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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

OR

Commission File Number 1-5517

SCIENTIFIC-ATLANTA, INC.

(Exact name of Registrant as specified in its charter)

770-236-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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.    ¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).         Yes  x        No  ¨

As of December 27, 2002, the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the closing price of the Scientific-Atlanta common stock on such date was $1,853,593,829.

As of September 1, 2003, the Registrant had outstanding 151,393,609 shares of common stock.

Documents Incorporated By Reference:

Specified portions of the Proxy Statement for the Registrant’s 2003 Annual Meeting of Shareholders are incorporated by reference to the extent indicated in Part III of this Form 10-K.

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Certain Selected Exhibits Included in 2003 Annual Report to Shareholders:*

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PART I

In this Form 10-K, the words “Scientific-Atlanta,” “we,” “our,” “ours,” and “us” refer to Scientific-Atlanta, Inc. and its subsidiaries. For your reference, we have included a glossary of technical terms in Exhibit 99.2.

Our fiscal year ends on the Friday closest to June 30 of each year. The references to fiscal year by date refer to our fiscal year ending in that particular calendar year; for example, fiscal year 2001 refers to our fiscal year ended June 29, 2001, fiscal year 2002 refers to our fiscal year ended June 28, 2002 and fiscal year 2003 refers to our fiscal year ended June 27, 2003.

This Form 10-K includes “forward-looking statements.” The words “may,” “will,” “should,” “could,” “continue,” “future,” “potential,” “believe,” “expect,” “anticipate,” “project,” “plan,” “intend,” “seek,” “estimate,” “predict,” and similar expressions identify forward-looking statements. We caution investors that any forward-looking statements made by us are not guarantees of future performance and that a variety of factors, including those discussed below, could cause our actual results and experience to differ materially from the anticipated results or other expectations expressed in our forward-looking statements. Please see Exhibit 99.1 to this Form 10-K for detailed information about the uncertainties and other factors that may cause actual results to materially differ from the views stated in such forward-looking statements.

General

Established as a Georgia corporation in 1951, Scientific-Atlanta, Inc. has evolved from a manufacturer of electronic test equipment for antennas and electronics to one of the leading providers of end-to-end networks used by programmers and cable operators and a provider of worldwide customer service and support for the cable television industry. We operate in only one business segment, Broadband.

In November 2002, we acquired from Arris International, Inc. (Arris) certain transmission product lines, including analog optics, nodes and radio frequency (RF) electronics products used in broadband cable networks. Additionally, in November 2002, we acquired from ChanneLogics, Inc. (ChanneLogics), a software developer, software, technology and other assets that can provide cable operators visibility to their high-speed data traffic and bandwidth consumption and allow them to identify potential bottlenecks and efficiently plan capacity expansion. In January 2002, we acquired BarcoNet NV, a Belgium-based, leading provider of multimedia distribution solutions for broadband cable and broadcast applications, as well as terrestrial, telecom, satellite and wireless applications, particularly in Europe. The results of operations of BarcoNet for the twelve months ended June 27, 2003 and six months ended June 28, 2002 are included in our Consolidated Statements of Earnings from the date of acquisition.

Our Internet address is www.scientificatlanta.com, and we will make available free of charge on or through our investor relations website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC).

Products

We are a producer of a wide variety of broadband products for the cable television industry. Networks in the cable television industry are comprised of equipment and software that reside at the programmer’s facility, at the cable operator’s headend (or “central office”), in the outside transmission plant (whether underground or above ground), and in the homes of consumers. Our products include:

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Our Explorer^® digital set-tops, digital headends, and related software products are designed to enable subscribers to access interactive television services developed by us and third parties. Several of these advanced services, including digital video recording (DVR), high-definition (HD) television capabilities, and video-on-demand (VOD), have already been deployed on many of our customers’ networks. Sales of our Explorer digital set-tops constituted approximately 56 percent, 52 percent, and 57 percent of our total sales in fiscal years 2003, 2002 and 2001, respectively.

During fiscal year 2003, we began volume deployments of our Explorer 8000^™ Home Entertainment Server, Explorer 3250^™ High-Definition set-top and our Explorer 4200^™ Home Gateway set-top. The Explorer 8000 Home Entertainment Server adds digital video recording capabilities that allow the cable subscriber to pause, rewind, fast forward, record, and replay live analog and digital TV programs using a built-in hard drive. During fiscal year 2003, we shipped approximately 386,000 Explorer 8000 Home Entertainment Servers. The Explorer 3250HD set-top improves upon previous generations of HD set-tops by offering enhanced installation features, nearly 30 percent faster processing speed, increased memory, additional audio options and stretch and zoom capabilities for HD Televisions. During fiscal year 2003, we shipped approximately 197,000 HD set-tops as compared to 99,000 HD set-tops shipped during fiscal year 2002. The Explorer 4200 Home Gateway set-top, which features an internal DOCSIS cable modem, and the Explorer 1850 set-top, which includes reduced feature functionality, began shipping in fiscal year 2003.

Our cable modem products are designed to enable subscribers to access high-speed data communication services over cable networks. During fiscal year 2003, we shipped approximately 731,000 WebSTAR^™ cable modems, as compared to 665,000 modems shipped during fiscal year 2002. Various products in our WebSTAR cable modem product line have received various certifications, including DOCSIS 1.0, DOCSIS 1.1, DOCSIS 2.0, Euro-DOCSIS, CE and BroadJump. Additionally, we introduced new data products including the SmartLAN^™ products, which provide a cost efficient, high-speed Ethernet-based backbone within a home or small office. The SmartLAN products make this possible by using a high-speed data cable modem along with the existing twisted-pair phone wiring prevalent in most homes and small offices. We also announced another home networking product, the WebSTAR^™ DPR2320^™, which will be able to provide a DOCSIS 2.0-based home and small office networking solution for connecting multiple PCs using Wi-Fi, Ethernet or USB technology.

Our products that transmit signals from the cable operator to the end-user customer include:

These products enable operators to transmit video, data and voice over the same cable operator network with a reverse path for the end user customer to communicate back through the network to a variety of services. Sales of our optoelectronic products constituted approximately 9 percent, 11 percent and 9 percent of our total sales in fiscal years 2003, 2002 and 2001, respectively. Sales of our RF distribution products constituted approximately 6 percent, 7 percent and 10 percent of our total sales for fiscal years 2003, 2002, and 2001, respectively.

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During fiscal year 2003, we introduced our Continuum DVP^™ Dense QAM Array (DQA), that incorporates sixteen QAM channels in a single device and allows us to sell QAM modulators into cable systems that use other companies’ conditional access systems. Our other products include encoders, statistical multiplexers, modulators and receivers. Customers, such as television programmers, broadcasters, and service providers use these products to deliver compressed digital video via satellite to cable operators and viewers.

During fiscal year 2003, we also announced the release of several new products designed to help our customers offer and deliver advanced digital interactive services to their subscribers. We introduced our new PowerVu^® advanced modulator (model D9390T). The modulator can be used to expand the number of channels that can be delivered by a single satellite transponder. We also announced the new Scientific-Atlanta Continuum DVP^™ eXtra Dense QAM Array (XDQA), that provides QAM modulation and RF channel output. It will be significantly smaller than the DQA device, which is important to cable operators due to the premium placed on physical space available in their headends. In addition, we introduced a new family of RF-based BroadLAN^™ products, along with an expansion of Scientific-Atlanta’s widely deployed Prisma IP^™ video, data and voice multi-service optical transport platform products. These products enable cable operators to offer high-speed data (HSD), voice and video services to businesses. During the first quarter of fiscal year 2004, we began a field trial of the BroadLAN products with a customer.

We previously announced that we had scheduled to begin delivering the Scientific-Atlanta Gigabit QAM (GQAM) modulator Model 9479 in the summer of 2003. We have delivered GQAM modulators for evaluation by customers and expect to begin shipping production GQAM modulators during the second quarter of fiscal year 2004. We previously announced that the Explorer 4200DVB set-top was expected to be commercially available in July 2003. We now expect to begin shipping the Explorer 4200DVB during the second quarter of fiscal year 2004. We previously announced that the Explorer 8000 multi-room system would be available at the end of calendar year 2003. We now expect to introduce the Explorer 8000 multi-room system by the end of the fourth quarter of fiscal year 2004.

Services

We have consolidated most of our service functions into a single professional services organization, SciCare^™ Broadband Services. SciCare Broadband Services offers a variety of maintenance and service contracts for Scientific-Atlanta networks. In addition, SciCare Broadband Services provides integration, installation, management and consulting services that can improve the efficiency of a cable network and help optimize services offered by a cable operator. We also offer software and systems integration and other consulting services that are not limited to Scientific-Atlanta products and can help a variety of customers implement “triple play” services as video, voice and data services converge onto a single platform and/or provider.

Customers

The cable television industry is comprised of many cable systems. In the United States, a small number of large cable television multiple system operators (MSOs) own a large portion of the cable television systems. Customers that accounted for 10 percent or more of our total sales in fiscal years 2003, 2002, or 2001 were as follows:

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Sales to customers outside the United States constituted 22 percent, 20 percent and 15 percent of our total sales for fiscal years 2003, 2002 and 2001, respectively. Sales are attributed to geographic areas based upon the location to which the product is shipped. Sales in any single country did not exceed 10 percent of total sales in fiscal years 2003, 2002 or 2001, except for the United States. See Note 6 of the Notes to Consolidated Financial Statements included in this Form 10-K.

Marketing and Sales

We sell our products primarily through our own sales personnel who work out of offices throughout the United States and various foreign countries. In addition, our management is actively involved in marketing and sales activities. Certain products are marketed in the United States through independent sales representatives, independent distributors and system integrators. Sales of certain products outside the United States are made through wholly-owned subsidiaries and branch offices, as well as through independent distributors and independent sales representatives. Sales of our products outside the United States are also made to independent system integrators and dealers who resell the products to customers.

Backlog

Our backlog consists of unfilled customer orders believed to be firm and long-term contracts that have not been completed. Scientific-Atlanta’s backlog as of June 27, 2003 and June 28, 2002 was $394,882,000 and $410,600,000, respectively. We believe that approximately 90 percent of the backlog existing at June 27, 2003 will be shipped within the succeeding fiscal year. In general, our policy is to place in our backlog firm orders for product scheduled for shipment within six months from the end of the reported quarter. On occasion, our customers may request that we delay shipment of an order previously entered into backlog. The quality of orders not shipped within the six month bookings policy is assessed to determine if the order should remain in backlog. If the quality of the order has not been impaired and the order is scheduled to ship within the next twelve months, the order remains in backlog.

The amount contained in backlog for any contract or order may not be the total amount of the contract or order. The amount of our backlog at any time may not reflect expected revenues for any future fiscal period because we may receive additional orders in the same period we ship the ordered product or our customers may request that we delay shipment of an order previously entered into backlog.

Product Research and Development and Intellectual Property

We conduct an active research and development program to develop new products and systems and to add significant new features to existing products and systems. Our development strategy is to identify features, products and systems which are, or are expected to be, needed by a number of customers with substantial customer bases in large markets and to allocate a greater share of our research and development resources to features, products and systems with the highest potential for future benefits to Scientific-Atlanta.

Expenditures in the last three fiscal years were principally for the development and integration of features, products and systems for our interactive broadband networks, including software and hardware development and integration related to our digital set-top and digital network products, and optoelectronic products, which include our Internet Protocol (IP)-based transport systems, PowerVu products and BarcoNet products (since acquisition in January 2002). In fiscal years 2003, 2002, and 2001, our research and development expenses were $146,596,000, $148,652,000 and $165,124,000 (including a $10,778,000 stock compensation charge related to the PowerTV tender offer), respectively.

We generally rely upon patent, copyright, trademark and trade secret laws to establish and maintain our proprietary rights in our technology products and systems. However, there can be no assurance that any of our proprietary rights will not be challenged, invalidated or circumvented, or that any such rights will provide significant competitive advantage. Third parties have claimed, and may claim, that we have infringed their current, or future, intellectual property rights. There can be no assurance that we will prevail in any intellectual property infringement litigation given the complex technical issues and inherent uncertainties in litigation. Even

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if we prevail in litigation, the expense of litigation could be significant. We are engaged in several lawsuits as plaintiff against Gemstar-TV Guide International, Inc. and affiliated and/or related companies alleging among other things violations of antitrust laws and misuse of certain patents, and requesting among other things a declaration that certain Gemstar patents are invalid, unenforceable and not infringed. We have described these proceedings in Item 3. Legal Proceedings.

Manufacturing

We have significant manufacturing operations that range from complete assembly of a particular product by one individual or small group of individuals to automated assembly lines for volume production. Because many of our products contain precision electronic components requiring close tolerances, we maintain rigorous and exacting test and inspection procedures designed to prevent production errors, and we frequently review our overall production techniques to enhance productivity and reliability.

Our key manufacturing facilities are located in Juarez, Mexico and Kortrijk, Belgium. During fiscal year 2002, we completed the transfer of all of our Atlanta-based manufacturing to our Juarez facility and currently approximately 90 percent of our in-house manufacturing is being performed in our Juarez facility. At full operation, the Juarez factory has the capability to run three shifts during the week and additional weekend shifts, if needed. At times during fiscal year 2003, we ran a partial third shift on certain products to satisfy product demand and to alleviate production bottlenecks. Due to our concentration of manufacturing in Juarez, we have considered appropriate business continuity and disaster recovery plans. However, we are unable to predict the impact on our results of operations, which may be materially adverse, of any type of disaster at this facility.

Long-lived assets include property, plant and equipment, cost in excess of net assets acquired, investments other than marketable securities, and intellectual property. Our long-lived assets in the United States, Mexico, and Belgium were, respectively:

Materials and Supplies

Except for certain Application Specific Integrated Circuits (ASICs), the materials and supplies we purchase generally are standard electronic components, such as integrated circuits, wire, circuit boards, transistors, capacitors and resistors, all of which are produced by a number of manufacturers. We also purchase aluminum die castings, steel enclosures and other semi-fabricated items, which are produced by a variety of sources.

We consider our sources of supply to be adequate. For fiscal year 2003, we did not experience any significant material availability issues, and we do not expect to have significant material supply issues in the foreseeable future. However, a reduction or interruption in supply or a significant change in price of one or more components could adversely affect our business, operating results and financial condition. Significant suppliers include the following:

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Employees

As of June 27, 2003, we employed approximately 6,889 regular full-time and part-time employees and approximately 156 additional temporary workers employed through employment agencies. We believe our employee relations are satisfactory.

Competition

Our products compete with those of a substantial number of companies worldwide.

Our Explorer digital set-tops, digital headends, and related software products compete with products from a number of companies. These include and may include:

The Federal Communications Commission (FCC) has mandated that digital tuners be incorporated into all television sets greater than 13 inches and all television receiving equipment such as VCRs and DVD players by July 1, 2007. Thus, television manufacturers may soon integrate into their products some of the technology that also is available in our set-top products.

On September 10, 2003 the FCC adopted rules for digital “plug and play” cable compatibility, though the final order has not yet been issued by the FCC. The new rules generally follow, with some modification, the technical, labeling and encoding rules originally set forth in a December 19, 2002 Memorandum of Understanding (MOU) between the cable and consumer electronics industries. The MOU contained both voluntary and inter-industry agreements and a package of regulatory proposals. The new rules will permit consumer electronics companies to manufacture television sets with “plug and play” functionality for one-way digital cable services, including typical cable programming as well as premium services. Consumers of such television sets will need to obtain a security card also known as a CableCARD to be inserted in the television set in order to receive such cable services.

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Other companies may have developed an alternative method of providing conditional access on cable networks that proposes to encrypt only a portion of digital video stream. If this alternative conditional access method proves to be technologically and commercially feasible, it may be adopted by our customers.

Our cable modem products and our products that transmit signals from the cable operator to the end-user customer compete with products from a large number of companies.

In each of these current and future competitive scenarios, some of the competitors have significantly greater resources, financial and otherwise, than we do. We believe that our ability to compete in the industry has resulted from our marketing strategies, engineering skills, product features, product performance, ability to provide post-purchase services, ability to provide quality products at competitive prices, and broad coverage of the market by our sales personnel and the alternate channels of distribution we utilize.

Scientific-Atlanta, Explorer, PowerVu, Prisma, and Continuum are registered trademarks of Scientific-Atlanta, Inc. WebSTAR, Continuum DVP, BroadLAN, SmartLAN, Prisma IP, SciCare, 3250, 4000, 8000 and DPR2320 are trademarks of Scientific-Atlanta, Inc. All other brand and product names are the property, and may be trademarks, of their respective owners.

We own and lease office, manufacturing and warehouse facilities in the United States and in other countries. Our principal locations are described below:

Given our significant international operations, our future sales and results of operation could be adversely affected by a variety of political and economic factors in various geographic regions, including foreign currency fluctuations, changes in a specific country’s or region’s political conditions or changes or continued weakness in economic conditions, trade protection measures, import or export licensing requirements, the overlap of different tax structures and unexpected changes in regulatory requirements.

From time to time, we are involved in litigation and legal proceedings incident to the ordinary course of our business, such as personal injury claims, employment matters, environmental proceedings, contractual disputes, securities litigation and intellectual property disputes. Included in the litigation or proceedings we currently have pending are the following:

Adelphia Matter

Adelphia Communications Corporation is one of Scientific-Atlanta’s major customers. Adelphia and several members of its former management are the subjects of civil and/or criminal charges brought by the SEC and the Justice Department. One aspect of the numerous charges concerns Adelphia’s January 2001 marketing

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support agreement with Scientific-Atlanta and the manner in which Adelphia accounted for such arrangement. The SEC and the Justice Department have subpoenaed records of Scientific-Atlanta, and the government has interviewed Scientific-Atlanta personnel with respect to the Adelphia agreement. Scientific-Atlanta continues to cooperate in these investigations. There can be no assurance as to the outcome of these investigations and their effects on Scientific-Atlanta.

Charter Matters

Charter Communications, Inc. is also one of Scientific-Atlanta’s major customers. Several members of its former management are the subjects of criminal charges brought by the Justice Department. In January 2003, the Justice Department subpoenaed records concerning Scientific-Atlanta’s marketing support and advertising agreements with Charter. In February 2003, the SEC issued a similar subpoena concerning Charter. The government has interviewed Scientific-Atlanta personnel with respect to the Charter agreements. In July 2003, a federal grand jury indicted certain former Charter officers. Charter’s accounting for its advertising agreement with Scientific-Atlanta in calendar year 2000 is one aspect of the charges contained in this indictment. Scientific-Atlanta continues to cooperate in these investigations. There can be no assurance as to the outcome of these investigations and their effects on Scientific-Atlanta.

We became a co-defendant on June 17, 2003 in previously filed purported securities class actions pending against Charter and certain of Charter’s present/former officers and directors in the United States District Court of the Eastern District of Missouri (the Consolidated Complaint). Plaintiffs in these cases seek to represent a putative class of investors in Charter stock from November 8, 1999 to July 17, 2002, and allege various securities law violations by Charter and its management. The Consolidated Complaint further alleges that certain commercial transactions between Charter and Scientific-Atlanta relating to Charter’s purchase of digital set-top boxes and a marketing support arrangement resulted in violations of securities laws as to investors in Charter’s securities. The Consolidated Complaint does not allege any impropriety as to our financial statements or statements made to our investors. Plaintiffs are seeking to recover damages from us in an unspecified amount. Scientific-Atlanta intends to vigorously defend the claim.

Class Action-Related Legal Proceedings

On July 24, 2001, a purported class action alleging violations of the federal securities laws by us and certain of our officers was filed in the United States District Court for the Northern District of Georgia. After July 24, 2001, several actions with similar allegations were filed. A lead plaintiff and lead counsel were selected by the Court in December 2001, and a consolidated complaint was filed by the lead counsel in January 2002. The U.S. District Court for the Northern District of Georgia denied on December 23, 2002 our motion to dismiss the consolidated complaint filed by the lead counsel. The U.S. District Court for the Northern District of Georgia certified for appeal on April 15, 2003 an issue raised by us in our motion for certification of interlocutory appeal and stayed discovery in the securities class action pending resolution of such appeal. The petition for interlocutory appeal was granted by the Eleventh Circuit Court of Appeals on June 12, 2003, and briefing on the appeal is complete. Plaintiffs are seeking to recover damages from us in an unspecified amount.

On April 8, 2002, a shareholder, Paul Thompson, filed a purported shareholder’s derivative action purportedly on behalf of Scientific-Atlanta in the Superior Court of Gwinnett County, Georgia against all of our directors and certain officers. Although a courtesy copy of the complaint has been supplied to us by counsel to the plaintiff shareholder, neither we nor the other defendants have been served with the complaint. This action is based upon substantially the same facts alleged in the securities class action litigation filed in July 2001 and described in the foregoing paragraph. This plaintiff shareholder is seeking to recover damages in an unspecified amount.

On January 3, 2003, a purported class action alleging violations of the Employee Retirement Income Security Act (ERISA) was also filed in the U.S. District Court for the Northern District of Georgia. The action, as

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amended, was brought against us and several of our officers and directors alleging breaches of fiduciary obligations to participants in Scientific-Atlanta’s 401(k) plan and is based on substantially the same factual allegations as the class action described above. In response to the Defendants’ motion to dismiss, Plaintiff, Randolph J. Schaubs, has moved the court to allow him to amend his complaint to remove all ERISA claims, remove all class action claims and convert the complaint into an individual claim for damages under the Georgia securities laws. The court has not yet ruled on the Plaintiff’s motion to amend his complaint. The Plaintiff seeks unspecified equitable and monetary relief.

We intend to vigorously defend all these matters.

Gemstar-Related Legal Proceedings

We have filed several lawsuits as plaintiff against Gemstar-TV Guide International, Inc. and affiliated and/or related companies. Gemstar-TV Guide International, Inc. and/or its affiliated entities are referred to hereafter as “Gemstar.”

Multi-District Proceedings

On December 3, 1998, we filed an action against Gemstar in the U.S. District Court in Atlanta, Georgia. The suit alleges that Gemstar has violated federal antitrust laws and has misused certain patents. We seek damages, an injunction and a declaration that eight Gemstar patents related to interactive program guides are invalid, unenforceable and not infringed by our products. On December 4, 1998, Gemstar filed a responsive action against us in the United States District Court in Los Angeles, California alleging infringement of two of the same patents involved in the Atlanta, Georgia suit filed by us on December 3, 1998. The suit asks for damages and injunctive relief. This case has been consolidated in the Atlanta action.

We have been granted summary judgment of non-infringement of five Gemstar patents in this action, U.S. Patent Nos. 5,508,815; 5,568,272; 4,751,578; 5,038,211; and 5,293,357. The parties have also filed a consent order to dismiss all claims of infringement and invalidity related to a sixth Gemstar patent in this action, U.S. Patent No. 4,963,994. On July 18, 2003 we filed motions for summary judgment of non-infringement in relation to all claims of two other patents-in-suit in this action, U.S. Patent Nos. 5,915,068 and 4,908,713. Based on prior rulings of the court, the parties have submitted a consent order granting summary judgment of non-infringement of the ‘713 patent by Scientific-Atlanta’s Explorer line of set-top boxes; Gemstar’s claims relating to our 8600x^™ set-top boxes remain in issue.

On March 14, 2003, in the Atlanta antitrust action, Gemstar filed three Motions for Partial Summary Judgment of three of our antitrust claims. We filed responsive briefs to these motions on April 14, 2003. The judge has not yet ruled on these motions.

Scientific-Atlanta Patents Proceedings

On April 23, 1999, we filed a patent infringement action against Gemstar in U.S. District Court in Atlanta. On July 23, 1999, we filed a patent infringement action against StarSight Telecast, Inc., a subsidiary of Gemstar International Group Ltd., in the U.S. District Court in Atlanta. These suits allege that Gemstar and StarSight infringe three Scientific-Atlanta patents, U.S. Patent Nos. 4,885,775, 4,991,011, and 5,477,262, relating to interactive program guides, and seeks damages and injunctive relief. The parties have filed briefs supporting their proposed interpretations of the claims of the patents. A “Markman Hearing” on these motions has been held and we await a claim interpretation ruling by the judge.

International Trade Commission and Related Proceedings

On June 25, 1999, we filed an action against StarSight in the U.S. District Court in Atlanta, seeking a declaratory judgment of invalidity and non-infringement of two StarSight patents, U.S. Patent Nos. 4,706,121 and 5,479,268, which StarSight asserts are related to interactive program guides. Thereafter Gemstar sought to raise claims under these same patents in an investigation by the International Trade Commission (ITC)

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(described in more detail below). The District Court action involving these patents has now been stayed by agreement of the parties, pending the outcome of Gemstar’s appeal of the Final Determination of the ITC.

On February 14, 2001, Gemstar initiated an investigation in the ITC under Section 337 of the Tariff Act of 1930 against Scientific-Atlanta, Pioneer Corporation and related entities, Echostar Communications Corporation and SCI Systems, Inc. The investigation was based on Gemstar’s allegation that certain imported set-top boxes, including those manufactured by Scientific-Atlanta in Mexico, infringe certain Gemstar patents. Two of these patents have been in dispute between the parties in connection with the June 25, 1999 action in the federal court in Atlanta. Immediately prior to filing the 337 action, Gemstar filed separate actions against Scientific-Atlanta, Pioneer and Echostar in the federal court in Atlanta alleging infringement of certain of the patents claimed in the 337 action. Scientific-Atlanta moved to stay any proceedings in these actions pending the outcome of the 337 action.

On June 21, 2002, the Administrative Law Judge in the ITC action issued an Initial Determination finding in favor of Scientific-Atlanta as to non-infringement and unenforceability of Gemstar’s patents. The Administrative Law Judge found that Scientific-Atlanta does not infringe the three Gemstar patents in suit; that one of the three patents in suit is unenforceable for failure to name an inventor; and that Gemstar had engaged in patent misuse rendering one of its patents unenforceable. On August 29, 2002 the full ITC determined not to review any issues regarding patent infringement or inventorship. By declining to review those issues, the ITC adopted the findings of the Initial Determination that Scientific-Atlanta’s products do not infringe the patents in issue. The ITC determined to take no position on the issue of Gemstar’s patent misuse. In light of these determinations, the ITC concluded that there is no violation of the Tariff Act of 1930 by Scientific-Atlanta. On March 6, 2003, Gemstar appealed the decision of the ITC to the Court of Appeals for the Federal Circuit. All briefs have been filed by all parties in the appeal and oral argument is scheduled for October 10, 2003.

In the cases involving our patents, we seek both damages and an injunction against the Gemstar defendants’ deployment of infringing program guides. In the cases challenging the Gemstar defendants’ patents, we seek an injunction against Gemstar’s enforcement of these patents. In those cases where Gemstar’s patents are at issue, they have sought damages and injunctive relief against us for infringement of certain of those patents. The party or parties prevailing on their patents in these actions could be entitled to damages measured either as actual lost profits or as a reasonable royalty for the past sale of infringing interactive program guides, and potentially a trebling of damages if the court determines that the losing party acted willfully. The prevailing party also may be entitled to an injunction against the future sale of infringing interactive program guides. Accordingly, an adverse judgment against either us or the Gemstar defendants could result in an injunction against the future sale by us or the Gemstar defendants of infringing interactive program guides and could cause the offending party to have to redesign their program guide to avoid infringement.

Personalized Media Communications Proceeding

On March 28, 2002, Personalized Media Communications, LLC (PMC) filed a patent infringement action against Scientific-Atlanta in the United States District Court for the Northern District of Georgia. PMC seeks an injunction and unspecified monetary damages. On August 5, 2002, we filed a motion to join Gemstar. The court granted that motion and Gemstar was added to the case. Discovery is on-going and a “Markman” hearing related to the claims of the patents in issue will be scheduled for early 2004.

We intend to vigorously defend or prosecute these claims.

We are a party to various other legal proceedings arising in the ordinary course of business. In management’s opinion, the outcome of these other proceedings will not have a material adverse effect on our financial position or results of operations.

No matters were submitted to a vote of Scientific-Atlanta’s security holders during the last quarter of its fiscal year ended June 27, 2003.

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The following persons are the executive officers of Scientific-Atlanta:

Each executive officer is elected annually and serves at the pleasure of the Board of Directors.

Mr. Bradner has served as Senior Vice President of Scientific-Atlanta since August 1999. From March 1996 to May 1999, he served as Chairman and Chief Executive Officer of Syntellect, Inc., an enterprise voice portal software company.

Mr. McIntyre has served as Senior Vice President and Chief Technical Officer since May 1999. Prior to joining Scientific-Atlanta in February 1999, he was employed by Avex Electronics, Inc., a contract manufacturing firm, as President and Chief Executive Officer from June 1998 to November 1998 and as Chief Operating Officer from September 1997 through November 1998.

Mr. Veysey has served as Senior Vice President, General Counsel and Corporate Secretary of Scientific-Atlanta since February 2003. From 1989 to 2001, he served as Senior Vice President, General Counsel and Secretary of Gould Electronics Inc., a worldwide manufacturer of electronic materials and components, where he served in various capacities in the law department from 1980 to 1988.

All other executive officers have been employed by Scientific-Atlanta in the same or substantially similar capacities for more than five years. There are no family relationships among the executive officers. Mr. Buckett also serves as a director of Interlink Electronics, Inc.

PART II

The common stock, par value $0.50 per share, of Scientific-Atlanta is traded on the New York Stock Exchange under the symbol “SFA.” As of September 1, 2003, the approximate number of holders of record of the common stock was 5,684.

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In 1976, Scientific-Atlanta 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 Scientific-Atlanta. During fiscal years 2002 and 2003, Scientific-Atlanta paid a quarterly cash dividend on its common stock of $0.01 per share.

Information as to the high and low stock prices for each quarter of fiscal years 2003 and 2002 follows.

Set forth in the table below is certain information about securities issuable under Scientific-Atlanta’s equity compensation plans as of June 27, 2003.

Under the 1996 Stock Option Plan, options may be granted covering up to 15,000,000 shares of common stock. Options are granted by the Human Resources and Compensation Committee of the Scientific-Atlanta board of directors to key personnel for the purchase of the Scientific-Atlanta stock at the fair market value of the shares on the dates of grant. Options granted under the 1996 Stock Option Plan vest in four equal, annual installments beginning on the date of grant.

Selected Financial Data is set forth on page 21 of this Report.

Management’s Discussion and Analysis of Consolidated Statements of Financial Position, of Consolidated Statements of Earnings, of Consolidated Statements of Cash Flows and of Critical Accounting Policies are set forth on pages 24 through 27, 29 through 36, 38 and 39, and 41 through 45 of this Report.

We are exposed to market risks from changes in foreign exchange rates and have a process to monitor and manage these risks. Scientific-Atlanta enters into foreign exchange forward contracts to hedge

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certain forecasted transactions and firm commitments denominated in currencies other than the U.S. dollar. These contracts, which qualify as cash flow hedges, are designated as hedging instruments at inception, are for periods consistent with the exposure being hedged and generally have maturities of one year or less. Contracts are recorded at fair value. Changes in the fair value of derivatives are recorded in other comprehensive income until the underlying transaction affects earnings.

The effectiveness of the hedge is based on a high correlation between the changes in its value and the value of the underlying hedged item. Any ineffectiveness is recorded through earnings.

In the fourth quarter of fiscal year 2002, ish GmbH & Co. KG (ish), a customer in Germany, suspended or canceled a number of orders issued to the Cable upgrade Consortium, of which we were a member and through which we furnished our products and services. A significant portion of these orders were denominated in Euros, and we had forward contracts to sell approximately 33,220,000 Euros at June 28, 2002, which were designated as cash flow hedges. During fiscal year 2003, we reached a settlement with ish. As a result of the settlement, we no longer needed the forward contracts which we settled and recorded charges of $3,023,000 for ineffectiveness in Other (income) expense in fiscal year 2003.

We also recorded charges of $166,000 for ineffectiveness in fiscal year 2002. There were no charges for ineffectiveness in fiscal year 2001.

Our foreign exchange forward contracts do not significantly subject our 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.

Firmly committed purchase (sales) exposure and related hedging instruments at June 27, 2003 are as follows:

At June 27, 2003, we had unrealized gains of $75,000, net of tax of $46,000, related to these derivatives which were included in accumulated other comprehensive income. Scientific-Atlanta has no derivative exposure beyond the first quarter of fiscal year 2004.

Unrealized gains and losses on foreign exchange forward contracts, which do not meet the criteria for a hedge, are recognized in Other (income) expense. We recorded losses of $390,000 in fiscal year 2002 related to such contracts. We had no speculative contracts in fiscal years 2003 or 2001.

We have market risks associated with the volatility in the value of our non-current marketable securities which consist of investments in common stock, primarily technology companies, warrants of publicly traded companies and a collar on a warrant and are stated at market value. All investments in common stock are classified as “available for sale” under the provisions of Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and thus, changes in the fair value of these securities are not included in our Consolidated Statements of Earnings until realized. Unrealized holding gains and losses are included, net of taxes, in accumulated other comprehensive income. We recorded after-tax, unrealized holding gains of $1,707,000 in fiscal year 2003 and after-tax, unrealized holding losses of $4,430,000 and $223,541,000 in fiscal years 2002 and 2001, respectively. Realized gains and losses and declines in value judged to be other-than-temporary are included in Other (income) expense. We recorded gains of $2,049,000 and $79,792,000 from the sale of a portion of our investments in fiscal years 2003 and 2001, respectively. We did not

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sell any of our securities in fiscal year 2002. We recorded losses of $6,876,000, $6,419,000 and $1,838,000 from other-than-temporary declines in the fair value of our investments in common stock in fiscal years 2003, 2002 and 2001, respectively.

Scientific-Atlanta holds warrants to purchase common stock that are recorded at fair value. We also entered into a collar with put and call options which is designed to limit our exposure to fluctuations in the fair value of one of the warrants. The warrants and the collar, which are included in Non-current marketable securities in the Consolidated Statements of Financial Position, are valued using the Black-Scholes pricing model. Fluctuations in the volatility of the market price of the common stock for which we hold a warrant, risk free rate of return and expiration date of the warrant impact the valuation. During fiscal year 2003, we recorded unrealized losses of $427,000 from the decline in the fair market value of warrants and a gain of $2,491,000 from the settlement of the collar in Other (income) expense. During fiscal year 2002, we recorded unrealized gains of $1,603,000 and $17,651,000 from the appreciation in the fair value of the warrants and collar, respectively, in Other (income) expense.

We also have market risks associated with the volatility of our investments in privately-held companies which consist primarily of securities of emerging technology companies. These investments are carried at cost and are evaluated periodically to determine if declines in fair value are other-than-temporary. Declines in value judged to be other-than-temporary are included in Other (income) expense. We recorded losses of $12,477,000 and $14,650,000 in fiscal years 2003 and 2002, respectively, from other-than-temporary declines in the fair value of our investments in privately-held companies. No such losses were recorded in fiscal year 2001. Investments in privately-held companies of $8,559,000 and $21,760,000 were included in Other assets in the Consolidated Statements of Financial Position at June 27, 2003 and June 28, 2002, respectively.

The consolidated financial statements of Scientific-Atlanta and notes thereto, the schedule containing certain supporting information and the report of independent public accountants are set forth on pages 22 through 72 of this Report. See Part IV, Item 15, for an index of the statements, notes and schedule.

On April 19, 2002, we announced that our Board of Directors had appointed Ernst & Young LLP as our independent accountant for fiscal year 2002. The appointment of Ernst & Young was made by the Board of Directors on the recommendation of its Audit Committee and concluded an extensive evaluation process. On April 19, 2002, we also dismissed Arthur Andersen LLP as the independent accountant for the Company.

Arthur Andersen’s reports on the financial statements for the fiscal year ended June 29, 2001 did not contain an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope, or accounting principles. During fiscal year 2001 and the subsequent interim period through April 19, 2002 (the “Period”), there were no disagreements with Arthur Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to the satisfaction of Arthur Andersen, would have caused Arthur Andersen to make reference to the subject matter of such disagreement in connection with the report. During the Period, there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K. During the Period, we did not consult Ernst & Young with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements, or any other matters or reportable events listed in Items 304(a)(2)(i) and (ii) of Regulation S-K.

(a)  Disclosure Controls and Procedures.    Scientific-Atlanta’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Scientific-Atlanta’s

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disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)), as of the end of the period covered by this report. Based on such evaluation, Scientific-Atlanta’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by Scientific-Atlanta in the reports that it files or submits under the Exchange Act.

(b)  Internal Control Over Financial Reporting.    There have not been any changes in Scientific-Atlanta’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of fiscal year 2003 that have materially affected, or are reasonably likely to materially affect, Scientific-Atlanta’s internal control over financial reporting.

PART III

Pursuant to Instruction G(3) to Form 10-K, the information required in Items 10-14 (except for the information set forth at the end of Part I in Item 4A with respect to Executive Officers of Scientific-Atlanta) is incorporated by reference from Scientific-Atlanta’s definitive proxy statement for Scientific-Atlanta’s 2003 Annual Meeting of Shareholders, which is expected to be filed pursuant to Regulation 14A within 120 days after the end of fiscal year 2003.

PART IV

Periodic reports, proxy statements and other information filed by Scientific-Atlanta with the SEC pursuant to the informational requirements of the Exchange Act may be inspected and copied at, or obtained at

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prescribed rates from, the public reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a Web site (http://www.sec.gov) that makes available reports, proxy statements and other information regarding Scientific-Atlanta. Scientific-Atlanta’s SEC file number is Commission File No. 1-5517.

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Selected Financial Data

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Report of Independent Auditors

To the Stockholders of Scientific-Atlanta, Inc.:

We have audited the accompanying consolidated statements of financial position of Scientific-Atlanta, Inc. (a Georgia corporation) and subsidiaries as of June 27, 2003 and June 28, 2002, and the related consolidated statements of earnings, cash flows and stockholders’ equity and comprehensive income for the years then ended appearing on pages 28, 37, 40 and 46, respectively. Our audits included the financial statement schedule listed in the index on Item 15(a) as of and for the years ended June 27, 2003 and June 28, 2002. These financial statements and schedule 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. The financial statements and schedule of the Company for the year ended June 29, 2001 were audited by other auditors who have ceased operations and whose report dated July 19, 2001 expressed an unqualified opinion on those financial statements and schedule before the restatement adjustments described in Notes 1, 18 and 19.

We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 27, 2003 and June 28, 2002 and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule as of and for the years ended June 27, 2003 and June 28, 2002, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As described in Note 1 to the consolidated financial statements, during the first quarter of fiscal 2002, the Company changed its method of accounting for goodwill and other intangible assets to conform with Statement of Financial Accounting Standard No. 142, Goodwill and Other Intangible Assets. Also as described in Note 1 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standard No. 146, Accounting for Costs Associated with Exit or Disposal Activities, for exit or disposal activities initiated after December 31, 2002.

Also, as discussed in Note 1, the consolidated financial statements of the Company for the year ended June 29, 2001, have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangibles, which was adopted by the Company during the first quarter of fiscal 2002. Our audit procedures with respect to the disclosures in Note 1 with respect to the year ended June 29, 2001 included (a) agreeing the previously reported net earnings and earnings per share to the previously issued financial statements, (b) agreeing the adjustments to reported net earnings and earnings per share representing amortization expense (including any related tax effects) recognized in the year ended June 29, 2001 related to goodwill that is no longer being amortized as a result of initially applying Statement No. 142 to the Company’s underlying records obtained from management, (c) agreeing all fiscal 2001 amortization expense disclosures to the Company’s underlying accounting records obtained from management and (d) testing the mathematical accuracy of the reconciliation of adjusted net earnings and earnings per share to reported net earnings and earnings per share.

Also, as discussed in Notes 1 and 18, the consolidated financial statements of the Company for the year ended June 29, 2001, have been revised to include the disclosures required by Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, which was adopted by the Company in the third quarter of fiscal 2003. Our audit procedures with respect to the disclosures in Note 1 for the year ended June 29, 2001, included (a) agreeing the previously reported net earnings to the previously issued financial statements, (b) agreeing the adjustments to reported net earnings representing compensation expense and pro forma compensation expense (including any related tax effects) related to the year ended June 29, 2001 to the Company’s underlying records obtained from management and (c) testing the mathematical accuracy of the reconciliation of pro forma net earnings to reported net earnings and related earnings per share amounts.

Also, the disclosures in Note 18 of the consolidated financial statements of the Company for the year ended June 29, 2001 have been revised to disclose additional detail with respect to treasury share activity during the year ended June 29, 2001. Our audit procedures with respect to these additional disclosures in Note 18 included (a) agreeing the beginning and ending treasury shares and the related activity for fiscal 2001 to the Company’s underlying records obtained from management, and (b) testing the mathematical accuracy of the treasury share activity within the table in Note 18.

Also, the disclosures in Note 19 of the consolidated financial statements of the Company for the year ended June 29, 2001 have been revised to disclose additional detail with respect to components of other comprehensive income (loss). Our audit procedures with respect to these additional disclosures in Note 19 included (a) agreeing the before-tax amounts of the other comprehensive income (loss) to the Company’s underlying records obtained from management, (b) re-calculating the income tax effect using the Company’s applicable income tax rate, (c) re-calculating the after tax amounts, and (d) testing the mathematical accuracy of the components of other comprehensive income (loss) within the table in Note 19.

In our opinion, the disclosures for the year ended June 29, 2001 with respect to the matters referred to in the preceding four paragraphs are appropriate. However, we were not engaged to audit, review, or apply any procedures to the consolidated financial statements of the Company for the year ended June 29, 2001, other than with respect to such disclosures and restatements and, accordingly, we do not express an opinion or any other form of assurance on the consolidated financial statements for the year ended June 29, 2001, taken as a whole.

/s/ ERNST & YOUNG LLP

Atlanta, Georgia

July 17, 2003

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(The following is a copy of the audit report previously issued by Arthur Andersen LLP in connection with Scientific-Atlanta’s filing on Form 10-K for the fiscal year ended June 29, 2001. This audit report has not been reissued by Arthur Andersen in connection with this filing on Form 10-K. See Exhibit 23.2 for further discussion. Page references in Arthur Andersen’s opinion are to Scientific-Atlanta’s Form 10-K for fiscal year 2001.)

Report of Independent Public Accountants

To the Stockholders of Scientific-Atlanta, Inc.:

We have audited the accompanying consolidated statements of financial position of Scientific-Atlanta, Inc. (a Georgia corporation) and subsidiaries as of June 29, 2001 and June 30, 2000 and the related consolidated statements of earnings, cash flows and stockholders’ equity and comprehensive income for each of the three years in the period ended June 29, 2001 appearing on pages 19, 27, 30 and 31, 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 audit.

We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 audit provides 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 29, 2001 and June 30, 2000 and the results of their operations and their cash flows for each of the three years in the period ended June 29, 2001 in conformity with accounting principles generally accepted in the United States.

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 15(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.

/s/ ARTHUR ANDERSEN LLP

Atlanta, Georgia

July 19, 2001

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 accounting principles generally accepted in the United States 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 and disclosure controls and procedures over the preparation of its published annual and interim financial statements. It should be recognized that even effective control systems and disclosure procedures, 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, the effectiveness of control systems and disclosure procedures may vary over time.

Management assessed the Company’s system of internal control and disclosure controls and procedures in relation to criteria for effective control and disclosure controls and procedures 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 and disclosure controls and procedures as of June 27, 2003 are 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, Ernst & Young 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. The audit committee met eight times this year to review with management the Company’s system of internal accounting controls and disclosure controls and procedures, audit plans and results, accounting principles and practices, and the quarterly and annual financial statements.

James F. McDonald		Wallace G. Haislip
Chairman of the Board		Senior Vice President
President and Chief Executive Officer		Chief Financial Officer and Treasurer

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Management’s Discussion and Analysis of Consolidated Statements of Financial Position

Scientific-Atlanta had stockholders’ equity of $1.5 billion and cash and short-term investments of $948.6 million at June 27, 2003. The current ratio was 4.8:1 at June 27, 2003, up from 4.1:1 at June 28, 2002.

Receivables were $184.6 million at year-end, down $76.6 million from the prior year. Average days sales outstanding were 56 days in fiscal year 2003, as compared to 83 days in the prior year. The year-over-year decline in receivables and the improvement in average days sales outstanding were due in part to an increase in sales to customers who take advantage of a discount for payment within ten to fifteen days of shipment in fiscal year 2003 as compared to fiscal year 2002. Accounts receivable at June 27, 2003 included $88.8 million from customers who accounted for 10 percent or more of our total sales in fiscal year 2003.

Additionally, Adelphia Communications Corporation (Adelphia) filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code in June 2002. In the fourth quarter of fiscal year 2002, we wrote off $88.8 million of receivables from Adelphia related to the uncertainty of the collectibility of the receivables due to the filing for bankruptcy. Although Adelphia has continued to operate its business as debtors-in-possession since its filing for bankruptcy in June 2002, we remain an unsecured creditor and are unable to predict the amount, if any, we will recover of the $88.8 million of receivables we wrote off. During the first quarter of fiscal year 2003, we signed an agreement with Adelphia under which we resumed shipments and are reasonably assured of payment.

During the fourth quarter of fiscal year 2002, a customer in Germany, ish GmbH & Co. KG (ish), requested and received a 120-day moratorium on payments to the Cable Upgrade Consortium, of which we were a member and through which we furnished our products and services. This moratorium negatively impacted average days sales outstanding in fiscal year 2002. We had no such moratoriums in fiscal year 2003. During the second quarter of fiscal year 2003, we reached an agreement with ish and settled all outstanding balances.

See Management’s Discussion and Analysis of Consolidated Statements of Earnings for additional discussion of the impact of Adelphia’s bankruptcy filing and the settlement with ish on Scientific-Atlanta.

Inventory was $127.1 million at June 27, 2003, down $90.4 million from the prior year. Inventory turnover improved to 5.9 turns in fiscal year 2003 from 5.6 turns in the prior year. The improvement in inventory turns, despite the lower sales volume in fiscal year 2003 as compared to the prior year and the acquisition of certain transmission product lines from Arris International, Inc. (Arris), was due primarily to our continued focus on working capital management.

Current deferred income taxes of $41.9 million consist of expenses incurred and reserves, such as the allowance for doubtful accounts, inventory reserves and warranty reserves, not currently deductible for income tax purposes.

Other current assets of $21.5 million include sales tax receivables, prepaid insurance, prepaid license fees and other miscellaneous prepaid expenses. The $29.1 million decrease in fiscal year 2003 as compared to the prior year was due primarily to an income tax payable at June 27, 2003 as compared to a receivable for income taxes at June 28, 2002.

Net property, plant and equipment of $197.7 million declined $24.7 million in fiscal year 2003 from the prior year. During fiscal year 2003, depreciation and net disposals exceeded capital additions of $24.4 million, which were primarily for tooling and test equipment.

Goodwill of $235.2 million at June 27, 2003 increased $39.6 million from the prior year primarily due to the impact of the strengthening of the Euro against the U.S. dollar on the translation of Euro-denominated goodwill from the acquisition of BarcoNet NV (BarcoNet), a Belgium-based manufacturer of cable television equipment, in fiscal year 2002. We also recorded goodwill of $12.4 million and $0.5 million in connection with the acquisition of certain assets of the transmission product

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Management’s Discussion and Analysis of Consolidated Statements of Financial Position (Continued)

lines of Arris and certain assets of ChanneLogics, Inc. (ChanneLogics), respectively, during fiscal year 2003.

During fiscal year 2003, we acquired certain assets of the transmission product lines of Arris for a cash payment of $31.6 million. These assets were recorded at their estimated fair value at the date of acquisition. The purchase price has been allocated to the assets acquired including $12.4 million of goodwill and $10.8 million of other intangible assets, primarily existing technology and customer base, which are being amortized over varying periods up to four years.

During the fiscal year 2003, we also acquired the remaining shares held by minority shareholders of PowerTV, Inc. (PowerTV) for cash payments of $5.2 million and recorded goodwill of $4.8 million in connection with these transactions. We now own 100 percent of the shares of PowerTV.

Determining the fair value of certain assets and liabilities acquired is judgmental in nature and often involves the use of significant estimates and assumptions. One of the areas that requires more judgment in determining fair values and useful lives is intangible assets.

Intangible assets of $51.0 million consist primarily of developed technology, patents and customer base.

Non-current marketable securities of $8.4 million consist of investments in common stock, primarily technology companies and warrants of publicly traded companies, all of which are reported at market value. Non-current marketable securities at June 28, 2002 also included a collar on a warrant. During fiscal year 2003, we recorded unrealized gains of $2.8 million, compared with unrealized losses of $13.6 million in fiscal year 2002, on our investments in common stock due to market value fluctuations, which were included in accumulated other comprehensive income. We also recorded charges of $6.9 million and $6.4 million in fiscal years 2003 and 2002, respectively, for other-than-temporary declines in the market value of certain investments in common stock, which were included in Other (income) expense. In addition, we recorded unrealized gains of $19.3 million in Other (income) expense from the appreciation in the market value of warrants and a collar on a warrant in fiscal year 2002 and a gain of $2.5 million on the settlement of the collar in fiscal year 2003. See Management’s Discussion and Analysis of Consolidated Statements of Earnings for additional information.

Non-current deferred income taxes of $38.2 million relate primarily to accruals for expenses, primarily postemployment and postretirement benefits and warranty, currently not deductible.

Other assets of $64.5 million include investments in privately-held companies, license fees, capitalized software development costs, cash surrender value of company-owned life insurance and various prepaid expenses. The year-over-year decline was primarily due to $12.5 million of other-than-temporary declines in the market value of investments in privately-held companies. See Management’s Discussion and Analysis of Consolidated Statements of Earnings for additional discussion of the decline in the market value of investments.

Accounts payable were $143.4 million at year-end, down $26.9 million from last year reflecting lower purchases due to lower production volumes in the fourth quarter of fiscal year 2003 as compared to the prior year. Days payable were 59 in fiscal year 2003 up slightly over the prior fiscal year.

Accrued liabilities of $100.9 million include accruals for compensation, deferred revenue, liabilities for product defects (excluding warranty obligations), warranty and service obligations, provisions for restructuring, customer down-payments, royalties and taxes (excluding income taxes). The year-over-year

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Management’s Discussion and Analysis of Consolidated Statements of Financial Position (Continued)

decline was primarily due to the resolution of liabilities for specific product defects accrued at June 28, 2002 that were resolved during fiscal year 2003.

Deferred revenue of $15.6 million includes deferrals primarily due to our future commitments to customers to provide products or services and contractually required acceptance from our customers, which we have not received, on products or services we have delivered.

Other liabilities of $148.7 million are comprised of deferred compensation, retirement plans, postretirement benefit plans, postemployment benefits, warranty obligations in excess of one year, and other miscellaneous accruals. The year-over-year increase was primarily due to a $7.6 million increase in deferred compensation at June 27, 2003, as compared to June 28, 2002, offset in part by declines in other liabilities.

Total debt of $10.0 million consists primarily of a mortgage we assumed as the result of the acquisition of BarcoNet.

Stockholders’ equity was $1.5 billion at the end of fiscal year 2003, up $44.5 million from the prior year. Net earnings of $100.3 million, a $21.7 million increase in accumulated other comprehensive income, primarily from unrealized gains on foreign currency translation, $19.0 million of additional paid-in capital and common stock from the issuance of common stock pursuant to employee benefit and other stock-based compensation plans and $14.0 million of previously unrecognized gains on the issuance of equity of a subsidiary were partially offset by the repurchase of 8.6 million shares of our common stock for $104.5 million and dividend payments of $6.1 million.

The accumulated other comprehensive income at June 27, 2003 included accumulated translation gains of $30.0 million, which were partially offset by $10.1 million of deferred expenses related to retirement plans. The year-over-year increase in accumulated other comprehensive income was due to the impact of the Euro strengthening against the U.S. dollar on the translation of Euro-denominated net assets, primarily goodwill and liabilities.

During fiscal year 2003, we purchased 8.0 million shares of our common stock at an aggregate cost of $97.3 million pursuant to a stock buyback program announced in July 2001 and 559 thousand shares at an aggregate cost of $7.2 million pursuant to a program announced in February 2003 to buy back up to 10.0 million shares. We plan to use the shares repurchased for issuance under our employee stock option plans and other benefit plans.

Off-Balance Sheet Financing

In July 1997, we entered into a long-term operating lease arrangement, which provided $36 million to finance the construction of the initial phase of our consolidated office site in metropolitan Atlanta, Georgia, which was completed in the third quarter of fiscal year 1999. The initial occupancy term is seven years and expires in July 2004. Three five-year extensions of the lease term are available to Scientific-Atlanta. Lease payments of approximately $0.2 million per month equal the interest on the $36 million at a fixed rate of 6.51 percent per annum. A final lease payment of $36 million is due at the termination of the lease. We can also purchase the buildings financed with this arrangement at any time for $36 million. The lessor is a non-bank general-purpose corporation owned by a financial institution that has engaged in many types of transactions with parties other than Scientific-Atlanta and activities other than lease transactions. Scientific-Atlanta has no ownership interest in the lessor or the financial institution.

The lease qualifies as an operating lease under Statement of Financial Accounting Standards (SFAS) No. 13 “Accounting for Leases”, as amended. The assets, liabilities, results of operations and cash flows of the lessor have not been included in the consolidated financial statements of Scientific-Atlanta. We are currently analyzing Interpretation No. 46

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Management’s Discussion and Analysis of Consolidated Statements of Financial Position (Continued)

“Consolidation of Variable Interest Entities” which may impact our accounting for this lease.

After the completion of the initial phase of our consolidated office site, all facility expansions were financed with existing cash balances and cash generated from operations.

Scientific-Atlanta has no other off-balance sheet financing arrangements.

Contractual Commitments

Contractual commitments at June 27, 2003 under debt and lease agreements and purchase commitments, primarily for inventory, are summarized below. (Amounts are in thousands.)

As noted above, we entered into a long-term operating lease arrangement, which expires in July 2004. Three five-year extensions of the lease term are available to Scientific-Atlanta. A final lease payment of $36 million is due at the termination of the lease. The commitment schedule does not include any obligations under this lease after July 2004.

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Consolidated Statements of Financial Position

See accompanying notes.

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Management’s Discussion and Analysis of Consolidated Statements of Earnings

The Consolidated Statements of Earnings summarize Scientific-Atlanta’s operating performance over the last three years. All references to per share amounts relate to diluted earnings per share.

General

Sales of $1.5 billion in fiscal year 2003 were $220.8 million less than sales in fiscal year 2002. We continued to experience year-over-year declines in sales in fiscal year 2003. We believe that our sales and results of operations have been affected by: (1) the low consumer confidence in the United States amid a slow economy and difficult economic and political conditions outside the United States, (2) continued significant declines in capital spending by our customers, (3) our customers’ competition from satellite providers, and (4) the declining financial condition of several of our customers and distributors. These trends have resulted in the failure of certain of our customers to: (1) pay for product that has shipped, (2) take delivery of orders they have previously placed and (3) raise additional capital to fund the purchase of equipment and services. Adelphia filed for bankruptcy in June 2002. During the first quarter of fiscal year 2003, Communications Dynamics, Inc., the parent of TVC Communications (TVC), a distributor of our products in Latin America, filed for bankruptcy. If these trends continue, which we are not able to predict, our sales and results of operations could be adversely affected. We periodically assess the impact of these trends on our cost structure and reduce our costs, including, but not limited to, reductions in our workforce and consolidation of operations, to attempt to align such costs with our sales level.

Our backlog increased to $394.9 million at June 27, 2003 from $339.9 million at March 28, 2003 but we had sequential, quarterly declines in backlog from $772.5 million at March 29, 2002 through March 28, 2003. Due to these declines in backlog, we are more dependent on the shipment of product from orders received during the quarter rather than from backlog to generate sales. Our increased dependence on the receipt of orders during each quarter to generate sales during that quarter and our continued limited visibility to the inventory our customers hold limit our ability to predict our sales volume for the quarter until the end of the quarter. Historically, our quarters tend to be back-end loaded with a larger portion of orders being received and sales being recognized for any quarter at or near the end of the quarter. We are unable to predict the timing of bookings or sales.

Bookings are orders we receive that are eligible for inclusion in backlog. In general, our policy is to place in backlog orders for product scheduled for shipment within six months from the end of the reported quarter. Although we have a six-month bookings policy, we have the production capacity to respond quickly to customer demand. We believe that customers may have shortened their ordering cycles accordingly, thereby contributing to our decline in backlog.

Net earnings were $100.3 million, or $0.65 per share in fiscal year 2003 as compared to $104.4 million, or $0.66 per share, in fiscal year 2002. Net earnings in fiscal year 2003 included after-tax charges of $13.1 million related to mark-to-market adjustments of various investments; $11.5 million related to various restructurings; and $4.3 million from the termination of a contract with German cable operator ish; and a net after-tax gain of $3.0 million from the sale of various marketable securities. These items totaled to a net after-tax charge of $25.9 million, or $0.17 per share.

Net earnings were $104.4 million, or $0.66 per share in fiscal year 2002 and included an after-tax bad debt expense of $55.2 million related to the write-off of accounts receivable from Adelphia resulting from its bankruptcy; after-tax charges of $18.6 million and $1.4 million related to restructurings announced in October 2001 and July 2002 and mark-to-market adjustments of various investments,

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respectively; and an after-tax gain of $4.5 million from insurance proceeds. These items totaled to a net after-tax charge of $70.7 million, or $0.45 per share.

Net earnings of $333.7 million, or $1.99 per share, in fiscal year 2001 included an after-tax gain of $49.5 million from the sale of a portion of our investments in Bookham and Wink and an after-tax charge of $7.1 million related to the tender of shares held by minority shareholders of PowerTV. These items totaled to a net after-tax gain of $42.4 million or $0.25 per share.

Sales of $1.5 billion in fiscal year 2003 declined 13 percent from the prior year. The decline was attributable to lower unit sales and lower average selling prices of both subscriber and transmission products. Sales of digital set-tops are determined in large part by the number of new digital subscribers added by our customers and the average number of set-tops per home. Although we do not have full visibility to the net new digital subscriber additions by multiple system operators (MSOs), we believe that on an industry-wide basis the number of new net digital subscriber additions by cable television MSOs declined during fiscal year 2003 as compared to the prior year, in conjunction with lower overall capital spending by the MSOs.

Subscriber product sales of $977.7 million in fiscal year 2003 decreased by 10 percent from the prior year. For the second consecutive year, many of our customers’ deployment rates declined relative to the preceding year. During fiscal year 2003, we shipped a total of 3.2 million Explorer^® digital set-tops, down from 3.4 million the prior year. In addition to lower volumes, the average selling prices for our earlier generation set-tops declined 9 percent from last year. During fiscal year 2003, we began shipping our Explorer 8000 set-tops, which contain integrated hard drives and a single user interface for digital video recording capabilities. We shipped a total of 386 thousand of these units during the year. In addition, during fiscal year 2003, we shipped a total of 197 thousand high-definition set-tops, up from 99 thousand shipped during fiscal year 2002. The Explorer 8000 set-top, in addition to high-definition set-top models, sells for a significantly higher average selling price than the average selling price for our earlier generation set-top models. The shift to a higher mix of Explorer 8000 and high-definition set-tops during fiscal year 2003 partially offset the price declines of our earlier generation set-top models. As a result, the combined average selling prices of all digital set-tops declined by slightly less than 2 percent.

Sales of digital multi-QAM modulators (MQAMs) that are deployed in digital systems that use Scientific-Atlanta’s PowerKey^® conditional access also declined to approximately 3 thousand units in fiscal year 2003, compared to approximately 7 thousand units shipped during fiscal year 2002. The rate of the deployment of MQAMs is directly related to the launch of video-on-demand services by MSOs, and future MQAM sales will depend on the rate at which video-on-demand services are deployed.

Sales of cable modems increased to 731 thousand units in fiscal year 2003 from 665 thousand units shipped the previous year.

Sales of transmission products of $392.3 million in fiscal year 2003 decreased 21 percent compared to fiscal year 2002. This decline was related to a reduction in capital spending by many of the largest North American and international MSOs. After several years of transmission plant upgrades, many of the North American MSOs are now nearing completion of their plant upgrades for a significant portion of their systems. In addition, several of our international customers continued to experience financial difficulties and began to undertake various forms of restructurings. As a result, shipments of transmission products to our international customers also declined significantly.

International sales were $323.3 million in fiscal year 2003, down 4 percent from the prior fiscal year. Sales into the European region declined 20 percent from last year, due primarily to a decline in shipments to German cable operator

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ish. An increase in shipments related to reporting BarcoNet for a full year during fiscal year 2003, which is highly concentrated in Europe, compared to only two quarters the previous year, helped to partially offset the decline in Europe. In light of the continuing economic recession and weakening currencies in the region, sales into the Latin American region remained relatively flat during fiscal year 2003. Sales into the Asia-Pacific region increased 24 percent from last year, due primarily to the acquisition of BarcoNet.

During the fourth quarter of fiscal year 2002, Kabel NRW GmbH & Co. KG (KNRW), parent of ish, was notified by its syndicate banks that an event of default had occurred under its Senior Credit Agreement. ish suspended or canceled a number of work orders previously issued to the Cable Upgrade Consortium, of which we were a member and through which we furnished our products and services. In addition, ish requested and received a 120-day moratorium on all outstanding invoices payable to all members of the Consortium. In addition, Callahan Nordrhein-Westfalen GmbH, parent of KNRW, initiated insolvency proceedings under German law in July 2002. During fiscal year 2003, we reached an agreement with ish related to work orders, which had been suspended or canceled during the fourth quarter of fiscal year 2002 and our exposure in accounts receivable and inventory related to ish. As part of this settlement, we received a cash payment of $22.0 million and notes receivable denominated at $19.0 million. In addition, we entered into an agreement to sell these notes receivable for $11.5 million and we received a cash payment of $12.8 million from the collection of the notes receivable and related accrued interest.

Sales of $1.7 billion in fiscal year 2002 decreased 33 percent from the prior year. This decline was attributable to lower unit sales volume and lower average selling prices of both subscriber and transmission products.

Subscriber product sales of $1.1 billion in fiscal year 2002 decreased 36 percent from the prior year. During fiscal year 2002, our customers’ deployment rate of digital set-tops slowed substantially over fiscal year 2001. During fiscal year 2002, we shipped 3.4 million Explorer digital set-tops, down from more than 4.8 million the previous year. In addition to lower volumes, the average selling prices for Explorer digital set-tops during fiscal year 2002 declined 15 percent from fiscal year 2001, which has also contributed to the lower sales.

While the demand for digital set-tops in fiscal year 2002 declined from the preceding year, sales of cable modems and digital multi-QAM modulators (MQAMs) increased during fiscal year 2002 as compared to fiscal year 2001. During fiscal year 2002, we shipped approximately 665 thousand cable modems compared to approximately 151 thousand during fiscal year 2001. During fiscal year 2002, several of our customers completed successful video-on-demand launches within selected systems, and as a result, our shipments of MQAMs increased to over 7 thousand MQAMs from approximately 3 thousand MQAMs in fiscal year 2001.

Sales of transmission products of $495.0 million in fiscal year 2002 decreased 31 percent compared to fiscal year 2001. The decline in transmission sales was primarily related to the reduction in capital spending by the largest North American MSOs as upgrades were completed in many markets and purchasing decisions were delayed as a result of the economic downturn. International sales of transmission products increased 7 percent in fiscal year 2002 over the prior fiscal year primarily from the acquisition of BarcoNet in January 2002 and sales to German cable operator ish. BarcoNet generated total sales of $40.3 million, primarily sales of transmission products, during the second half of fiscal year 2002.

Although the domestic cable industry is comprised of thousands of cable systems, a small number of large MSOs own a large portion of the cable television systems and account for a significant portion of the capital

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expenditures made by cable television operators. A loss of business from a significant MSO could have a material adverse effect on our business. Customers that accounted for 10 percent or more of our total sales in fiscal years 2003, 2002, or 2001 were as follows:

Sales of products that accounted for 10 percent or more of total sales in fiscal years 2003, 2002, or 2001 were as follows:

International sales were 22 percent of total sales in fiscal year 2003 as compared to 20 percent and 15 percent of such sales in fiscal years 2002 and 2001, respectively.

Cost of sales, as a percent of sales, increased 0.3 percentage points in fiscal year 2003 over fiscal year 2002. The increase was due primarily to a higher mix of new set-top models that currently have lower gross margins than our average gross margin. This was partially offset by material cost reductions, cost reductions from product redesigns and conversion cost improvements. Cost of sales in fiscal year 2003 included a $10.9 million charge related to the settlement with ish.

Cost of sales as a percent of sales decreased 3.4 percentage points in fiscal year 2002 from fiscal year 2001. The year-over-year improvement was due to the cost reduction efforts described below.

We aggressively continue to reduce our costs through product design, procurement, and manufacturing. Each generation of our custom Application Specific Integrated Circuits (ASICs) incorporates more functionality and helps us reduce the number of components in our digital set-tops. Our material costs have benefited from the downturn in the overall economy as we have been able to negotiate reduced prices from our suppliers. In addition, we completed the transition of all of our Atlanta, Georgia-based manufacturing to our Juarez, Mexico manufacturing facility during fiscal year 2002, which generated additional manufacturing cost savings.

As a result of the transfer of manufacturing from Atlanta to Juarez in fiscal year 2002, we now perform approximately 90 percent of our in-house manufacturing in our Juarez facility. We also have manufacturing operations in four other locations.

Except for certain ASICs, the materials and supplies we purchase generally are standard electronic components, such as integrated circuits, wire, circuit boards, transistors, capacitors and resistors, all of which are produced by a number of manufacturers. We also purchase aluminum die castings, steel enclosures and other semi-fabricated items, which are produced by a variety of sources. We consider our sources of supply to be adequate. Significant suppliers include the following:

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