GAAP EPS of $0.51, up 34 percent year over year
• Adjusted EPS of $0.55, excluding costs associated with the Andrew
acquisition
• Sales of $463 million, up 17 percent year over year
• Operating income up 52 percent to $55 million
• Orders of $420 million, up 19 percent year over year
Hickory, NC (February 28, 2008) CommScope, Inc. (NYSE: CTV), a global
leader in infrastructure solutions for communications networks, achieved record
fourth quarter 2007 results, including sales of $462.6 million and net income of
$37.6 million, or $0.51 per diluted share.
The reported net income includes after-tax charges of approximately $3.1
million for interest on new term loans, write-off of deferred financing fees and
acquisition-related expenses related to the acquisition of Andrew Corporation.
Excluding these special items, adjusted fourth quarter 2007 earnings were $40.6
million, or $0.55 per diluted share. (A reconciliation of reported GAAP
earnings and earnings per diluted share to adjusted results for the fourth
quarter and calendar year is attached.)
For the fourth quarter 2006, CommScope reported sales of $393.7 million and
net income of $27.2 million, or $0.38 per diluted share. The reported net
income includes after-tax charges of $1.1 million related to restructuring
costs. Excluding this special item, adjusted fourth quarter 2006 earnings were
$28.3 million, or $0.40 per diluted share.
For 2007, CommScope sales rose 18.9 percent to $1.93 billion and net income
rose 57.4 percent to $204.8 million, or $2.78 per diluted share. This compares
to sales of $1.62 billion and net income of $130.1 million, or $1.84 per diluted
share for 2006.
“Despite an uncertain economic environment, we are pleased to have delivered
another record quarter and year while closing the acquisition of Andrew
Corporation,” said CommScope Chairman and Chief Executive Officer, Frank
Drendel. “We believe that the ongoing, fundamental global demand for bandwidth
will continue to drive the need for communications infrastructure—in both wired
and wireless networks.
“Both CommScope and Andrew claim a proud past and we believe that, together
as one company, we have a promising future. We intend to execute on our
previously announced cost reduction plans while we build upon our industry
leading portfolio of products, broad geographic base and market diversity to
create strong cash flow from operations in 2008. We have an experienced
management team and solid competitive position. We remain confident in the
long-term outlook for sales growth and profitability.”
Sales Overview
Sales for the fourth quarter 2007 increased 17.5 percent year over year,
primarily driven by increased volume in all three segments, with particular
strength in the Carrier segment. As anticipated, sales declined sequentially due
to the typical seasonal slowdown.
Enterprise segment sales rose 16.7 percent year over year to $218.8 million
driven by volume growth in all regions with particular strength in North
America. Despite economic uncertainty, Enterprise users continue to invest in
their communications networks as employees work more collaboratively, data
centers expand and buildings are configured with intelligent infrastructure.
These drivers, along with the recent ratification of the Category 6A and Class
EA standards by the Telecommunication Industry Association (TIA), the
International Organization for Standardization (ISO) and International
Electrotechnical Commission (IEC) support ongoing demand for 10 Gb/s solutions,
such as the industry-leading SYSTIMAX® GigaSPEED X10D.
Broadband segment sales rose 6 percent year over year to $152.6 million,
primarily due to higher international sales volumes 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
should continue to drive investment by MSOs in their networks.
Carrier segment sales increased 46.5 percent year over year to $91.4 million.
Sales rose significantly in all major Carrier product areas. CommScope
experienced particularly strong international wireless sales of its ExtremeFlex®
smooth wall aluminum cables for mobile cellular towers in the quarter.
Integrated Cabinet Solutions (ICS) revenue increased as large domestic wireline
carriers continue to deploy electronics deeper in their networks to offer higher
bandwidth broadband and video services. Fourth quarter ICS sales reflect a less
favorable product mix than previous quarters.
Total international sales for the fourth quarter 2007 rose 17.4 percent year
over year to $164.5 million, or 35.6 percent of total company sales.
External customer orders booked in the fourth quarter 2007 were $420.1
million, up 18.5 percent from the year-ago quarter.
Other Fourth Quarter Highlights
• Gross margin for the fourth quarter 2007 was 29.2 percent, up more than
100 basis points year over year. The gross margin improvement was primarily due
to higher sales levels, a more favorable product mix and the benefits of ongoing
cost reduction activities.
• SG&A expense for the fourth quarter 2007 was $70.6 million, or 15.3
percent of sales, compared to $64.8 million or 16.5 percent of sales in the
year-ago quarter. SG&A expenses grew primarily due to higher sales levels
and spending to support and expand global sales initiatives.
• Operating income for the fourth quarter 2007 increased approximately 52
percent year over year to $55.1 million, or 11.9 percent of sales. In the
year-ago quarter, operating income was $36.3 million, or 9.2 percent of sales.
Excluding restructuring costs in the year ago quarter, operating income would
have been $38.1 million, or 9.7 percent of sales.
• Total depreciation and amortization expense was $12.2 million for the
fourth quarter of 2007, while capital spending in the quarter was $9.6
million.
• Net cash provided by operating activities rose to an all-time quarterly
record of $101.4 million.
Full Year 2007 Results
CommScope reported sales of $1.93 billion for 2007, and net income of $204.8
million, or $2.78 per diluted share. The company’s 2007 results included
after-tax charges of approximately $3.8 million related to interest on the new
term loans associated with the Andrew acquisition, write-off of deferred
financing fees, restructuring costs and acquisition costs. Excluding these
special items, 2007 adjusted earnings would have been $208.6 million or $2.83
per diluted share. (Please see the attached reconciliation of reported GAAP
earnings and earnings per diluted share to adjusted results.)
CommScope reported sales of $1.62 billion for 2006, and net income of $130.1
million, or $1.84 per diluted share. The company’s 2006 results included an
after-tax charge of $8.1 million related to restructuring costs and an after-tax
benefit of $18.6 million related to a recovery on a note receivable from OFS
BrightWave, LLC. Excluding these special items, 2006 adjusted earnings would
have been $119.6 million or $1.69 per diluted share. A sales summary for 2007
and 2006 is shown below:
Andrew Acquisition and December Quarter Results
On December 27, CommScope completed its acquisition of Andrew Corporation for
a total purchase price of approximately $2.6 billion. In its December quarter,
prior to the acquisition by CommScope, Andrew’s unaudited results included
revenues of $546.2 million and an operating loss of $24.7 million. Andrew’s
operating loss reflected merger costs of $34.0 million, asset impairment of
$12.1 million, restructuring of $4.8 million, intangible amortization of $1.6
million and a gain on the sale of assets of $0.9 million.
CommScope’s 2007 statements of operations and cash flows do not include any
operating results for Andrew, which were immaterial for the four-day period
between closing and December 31.
2008 Outlook
CommScope management is providing the following guidance for calendar year
2008:
• Expected revenue of $4.1 - $4.3 billion
• Pro forma operating income target of $525 - $575 million, excluding
restructuring and transition costs as well as purchase accounting adjustments
related to the fair value write-up of inventory, property, plant and equipment
and intangibles, which results in increased charges for inventory, depreciation
and amortization. This operating income target assumes that the company will be
able to successfully recover costs associated with rising raw material
costs.
• Overall interest rate expected to be around 6.75 % for the term loans,
which had a beginning balance of $2.1 billion
• Expected tax rate of 34% - 36%
• Approximately 81 million weighted average fully diluted shares
anticipated to be outstanding
• More than $500 million of cash flow from operations expected
• Expected capital expenditures of $80-$90 million
• Significant non-cash costs related to purchase accounting adjustments
expected, including:
o More than $100 million of additional annual intangible amortization
o More than $50 million of fair value inventory write-up that increases
cost of goods sold primarily in the first quarter
First Quarter 2008 Outlook
CommScope management is providing the following guidance for the first
quarter of 2008:
• Expected Revenue of $950 - $970 million
• Pro forma operating income of $80 - $90 million, excluding restructuring
and transition costs as well as purchase accounting adjustments related to the
fair value write-up of inventory, property, plant and equipment and intangibles,
which results in increased charges for inventory, depreciation and
amortization
• As the result of significant non-cash costs related to purchase
accounting adjustments and one-time transition costs, CommScope anticipates
reporting a GAAP loss in the first quarter of 2008.
“We are excited about the acquisition and the significant task of integrating
CommScope and Andrew is well underway,” said Executive Vice President and Chief
Financial Officer Jearld Leonhardt. “We face some headwinds with the recent
volatility in raw material costs. Our calendar year 2008 guidance assumes the
ability to recover higher costs, a stable business environment and includes the
previously announced $50 to $60 million in cost reduction synergies. While we
face some near term challenges, we believe that CommScope has a great foundation
for success and that the Andrew team makes us even stronger. We look forward to
another successful year.”
Conference Call Information
CommScope plans to host a call today at 5:00 p.m. EST to discuss fourth
quarter results and full year 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 (706) 679-4510. 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 21375605 and it will be available through
Thursday, March 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 Andrew Wireless Solutions®
brand, it is a global leader in radio frequency subsystem solutions for wireless
networks. Through its SYSTIMAX® SolutionsTM and Uniprise® Solutions brands, it
is a world leader in network infrastructure solutions, delivering a complete
end-to-end physical layer solution, including cables and connectivity,
enclosures, intelligent software and network design services. CommScope is
also the premier manufacturer of coaxial cable for broadband cable television
networks and one of the leading North American providers of environmentally
secure cabinets for DSL and FTTN applications. Backed by strong research and
development, CommScope combines technical expertise and proprietary technology
with global manufacturing capability to provide customers with infrastructure
solutions for evolving global communications networks in more than 130 countries
around the world.
Forward-Looking Statements
This press release contains forward-looking statements regarding, among other
things, the Andrew acquisition, business position, plans, outlook, revenues,
margins, earnings, integration, 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.
Statements made in the future tense, and statements using words such as
“intend,” “goal,” “estimate,” “expect,” “project,” “projections,” “plans,”
“anticipate,” “should,” “designed to,” “foreseeable future,” “believe,”
confident,” “think,” “scheduled,” “outlook,” “guidance” 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, and therefore should be carefully considered. Factors that could
cause actual results of CommScope to differ materially include, but are not
limited to, customer demand for our products and the ability to maintain
existing business alliances with key customers or distributors; competitive
pricing and acceptance of products; industry competition and the ability to
retain customers through product innovation; changes in cost and availability of
key raw materials and the ability to recover these costs from customers through
pricing actions; 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;
possible production disruption due to supplier or contract manufacturer
bankruptcy, reorganization or restructuring; achievement of cost reduction
synergies expected from the acquisition of Andrew; significant international
operations; ability to integrate the CommScope and Andrew businesses; ability to
fully realize anticipated benefits from prior or future acquisitions or equity
investments; substantial indebtedness as a result of the acquisition of Andrew;
dependence upon key personnel; ability to integrate Andrew’s systems of internal
control over financial reporting with ours; realignment of global manufacturing
capacity; purchase accounting costs; protecting or defending intellectual
property; ability to obtain capital on commercially reasonable terms;
fluctuations in interest rates; the ability to achieve expected sales, growth
and earnings goals; and 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.
In providing forward-looking statements, CommScope does not intend, and does
not undertake any duty or obligation, to update these statements as a result of
new information, future events or otherwise.
Investor Contact:
Philip Armstrong
+1 (828) 323-4848
News Media Contact:
Rick Aspan
+1 (708) 236-6568 or publicrelations@commscope.com
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