| HICKORY, N.C., July 26 /PRNewswire-FirstCall/ -- CommScope, Inc.
(NYSE: CTV) today announced second quarter results for the period
ended June 30, 2006. The Company reported second quarter sales of
$411.9 million and net income of $46.6 million, or $0.65 per
diluted share. The reported net income includes an after-tax gain
of $18.6 million related to a recovery on a note receivable from
OFS Bright Wave, LLC and after-tax charges of $2.6 million related
to restructuring costs. Excluding these special items, adjusted
second quarter earnings were $30.6 million, or $0.43 per diluted
share.
For the second quarter of 2005, CommScope reported sales of
$336.7 million and net income of $16.3 million, or $0.25 per
diluted share. Second quarter 2005 net income included after-tax
restructuring charges of $1.0 million, or $0.02 per diluted
share.
"We are pleased with the strong revenue and earnings growth that
we delivered in the second quarter," said Frank M. Drendel,
CommScope Chairman and Chief Executive Officer. "We believe that
our solid financial performance -- notably record sales and orders
during the quarter -- further demonstrates the quality of our
businesses and our operational execution. We intend to continue
building upon our global leadership position in the 'last mile' of
telecommunications while effectively managing our cost structure.
We believe that CommScope is well-positioned to continue creating
value for our stockholders."
"We are particularly proud of the turnaround we executed in the
Carrier segment. Through reorganization, focus on productivity and
effective integration, we transformed a business that had
significant historical losses to our highest margin segment in only
two years," noted Drendel.
Sales Overview
Sales for the second quarter of 2006 increased 22.3% year over
year, primarily driven by increased customer demand and price
increases in response to higher raw material costs. Below is a
sales summary:
Second First Second
($ in millions) Quarter Quarter Quarter % Change
2006 2006 2005 YOY Sequential
Enterprise $205.1 $172.1 $173.8 18.0% 19.2%
Broadband $136.5 $125.9 $109.9 24.2% 8.4%
Carrier $71.0 $54.7 $53.7 32.2% 29.8%
Inter-segment eliminations ($0.7) ($0.4) ($0.7) n/a n/a
Total CommScope Net Sales $411.9 $352.3 $336.7 22.3% 16.9%
Enterprise segment sales rose 18.0% year over year to $205.1
million primarily due to higher sales prices for most cable
products and higher sales volume in North America and Asia.
Information technology investment, new bandwidth-intensive
applications and development of consolidated data centers are among
the ongoing drivers of the Enterprise business.
Broadband segment sales rose to $136.5 million, up 24.2% year
over year, as a result of both higher prices for coaxial cable
products and increased global sales volumes. Broadband sales
continue to be positively affected by competition between cable
television operators and telephone companies as they work to
provide video, voice and data services to customers.
Carrier segment sales rose 32.2% year over year to $71.0 million
primarily due to increased demand for Integrated Cabinet Solutions
(ICS) products. ICS sales increased significantly as domestic
telephone companies continued investing in their infrastructure to
support video and high-speed data services. While Wireless sales
increased significantly sequentially, sales rose modestly year over
year as North American market demand softened.
Total international sales rose 17.1% year over year to $132.9
million, or approximately 32% of total company sales.
Overall external orders booked in the second quarter of 2006
were $500.9 million, up 45.1% from the year-ago quarter.
Book-to-bill ratios were positive in all segments with particular
strength continuing in the Enterprise segment.
Gain on OFS Note Receivable
During the second quarter of 2006, CommScope received a cash
payment of $29.8 million plus accrued interest of approximately
$0.5 million from OFS BrightWave, LLC. This payment satisfied the
$30.0 million outstanding note issued under a revolving credit
facility between CommScope and OFS BrightWave, a venture formed in
2001 by CommScope and The Furukawa Electric Co., Ltd. The companies
also agreed to terminate the revolving credit facility, which was
created in 2001 and was scheduled to mature in November 2006. The
$30 million long-term note had been considered fully impaired by
CommScope since the Company exited the venture in June 2004.
CommScope recorded a gain of $29.8 million ($18.6 million after
tax) during the second quarter of 2006.
Global Manufacturing Initiatives
CommScope's second quarter 2006 results reflect pretax
restructuring charges of $4.0 million ($2.6 million after tax)
primarily for employee- related and equipment relocation costs
associated with the Company's global manufacturing initiatives.
The global manufacturing initiatives, which were announced in
September 2005, continue to progress on schedule. The Company has
achieved a number of notable accomplishments since the
implementation of its global manufacturing initiatives, including
improved factory efficiency, lower overhead and enhanced customer
service.
As previously announced, CommScope anticipates total annualized
pretax savings of $35-$40 million from the initiatives, which are
expected to be completely implemented by early 2007. The Company
expects to realize about half of these annualized pretax savings
during 2006.
Other Second Quarter 2006 Highlights
- During the quarter, CommScope announced a number of new
products, including a new family of dry, loose-tube fiber optic
cable designs. The new designs provide for a smaller and a more
lightweight and craft- friendly cable.
- CommScope also introduced ExtremeFlex(R), the wireless
industry's first full line of 50-ohm aluminum transmission cables.
Carriers have experienced excellent results from smaller diameter
ExtremeFlex cables that have been installed in thousands of cell
sites across North America during the past three years. Customers
can now take advantage of a broader portfolio of aluminum cables
that meet or exceed the electrical, mechanical and environmental
specifications of traditional copper cables.
- Gross margin for the second quarter rose to 26.4%, up more than
200 basis points sequentially. Gross margin improved sequentially
primarily due to higher sales volumes and ongoing cost management
programs.
- SG&A for the second quarter of 2006 was $58.3 million or 14.1%
of sales, compared to $54.0 million or 16.0% of sales in the
year-ago quarter. SG&A declined as a percentage of sales primarily
due to higher sales levels and ongoing cost management.
- Second quarter 2006 results include $1.1 million (pretax) of
equity- based compensation expense in accordance with SFAS No.
123(R).
- Operating income for the second quarter of 2006 was $38.1
million or 9.2% of sales. Excluding restructuring costs, operating
income would have been $42.1 million or 10.2% of sales. In the
year-ago quarter, operating income was $24.6 million or 7.3% of
sales. Adjusted operating income was $26.2 million or 7.8% of sales
for the second quarter of 2005, excluding restructuring
charges.
- Total depreciation and amortization expense was $14.2 million
for the second quarter, which included $3.5 million of intangibles
amortization.
- Net cash provided by operating activities in the second quarter
was $15.0 million. Capital spending in the quarter was $8.3
million.
Outlook
CommScope management provided the following guidance for the
third quarter and calendar year 2006:
* For the third quarter of 2006, revenue is expected to be in the range
of $420-$435 million and operating margin is expected to be in the
10.5%-11.5% range, excluding special items.
* For calendar year 2006, revenue is expected to be in the range of
$1.56-$1.59 billion and operating margin is expected to be in the 9.0%-
9.5% range, excluding special items.
* Higher expected tax rate of 30%-34% in the second half of the year,
primarily due to changes in the mix of international and domestic
income.
"We delivered strong financial results in the second quarter and
we are raising our sales and operating income guidance for calendar
year 2006 to reflect the expectation of improving Enterprise sales
volume, higher sales prices and ongoing cost management," said
Jearld L. Leonhardt, Executive Vice President and Chief Financial
Officer.
Conference Call Information
CommScope plans to host a call today at 5:00 p.m. EDT to discuss
second 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 +1-415-537-1914. 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
21299597. The replay will be available through Wednesday, August 2.
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) ( www.commscope.com ) is a world leader in
the design and manufacture of "last mile" cable and connectivity
solutions for communication networks. Through its SYSTIMAX(R)
Solutions(TM) and Uniprise(R) Solutions brands CommScope is the
global leader in structured cabling systems for business enterprise
applications. It is 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, global
manufacturing initiatives, recent product-line acquisition,
synergies and other financial items relating to CommScope 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 by the use
of certain terms and phrases, including but not limited to
"intends," "intend," "intended," "goal," "estimate," "estimates,"
"expects," "expect," "expected," "expectations," "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, changes in cost
and availability of key raw materials and our ability to recover
these costs from our customers through price increases; the
challenges of executing our previously announced global
manufacturing initiatives; the integration and expected synergies
related to the acquisition of the MC2(R) product line from Trilogy
Communications, Inc.; customer demand for our products and the
ability to maintain existing business alliances with key customers
or distributors; the risk that our internal production capacity and
that of our contract manufacturers may be insufficient to meet
customer demand for our products; the risk that customers might
cancel orders placed or that orders currently placed may affect
orders in the future; continuing consolidation among our customers;
competitive pricing and acceptance of our products; industry
competition and the ability to retain customers through product
innovation; possible production disruption due to supplier or
contract manufacturer bankruptcy, reorganization or restructuring;
successful ongoing operation of our vertical integration
activities; the possibility of further restructuring actions;
possible future impairment charges for fixed or intangible assets;
increased obligations under employee benefit plans; ability to
achieve expected sales, growth and earnings goals; ability to
achieve expected benefits from future acquisitions; costs of
protecting or defending our intellectual property; ability to
obtain capital on commercially reasonable terms; adequacy and
availability of insurance; costs and challenges of compliance with
domestic and foreign environmental laws; variability in expected
tax rate and ability to recover amounts recorded as value-added tax
receivables; product performance issues and associated warranty
claims; ability to successfully implement major systems
initiatives; regulatory changes affecting us or the industries we
serve; 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 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, which are available on CommScope's website or
at www.sec.gov. 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 Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Net sales $411,881 $336,711 $764,135 $645,765
Operating costs and expenses:
Cost of sales 303,333 248,102 570,848 484,994
Selling, general and
administrative 58,253 54,016 112,430 107,898
Research and development 8,205 8,437 15,670 16,207
Restructuring costs 4,004 1,546 7,753 3,575
Total operating costs and
expenses 373,795 312,101 706,701 612,674
Operating income 38,086 24,610 57,434 33,091
Other income (expense), net 27 (612) 665 (669)
Interest expense (1,987) (2,289) (3,972) (4,367)
Interest income 2,343 1,149 4,396 2,148
Income before income taxes and
gain on OFS BrightWave
note receivable 38,469 22,858 58,523 30,203
Income tax expense before
income tax provision on gain
on OFS BrightWave note
receivable (10,448) (6,554) (17,775) (8,365)
Income before gain on OFS
BrightWave note receivable 28,021 16,304 40,748 21,838
Gain on OFS BrightWave note
receivable, net of tax of
$11,175 18,625 - 18,625 -
Net income $46,646 $16,304 $59,373 $21,838
Net income per share:
Basic $0.80 $0.30 $1.03 $0.40
Assuming dilution (a) $0.65 $0.25 $0.85 $0.34
Weighted average shares
outstanding:
Basic 58,502 54,561 57,626 54,537
Assuming dilution (a) 72,221 67,065 71,519 67,036
(a) Calculation of net income
per share, assuming dilution:
Net income (basic) $46,646 $16,304 $59,373 $21,838
Convertible debt add-back (b) 629 629 1,258 1,258
Numerator (assuming
dilution) $47,275 $16,933 $60,631 $23,096
Weighted average shares
(basic) 58,502 54,561 57,626 54,537
Dilutive effect of:
Stock options (c) 2,073 1,010 2,277 1,005
Phantom stock and
performance units 152 - 122 -
Convertible debt (b) 11,494 11,494 11,494 11,494
Denominator (assuming
dilution) 72,221 67,065 71,519 67,036
(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.
(c) Options to purchase approximately 0.6 million and 3.3 million common
shares were excluded from the computation of net income per share,
assuming dilution, for the three months ended June 30, 2006 and
June 30, 2005, respectively, because they would have been
antidilutive. Options to purchase approximately 0.6 million and
4.5 million common shares were excluded from the computation of net
income per share, assuming dilution, for the six months ended
June 30, 2006 and June 30, 2005, respectively, because they would have
been antidilutive.
CommScope, Inc.
Condensed Consolidated Balance Sheets
(Unaudited -- In thousands, except share amounts)
June 30, December 31,
2006 2005
Assets
Cash and cash equivalents $185,338 $146,549
Short-term investments 110,781 102,101
Total cash, cash equivalents and
short-term investments 296,119 248,650
Accounts receivable, less allowance
for doubtful accounts of
$14,226 and $13,644, respectively 217,934 165,608
Inventories 156,199 123,603
Prepaid expenses and other current
assets 26,996 26,156
Deferred income taxes 26,872 25,245
Total current assets 724,120 589,262
Property, plant and equipment, net 239,821 252,877
Goodwill 151,371 151,356
Other intangibles, net 69,999 69,297
Deferred income taxes 16,535 24,623
Other assets 22,588 14,766
Total Assets $1,224,434 $1,102,181
Liabilities and Stockholders' Equity
Accounts payable $91,257 $63,444
Other accrued liabilities 88,204 100,498
Current portion of long-term debt 13,000 13,000
Total current liabilities 192,461 176,942
Long-term debt 277,800 284,300
Pension and postretirement benefit
liabilities 92,838 101,989
Other noncurrent liabilities 18,653 16,925
Total Liabilities 581,752 580,156
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.01 par value;
Authorized shares: 20,000,000;
Issued and outstanding shares:
None at June 30, 2006 and
December 31, 2005 - -
Common stock, $.01 par value;
Authorized shares: 300,000,000;
Issued shares, including treasury
stock: 69,065,654 at
June 30, 2006 and 66,073,347 at
December 31, 2005;
Issued and outstanding shares:
58,865,654 at June 30, 2006
and 55,873,347 at
December 31, 2005 691 661
Additional paid-in capital 511,477 462,842
Deferred equity compensation - (8,980)
Retained earnings 276,061 216,688
Accumulated other comprehensive loss (12) (3,651)
Treasury stock, at cost: 10,200,000
shares at June 30, 2006
and December 31, 2005 (145,535) (145,535)
Total Stockholders' Equity 642,682 522,025
Total Liabilities and
Stockholders' Equity $1,224,434 $1,102,181
CommScope, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited -- In thousands)
Six Months Ended
June 30,
2006 2005
Operating Activities:
Net income $59,373 $21,838
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 28,409 30,616
Equity based compensation 1,811 -
Deferred income taxes 6,904 (2,521)
Gain on OFS BrightWave note
receivable (29,800) -
Restructuring costs related to
fixed asset impairment
and curtailment - 2,225
Tax benefit from stock option
exercises - 355
Changes in assets and liabilities (70,360) (25,383)
Net cash provided by (used in)
operating activities (3,663) 27,130
Investing Activities:
Additions to property, plant and
equipment (15,050) (13,450)
Repayment of OFS BrightWave note
receivable 29,800 -
Acquisition of MC2 product line (13,810) -
Acquisition of Connectivity
Solutions - 653
Net proceeds from (purchases of)
short-term investments (8,680) 11,479
Proceeds from disposal of fixed
assets 550 1,576
Net cash provided by (used in)
investing activities (7,190) 258
Financing Activities:
Principal payments on long-term
debt (6,500) (6,500)
Long-term financing costs - (306)
Proceeds from exercise of stock
options 42,353 1,982
Tax benefit from stock option
exercises 12,981 -
Net cash provided by (used in)
financing activities 48,834 (4,824)
Effect of exchange rate changes on cash 808 (1,115)
Change in cash and cash equivalents 38,789 21,449
Cash and cash equivalents, beginning
of period 146,549 99,631
Cash and cash equivalents, end of
period $185,338 $121,080
CommScope, Inc.
Sales and Operating Income by Reportable Segment
(Unaudited -- In millions)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Net Sales:
Enterprise $205.1 $173.8 $377.2 $331.5
Broadband 136.5 109.9 262.4 218.0
Carrier 71.0 53.7 125.7 97.8
Inter-segment eliminations (0.7) (0.7) (1.2) (1.5)
Consolidated Net Sales $411.9 $336.7 $764.1 $645.8
Operating Income (Loss):
Enterprise $23.8 $22.2 $35.1 $31.1
Broadband 4.5 5.8 12.5 12.3
Carrier 9.8 (3.4) 9.8 (10.3)
Consolidated Operating Income $38.1 $24.6 $57.4 $33.1
CommScope, Inc.
Reconciliation of GAAP Earnings to Adjusted Earnings
(Unaudited)
Second Quarter 2006 Year-to-Date 2006
Earnings Diluted Earnings Diluted
($m) EPS ($m) EPS
GAAP Earnings Reported $46.6 $0.65 $59.4 $0.85
Special items:
Restructuring costs 2.6 0.04 5.0 0.07
Gain on OFS BrightWave note
receivable (18.6) (0.26) (18.6) (0.26)
Adjusted Earnings $30.6 $0.43 $45.8 $0.66
CommScope management believes that presenting earnings information
excluding the special after-tax items noted above provides meaningful
information to investors because the adjusted results eliminate special
items that are not related to CommScope's ongoing operations, and
therefore allows investors to compare period to period more easily.
SOURCE CommScope, Inc.
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)
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