HICKORY, N.C., Oct. 30 /PRNewswire-FirstCall/ --
-- Record third quarter EPS of $0.81; up 33 percent year over year
-- Record third quarter sales of $514 million, up 10 percent year over
year
-- Operating income increases more than 25 percent to $81 million
-- Operating margin of 15.8 percent
-- Orders of $482 million, up 25 percent year over year
CommScope, Inc. (NYSE: CTV), a global leader in infrastructure solutions for
communications networks, today announced record third quarter results for the
period ended September 30, 2007.
For the third quarter of 2007, CommScope reported sales of $513.6 million and
net income of $60.3 million, or $0.81 per diluted share. For the third quarter
of 2006, CommScope reported sales of $466.1 million and net income of $43.6
million, or $0.61 per diluted share. The reported net income for the third
quarter of 2006 included after-tax charges of $1.9 million related to
restructuring costs. Excluding this special item, adjusted third quarter 2006
earnings were $45.5 million, or $0.64 per diluted share.
"We are pleased to deliver another strong quarter as all of our operating
segments continue to benefit from the global demand for bandwidth," said
CommScope Chairman and Chief Executive Officer, Frank M. Drendel. "We believe
that video, data intensive applications, mobility and dynamic websites create an
ongoing need for infrastructure solutions for communication networks. With our
acquisition of Andrew Corporation on track to be completed by the end of this
year, we believe that CommScope, as a global leader in 'last mile'
infrastructure solutions, will be solidly positioned to continue to benefit from
these long-term trends," Drendel added.
Sales Overview
Sales for the third quarter of 2007 increased 10.2 percent year over year,
primarily driven by increased volume in all three segments, with particular
strength in the Carrier segment.
Third Second Third
Quarter Quarter Quarter % Change
($ in millions) 2007 2007 2006 YOY Sequential
Enterprise $240.4 $239.4 $237.7 1.1% 0.4 %
Broadband 161.2 163.4 143.8 12.1% -1.3 %
Carrier 112.3 116.7 85.0 32.1% -3.8 %
Inter-segment
eliminations (0.3) (0.4) (0.4)
Total CommScope
Net Sales $513.6 $519.1 $466.1 10.2% -1.1 %
Enterprise segment sales rose 1.1 percent year over year to $240.4 million,
primarily due to higher sales volume. Enterprise revenues grew slightly year
over year despite unusually strong third quarter 2006 sales. Sales in the third
quarter of 2006 had been positively affected by a particularly strong backlog
coming into the year-ago quarter. This backlog resulted from longer lead times
associated with the company's global manufacturing initiatives and volatile raw
material costs.
CommScope announced price increases on selected Enterprise cable and
apparatus late in the third quarter of 2007 in response to higher costs. The
company expects limited revenue and gross margin benefit from these price
increases during the fourth quarter of 2007.
Broadband segment sales rose 12.1 percent year over year to $161.2 million,
primarily due to higher sales volumes, particularly in the Central and Latin
American region, and the positive impact of the Signal Vision, Inc. acquisition,
which closed on May 1, 2007. Competition between domestic Multiple System
Operators (MSOs) and domestic wireline carriers continues to drive investment by
MSOs in their networks.
Carrier segment sales increased 32.1 percent year over year to $112.3
million. These robust sales result from strong growth in all Carrier product
areas. CommScope's Integrated Cabinet Solutions (ICS) increased as large
domestic wireline carriers continue to deploy electronics deeper in their
networks to offer higher bandwidth broadband and video services. Strong
international sales growth of CommScope's Extremeflex(R) smooth wall aluminum
cables to major wireless carriers also drove Carrier performance.
Total international sales for the third quarter of 2007 rose 19.0 percent
year over year to $168.5 million, or approximately 32.8 percent of total company
sales.
External orders booked in the third quarter of 2007 were $482.3 million, up
25.4 percent from the year-ago quarter.
Andrew Acquisition
On June 27, 2007, CommScope and Andrew Corporation (NASDAQ: ANDW) announced a
definitive agreement, unanimously approved by both companies' respective Boards
of Directors, under which CommScope will acquire all of the outstanding shares
of Andrew for $15.00 per share, at least 90 percent in cash. The combined
company will be a global leader in infrastructure solutions for communications
networks, including structured cabling solutions for the business enterprise;
broadband cable and apparatus for cable television applications; and antenna and
cable products, base station subsystems, coverage and capacity systems, and
network solutions for wireless applications.
"As we approach the closing of the Andrew acquisition, we are increasingly
excited about the prospects of combining our talented work forces and extensive
portfolios of 'last mile' solutions," Mr. Drendel stated. "We continue to
believe that cost reductions, growth opportunities and other synergies inherent
in this combination will drive increased value for our stockholders. We have
been working with our colleagues at Andrew on integration planning and we
believe that once this transaction is completed, we will be well-prepared to
begin integrating our two industry leading organizations."
The total transaction value is approximately $2.6 billion, based on Andrew's
estimated 176 million shares outstanding on a fully diluted basis, which
includes shares associated with Andrew's existing convertible notes. CommScope
expects to fund the cash portion of the purchase price through a combination of
new credit facilities and available cash on hand. CommScope has obtained
customary fully underwritten debt financing commitment letters from Bank of
America and Wachovia Bank, N.A. (and their respective affiliates). The
transaction is not conditioned on receipt of financing by CommScope.
The transaction is subject to completion of customary closing conditions,
including effectiveness of a registration statement on Form S-4, approval by
Andrew's stockholders, clearance under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and any other applicable laws or
regulations. As previously announced, on August 16, 2007, CommScope and Andrew
received requests for additional information from the Antitrust division of the
U.S. Department of Justice (DOJ). CommScope and Andrew have been cooperating
fully with the DOJ. The companies continue to expect to close the transaction
before the end of 2007. Other Third Quarter Highlights
-- As part of CommScope's continued cost management initiatives, a vacant
400,000 square foot warehouse along with 22 acres in Omaha, Nebraska
and a vacant 150,000 square foot manufacturing facility in Scottsboro,
Alabama were sold for approximately $11 million.
-- CommScope and Axis Communications announced an alliance to provide
converged security solutions for intelligent buildings. CommScope
believes combining the strengths of its global leadership in Enterprise
infrastructure with Axis Communications' unique expertise and global
leadership in IP-based video surveillance should help deliver customers
exceptional intelligent building solutions.
-- CommScope's Carrier segment extended its product portfolio through
several product introductions, including the new quieter 52 Universal
Cabinet Series designed for residential applications and the 30EC
Modular Battery Cabinet designed as a reserve power storage system
capable of using multiple vendors' batteries, which supports increased
DSL capacity in previously deployed systems.
-- Gross margin for the third quarter of 2007 was 31.0 percent, up
approximately 100 basis points year over year. The gross margin
improvement was primarily due to higher sales levels and a more
favorable mix.
-- SG&A expense for the third quarter of 2007 was $69.4 million or 13.5
percent of sales, compared to $62.8 million or 13.5 percent of sales in
the year-ago quarter. SG&A expense grew primarily due to higher sales
levels and spending to support and expand global sales initiatives.
-- Third quarter 2007 results include $2.7 million of pretax equity-based
compensation expense in accordance with SFAS No. 123( R ).
-- Operating income for the third quarter of 2007 increased 25 percent
year over year to $81.4 million, or 15.8 percent of sales. In the
year-ago quarter, operating income was $64.9 million, or 13.9 percent
of sales. Excluding restructuring costs in the year ago quarter,
operating income would have been $67.9 million, or 14.6 percent of
sales.
-- Total depreciation and amortization expense was $12.4 million for the
third quarter of 2007.
-- Net cash provided by operating activities in the third quarter of 2007
was $80.7 million. Capital spending in the quarter was $7.0 million.
Outlook
CommScope management provided the following guidance for the fourth quarter,
calendar year 2007 and calendar year 2008 without giving effect to the proposed
acquisition of Andrew.
Fourth Quarter and Calendar Year 2007
For the fourth quarter of 2007, revenue is expected to be $420-$440 million,
up approximately 7 percent to 12 percent year over year, and operating income
should rise by 20 percent to 40 percent year over year, based on the expected
operating margin of 11.0 percent to 12.0 percent, excluding special items.
"Consistent with historical patterns, we expect lower sequential sales as we
move into the seasonally slower fourth quarter," stated CommScope Executive Vice
President and Chief Financial Officer, Jearld Leonhardt. "Again this year, we
expect lower sales of ICS products in the fourth quarter to be followed by a
robust recovery in the first quarter of 2008."
Based on the fourth quarter 2007 financial guidance, sales for calendar year
2007 are expected to be approximately $1.89-$1.91 billion, up approximately 16
percent to 17 percent year over year. Operating margin for calendar year 2007 is
estimated to be 14.75 percent to 15.0 percent, excluding special items. Calendar
year 2007 capital spending is expected to be approximately $24-$27 million.
The company's previous calendar year 2007 guidance was sales of $1.90 - $1.94
billion and operating margin of 15.25 percent to 15.50 percent, excluding
special items.
Calendar Year 2008
For calendar year 2008, CommScope expects modest sales and operating income
growth assuming relative stability in the business environment and raw material
costs. The company intends to provide calendar-year 2008 guidance after it
closes the Andrew transaction and completes its planning for the combined
business. Excluding intangible amortization, transition and any other
nonrecurring items, and including synergies, the company expects the transaction
with Andrew to be accretive to its 2008 results.
Conference Call Information
CommScope plans to host a call today at 5:00 p.m. EDT to discuss third
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 on the conference call, domestic and international callers
should dial (212) 231-2901. 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 be available through a link on the
"Events/Presentations" tab of the Investor Relations section of CommScope's
website at www.commscope.com.
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 (402) 977-9140
for the replay. The replay ID is 21352735 and it will be available through
Tuesday, November 6. A webcast replay will also be archived on CommScope's
website for a limited period of time following the conference call.
About CommScope
CommScope (NYSE: CTV - www.commscope.com) is a world leader in infrastructure
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 proposed business combination between CommScope and Andrew and the
anticipated consequences and benefits of such transaction, and other financial
and operational items relating to CommScope and Andrew. Statements made in the
future tense, and statements using words such as "intend," "goal," "estimate,"
"expect," "expectations," "project," "projections," "plans," "anticipates,"
"believe," "think," "should," "confident" and "scheduled" and similar
expressions are intended to identify forward-looking statements. Forward-looking
statements are not a guarantee of performance and are subject to a number of
risks and uncertainties, many of which are difficult to predict and are beyond
the control of CommScope or Andrew. These risks and uncertainties could cause
actual results to differ materially from those expressed in or implied by the
forward-looking statements, and therefore should be carefully considered.
Relevant risks and uncertainties relating to the proposed transaction include,
but are not limited to: the risk that required regulatory review and approval
may not be obtained in a timely manner, if at all; Andrew's stockholders may not
approve the proposed transaction; the anticipated benefits and synergies of the
proposed transaction may not be realized; the integration of Andrew's operations
with CommScope could be materially delayed or may be more costly or difficult
than expected; the proposed transaction may not be consummated; legal
proceedings may be commenced by or against CommScope or Andrew. Relevant risks
and uncertainties generally applicable to CommScope and Andrew include, but are
not limited to: changes in cost and availability of key raw materials and the
ability to recover these costs from customers through pricing actions; customer
demand for products and the ability to maintain existing business alliances with
key customers or distributors; concentration of sales among a limited number of
customers or distributors; the risk that internal production capacity and that
of contract manufacturers may be insufficient to meet customer demand for
products; the risk that customers might cancel orders placed or that orders
currently placed may affect order levels in the future; continuing consolidation
among customers; competitive pricing and acceptance of 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; ability to achieve expected sales, growth and
earnings goals; costs of protecting or defending intellectual property; ability
to obtain capital on commercially reasonable terms; regulatory changes affecting
us or the industries we serve. For a more complete description of factors that
could cause such a difference, please see CommScope's filings with the
Securities and Exchange Commission (SEC), which are available on CommScope's
website or at www.sec.gov, and Andrew's filings with the SEC, which are
available on Andrew's website or at www.sec.gov. In providing forward-looking
statements, neither CommScope nor Andrew intends, and neither undertakes any
duty or obligation, to update these statements as a result of new information,
future events or otherwise.
Additional Information
In connection with the proposed merger, CommScope filed a registration
statement with the SEC on Form S-4 (File No. 333-145398) containing a
preliminary proxy statement/prospectus and CommScope and Andrew expect to mail a
definitive proxy statement/prospectus to Andrew's stockholders containing
information about the merger. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ
THE REGISTRATION STATEMENT AND THE PROXY STATEMENT/PROSPECTUS CAREFULLY.
The registration statement and the proxy statement/prospectus contain
important information about CommScope, Andrew, the merger, and related matters.
Investors and security holders may obtain free copies of these documents through
the web site maintained by the SEC at www.sec.gov. In addition to the
registration statement and the proxy statement/prospectus, CommScope and Andrew
file annual, quarterly, and special reports, proxy statements, and other
information with the SEC. Printed copies of these documents can also be obtained
free of charge (other than a reasonable duplicating charge for exhibits to our
reports on Form 10-K, Form 10-Q and Form 8-K) by any stockholder who requests
them from either CommScope's or Andrew's Investor Relations Department: Investor Relations
CommScope, Inc.
1100 CommScope Place, SE
P.O. Box 339
Hickory, North Carolina 28602 U.S.A.
Phone: (828) 324-2200
Fax: (828) 982-1708
E-mail: investor.relations@commscope.com
Investor Relations
Andrew Corporation
3 Westbrook Corporate Center
Suite 900
Westchester, Illinois 60154 U.S.A.
Phone: (800) 232-6767 or (708) 236-6616
Fax: (708) 492-3774
E-mail: investor.relations@andrew.com
CommScope, Andrew and their respective directors and executive officers and
other members of management and employees may be deemed to be participants in
the solicitation of proxies from Andrew stockholders in connection with the
proposed transaction. Information about CommScope's directors and executive
officers and their ownership of CommScope common stock is set forth in the
definitive proxy statement for CommScope's 2007 annual meeting of stockholders,
as filed by CommScope with the SEC on Schedule 14A on March 16, 2007.
Information about Andrew's directors and executive officers and their ownership
of Andrew common stock is set forth in the definitive proxy statement for
Andrew's 2007 annual meeting of stockholders, as filed by Andrew with the SEC on
Schedule 14A on December 29, 2006. Other information regarding the participants
in the proxy solicitation is contained in the proxy statement/prospectus and
other relevant materials filed with the SEC when they come available.
CommScope, Inc.
Condensed Consolidated Statements of Operations
(Unaudited -- In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Net sales $513,608 $466,100 $1,468,204 $1,230,235
Operating costs and expenses:
Cost of sales 354,324 326,287 1,014,382 897,135
Selling, general and
administrative 69,416 62,799 196,659 175,229
Research and development 8,288 9,151 24,610 24,821
Restructuring costs 215 3,011 1,113 10,764
Total operating costs and
expenses 432,243 401,248 1,236,764 1,107,949
Operating income 81,365 64,852 231,440 122,286
Other income (expense), net 2,824 207 2,542 872
Interest expense (1,665) (2,110) (5,339) (6,082)
Interest income 5,962 3,145 16,248 7,541
Income before income taxes
and gain on OFS BrightWave
note receivable 88,486 66,094 244,891 124,617
Income tax expense before
income tax provision on
gain on OFS BrightWave note
receivable (28,213) (22,504) (77,634) (40,279)
Income before gain on OFS
BrightWave note receivable 60,273 43,590 167,257 84,338
Gain on OFS BrightWave note
receivable, net of tax of
$11,175 - - - 18,625
Net income $60,273 $43,590 $167,257 $102,963
Net income per share:
Basic $0.98 $0.74 $2.74 $1.77
Assuming dilution (a) $0.81 $0.61 $2.26 $1.45
Weighted average shares
outstanding:
Basic 61,661 59,166 61,105 58,146
Assuming dilution (a) 74,978 72,662 74,500 71,917
(a) Calculation of net
income per share, assuming
dilution:
Net income (basic) $60,273 $43,590 $167,257 $102,963
Convertible debt add-back
(b) 629 629 1,887 1,887
Numerator (assuming
dilution) $60,902 $44,219 $169,144 $104,850
Weighted average shares
(basic) 61,661 59,166 61,105 58,146
Dilutive effect of:
Stock options (c) 1,294 1,823 1,435 2,136
Phantom stock,
restricted stock and
performance units 529 179 466 141
Convertible debt (b) 11,494 11,494 11,494 11,494
Denominator
(assuming dilution) 74,978 72,662 74,500 71,917
(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) No options to purchase common shares were excluded from the
computation of net income per share, assuming dilution, for the three
and nine months ended September 30, 2007. Options to purchase
approximately 0.6 million and 1.9 million common shares were excluded
from the computation of net income per share, assuming dilution, for
the three and nine months ended September 30, 2006, respectively,
because they would have been antidilutive.
CommScope, Inc.
Condensed Consolidated Balance Sheets
(Unaudited -- In thousands, except share
amounts)
September 30, December 31,
2007 2006
Assets
Cash and cash equivalents $333,316 $276,042
Short-term investments 238,575 151,868
Total cash, cash equivalents and
short-term investments 571,891 427,910
Accounts receivable, less allowance
for doubtful accounts of
$14,558 and $13,461, respectively 257,564 186,824
Inventories, net 190,288 153,596
Prepaid expenses and other current
assets 18,982 14,914
Deferred income taxes 27,361 24,556
Total current assets 1,066,086 807,800
Property, plant and equipment, net 222,707 242,012
Goodwill 154,454 151,378
Other intangibles, net 68,184 63,967
Deferred income taxes 18,470 15,493
Other assets 20,316 21,823
Total Assets $1,550,217 $1,302,473
Liabilities and
Stockholders' Equity
Accounts payable $84,391 $74,927
Other accrued liabilities 114,754 95,316
Current portion of long-term debt 11,550 13,000
Total current liabilities 210,695 183,243
Long-term debt 250,000 271,100
Pension and postretirement benefit
liabilities 89,272 89,995
Other noncurrent liabilities 33,154 19,031
Total Liabilities 583,121 563,369
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.01 par value;
Authorized shares: 20,000,000;
Issued and outstanding shares:
None at September 30, 2007 and
December 31, 2006 - -
Common stock, $.01 par value;
Authorized shares: 300,000,000;
Issued shares, including treasury
stock: 71,882,441 at September 30,
2007 and 69,934,533 at December 31,
2006; Issued and outstanding shares:
61,682,441 at September 30, 2007
and 59,734,533 at December 31, 2006 719 699
Additional paid-in capital 591,043 532,344
Retained earnings 508,023 346,821
Accumulated other comprehensive
income 12,846 4,775
Treasury stock, at cost: 10,200,000
shares at September 30, 2007
and December 31, 2006 (145,535) (145,535)
Total Stockholders' Equity 967,096 739,104
Total Liabilities and
Stockholders' Equity $1,550,217 $1,302,473
CommScope, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited -- In thousands)
Nine Months Ended
September 30,
2007 2006
Operating Activities:
Net income $167,257 $102,963
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 37,285 41,858
Equity-based compensation 7,747 3,384
Deferred income taxes (10,096) 9,967
Gain on OFS BrightWave note
receivable - (29,800)
Changes in assets and liabilities (63,680) (96,904)
Net cash provided by operating
activities 138,513 31,468
Investing Activities:
Additions to property, plant and
equipment (18,284) (22,625)
Proceeds from OFS BrightWave note
receivable - 29,800
Net purchases of short-term
investments (86,707) (10,022)
Proceeds from disposal of fixed
assets 10,957 4,599
Cash paid for acquisitions (16,976) (13,810)
Net cash used in investing activities (111,010) (12,058)
Financing Activities:
Principal payments on long-term
debt (22,550) (9,950)
Proceeds from the issuance of
shares under equity-based
compensation plans 34,667 48,969
Tax benefit from the issuance of
shares under equity-based
compensation plans 16,305 15,857
Net cash provided by financing
activities 28,422 54,876
Effect of exchange rate changes on
cash 1,349 775
Change in cash and cash equivalents 57,274 75,061
Cash and cash equivalents, beginning
of period 276,042 146,549
Cash and cash equivalents, end of
period $333,316 $221,610
CommScope, Inc.
Sales and Operating Income by Reportable
Segment
(Unaudited -- In millions)
Three Months Ended
September 30,
2007 2006
Net Sales:
Enterprise $ 240.4 $ 237.7
Broadband 161.2 143.8
Carrier 112.3 85.0
Inter-segment eliminations (0.3) (0.4)
Consolidated Net Sales $ 513.6 $ 466.1
Operating Income:
Enterprise $ 42.5 $ 40.9
Broadband 17.0 12.8
Carrier 21.9 11.2
Consolidated Operating Income $ 81.4 $ 64.9
Nine Months Ended
September 30,
2007 2006
Net Sales:
Enterprise $ 680.6 $ 614.9
Broadband 472.7 406.2
Carrier 316.2 210.7
Inter-segment eliminations (1.3) (1.6)
Consolidated Net Sales $ 1,468.2 $ 1,230.2
Operating Income:
Enterprise $ 119.8 $ 76.1
Broadband 58.8 25.3
Carrier 52.8 20.9
Consolidated Operating Income $ 231.4 $ 122.3
SOURCE CommScope, Inc.
CONTACT: Investors, Phil Armstrong of CommScope,
+1-828-323-4848,
phil.armstrong@commscope.com; or Media, Matthew
Sherman,
msherman@joelefrank.com, or Jeremy Jacobs, jjacobs@joelefrank.com,
both of
Joele Frank, Wilkinson Brimmer Katcher, +1-212-355-4449/
/Web
Site: http://www.commscope.com /
(CTV ANDW)
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