| HICKORY, N.C., May 2 /PRNewswire-FirstCall/ -- CommScope, Inc.
(NYSE: CTV) today announced first quarter results for the period
ended March 31, 2005. The Company reported first quarter sales of
$309.1 million and net income of $5.5 million. Diluted earnings
were $0.09 per share, which reflects the dilutive effect of the
Company's outstanding convertible debentures. The reported net
income includes previously announced, after-tax charges of $1.3
million related to the organizational and cost-reduction
initiatives at the Omaha, Nebraska manufacturing facility.
Excluding this charge, adjusted earnings were $6.9 million, or
$0.11 per diluted share.
For the first quarter of 2004, CommScope reported sales of
$235.1 million and a net loss of $16.4 million, or $0.27 per share.
The first quarter 2004 net loss reflected after-tax charges of
$20.0 million, or $0.33 per share, primarily related to the January
31, 2004 acquisition of the Connectivity Solutions business of
Avaya Inc.
"We made excellent progress in the first quarter," stated Frank
M. Drendel, CommScope Chairman and Chief Executive Officer. "Sales
increased year over year in all segments and operating income more
than doubled sequentially, excluding special charges. We were
particularly pleased with the sales of GigaSPEED(R) X10D, our
revolutionary copper cabling system capable of supporting 10
Gigabit Ethernet. We already have more than 50 project wins around
the world and are excited about the ongoing prospects for its
growth."
New Segment Reporting
As a result of the continued integration of the Connectivity
Solutions business into CommScope's global operations and reporting
systems, CommScope will now report sales by three market segments:
Enterprise, Broadband and Carrier. The Enterprise segment mainly
consists of sales of structured cabling systems for business
enterprise applications. This segment includes sales of
industry-leading SYSTIMAX(R) Solutions and Uniprise Solutions(TM)
branded products. The Enterprise segment also includes coaxial
cable for various video and data applications primarily sold
through the same distribution channels as Uniprise Solutions. These
coaxial cable products were previously reported in broadband/video
sales as part of the Cable segment.
The Broadband segment primarily consists of sales of coaxial
cable, fiber optic cable and conduit for cable television Multiple
System Operators (MSOs) around the world. MSOs provide
multi-channel video, voice and high-speed data services primarily
to residential and commercial customers using Hybrid Fiber Coaxial
(HFC) architecture.
The Carrier segment consists of sales to wireline and wireless
telecommunication service providers. This segment includes sales of
Integrated Cabinet Solutions (ICS) secure environmental enclosures,
ExchangeMAX(R) telephone central office products and Cell Reach(TM)
wireless products.
Sales Overview
Sales for the first quarter of 2005 increased 18.5% year over
year on a pro forma basis, primarily driven by price increases in
response to higher raw material costs. Below is a sales summary
based on the new reportable segments. This summary reflects first
quarter 2005 sales compared to actual and pro forma sales for the
first quarter of 2004 and actual sales for the fourth quarter of
2004. The pro forma sales information for the first quarter of 2004
includes the historical results of the Connectivity Solutions
business as operated and publicly reported by Avaya for January
2004. The pro forma information is presented as if Connectivity
Solutions had been acquired on January 1, 2004. All subsequent
year-over-year sales comparisons are made on a pro forma basis:
Pro
Actual Actual Actual Forma % Change
First Fourth First First Pro Sequen-
($ in millions) Quarter Quarter Quarter Quarter Forma tial
2005 2004 2004 2004 YOY
Enterprise $157.7 $149.6 $112.4 $126.8 24.4% 5.4%
Broadband $108.1 $110.9 $91.1 $91.1 18.7% -2.5%
Carrier $44.1 $35.4 $32.1 $43.4 1.6% 24.6%
Intersegment eliminations ($0.8) ($0.3) ($0.5) ($0.5) n/a n/a
Total CommScope Net Sales $309.1 $295.6 $235.1 $260.8 18.5% 4.6%
CommScope's Enterprise segment sales rose 24.4% year over year
to $157.7 million. The strong year-over-year sales growth reflects
higher prices for most products, improved international business in
all regions and new product introduction. Enterprise sales in the
first quarter of 2004 were affected by CommScope's efforts to
reduce external channel inventory to a more appropriate level.
Broadband segment sales rose 18.7% year over year to $108.1
million primarily due to higher prices for most products, improving
international sales and ongoing domestic network expenditures.
Broadband sales increased to all major domestic MSOs and increased
in most regions of the world.
Carrier segment sales increased 24.6% sequentially primarily due
to strong sales growth of ICS and wireless products to
telecommunication service providers. The year over year growth of
1.6% was driven by substantially higher sales of wireless products,
offset by lower sales of ICS and ExchangeMAX products.
Total international sales rose 21.4% year over year to $103.3
million or approximately 33.4% of total company sales.
Overall external orders booked in the first quarter of 2005 were
$313.1 million.
Other First Quarter Highlights
- Gross margin for the first quarter of 2005 rose to 23.3%, compared to
22.8% in the fourth quarter of 2004. Gross margin increased
sequentially primarily due to the positive impact of higher sales
prices, cost reduction initiatives at the Omaha facility as well as
increased sales volumes for certain products. Gross margin in the
first quarter of 2004 was 15.9% and reflected certain purchase
accounting adjustments related to inventory acquired from Avaya and
sold during the quarter. Excluding this impact, the company's adjusted
gross margin for the first quarter of 2004 was 21.6%.
- Operating income was $8.5 million or 2.7% of sales for the first
quarter of 2005. Excluding special charges related to restructuring
costs at the Omaha facility, operating income more than doubled
sequentially to $10.5 million or 3.4% of sales for the quarter.
- Total depreciation and amortization expense was $15.7 million for the
first quarter of 2005, which included $3.2 million of intangibles
amortization and deferred financing fee amortization of $0.6 million.
- Net cash used in operating activities in the first quarter of 2005 was
$8.7 million. The use of cash reflected an approximate $40 million
increase in accounts receivable. Accounts receivable and Days Sales
Outstanding (DSOs) increased primarily due to a reduction in prompt pay
discount terms and seasonal trends.
- Capital spending for the first quarter of 2005 was $8.2 million and is
expected to be the highest quarterly spending level of the year. First
quarter capital spending reflects costs associated with the
construction of the Company's new broadband facility in China, which is
expected to begin operations in the second quarter of 2005.
Omaha Cost Reduction on Track
Connectivity Solutions Manufacturing, Inc. (CSMI), an indirect,
wholly owned manufacturing subsidiary of CommScope, continues to
implement previously announced organizational and cost-reduction
initiatives at its Omaha facility. During the first quarter of
2005, the Company recognized $2.0 million in pre- tax, net
restructuring costs primarily related to process improvement costs
and impairment of excess equipment and real estate.
"The CSMI team has improved operations over the last six
months," said Drendel. "The ICS product line made significant
strides toward profitability in the quarter. While we still have
work to do, our cost reduction initiatives are on target and we are
encouraged by our progress."
CSMI has consolidated certain operations at the Omaha facility
and is actively marketing excess real estate. As a result, certain
CSMI real estate and equipment were reclassified from property,
plant and equipment to assets held for sale within other current
assets.
The Company expects to recognize additional pretax restructuring
costs during the second quarter of up to $3 million related to
completing the implementation of initiatives announced in 2004.
Stronger Second Quarter Expected
"Our financial performance in the first quarter of 2005 exceeded
the high end of our guidance," said CommScope Executive Vice
President and Chief Financial Officer Jearld L. Leonhardt. "We had
an excellent start to the year and expect stronger financial
performance in the second quarter mainly due to the expected
seasonal strength of the Enterprise segment. For the second quarter
of 2005, we expect sales to rise to $320-$340 million and operating
margin to increase to 5.0%-5.5% of sales, excluding special
charges."
CommScope has not changed its previously announced financial
guidance for calendar year 2005, which was sales of $1.2 - $1.3
billion and operating margin of 5.0%-5.5%, excluding special
charges.
Conference Call Information
CommScope plans to host a conference call today at 5:00 p.m. EST
to discuss first quarter results. You are invited to listen to the
conference call or live webcast with Frank Drendel, Chairman and
CEO; Brian Garrett, President and COO; and Jearld Leonhardt,
Executive Vice President and CFO.
To participate in the conference call, domestic and
international callers should dial +1-212-676-5367. Please plan to
dial in 10-15 minutes before the start of the call to facilitate a
timely connection. The live, listen-only audio of the conference
call will also be available via the Presentations page on
CommScope's website at
http://phx.corporate-ir.net/phoenix.zhtml?c=101146&p=irol-presentations
.
If you are unable to participate on the call and would like to
hear a replay, you may dial 800-633-8284. International callers
should dial +1-402- 977-9140 for the replay. The replay ID is
21244015. The replay will be available through Monday, May 9th. A
webcast replay will also be archived for a limited period of time
following the conference call via the Internet on CommScope's web
site.
About CommScope
CommScope (NYSE: CTV - http://www.commscope.com ) is a world
leader in the design and manufacture of 'last mile' cable and
connectivity solutions for communication networks. Through our
SYSTIMAX(R) Solutions(TM) and Uniprise Solutions(TM) brands we are
the global leader in structured cabling systems for business
enterprise applications. We are also the world's largest
manufacturer of coaxial cable for Hybrid Fiber Coaxial
applications. Backed by strong research and development, CommScope
combines technical expertise and proprietary technology with global
manufacturing capability to provide customers with high-performance
wired or wireless cabling solutions.
Forward-Looking Statements
This press release contains forward-looking statements
regarding, among other things, the business position, plans,
transition, outlook, revenues, margins, accretion, earnings,
synergies and other financial items relating to CommScope, and
integration and restructuring plans related to CommScope's
acquisition of substantially all of the assets and certain
liabilities of Connectivity Solutions ("the acquisition") that are
based on information currently available to management,
management's beliefs and a number of assumptions concerning future
events. These forward-looking statements are identified, including,
without limitation, by their use of such terms and phrases as
"intends," "intend," "intended," "goal," "estimate," "estimates,"
"expects," "expect," "expected," "project," "projects,"
"projected," "projections," "plans," "anticipates," "anticipated,"
"should," "designed to," "foreseeable future," "believe,"
"believes," "think," "thinks" and "scheduled" and similar
expressions. Forward-looking statements are not a guarantee of
performance and are subject to a number of uncertainties and other
factors that could cause the actual results to differ materially
from those currently expected. The potential risks and
uncertainties that could cause actual results of CommScope to
differ materially include, but are not limited to, the challenges
of integration and restructuring associated with the acquisition of
Connectivity Solutions or any future acquisition, including cost
reduction plans at CSMI's Omaha, Nebraska facility; the challenges
of achieving anticipated synergies; the ability to retain qualified
employees and existing business alliances; maintaining satisfactory
relationships with represented employees; customer demand for our
products, applications and services; expected demand from major
domestic MSOs; telecommunications industry capital spending;
ability to maintain successful relationships with our major
distributors; industry consolidation; ability of our customers to
secure adequate financing to fund their infrastructure projects or
to pay us; changes or fluctuations in global business conditions;
competitive pricing and acceptance of our products; changes in cost
and availability of key raw materials, especially those that are
available only from limited sources; ability to recover higher
material and transportation costs from our customers through price
increases; possible future impairment charges for goodwill and
other long-lived assets; industry competition and the ability to
retain customers; possible production disruption due to supplier
bankruptcy, reorganization or restructuring; variability in our
effective tax rate; our ability to obtain financing and capital on
commercially reasonable terms; covenant restrictions and our
ability to comply with covenants in our debt agreements; successful
operation of our vertical integration activities; successful
expansion and related operation of our facilities; achievement of
sales, growth and earnings goals; ability to achieve reductions in
costs; ability to retain and attract key personnel; developments in
technology; intellectual property protection; product performance
issues and associated warranties; adequacy and availability of
insurance; regulatory changes affecting us or the industries we
serve; any changes required by the Securities and Exchange
Commission in connection with its review of our public filings;
authoritative changes in generally accepted accounting principles
by standard-setting bodies; environmental remediation issues;
terrorist activity or armed conflict; political instability; major
health concerns and other factors; and any statements of belief and
any statements of assumptions underlying any of the foregoing. For
a more complete description of factors that could cause such a
difference, please see CommScope's filings with the Securities and
Exchange Commission. In providing forward-looking statements, the
Company does not intend, and is not undertaking any duty or
obligation, to update these statements as a result of new
information, future events or otherwise.
CommScope, Inc.
Condensed Consolidated Statements of Operations
(Unaudited -- In thousands, except per share amounts)
Three Months Ended
March 31,
2005 2004
Net sales $309,054 $235,061
Operating costs and expenses:
Cost of sales 236,892 197,677
Selling, general and administrative 53,882 35,984
Research and development 7,770 4,866
In-process research and development
charges - 3,894
Acquisition-related transition and
startup costs - 6,739
Restructuring costs 2,029 -
Total operating costs and
expenses 300,573 249,160
Operating income (loss) 8,481 (14,099)
Other income (expense), net (57) (1,126)
Loss on early extinguishment of debt - (5,029)
Interest expense (2,078) (2,759)
Interest income 999 479
Income (loss) before income taxes,
equity in losses of OFS
BrightWave, LLC 7,345 (22,534)
Income tax benefit (expense) (1,811) 6,979
Income (loss) before equity in losses
of OFS BrightWave, LLC 5,534 (15,555)
Equity in losses of OFS BrightWave,
LLC, net of tax of $503 - (815)
Net income (loss) $5,534 $(16,370)
Net income (loss) per share:
Basic $0.10 $(0.27)
Assuming dilution (a) $0.09 $(0.27)
Weighted average shares outstanding:
Basic 54,512 60,653
Assuming dilution (a) 66,784 60,653
(a) Calculation of net income (loss)
per share, assuming dilution:
Net income (loss) (basic) $5,534 $(16,370)
Convertible debt add-back (b) 629 -
Numerator (assuming
dilution) $6,163 $(16,370)
Weighted average shares (basic) 54,512 60,653
Dilutive effect of:
Stock options (c) 778 -
Convertible debt (b) 11,494 -
Denominator (assuming
dilution) 66,784 60,653
(b) In March 2004, the Company issued $250 million of 1% convertible
senior subordinated debentures, which are convertible into shares of
common stock at a conversion rate of 45.9770 shares per $1,000
principal amount representing a conversion price of $21.75 per share.
These debentures are convertible into shares of CommScope common stock
under specific circumstances as described in the Company's Form 10-K
for the year ended December 31, 2004. For the three months ended
March 31, 2004, the debentures were antidilutive as a result of the
net loss during such period and therefore were excluded from the
calculation of net loss per share, assuming dilution.
(c) Options to purchase approximately 5.6 million and 7.4 million common
shares were excluded from the computation of net income (loss) per
share, assuming dilution, for the three months ended March 31, 2005
and March 31, 2004, respectively, because they would have been
antidilutive.
CommScope, Inc.
Condensed Consolidated Balance Sheets
(Unaudited -- In thousands, except share amounts)
March 31, December 31,
2005 2004
Assets
Cash and cash equivalents $89,519 $99,631
Short-term investments 65,495 77,620
Total cash, cash equivalents and
short-term investments 155,014 177,251
Accounts receivable, less allowance
for doubtful accounts of $13,512 and
$12,761, respectively 162,366 122,612
Inventories 110,059 108,342
Prepaid expenses and other current
assets 24,470 13,244
Deferred income taxes 28,295 26,644
Total current assets 480,204 448,093
Property, plant and equipment, net 293,768 311,453
Goodwill 151,373 151,384
Other intangibles, net 79,111 82,315
Deferred income taxes 14,414 17,341
Other assets 20,931 19,993
Total Assets $1,039,801 $1,030,579
Liabilities and
Stockholders' Equity
Accounts payable $65,856 $52,898
Other accrued liabilities 85,005 90,775
Current portion of long-term debt 13,000 13,000
Total current liabilities 163,861 156,673
Long-term debt 294,050 297,300
Pension and postretirement benefit
liabilities 93,501 90,620
Other noncurrent liabilities 33,758 36,523
Total Liabilities 585,170 581,116
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.01 par value;
Authorized shares: 20,000,000;
Issued and outstanding shares:
None at March 31, 2005 and
December 31, 2004 - -
Common stock, $.01 par value;
Authorized shares: 300,000,000;
Issued shares, including treasury
stock: 64,727,221 at March 31, 2005
and 64,687,745 at December 31, 2004;
Issued and outstanding shares:
54,527,221 at March 31, 2005 and
54,487,745 at December 31, 2004 647 647
Additional paid-in capital 433,246 432,839
Retained earnings 172,244 166,710
Accumulated other comprehensive
loss (5,971) (5,198)
Treasury stock, at cost: 10,200,000
shares at March 31, 2005
and December 31, 2004 (145,535) (145,535)
Total Stockholders' Equity 454,631 449,463
Total Liabilities and
Stockholders' Equity $1,039,801 $1,030,579
CommScope, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited -- In thousands)
Three Months Ended
March 31,
2005 2004
Operating Activities:
Net income (loss) $5,534 $(16,370)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 15,743 14,493
In-process research and
development charges - 3,894
Equity in losses of OFS
BrightWave, LLC, pretax - 1,318
Restructuring costs related to
fixed asset impairment 1,678 -
Deferred income taxes 1,370 (2,627)
Tax benefit from stock option
exercises 87 789
Changes in assets and liabilities:
Accounts receivable (39,916) (28,815)
Inventories (1,930) 31,209
Prepaid expenses and other
current assets (693) (6,384)
Accounts payable and other
accrued liabilities 7,418 21,319
Other noncurrent liabilities 797 2,915
Other 1,236 (122)
Net cash provided by (used in)
operating activities (8,676) 21,619
Investing Activities:
Additions to property, plant and
equipment (8,226) (1,761)
Acquisition of Connectivity
Solutions 653 (253,003)
Net proceeds from short-term
investments 9,158 84,940
Proceeds from disposal of fixed
assets 426 72
Net cash provided by (used in)
investing activities 2,011 (169,752)
Financing Activities:
Proceeds from issuance of long-
term debt - 100,000
Principal payments on long-term
debt (3,250) (28,750)
Proceeds from issuance of
convertible notes - 250,000
Repayment of convertible notes - (102,925)
Long-term financing costs - (10,013)
Proceeds from exercise of stock
options 320 5,110
Net cash provided by (used in)
financing activities (2,930) 213,422
Effect of exchange rate changes on
cash (517) (252)
Change in cash and cash equivalents (10,112) 65,037
Cash and cash equivalents, beginning
of period 99,631 110,358
Cash and cash equivalents, end of
period $89,519 $175,395
SOURCE CommScope, Inc.
-0- 05/02/2005
/CONTACT: Phil Armstrong, Investor Relations, +1-828-323-4848, or Betsy
Lambert, APR, Media Relations, +1-828-323-4873, both of CommScope, Inc./
/Web site: http://www.commscope.com/
(CTV)
CO: CommScope, Inc.
ST: North Carolina
IN: CPR TLS
SU: ERN ERP CCA MAV
JK-JJ
-- CLM052 --
1521 05/02/2005 16:00 EDT http://www.prnewswire.com
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