SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): January 7, 1997
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General Instrument Corporation
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(Exact name of registrant as specified in its charter)
Delaware 1-5442 13-3575653
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(State or other jurisdiction of (Commission File No.) (I.R.S. Employer
incorporation) Identification No.)
8770 West Bryn Mawr Avenue, Chicago, Illinois 60631
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(Address of principal executive office) (Zip Code)
(773)-695-1000
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(Registrant's telephone number, including area code)
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Item 5 Other Events
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The Registrant hereby incorporates by reference the description of the
matters set forth in its press release dated January 7, 1997 (such press release
being Exhibit 99 attached hereto).
Item 7 Financial Statements and Exhibits
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(c) Exhibits
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99 Registrant's press release dated January 7, 1997
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 hereunto duly authorized.
GENERAL INSTRUMENT CORPORATION
By: /s/Paul J. Berzenski
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Paul J. Berzenski
Vice President and Controller
DATE: January 7, 1997
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EXHIBIT INDEX
Sequential
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No. Exhibits No.
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99 The Registrant's press release dated 4
January 7, 1997
EXHIBIT 99
FOR IMMEDIATE RELEASE Contacts: Dick Badler
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[email protected]
Mark Borman
773-695-1150
[email protected]
GENERAL INSTRUMENT ANNOUNCES STRATEGIC RESTRUCTURING PLAN
GI Will Separate Into Three Public Companies to
Focus On Global Growth Opportunities
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CHICAGO, ILLINOIS - (January 7, 1997) -- General Instrument Corporation
(NYSE:GIC) today announced that its Board of Directors has approved a strategic
restructuring plan to divide GI into three separate public companies that are
leaders in distinct global growth markets.
The restructuring, expected to be completed this summer through a tax-free
spin-off to shareholders, will create three independent companies:
o NextLevel Systems, Inc., a leading worldwide supplier of systems and
components for high-performance networks delivering video, voice and
Internet/data services, comprised of GI's cable, satellite and telephony
businesses, with 1996 sales in excess of $1.7 billion.
o CommScope, Inc., the world's largest manufacturer of coaxial cable and a
leading supplier of high-performance electronic cables, with 1996 sales of more
than $560 million.
o General Semiconductor, Inc., now GI's Power Semiconductor division, the
world's leading supplier of low-to-medium power rectifiers and transient voltage
suppressors, with 1996 sales of over $360 million.
"Now is the time to make this comprehensive move," said Richard S.
Friedland, Chairman and CEO of General Instrument, who will be Chairman and CEO
of NextLevel Systems. "During the last 12 months, we began volume shipment of
our digital set top boxes, next-generation satellite systems and SURFboard cable
modems, and won our first contract to provide telephony services to a regional
Bell operating company, NYNEX. NextLevel Systems will be a powerful $1.7 billion
sales company that is 100-percent focused on the high-growth opportunities in
the worldwide market for high-performance communications networks -- a market
being transformed by accelerating consumer and business demand worldwide."
"At the same time, CommScope is expanding its position in the worldwide
cable and satellite TV industries and has great opportunities with its
high-performance electronic cables, while worldwide demand for General
Semiconductor's power conditioning products is starting to resume its historical
growth trends," he said.
NextLevel to Focus on High-Performance Video, Voice and Data Networks
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NextLevel Systems, Inc. will be formed by combining GI's Communications
divisions in Hatboro, Pennsylvania and San Diego, California, and its Rohnert
Park, California-based NextLevel Communications subsidiary. Historically, the
operations that will make up NextLevel Systems have focused on the cable and
satellite television markets, but the company expects to expand aggressively
beyond these markets, seeking to build a major presence in the new growth
markets for high-speed modems, which provide Internet and multimedia services,
and switched-digital local access systems, which provide advanced voice, plus
video and high-speed data services over telephone networks.
This expansion will leverage NextLevel Systems' broad expertise in
providing systems and components for the full spectrum of video, voice and data
networks regardless of their technology or architecture -- including satellite,
broadcast, wireless and wired networks using coaxial, fiber optic or copper
twisted-pair cable. NextLevel's systems and components permit high-performance
video, voice and data services to be transmitted over any of these networks. As
a result of its expansion plans, NextLevel Systems expects its revenues to be
more evenly distributed across the cable, satellite, high-speed data and
telephony network markets by the year 2000.
"The transition to GI's next-generation of digital and analog systems for
cable and satellite networks is nearly completed," said Friedland. "Sales of
these products, which are the core of NextLevel Systems, are growing rapidly
with improving profit margins. We are also on the threshold of significant
deployment of our NLevel3 switched-digital local access telephone system and
high-speed SURFboard modems."
General Instrument's current corporate management team and the management
teams of the GI Communications and Next Level Communications businesses will
lead NextLevel Systems after the spin-offs. Reflecting the high-growth potential
of its businesses, NextLevel is expected to have sufficient cash and borrowing
capacity to provide the company with the financial flexibility to invest for
growth in its high-technology markets. NextLevel Systems will be based in
Chicago, Illinois with approximately 8,300 employees worldwide.
CommScope to Focus on Expanding its Broadband Cable Sales Worldwide
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CommScope, with 1996 sales exceeding $560 million, is the world's leading
manufacturer of coaxial cables for cable television systems, with more than a 50
percent market share. It also supplies fiber optic and other high-performance
electronic cables. CommScope cables are used in cable and satellite television
networks, telephone networks, local area networks, wireless transmission
systems, residential wiring and airplanes. In 1996, approximately 35 percent of
CommScope's sales were outside the U. S. Based in Hickory, North Carolina,
CommScope has approximately 2,500 employees worldwide.
"CommScope has been focusing its business on broadband cables for over 30
years," said Frank Drendel, who has managed CommScope since 1972 and will be the
Chairman and CEO of the company following its spin-off. "We are expanding as
well in other related electronic cable markets, such as local area networks,
where we have the capability for continued significant growth."
CommScope is well-positioned to service the $2.4 billion worldwide
broadband cable market. CommScope's sales have grown at a compound annual rate
of approximately 18 percent since 1993 by increasing market share and focusing
on new, high-growth markets, such as international cable systems, local area
networks and residential wiring. Additional future growth opportunities at
CommScope are expected to come from new markets for wireless transmission
systems and airplanes.
General Semiconductor to Focus on Global Growth in Electronic Content
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Power Semiconductor, which will become General Semiconductor, is the
world's leading supplier of low-to-medium power rectifiers and voltage
suppressors for use in diverse applications by automotive, computer, consumer,
industrial and telecommunications manufacturers. General Semiconductor, with
1996 sales exceeding $360 million, will be based in Melville, New York, with
approximately 3,000 employees worldwide.
"With a singular focus on power rectifier and transient voltage suppressor
products and services, we believe General Semiconductor will be better
positioned to leverage its market leadership and competitive strengths of
distribution and high quality manufacturing," said Ron Ostertag, who has managed
the business since 1990 and will be the CEO of General Semiconductor. "This will
allow us to enhance our global service and increase customer satisfaction."
General Semiconductor is a formidable global competitor serving the $1.6
billion worldwide power rectifier and transient voltage suppressor markets.
Since 1993, its sales have grown at a three-year compound annual rate of
approximately 10 percent. Management expects General Semiconductor's future
growth to be driven by worldwide demand for increased electronic functions and
the company's strong position as a global supplier of high quality, reliable
components. In 1996, approximately 70 percent of the business' sales were
outside the U.S.
Reasons For Restructuring
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"After considerable study and detailed analysis, we concluded that our
three diverse businesses would be best positioned as independent, public
companies," said Friedland. "The businesses have different dynamics and business
cycles, serve different markets and customers, are subject to different
competitive forces and must be managed with different short- and long-term
goals."
"The restructuring will give the management of each business the ability to
focus on its own business, markets, customer requirements and growth
opportunities," he continued. "Specifically, each business will be able to
organize its capital structure, allocate its resources and design corporate
strategies based wholly on the benefits to its own operations. Moreover,
management will be able to design equity-based compensation programs that are
targeted to its specific business and performance, and therefore be better
positioned to attract and retain key personnel."
"Over the long term, the spin-offs will allow each business to more
efficiently leverage its world leadership position to increase shareholder
value," said Friedland. "Investors will be able to value each of the three
companies on its own merits and growth fundamentals."
Restructuring and Other Charges
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GI will incur after-tax charges of $55 to $65 million ($0.37 to $0.44 per
fully diluted share) in the fourth quarter of 1996. These charges consist
primarily of costs related to the transition to the next generation of digital
products, restructuring costs incurred through December 31, 1996 and the
write-down of certain assets. The company expects fourth quarter earnings, which
will be announced on February 10, to be in the range of $0.28 to $0.32 per
fully-diluted share, excluding the charges.
The company will incur additional after-tax charges in 1997 of $50 to $70
million ($0.33 to $0.47 per fully diluted share) for costs related to the
consummation of the restructuring, including the costs of dividing the company's
Taiwan assets between NextLevel Systems and General Semiconductor.
Legal, Tax and Capital Structure Matters
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The restructuring plan is subject to the approval of the holders of a
majority of shares of General Instrument and the receipt of a ruling from the
Internal Revenue Service that the separation of NextLevel Systems, CommScope and
General Semiconductor is not taxable to the company or its shareholders.
General Instrument intends to tailor each new company's capital structure
to ensure that it will have the financial flexibility to invest in the growth of
its world leadership businesses. At December 31, 1996, General Instrument's
total debt outstanding was $703 million, of which $228 million are notes
convertible into GI's common stock at a conversion price of $23.75 per share.
General Instrument expects the convertible notes to be redeemed or converted
prior to the spin-offs.
Shareholder Rights Plan Adopted
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As General Instrument moves into the implementation phase of its
restructuring plan, the Board of Directors also approved a shareholder rights
plan designed to protect shareholders from various abusive takeover tactics,
including attempts to acquire control of the company at an inadequate price.
Under the rights plan, each shareholder will receive a dividend of one
right for each outstanding share of GI common stock. Upon the occurrence of
certain events involving a buyer (other than an existing 15% shareholder)
acquiring a 15% or greater position in the company, all rights holders except
the buyer will be entitled to purchase GI stock at a discount. If GI is acquired
in a merger after such an acquisition, all rights holders except the buyer will
also be entitled to purchase stock in the buyer at a discount.
Rights will be distributed to shareholders of record as of January 24,
1997, and will also apply to newly-issued shares after that date. The company
may redeem the rights for $0.01 each at any time before a buyer acquires a 15%
position in the company, and under certain other circumstances. The rights
distribution is not taxable to shareholders. Details of the rights plan will be
mailed to all GI shareholders.
The investment banking firms of Goldman, Sachs & Co., Merrill Lynch and
Lazard Freres and the law firm of Fried, Frank, Harris, Shriver & Jacobson are
serving as advisors to General Instrument.
The information set forth above includes "forward-looking" information and,
accordingly, the cautionary statements contained in Forward-Looking Information
filed by General Instrument as Exhibit 99 to its Form 10-K for the year ended
December 31, 1995 are incorporated herein by reference. General Instrument's
actual results could differ materially from the "forward-looking" information in
this press release.
For more information on the strategic restructuring, visit General
Instrument on the World Wide Web at http://www.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.
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