General Instrument Reports First Quarter 1998 Results; EPS of $0.13 Before Charges on Sales of $417 Million; Record Orders of $508 Million; Ships One Millionth Interactive Digital Cable TV Set Top
PR Newswire - April 30, 1998 16:36
HORSHAM, Pa., April 30 /PRNewswire/ -- General Instrument Corporation
(NYSE: GIC) today reported sales for the first quarter ended March 31, 1998 of
$417 million, compared to $408 million in the first quarter of 1997. The
sales increase reflects a more than 100% increase in shipped digital cable TV
products and strong advanced analog product sales, partially offset by
continued weakness in sales of private/commercial satellite products and the
expected decline in basic analog product sales.
Orders for the first quarter of 1998 totaled a record $508 million, up
from $489 million in the first quarter of 1997. The Company's backlog on
March 31, 1998 was $554 million, compared to $470 million a year ago.
Operating income, before restructuring and other charges, was $33 million
in the first quarter of 1998 compared to pro forma operating income, before
restructuring and other charges, of $17 million in the first quarter of 1997.
The increase in operating income reflects higher sales and profit margins of
digital cable TV products and higher profit margins in advanced analog
products, offset by lower sales of private/commercial network satellite and
basic analog products. The increase in operating income also reflects cost
savings associated with previously announced restructuring steps which
included the streamlining of the Company's Satellite Data Networks business
unit and the contribution of the Next Level Communications telephony business
into a new limited partnership.
Net income, before restructuring and other charges, was $20 million
($0.13 per diluted share) in the 1998 first quarter compared to pro forma net
income on the same basis of $9 million ($0.06 per pro forma diluted share) in
the first quarter of 1997.
On a reported basis, which includes the impact of all restructuring and
other charges, the first quarter of 1998 had a net loss of $60 million
($0.40 loss per diluted share) compared to pro forma net income of $7 million
($0.05 per pro forma diluted share) in the first quarter of 1997.
"Our first quarter results are already highlighting the positive effects
of the plan which we announced last October to improve General Instrument's
financial performance and achieve its full strategic potential," said Edward
D. Breen, Chairman and CEO of General Instrument. "The quarter's results
reflect strong digital and advanced analog systems sales, continued progress
in cost reductions and substantial operational improvements in our satellite
TV equipment business."
GENERAL INSTRUMENT SOLIDIFIES ITS LEADERSHIP POSITION IN INTERACTIVE
DIGITAL SYSTEMS
During the quarter, General Instrument continued to solidify its position
as the worldwide leader in the evolution of digital cable TV. GI reached a
major milestone during the quarter as it shipped its one millionth digital
cable TV set-top terminal. Digital cable TV shipments for the quarter reached
300,000 units, slightly exceeding expectations. GI currently has digital
systems installed in more than 500 cable headends, giving the Company's
interactive digital platform a service footprint of 25 million North American
homes.
During the quarter, GI's digital technology was launched in many cable TV
systems around the country, including Comcast's system in Detroit; Cox's
systems in Omaha, New Orleans and Hartford, CT; Intermedia systems in
Nashville and Spartanburg, SC; and nationally controlled systems such as
FrontierVision in Rockland, ME and Greenville, TN, TW-Fanch Two in Oxford, MI
and Rifkin in Cookeville, TN. These systems join hundreds of other digital
launches by these same MSOs and other operators including TCI, Adelphia, Shaw,
Bell Canada and GTE.
In addition, during the first quarter of 1998, General Instrument received
many new digital awards such as Comcast's systems in Indianapolis, Sacramento,
Union, NJ and Glasgow, KY; and FrontierVision systems in Newark, OH, Marion,
OH, Ashland, KY and Lebanon NH.
General Instrument has been mass deploying two-way, interactive digital
cable TV systems and set-top terminals since 1996. Each of the Company's one
million digital terminals shipped to date is OpenCable compliant and capable
of real-time two-way interactivity. These digital terminals are capable of
supporting applications and services such as expanded programming, digital
music, electronic program guides, video-on-demand, Internet access, e-mail,
yellow pages and interactive advertising.
"GI is the only company in the world mass deploying digital cable TV
systems," said Breen. "Shipments of these digital systems are growing at a
rate exceeding our expectations, driven by broad-based commercial acceptance
of our interactive digital platform. We expect to continue to benefit from
this trend as we execute on our recent 15 million digital set-top deal with
leading MSOs."
During the quarter, and more recently, General Instrument announced many
initiatives and developments that are helping to move the company toward
achieving its full strategic potential:
-- 15 Million Digital Set Top Deal Commenced
GI began to deliver on its completed definitive agreements to supply
15 million two-way, OpenCable compliant digital set-top terminals to
12 North American cable operators, valued at approximately
$4.5 billion over the next three to five years.
-- Internet/E-mail Cable TV Service Launched
On April 21, GI, Charter Communications and WorldGate announced the
commercial launch of low-cost, high-performance Internet access over
the television. This service is being launched on GI's advanced
analog platform and is expected to be ready for deployment on GI's
interactive digital system during the 2nd quarter of this year.
Internet access was one of the original applications targeted by
General Instrument's Horizons Developers Program. Launched in
September 1997, Horizons is designed to provide technical, marketing
and sales support to help third-party developers create new services
and applications.
-- Video-on-Demand Agreement With DIVA Systems
Today, GI announced an agreement with DIVA Systems Corporation to offer
true video-on-demand (VOD) service on GI's DCT1000/1200 interactive
digital platform. By integrating DIVA's service with GI's digital
platform, cable operators will be able to commercially deploy an
integrated VOD system over their existing GI interactive digital cable
TV systems this year. The Lenfest Group intends to mass deploy
DCT1200 digital terminals offering VOD services to its customers later
this year.
-- Strategic Alliance With Sony / NCTA Demonstration of DCT5000+
In January, General Instrument and Sony jointly announced plans for a
strategic alliance to develop digital TV technologies. Today, General
Instrument and Sony announced the upcoming demonstration of
interactive digital in-home networking at this year's National Cable
Television Association Show (May 4-6). Utilizing GI's next generation
interactive digital terminal, the DCT5000+, and incorporating Sony's
Home Networking Module and "Aperios" real-time operating system, this
demonstration represents the first public display of the DCT5000+
platform. The DCT5000+ is built around a high-power 175 MHz RISC
processor and a high-end 3D and picture-in-graphics capable graphics
platform, representing the leading edge in next generation digital
cable terminals.
-- Silicon Component Vendors Selected For Digital Terminals
On March 25, GI announced the selection of Broadcom Corporation
(Nasdaq: BRCM), Motorola, Inc. (NYSE: MOT) and Quantum Effect Design,
Inc. (QED) to supply key silicon components for inclusion in GI's
interactive advanced digital set-top terminals. These selections
reflect GI's aggressive program of ongoing cost reductions and silicon
integration through outsourcing of chip production. GI was an early
investor in Broadcom, which recently completed its initial public
offering. GI's investment exceeds 5% of the outstanding Broadcom
stock.
-- HITS Plans Moving Forward
GI and TCI are proceeding with plans for GI's acquisition of the
digital authorization services of TCI's Headend In The Sky(R) (HITS)
organization, providing an access control service to support the mass
deployment of digital cable TV systems throughout the U.S. It is
expected that this agreement will be finalized during the second
quarter of 1998.
"We are confident that, as the convergence of video, voice and data
accelerates, General Instrument is well positioned with the financial
strength, product pipeline and flexibility needed to meet the growing demand
for interactive digital cable TV services," said Breen.
THE WORLD LEADER IN ADVANCED ANALOG SYSTEMS
General Instrument continues its leadership in the delivery of analog
cable products, both in the basic and advanced product categories. During the
quarter, GI shipped 772,000 advanced analog set top terminals. GI's CFT 2200
advanced analog set top is a two-way, interactive terminal offering the most
complete set of functionality available today in this product class. The CFT
2200 is the only product in its category that supports expanded channels, CD
quality music, and emerging interactive applications such as Internet access.
Major advanced analog awards during the quarter include: Comcast's system
in Detroit, MI, Media General Cable of Fairfax County, VA; Greater Media Cable
of Philadelphia; Super Cable in Venezuela; and VTR in Chile. Also, during the
quarter, General Instrument was awarded more than 50 basic analog addressable
systems by Argentine operator Cablevision.
TRANSMISSION SHIPMENTS EXPECTED TO STRENGTHEN DURING SECOND HALF.
On April 29, GI announced that it was awarded three turnkey system
upgrades for TCI in Chicago, St. Louis and Grand Rapids, MI, consisting of
more than 9,000 miles of network upgrades. GI was also selected by TCI to
supply equipment to upgrade eight additional metropolitan markets.
To enable these upgrades, GI will provide products and services including
CableOptics(R), Gallium Arsenide (GaAs) transmission equipment offering the
industry's highest performance and reliability and GI's NETadvantage(TM)
network support services. The NETadvantage(TM service was established last
year to provide engineering design and network certification services.
"These awards reaffirm that our network business is expected to strengthen
during the second half of this year," said Breen. "We expect that this
business will continue to benefit as TCI and other cable operators continue to
upgrade their transmission networks for extended bandwidth and two-way
capability."
General Instrument Corporation (NYSE: GIC) is the world leader in analog
and digital systems that provide video, audio and high-speed Internet/data
services over cable and satellite TV networks. GI's cable and satellite TV
operations have approximately 7,000 employees and annual sales of
approximately $1.8 billion. GI can be found on the Internet at www.gi.com.
The information set forth above includes "forward-looking" information
and, accordingly, the cautionary statements contained in Exhibit 99, under the
caption "Forward-Looking Information" in General Instrument Corporation's
Annual Report on Form 10K for the year ended December 31, 1997, are
incorporated herein by reference. General Instrument's actual results could
differ materially from the "forward-looking" information in this press
release.
Headend In The Sky(R) is a registered trademark of Tele-Communications,
Inc.
All other trademarks and company names are the properties of their
respective owners.
GENERAL INSTRUMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - In Thousands, Except Per Share Information)
Historical Pro Forma
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997 1997(A)
NET SALES $416,920 $408,028 $408,028
Cost of sales 323,932 294,514 294,514
GROSS PROFIT 92,988 113,514 113,514
OPERATING EXPENSES:
Selling, general and administrative 55,885 42,754 44,554
Research and development 115,903 51,045 51,045
Amortization of excess of cost over
fair value of net assets acquired 3,562 3,558 3,558
Total operating expenses 175,350 97,357 99,157
OPERATING INCOME (LOSS) (82,362) 16,157 14,357
Other expense - net (9,008) (529) (529)
Interest expense - net (979) (7,091) (1,899)
INCOME (LOSS) BEFORE INCOME TAXES (92,349) 8,537 11,929
Benefit (Provision) for income taxes 32,458 (3,577) (4,866)
NET INCOME (LOSS) $(59,891) $4,960 $7,063
Pro Forma Earnings Per Share --- $0.03 $0.05
Loss Per Share - Basic and Diluted $(0.40) --- ---
Pro Forma Weighted-Average Shares
Outstanding --- 148,700 148,700
Weighted-Average Shares Outstanding 149,666 --- ---
(A) Pro forma information reflects (i) the number of common shares issued
and common equivalent shares existing at the date of the distribution from the
former parent company, (ii) an additional $1.8 million of selling, general and
administrative costs to eliminate the allocation of corporate expenses to
CommScope and General Semiconductor, as such costs subsequent to the
distribution are no longer allocable, and (iii) a net debt level of
$100 million at the beginning of the year.
SOURCE General Instrument Corporation
/CONTACT: Media, Dick Badler, 215-323-1618, or Investors, Dario Santana,
215-323-1213, or Steve Schlegel, 215-323-1215, all of General Instrument/
/Web site: gi.com |
