 21 % of the
Company's total sales for fiscal year 1994, and approximately 18 % and 20 % of
such sales in each of the fiscal years 1993 and 1992, respectively.
Proprietary software used in the terminals, as well as system manager software
at the headend system, was developed by the Company and is updated from time to
time. The Company's new digital home communications terminals will enable
subscribers to access new services such as advanced pay-for-view ordering of
special events and movies, fully interactive home shopping services, electronic
program guides and more.
Other computer-based systems designed and delivered by the Company are
used to distribute video information for other business users. These include
airline information systems which link video terminals and cameras in an
airport under a central control.
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The Company's products, both analog and digital, are being utilized by
the Company's traditional cable operator customers to upgrade their networks to
provide new services and by the Regional Bell Operating Companies to build new
video, voice and data networks. They are also utilized by electric utilities
in load management systems which monitor and control power usage and monitor
power outages.
The Company's satellite earth stations receive and transmit signals
for video, voice and data and are utilized in satellite-band telephone, data
and television distribution networks. Some of these earth stations are part of
national and international communications systems which communicate by means of
a satellite with earth stations in other countries or with other earth stations
in the same national network. Earth stations in these systems may be connected
with local telephone, teletype, television or other terrestrial communications
networks. The Company's earth stations, signal encoders and decoders, packet
switches and controllers are also used in private business networks for the
exchange of audio, video and data via satellite among various office,
manufacturing and sales facilities and for the delivery of television
programming to hotels, motels and apartment complexes. The Company's data
communications product offerings include private interactive data systems using
VSAT (very small aperture terminal) technology.
The Company designs, manufactures and sells digital video compression
communications products for direct satellite broadcast and cable television
systems and digital storage and retrieval products for applications such as ad
insertion for television broadcasters and cable operators. The Company's
compression products utilize the open architecture MPEG-2 technology developed
by an international standards group. MPEG-2 digital equipment allows cable,
telephone, computer and consumer electronics products and systems to operate
together across networks and in the home.
The Company's satellite products and systems include tracking and
telemetry equipment, earth observation satellite ground stations, shipboard
and command telephony and facsimile communications products and intercept
systems. The Company produces telemetry instruments, radar platforms, special
receivers, special measurement devices and other equipment used to track
aircraft, missiles, satellites and other moving objects and to communicate with
and receive and record various measurements and other data from the object.
The Company develops services and applications which can be utilized
by its customers on their terrestrial and satellite-based networks.
Applications recently introduced include a system which enables power companies
to detect power failures automatically, telephony capability over cable
networks, interactive systems for video conferencing, retail banking and
distance learning and interactive video games.
OTHER PRODUCTS AND SERVICES.
The Company produces advanced products and systems that measure,
analyze or control processes associated with acoustics, signal analysis and
machinery diagnostics. Their applications range from sonars and anti-submarine
warfare analysis tools to vibration and acoustic analyzers used to measure jet
engine vibration, helicopter rotor wing trim and balance and non-intrusive
medical testing. Products include acoustic systems, machinery diagnostic
systems, signal processors and trainers and are used in engineering design,
structural evolution, accoustic and electronic testing and turbine engine
balancing.
The Company's microwave instrumentation systems are used to design and
manufacture antennas for communication and radar systems. Products include
pattern recorders, receivers, positioners and various display units, which
measure, record and display various characteristics of antennas such as signal
pattern, gain, phase, amplitude and frequency.
MARKETING AND SALES
The Company's products are sold primarily through its own sales
personnel who work out of offices in Atlanta and other metropolitan areas in
the United States. Certain products are also marketed in the United States
through independent sales representatives and distributors. Sales in foreign
countries are made through wholly-owned subsidiaries and branch offices, as
well as through independent distributors and sales representatives. The
Company's management personnel are also actively involved in marketing and
sales activities.
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GOVERNMENT AND FOREIGN SALES
The Company's sales to units of the United States Government
constituted 11% of the Company's sales for fiscal year 1993 and 12% for fiscal
year 1992. Such sales were less than 10% during fiscal year 1994.
The Company's sales to customers in foreign countries constituted 33%,
26% and 27% of the Company's total sales for fiscal years 1994, 1993 and 1992,
respectively. Substantially all of these sales were export sales. Foreign
subsidiary sales were not material for any of these fiscal years. Sales to no
one geographic area constituted 10 % of the Company's total sales during those
years.
BACKLOG
The Company's backlog consists of unfilled customer orders believed to
be firm and long-term contracts which have not been completed. The Company's
backlog as of July 1, 1994 and July 2, 1993 was $405,860,000 and $272,629,000,
respectively.
The Company believes that approximately 90 % of the backlog existing
at July 1, 1994 will be shipped within the succeeding fiscal year. The Company
includes in its backlog with respect to long-term contracts only amounts
representing orders currently released for production. The amount contained in
backlog for any contract or order may not be the total amount of the contract
or order. The amount of the Company's backlog at any time does not reflect
expected revenues for any fiscal period.
PRODUCT RESEARCH AND DEVELOPMENT AND PATENTS
The Company conducts an active research and development program to
strengthen and broaden its existing products and systems and to develop new
products and systems. The Company's development strategy is to identify
products and systems which are, or are expected to be, needed by substantial
numbers of customers in the Company's markets and to allocate a greater share
of its research and development resources to areas with the highest potential
for future benefits to the Company. In addition, the Company develops specific
applications related to its present technology. Expenditures in fiscal 1994,
1993 and 1992 were principally for development of commercial cable and
telephone digital products, satellite network products and interactive data
communications products. In fiscal 1994, 1993 and 1992, the Company's research
and development expenses were approximately $60,417,000, $60,161,000 and
$52,267,000, respectively.
The Company holds patents with respect to certain of its products and
actively seeks to obtain patent protection for significant inventions and
developments.
MANUFACTURING
The Company develops, designs, fabricates, manufactures, assembles or
acquires its products. Manufacturing operations range from complete assembly
of a particular product by one individual or small group of individuals to
semi-automated assembly lines for volume production. Because many of the
Company's products include precision electronic components requiring close
tolerances, the Company maintains rigorous and exacting test and inspection
procedures designed to prevent production errors, and also constantly reviews
its overall production techniques to enhance productivity and reliability. The
Company's set-top terminals and certain pole-line hardware for the CATV
industry are manufactured by contract vendors with high-quality, high-volume
production facilities. In addition to such manufacturing by contract vendors,
the Company plans to commence its own manufacturing of set-top terminals in
1995.
MATERIALS AND SUPPLIES
The materials and supplies purchased by the Company are standard
electronic components, such as custom integrated circuits, wire, circuit
boards, transistors, capacitors and resistors, all of which are produced by a
number of manufacturers. The principal suppliers of the Company's set-top
terminals and active solid state components are Matsushita Electronic
Components Co., Ltd. and Motorola, Inc., respectively. The Company also
purchases aluminum and steel, including castings and semi-fabricated items
produced by a variety of sources. The Company considers its sources of
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supply to be adequate and is not dependent upon any single supplier, except for
Matsushita Electronic Components Co., Ltd., for any significant portion of the
materials used in the products it manufactures.
EMPLOYEES
The Company had approximately 4,000 employees on July 1, 1994. The
Company believes its employee relations are satisfactory.
COMPETITION
The businesses in which the Company is engaged are highly competitive.
The Company competes with companies which have substantially greater resources
and a larger number of products, as well as with smaller specialized companies.
Some of the Company's customers are in businesses closely related to the
production of such products and are, therefore, potential competitors of the
Company. The Company believes that its ability to compete successfully results
from its marketing strategy, engineering skills, ability to provide quality
products at competitive prices and broad coverage by its sales personnel.
ITEM 2. PROPERTIES
The Company owns office and manufacturing facilities in metropolitan
Atlanta, Georgia, and San Diego, California, which comprise four plants
containing a total of approximately 412,400 square feet.
The Company also owns approximately 128 acres of land in Gwinnett
County, Georgia, where antenna test ranges and a hub station used in providing
interactive data communications services are located and 219 acres of land in
Walton County, Georgia, held for future antenna test range expansion. The
Company presently owns one building and leases two buildings in San Diego
County, California, which are not required for present operations and are under
sublease to other tenants.
Additional major manufacturing facilities containing an aggregate of
approximately 200,800 square feet are leased by the Company at the following
locations under leases expiring (including renewal options) from 1995 to 2002:
LOCATION APPROXIMATE FOOTAGE
-------- -------------------
Doraville (Atlanta), Georgia 63,500
Melbourne, Florida 10,000
Toronto, Ontario 16,000
Norcross (Atlanta), Georgia 53,500
Vancouver, British Columbia 57,800
The Company also leases office and warehouse space in several
buildings in the Atlanta, Georgia, and Tempe, Arizona areas and leases sales
and service offices in 25 U.S. and foreign cities. The Company is currently
expanding its manufacturing capabilities, both in the U. S. and abroad, to
meet the increased demand for its products.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings which may or could
have a material adverse impact on the Company or its operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the last quarter of its fiscal year ended July 1, 1994.
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EXECUTIVE OFFICERS OF THE COMPANY
The following persons are the executive officers of the Company:
Executive
Name Age Officer Since Present Office
---- --- ------------- --------------
James F. McDonald 54 1993 President and
Chief Executive Officer
John E. Breyer 59 1989 Senior Vice President
and Group President
William E. Eason, Jr. 51 1993 Senior Vice President,
General Counsel and
Corporate Secretary
Dr. H. Allen Ecker 58 1979 Senior Vice President,
Technical Operations
John H. Levergood 60 1992 Senior Vice President
and Group President
Raymond D. Lucas 56 1989 Senior Vice President,
Strategic Operations
Jack W. Simpson, Sr. 52 1993 Senior Vice President
and Group President
Harvey A. Wagner 53 1994 Senior Vice President,
Chief Financial Officer
and Treasurer
Julian W. Eidson 55 1978 Vice President
and Controller
Brian C. Koenig 47 1988 Vice President, Human Resources
Each executive officer is elected annually and serves at the pleasure
of the Board of Directors.
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Mr. McDonald was elected President and Chief Executive Officer of the
Company effective July 15, 1993. He was a general partner of J.H. Whitney &
Company, a private investment firm, from 1991 until his employment by the
Company. From 1989 to 1991 he was President and Chief Executive Officer of
Prime Computer, Inc., a supplier of CAD/CAM software and computer systems.
Prior to that time he was President and Chief Operating Officer of Gould, Inc.,
a computer and electronics company (1984 to 1989) and held a variety of
positions with IBM Corporation (1963 to 1984).
Mr. Eason has been a partner at Paul, Hastings, Janofsky & Walker
since 1989. He has been Secretary of the Company since August, 1993, and
became Senior Vice President and General Counsel in February, 1994. Paul,
Hastings, Janofsky & Walker performs legal services for the Company. Mr. Eason
receives a fixed salary from the Firm for work which he performs for clients of
the Firm other than the Company, but has no interest in the Firm's earnings and
profits.
Mr. Levergood re-joined the Company in December 1992. He had
previously been employed by the Company in various managerial positions (most
recently as Chief Operating Officer) until December 1989. From January through
June, 1990, he was President and Chief Operating Officer of Dowden
Communications, an operator of cable television systems. He was an independent
communications consultant from June, 1990 until he re-joined the Company in
1992.
Mr. Simpson was President and Chief Executive Officer of Mead Data
Central, Inc., an electronic publisher, from June, 1982 through November, 1992.
From December, 1992 until joining the Company in October, 1993, he was
President of Infobyte, Inc., a consulting firm.
Mr. Wagner was Vice President-Finance and Chief Financial Officer of
Computervision Corporation, a supplier of CAD/CAM/CAE software and services
from September, 1989 until he joined the Company in June, 1994.
All other executive officers have been employed by the Company in the
same or similar capacities for more than five years. There are no family
relationships among the executive officers.
PART II
Item 5. Market for the Registrant's Common Stock and Related Matters
The Common Stock of the Company is traded on the New York Stock
Exchange (symbol SFA). The approximate number of holders of record of the
Company's Common Stock at September 8, 1994 was 6,021.
It has been the policy of the Company to retain a substantial portion
of its earnings to finance the expansion of its business. In 1976 the Company
commenced payment of quarterly cash dividends and intends to consider the
continued payment of dividends on a regular basis; however, the declaration of
dividends is discretionary with the Board of Directors, and there is no
assurance regarding the payment of future dividends by the Company.
Information as to the high and low stock prices and dividends paid for
each quarter of fiscal years 1994 and 1993 is included in Note 5 of the Notes
to Financial Statements included in this Report.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data is set forth on page 20 of this Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion of Consolidated Statement of Financial
Position, Consolidated Statement of Earnings, and Consolidated Statement of
Cash Flows are set forth on pages 12, 14, 15 and 18 of this Report.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company and notes
thereto, schedules containing certain supporting information and the report of
independent public accountants are set forth on pages 11 through 32 of this
Report. See Part IV, Item 14 for an index of the statements, notes and
schedules.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
Pursuant to Instruction G(3) to Form 10-K, the information required in
Items 10-13 (except for the information set forth at the end of Part I with
respect to Executive Officers of the Company) is incorporated by reference from
the Company's definitive proxy statement for the Company's 1994 Annual Meeting
of shareholders, which is expected to be filed pursuant to Regulation 14A
within 120 days after the end of the Company's 1994 fiscal year.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this Report:
(1) The consolidated financial statements listed below are
included on pages 11 through 29 of this Report.
Report of Independent Public Accountants
Consolidated Statement of Financial Position
as of July 1, 1994 and July 2, 1993
Consolidated Statement of Earnings for each of the
three years in the period ended July 1, 1994
Consolidated Statement of Cash Flows for each of the
three years in the period ended July 1, 1994
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules:
Page
----
Schedule VIII Valuation and Qualifying Accounts for each 30
of the three years in the period ended
July 1, 1994
Schedule IX Short-Term Borrowings for each of the 31
three years in the period ended July 1,
1994
Schedule X Supplementary Income Statement Information 32
for each of the three years in the period
ended July 1, 1994
All other Schedules called for under Regulation S-X are not submitted because
they are not applicable or not required or because the required information is
not material or is included in the financial statements or notes thereto.
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(3) Exhibits:
(3) (a) The following is incorporated by reference to the registrant's
report on Form 10-K for its fiscal year ended June 29, 1990:
(i) Amended and Restated Articles of Incorporation, as
amended.
(b) By-laws of registrant as currently in effect.
(10) Material Contracts -
(a) The following material contract is incorporated by reference
to the registrant's report on Form 10-Q for its fiscal quarter
ended March 31, 1987:
(i) Agreement pertaining to the compensation of Sidney
Topol. *
(b) The following material contract is incorporated by reference
to the registrant's report on Form 10-Q for its fiscal quarter
ended December 29, 1989:
(i) Scientific-Atlanta, Inc. Non-Employee Directors Stock
Option Plan. *
(c) The following material contracts are incorporated by
reference to the registrant's report on Form 10-K for the
fiscal year ended June 26, 1992:
(i) Scientific-Atlanta, Inc. 1981 Incentive Stock Option Plan,
as amended.*
(ii) 1985 Executive Deferred Compensation Plan of Scientific-
Atlanta, Inc., as amended.*
(iii) Scientific-Atlanta, Inc. Annual Incentive Plan for
Key Executives, as amended.*
(iv) Scientific-Atlanta, Inc. Long Term Incentive Compensation
Plan, as amended.*
(v) Scientific-Atlanta, Inc. 1978 Non-Qualified Stock Option
Plan for Key Employees, as amended.*
(d) The following material contract is incorporated by reference
to the registrant's report on Form 10-K for the fiscal year
ended July 2, 1993:
(i) Scientific-Atlanta, Inc. 1992 Employee Stock Option Plan.*
(e) Scientific-Atlanta, Inc. Supplemental Executive Retirement
Plan. *
(f) 1994 Scientific-Atlanta, Inc. Executive Deferred Compensation
Plan.*
(g) Form of Severance Protection Agreement between the Registrant
and certain officers and key employees.*
(h) Scientific-Atlanta, Inc. Retirement Plan for Non-Employee
Directors, as amended.*
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(11) Computation of Earnings per Share of Common Stock
(23) Consent of Independent Public Accountants
(27) Financial Data Schedule
______________________
* Indicates management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the period covered
by this report.
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Scientific-Atlanta, Inc.:
We have audited the accompanying consolidated statement of financial position
of Scientific-Atlanta, Inc. (a Georgia corporation) and subsidiaries as of July
1, 1994 and July 2, 1993 and the related consolidated statements of earnings
and cash flows for each of the three years in the period ended July 1, 1994
appearing on pages 13, 17 and 19, respectively. These financial statements and
the schedules referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Scientific-Atlanta, Inc. and
subsidiaries as of July 1, 1994 and July 2, 1993 and the results of their
operations and their cash flows for each of the three years in the period ended
July 1, 1994 in conformity with generally accepted accounting principles.
As explained in Notes 9 and 10 to the financial statements, effective June 27,
1992, the Company changed its method of accounting for income taxes,
postretirement and postemployment benefits.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in
Item 14(a)(2) of this Form 10-K are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Atlanta, Georgia, ARTHUR ANDERSEN LLP
August 4, 1994
REPORT OF MANAGEMENT
The management of Scientific-Atlanta, Inc. (the Company) has the responsibility
for preparing the accompanying financial statements and for their integrity and
objectivity. The statements, which include amounts that are based on
management's best estimates and judgments, have been prepared in conformity
with generally accepted accounting principles and are free of material
misstatement. Management also prepared the other information in the Form 10-K
and is responsible for its accuracy and consistency with the financial
statements.
The Company maintains a system of internal control over the preparation of its
published annual and interim financial statements. It should be recognized
that even an effective internal control system, no matter how well designed,
can provide only reasonable assurance with respect to the preparation of
reliable financial statements; further, because of changes in conditions,
internal control system effectiveness may vary over time.
Management assessed the Company's system of internal control in relation to
criteria for effective internal control over the preparation of its published
annual and interim financial statements. Based on its assessment, it is
management's opinion that its system of internal control as of July 1, 1994 is
effective in providing reasonable assurance that its published annual and
interim financial statements are free of material misstatement.
As part of their audit of our financial statements, Arthur Andersen LLP
considered certain elements of our system of internal controls in determining
their audit procedures for the purpose of expressing an opinion on the
financial statements.
The audit committee of the board of directors is composed solely of outside
directors and is responsible for recommending to the board the independent
public accountants to be retained for the year, subject to stockholder
approval. The audit committee meets three times each year to review with
management the Company's system of internal accounting controls, audit plans
and results, accounting principles and practices, and the annual financial
statements.
/s/ James F. McDonald /s/ Harvey A. Wagner
- --------------------- --------------------
James F. McDonald Harvey A. Wagner
President and Chief Executive Officer Senior Vice President and Chief
Financial Officer
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MANAGEMENT'S DISCUSSION OF CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Scientific-Atlanta's financial position was strong at the end of 1994 with
stockholders' equity of $395.6 million and cash on hand of $123.4 million.
The current ratio of 2.5:1 at July 1, 1994 compared to 3.2:1 at
July 2, 1993. Cash generated from earnings and the sale of an investment in
International Cablecasting Technologies, Inc. (ICT) was used for capital
expenditures, investments in partnerships, the settlement of securities
class action litigation and to fund working capital requirements.
CASH AND CASH EQUIVALENTS at the end of 1994 were $123.4 million, up from
$103.5 million last year. This increase reflects cash generated from
operations, the sale of ICT and the issuance of stock pursuant to stock
option plans. Ending working capital, excluding cash, was $179.4 million, or
22.1 percent of sales, as compared to 24.2 percent in the prior year.
RECEIVABLES were $206.1 million at year-end, compared to $150.9 million at the
prior fiscal year-end. The increase reflects the sales growth in 1994.
Average days sales outstanding increased to 74 for 1994 from 70 for 1993.
INVENTORY TURNOVER was 4.4 times in 1994, compared to 4.6 in the prior year.
Inventories of $136.8 million at year-end were $9.4 million higher than at
the end of the prior year, reflecting the higher production and sales levels
in 1994. See Note I for details.
CURRENT DEFERRED INCOME TAXES increased $4.0 million due to increases in
nondeductible accrued liabilities.
OTHER CURRENT ASSETS, which include prepaid insurance, deposits, royalties,
license fees and other miscellaneous prepaid expenses, increased $5.8
million due to higher deposits, royalties and license fees.
NET PROPERTY, PLANT AND EQUIPMENT increased by $14.2 million in 1994 as capital
spending exceeded depreciation and disposals. Capital additions of $34.9
million included investments for increased capacity and productivity
improvements.
COST IN EXCESS OF NET ASSETS ACQUIRED decreased in 1994, reflecting
amortization of goodwill.
OTHER ASSETS, which include license fees, investments, noncurrent deferred tax
charges, intellectual property, various prepaid expenses and cash surrender
value of company-owned life insurance, increased $8.2 million in 1994 due
primarily to higher prepaid license fees. See Note 2.
TOTAL BORROWINGS at year-end amounted to $7.6 million, up $0.2 million from the
prior year. The borrowings include industrial development bonds and working
capital loans for foreign subsidiaries. Working capital borrowings increased
to support the operations of foreign subsidiaries. Details of borrowings
are shown in Note 6.
ACCOUNTS PAYABLE were $82.3 million at year-end, up from $47.2 million last
year. The increase reflects higher production and inventory levels and an
increase to 33 days in accounts payable from 28 in 1993.
ACCRUED LIABILITIES of $95.5 million include accruals for compensation,
warranty and service, customer downpayments and taxes, excluding income
taxes. Higher customer downpayments, accruals for compensation and
retirement benefits and other miscellaneous accruals were the principal
factors in the year-to-year increase. See Note 7 for details.
OTHER LIABILITIES of $41.2 million are comprised of deferred compensation,
postretirement benefit plans, postemployment benefits and other
miscellaneous accruals. See Note 8 for details.
STOCKHOLDERS' EQUITY was $395.6 million at the end of 1994, up $42.8 million
from the prior year. Net earnings of $35.0 million and the issuance of stock
grants and stock pursuant to stock option plans of $12.3 million were
partially offset by dividends of $4.5 million and a decrease in accumulated
translation adjustments. See Note 15 for details of changes in stockholders'
equity.
RETURN ON AVERAGE STOCKHOLDERS' EQUITY for 1994 was 9.5 percent, up from 6.1
percent the prior year, reflecting improved earnings performance.
-12-
14
Scientific-Atlanta, Inc., and Subsidiaries
Consolidated Statement of Financial Position
In Thousands
---------------------------------------
1994 1993
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 123,387 $ 103,536
Receivables, less allowance for doubtful accounts of
$3,839,000 in 1994 and $4,224,000 in 1993 206,145 150,851
Inventories 136,813 127,408
Deferred income taxes 27,918 23,919
Other current assets 10,774 4,938
-------- --------
TOTAL CURRENT ASSETS 505,037 410,652
-------- --------
PROPERTY, PLANT, AND EQUIPMENT, at cost
Land and improvements 3,823 3,658
Buildings and improvements 28,890 26,721
Machinery and equipment 108,585 92,066
-------- --------
141,298 122,445
Less -Accumulated depreciation and amortization 55,510 50,813
-------- --------
85,788 71,632
-------- --------
COST IN EXCESS OF NET ASSETS ACQUIRED 7,689 8,438
-------- --------
OTHER ASSETS 41,705 33,488
-------- --------
TOTAL ASSETS $ 640,219 $ 524,210
======== ========
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt and current maturities of long-term debt $ 6,487 $ 5,962
Accounts payable 82,285 47,224
Accrued liabilities 95,505 73,780
Income taxes currently payable 17,989 3,070
-------- --------
TOTAL CURRENT LIABILITIES 202,266 130,036
-------- --------
LONG-TERM DEBT, less current maturities 1,088 1,398
-------- --------
OTHER LIABILITIES 41,219 39,886
-------- --------
COMMITMENTS AND CONTINGENCIES (NOTE 13)
STOCKHOLDERS EQUITY
Preferred stock, authorized 50,000,000 shares; no shares issued
Common stock, $0.50 par value, authorized 350,000,000 shares,
issued 75,494,670 shares in 1994 and 37,196,194
shares in 1993 37,747 18,598
Additional paid-in capital 141,179 129,072
Retained earnings 215,926 204,274
Accumulated translation adjustments 794 946
-------- --------
395,646 352,890
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 640,219 $ 524,210
======= ========
- ------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
-13-
15
MANAGEMENT'S DISCUSSION OF CONSOLIDATED STATEMENT OF EARNINGS
The Consolidated Statement of Earnings summarizes
Scientific-Atlanta's operating performance over the
last three years, during which time the company has
accelerated development of new products and
expanded into international markets.
EARNINGS WERE UP $15.0 MILLION OVER 1993. Higher sales
and improved margins were the primary factors in
the increase.
Earnings in 1993 were up $3.7 million over 1992.
Higher sales and improved gross margins were the
principal factors in the increase.
SALES INCREASED 11 PERCENT OVER 1993. Continued strong
sales growth in cable television distribution
equipment and addressable home communications
terminals (converters) and significant improvement
in sales of network systems were offset partially
by reduced sales due to completion of the PrimeStar
television contract, lower digital audio sales and
sales of defense related products. International
sales increased to 33 percent of total sales in
1994, up from 26 percent in the prior year. Higher
sales of cable equipment and network systems
contributed to the growth in international sales.
Sales in 1993 increased 26 percent over 1992.
Strong growth in sales of transmission products,
international cable equipment and digital audio
products contributed to the improved sales growth.
COST OF SALES AS A PERCENT OF SALES DECREASED 2.2
PERCENTAGE POINTS. Mix changes, manufacturing
efficiencies, higher margins on addressable
converter products and improved program
management contributed to the improved margins.
Certain material purchases are denominated in yen
and accordingly, the purchase price in U.S.
dollars is subject to change based on exchange
rate changes. Recently the exchange rate for
Japanese yen has fallen to a post-war low. The
Company has forward exchange contracts to
purchase yen to hedge a portion of its purchase
commitments for a period of approximately three
months.
Cost of sales as a percent of sales increased 1.6
percentage points in 1993. Mix changes and costs
associated with the launch of new compression
products adversely affected margins.
SALES AND ADMINISTRATIVE EXPENSE INCREASED 3 PERCENT IN
1994. Increases in sales and marketing costs
associated with ongoing investments to support
expansion into international markets and the
introduction of new products were offset slightly
by lower administrative costs, primarily
professional fees. Sales and administrative
expenses as a percent of sales declined to 14.5
percent in 1994 from 15.6 percent in 1993.
Sales and administrative expense increased 12
percent in 1993. Increased expenses reflect
costs associated with higher sales volumes,
ongoing investments to support the introduction
of new products and expansion into international
markets and higher professional expenses.
RESEARCH AND DEVELOPMENT EXPENSES OF $60.4 MILLION
WERE UP SLIGHTLY OVER THE PRIOR YEAR.
Accelerated research and development activity,
particularly, development of digital products,
was offset by declines in defense related
products and the reallocation of engineering
resources from research and development efforts
to specific customer orders. The revenue from
these orders will be recognized in future periods
and, accordingly, the related costs have been
inventoried. Product development activity is
expected to continue near current levels.
Research and development was expanded in 1993 to
accelerate new product development, particularly
continued development of digital video
compression products.
INTEREST EXPENSE WAS $1.1 MILLION IN 1994 AND $0.9
MILLION IN 1993. Reductions in interest expense
from lower average borrowings and lower interest
rates on working capital borrowings by foreign
subsidiaries was offset by interest on other
obligations, including obligations related to the
acquisition of certain assets of Nexus
Engineering Corp.
INTEREST INCOME WAS $3.2 MILLION IN 1994 AND $2.9
MILLION IN 1993. The increase in interest income
reflects higher average cash balances.
OTHER EXPENSE WAS $17.4 MILLION IN 1994. Other
expense included a $17.5 million charge to settle
securities class action litigation, losses of
$1.0 million from partnership activities and net
gains from other miscellaneous items of
$1.1 million.
-14-
16
MANAGEMENT'S DISCUSSION OF CONSOLIDATED STATEMENT OF EARNINGS
Other income of $0.7 million in 1993 included
royalty income, rental income, and other
miscellaneous items of $1.7 million and losses from
foreign currency transactions of $1.0 million.
THE PROVISION FOR INCOME TAXES WAS 32 PERCENT OF PRE-
TAX EARNINGS IN 1994, 7 PERCENTAGE POINTS HIGHER
THAN 1993 AND 1992. The lower provisions in 1993
and 1992 reflect interest income on tax-exempt
investments and benefits from international tax
planning. Details of the provision for income
taxes are discussed in Note 9.
ACCOUNTING CHANGES RESULTED IN A CHARGE OF $4.7 MILLION
TO EARNINGS IN 1993. Effective as of the first
quarter of fiscal 1993, the Company adopted the
provisions of SFAS No. 106 "Postretirement
Benefits", SFAS No. 112 "Postemployment Benefits"
and SFAS No. 109 "Accounting for Income Taxes".
Charges of $6.7 million and $1.9 million for SFAS
No. 106 and SFAS No. 112, respectively, were
partially offset by a credit of $3.9 million for
SFAS No. 109, reducing previously reported earnings
for the quarter ended September 25, 1992 by $0.06
per share. The adoption of these standards did not
have a significant impact on income from operations
and is not expected to significantly impact
earnings in subsequent years. See Notes 9 and 10.
EARNINGS PER SHARE OF $0.46 INCREASED $0.19 AFTER AN
INCREASE OF $0.04 IN 1993. Shares outstanding and
share equivalents increased 2 percent to 76.6
million in 1994 from 75.1 million in 1993.
-15-
17
(This page intentionally left blank.)
-16-
18
CONSOLIDATED STATEMENT OF EARNINGS
(In Thousands, Except Per Share Data) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
SALES $ 811,583 $ 730,632 $ 580,831
--------- --------- ---------
COST AND EXPENSES
Cost of sales 566,729 526,227 408,845
Sales and administrative 117,604 114,040 102,144
Research and development 60,417 60,161 52,267
Interest expense 1,066 933 568
Interest income (3,151) (2,933) (4,424)
Other (income) expense, net 17,416 (694) (271)
--------- --------- ----------
760,081 697,734 559,129
--------- --------- ----------
EARNINGS BEFORE INCOME TAXES AND
ACCOUNTING CHANGES 51,502 32,898 21,702
PROVISION FOR INCOME TAXES 16,480 8,224 5,425
--------- --------- ----------
EARNINGS BEFORE ACCOUNTING CHANGES 35,022 24,674 16,277
Cumulative effect of changes in accounting
for postretirement benefits, postemployment
benefits and income taxes -- (4,700) --
--------- --------- ----------
NET EARNINGS $ 35,022 $ 19,974 $ 16,277
========= ========= =========
EARNINGS PER COMMON SHARE AND
COMMON EQUIVALENT SHARE
Primary
Before accounting changes $ 0.46 $ 0.33 $ 0.23
Accounting changes -- (0.06) --
--------- --------- ----------
Net earnings $ 0.46 $ 0.27 $ 0.23
========= ========= =========
Fully diluted $ 0.46 $ 0.27 $ 0.23
========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND COMMON EQUIVALENT SHARES OUTSTANDING
Primary 76,638 75,082 70,226
========= ========= =========
Fully diluted 77,105 75,257 71,678
========= ========= =========
See accompanying notes.
-17-
19
MANAGEMENT'S DISCUSSION OF CONSOLIDATED STATEMENT OF CASH FLOWS
The Statement of Cash Flows summarizes the main sources of Scientific-Atlanta's
cash and its uses. These flows of cash provided or used are summarized by
the Company's operating activities, investing activities and financing
activities.
Cash on hand at the end of 1994 was $123.4 million. Cash generated from
earnings and the sale of ICT was used for capital expenditures, investments
in partnerships, the settlement of securities class action litigation and
to fund working capital requirements.
CASH PROVIDED BY OPERATING ACTIVITIES was $48.5 million for 1994, compared to
$19.3 million for 1993. In 1994 and 1993 cash provided by improved
earnings and increases in payables was partially offset by increases in
accounts receivable and inventories. See Management's Discussion of the
Statement of Financial Position for details of this performance.
CASH USED BY INVESTING ACTIVITIES of $29.4 million during 1994 included $34.9
million for purchases of plant and equipment and $5.2 million for
investments in partnerships. Expenditures focused on increased capacity
and productivity improvements. Cash provided by investing activities
included $11.2 million from the sale of ICT. In 1993 cash used by
investing activities included $24.0 million for purchases of plant and
equipment and $6.3 million for the purchase of certain net assets of Nexus
Engineering Corp. See Note 2 for details.
CASH PROVIDED BY FINANCING ACTIVITIES WAS $0.8 MILLION IN 1994. The issuance
of stock pursuant to stock option and employee benefit plans and increases
in short-term borrowings generated $5.0 million and $0.5 million,
respectively, of cash during the year.
Cash provided by financing activities was $21.7 million in 1993. The
issuance of stock pursuant to stock option and employee benefit plans and
increases in short-term borrowings generated $24.4 million and $1.9
million, respectively, of cash during the year.
-18-
20
Consolidated Statement of Cash Flows
(In Thousands) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net earnings $ 35,022 $ 19,974 $ 16,277
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 20,938 19,068 16,082
Cumulative effect of accounting changes -- 4,700 --
Compensation related to stock benefit plans 4,787 2,056 1,803
Provision for losses on accounts receivable 73 145 1,036
Loss on sale of property, plant and equipment 824 517 232
Start-up costs and losses of partnerships 475 -- 2,500
Changes in operating assets and liabilities:
Receivables (55,367) (23,212) (36,318)
Inventories (12,063) (21,998) (17,229)
Deferred income taxes (2,582) 7,416 (520)
Accounts payable and accrued liabilities 57,736 15,062 21,127
Other assets (22,881) (5,939) (2,376)
Other liabilities 21,735 1,903 4,756
Net effect of exchange rate fluctuations (163) (374) 38
--------- -------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 48,534 19,318 7,408
--------- -------- ---------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (34,904) (23,998) (18,491)
Payment for businesses purchased (1,060) (6,314) --
Proceeds from the sale of property, plant
and equipment 596 2,292 109
Investment in ICT -- (387) (11,334)
Proceeds from the sale of investment in ICT 11,174 -- --
Investment in and advances to partnerships (5,240) -- (2,500)
--------- -------- ---------
NET CASH USED BY INVESTING ACTIVITIES (29,434) (28,407) (32,216)
--------- -------- ---------
FINANCING ACTIVITIES:
Net short-term borrowings 520 1,875 3,470
Principal payments on long-term debt (305) (300) (297)
Dividends paid (4,497) (4,248) (3,657)
Issuance of stock 5,033 24,410 3,782
--------- -------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 751 21,737 3,298
--------- -------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 19,851 12,648 (21,510)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 103,536 90,888 112,398
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 123,387 $103,536 $ 90,888
========= ======== =========
See accompanying notes.
-19-
21
SELECTED FINANCIAL DATA
(Dollars in Thousands, Except Per Share Data) 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------
SALES $ 811,583 $ 730,632 $ 580,831 $ 493,653 $ 614,319
- ------------------------------------------------------------------------------------------------------------------------
Cost of Sales 566,729 526,227 408,845 353,190 405,637
Sales and Administrative Expense 117,604 114,040 102,144 97,050 102,582
Research and Development Expense 60,417 60,161 52,267 49,175 39,719
Interest Expense 1,066 933 568 1,106 1,489
Interest Income (3,151) (2,933) (4,424) (6,221) (5,276)
Other (Income) Expense, Net 17,416 (694) (271) (2,179) 5,967
- ------------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES AND
ACCOUNTING CHANGES 51,502 32,898 21,702 1,532 64,201
- ------------------------------------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES 16,480 8,224 5,425 475 19,902
- ------------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE ACCOUNTING CHANGES 35,022 24,674 16,277 1,057 44,299
- ------------------------------------------------------------------------------------------------------------------------
CUMULATIVE EFFECT OF ACCOUNTING CHANGES -- (4,700) -- -- --
- ------------------------------------------------------------------------------------------------------------------------
NET EARNINGS $ 35,022 $ 19,974 $ 16,277 $ 1,057 $ 44,299
- ------------------------------------------------------------------------------------------------------------------------
PRIMARY EARNINGS PER SHARE $ 0.46 $ 0.27 $ 0.23 $ 0.02 $ 0.63
- ------------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS PAID PER SHARE $ 0.06 $0.05 5/6 $0.05 1/3 $0.05 1/3 $0.05 1/3
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
WORKING CAPITAL, NET $ 302,771 $ 280,616 $ 233,691 $ 226,190 $ 225,232
- ------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 640,219 $ 524,210 $ 440,913 $ 394,211 $ 388,873
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Short-Term Debt and Current Maturities $ 6,487 $ 5,962 $ 4,081 $ 608 $ 4,747
Long-Term Debt 1,088 1,398 1,704 2,004 2,301
Stockholders' Equity 395,646 352,890 299,725 281,636 279,469
- ------------------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL INVESTED $ 403,221 $ 360,250 $ 305,510 $ 284,248 $ 286,517
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
SALES PER EMPLOYEE $ 220 $ 213 $ 190 $ 165 $ 173
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
GROSS MARGIN % TO SALES 30.2% 28.0% 29.6% 28.5% 34.0%
- ------------------------------------------------------------------------------------------------------------------------
NET RETURN ON SALES 4.3% 2.7% 2.8% 0.2% 7.2%
- ------------------------------------------------------------------------------------------------------------------------
RETURN ON AVERAGE STOCKHOLDERS' EQUITY 9.5% 6.1% 5.7% 0.4% 16.9%
- ------------------------------------------------------------------------------------------------------------------------
-20-
22
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR END
The Company's year ends on the Friday closest to June 30 of each year. Fiscal
year ends are as follows:
1994: July 1, 1994
1993: July 2, 1993
1992: June 26, 1992
Fiscal 1993 includes fifty-three weeks.
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and all subsidiaries after elimination of all material intercompany
accounts and transactions.
FOREIGN CURRENCY TRANSLATION
The financial statements of certain foreign operations are translated into U.S.
dollars at current exchange rates. Resulting translation adjustments are
accumulated as a component of stockholders' equity and excluded from net
earnings. Foreign currency transaction gains and losses are included in cost
of sales and other income. Such gains and losses were not material during the
periods being reported.
METHOD OF RECORDING CONTRACT PROFITS
Revenues from progress-billed contracts are primarily recorded using the
percentage-of-completion method based on contract costs incurred to date.
Losses, if any, are recorded when determinable. Costs incurred and accrued
profits not billed on these contracts are included in receivables. These
receivables from commercial customers and government agencies were $17,628 at
July 1, 1994, and $28,524 at July 2, 1993. It is anticipated that substantially
all such amounts will be collected within one year.
DEPRECIATION, MAINTENANCE AND REPAIRS
For financial reporting purposes, depreciation is provided using principally
the straight-line method over the estimated useful lives of the assets.
Maintenance and repairs are charged to expense as incurred. Renewals and
betterments are capitalized. The cost and accumulated depreciation of property
retired or otherwise disposed of are removed from the respective accounts, and
the gains or losses thereon are included in the consolidated statement of
earnings.
WARRANTY COSTS
The Company accrues warranty costs at the time of sale. Expenses related to
unusual product warranty problems and product defects are recorded in the
period the problem is identified.
EARNINGS PER SHARE
Earnings per share were computed based on the weighted average number of shares
of common stock outstanding and equivalent shares derived from dilutive stock
options.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all liquid
debt instruments purchased with a maturity of three months or less to be cash
equivalents.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market.
Cost includes materials, direct labor, and manufacturing overhead. Market is
defined principally as net realizable value. Inventories include purchased and
manufactured components in various stages of assembly as presented in the
following table:
1994 1993
---- ----
Raw Materials and
Work-In-Process $ 94,890 $ 71,780
Finished Goods 41,923 55,628
-------- ---------
Total Inventory $136,813 $ 127,408
======== =========
COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets of businesses acquired is amortized on a
straight-line basis over seventeen years.
FINANCIAL PRESENTATION
Certain prior year amounts have been reclassified to conform with current year
presentation. All per share amounts have been restated to reflect the 2-for-1
stock split effected as a dividend declared in August 1994 and the 3-for-2
stock split effected as a dividend issued in December 1992.
2. INVESTMENTS AND ACQUISITION
During 1994 the Company entered into partnership agreements in connection with
the formation of Comunicaciones Broadband and Scientific-Atlanta of Shanghai,
Ltd. and invested $5,240 in the partnerships. The Company's equity in the
losses of these partnerships was $345 in 1994.
-21-
23
In February 1993 the Company acquired certain net assets of Nexus Engineering
Corp. for $6,314 cash and obligations of $4,398 in a purchase transaction. The
pro forma effect on operations for prior periods and the effect on 1993 were
immaterial.
The Company acquired 11 percent of the outstanding common stock of
International Cablecasting Technologies, Inc., for a cash investment of $11,334
in August 1991 and acquired additional common stock in 1993 for $387. During
1994, the Company disposed of its investment in ICT for a loss of $549 which
was included in other (income) expense.
In December 1991 the Company entered into a partnership agreement with a 44
percent partnership interest to form Checkout Channel, L.P. The Company's
equity in the losses of Checkout Channel, L.P. was $500 in 1992. The agreement
was terminated in July 1992.
3. SALES AND BUSINESS SEGMENT INFORMATION
Sales to the United States government were 11 percent and 12 percent of total
sales in 1993 and 1992, respectively. Sales were not material to any one
customer in 1994. Export sales accounted for 33 percent, 26 percent, and 27
percent of total sales in 1994, 1993 and 1992, respectively. Foreign subsidiary
sales were not material for any of the three fiscal years presented, nor were
they material to any one geographic location.
The Company identified Communications and Instrumentation as its major business
segments in prior years and provided business segment information related to
sales, operating profit, assets, capital expenditures, depreciation and
amortization and backlog. The customer base, marketing strategies, technology
to support new product development and manufacturing processes for utility load
management products and measurement and control systems have recently become
more closely aligned with those of the Communications segment and, accordingly,
management and operations which support these products and services were moved
into the Communications segment from the Instrumentation segment.
In addition, sales of electronic equipment such as sonar and microwave energy
products, particularly sales of government and defense related products,
supplied by the Instrumentation segment have recently declined. As a result,
the Company now operates primarily in one business segment, Communications,
providing satellite and terrestial based networks to a range of customers and
applications and network management and systems integration to add value to
those networks. This segment represents approximately 90 percent of
consolidated sales, operating profit and identifiable assets.
4. OTHER (INCOME) EXPENSE
Other expense of $17,416 in 1994 included a $17,500 charge to settle securities
class action litigation, losses of $992 from partnership activities and net
gains from other miscellaneous items of $1,076.
Other income of $694 in 1993 included royalty income, rental income and other
miscellaneous items of $1,656 and losses from foreign currency transactions of
$962.
Other income of $271 in 1992 included $2,500 of start-up costs and losses of a
terminated partnership offset by gains from foreign currency transactions, the
settlement of an insurance claim and other miscellaneous items.
5. QUARTERLY FINANCIAL DATA (UNAUDITED)
FISCAL QUARTERS
-------------------------------------
First Second Third Fourth
----- ------ ----- ------
1994
- -------------
Sales $170,292 $178,033 $204,047 $259,211
Gross margin 49,592 53,238 63,387 78,637
Gross margin % 29.1% 29.9% 31.1% 30.3%
Net earnings
(loss) 7,150 (4,581)(1) 11,907 20,546
Earnings (loss)
per share 0.09 (0.06) (1) 0.16 0.27
Stock prices:
High 18.81 19.06 18.25 18.94
Low 14.50 14.94 12.94 12.88
Dividends paid
per share 0.01 1/2 0.01 1/2 0.01 1/2 0.01 1/2
(1)Includes charge of $11,900 ($0.15 per share) to settle securities class
action litigation.
-22-
24
FISCAL QUARTERS
-------------------------------------
First Second Third Fourth
----- ------ ----- ------
1993
- ------------
Sales $171,200 $186,647 $184,138 $188,647
Gross margin 48,011 44,077 52,938 59,379
Gross margin % 28.0% 23.6% 28.7% 31.5%
Net earnings 2,090(1) 1,425 6,922 9,537
Earnings
per share 0.03(1) 0.02 0.09 0.13
Stock prices:
High 9.71 13.50 15.00 17.50
Low 7.58 9.08 9.19 11.32
Dividends paid
per share 0.01 1/3 0.01 1/2 0.01 1/2 0.01 1/2
(1) Includes one-time, after-tax charges of $4,700 ($0.06 per share) from the
adoption of Financial Accounting Standards Board Statement (SFAS) No. 106
"Postretirement Benefits", No. 112 "Postemployment Benefits" and No. 109
"Accounting for Income Taxes" effective June 27, 1992.
6. INDEBTEDNESS
Long-term debt consisted of:
1994 1993
-------- -------
6 1/4%-10% capitalized leases,
payable in varying installments
ranging from $200 to $250
through 1999 $ 1,150 $ 1,400
8 1/4% mortgage 248 303
-------- -------
1,398 1,703
Less-Current maturities 310 305
-------- -------
$ 1,088 $ 1,398
======== =======
Long-term debt at July 1, 1994 had scheduled maturities as follows: 1995--$310;
1996--$315; 1997--$321; 1998--$252; 1999--$200.
At July 1, 1994, property, plant and equipment costing approximately $5,925
were pledged as collateral on long-term debt.
Foreign short-term debt was $6,177 and $5,657 at the end of 1994 and 1993,
respectively.
The average interest rates for foreign short-term debt at year-end 1994 and
1993 were 8.3 percent and 10.8 percent, respectively.
Total interest paid was $1,071, $831 and $586, in 1994, 1993 and 1992,
respectively.
7. ACCRUED LIABILITIES
Accrued liabilities consisted of:
1994 1993
--------- --------
Compensation $ 26,939 $ 19,641
Customer down payments 17,506 7,406
Warranty and service 11,597 15,718
Taxes 5,941 3,952
Other 33,522 27,063
--------- --------
$ 95,505 $ 73,780
========= ========
8. OTHER LIABILITIES
Other liabilities consisted of:
1994 1993
--------- --------
Retirement $ 28,595 $ 28,597
Compensation 5,177 2,397
Other 7,447 8,892
--------- --------
$ 41,219 $ 39,886
========= ========
9. INCOME TAXES
The Company adopted the provisions of SFAS No. 109, "Accounting for Income
Taxes", effective the first quarter of fiscal 1993. The statement requires
that deferred income taxes reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts. The cumulative effect of this change increased net income
by $3,856. Prior to 1993, provisions were made for deferred income taxes where
differences existed between the time that transactions affected taxable income
and the time that these transactions entered into the determination of income
for financial statement purposes.
-23-
25
The tax provision differs from the amount resulting from multiplying earnings
before income taxes by the statutory federal income tax rate as follows:
1994 1993 1992
---- ---- ----
Statutory federal
tax rate 35.0% 34.0% 34.0%
State income taxes, net
of federal tax benefit 4.6 5.6 3.1
Tax reserves 0.5 (8.1) 16.1
Export incentives (2.1) (4.7) (6.1)
Exempt interest income (1.9) (3.1) (7.3)
Foreign tax adjustment (0.3) (1.1) (11.7)
Research and develop-
ment tax credit (3.4) -- (5.4)
Other, net (0.4) 2.4 2.3
---- ---- ----
32.0% 25.0% 25.0%
==== ==== ====
Income tax provision (benefit) includes the following:
1994 1993 1992
--------- -------- --------
Current tax provision
Federal $ 14,602 $ 8,131 $ 4,431
State 3,879 3,456 1,093
Foreign 581 467 391
--------- -------- --------
19,062 12,054 5,915
--------- -------- --------
Deferred tax benefit
Federal (1,911) (1,938) (162)
State (263) (684) (65)
Foreign (408) (1,208) (263)
--------- -------- --------
(2,582) (3,830) (490)
--------- -------- --------
Total provision
for income taxes $ 16,480 $ 8,224 $ 5,425
========= ======== ========
Total income taxes paid include settlement payments for federal and state audit
adjustments. The total income taxes paid were $1,551, $3,464 and $4,072 in
1994, 1993 and 1992, respectively.
The components of the net deferred tax benefit were:
1994 1993 1992
---- ---- ----
Liabilities not
currently deductible $(2,857) $ 921 $ 1,132
Income deferred under
completed contract
method 96 (436) (1,260)
Postretirement benefits (599) (786) (722)
Tax credit/loss
carryforwards (644) (847) (267)
Warranty reserves 1,542 (1,084) (763)
Inventory valuation (658) (1,914) 1,360
Other 538 316 30
------- ------- -------
Total deferred tax
benefit, net $(2,582) $(3,830) $ (490)
======= ======= =======
The tax effect of significant temporary differences representing deferred tax
assets and liabilities are as follows:
Current deferred tax assets 1994 1993
---- ----
Liabilities not currently
deductible $15,809 $10,974
Inventory valuation 7,993 7,335
Warranty reserves 2,158 3,668
Bad debt reserves 1,635 1,532
Other 323 410
------- -------
27,918 23,919
Valuation allowance -- --
------- -------
Net current deferred tax asset $27,918 $23,919
======= =======
Noncurrent deferred tax assets
Postretirement and
postemployment benefits $12,482 $11,891
Tax credit/loss carryforwards 3,297 2,653
Liabilities not currently
deductible 155 2,166
------- -------
15,934 16,710
Valuation allowance -- --
------- -------
Net noncurrent deferred tax
asset 15,934 16,710
------- -------
Noncurrent deferred tax
liabilities
Depreciation (6,499) (5,827)
Other (48) (79)
------- -------
Net noncurrent deferred tax
liability (6,547) (5,906)
------- -------
Net noncurrent deferred tax
asset $ 9,387 $10,804
======= =======
The net noncurrent deferred tax asset is included in Other Assets at July 1,
1994 and July 2, 1993.
In 1994, 1993 and 1992 earnings before income taxes included $2,641, $83 and
$402, respectively, of earnings generated by the Company's foreign operations.
-24-
26
10. RETIREMENT AND BENEFIT PLANS
The Company has a defined benefit pension plan covering substantially all of
its domestic employees. The benefits are based upon the employees' years of
service and compensation.
The Company's funding policy is to contribute annually the amount expensed each
year consistent with the requirements of federal law to the extent that such
costs are currently deductible.
The following table sets forth the plan's funded status, amounts recognized in
the Company's Consolidated Statement of Financial Position at year-end, using
March 31 as a measurement date for all actuarial calculations of asset and
liability values and significant actuarial assumptions:
1994 1993
------- --------
Accumulated benefit obligation
Vested portion $ 51,699 $ 46,955
Nonvested portion 1,577 2,678
-------- --------
53,276 49,633
Effect of projected future
compensation levels 10,070 7,172
-------- --------
Projected benefit obligation 63,346 56,805
Plan assets at fair value (56,755) (56,930)
-------- --------
Projected benefit obligation in
excess of (less than) plan
assets 6,591 (125)
Unrecognized prior service costs 419 534
Unrecognized net gain (loss) (1,035) 2,201
Unrecognized net asset from
initial application of SFAS 87 8,336 8,992
Fourth quarter contribution (608) --
-------- -------
Accrued pension cost $ 13,703 $11,602
======== =======
Discount rate 8.0% 8.0%
Rate of increase in future
compensation 4.5% 5.5%
Expected long-term rate of
return on assets 10.0% 8.0%
Plan assets are invested in listed stocks, bonds and short-term monetary
investments.
The Company's net pension expense was $2,709 in 1994; $2,686 in 1993; and
$3,100 in 1992.
The components of pension expense are as follows:
1994 1993 1992
-------- ------- --------
Service cost of
benefits earned $ 4,522 $ 3,459 $ 3,744
Interest cost 4,295 3,895 3,783
Actual return on
plan assets (2,694) (6,479) (3,926)
Net amortization and
deferral (3,414) 1,811 (501)
------- ------- --------
Net periodic pension
cost $ 2,709 $ 2,686 $ 3,100
======= ======= ========
The Company has unfunded defined benefit retirement plans for certain key
officers and non-employee directors. Accrued pension cost for these plans was
$4,338 at July 1, 1994 and $3,447 at July 2, 1993. Retirement expense for
these plans was $906, $156 and $1,216, in 1994, 1993 and 1992, respectively.
In addition to providing pension benefits, the Company has contributory plans
that provide certain health care and life insurance benefits to eligible
retired employees.
The Company adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," effective the first quarter of fiscal 1993.
This statement requires the accrual of the cost of providing postretirement
benefits, including medical and life insurance coverage, during the active
service period of the employee. The Company elected to immediately recognize
the accumulated liability, measured as of April 1, 1992. This resulted in a
one-time charge of $6,696, net of a deferred tax benefit of $4,104. Prior to
1993, the Company recognized expense in the year the benefits were provided.
Postretirement health care and life insurance costs charged to expense were
approximately $287 in 1992.
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27
The following table sets forth the plan's funded status and amounts recognized
in the Company's Consolidated Statement of Financial Position at year-end,
using March 31 as a measurement date for all actuarial calculations of
liability values:
1994 1993
---- ----
Accumulated postretirement
benefit obligation
Retirees $ 8,135 $ 6,745
Fully eligible active
participants 1,271 3,301
Other active participants 274 457
-------- ---------
9,680 10,503
Unrecognized net gain 1,060 --
Fourth quarter claims
payments (370) (129)
-------- ---------
Accrued postretirement
benefit cost $ 10,370 $ 10,374
======== =========
The components of postretirement benefit expense are as follows:
1994 1993
---- ----
Service cost of benefits earned $ 25 $ 23
Interest cost on accumulated
postretirement benefit
obligation 808 812
----- ----
Postretirement benefit expense $ 833 $835
===== ====
Significant actuarial assumptions are as follows:
1994 1993
---- ----
Annual rate of increase in per capita cost
Pre-Medicare 11.25% 15.00%
Annual decline 0.75% 1.00%
Final rate of interest 6.00% 7.00%
Post-Medicare 9.50% 12.00%
Annual decline 0.50% 0.75%
Final rate of increase 6.00% 6.00%
Impact of one percentage point
in health care cost trend rate
on
Accumulated post
retirement benefit
obligation 7.6% 8.9%
Interest cost component
of benefits 8.2% 9.3%
Discount rate used to measure
accumulated post-retirement
benefit obligation 8.0% 8.0%
The Company also adopted SFAS No. 112, "Employers Accounting for Postemployment
Benefits" effective the first quarter of 1993. This statement requires the
accrual method of accounting for benefits to former or inactive employees after
employment but before retirement. Postemployment benefits include disability
benefits, severence benefits, and continuation of health care benefits. A
one-time charge of $1,860, net of a deferred tax benefit of $1,140, related to
the adoption of SFAS No. 112 was recognized effective June 27, 1992. The
effect of this change on 1993 operating results, after recording the one time
charge, was not material. Postemployment costs charged to expense in 1992 were
not material.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents approximates fair value
because of the short maturity of those instruments. The fair value of long-term
investments and foreign currency contracts are based on quoted market prices.
1994 1993
------------------ -----------------
CARRYING/ Carrying/
CONTRACT FAIR Contract Fair
AMOUNT VALUE Amount Value
-------- ----- -------- ------
Cash and cash
equivalents $123,387 $ 123,387 $103,536 $103,536
Long-term
investments $ -- $ -- $ 11,721 $ 18,881
Foreign
currency
contracts
Sell $ 5,132 $ 5,149 $ 289 $ 293
Buy $ 62,218 $ 66,695 $ 35,081 $ 38,185
12. RELATED PARTY TRANSACTIONS
During 1994 the Company had sales of $12,127 to Comunicaciones Broadband and
Scientific-Atlanta of Shanghai, Ltd. and had a net receivable of $4,774 from
these partnerships at July 1, 1994.
13. COMMITMENTS, CONTINGENCIES, AND OTHER MATTERS
Rental expense under operating lease agreements for facilities and equipment
for 1994, 1993 and 1992 was approximately $9,303, $7,983 and $6,665,
respectively. The Company pays taxes, insurance, and maintenance costs with
respect to most leased items. Remaining operating lease terms range up to
twenty years. Future minimum payments at July 1, 1994, under operating leases
were $41,805. Payments under these leases for the next five years are as
follows: 1995-- $8,922; 1996-- $7,666; 1997-- $5,068; 1998-- $4,359; 1999--
$3,455. The Company has obligations under certain partnership agreements to
make cash contributions of $4,410 in 1995 and $3,250 in 1996.
-26-
28
The Company has employment agreements with certain officers which include
certain benefits in the event of termination of the officers' employment as a
result of a change in control of the Company.
The Company is also committed under certain purchase agreements which are
intended to benefit future periods.
The Company had forward exchange contracts maturing at various dates to
purchase or sell the equivalent of $67,350 and $35,370 in various foreign
currencies at July 1, 1994 and July 2, 1993, respectively. The Company uses
these contracts to hedge certain firm commitments and assets denominated in
currencies other than the U.S. dollar, primarily Japanese yen. In management's
opinion, settlement of these contracts will not result in any material adverse
financial effect in the future.
The Company is a party to various legal proceedings arising in the ordinary
course of business. In management's opinion, the outcome of these proceedings
will not have a material adverse effect on the Company's financial position or
results of operations.
14. COMMON STOCK AND RELATED MATTERS
In August 1994, the Company declared a 2-for-1 stock split effected in the form
of a 100 percent stock dividend payable on or about October 6, 1994, to
shareholders of record on September 8, 1994. This stock split has been
accounted for as of July 1, 1994, by a transfer from retained earnings to
common stock in the amount of the par value of stock outstanding at July 1,
1994. In December 1992, the Company issued a 3-for-2 stock split effected in
the form of a 50 percent stock dividend. The stock split has been accounted
for by a transfer from retained earnings to common stock in the amount of the
par value of the additional stock issued. All per share amounts and options
have been restated to reflect the stock splits.
The following information pertains to options on the company's common stock for
the years ended July 1, 1994 and July 2, 1993:
Number of shares
---------------------
1994 1993
--------- ---------
Outstanding, beginning of year 4,171,528 7,702,482
Options granted 1,214,700 1,541,700
Options canceled (247,804) (367,598)
Options exercised (at option
prices ranging from $2.875
to $16.937 in 1994) (656,372) (4,705,056)
--------- ---------
Outstanding, end of year (at
option prices ranging from
$2.875 to $17.375 in 1994) 4,482,052 4,171,528
========= =========
Exercisable, end of year (at
option prices ranging from
$2.875 to $17.125 in 1994) 1,647,078 808,812
========= =========
At July 1, 1994, an additional 3,782,102 shares were reserved under employee
and director stock option plans.
The Company has an employee stock purchase plan whereby the Company contributes
to the purchase price of stock for participating employees. At July 1, 1994,
689,060 shares were reserved for issuance to employees under the plan.
The Company has a 401(k) plan whereby the Company matches eligible employee
contributions in Company stock. At July 1, 1994, 1,249,612 shares were reserved
for issuance to employees under the plan.
In April 1987 the Company adopted a Shareholder Rights Plan (which was amended
in August 1988 and May 1994) and pursuant thereto declared a dividend of one
Common Stock Purchase Right ("Right") for each outstanding share of common
stock. The Rights will become exercisable if a person or group (an "Acquiring
Shareholder") (i) holds 10 percent or more of the Company's common stock and is
determined by the Board of Directors to be an "adverse person" as defined by
the Plan, or (ii) acquires or makes a tender offer to acquire 15 percent of the
Company's common stock. Either such event is referred to as the "Distribution
Date". If a person acquires 15 percent of the Company's common stock or is
determined by the Board of Directors to be an "adverse person" or, after the
"Distribution Date" the Company is merged with any entity, each Right will
entitle the holder thereof, other than the Acquiring Shareholder, to purchase
$33 worth of the Company's or the surviving
-27-
29
corporation's common stock, as the case may be, based on the Company's market
price at the time, for $17.
The Rights may be redeemed by the Company at a price of $.0167 per Right until
the expiration of the rights or 10 days after any party acquires 15 percent of
more of the Company's common stock. Rights are exercisable until the Company's
right of redemption discussed above has expired. The Rights have no voting
power and, until exercised, no dilutive effect on earnings per share. If not
previously redeemed, the Rights will expire on April 13, 1997. At July 1,
1994, 147,516,586 shares were reserved for Common Stock Purchase Rights.
At July 1, 1994, a total of 153,237,360 shares of authorized stock were
reserved for the above purposes.
-28-
30
15. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In Thousands) 1994 1993 1992
---- ---- ----
PREFERRED STOCK
Shares authorized 50,000 50,000 50,000
Shares issued -- -- --
COMMON STOCK ($0.50 PAR VALUE)
Shares authorized 350,000 350,000 350,000
-------- -------- --------
Shares issued at
beginning of year 37,196 24,086 24,086
Issuance of a 2-for-1 stock
split effected in the form of
a stock dividend (See Note 14) 37,748 -- --
Issuance of a 3-for-2 stock
split effected in the form of
a stock dividend (See Note 14) 12,042 --
Issuance of shares under
employee benefit plans 481 1,068 --
Issuance of restricted shares 70 -- --
Shares in treasury -- -- (989)
-------- -------- --------
Shares outstanding 75,495 37,196 23,097
======== ======== ========
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year $129,072 $115,022 $117,267
Issuance of shares under
employee benefit plans 10,910 14,050 (2,245)
Restricted shares issued to
employees, net of unearned
compensation 1,197 -- --
-------- -------- --------
Balance at end of year $141,179 $129,072 $115,022
======== ======== ========
RETAINED EARNINGS
Balance at beginning of year $204,274 $194,569 $181,949
Net earnings 35,022 19,974 16,277
Issuance of a 2-for-1 stock
split effected in the form of
a stock dividend (See Note 14) (18,873) -- --
Issuance of a 3-for-2 stock
split effected in the form of
a stock dividend (See Note 14) -- (6,021) --
Cash dividends(1) (4,497) (4,248) (3,657)
-------- -------- --------
Balance at end of year $215,926 $204,274 $194,569
======== ======== ========
(1) $0.06 per share, $0.05 5/6 per
share, and $0.05 1/3 per share
in 1994, 1993 and 1992,
respectively
ACCUMULATED TRANSLATION ADJUSTMENTS
Balance at beginning of year $ 946 $ 1,351 $ 1,635
Foreign currency translation
adjustments (152) (405) (284)
-------- -------- --------
Balance at end of year $ 794 $ 946 $ 1,351
======== ======== ========
TREASURY STOCK
Balance at beginning of year $ -- $(23,260) $(31,258)
Issuance of shares under
employee benefit plans -- 23,260 7,998
-------- -------- --------
Balance at end of year $ -- $ -- $(23,260)
======== ======== ========
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SCHEDULE VIII
SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JULY 1, 1994
(In Thousands)
Col. A Col. B Col. C Col. D Col. E
Additions
Balance at ------------------------------------ Balance at
beginning Charged to Charged to end of
Description of period costs and expenses other accounts (1) Deductions(2) period
----------- ----------- ------------------ ------------------ ------------ ------
Deducted on the balance sheet
from asset to which it applies:
July 1, 1994 --
Allowance for doubtful accounts $ 4,224 $ 73 $ 115 $ (573) $ 3,839
======== ======== ======== ========= =========
July 2, 1993 --
Allowance for doubtful accounts $ 4,160 $ 145 $ 420 $ (501) $ 4,224
======== ======== ======== ========= =========
June 26, 1992 --
Allowance for doubtful accounts $ 3,885 $ 1,036 $ 320 $ (1,081) $ 4,160
======== ======== ======== ======== =========
Notes:
(1) Represents recoveries on accounts previously written off, and in fiscal
1993, the $167 acquired with the purchase of Nexus Engineering Corp.
(2) Amounts represent uncollectible accounts written off.
-30-
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SCHEDULE IX
SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES
SCHEDULE IX -- SHORT-TERM BORROWINGS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JULY 1, 1994
(In Thousands)
Col. A Col. B Col. C Col. D Col. E Col. F
Weighted Maximum Average Weighted
average amount amount average
Category of aggregate Balance at interest rate at outstanding outstanding interest rate
short-term borrowings end of period end of period(4) during the period during the period(2) during the period(3),(4)
- --------------------- ------------- ------------- ----------------- ----------------- -----------------
Year ended July 1, 1994:
Notes payable (1) $ 6,177 8.3% $ 6,474 $ 5,493 10.0%
======== ======= ======== ======== ======
Year ended July 2, 1993:
Notes payable (1) $ 5,656 10.8% $ 6,214 $ 6,028 10.7%
======== ======= ======== ======== ======
Year ended June 26, 1992:
Notes payable (1) $ 3,781 10.3% $ 3,781 $ 3,207 10.0%
======== ======= ======== ======== ======
Notes:
(1) Notes payable represent borrowings under credit arrangements which
have no termination date but are reviewed annually for renewal.
(2) The average amount outstanding during the period was computed by
dividing the total of month-end outstanding principal balances by 12.
(3) The weighted average interest rate during the period was computed by
dividing the actual interest expense related to short-term borrowings
by average short-term debt outstanding.
(4) Represents interest on funds borrowed in foreign currencies.
-31-
33
SCHEDULE X
SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JULY 1, 1994
(In Thousands)
Col. A Col. B
Charged to costs
Item and expenses
---- ----------------
Year ended July 1, 1994:
Advertising costs $ 6,689
========
Year ended July 2, 1993:
Advertising costs $ 6,194
========
Year ended June 26, 1992:
Advertising costs $ 5,854
========
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34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
/s/ James F. McDonald September 23, 1994
- ----------------------------------------------- -------------------------------------------
James F. McDonald Date
President and Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ James F. McDonald September 23, 1994
- ----------------------------------------------- -------------------------------------------
James F. McDonald Date
President and Chief Executive Officer
and Director
(Principal Executive Officer)
/s/ Harvey A. Wagner September 23, 1994
- ----------------------------------------------- -------------------------------------------
Harvey A. Wagner Date
Senior Vice President,
Chief Financial Officer and
Treasurer
(Principal Financial Officer)
/s/ Julian W. Eidson September 23, 1994
- ----------------------------------------------- -------------------------------------------
Julian W. Eidson Date
Vice President and Controller
(Principal Accounting Officer)
-33-
35
/s/ Marion H. Antonini September 23, 1994
- ----------------------------------------------- -------------------------------------------
Marion H. Antonini, Director Date
/s/ William E. Kassling September 23, 1994
- ----------------------------------------------- -------------------------------------------
William E. Kassling, Director Date
/s/ Wilbur Branch King September 23, 1994
- ----------------------------------------------- -------------------------------------------
Wilbur Branch King, Director Date
/s/ Mylle Bell Mangum September 23, 1994
- ----------------------------------------------- -------------------------------------------
Mylle Bell Mangum, Director Date
/s/ Alonzo L. McDonald September 23, 1994
- ----------------------------------------------- -------------------------------------------
Alonzo L. McDonald, Director Date
/s/ David J. McLaughlin September 23, 1994
- ----------------------------------------------- -------------------------------------------
David J. McLaughlin, Director Date
/s/ James V. Napier September 23, 1994
- ----------------------------------------------- -------------------------------------------
James V. Napier, Director Date
/s/ Sidney Topol September 23, 1994
- ----------------------------------------------- -------------------------------------------
Sidney Topol, Director Date
-34-