EXHIBIT 99
CAUTIONARY STATEMENTS
General
From time to time, Scientific-Atlanta may publish, verbally or in
written form, forward-looking statements relating to such matters as anticipated
financial performance, business prospects, technological developments, new
products, research and development activities and similar matters. In fact, this
Form 10-Q (or any other periodic reporting documents required by the Exchange
Act) may contain forward-looking statements reflecting our current views
concerning potential future events or developments. The Private Securities
Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking
statements. These Cautionary Statements are being made pursuant to the
provisions of the Private Securities Litigation Reform Act and with the
intention of obtaining the benefits of the "safe harbor" provisions of the Act.
In order to comply with the terms of the "safe harbor," 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. The risks and uncertainties which may affect the operations,
performance, development and results of our business and some of which are
described in more detail below include, but are not limited to, the following:
... uncertainties relating to economic conditions (including the growth of the
cable industry);
... uncertainties relating to customer plans and commitments;
... changes in customer order patterns;
... changes in the ownership and/or management of our major customers and their
competitors;
... our dependence on the cable television industry and cable television
spending;
... development and timing of the introduction of software applications for the
Explorer network;
... insufficient, excess or obsolete inventory;
... the pricing and availability of equipment, materials and inventories;
... performance issues with key suppliers and subcontractors;
... the entry of new, well-capitalized competitors into our markets;
... delays in development, manufacture, and/or deployment of new products,
including digital set-top products and the software applications to be used
on such digital set-top products;
... delays in testing of new products;
... technological developments;
... signal security;
... uncertainties relating to the development and ownership of intellectual
property;
... uncertainties relating to the ability of Scientific-Atlanta and other
companies to enforce their intellectual property rights;
... regulatory uncertainties;
... uncertainties inherent in international operations and foreign currency
fluctuations;
... worldwide political stability and economic growth;
... uncertainties relating to the impact of the terrorist events of September
11, 2001 and the resulting hostilities in Afghanistan;
... governmental export and import policies, and global trade policies;
... uncertainties related to the regulation of the Internet; and
... the impact of a major earthquake on our operations.
The words "may," "will," "should," "continue," "future,"
"potential," "believe," "expect," "anticipate," "project," "plan," "intend,"
"seek," "estimate" and similar expressions identify forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date the statement was made.
Factors That May Affect Future Performance
Dependence on Key Customers. Although the domestic cable television
industry is comprised of thousands of cable systems, a small number of large
cable television multiple systems operators (MSOs) own a large portion of the
cable television systems and account for a significant portion of the capital
expenditures made by cable television system operators. Historically, a
significant majority of our sales have been to relatively few customers. Sales
of products to AOL Time Warner, Inc. and its affiliates were 22 percent, 23
percent and 16 percent of our total sales in fiscal years 2001, 2000 and 1999,
respectively. Sales of products to Charter Communications, Inc. and its
affiliates were 20 percent, 14 percent and 7 percent of sales in fiscal years
2001, 2000 and 1999, respectively. Sales of products to Adelphia and its
affiliates were 18 percent, 2 percent and 2 percent of sales in fiscal years
2001, 2000 and 1999, respectively. Sales of products to AT&T and its affiliates
were 2 percent, 10 percent and 16 percent of our total sales in fiscal years
2001, 2000 and 1999, respectively. The loss of business from a significant MSO
could have a material adverse effect on our business.
Dependence on Principal Product Line. Sales of our Explorer digital
set-tops constituted approximately 57 percent, 34 percent and 15 percent of our
total sales in fiscal years 2001, 2000 and 1999, respectively. We expect that
sales of our Explorer set-tops will continue to account for a significant
portion of our revenues for the foreseeable future. As a result, our financial
performance will depend in significant part on continued market acceptance of
the Explorer digital set-tops and the growth of the digital interactive
television application market.
Sales of Explorer digital set-tops depend in large part on the
number of new "net digital subscriber additions" added by our customers. "Net
digital subscriber additions" in any period is the number of new digital
subscribers added in that period less the number of previous digital subscribers
who discontinued that service in the same period. The number of net digital
subscriber additions is usually published quarterly by each MSO. We are unable
to predict future rates of net digital subscriber additions. This rate is
dependent on a number of factors, including economic conditions, the
effectiveness of the marketing efforts and programs of our customers, and the
other factors set forth in the following paragraph. Declines in the net digital
subscriber addition rates could have an adverse effect on our results. In
addition, we have limited visibility to the inventories that the MSOs may have
accumulated. A reduction in the MSO net digital subscriber addition rates could
mean that these inventories will not be utilized as quickly as would otherwise
be the case.
Digital interactive television is a relatively new business, and
therefore there are many characteristics of this business that are not yet fully
known. These characteristics include sensitivity to the economy, consumer demand
for various types of interactive applications, the proper pricing levels and
models for various applications, the likely level of penetration of digital
services into the subscriber base, the likely number of digital set-tops per
household, the customer churn rate to be expected, the extent to which digital
cable interactive services will successfully compete against direct-to-home
satellite services, international demand for the products and the extent to
which demand will be seasonal. A declining economy may adversely affect consumer
purchases of new digital services, and thus purchases of our digital products by
the MSOs, even if it does not impact monthly MSO subscription revenues. Each of
these business characteristics may have a material impact on the sales of our
products.
Dependence on the General Business and Economic Condition of the
Cable Television Industry and Cable Television Capital Spending. The majority of
our revenues come from sales of systems and equipment to the cable television
industry. Demand for these products depends primarily on capital spending by
cable television system operators for constructing, rebuilding or upgrading
their systems. The amount of this capital spending, and, therefore, our sales
and profitability, may be affected by a variety of factors, including general
political and economic conditions in
the United States and abroad, including but not limited to the results of the
terrorist events of September 11, 2001, the continuing trend of cable system
consolidation within the industry, the financial condition of domestic cable
television system operators and their access to financing, competition from
direct-to-home satellite, wireless television providers and telephone companies
offering video programming, technological developments that impact the
deployment of equipment and new legislation and regulations affecting the
equipment used by cable television system operators and their customers. There
can be no assurance that cable television capital spending will increase from
historical levels or that existing levels of cable television capital spending
will be maintained.
International. We have and expect to continue to make significant
sales to customers outside the United States. International sales constituted 15
percent, 21 percent and 22 percent of our total sales for fiscal years 2001,
2000 and 1999, respectively. Substantially all of these sales were export sales.
As a result, our revenues are subject to the impact of political and economic
conditions in various geographic regions. In addition, a portion of our product
manufacturing is located outside the United States, and we are in the process of
consolidating substantially all of our Atlanta, Georgia manufacturing operations
into our Juarez, Mexico facility. We have also acquired BarcoNet NV, which has
extensive operations in Europe and Asia Pacific regions. A number of MSOS in
Europe have publicly reported financial difficulties, which may adversely affect
our potential for sales to these customers. Accordingly, our future results
could be adversely affected by a variety of factors, 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.
Rapid Changes in Technology. The markets for our products are
characterized by rapidly changing technology, evolving industry standards,
frequent new product introductions and evolving methods of building and
operating networks. The success of our existing and future products is dependent
on several factors, including proper product definition, product cost, timely
completion and introduction of new products, differentiation of new products
from those of our competitors and market acceptance of these products. There can
be no assurance that we will successfully identify new product opportunities,
develop and bring new products to market in a timely manner and achieve market
acceptance of our products or that products and technologies developed by others
will not render our products or technologies obsolete or noncompetitive.
New Product Introductions. Our future operating results may be
adversely affected if we are unable to continue to develop, manufacture and
market innovative products and services that meet customer requirements for
performance and reliability on a timely basis. The process of developing our new
high technology products is inherently complex and uncertain. We have in the
past experienced delays in product development and introduction, and there can
be no assurance that we will not experience further delays in connection with
our current product development or future development activities.
Competition. Our products compete with those of a substantial number
of foreign and domestic companies, some with greater resources, financial or
otherwise, than us, and the rapid technological changes occurring in our markets
are expected to lead to the entry of new competitors. Our ability to anticipate
technological changes and to introduce enhanced products on a timely basis will
be a significant factor in our ability to anticipate technological changes and
to introduce enhanced products on a timely basis will be a significant factor in
our ability to expand and remain competitive. The changing competitive
environment for our broadband products may be a primary factor that may
influence our future operations, structure and profitability. Changes in the
industry may include the commoditization of set-tops and the entry of retail
competitors into our markets. We have licensed two other manufacturers to
produce set-tops compatible with our set-tops and digital networks, and these
licensees may offer set-tops at prices lower than our prices. Commoditization of
our products and sales of set-tops by licensees may produce lower margins from
such products. Certain of the retail competitors who may enter into our markets
may have greater resources than us.
Reliance on Suppliers. Our growth and ability to meet customer
demands also depend in part on our ability to obtain timely deliveries of parts
from our suppliers. Certain components of our products are presently available
only from a single source or limited sources. A reduction or interruption in
supply or a significant increase in the price of one or more components could
adversely affect our business, operating results and financial condition and
could materially damage customer relationships. From time to time, we experience
shortages of certain electronic components from our suppliers. These shortages
could have a material effect on our operations.
Industry Consolidation and Acquisitions. There has been a recent trend
toward industry consolidation. Our major competitor, General Instrument
Corporation, was acquired by Motorola, Inc., and a significant customer, Time
Warner Inc., was acquired by America Online, Inc. On December 19, 2001, AT&T and
Comcast Corporation announced that they had approved a definitive agreement to
combine AT&T Broadband with Comcast. We believe that this trend toward industry
consolidation may continue as companies attempt to strengthen or hold their
market positions in an evolving industry. These consolidations could adversely
affect our sales and results of operations.
In addition, our industry is highly competitive, and as such, our
growth is dependent upon market growth and our ability to enhance our existing
products and services. Accordingly, one of the ways we may address the need to
enhance products and services is through acquisitions of other companies. The
acquisition of BarcoNet may involve numerous risks, including the following:
difficulties in integration of the operations, technologies and products of the
acquired companies; the risk of diverting management's attention from normal
daily operations of the business; and the potential loss of key employees of the
acquired company. Failure to manage growth effectively and successfully
integrate acquisitions made by us could materially harm our business and
operating results.
Intellectual Property. We generally rely upon patent, copyright,
trademark and trade secret laws to establish and maintain our proprietary rights
in our technology and products. 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. Any claims, with or without merit, could
be time-consuming, result in costly litigation, cause product shipment delays,
or require us to enter into royalty or licensing agreements, any of which could
seriously harm our business, financial condition and results of operations.
There can be no assurance that such royalty or licensing agreements, if
required, would be available on terms acceptable to us, if at all. Additionally,
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. In the event an intellectual property claim against
us was successful and we could not obtain a license on acceptable terms or
license a substitute technology or redesign to avoid infringement, our business,
financial condition and results of operations would be seriously harmed. Even if
we prevail in litigation, the expense of litigation could be significant and
could seriously harm our business, financial condition and results of operation.
Securities Litigation. The trading price of our common stock may be
volatile. The stock market in general, and the market for technology companies
in particular, has, from time to time, experienced extreme volatility that often
has been unrelated to the operating performance of particular companies. These
broad market and industry fluctuations may significantly affect the trading
price of our common stock, regardless of our actual operating performance. The
trading price of our common stock could be affected by a number of factors,
including: changes in expectations of our future financial performance; changes
in securities analysts' estimates (or the failure to meet such estimates);
announcements of technological innovations; customer relationship developments;
conditions affecting our targeted markets in general; and quarterly fluctuations
in our revenue and financial results. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been instituted. 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. Since then, several actions with similar allegations have
been filed. Such litigation may be expensive and may divert management's
attention.