Scientific-Atlanta (SFA) 28 1/2 -1: supplier of broadband communications systems reports Q3 net of $0.25 a share, six cents above the First Call mean, vs yr-ago EPS of $0.22; revenue rose 11% to $320 million; says performance was driven by a 29% increase in N. American sales of broadband equipment to cable television operators; see press release.....
Scientific-Atlanta Reports Record Third Quarter FY-99 Revenues and Earnings as Deployments of Digital Internet Protocol Networks for Cable Industry Gain Momentum
PR Newswire - April 28, 1999 16:33
ATLANTA, April 28 /PRNewswire/ -- Scientific-Atlanta (NYSE: SFA) today reported record third quarter revenues and net earnings driven by double digit increases in sales as compared to last year. The company also reported record third quarter pre-tax profit, earnings per share, backlog and cash position.
Revenues for the third quarter of fiscal year 1999 ended April 2, 1999 totaled $320.0 million compared to $288.7 million in the previous year's third quarter, an increase of 11%. The record third quarter revenue performance was driven by a 29% increase in North American sales of broadband equipment to cable television operators. Record third quarter net earnings were $20.8 million, or $0.27 per share, including one-time gains of $0.02 per share, compared to the prior year's third quarter net earnings of $17.1 million, or $0.22 per share. The one-time gains during the quarter were from the adjustment of the company's investments in Broadcom Corp and other securities to current market values. Sales of two of the company's marketable securities, which took place during April, will yield a gain of approximately $0.26 per share during the fourth quarter. These transactions include the exercise of warrants to purchase 720,000 shares of common stock of Harmonic, Inc. and the subsequent sale of these shares. The other transaction was the sale of the company's remaining one million share investment in Broadcom.
Net earnings and record third quarter profit before tax of $29.7 million, were driven by North American transmission and subscriber volumes, significantly improved results in the company's satellite businesses and continued reduction in manufacturing and other operating costs.
Orders booked in the third quarter were $304.1 million compared to $309.8 million in the previous year's third quarter. Sequentially, bookings increased $13.6 million, driven by strong bookings in transmission networks.
Gross margins were 28.6%, up 0.3 percentage points sequentially, but less than the 31.6% gross margins in the prior year's third quarter due to the higher percentage of new digital products in the overall product mix in the third quarter of fiscal 1999. Operating profit increased to 8.1% from 4.9% in the previous quarter due to larger volumes and reduced operating expenses. The company's balance sheet remained strong with cash and marketable securities of $236 million at the end of the quarter, an increase of $37 million from the previous quarter. Backlog at the end of the quarter was $496.0 million, a record for any third quarter.
Revenues for the first nine months of fiscal 1999 were $888.2 million versus $877.7 million in the previous year. Net earnings for the nine month period were $55.0 million, or $0.71 per share, compared to $48.5 million, or $0.62 per share in the prior year's nine-month period.
Scientific-Atlanta President and CEO James F. McDonald said, "The robust results of the third quarter are indicative of the success of our long-held strategy of focusing our resources on fully interactive Internet Protocol, or IP-based, digital networks and set-top network devices. The signs are clear that the long-awaited move to advanced interactive networks is gathering momentum. We are now entering the phase of our digital strategy implementation where new interactive services such as e-mail and video-on-demand can be deployed on the networks.
"We are pleased to have designed, delivered, installed and commercially deployed the industry's first digital IP networks over cable systems to television sets. Scientific-Atlanta is well positioned to benefit from the growing demand for high-speed broadband access to the Internet and other two- way services. Our goal is to help our customers realize their vision of bringing a rich array of new revenue-generating interactive services to cable subscribers as quickly as possible. That process is now well under way, and evidence from consumers to date indicates a very high level of satisfaction with the compelling capabilities of the new networks."
Subscriber Networks Sales Strong
Sales of the company's Subscriber Networks business increased 38% year- over-year. The company shipped 150,000 Explorer(R) 2000 digital set-tops during the quarter. Operators purchasing Explorer 2000 digital set-tops in the quarter included Charter Communications, Comcast, Cox Communications, Intermedia Partners and Time Warner in the United States and Rogers Communications and Videotron in Canada. In anticipation of continued growth in shipments, the company has decided to increase manufacturing capacity in its Juarez, Mexico facility from 250,000 Explorer 2000 units per quarter to 375,000 units by the end of September, 1999.
Seventeen cable operators in the US and Canada have committed to deploy the Scientific-Atlanta digital interactive system. One hundred systems have been shipped to date, seventy-nine to customer sites and an additional 21 systems to partners and developers. Sixty-four systems have been fully installed at customer sites. Twenty-nine systems have commercially launched to paying customers compared to eight systems at the end of the last quarter. Among those systems that have paying customers are some of the major sites in the United States and Canada, including Adelphia Communications in Buffalo, New York and Toms River, New Jersey; Charter Communications in Glendale, California;
Comcast in Baltimore, Maryland; Cox Communications in San Diego, California; Las Vegas Nevada and Phoenix, Arizona; Time Warner in Austin, Texas, Honolulu, Hawaii and Tampa, Florida; and Videotron in Montreal.
Yesterday the company announced that the PowerTV e-mail application, SofaMAIL(TM), will be available to cable operators next month on all Explorer 2000 set-tops. PowerTV is a majority-owned subsidiary of Scientific-Atlanta.
Several customers are moving forward with plans to offer interactive services with the Explorer platform. Adelphia Communications will launch a trial of the SofaMAIL application during the current quarter. Time Warner, under their Pegasus initiative, plans to offer video-on-demand services with multiple server providers. Scientific-Atlanta is working with Time Warner to provide a standard open VOD interface and will support Time Warner field trials of video-on-demand this calendar year.
As a result of the increasing interest in new application services, in May the company will host a Developers Showcase where some of the nation's leading applications developers including Microsoft, IBM, the NCI joint venture between Netscape and Oracle, Wink, WorldGate, Peach Networks, PowerTV, among others, will demonstrate their applications to cable operators. The Showcase will be sponsored by the company's CreativEdge(TM) organization which works with third party application developers who wish to write applications to run on the Explorer network.
Sales of advanced analog set-top terminals were up slightly during the quarter, with 327,000 units sold out of total analog shipments of 503,000 units, consistent with the company's previous indications that total analog shipments would remain in the 500,000 unit per quarter range this fiscal year.
Increased Transmission Networks Volumes
Sales of the company's Transmission Network business increased 9% over the third quarter of last year. The transfer of the company's RF product manufacturing to Juarez, Mexico in the previous quarter resulted in significantly lower costs for this rapidly growing product area. Initial reaction to the company's new digital reverse family of optical electronic products has been favorable, and the Prisma(TM) DT digital transport system began volume shipments in the quarter. A record number of 1310 nanometer optical transmitters were shipped in the quarter.
Satellite Restructuring Generates Results
The company's satellite businesses returned to approximately break-even status as a result of a vigorous restructuring program over the past three quarters. At the recent National Association of Broadcasters (NAB) annual trade show, Scientific-Atlanta demonstrated several new standard definition and high definition products within its PowerVu Plus(TM) family of products to help broadcasters and cable operators transition to digital transmission.
McDonald concluded, "We were pleased with the results of the third quarter which provided further validation of the significant investments we and our customers have made in IP packet networks for the cable industry. Our R&D investments over the past several years have placed us in the position where we can help our customers preserve their position as the primary provider of broadband access to the home. We look forward the next phase of our digital strategy as we begin to offer to our customers this quarter the first of many interactive services."
"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 the company's actual results to differ from the anticipated results expressed in such forward-looking statements. Investors are referred to the company'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 is a registered trademark of Scientific Atlanta. CreativEdge, Prisma and PowerVu Plus are trademarks of Scientific Atlanta. SofaMAIL is a trademark of PowerTV, Inc.
SCIENTIFIC-ATLANTA, INC.
consolidated statement of earnings
(in millions, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
April 2, March 27, April 2, March 27,
1999 1998 1999 1998
SALES $320.0 $288.7 $888.2 $877.7
COSTS AND EXPENSES
Cost of sales 228.6 197.4 638.6 610.2
Sales and administrative 37.6 39.8 119.2 120.0
Research and development 27.9 27.3 87.0 80.7
Interest expense 0.2 0.1 0.7 0.4
Interest (income) (1.7) (1.3) (5.6) (3.6)
Other (income)
expense, net (2.3) 0.9 (30.3) 0.8
Total costs
and expenses 290.3 264.2 809.6 808.5
EARNINGS BEFORE
INCOME TAXES 29.7 24.5 78.6 69.2
PROVISION FOR
INCOME TAXES 8.9 7.4 23.6 20.7
NET EARNINGS $20.8 $17.1 $55.0 $48.5
EARNINGS PER COMMON SHARE
BASIC $0.27 $0.22 $0.71 $0.62
DILUTED $0.27 $0.22 $0.71 0.62
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
BASIC 75.9 78.7 76.8 78.6
DILUTED 78.2 79.7 78.3 79.9
BOOKINGS $304.1 $309.8 $896.2 $885.0
SOURCE Scientific-Atlanta, Inc.
/CONTACT: Bob Meyers of Scientific-Atlanta, Inc., 770-903-4608,
robert.meyers@sciatl.com /
/Web site: sciatl.com /
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