UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 2, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-5517
SCIENTIFIC-ATLANTA, INC.
(Exact name of Registrant as specified in its charter)
| Georgia | 58-0612397 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) | |
| 5030 Sugarloaf Parkway Lawrenceville, Georgia |
30042-5447 | |
| (Address of principal executive offices) | (Zip Code) | |
770-236-5000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act). Yes x No ¨
As of April 30, 2004, Scientific-Atlanta, Inc. had outstanding 153,164,380 shares of common stock.
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PART I – FINANCIAL INFORMATION
SCIENTIFIC-ATLANTA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| April 2, 2004 |
March 28, 2003 |
April 2, 2004 |
March 28, 2003 |
|||||||||||||
| SALES |
$ | 436,969 | $ | 382,630 | $ | 1,249,171 | $ | 1,046,193 | ||||||||
| COSTS AND EXPENSES |
||||||||||||||||
| Cost of sales |
275,533 | 252,024 | 783,115 | 691,493 | ||||||||||||
| Sales and administrative |
51,829 | 46,508 | 147,839 | 141,541 | ||||||||||||
| Research and development |
38,896 | 35,728 | 110,234 | 112,351 | ||||||||||||
| Restructuring |
51 | 3,555 | 1,364 | 14,790 | ||||||||||||
| Interest expense |
191 | — | 630 | 710 | ||||||||||||
| Interest income |
(4,235 | ) | (4,695 | ) | (12,275 | ) | (16,377 | ) | ||||||||
| Other (income) expense, net |
(4,638 | ) | 8,874 | (5,945 | ) | 21,379 | ||||||||||
| Total costs and expenses |
357,627 | 341,994 | 1,024,962 | 965,887 | ||||||||||||
| EARNINGS BEFORE INCOME TAXES |
79,342 | 40,636 | 224,209 | 80,306 | ||||||||||||
| PROVISION FOR (BENEFIT FROM) INCOME TAXES |
||||||||||||||||
| Current |
27,718 | 3,645 | 70,310 | 30,848 | ||||||||||||
| Deferred |
(2,329 | ) | 10,171 | 6,145 | (3,524 | ) | ||||||||||
| NET EARNINGS |
$ | 53,953 | $ | 26,820 | $ | 147,754 | $ | 52,982 | ||||||||
| EARNINGS PER COMMON SHARE |
||||||||||||||||
| BASIC |
$ | 0.35 | $ | 0.18 | $ | 0.97 | $ | 0.34 | ||||||||
| DILUTED |
$ | 0.35 | $ | 0.18 | $ | 0.96 | $ | 0.34 | ||||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |
||||||||||||||||
| BASIC |
152,569 | 151,771 | 151,802 | 153,760 | ||||||||||||
| DILUTED |
155,305 | 152,167 | 154,537 | 154,211 | ||||||||||||
| DIVIDENDS PER SHARE PAID |
$ | 0.01 | $ | 0.01 | $ | 0.03 | $ | 0.03 | ||||||||
SEE ACCOMPANYING NOTES
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SCIENTIFIC-ATLANTA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
| April 2, 2004 |
June 27, 2003 | |||||
| ASSETS |
||||||
| CURRENT ASSETS |
||||||
| Cash and cash equivalents |
$ | 443,948 | $ | 359,780 | ||
| Short-term investments |
751,505 | 588,775 | ||||
| Receivables, less allowance for doubtful accounts of $3,260 at April 2 and $3,260 at June 27 |
224,621 | 184,585 | ||||
| Inventories |
125,789 | 127,054 | ||||
| Deferred income taxes |
30,892 | 41,874 | ||||
| Other current assets |
20,182 | 21,548 | ||||
| TOTAL CURRENT ASSETS |
1,596,937 | 1,323,616 | ||||
| PROPERTY, PLANT AND EQUIPMENT, at cost |
||||||
| Land and improvements |
22,248 | 22,139 | ||||
| Building and improvements |
82,948 | 83,624 | ||||
| Machinery and equipment |
220,601 | 219,647 | ||||
| 325,797 | 325,410 | |||||
| Less – Accumulated depreciation and amortization |
140,547 | 127,726 | ||||
| 185,250 | 197,684 | |||||
| GOODWILL |
240,244 | 235,248 | ||||
| INTANGIBLE ASSETS |
41,773 | 51,028 | ||||
| NON-CURRENT MARKETABLE SECURITIES |
2,028 | 8,367 | ||||
| DEFERRED INCOME TAXES |
38,923 | 38,200 | ||||
| OTHER ASSETS |
70,316 | 64,486 | ||||
| TOTAL ASSETS |
$ | 2,175,471 | $ | 1,918,629 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||
| CURRENT LIABILITIES |
||||||
| Current maturities of long-term debt |
$ | 1,416 | $ | 1,455 | ||
| Accounts payable |
159,398 | 143,379 | ||||
| Accrued liabilities |
87,453 | 100,876 | ||||
| Deferred revenue |
17,972 | 15,626 | ||||
| Income taxes currently payable |
31,733 | 12,273 | ||||
| TOTAL CURRENT LIABILITIES |
297,972 | 273,609 | ||||
| LONG-TERM DEBT, LESS CURRENT MATURITIES |
7,877 | 8,567 | ||||
| NON-CURRENT DEFERRED REVENUE |
7,010 | 6,507 | ||||
| OTHER LIABILITIES |
146,217 | 148,705 | ||||
| STOCKHOLDERS’ EQUITY |
||||||
| Preferred stock, authorized 50,000,000 shares; no shares issued |
— | — | ||||
| Common stock, $0.50 par value, authorized 350,000,000 shares; issued 164,992,376 shares at April 2 and June 27 |
82,496 | 82,496 | ||||
| Additional paid-in capital |
558,248 | 520,503 | ||||
| Retained earnings |
1,234,020 | 1,127,441 | ||||
| Accumulated other comprehensive income, net of taxes of $20,120 at April 2 and $13,169 at June 27 |
32,827 | 21,486 | ||||
| 1,907,591 | 1,751,926 | |||||
| Less –Treasury stock, at cost (12,056,542 shares at April 2 and 15,550,442 shares at June 27) |
191,196 | 270,685 | ||||
| 1,716,395 | 1,481,241 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 2,175,471 | $ | 1,918,629 | ||
SEE ACCOMPANYING NOTES
3 of 35
SCIENTIFIC-ATLANTA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
| Nine Months Ended |
||||||||
| April 2, 2004 |
March 28, 2003 |
|||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES |
$ | 204,778 | $ | 300,082 | ||||
| INVESTING ACTIVITIES: |
||||||||
| Purchases of short-term investments, net |
(159,592 | ) | (193,705 | ) | ||||
| Purchases of property, plant, and equipment |
(19,733 | ) | (19,518 | ) | ||||
| Purchase of shares of PowerTV |
— | (4,580 | ) | |||||
| Proceeds from the sales of investments |
16,573 | 2,880 | ||||||
| Proceeds from the settlement of a collar on a warrant to purchase shares of common stock |
— | 20,821 | ||||||
| Payment of purchase price adjustment on businesses sold to ViaSat, Inc. |
(9,000 | ) | — | |||||
| Acquisition of certain assets of Arris Group |
— | (30,000 | ) | |||||
| Acquisition of certain assets of ChanneLogics, Inc. |
— | (1,600 | ) | |||||
| Other |
361 | 69 | ||||||
| Net cash used in investing activities |
(171,391 | ) | (225,633 | ) | ||||
| FINANCING ACTIVITIES: |
||||||||
| Issuance of common stock pursuant to employee stock option and stock purchase plans |
56,226 | 2,294 | ||||||
| Treasury shares acquired |
— | (104,472 | ) | |||||
| Dividends paid |
(4,560 | ) | (4,579 | ) | ||||
| Principal payments on debt, net |
(885 | ) | (1,388 | ) | ||||
| Net cash provided by (used in) financing activities |
50,781 | (108,145 | ) | |||||
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
84,168 | (33,696 | ) | |||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
359,780 | 376,429 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 443,948 | $ | 342,733 | ||||
| SUPPLEMENTAL CASH FLOW DISCLOSURES |
||||||||
| Cash paid during the period: |
||||||||
| Interest |
$ | 584 | $ | 653 | ||||
| Income taxes paid (refunded), net |
$ | 38,162 | $ | (17,081 | ) | |||
SEE ACCOMPANYING NOTES
4 of 35
SCIENTIFIC-ATLANTA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
(UNAUDITED)
| Three Months Ended |
Nine Months Ended | |||||||||||||
| April 2, 2004 |
March 28, 2003 |
April 2, 2004 |
March 28, 2003 | |||||||||||
| NET EARNINGS |
$ | 53,953 | $ | 26,820 | $ | 147,754 | $ | 52,982 | ||||||
| OTHER COMPREHENSIVE INCOME, NET OF TAX(1) |
||||||||||||||
| Unrealized holding gains (losses) on short-term investments |
(174 | ) | — | 59 | — | |||||||||
| Unrealized holding gains (losses) on marketable securities, net(2) |
(972 | ) | 1,003 | (512 | ) | 841 | ||||||||
| Foreign currency translation adjustments |
(6,430 | ) | 4,068 | 11,917 | 10,880 | |||||||||
| Changes in fair value of derivatives |
(165 | ) | 217 | (123 | ) | 1,101 | ||||||||
| COMPREHENSIVE INCOME |
$ | |||||||||||||