Fourth qtr and year end results are in:
Scientific-Atlanta Reports Record Fourth Quarter and Fiscal Year
Earnings
ATLANTA, Aug. 6 /PRNewswire/ -- Scientific-Atlanta (NYSE: SFA - news) reported record net earnings of $32.3 million,
or $0.40 per share, for the fiscal fourth quarter ended June 26, 1998. Previously announced restructuring and one-time
charges of $76.2 million were recorded in the fourth quarter. The company had a one-time gain of $94.0 million to adjust its
investment in Broadcom Corporation [Nasdaq:BRCM - news] to market value. In the prior year, the company reported net
earnings of $19.6 million, or $0.25 per share. Net earnings for the quarter excluding one-time special items were $20.1
million, or $0.25 per share.
The restructuring moves and other one-time measures are aimed at enhancing Scientific-Atlanta's competitive position and
increasing the efficiency of the company's worldwide operations.
Sales for the fourth quarter were $303.7 million compared to the prior year's fourth quarter sales of $322.7 million. Orders
booked in the fourth quarter were $319.7 million compared with the previous year's fourth quarter orders of $321.1 million.
Backlog at fiscal year end was $486.1 million, an all time record for any fiscal year end.
The company's balance sheet remains strong with a record cash and marketable securities balance of $271.3 million at the end
of the fiscal year, an increase of $164.2 million from the end of the prior fiscal year. Gross margin for the quarter was 31.9%,
excluding one-time charges, representing a 0.7 of a percentage point improvement over last year.
Net earnings for the fiscal year were $80.8 million, or $1.02 per share, both all-time records, compared with $64.0 million, or
$0.82 per share, in the prior year. Net earnings excluding one-time special items were $68.5 million, or $0.87 per share. Sales
were at an all-time record of $1,181.4 million, compared with $1,168.2 million in the previous year, as stronger U.S. sales
offset the weakness in international sales, primarily in Asia. Fiscal year bookings were $1,204.7 million, compared with the
prior year's total of $1,264.3 million.
James F. McDonald, Scientific-Atlanta's CEO said, ''It is clear that the market is endorsing the advanced digital interactive
concept, especially in larger cable systems. At the same time the pace of change in the industry is accelerating as companies
such as Microsoft, AT&T, Paul Allen and others endorse the cable industry's high-capacity broadband network as the
network of choice for delivering new interactive digital services to the consumer. These changes will bring more choice and
enriched services to consumers, increase revenues for our customers and provide major opportunities for Scientific- Atlanta.
''We believe in enhanced services which are available only with an interactive advanced digital system and full interactive
digital set-top, and we are making those services happen. These include e-mail over television, video-on-demand, Web
browsing and various forms of electronic-commerce, all of which we plan to bring to the market by fiscal year-end. These
services will be a source of increased value and revenues for our customers.
''This was an excellent quarter and a very solid year for Scientific- Atlanta, significant in many respects.
* We began the roll-out of advanced two-way digital cable systems in the fourth quarter, as scheduled. Scientific-Atlanta is
the only supplier today of real-time, interactive digital networks capable of advanced services such as video-on-demand, IP
telephony and Internet browsing.
* We received purchase orders or commitments for our interactive digital
network equipment from 11 major cable operators in the United States
and Canada. By fiscal year-end, we had shipped network equipment to 37
sites, including 27 customer sites.
* We announced today an agreement with Time Warner Cable for the
expanded deployment of our digital system and Explorer(R) 2000
set-tops to a significant number of major cable systems by
calendar year-end 1998 in preparation for a vigorous launch of new
digital services in calendar year 1999 under the Time Warner
Pegasus program.
* We also announced today an agreement to supply substantial
quantities of advanced digital set-tops and supporting digital
network to Tele-Communications, Inc. (TCI).
* We announced that Cox Communications has selected Scientific-
Atlanta as primary digital video equipment supplier for Cox's San
Diego, Ca.; Phoenix, Ariz.; and Oklahoma City, Okla. systems for
the next three years. The Phoenix and San Diego systems are the
fourth and sixth largest cable systems in the U.S.
* We recently announced that Comcast Cable Communications, Inc. will
offer its Charleston, S.C consumers interactive digital services
using our advanced digital network and Explorer 2000 set-tops.
Charleston is the third Comcast system to deploy Scientific-
Atlanta's interactive digital system.
* In response to customer demand and market projections, we recently
announced plans to double the production capacity for our Explorer 2000
digital set-tops in our Juarez, Mexico facility to 1 million units
annually by October of this year.
* During the quarter we shipped a total of about 764,000 analog set-tops,
a 14% increase over last quarter, including 440,000 8600x(TM) advanced
analog units. For the year as a whole, we shipped 2.7 million analog
set-tops, a 37% increase over the previous year. We view analog as
largely complementary to digital. However, we anticipate some decline
in analog shipments going forward as our customers begin the natural
transition to higher function and priced digital products. Overall, we
anticipate that our combined analog and digital subscriber business
will continue to grow.
* We had an excellent year in our transmission business in the United
States although our international business suffered from the effects of
weakness in certain countries. Earlier this week, we announced our
selection by Charter Communications to upgrade their entire St. Louis
system to include the full breadth of our transmission product line.
* Worldwide market penetration by our PowerVu(R) digital video
compression system continued to grow in the quarter with our selection
by Turner Broadcasting for delivery of its TNT programming to its
nearly 2,000 affiliates in the western time zone. Lifetime Television
announced it will launch Lifetime Movie Network using PowerVu digital
compression. A&E Networks also will use a PowerVu system in its
digital plans, and Hallmark Entertainment Networks, Inc. will launch
its new Kermit Channel in the Asia/Pacific Rim and Latin America this
year. Currently, more than 300 PowerVu systems are delivering more
than 800 channels of digitally compressed video into 170 countries.
* We also began initial shipments of Subscriber Communicator Units for
tracking of rail cars and tractor trailers and for automated meter
reading utilizing the ORBCOMM global communications network. ORBCOMM
provides two-way monitoring, tracking and messaging services through
the world's first low-earth orbit satellite-based data communications
system.
''We were very pleased with the strength of the U.S. market where cable operators continue to upgrade their networks.
Overall U.S. bookings for the quarter increased 33% over last year. In our U.S. transmission business, quarterly orders
increased 29% compared to last year; subscriber orders were very strong with a 60% growth versus last year and overall
satellite orders were up 13%. Total company fourth quarter sales in the U.S. increased 14% over the prior year. Transmission
sales improved 27%; subscriber grew 10% and satellite sales grew 6%.
''International markets had a negative effect on the company's bookings and sales in the quarter and for the entire year,
primarily due to the currency and economic crisis in Asia. International bookings in the quarter were approximately 20% of
total bookings, and international sales were approximately 24% of the company total. International bookings were down 50%
compared to last year's fourth quarter, and international sales declined 39%. While recovery in Asia is not expected in the near
term, we believe that the dynamics of the region will eventually work in our favor, and we continue our commitment to the
region.
McDonald concluded, ''We feel very good about fiscal year 1998. We met the challenge of making up a significant shortfall in
international bookings, and our total year sales for the year grew in spite of Asia, where sales were down 35%. We have
focused our resources on the advanced digital network, and fully interactive digital set-tops and software. We believe our
decision to skip broadcast digital and focus on fully interactive systems is now being validated by the marketplace. It is
essential for financial success that cable operators provide networks, including all of the software, that can support a wide
range of two-way, real-time interactive communications simultaneously to many subscribers. Our network does that.''
''Forward-looking statements,'' as defined in the Private Securities Litigation Reform Act of 1995, may be included in this
news release. A variety of factors could cause Scientific-Atlanta's actual results to differ from the anticipated results expressed
in such forward-looking statements. Investors are referred to Scientific-Atlanta's Cautionary Statements (Exhibit 99 to the
company's most recent Form 10-Q), which statements are incorporated into this news release by reference.
Scientific-Atlanta, Inc. (http://www.sciatl.com) is a leading supplier of broadband communications systems, satellite-based
video, voice and data communications networks, and worldwide customer service and support.
Explorer and PowerVu are registered trademarks and 8600x is a trademark of Scientific-Atlanta, Inc.
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