GENERAL INSTRUMENT REPORTS FOURTH QUARTER 1997 RESULTS
Sales of $441 Million and EPS of $0.10 Before Restructuring and Other Net
Charges;
Orders of $479 Million, Up 26%; Strong Growth in Digital and Advanced
Analog Cable TV Businesses; Lower Results for Private/Commercial Satellite
and Basic Analog Cable TV Businesses
15 Million Two-way, Interactive Digital Cable Set-tops Committed to Major
MSOs
HORSHAM, Pa. (February 19, 1998) -- General Instrument Corporation (NYSE:
GIC) today reported sales in the fourth quarter ended December 31, 1997 of
$441 million compared to $507 million in the fourth quarter of 1996. The
sales decline reflects lower results for the analog cable TV and
private/commercial network satellite businesses partially offset by more
than a doubling of sales in the digital cable TV business. Orders of $479
million in the fourth quarter of 1997 were up 26% from $381 million in the
fourth quarter of 1996.
Operating income, before restructuring and other net charges, was $22
million in the fourth quarter of 1997 compared to pro forma operating
income, before restructuring and other charges, of $38 million in the
prior-year fourth quarter. Operating income decreased as a result of lower
sales and profit margins for private/commercial network satellite products
and lower basic analog cable TV volumes partially offset by improved
profits on digital and advanced analog cable TV systems. Operating income
was also affected by the planned investment increase in GI's advanced
telephony business, Next Level Communications, which in January 1998 was
placed into a limited partnership to maximize its growth potential. Net
income, before restructuring and other net charges, was $15 million ($0.10
per share) in this year's fourth quarter compared to pro forma net income,
before restructuring and other charges, of $23 million ($0.15 per pro forma
share) in the fourth quarter of 1996. On a reported basis, which includes
the impact of all restructuring and other net charges, the 1997 fourth
quarter had a net loss of $46 million ($0.31 loss per share) compared to a
pro forma net loss of $31 million ($0.21 loss per pro forma share) in the
fourth quarter of 1996. The 1997 fourth quarter included $61 million
($0.41 per share) of previously announced after-tax restructuring and other
net charges. In 1996, the fourth quarter included $54 million ($0.36 per
pro forma share) of after-tax restructuring and other charges. As
previously announced, GI expects to record additional after-tax
restructuring and other charges of $70 to $85 million ($0.43 to $0.52 per
share) in the first quarter of 1998.
Orders continued to strengthen in the quarter for digital cable TV systems
and advanced analog cable TV systems, each reporting orders of $129
million for a combined increase of 107% over the 1996 comparable quarter.
This strong digital and advanced analog cable TV demand was partially
offset by lower orders for basic analog cable TV and private/commercial
network satellite systems, down 44% from the fourth quarter of 1996.
Backlog at December 31, 1997 was $484 million.
"Our plan to improve General Instrument's financial performance and achieve
our full strategic potential is now in place and picking up momentum," said
Edward D. Breen, Chairman and CEO of General Instrument. "We are pleased
with the strong support that our cable TV customers have provided GI to
enable the mass deployment of digital cable TV services to consumers
throughout North America. In addition, we are working closely with a broad
range of computer and software companies to offer consumers enhanced
entertainment, information and transaction services over GI's
open-standards cable TV systems. As a result, General Instrument is well
positioned to meet the growing and broad-based customer demand for both our
digital and advanced analog cable TV systems. Turning around our satellite
TV business also remains a top priority for us. In addition, we are
working to create higher value at our Next Level Communications telephony
business through our partnership with Spencer Trask."
ACTIONS TO IMPROVE FINANCIAL PERFORMANCE AND ACHIEVE FULL STRATEGIC
POTENTIAL
Since October 16, 1997, when General Instrument announced its plan to
improve its financial performance and achieve its full strategic potential,
the following actions have been taken:
ú Since announced on December 17, 1997, GI has completed definitive
agreements with most of the leading North American cable TV operators under
which it is obligated to supply 15 million of its two-way, interactive
digital cable terminals over the next 3 to 5 years at an estimated value of
$4.5 billion. In connection with these agreements GI has issued warrants,
exercisable upon the delivery of target levels of digital terminals, that
will enable the cable TV operators to purchase up to an aggregate of 29
million shares of GI stock at a price of $14.25 per share.
ú Also on December 17, 1997, GI announced its plans to acquire from TCI the
authorization functions of TCI's Headend In The Sky (HITS) organization,
providing an access control service to support the mass deployment of
digital cable TV systems throughout the U.S.
ú On January 5, 1998, GI and Sony jointly announced preliminary plans for a
strategic alliance to develop digital TV technologies for cable TV devices
and high-definition TV (HDTV) products, as well as incorporate Sony's Home
Network architecture into GI's advanced digital set-top terminals. This
alliance includes the purchase by Sony of 7.5 million new GI common shares
at a price of $25 per share when definitive agreements are completed.
ú On January 12, 1998, GI announced that it is the first company to launch
cable modems with a major national computer retailer - CompUSA.
ú In anticipation of mass distribution of standardized cable modems based
on the Multimedia Cable Network Systems (MCNS) specification, GI announced
on December 8, 1997 that it is working with Cisco Systems to develop an
interoperable MCNS-based, two-way cable modem network using GI's SURFboard
cable modems.
ú On January 14, 1998, GI separated its advanced telephony business from
its core cable and satellite TV operations. This separation placed Next
Level Communications into a new limited partnership to maximize its growth
potential.
ú On January 19, 1998, GI acquired FUBA Communications Systems GmbH, a
leading German manufacturer of high-quality cable TV equipment, to expand
GI's business in Europe.
ú On February 18, 1998, PRIMESTAR announced that it awarded GI a contract
in excess of $180 million to supply high-power digital receivers for its
direct broadcast satellite (DBS) service to consumers.
ú During the fourth quarter of 1997, GI cut costs by reducing a substantial
number of jobs at its San Diego satellite TV operations, closing its Puerto
Rico satellite TV manufacturing facility and consolidating its Chicago
corporate office into its new corporate headquarters in Horsham, Pa.
FULL-YEAR RESULTS
Sales for both the twelve months ended December 31, 1997 and 1996 were $1.8
billion. Excluding the 1997 and 1996 restructuring and other net charges,
pro forma operating income was $108 million for 1997 compared to $98
million in 1996 and pro forma net income for 1997 was $67 million ($0.45
per pro forma share) compared to $57 million ($0.38 per pro forma share) in
1996. In addition to the restructuring and other net charges in the
fourth quarters of 1997 and 1996, General Instrument incurred after-tax
restructuring charges of $18 million in the first six months of 1997
related to its spin-off in July 1997, and an after-tax litigation charge of
$92 million in the second quarter of 1996. On a reported basis, which
includes the impact of all restructuring and other net charges, the pro
forma net loss was $12 million ($0.08 loss per pro forma share) in 1997
compared to a pro forma net loss of $89 million ($0.60 loss per pro forma
share) in 1996.
THE NEW, PURE-PLAY GENERAL INSTRUMENT - THE WORLD LEADER IN CONNECTING
CONSUMERS TO ADVANCED DIGITAL AND ANALOG SERVICES
On January 14, 1998, General Instrument restructured the former NextLevel
Systems (NYSE: NLV) into a pure-play cable and satellite TV systems
business by placing its advanced telephony business, Next Level
Communications (NLC), into a limited partnership controlled by Spencer
Trask & Co. as the general partner with 80% owned by GI as the limited
partner. As a result, the cable and satellite TV business was renamed
General Instrument and began trading on the New York Stock Exchange under
the "GIC" ticker symbol on February 2, 1998. "Shareholders will now be
able to see the results of GI's world leadership in cost-effective,
open-standards platforms in cable and satellite TV systems without its
earnings being penalized by NLC's R&D expenses," said Breen. "At the same
time, General Instrument shareholders have significant upside opportunity
if NLC achieves its enormous growth potential."
THE ONLY COMPANY IN THE WORLD MASS DEPLOYING TWO-WAY, INTERACTIVE DIGITAL
CABLE TV SYSTEMS AND SET-TOP TERMINALS
Beginning in 1996, General Instrument has been the only company in the
world mass deploying two-way, interactive digital cable TV systems and
set-top terminals. As of December 31, 1997, GI had shipped more than
700,000 two-way, interactive digital set-top terminals to cable TV
operators throughout North America and deployed more than 500 digital cable
headends passing 25 million homes.
Since announced on December 17, 1997, General Instrument has completed
definitive agreements with most of the leading North American cable TV
operators under which it is obligated to supply 15 million of its advanced
digital terminals over the next 3 to 5 years at an estimated value of $4.5
billion. The operators entitled to purchase under these agreements include
TCI, Time Warner, MediaOne, Comcast, Cox, Adelphia, Shaw, Jones, Lenfest,
Intermedia, Bresnan and Charter. In connection with these agreements GI has
issued warrants, exercisable upon the delivery of target levels of digital
terminals, that will enable the cable TV operators to purchase up to an
aggregate of 29 million shares of GI stock at a price of $14.25 per share.
GI is now shipping its two-way, interactive digital terminals at an
accelerated rate compared to 1997. "General Instrument's success as the
only company mass deploying digital cable TV systems has been achieved by
working closely with our customers to design and produce the systems that
they specify for the delivery of two-way, interactive services today and in
the future," said Breen. General Instrument is an important digital link
connecting consumers to the high-speed Information Age. GI's integrated,
open-standards systems give cable TV operators the complete end-to-end
connection that delivers entertainment, information and transaction
services to consumers.
THE WORLD LEADER IN ADVANCED ANALOG CABLE TV SYSTEMS
Complementing its world leadership in digital cable TV systems, General
Instrument is also the world market share leader in the advanced analog
category. GI shipped approximately 726,000 CFT advanced analog cable TV
terminals in the fourth quarter and 3.2 million of these advanced analog
units for all of 1997.
**********
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.
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's (formerly
NextLevel Systems) quarterly report on Form 10-Q, for the three months
ended September 30, 1997, are incorporated herein by reference. General
Instrument's actual results could differ materially from the
"forward-looking" information in this press release.
Visit the General Instrument Web site at gi.com
General Instrument supports the National Association of Investors
Corporation's
"Own Your Share of America" campaign, which encourages individuals to
invest in common stock.
For complete financial data, please go to
gi.com
CONTACTS:
Media:
Dick Badler (773) 695-1030
Investors:
Dario Santana (773) 695-1150
Steve Schlegel (773) 695-1155
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