One thing's for sure Art, it's happening - the digital interactive wave is coming (I know Mike Fredericks will probably ask what this has to do with ACTV):
Thursday July 22, 4:18 pm Eastern Time
Company Press Release
SOURCE: General Instrument
Corporation
General Instrument
Reports Record Second
Quarter Results
Record Results Include EPS of $0.24 Before One-Time
Gain, Orders of $592 Million, Revenues of $527 Million,
Operating Margin of 12.6%; Cash From Operations
Exceeds $100 Million for Fifth Consecutive Quarter
HORSHAM, Pa., July 22 /PRNewswire/ -- General Instrument
Corporation (NYSE: GIC - news) today announced record second
quarter results and strong earnings growth for the quarter ended June
30, 1999. Reported earnings per share of $0.26 includes a one-time
gain of $6 million before taxes ($0.02 per share) related to the
favorable resolution of certain duty matters. Excluding this one-time
gain, earnings per share of $0.24 grew 26% from $0.19 per share in
the second quarter of 1998. Net income for the quarter, before the
one-time gain, grew 49% to $44.6 million, compared to net income of
$30.0 million in the prior year.
Operating income for the second quarter of 1999, before the one-time
gain, was $66.6 million, compared to $49.4 million for the same period
last year. Operating margin for the quarter, before the one-time gain,
increased to 12.6% compared to 10.1% in the second quarter of 1998.
Revenues for the quarter were $527 million compared to $489 million
in the prior year. Year over year revenue growth was driven by
interactive digital cable TV systems, transmission networks and
high-speed data product sales, partially offset by anticipated declines in
shipments of analog and satellite products. Excluding revenues related
to the sale of products to PRIMESTAR, Inc. from the prior year
period and current results, revenue for the quarter grew approximately
25%.
Orders of $592 million for the quarter represent a record for any
quarter and compares to $550 million in the second quarter of 1998.
The Company's backlog of $674 million on June 30, 1999, compares
to $595 million in the prior year period and also represents a record for
any quarter.
During the quarter, General Instrument generated $102 million in cash
from operations. As previously reported, on April 5, 1999, the
Company repurchased 5.3 million shares of General Instrument
common stock from two partnerships affiliated with Forstmann Little
& Co. for $148.4 million. General Instrument remained debt free
throughout the quarter and the cash balance on June 30, 1999 was
$365 million.
''The cable industry's initiatives to rollout revenue generating services
continues to fuel the demand for General Instrument's products and
solutions. Transmission product shipments accelerated during the
quarter driven by an increase in network upgrade activity. This trend
combined with the continuing deployment of interactive digital systems
and high-speed data products contributed to our revenue growth during
the quarter,'' said Edward D. Breen, Chairman and CEO. ''Top line
growth combined with our focus on product cost reduction,
productivity gains and improved cash management drove our positive
results in this quarter.''
INTERACTIVE DIGITAL SHIPMENTS DOUBLE VS. PRIOR
YEAR
General Instrument shipped approximately 840,000 interactive digital
set- top terminals during the quarter, doubling the number of units
shipped in the prior year period. During the quarter, General
Instrument also launched more than 90 interactive digital headend
systems including MediaOne systems in Atlanta, GA; Cleveland OH;
and Richmond VA. These new MediaOne launches expand on the
previously announced launch of GI's digital technology by MediaOne
in Detroit, MI.
From the time of product introduction in late 1996 through the second
quarter of 1999, General Instrument has shipped more than 4.3 million
interactive digital set-top terminals and more than 850 interactive
digital headend systems. ''Solid consumer demand for digital video
services is driving higher rates of penetration, promoting new digital
launches, and in turn, resulting in strong digital video shipments,'' said
Breen.
DCT5000+ COMMERCIAL PRODUCTION BEGINS
Commercial production of the DCT5000+ interactive digital set-top
terminal began at General Instrument's Taiwanese manufacturing
facility earlier this month. Built around a 167MHz RISC processor, 32
bit/3D graphics platform and DOCSIS 1.1 capable modem, the
DCT-5000+ is an advanced digital interactive set-top terminal that will
be capable of Internet Protocol telephony, high-speed data and
advanced interactive services.
''As the industry's first mass-deployable advanced digital set-top
where video, data and voice truly converge, the DCT5000+ represents
the target platform for several leading cable operators,'' said Breen.
''The start-up of commercial production for the DCT5000+ represents
a key milestone in our digital program.''
GI AND HITS® TEAM-UP TO DELIVER NEW SERVICE
On June 14, 1999, General Instrument and Headend In The Sky
(HITS®) announced the joint development of a Satellite/Cable
Overlay system and service called HITS2HOME(TM) that will allow
cable operators to add 140+ channels of digital programming to their
existing analog lineup.
The HITS2HOME(TM) signals will be delivered via a satellite dish to
the cable customers' home and combined with the current analog
services from their local cable operator. General Instrument will
provide the authorization service and the set-top terminals that will
integrate the analog and digital signals at the home. The introduction of
HITS2HOME(TM) further enhances GI's digital system offering by
enabling deployments in cable systems serving less than three thousand
subscribers.
CABLE MODEM SHIPMENTS MORE THAN DOUBLE
SEQUENTIALLY
During the quarter, General Instrument shipped approximately 30,000
SURFboard® DOCSIS modems, more than doubling the number of
modems shipped during the first quarter of 1999. On May 6, 1999,
General Instrument announced that Cable Television Laboratories,
Inc. (CableLabs®) certified its SURFboard high-speed cable modem.
This certification complements @Home Network's approval of GI's
SURFboard modem announced on March 1, 1999.
''Achieving CableLabs certification and @Home approval is a
testament to the design, reliability, and performance of our
second-generation cable modem,'' said Breen. ''These approvals
played a critical role in the acceleration of our DOCSIS-certified
SURFboard modem shipments during the quarter.''
On July 15, General Instrument and Excite@Home announced a
technology partnership and strategic investment by GI in @Home
Solutions, Excite@Home's recently formed venture that offers
turnkey, fully managed and comprehensive broadband cable Internet
services. General Instrument invested in the venture to help speed the
deployment of broadband data services to the estimated 15 million
homes and businesses passed by the cable operators targeted by
@Home Solutions.
''General Instrument's designation as a preferred technology supplier
enables GI to provide its line-up of CableLabs certified modems to the
venture,'' said Breen. ''Our investment in @Home Solutions further
reinforces GI's position as a leading supplier of DOCSIS-based cable
modems.''
APPROXIMATELY 700,000 ANALOG SET-TOPS SHIPPED IN
THE QUARTER
Second quarter 1999 analog set-top shipments of approximately
700,000 units were consistent with first quarter 1999 results.
Compared to the prior year period, analog shipments declined as
expected.
''During the quarter, the migration to digital technology in North
America impacted analog sales as expected,'' said Breen. ''We
continue to see the hundreds of millions of TV households outside
North America without access to tiered pay TV services as a
significant growth opportunity for General Instrument's analog
business when international economic conditions rebound.''
TRANSMISSION ORDERS GREW 30% FROM PRIOR YEAR
Record transmission orders for the second quarter of 1999 grew 30%
relative to prior year and approximately 25% sequentially.
Transmission sales for the quarter increased more than 25%
sequentially and year over year.
''Network upgrade activity continues to accelerate as operators ready
their networks for advanced services such as high speed data,
interactive video applications and telephony,'' said Breen. ''Solid
demand in network products coupled with GI's leadership in Gallium
Arsenide, optics and other RF technologies resulted in this solid
performance in our transmission business during the quarter.''
General Instrument Corporation (NYSE: GIC - news) is a leading
worldwide provider of integrated and interactive broadband access
solutions, teaming with its business partners to lead the convergence of
the Internet, telecommunications and video entertainment industries.
This press release contains ''forward-looking'' information within the
meaning of the Private Securities Litigation Reform Act of 1995, and,
accordingly, the cautionary statements contained in Exhibit 99, under
the caption ''Forward-Looking Information'' in General Instrument
Corporation's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999, are incorporated herein by reference. Actual results
might differ materially from those projected in the forward-looking
statements.
GENERAL INSTRUMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - In Thousands, Except Per Share Information)
Three Months Ended
June 30,
1999 1998
NET SALES $527,030 $488,505
Cost of sales 368,872 347,384
GROSS PROFIT 158,158 141,121
OPERATING EXPENSES:
Selling, general and administrative 39,881 45,883
Research and development 41,905 42,266
Goodwill amortization 3,699 3,562
Total operating expenses 85,485 91,711
OPERATING INCOME 72,673 (A) 49,410
Other expense - net (128) (796)
Interest income (expense) - net 4,386 (284)
INCOME BEFORE INCOME TAXES 76,931 48,330
Provision for income taxes (28,464) (18,367)
NET INCOME $48,467 (A) $29,963
Earning Per Share - Basic $0.28 $0.20
Earning Per Share - Diluted $0.26 (A) $0.19
Weighted-Average Shares
Outstanding - Basic 173,081 151,226
Weighted-Average Shares
Outstanding - Diluted 188,231 160,863
(A) - Excluding the gain of $6 million ($4 million net of tax) related to
the favorable resolution of certain duty matters recorded as a reduction
to cost of sales, operating income and net income would have been
$67 million and $45 million, respectively, or $.24 per diluted share.
GENERAL INSTRUMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - In Thousands, Except Per Share Information)
Six Months Ended
June 30,
1999 1998
NET SALES $1,046,091 $905,425
Cost of sales 749,887 671,316
GROSS PROFIT 296,204 234,109
OPERATING EXPENSES:
Selling, general and administrative 90,798 101,768
Research and development 82,890 158,169
Goodwill amortization 7,281 7,123
Total operating expenses 180,969 267,060
OPERATING INCOME (LOSS) 115,235 (A) (32,951) (B)
Other expense - net (1,154) (9,804)
Interest income (expense) - net 8,069 (1,264)
INCOME (LOSS) BEFORE INCOME TAXES 122,150 (44,019)
Benefit (provision) for income taxes (45,195) 14,090
NET INCOME (LOSS) $76,955 (A) $(29,929) (B)
Earning (Loss) Per Share - Basic $0.44 $(0.20)
Earning (Loss) Per Share - Diluted $0.41 (A) $(0.20) (B)
Weighted-Average Shares Outstanding -
Basic 174,137 150,450
Weighted-Average Shares Outstanding -
Diluted 188,861 150,450
(A) - Excluding the gain of $6 million ($4 million net of tax)
related to the favorable resolution of certain duty matters and the
$15 million ($9 million net of tax) of restructuring charges
recorded during the three months ended March 31, 1999
(primarily costs related to the restructuring of the Satellite
operations), operating income and net income would have been
$124 million and $82 million, respectively, or $.44 per diluted
share. The gain was recorded in cost of sales, and the
restructuring costs include $8 million charged to cost of sales and
$7 million charged to selling, general and administrative expense.
(B) - Excluding the $124 million ($79 million net of tax) of
restructuring and other charges recorded during the three months
ended March 31, 1998 (primarily costs related to the closure of
various facilities, including the Company's satellite TV
manufacturing facility in Puerto Rico, severance and other
employee separation costs, the write-down of fixed assets to their
estimated fair values and inventory to its lower of cost or market
and a $75 million charge to fully reserve for an advance made to
the Next Level Communications partnership), operating income
and net income would have been $82 million and $50 million,
respectively, or $.31 per diluted share for the six months ended
June 30, 1998. These costs include $27 million charged to cost
of sales, $13 million to selling, general and administrative
expense, $75 million to research and development expense and
$9 million to other expense, net.
SOURCE: General Instrument Corporation |
