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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 June 30, 1995
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 30092-2967
NORCROSS, GEORGIA (Zip Code)
(Address of principal executive offices)
770-903-5000
(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 -------------------
New York Stock Exchange
$0.50 per share
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) 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 [ ]
Indicated 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, 1995, was approximately $1,232,761,207.
As of September 8, 1995, the registrant had outstanding 77,030,331 shares of
common stock.
DOCUMENTS INCORPORATED BY REFERENCE:
Specified portions of the Proxy Statement for the registrant's 1995 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 operates primarily in one business segment,
Communications, providing satellite and terrestrial based networks to a range
of customers and applications, and providing network management and systems
integration to add value to those networks. This segment represents over 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 the products 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 25% of the
Company's total sales for fiscal year 1995, and approximately 21% and 18% of
such sales in each of the fiscal years 1994 and 1993, 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-per-view ordering of special events
and movies, fully interactive home shopping services, electronic program guides
and more.
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
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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, acoustic 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.
STATUS OF THE 8600X HOME COMMUNICATIONS TERMINAL
The Company's rollout of the 8600x home communications terminal
was delayed in fiscal 1995 as a result of the continued development of headend
software requested by a customer to maximize the functionality of the 8600x
terminals. Such software has been fully developed, and the Company does not
anticipate any further delays in this rollout.
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.
The Company's sales to various units of the United States
Government constituted 11% of the Company's sales for fiscal year 1993. Such
sales were less than 10% during fiscal years 1995 and 1994.
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The Company's sales to customers in foreign countries constituted
33% of the Company's total sales for fiscal years 1995 and 1994 and 26% of
total sales in fiscal year 1993. 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% or more of the Company's
total sales during those years.
Approximately 12% of the Company's total sales for fiscal year
1995 were made to Time Warner, Inc. and its affiliates, with such sales being
comprised of products to be used in the cable industry.
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 June 30, 1995, and July 1, 1994, was $457,455,000 and
$405,860,000, respectively.
The Company believes that approximately 90% of the backlog
existing at June 30, 1995 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 1995,
1994 and 1993 were principally for development of commercial cable and
telephone digital products, satellite network products and interactive data
communications products. In fiscal 1995, 1994 and 1993, the Company's research
and development expenses were approximately $83,316,000, $60,417,000 and
$60,161,000, 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 commenced its own manufacturing of set-top
terminals in fiscal year 1995 in its new Juarez, Mexico facility.
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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 supplier of the Company's set-top
terminals is Matsushita Electronic Components Co., Ltd. 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 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 4,700 employees (approximately 700
of which were employed through temporary employment agencies) on June 30, 1995.
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.
INDUSTRY REGULATORY UNCERTAINTY AND RESTRUCTURING
Federal, state and local regulatory uncertainty was a dominant
feature of the communications industry during fiscal 1995, and such uncertainty
is expected to continue for all or a portion of fiscal 1996. During 1995, the
House and the Senate passed differing telecommunications reform bills aimed at
deregulating and removing barriers to competition in the telecommunications
industry. It is not known when (or whether) the Senate and House bills will be
reconciled and passed by both houses of Congress and signed by President
Clinton.
Several states passed legislation designed to deregulate their
telecommunications industries and several regional telephone companies
challenged in court existing laws and regulations that prohibit or limit their
entry into cable service.
Most of the regional Bell operating companies filed applications
under Section 214 of the Federal Communications Act for the construction and
operation of video delivery systems called "video dialtone networks." Some of
these applications were granted, some delayed or denied and some withdrawn. In
at least one case, a regional telephone company chose to proceed with a cable
television franchise without filing an application under Section 214 in
apparent contradiction of FCC regulations.
As the regional telephone companies sought entry into the video
delivery industry during fiscal 1995, the cable industry itself was changing
through consolidation, merger, acquisition and exchanges of local cable
systems. Regional telephone companies also acquired cable companies outside of
their regions. At the same time that telephone companies were attempting to
develop or acquire video networks, some of the traditional cable operators
began efforts to provide telephony on their networks.
Uncertainty and change were also prevalent with respect to
sources for content for video entertainment networks. Some content providers
formed alliances or joint ventures with other content and network providers,
including cable companies and telephone companies. Proposed acquisitions of two
of the major broadcast networks (ABC and CBS) were announced.
Overall, the telecommunications industry was characterized during
fiscal 1995 by a changing yet uncertain regulatory climate, the beginning of
competition between cable companies and telephone companies, consolidation of
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cable franchise territories, and uncertainty in the source of program content.
These factors caused a degree of uncertainty in the demand for the Company's
products. It is not possible to predict the impact of these factors on future
orders and sales volumes.
ITEM 2. PROPERTIES
The Company owns office and manufacturing facilities in
metropolitan Atlanta, Georgia, San Diego, California, and Juarez, Mexico, which
comprise five sites containing a total of approximately 561,800 square feet.
The Company also owns approximately 130 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, all of which are not required for present operations and
are under lease or sublease to other tenants.
Additional major manufacturing facilities containing an aggregate
of approximately 437,200 square feet are leased by the Company at the following
locations under leases expiring (including renewal options) from 1996 to 2015:
LOCATION APPROXIMATE FOOTAGE
-------- -------------------
Doraville (Atlanta), Georgia 63,500
Toronto, Ontario 16,000
Norcross (Atlanta), Georgia 332,700
Vancouver, British Columbia 25,000
The Company also leases office and warehouse space in several
buildings in the Atlanta, Georgia, San Jose, California, and Tempe, Arizona
areas and leases sales and service offices in 24 U.S. and foreign cities.
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 June 30, 1995.
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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 55 1993 President and
Chief Executive Officer
John E. Breyer 60 1989 Senior Vice President
and Group President
William E. Eason, Jr. 52 1993 Senior Vice President,
General Counsel and
Corporate Secretary
H. Allen Ecker 59 1979 Senior Vice President,
Technical Operations
Brian C. Koenig 48 1988 Senior Vice President,
Human Resources
John H. Levergood 61 1992 Senior Vice President
and Group President
Raymond D. Lucas 57 1989 Senior Vice President,
Strategic Operations
Jack W. Simpson 53 1993 Senior Vice President
and Group President
Harvey A. Wagner 54 1994 Senior Vice President,
Chief Financial Officer
and Treasurer
Julian W. Eidson 56 1978 Vice President
and Controller
Larry L. Enterline 42 1995 Vice President
Robert C. McIntyre 44 1995 Vice President
Conrad Wredberg, Jr. 54 1995 Vice President
Each executive officer is elected annually and serves at the pleasure
of the Board of Directors.
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).
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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. Koenig was elected Senior Vice President, Human Resources in 1995.
Prior to that time he served as Vice President, Human Resources for more than
five years.
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.
Mr. Enterline has been employed by the Company in a variety of
positions since 1989. He was elected Vice President in February, 1995.
Mr. McIntyre was elected Vice President in February, 1995. He has been
employed by the Company since 1991. Prior to his employment with the Company,
Mr. McIntyre was employed by Augat, Inc., a computer components supplier, as
Vice President and General Manager of its Interconnection Products Division,
from 1988 to 1991.
Mr. Wredberg joined the Company in 1995 and was elected to the
position of Vice President in May, 1995. Mr. Wredberg served as President of
American Microsystem, Inc., a supplier of semiconductors, from 1985 until 1995.
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, 1995, was 6,256.
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 1995 and 1994 is included in Note 5 of
the Notes to Financial Statements included in this Report.
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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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company and notes
thereto, the schedule containing certain supporting information and the report
of independent public accountants are set forth on pages 11 through 29 of this
Report. See Part IV, Item 14 for an index of the statements, notes and
schedule.
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 1995
Annual Meeting of shareholders, which is expected to be filed pursuant to
Regulation 14A within 120 days after the end of the Company's 1995 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 28 of this Report.
Report of Independent Public Accountants
Consolidated Statement of Financial Position
as of June 30, 1995 and July 1, 1994
Consolidated Statement of Earnings for each of the
three years in the period ended June 30, 1995
Consolidated Statement of Cash Flows for each of the
three years in the period ended June 30, 1995
Notes to Consolidated Financial Statements
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(2) Financial Statement Schedule:
Page
----
Schedule II Valuation and Qualifying Accounts for Each of 29
the Three Years in the Period ended June 30,
1995
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.
(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) The following is incorporated by reference to the
registrant's report on form 10-K for its fiscal
year ended July 1, 1994:
(i) By-laws of registrant, as amended.
(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.*
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(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) The following material contracts are incorporated
by reference to the registrant's report on Form
10-K for the fiscal year ended July 1, 1994:
(i) Scientific-Atlanta, Inc. Supplemental
Executive Retirement Plan. *
(ii) 1994 Scientific-Atlanta, Inc. Executive
Deferred Compensation Plan.*
(iii) Form of Severance Protection Agreement
between the Registrant and Certain Officers
and Key Employees.*
(iv) Scientific-Atlanta, Inc. Retirement Plan for
Non-Employee Directors, as amended.*
(f) The following material contract is incorporated by
reference to the exhibit filed with the
registrant's proxy statement filed on October 3,
1994, as amended by the revised cover page thereto
incorporated by reference to the registrant's
report on Form 10-Q for the fiscal quarter ended
December 31, 1994:
(i) Scientific-Atlanta, Inc. Long-Term Incentive
Plan, adopted by the shareholders on
November 11, 1994.*
(g) Credit Agreement, dated May 11, 1995, by and
between the Company and NationsBank of Georgia,
National Association, for itself and as agent for
other banks participating in the credit facility.
(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 June
30, 1995 and July 1, 1994 and the related consolidated statements of earnings
and cash flows for each of the three years in the period ended June 30, 1995
appearing on pages 13, 17 and 19, respectively. These financial statements and
the schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule 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 June 30, 1995 and July 1, 1994 and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1995 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 schedule listed in Item
14(a)(2) of this Form 10-K is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states 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, 1995
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 June 30, 1995 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
Chief Financial Officer and Treasurer
-11-
13
MANAGEMENT'S DISCUSSION OF CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Scientific-Atlanta had stockholders' equity of $474.2 million and cash on hand
of $80.3 million at June 30, 1995. The current ratio of 2.2:1 at June 30,
1995 compared to 2.5:1 at July 1, 1994. Cash on hand and cash generated from
earnings was used to fund working capital requirements and for capital
expenditures.
CASH AND CASH EQUIVALENTS at the end of 1995 were $80.3 million, down from
$123.4 million last year. Cash decreased as expenditures for inventories,
equipment and expansion of manufacturing capacity exceeded cash generated
from earnings. Ending working capital, excluding cash, was $259.4 million,
or 22.6 percent of sales, as compared to 22.1 percent in the prior year.
RECEIVABLES were $243.4 million at year-end, compared to $206.1 million at the
prior fiscal year-end. The increase reflects the sales growth in 1995.
Average days sales outstanding decreased to 71 for 1995 from 74 for 1994.
The allowance for doubtful accounts as a percent of gross receivables
declined in 1995 due to a lower level of delinquent balances and write-offs.
INVENTORY TURNOVER was 4.2 times in 1995, compared to 4.4 in the prior year.
Inventories of $257.4 million at year-end were $120.6 million higher than
at the end of the prior year, reflecting the higher production and sales
levels in 1995 and delays in the shipments of certain home communications
terminals.
CURRENT DEFERRED INCOME TAXES increased $0.4 million due to increases in
nondeductible reserves.
OTHER CURRENT ASSETS, which include prepaid insurance, deposits, royalties,
license fees and other miscellaneous prepaid expenses, decreased $4.8 million
due primarily to lower deposits and royalties.
NET PROPERTY, PLANT AND EQUIPMENT increased by $38.8 million in 1995 as capital
spending exceeded depreciation and disposals. Capital additions of $64.8
million included expenditures for equipment and expansion of manufacturing
capacity including the construction of a manufacturing facility in Juarez,
Mexico.
COST IN EXCESS OF NET ASSETS ACQUIRED decreased in 1995, 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, decreased $3.4 million in 1995 due
primarily to lower prepaid license fees. See Note 2.
TOTAL BORROWINGS at year-end amounted to $2.2 million, down $5.4 million from
the prior year. The borrowings include industrial development bonds and
working capital loans for foreign subsidiaries. Working capital borrowings
by foreign subsidiaries were reduced $5.1 million during 1995. Details of
borrowings are shown in Note 6.
In May 1995 the Company established a $300 million senior credit facility
consisting of a $150 million one-year facility and a $150 million five-year
facility to be available for general corporate purposes. There were no
borrowings under this facility at June 30, 1995. The facility will be used to
supplement funds generated internally to support the growth of the Company.
ACCOUNTS PAYABLE were $148.3 million at year-end, up from $82.3 million last
year. The increase reflects higher production and inventory levels and an
increase to 43 days in accounts payable from 33 in 1994.
ACCRUED LIABILITIES of $113.9 million include accruals for compensation,
warranty and service, customer down-payments and taxes, excluding income
taxes. Higher 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 $34.6 million are comprised of deferred compensation,
postretirement benefit plans, postemployment benefits and other miscellaneous
accruals. See Note 8 for details.
STOCKHOLDERS' EQUITY was $474.2 million at the end of 1995, up $78.5 million
from the prior year. Net earnings of $63.5 million and the issuance of stock
grants and stock pursuant to stock option plans of $19.7 million were
partially offset by dividends of $4.6 million and a decrease in accumulated
translation adjustments. See Note 15 for details of changes in
stockholders' equity.
RETURN ON AVERAGE STOCKHOLDERS' EQUITY for 1995 was 14.7 percent, up from 9.5
percent the prior year, reflecting improved earnings performance.
-12-
14
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
In Thousands
-------------------
1995 1994
===================================================================================================
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 80,311 $123,387
Receivables, less allowance for doubtful accounts of
$3,823,000 in 1995 and $3,839,000 in 1994 243,420 206,145
Inventories 257,427 136,813
Deferred income taxes 28,271 27,918
Other current assets 5,950 10,774
-------- --------
TOTAL CURRENT ASSETS 615,379 505,037
-------- --------
PROPERTY, PLANT, AND EQUIPMENT, at cost
Land and improvements 7,005 3,823
Buildings and improvements 36,847 28,890
Machinery and equipment 145,301 108,585
-------- --------
189,153 141,298
Less-Accumulated depreciation and amortization 64,539 55,510
-------- --------
124,614 85,788
-------- --------
COST IN EXCESS OF NET ASSETS ACQUIRED 6,940 7,689
-------- --------
OTHER ASSETS 38,331 41,705
-------- --------
TOTAL ASSETS $785,264 $640,219
======== ========
===================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt and current maturities of long-term debt $ 1,386 $ 6,487
Accounts payable 148,260 82,285
Accrued liabilities 113,947 95,505
Income taxes currently payable 12,121 17,989
-------- --------
TOTAL CURRENT LIABILITIES 275,714 202,266
-------- --------
LONG-TERM DEBT, less current maturities 773 1,088
-------- --------
OTHER LIABILITIES 34,588 41,219
-------- --------
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 76,950,029 shares in 1995 and 75,494,670 shares in 1994 38,475 37,747
Additional paid-in capital 160,206 141,179
Retained earnings 274,840 215,926
Accumulated translation adjustments 668 794
-------- --------
474,189 395,646
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $785,264 $640,219
-------- --------
---------------------------------------------------------------------------------------------------
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 IN 1995 WERE UP $28.5 MILLION OVER 1994.
Higher sales volume was the primary factor in the year-to-year increase.
Earnings in 1994 were up $15.0 million over 1993. Higher sales volume and
improved margins were the primary factors in the increase.
The Company's fiscal year is comprised of fifty-two or fifty-three weeks,
ending on the Friday nearest to June 30 each year. Fiscal years 1995 and
1994 included fifty-two weeks while fiscal year 1993 included fifty-three
weeks. The effect on the results of operations of the inclusion of
fifty-two weeks in 1995 and 1994 versus fifty-three weeks in 1993 was not
material.
SALES INCREASED 41 PERCENT OVER 1994. Strong growth in sales volume of
transmission and addressable converter products and Sega game adapters and
deliveries of equipment to Orbit Communications Company for its direct to
home satellite services contributed to the year-to-year increase in sales.
Sales of instrumentation products continue to be adversely affected by
spending reductions in the defense industry. International sales were 33
percent of total sales in 1995.
Sales in 1994 increased 11 percent over 1993. Continued strong sales
volume 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.
COST OF SALES AS A PERCENT OF SALES INCREASED 2.2 PERCENTAGE POINTS OVER 1994.
Gains from cost improvements in satellite networks and increased volumes
in transmission and addressable converter products were offset by
unfavorable exchange rate changes in Japanese yen, production startup
costs, product mix and cost overuns on defense contracts. The Company
believes that gross margins may be negatively impacted in future periods
by planned expansion of manufacturing capacity and the continued increase
in sales of addressable converter products and Sega adapters which have
lower margins than some of the Company's other products. Continued
strength of the yen would also adversely affect gross margins.
Certain material purchases are denominated in Japanese yen and,
accordingly, the purchase price in U.S. dollars is subject to change based
on exchange rate fluctuations. Currently, the Company has forward exchange
contracts to purchase yen to hedge its exposure on purchase commitments
for a period of twelve months.
Cost of sales as a percent of sales decreased 2.2 percentage points in
1994. Favorable mix change was the primary factor in the year-to-year
improvement. Manufacturing efficiencies, higher margins on addressable
converter products and improved program management also contributed to the
improved margins.
SALES AND ADMINISTRATIVE EXPENSE INCREASED 26 PERCENT OVER THE PRIOR YEAR.
Increased expenses reflect costs associated with ongoing investments to
support expansion into international markets, the introduction of new
products and a build-up in the infrastructure of the Company to handle the
growth the Company is experiencing. Sales and administrative expenses as a
percent of sales declined to 13 percent in 1995 from 14 percent in 1994.
Sales and administrative expense increased 3 percent in 1994. Increases in
sales and marketing costs associated with expansion into international
markets and the introduction of new products were offset slightly by
administrative costs which declined 2 percent, primarily due to lower
professional fees.
RESEARCH AND DEVELOPMENT EXPENSES INCREASED $22.9 MILLION OVER THE PRIOR YEAR.
Increased research and development activity, particularly development of
digital products, was the primary factor in the year-to-year increase.
Product development activity is expected to continue near current levels.
Research and development expenses of $60.4 million in 1994 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
-14-
16
reallocation of engineering resources from research and development efforts
to specific customer orders. The revenue from these orders was recognized
in 1995, and, accordingly the related costs were inventoried at July 1,
1994.
INTEREST EXPENSE WAS $0.8 MILLION IN 1995 AND $1.1 MILLION IN 1994. The
decrease reflects lower average working capital borrowings by foreign
subsidiaries.
INTEREST INCOME WAS $2.8 MILLION IN 1995 AND $3.2 MILLION IN 1994. The
decrease in interest income reflects lower average cash balances.
OTHER INCOME WAS $1.5 MILLION IN 1995. Other income included rental income,
royalty income, net gains from partnership activities and other
miscellaneous items. There were no significant items in other income and
other expense during 1995.
Other expense of $17.4 million in 1994 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.
The securities class action suit, which was filed in 1988, related to
events which occurred during the early 1980's principally as a result of
the difficulties experienced by the Company in the production and delivery
of a new product. The Company firmly believes it fully complied with the
law in this matter and that the suit was without merit. The litigation was
settled in 1994 in the best interest of the Company's shareholders to
avoid protracted and costly legal proceedings and eliminate the
uncertainty of a jury trial.
THE PROVISION FOR INCOME TAXES WAS 32 PERCENT OF PRE-TAX EARNINGS IN 1995,
UNCHANGED FROM THE PRIOR YEAR. The provision for income taxes was 25
percent of pre-tax earnings in 1993. The lower provision in 1993 reflects
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".
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 $0.83 IN 1995 INCREASED $0.37 AFTER AN INCREASE OF $0.19
IN 1994. Shares outstanding and share equivalents decreased slightly to
76.2 million in 1995 from 76.6 million in 1994.
-15-
17
(THIS PAGE INTENTIONALLY LEFT BLANK.)
-16-
18
CONSOLIDATED STATEMENT OF EARNINGS
(In Thousands, Except Per Share Data) 1995 1994 1993
----------------------------------------------------------------------------------------------------------------
SALES $1,146,502 $811,583 $730,632
---------- -------- --------
COSTS AND EXPENSES
Cost of sales 825,254 566,729 526,227
Sales and administrative 148,077 117,604 114,040
Research and development 83,316 60,417 60,161
Interest expense 775 1,066 933
Interest income (2,837) (3,151) (2,933)
Other (income) expense, net (1,524) 17,416 (694)
---------- -------- --------
1,053,061 760,081 697,734
---------- -------- --------
EARNINGS BEFORE INCOME TAXES AND
ACCOUNTING CHANGES 93,441 51,502 32,898
PROVISION FOR INCOME TAXES 29,901 16,480 8,224
---------- -------- --------
EARNINGS BEFORE ACCOUNTING CHANGES 63,540 35,022 24,674
Cumulative effect of changes in accounting
for postretirement benefits, postemployment
benefits and income taxes -- -- (4,700)
NET EARNINGS $ 63,540 $ 35,022 $ 19,974
======== ======== ========
EARNINGS PER COMMON SHARE AND
COMMON EQUIVALENT SHARE
Primary
Before accounting changes $ 0.83 $ 0.46 $ 0.33
Accounting changes -- -- (0.06)
---------- -------- --------
Net earnings $ 0.83 $ 0.46 $ 0.27
========== ======== ========
Fully diluted $ 0.83 $ 0.46 $ 0.27
========== ======== ========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND COMMON EQUIVALENT SHARES OUTSTANDING
Primary 76,194 76,638 75,082
========== ======== ========
Fully diluted 76,194 77,105 75,257
========== ======== ========
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 1995 was $80.3 million. Cash on hand and cash
generated from earnings were used for capital expenditures and to fund
working capital requirements.
In May 1995 the Company established a $300 million senior credit facility
consisting of a $150 million one-year facility and a $150 million
five-year facility to be available for general corporate purposes. There
were no borrowings under this facility at June 30, 1995. The facility will
be used to supplement funds generated internally to support the growth of
the Company.
CASH PROVIDED BY OPERATING ACTIVITIES was $24.0 million for 1995, compared to
$48.5 million for 1994. In 1995 and 1994 cash provided by improved
earnings and increases in payables was partially offset by increases in
inventories and accounts receivable. See Management's Discussion of the
Statement of Financial Position for details of this performance.
CASH USED BY INVESTING ACTIVITIES of $65.3 million during 1995 included
expenditures of $64.8 million for equipment and expansion of manufacturing
capacity, including the construction of a manufacturing facility in
Juarez, Mexico. In 1994, cash used by investing activities 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 shares.
CASH USED BY FINANCING ACTIVITIES WAS $1.8 MILLION IN 1995. The issuance of
stock pursuant to stock option and employee benefit plans generated $8.2
million. Cash used by financing activities included a $5.1 million
reduction of working capital borrowings by foreign subsidiaries and
dividend payments of $4.6 million.
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.
-18-
20
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands) 1995 1994 1993
-----------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
NET EARNINGS $ 63,540 $ 35,022 $ 19,974
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 29,790 20,938 19,068
Cumulative effect of accounting changes -- -- 4,700
Compensation related to stock benefit plans 6,051 4,787 2,056
Provision for losses on accounts receivable 343 73 145
Loss on sale of property, plant and equipment 625 824 517
Losses of partnerships 386 475 --
Changes in operating assets and liabilities:
Receivables (37,618) (55,367) (23,212)
Inventories (120,614) (12,063) (21,998)
Deferred income taxes (353) (2,582) 7,416
Accounts payable and accrued liabilities 80,067 57,736 15,062
Other assets 3,025 (22,881) (5,939)
Other liabilities (1,021) 21,735 1,903
Net effect of exchange rate fluctuations (208) (163) (374)
--------- --------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 24,013 48,534 19,318
--------- --------- --------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (64,787) (34,904) (23,998)
Payment for businesses purchased (1,634) (1,060) (6,701)
Proceeds from the sale of property, plant
and equipment 510 596 2,292
Proceeds from the sale of investments 4,214 11,174 --
Investment in and advances to partnerships (3,560) (5,240) --
--------- --------- --------
NET CASH USED BY INVESTING ACTIVITIES (65,257) (29,434) (28,407)
--------- --------- --------
FINANCING ACTIVITIES:
Net short-term borrowings (payments) (5,101) 520 1,875
Principal payments on long-term debt (315) (305) (300)
Dividends paid (4,578) (4,497) (4,248)
Issuance of stock 8,162 5,033 24,410
--------- --------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (1,832) 751 21,737
--------- --------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (43,076) 19,851 12,648
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 123,387 103,536 90,888
--------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 80,311 $ 123,387 $103,536
========= ========= ========
See accompanying notes.
-19-
21
SELECTED FINANCIAL DATA
(Dollars in Thousands, Except Per Share Data) 1995 1994 1993 1992 1991
--------------------------------------------------------------------------------------------------------------------------
SALES $ 1,146,502 $ 811,583 $ 730,632 $ 580,831 $493,653
==========================================================================================================================
Cost of Sales 825,254 566,729 526,227 408,845 353,190
Sales and Administrative Expense 148,077 117,604 114,040 102,144 97,050
Research and Development Expense 83,316 60,417 60,161 52,267 49,175
Interest Expense 775 1,066 933 568 1,106
Interest Income (2,837) (3,151) (2,933) (4,424) (6,221)
Other (Income) Expense, Net (1,524) 17,416 (694) (271) (2,179)
==========================================================================================================================
EARNINGS BEFORE INCOME TAXES AND
ACCOUNTING CHANGES 93,441 51,502 32,898 21,702 1,532
--------------------------------------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES 29,901 16,480 8,224 5,425 475
--------------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE ACCOUNTING CHANGES 63,540 35,022 24,674 16,277 1,057
--------------------------------------------------------------------------------------------------------------------------
CUMULATIVE EFFECT OF ACCOUNTING CHANGES -- -- (4,700) -- --
--------------------------------------------------------------------------------------------------------------------------
NET EARNINGS $ 63,540 $ 35,022 $ 19,974 $ 16,277 $ 1,057
--------------------------------------------------------------------------------------------------------------------------
PRIMARY EARNINGS PER SHARE BEFORE
ACCOUNTING CHANGES $ 0.83 $ 0.46 $ 0.33 $ 0.23 $ 0.02
--------------------------------------------------------------------------------------------------------------------------
PRIMARY EARNINGS PER SHARE $ 0.83 $ 0.46 $ 0.27 $ 0.23 $ 0.02
--------------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS PAID PER SHARE $ 0.06 $ 0.06 $0.05 5/6 $0.05 1/3 $0.05 1/3
--------------------------------------------------------------------------------------------------------------------------
==========================================================================================================================
WORKING CAPITAL $ 339,665 $ 302,771 $ 280,616 $ 233,691 $226,190
--------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 785,264 $ 640,219 $ 524,210 $ 440,913 $394,211
--------------------------------------------------------------------------------------------------------------------------
==========================================================================================================================
Short-Term Debt and Current Maturities $ 1,386 $ 6,487 $ 5,962 $ 4,081 $ 608
Long-Term Debt 773 1,088 1,398 1,704 2,004
Stockholders' Equity 474,189 395,646 352,890 299,725 281,636
==========================================================================================================================
TOTAL CAPITAL INVESTED $ 476,348 $ 403,221 $ 360,250 $ 305,510 $ 284,248
--------------------------------------------------------------------------------------------------------------------------
==========================================================================================================================
SALES PER EMPLOYEE $ 253 $ 220 $ 213 $ 190 $ 165
--------------------------------------------------------------------------------------------------------------------------
==========================================================================================================================
GROSS MARGIN % TO SALES 28.0% 30.2% 28.0% 29.6% 28.5%
==========================================================================================================================
NET RETURN ON SALES 5.5% 4.3% 2.7% 2.8% 0.2%
==========================================================================================================================
RETURN ON AVERAGE STOCKHOLDERS' EQUITY 14.7% 9.5% 6.1% 5.7% 0.4%
==========================================================================================================================
-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 fiscal year ends on the Friday closest to June 30 of each year.
Fiscal year ends are as follows:
1995: June 30, 1995
1994: July 1, 1994
1993: July 2, 1993
Fiscal 1993 includes fifty-three weeks.
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 $32,738 at
June 30, 1995, and $17,628 at July 1, 1994. It is anticipated that
substantially all such amounts will be collected within one year.
DEPRECIATION, MAINTENANCE AND REPAIRS
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 in 1995 was computed based on the weighted average number of
shares of common stock outstanding. Earnings per share in 1994 and 1993 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:
1995 1994
-------- --------
Raw Materials and
Work-In-Process $142,418 $ 94,890
Finished Goods 115,009 41,923
-------- --------
Total Inventory $257,427 $136,813
======== ========
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 the current
year presentation. All per share amounts have been restated to reflect the
2-for-1 stock split effected as a dividend issued in October 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 two joint ventures, Comunicaciones Broadband and
Scientific-Atlanta of Shanghai, Ltd., and invested a total of $5,240 in the
partnerships. During 1995 the Company invested an additional $2,410 in these
partnerships and disposed of its investment in Comunicaciones Broadband for a
loss of $0.2 which was included in other (income) expense. The Company's equity
in the losses of these partnerships was $296 and $345 in 1995 and 1994,
respectively.
-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.
During 1994, the Company disposed of its investment in International
Cablecasting Technologies, Inc., for a loss of $549 which was included in other
(income) expense.
3. SALES AND BUSINESS SEGMENT INFORMATION
Sales to Time Warner, Inc. and affiliates were 12 percent of total sales in
1995. Sales were not material to any one customer in 1994. Sales to the United
States government were 12 percent of total sales in 1993. Export sales
accounted for 33 percent of total sales in 1995 and 1994 and 26 percent of
total sales in 1993. 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 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.
4. OTHER (INCOME) EXPENSE
Other income of $1,524 in 1995 included rental income, royalty income, net
gains from partnership activities and other miscellaneous items. There were no
significant items in other income and other expense during 1995.
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.
The securities class action suit, which was filed in 1988, related to events
which occurred during the early 1980's principally as a result of the
difficulties experienced by the Company in the production and delivery of a new
product. The Company firmly believes it fully complied with the law in this
matter and that the suit was without merit. The litigation was settled in 1994
in the best interest of the Company's shareholders to avoid protracted and
costly legal proceedings and eliminate the uncertainty of a jury trial.
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.
5. QUARTERLY FINANCIAL DATA (UNAUDITED)
FISCAL QUARTERS
-----------------------------------------
First Second Third Fourth
----- ------ ----- ------
1995
------------
Sales $232,301 $277,393 $313,510 $323,298
Gross margin 69,865 75,335 83,021 93,027
Gross margin % 30.1% 27.2% 26.5% 28.8%
Net earnings 12,109 15,013 15,671 20,747
Earnings
per share 0.16 0.19 0.21 0.27
Stock prices:
High 22.438 22.875 24.875 24.500
Low 16.375 19.125 18.125 18.375
Dividends paid
per share 0.015 0.015 0.015 0.015
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 18.813 19.063 18.250 18.938
Low 14.500 14.938 12.938 12.875
Dividends paid
per share 0.015 0.015 0.015 0.015
(1) Includes charge of $11,900 ($0.15 per share) to settle securities class
action litigation.
-22-
24
6. INDEBTEDNESS
Credit Facility:
At June 30, 1995, the Company had a $300,000 senior credit facility that
provides for unsecured borrowings up to $150,000 which expire May 10, 1996 and
$150,000 which expire May 10, 2000. There were no borrowings under this
facility at June 30, 1995. Interest on borrowings under this facility are at
varying rates and fluctuate based on market rates. Facility fees based on the
average daily aggregate amount of the facility commitments are payable
quarterly.
Long-term debt consisted of:
1995 1994
--------- -------
6 1/4%-10% capitalized leases,
payable in varying installments
ranging from $200 to $250
through 1999 $ 900 $ 1,150
8 1/4% mortgage 188 248
--------- -------
1,088 1,398
Less-Current maturities 315 310
--------- -------
$ 773 $ 1,088
========= =======
Long-term debt at June 30, 1995 had scheduled maturities as follows:
1996--$315; 1997--$321; 1998--$252; 1999--$200.
At June 30, 1995, property, plant and equipment costing approximately $5,925
were pledged as collateral on long-term debt.
Foreign short-term debt was $ 1,071 and $6,177 at the end of 1995 and 1994,
respectively. The average interest rates for foreign short-term debt at June
30, 1995 and July 1, 1994 were 9.2 percent and 8.3 percent, respectively.
Total interest paid was $811, $1,071, and $831 in 1995, 1994, and 1993,
respectively.
7. ACCRUED LIABILITIES
Accrued liabilities consisted of:
1995 1994
---------- --------
Compensation $ 34,747 $ 26,939
Warranty and service 13,818 11,597
Customer down payments 7,976 17,506
Taxes other than income taxes 5,613 5,941
Other 51,793 33,522
---------- --------
$ 113,947 $ 95,505
========== ========
8. OTHER LIABILITIES
Other liabilities consisted of:
1995 1994
---------- --------
Retirement $ 22,751 $ 28,595
Compensation 6,285 5,177
Other 5,552 7,447
---------- --------
$ 34,588 $ 41,219
========== ========
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.
The tax provision differs from the amount resulting from multiplying earnings
before income taxes by the statutory federal income tax rate as follows:
1995 1994 1993
---- ---- ----
Statutory federal
tax rate 35.0% 35.0% 34.0%
State income taxes, net
of federal tax benefit 3.5 4.6 5.6
Tax reserves 0.3 0.5 (8.1)
Research and develop-
ment tax credit (3.1) (3.4) --
Export incentives (1.5) (2.1) (4.7)
Exempt interest income (0.7) (1.9) (3.1)
Other, net (1.5) (0.7) 1.3
---- ---- ----
32.0% 32.0% 25.0%
==== ==== ====
-23-
25
Income tax provision (benefit) includes the following:
1995 1994 1993
--------- --------- --------
Current tax provision
Federal $ 21,661 $ 14,602 $ 8,131
State 5,222 3,879 3,456
Foreign 1,138 581 467
--------- --------- --------
28,021 19,062 12,054
--------- --------- --------
Deferred tax provision (benefit)
Federal (389) (1,911) (1,938)
State (195) (263) (684)
Foreign 2,464 (408) (1,208)
--------- --------- --------
1,880 (2,582) (3,830)
--------- --------- --------
Total provision
for income
taxes $ 29,901 $ 16,480 $ 8,224
========= ========= ========
Total income taxes paid include settlement payments for federal, state and
foreign audit adjustments. The total income taxes paid were $28,937, $1,551,
and $3,464 in 1995, 1994, and 1993, respectively.
The tax effect of significant temporary differences representing deferred tax
assets and liabilities are as follows:
1995 1994
---- ----
Current deferred tax assets
Liabilities not currently
deductible $13,582 $15,809
Inventory valuation 9,876 7,993
Warranty reserves 3,077 2,158
Bad debt reserves 1,432 1,635
Other 304 323
------- -------
Current deferred tax assets $28,271 $27,918
======= =======
Noncurrent deferred tax assets
Postretirement and
postemployment benefits $12,235 $12,482
Tax credit/loss carryforwards 633 3,297
Liabilities not currently deductible 1,748 155
------- -------
Noncurrent deferred tax assets 14,616 15,934
======= =======
Noncurrent deferred tax liabilities
Depreciation (7,461) (6,499)
Other -- (48)
------- -------
Noncurrent deferred tax liabilities (7,461) (6,547)
------- -------
Net noncurrent deferred tax asset $ 7,155 $ 9,387
======= =======
Valuation allowances for current deferred tax assets and noncurrent deferred
tax assets were not required in 1995 or 1994.
The net noncurrent deferred tax asset is included in Other Assets at June 30,
1995 and July 1, 1994.
In 1995, 1994, and 1993, earnings before income taxes included $8,571, $2,641,
and $83, respectively, of earnings generated by the Company's foreign
operations.
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:
1995 1994
------- --------
Accumulated benefit obligation
Vested portion $49,723 $ 51,699
Nonvested portion 2,234 1,577
------- --------
51,957 53,276
Effect of projected future
compensation levels 15,144 10,070
------- --------
Projected benefit obligation 67,101 63,346
Plan assets at fair value (60,381) (56,755)
------- --------
Projected benefit obligation in
excess of plan assets 6,720 6,591
Unrecognized prior service costs 384 419
Unrecognized loss (2,855) (1,035)
Unrecognized net asset from
initial application of SFAS 87 7,681 8,336
Fourth quarter contribution (999) (608)
------- --------
Accrued pension cost $10,931 $ 13,703
======= ========
Discount rate 8.0% 8.0%
Rate of increase in future
compensation 4.5% 4.5%
Expected long-term rate of
return on assets 10.0% 10.0%
Plan assets are invested in listed stocks, bonds and short-term monetary
investments.
The Company's net pension expense was $2,483 in 1995, $2,709 in 1994, and
$2,686 in 1993.
-24-
26
The components of pension expense are as follows:
1995 1994 1993
-------- -------- --------
Service cost of
benefits earned $ 4,059 $ 4,522 $ 3,459
Interest cost 4,826 4,295 3,895
Actual return on
plan assets (4,821) (2,694) (6,479)
Net amortization and
deferral (1,581) (3,414) 1,811
-------- -------- --------
Net periodic pension
cost $ 2,483 $ 2,709 $ 2,686
======== ======== ========
The Company has unfunded defined benefit retirement plans for certain key
officers and non-employee directors. Accrued pension cost for these plans was
$5,521 at June 30, 1995 and $4,338 at July 1, 1994. Retirement expense for
these plans was $1,223, $906, and $156 in 1995, 1994, and 1993, 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.
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:
1995 1994
---- ----
Accumulated postretirement
benefit obligation
Retirees $ 8,876 $ 8,135
Fully eligible active
participants 177 1,271
Other active participants 287 274
------- -------
9,340 9,680
Unrecognized net gain 1,200 1,060
Fourth quarter claims
payments (167) (370)
------- -------
Accrued postretirement
benefit cost $10,373 $10,370
======= =======
The components of postretirement benefit expense are as follows:
1995 1994
---- ----
Service cost of benefits earned $ 30 $ 25
Interest cost 740 808
Net amortization and deferral (11) --
----- -----
Postretirement benefit expense $ 759 $ 833
===== =====
Significant actuarial assumptions are as follows:
1995 1994
---- ----
Annual rate of increase in per capita cost
Pre-Medicare 11.25% 11.25%
Annual decline 0.75% 0.75%
Final rate of increase 6.00% 6.00%
Post-Medicare 9.50% 9.50%
Annual decline 0.50% 0.50%
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 8.6% 7.6%
Interest cost component
of benefits 9.0% 8.2%
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.
-25-
27
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 foreign
currency contracts is based on quoted market prices.
1995 1994
----------------- ----------------
CARRYING/ Carrying/
CONTRACT FAIR Contract Fair
AMOUNT VALUE Amount Value
-------- ----- -------- -----
Cash and cash
equivalents $ 80,311 $ 80,311 $123,387 $123,387
Foreign
currency
contracts
Sell $ 7,185 $ 7,605 $ 5,132 $ 5,149
Buy $ 129,570 $ 127,749 $62,218 $ 66,695
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.
Gains and losses on foreign exchange forward 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.
12. RELATED PARTY TRANSACTIONS
During 1995 the Company had sales of $3,384 to Scientific-Atlanta of Shanghai,
Ltd. and a net receivable of $420 at June 30, 1995.
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 1995, 1994 and 1993 was $10,696, $9,303, and $7,983, respectively. The
Company pays taxes, insurance, and maintenance costs with respect to most
leased items. Remaining operating lease terms, including renewals, range up to
twenty years. Future minimum payments at June 30, 1995, under operating leases
were $38,796. Payments under these leases for the next five years are as
follows: 1996-- $11,144; 1997-- $7,639; 1998-- $4,952; 1999-- $3,367; 2000--
$3,066.
The Company has 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 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 October 1994, the Company issued a 2-for-1 stock split effected in the form
of a 100 percent stock dividend. This stock split was 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 June 30, 1995, July 1, 1994 and July 2, 1993:
Number Option
of Shares Price
--------- -----
1995
Outstanding, beginning of year 4,482,052 $ 2.875 - $ 17.375
Granted 1,624,189 $ 16.563 - $ 22.150
Cancelled (202,979) $ 3.250 - $ 22.150
Exercised (957,063) $ 2.875 - $ 21.938
Outstanding, end of year 4,946,199 $ 2.875 - $ 22.125
Exercisable, end of year 2,306,769 $ 2.875 - $ 22.125
1994
Outstanding, beginning of year 4,171,528 $ 2.875 - $ 15.688
Granted 1,214,700 $ 13.500 - $ 17.375
Cancelled (247,804) $ 3.250 - $ 15.938
Exercised (656,372) $ 2.875 - $ 16.937
Outstanding, end of year 4,482,052 $ 2.875 - $ 17.375
Exercisable, end of year 1,647,078 $ 2.875 - $ 17.125
1993
Outstanding, beginning of year 7,702,482 $ 2.875 - $ 6.875
Granted 1,541,700 $ 9.083 - $ 15.688
Cancelled (367,598) $ 3.250 - $ 6.625
Exercised (4,705,056) $ 2.875 - $ 6.625
Outstanding, end of year 4,171,528 $ 2.875 - $ 15.688
Exercisable, end of year 808,812 $ 2.875 - $ 11.375
-26-
28
At June 30, 1995, an additional 2,285,212 shares were reserved under employee
and director stock option plans.
The Company has an employee stock purchase plan whereby the Company provides
certain purchase benefits for participating employees. At June 30, 1995,
628,171 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, subject to certain limitations. The Company's
expense to match contributions was $4,940, $3,373 and $1,487 in 1995, 1994 and
1993, respectively. At June 30, 1995, 1,012,994 shares were reserved for
issuance to employees under the plan.
The Company issues restricted stock awards to certain officers and key
employees. Compensation expense for restricted stock awards was $1,102 in 1995
and $1,232 in 1994.
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. For shares issued after such dividend, a right attaches to each share of
common stock issued. 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
corporation's common stock, as the case may be, based on the Company's market
price at the time, for $16.67.
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 June 30,
1995, 127,583,148 shares were reserved for Common Stock Purchase Rights. At
June 30, 1995, a total of 131,509,525 shares of authorized stock were reserved
for the above purposes.
-27-
29
15. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In Thousands) 1995 1994 1993
---- ---- ----
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 75,495 37,196 24,086
Issuance of a 2-for-1 stock
split effected in the form of
a stock dividend (See Note 14) 97 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 1,179 481 1,068
Issuance of restricted shares 179 70 --
----------- -------- ------------
Shares outstanding 76,950 75,495 37,196
=========== ======== ============
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year $ 141,179 $129,072 $ 115,022
Issuance of shares under
employee benefit plans 13,048 8,347 3,180
Tax benefit from employees'
stock option plan 4,966 2,563 10,870
Issuance of restricted shares to
employees 3,825 2,174 --
Unearned compensation -
restricted shares (2,812) (977) --
----------- -------- ------------
Balance at end of year $ 160,206 $141,179 $ 129,072
=========== ======== ============
RETAINED EARNINGS
Balance at beginning of year $ 215,926 $204,274 $ 194,569
Net earnings 63,540 35,022 19,974
Issuance of a 2-for-1 stock
split effected in the form of
a stock dividend (See Note 14) (48) (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) (4,578) (4,497) (4,248)
----------- -------- ------------
Balance at end of year $ 274,840 $215,926 $ 204,274
=========== ======== ============
(1) $0.06 per share in 1995 and 1994
and $0.05 5/6 per share in 1993
ACCUMULATED TRANSLATION ADJUSTMENTS
Balance at beginning of year $ 794 $ 946 $ 1,351
Foreign currency translation
adjustments (126) (152) (405)
----------- -------- ------------
Balance at end of year $ 668 $ 794 $ 946
=========== ======== ============
TREASURY STOCK
Balance at beginning of year $ -- $ -- $ (23,260)
Issuance of shares under
employee benefit plans -- -- 23,260
----------- -------- ------------
Balance at end of year $ -- $ -- $ --
=========== ======== ============
-28-
30
SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 30, 1995
(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:
June 30, 1995 --
Allowance for doubtful accounts $ 3,839 $ 343 $ 69 $ (428) $ 3,823
======== ======== ======== ======= ==========
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
======== ======== ======== ======= ==========
Notes:
(1) Represents recoveries on accounts previously written off, and in fiscal
1993, the $167 acquired with purchase of Nexus Engineering Corp.
(2) Amounts represent uncollectible accounts written off.
-29-
31
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 6, 1995
----------------------- -----------------
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 6, 1995
------------------------------ -----------------
James F. McDonald Date
President and
Chief Executive Officer
and Director
(Principal Executive Officer)
/s/ Harvey A. Wagner September 12, 1995
------------------------------ ------------------
Harvey A. Wagner Date
Senior Vice President,
Chief Financial Officer and
Treasurer
(Principal Financial Officer)
/s/ Julian W. Eidson September 11, 1995
------------------------------ ------------------
Julian W. Eidson Date
Vice President and Controller
(Principal Accounting Officer)
/s/ Marion H. Antonini September 6, 1995
------------------------------ -----------------
Marion H. Antonini, Director Date
-30-
32
/s/ William E. Kassling September 12, 1995
----------------------------- ------------------
William E. Kassling, Director Date
/s/ Wilbur Branch King September 10, 1995
----------------------------- ------------------
Wilbur Branch King, Director Date
/s/ Mylle Bell Mangum September 13, 1995
----------------------------- ------------------
Mylle Bell Mangum, Director Date
/s/ Alonzo L. McDonald September 12, 1995
----------------------------- ------------------
Alonzo L. McDonald, Director Date
/s/ David J. McLaughlin September 9, 1995
----------------------------- ------------------
David J. McLaughlin, Director Date
/s/ James V. Napier September 12, 1995
----------------------------- ------------------
James V. Napier, Director Date
/s/ Sidney Topol September 11, 1995
----------------------------- ------------------
Sidney Topol, Director Date
-31-