UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 1-5442
General Instrument Corporation
------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3575653
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
181 West Madison Street, Chicago, Illinois 60602
------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(312) 541-5000
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
As of November 1, 1995 there were 125,776,052 shares of Common Stock
outstanding.
<PAGE>
<TABLE>
PART I
FINANCIAL INFORMATION
GENERAL INSTRUMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
ASSETS
<CAPTION>
(Unaudited)
September 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .......................................................... $ 20,025 $ 5,128
Accounts receivable, less allowance for doubtful
accounts of $14,965 and $7,582, respectively .................................. 322,762 306,754
Inventories ........................................................................ 306,847 214,180
Prepaid expenses and other current assets .......................................... 33,875 22,256
Deferred income taxes .............................................................. 113,423 93,446
---------- ----------
Total current assets .......................................................... 796,932 641,764
Property, plant and equipment - net ................................................ 402,116 343,868
Intangibles, less accumulated amortization of $90,585
and $78,460, respectively ..................................................... 150,716 161,410
Excess of cost over fair value of net assets acquired,
less accumulated amortization of $129,478 and
$110,952, respectively ........................................................ 862,561 904,184
Investments and other assets ....................................................... 14,434 10,113
Deferred income taxes, net of valuation allowance .................................. 19,840 29,238
Deferred financing costs, less accumulated
amortization of $26,848 and $22,980, respectively ............................. 14,506 18,374
---------- ----------
TOTAL ASSETS ....................................................................... $2,261,105 $2,108,951
========== ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
GENERAL INSTRUMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
(Unaudited)
September 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable ......................................................................... $ 204,056 $ 162,529
Accrued interest payable ................................................................. 9,927 2,737
Income taxes payable ..................................................................... 57,512 52,670
Accrued liabilities ...................................................................... 212,407 208,383
Current portion of long-term debt ........................................................ 4,310 2,155
---------- ----------
Total current liabilities ........................................................... 488,212 428,474
---------- ----------
Deferred income taxes .................................................................... 16,968 21,990
---------- ----------
Long-term debt ........................................................................... 709,324 794,694
---------- ----------
Other non-current liabilities ............................................................ 189,616 186,615
---------- ----------
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $.01 par value; 20,000,000 shares
authorized; no shares issued ......................................................... -- --
Common Stock, $.01 par value; 400,000,000 shares authorized; 125,773,745 and
122,231,348 issued at September 30, 1995 and December 31, 1994, respectively ......... 1,258 1,222
Additional paid-in capital ............................................................... 660,268 543,728
Retained earnings ........................................................................ 202,849 132,634
---------- ----------
864,375 677,584
Less - Treasury stock, at cost, 229,011 and 11,259 shares of Common Stock at
September 30, 1995 and December 31, 1994, respectively .............................. (7,246) (17)
Unearned compensation ............................................................... (144) (389)
---------- ----------
Total stockholders' equity .......................................................... 856,985 677,178
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,261,105 $ 2,108,951
============= =============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
GENERAL INSTRUMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - In Thousands, Except Earnings (Loss) Per Share)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES .......................................................... $ 563,251 $ 554,750 $ 1,783,606 $ 1,496,054
------------ ------------ ------------ ------------
OPERATING COSTS AND EXPENSES:
Cost of sales .................................................. 383,808 389,380 1,217,961 1,026,618
Selling, general and administrative ............................ 55,255 47,335 178,167 131,897
Research and development ....................................... 34,567 28,677 105,342 81,575
Purchased in-process technology ................................ 139,860 -- 139,860 --
Amortization of excess of cost over fair value
of net assets acquired ...................................... 6,175 6,385 18,526 19,209
------------ ------------ ------------ ------------
Total operating costs and expenses ........................ 619,665 471,777 1,659,856 1,259,299
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) ............................................ (56,414) 82,973 123,750 236,755
Other expense, net ................................................. (510) (2,409) (1,366) (5,416)
Interest expense, net .............................................. (11,645) (13,696) (37,015) (40,271)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE .................................. (68,569) 66,868 85,369 191,068
(Provision) benefit for income taxes ............................... 27,677 (10,087) (15,154) (29,384)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF A CHANGE IN ACCOUNTING PRINCIPLE ............................ (40,892) 56,781 70,215 161,684
Cumulative effect of a change in accounting principle .............. -- -- -- (1,917)
------------ ------------ ------------ ------------
NET INCOME (LOSS) .................................................. $ (40,892) $ 56,781 $ 70,215 $ 159,767
============ ============ ============ ============
Weighted Average Shares Outstanding ................................ 124,333 123,639 123,791 123,257
Earnings (Loss) per share
Primary:
Income (loss) before cumulative effect of a change
in accounting principle ................................ $ (0.33) $ 0.46 $ 0.57 $ 1.31
Cumulative effect of a change in accounting principle ....... -- -- -- $ (0.01)
------------ ------------ ------------ ------------
Net income (loss) ........................................... $ (0.33) $ 0.46 $ 0.57 $ 1.30
============ ============ ============ ============
Fully Diluted:
Income (loss) before cumulative effect of a change
in accounting principle ................................ $ (0.33) $ 0.44 $ 0.57 $ 1.25
Cumulative effect of a change in accounting principle ....... -- -- -- $ (0.01)
------------ ------------ ------------ ------------
Net income (loss) ........................................... $ (0.33) $ 0.44 $ 0.57 $ 1.24
============ ============ ============ ============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
GENERAL INSTRUMENT CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited - In Thousands)
<CAPTION>
Total
Additional Common Unearned Stock-
Common Stock Paid-In Retained Stock in Compen- holders'
Shares Amount Capital Earnings Treasury sation Equity
-------- --------- ---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 ................ 122,231 $ 1,222 $ 543,728 $ 132,634 $ (17) $ (389) $ 677,178
Net income for the nine months
ended September 30, 1995 ................ 70,215 70,215
Exercise of stock options ................. 1,077 11 17,283 17,294
Stock issued for business acquisition ..... 2,465 25 92,052 (7,229) 84,848
Tax benefit from exercise of
stock options ........................... 8,290 8,290
Costs associated with the sale /
issuance of Common Stock ............... (1,100) (1,100)
Amortization of unearned
compensation ........................... 245 245
Conversion of Convertible Junior
Subordinated Notes ..................... 1 15 15
------- --------- --------- --------- --------- --------- ---------
BALANCE, SEPTEMBER 30, 1995 ............... 125,774 $ 1,258 $ 660,268 $ 202,849 $ (7,246) $ (144) $ 856,985
======= ========= ========= ========= ========= ========= =========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
GENERAL INSTRUMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - In Thousands)
<CAPTION>
Nine Months Ended
September 30,
1995 1994
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ........................................................................ $ 70,215 $ 159,767
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization .................................................. 80,795 71,060
Purchased in-process technology, net ........................................... 90,000 --
Accounts receivable ............................................................ (10,008) (113,560)
Inventories .................................................................... (92,667) (67,555)
Prepaid expenses and other current assets ...................................... (11,593) (7,865)
Deferred income taxes .......................................................... (1,411) 639
Accounts payable, income taxes payable and other
accrued liabilities .......................................................... 69,939 58,948
Other non-current liabilities .................................................. (4,242) 16,420
Other .......................................................................... (3,188) 776
--------- ---------
Net cash provided by operating activities .......................................... 187,840 118,630
--------- ---------
INVESTMENT ACTIVITIES:
Proceeds from sale of assets ................................................... -- 6,799
Additions to fixed assets - net ................................................ (102,305) (90,003)
Investments in other assets .................................................... (906) --
Acquisition of Next Level Communications, net
of cash acquired of $3,800 (See Note 6) ...................................... (2,775) --
--------- ---------
Net cash used in investment activities ............................................. (105,986) (83,204)
--------- ---------
FINANCING ACTIVITIES:
Costs associated with the sale of Common Stock ................................. (1,051) (400)
Proceeds from the issuance of Flexible Term Notes .............................. 10,800 --
Repayments of debt ............................................................. -- (16,605)
Net repayments of revolving credit facilities .................................. (94,000) (12,750)
Proceeds from stock options .................................................... 17,294 5,167
--------- ---------
Net cash used in financing activities .............................................. (66,957) (24,588)
--------- ---------
Increase in cash and cash equivalents .............................................. 14,897 10,838
Cash and cash equivalents, beginning of the period ................................. 5,128 5,584
--------- ---------
Cash and cash equivalents, end of the period ....................................... $ 20,025 $ 16,422
========= =========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
GENERAL INSTRUMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In Thousands, Unless Otherwise Noted)
1. BASIS OF PRESENTATION
The consolidated balance sheet as of September 30, 1995, the consolidated
statements of operations for the three and nine months ended September 30, 1995
and 1994, the consolidated statements of cash flows for the nine months ended
September 30, 1995 and 1994 and the consolidated statement of stockholders'
equity for the nine months ended September 30, 1995 of General Instrument
Corporation (the "Company") are unaudited and reflect all adjustments of a
normal recurring nature which are, in the opinion of management, necessary for a
fair presentation of the interim period financial statements. There were no
adjustments of a non-recurring nature recorded during the three and nine months
ended September 30, 1995 and 1994, except for certain items disclosed in the
notes to these consolidated financial statements. These consolidated financial
statements should be read in conjunction with the Company's December 31, 1994
financial statements.
Certain reclassifications have been made to the comparative prior period
financial statements to conform to the current period presentation.
2. INVENTORIES
Inventories consist of:
September 30, 1995 December 31, 1994
------------------ -----------------
Raw materials $134,110 $ 81,987
Work in process 25,090 25,822
Finished goods 147,647 106,371
-------- ---------
Inventories $306,847 $214,180
======== ========
3. LONG-TERM DEBT
Long-term debt consists of:
September 30, 1995 December 31, 1994
Senior indebtedness: ------------------ -----------------
Revolving credit facilities $146,000 $240,000
Taiwan loan 56,849 56,849
Flexible term notes 10,800 -
Convertible junior
subordinated notes 499,985 500,000
-------- --------
Total 713,634 796,849
Less current maturities 4,310 2,155
-------- --------
Long-term debt $709,324 $794,694
======== ========
<PAGE>
In January 1995, CommScope, Inc., an indirect wholly-owned subsidiary of the
Company, entered into an $11 million loan agreement in connection with the
issuance of notes by the Alabama State Industrial Development Authority (the
"Flexible Term Notes"). Borrowings under the loan agreement bear interest at
variable rates based upon current market conditions for short-term financing.
The loan agreement will mature on January 1, 2015 and any remaining amounts
outstanding under the Flexible Term Notes will be due and payable on that date.
4. INCOME TAXES
The (provision)/benefit for income taxes for the three and nine months ended
September 30, 1995 is based on the Company's expected annual effective rate
adjusted for a $12 million credit for the settlement of certain tax matters
recorded during the three months ended March 31, 1995 and a $50 million non-cash
tax benefit associated with the write-off of in-process technology in connection
with the acquisition of Next Level Communications during September 1995.
5. STOCKHOLDERS' EQUITY
In April 1995, affiliates of Forstmann Little & Co. and certain current and
former directors of the Company sold an aggregate of 15.6 million shares of
Common Stock in a public offering. The Company received no proceeds from such
offering.
In April 1995, the stockholders approved an amendment to the Company's
Certificate of Incorporation which increased the number of authorized shares of
Common Stock from 175 million to 400 million.
6. BUSINESS ACQUISITION
In September 1995, the Company acquired all of the outstanding shares of Next
Level Communications ("NLC") not previously owned and assumed all its
outstanding options and warrants. The total purchase price of $91 million
consisted of approximately 2.2 million common shares of the Company valued at
$75 million, Company stock options valued at $10 million and $6 million in cash.
NLC is involved with the development of a next generation broadband access
system utilizing switched-digital video technology. Using NLC's technology, the
Company intends to provide transport and network management products to regional
telephone companies for the delivery of video, voice and data over
"fiber-to-the-curb" networks.
The acquisition was accounted for as a purchase and, accordingly, the acquired
assets and liabilities were recorded at their estimated fair values at the date
of acquisition. The purchase price of $91 million, plus the $2 million of costs
directly attributable to the completion of the acquisition, have been allocated
to the assets and liabilities acquired. Approximately $90 million of the total
purchase price represented the value, net of deferred income taxes, of NLC's
in-process technology. Since technological feasibility has not yet been achieved
and there is no alternative future use for the technology being developed, the
amounts allocated to the in-process technology were expensed concurrent with the
purchase. The non-recurring net-of-tax charge of $90 million included $140
million associated with this technology charged to operating income, offset by a
non-cash tax benefit of $50 million.
7. SUBSEQUENT EVENT
In October 1995, the Company and certain of its officers and directors were
named as defendants in several complaints filed as purported class actions in
the United States District Courts for the Eastern District of Pennsylvania and
the Northern District of Illinois which allege that the Company violated federal
securities laws by making false and misleading statements concerning the
Company's business. The complaints do not state specified damage amounts and the
outcome or potential liability, if any, is not yet determinable. Management
believes the complaints are without merit and intends to contest these actions
vigorously.
<PAGE>
GENERAL INSTRUMENT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
NET SALES
- ---------
Net sales for the three months ended September 30, 1995 ("Third Quarter 1995")
were $563 compared to $555 in the three months ended September 30, 1994 ("Third
Quarter 1994"), an increase of $8, or 2%. Net sales were $1,784 in the nine
months ended September 30, 1995 compared to $1,496 in the nine months ended
September 30, 1994, an increase of $288, or 19%.
Broadband Communications sales of $454 decreased $18, or 4%, in Third Quarter
1995 and increased $205, or 16%, to $1,472 in the nine months ended September
30, 1995, over the comparable 1994 periods. Sales for the quarter decreased as a
result of lower shipments of cable television electronics and C-band satellite
systems, partially offset by higher shipments of PRIMESTAR digital satellite
consumer receivers. Sales in Third Quarter 1995 were adversely affected by a
general slow down in spending by U.S. cable television operators primarily due
to uncertainty from the delay in enacting proposed far-reaching
telecommunications reform legislation. Sales for the nine months ended September
30, 1995 increased primarily as a result of increased sales volume of
DigiCipher(TM) digital compression products, distribution electronics and
CommScope cable products, partially offset by decreased sales of C-band
satellite systems. The higher sales volume primarily reflects commercialization
of digital broadband systems and deployment of new cable television systems in
international markets. International sales of cable television products in Third
Quarter 1995 were consistent with Third Quarter 1994 and increased 32% for the
nine months ended September 30, 1995 over the comparable 1994 period. The
increased DigiCipher(TM) digital compression product sales in 1995 consisted
primarily of sales of digital consumer receivers to PRIMESTAR Partners. In 1994,
the Company had significant sales of VideoCipher RS(TM) analog satellite
receiver consumer modules to persons who had been receiving without
authorization (or "pirating") the commercial satellite programming data signals.
In 1995, sales of these modules were at lower levels as expected.
Power Semiconductor sales increased $26 or 31% to $110 in Third Quarter 1995 and
$83 or 36% to $311 in the nine months ended September 30, 1995, respectively,
over the comparable 1994 periods. These increases were a result of continued
broad-based global demand, primarily from automotive, computer, and consumer
electronics customers for power rectifiers and protection devices.
GROSS PROFIT (NET SALES LESS COST OF SALES)
- -------------------------------------------
Gross profit increased $14, or 9%, to $179 in Third Quarter 1995 from $165 in
Third Quarter 1994, and was 31.9% of sales in Third Quarter 1995 compared to
29.8% of sales in Third Quarter 1994. Gross profit increased $97, or 20%, to
$566 in the nine months ended September 30, 1995 from $469 in the nine months
ended September 30, 1994, and was 31.7% and 31.4% of sales in the nine months
ended September 30, 1995 and 1994, respectively.
The increased gross profit margin in Third Quarter 1995 compared to Third
Quarter 1994 primarily resulted from improved margins of Power Semiconductor
products, reflecting efficiencies gained through higher sales volumes and
favorable product mix. Gross profit margin for the nine months ended September
30, 1995 was comparable to the margin for the nine months ended September 30,
1994, reflecting efficiencies gained through higher sales volumes, partially
offset by a shift in product mix from higher margin VideoCipher RS(TM) analog
satellite receiver consumer modules to DigiCipher(TM) digital compression
products.
In 1996, the Company expects to ship a significant volume of new products which
will initially earn lower margins than mature products. With this expected
shipment of new products, combined with current trends in cable operator
spending on mature products, the Company anticipates its product mix in 1996 to
be more heavily weighted toward new products. As a result, during this period of
new product introduction, the Company expects its consolidated gross margins to
decline from current levels.
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------------
Selling, general and administrative ("SG&A") expenses increased $8 to $55 in
Third Quarter 1995 from $47 in Third Quarter 1994, and increased $46 or 35% in
the nine months ended September 30, 1995 compared to the nine months ended
September 30, 1994. SG&A expense increased as a percentage of sales to 10% in
Third Quarter 1995 and the nine months ended September 30, 1995 from 9% in Third
Quarter 1994 and the nine months ended September 30, 1994.
The increase in SG&A expense in Third Quarter 1995 over Third Quarter 1994
reflects a $7 restructuring charge for the direct costs associated with the
reorganization of the Company's Communications Division and the consolidation of
the Company's corporate headquarters into one location. Concurrent with the
reorganization, the Company's Communications Division has reduced its North
America non-manufacturing workforce by approximately 10%. The increase in SG&A
expense in the nine months ended September 30, 1995 over the comparable 1994
period reflects higher sales volume, additional marketing and selling costs
incurred by the Company to increase its sales force, field support and marketing
activities to take advantage of increased growth opportunities in international
cable and satellite television and worldwide telecommunications markets and the
$7 restructuring charge. SG&A expenses in the nine months ended September 30,
1995 also include $14 related to a national advertising campaign, which ended
during Third Quarter 1995, to support sales of C-Band satellite systems.
RESEARCH AND DEVELOPMENT
- ------------------------
Research and development ("R&D") expense was $35 in Third Quarter 1995 and $105
in the nine months ended September 30, 1995 compared to $29 and $82 in the
comparable 1994 periods. R&D was 6% of sales in Third Quarter 1995 and the nine
months ended September 30, 1995 compared to 5% in the comparable 1994 periods.
This level of spending, principally focused on the Broadband Communications
business, reflects continued development of the second generation of cable
set-top terminals, which incorporate digital compression and multimedia
capabilities; development of enhanced addressable analog terminals; development
of advanced digital systems for cable and satellite television distribution; and
product development through strategic alliances. Emerging R&D activities include
development of broadband telephony products and interactive multimedia
technologies for broadband networks. The Company's research and development
expenditures are expected to approximate $140 for the year ending December 31,
1995.
PURCHASED IN-PROCESS TECHNOLOGY
- -------------------------------
In connection with the completion of the acquisition of Next Level
Communications in September 1995, the Company recorded a pre-tax charge of $140
for purchased in-process technology which had not reached technological
feasibility and had no future alternative use. Further development activities
primarily include employee related costs for design, prototype development and
testing. The Company estimates that approximately $20 to $25 will be expended
over the next 12 to 18 months to complete the development of this technology.
NET INTEREST EXPENSE
- --------------------
Net interest expense was $12 in Third Quarter 1995 compared to $14 in Third
Quarter 1994, and $37 in the nine months ended September 30, 1995 compared to
$40 in the nine months ended September 30, 1994. The levels of interest expense
reflect lower weighted average borrowings in 1995 partially offset by higher
interest rates.
INCOME TAXES
- ------------
Income tax expense was $22 in Third Quarter 1995 and $77 in the nine months
ended September 30, 1995 after excluding the $50 tax benefit associated with the
write-off of purchased in-process technology in September 1995 and the $12
credit related to the settlement of certain tax matters during the first quarter
of 1995. Excluding these tax adjustments and the related pre-tax charge, the
effective tax rates were 31% and 34%, respectively, as compared to 15% for the
comparable prior periods. The increases in the effective tax rates in 1995 are
attributable to the Company having a valuation allowance related to domestic
deferred tax assets in 1994 which was reduced during 1994, to the extent that
domestic taxable income was generated. As of December 31, 1994, the majority of
the Company's domestic deferred tax assets were determined to be realizable and
therefore there was no valuation allowance impact on income taxes in 1995.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At September 30, 1995, working capital was $309 compared to $213 at December 31,
1994. The working capital increase of $95 was due principally to an inventory
build-up to support business growth and introduction of new products, partially
offset by a related increase in accounts payable. Based on current levels of
order input and backlog, as well as significant sales agreements not yet
reflected in order and backlog levels, the Company believes that operational
working capital levels are appropriate to support future operations and the
introduction of new products. There can be no assurance, however, that future
industry specific developments or general economic trends will not alter the
Company's working capital requirements. As of September 30, 1995, the Company
had outstanding $146 of indebtedness under its $500 revolving credit facilities.
In January 1995, CommScope, Inc., an indirect wholly-owned subsidiary of the
Company, entered into an $11 loan agreement in connection with the issuance of
notes by the Alabama State Industrial Development Authority. See Note 3 to the
September 30, 1995 consolidated financial statements.
During the nine months ended September 30, 1995, the Company invested $103 in
equipment and facilities. These capital expenditures were used to expand
capacity to meet increased current and future demands for analog and digital
products, coaxial cable and rectifiers. The Company's capital expenditures are
expected to approximate $160 for the year ending December 31, 1995.
At September 30, 1995, the Company had $20 of cash and cash equivalents on hand
compared to $5 at December 31, 1994. At September 30, 1995, long-term debt,
including current maturities, was $714 compared to $797 at December 31, 1994.
The reduction in long-term debt primarily resulted from increased cash flow from
operations.
The Company's principal source of liquidity both on a short-term and long-term
basis is cash flow provided by operations. Occasionally, however, the Company
may borrow against its revolving credit facilities to supplement cash flow from
operations. The Company believes that, based upon an analysis of its
consolidated financial position, its cash flow during the past 12 months and the
expected results of operations in the future, operating cash flow and available
funding under its revolving credit facilities will be adequate to fund
operations, research and development expenditures, capital expenditures and debt
service for the next 12 months. The Company intends to repay its remaining
indebtedness primarily with cash flow from operations. There can be no
assurance, however, that future industry specific developments or general
economic trends will not adversely affect the Company's operations or its
ability to meet its cash requirements.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
See note 7 to the Company's September 30, 1995 consolidated
financial statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings (Loss) Per Share
(b) Report on Form 8-K
The Company filed a report on Form 8-K dated July 27, 1995
reporting that Daniel F. Akerson, previously Chairman and Chief
Executive Officer, stepped down as CEO and that Richard S.
Friedland, previously President and Chief Operating Officer,
became CEO of the Company effective August 1, 1995.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL INSTRUMENT CORPORATION
November 14, 1995 /s/ Paul J. Berzenski
- ----------------- -----------------------------
Date Paul J. Berzenski
Vice President and Controller
Signing both in his capacity as Vice President
on behalf of the Registrant and as Chief
Accounting Officer of the Registrant
<TABLE>
GENERAL INSTRUMENT CORPORATION
Exhibit 11 - Computation of Earnings (Loss) Per Share
(In Thousands Except Per Share Amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PRIMARY:
Income (loss) before cumulative effect of a
change in accounting principle ................................ $ (40,892) $ 56,781 $ 70,215 $ 161,684
Cumulative effect of a change in accounting principle .......... -- -- -- (1,917)
--------- --------- --------- ---------
Net income (loss) .............................................. $ (40,892) $ 56,781 $ 70,215 $ 159,767
========= ========= ========= =========
Weighted average common shares outstanding ..................... 123,255 120,784 122,739 120,614
Incremental shares under stock option plans .................... 1,078 2,855 1,052 2,643
--------- --------- --------- ---------
Weighted average common and common
equivalent shares outstanding ................................. 124,333 123,639 123,791 123,257
========= ========= ========= =========
Primary earnings (loss) per share:
Income (loss) before cumulative effect of a
change in accounting principle ................................ $ (0.33) $ 0.46 $ 0.57 $ 1.31
Cumulative effect of a change in accounting principle .......... -- -- -- (0.01)
--------- --------- --------- ---------
Net income (loss) .............................................. $ (0.33) $ 0.46 $ 0.57 $ 1.30
========= ========= ========= =========
FULLY DILUTED:
Income (loss) before cumulative effect of a
change in accounting principle ................................ $ (40,892) $ 56,781 $ 70,215 $ 161,684
Interest and amortization of debt issuance costs
related to the Convertible Junior Subordinated
Notes ("Notes"), net of income tax effects .................... 4,119 6,469 12,357 19,407
--------- --------- --------- ---------
Adjusted income (loss) before a cumulative effect
of a change in accounting principle ........................... (36,773) 63,250 82,572 181,091
Cumulative effect of a change in accounting principle .......... -- -- -- (1,917)
--------- --------- --------- ---------
Adjusted net income (loss) ..................................... $ (36,773) $ 63,250 $ 82,572 $ 179,174
========= ========= ========= =========
Weighted average common shares outstanding ........................ 123,255 120,784 122,739 120,614
Incremental shares under stock option plans .................... 1,078 2,855 1,076 2,708
Incremental shares attributable to Notes ....................... 21,053 21,053 21,053 21,053
--------- --------- --------- ---------
Adjusted weighted average shares outstanding ................... 145,386 144,692 144,868 144,375
========= ========= ========= =========
Fully diluted earnings (loss) per share:
Income (loss) before cumulative effect of a change in
accounting principle .......................................... $ (0.25)* $ 0.44 $ 0.57 $ 1.25
Cumulative effect of a change in accounting principle .......... -- -- -- (0.01)
--------- --------- --------- ---------
Net income (loss) .............................................. $ (0.25)* $ 0.44 $ 0.57 $ 1.24
========= ========= ========= =========
Note: The computations of primary and fully diluted earnings (loss) per share
assume incremental shares under stock option plans using the treasury
method.
* Differs from earnings (loss) per share as reported in the Consolidated
Statements of Operations because the effect of the Notes was
antidilutive.
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from General
Instrument Corporation's unaudited financial statements as of and for the nine
month period ended September 30, 1995 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000040656
<NAME> GENERAL INSTRUMENT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 20,025
<SECURITIES> 0
<RECEIVABLES> 322,762
<ALLOWANCES> 14,965
<INVENTORY> 306,847
<CURRENT-ASSETS> 796,932
<PP&E> 402,116
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,261,105
<CURRENT-LIABILITIES> 488,212
<BONDS> 709,324
<COMMON> 1,258
0
0
<OTHER-SE> 855,727
<TOTAL-LIABILITY-AND-EQUITY> 2,261,105
<SALES> 1,783,606
<TOTAL-REVENUES> 1,783,606
<CGS> 1,217,961
<TOTAL-COSTS> 1,217,961
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,015
<INCOME-PRETAX> 85,369
<INCOME-TAX> 15,154
<INCOME-CONTINUING> 70,215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,215
<EPS-PRIMARY> .57
<EPS-DILUTED> .57
</TABLE>
