General Instrument Reports Record Earnings per Share of $0.19; Operating Margin Exceeds 10% on Revenue of $489 Million; Digital Roll out in Full Swing; 420,000 Units Shipped in the Quarter
July 28, 1998 04:08 PM
HORSHAM, Pa., July 28 /PRNewswire/ -- General Instrument Corporation GIC today reported record earnings per share on strong earnings growth for the second quarter, which ended on June 30, 1998. EPS grew 58% year over year to $0.19 (per diluted share) in this year's second quarter from $0.12 (per pro forma share before restructuring charges) in the second quarter of 1997. Net income for the second quarter was $30 million, compared to pro forma net income before restructuring charges of $17.6 million for the second quarter of 1997.
Operating income was $49.4 million in the second quarter, compared to pro forma operating income before restructuring charges of $32.2 million for the same period last year. Operating margin of 10.1% in the second quarter of 1998 compared to 7.1% excluding restructuring charges in last year's second quarter.
Sales were $489 million for the quarter, compared to $450 million in the second quarter of 1997. The sales increase reflects more than a tripling in digital cable TV revenues, partially offset by continued weakness in sales of private/commercial satellite products and the expected decline in basic analog product revenues.
Orders for the second quarter of 1998 totaled a record $550 million, up from $493 million in the second quarter of 1997 and $508 million in the first quarter of 1998. The Company's backlog on June 30, 1998 stood at $595 million, compared to $508 million a year ago.
"Operating income for the quarter grew by more than 50% over last year, driven by operational improvements and rapid growth in digital cable TV system revenues," said Edward D. Breen, Chairman and CEO of General Instrument. "General Instrument should continue to benefit from operational leverage as digital revenues continue to grow in response to increasing digital deployment and acceptance."
Cash generated from GI's operating activities during the quarter exceeded $100 million, driven by strong operating performance and improved working capital management.
GENERAL INSTRUMENT LEADS THE WORLD IN INTERACTIVE DIGITAL SYSTEMS
"The anticipated AT&T / TCI (Tele-Communications, Inc.) merger represents a strong endorsement of the broadband platform for the delivery of video, voice and data," said Breen. "As the leading supplier of end to end hybrid fiber coax solutions, including Internet Protocol capable digital cable TV systems, we view this merger as a catalyst for accelerated growth in the deployment of fully integrated digital networks."
Digital cable TV shipments for the quarter were 420,000 units, 40% above first quarter 1998 shipments of 300,000 digital set-top terminals. By June 30, 1998, General Instrument had shipped more than 1.4 million interactive digital set-top terminals. All of these terminals are OpenCable compliant and capable of supporting advanced applications and services.
During the quarter, GI's digital technology was launched in many cable TV systems around the country. These launches include Comcast Cable Communications' systems in Indianapolis, Sacramento and Union, NJ; MediaOne's system in Detroit; and Cox Communications' systems in Hampton Roads VA and in Rhode Island. These systems join hundreds of other digital launches by these same MSOs and other operators including TCI, Adelphia Cable Communications, Shaw Cablesystems, Bell Canada, GTE and Intermedia.
In addition, during the quarter, General Instrument received many new digital awards, including selected systems in Charter Communications' Western, Central and Southeastern regions, and many nationally controlled systems, including 20 Frontiervision systems across North America.
During the quarter, General Instrument also received a digital award from SARA Vision LTD. in the Kingdom of Saudi Arabia. SARA Vision LTD. is a nationwide wireless network that is expected to reach more than 4 million TV households in that country.
"Shipments of digital cable TV systems exceeded our expectations during the second quarter and year to date. Digital shipments are accelerating, driven by the attractive economics of digital services such as video and audio tiering, expanded pay per view, near video on demand, and electronic program guides," said Ed Breen. "As operators begin to take advantage of the real- time capability of our digital systems for video on demand and Internet services, the digital business case should become even more compelling."
In July, General Instrument completed the acquisition of the authorization services business of Headend In The Sky(R) (HITS). With this acquisition, GI now provides authorization services throughout the United States for the wide-scale deployment of digital cable TV technology. Combined with General Instrument's full featured, interactive, local access control options, the national authorization service provides GI with a complete offering of digital solutions.
"This service is an excellent complement to the digital cable TV solutions we have been deploying since 1996. National authorization will allow General Instrument to market the secure transmission of an array of digital cable TV services cost-effectively across North America," said Breen.
CONTINUED LEADERSHIP IN ADVANCED ANALOG SYSTEMS
General Instrument shipped 800,000 advanced analog set top terminals during the quarter, bringing year-to-date shipments to more than 1.5 million units in this product category. GI's CFT 2200 is the only advanced analog product that supports expanded channels, CD quality music, and emerging interactive applications such as Internet access, e-mail and enhanced programming.
The deployment of advanced interactive services is gaining momentum across the industry. During the quarter, CFT 2200-enabled interactive launches included Wink Communications' enhanced TV services in Intermedia systems in Tennessee and Cablesoft Corporation's interactive advertising and local information services in Jacksonville Florida.
ORDERS FOR TRANSMISSION EQUIPMENT STRENGTHEN
"Second quarter orders for transmission systems grew by more than 40% sequentially," said Breen. "This strength in our orders reflects increased spending as cable operators continue to invest in expanded bandwidth and two-way capability."
During the quarter, General Instrument received new commitments from several U.S. multiple system operators for approximately 8,000 miles of rebuilds and upgrades. As expected, GI also received new TCI awards including systems in Dallas, TX; Denver, CO; Eugene, OR; Spokane WA, and various locations in Idaho and Montana. This is in addition to the previously announced projects in TCI's Chicago, St. Louis, and Grand Rapids systems.
INTERNATIONAL REVENUES
Second quarter international sales as a percent of total GI sales remained flat relative to first quarter 1998 and were below the second quarter 1997 rate. Continued weakness in Asia Pacific and softness in certain markets in Latin America were the causes behind these results.
"While international sales remained weak during the quarter, we are seeing encouraging signs in Latin America and selected markets in Asia Pacific," said Breen.
NLC INVESTMENT REPRESENTS ADDITIONAL STOCKHOLDER VALUE
Next Level Communications, L.P. (NLC), a limited partnership with Spencer Trask & Co. as the general partner and General Instrument as the limited partner and 80% owner, announced last week that it has been awarded a major contract to supply Digital Loop Carrier (DLC) and Fiber to the Curb (FTTC) systems to U S West Communications for the delivery of broadband video, high speed data, and telephone (POTS) services. The selection of NLC as a key strategic vendor and a major supplier for DLC and FTTC data and POTS deployment is part of U S WEST's overall network strategy to build a full- service network.
NLC's integrated system allows U S WEST to cost-effectively deliver high quality, reliable phone service while at the same time providing a broadband enabling platform for data and video. This award follows last year's contract with U S WEST to supply 450,000 broadband xDSL access lines and a contract with Bell Atlantic to supply 1,000,000 lines of telephone service under which NLC is currently successfully deploying its NLevel3(R) (see note below) products.
General Instrument Corporation GIC 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.
Visit General Instrument at our Web Site - 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 Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1998, 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.
Note: The "3" in "NLevel3(R)" is superscript.
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