Revenue more than doubles to $1 billion, reflecting Andrew
acquisition
Net loss of $11 million, or $0.16 per share, reflects
acquisition related costs
Adjusted operating income of $112 million, excluding special
items
Adjusted EPS of $0.59, excluding special items
Generates strong first quarter cash flow from operations
of $80 million
Reduces debt by $291 million
Hickory, NC (April 29, 2008) CommScope, Inc. (NYSE: CTV), a global leader
in infrastructure solutions for communications networks, reported revenue of
$1.0 billion and a net loss of $11.0 million, or $0.16 per share, for the quarter
ended March 31, 2008.
The reported net income includes after-tax charges of approximately $34.3
million for inventory-related purchase accounting adjustments, $18.5 million
for the amortization of purchased intangibles, $2.8 million of cost related
to debt reduction and $2.1 million for acquisition and restructuring costs.
Excluding these items, adjusted first quarter 2008 earnings were $46.7
million, or $0.59 per diluted share. (A reconciliation of reported GAAP
earnings and earnings per diluted share to adjusted results for the quarter
is attached.)
For the first quarter of 2007, CommScope reported sales of $435.5 million
and net income of $45.9 million, or $0.63 per diluted share.
We are proud to deliver another excellent quarter as we have successfully
begun the integration of CommScope and Andrew Corporation, said CommScope Chairman
and Chief Executive Officer Frank Drendel. Cost synergies are ahead of schedule
and our global wireless business performed very well, particularly in North
America and in the Asia Pacific region. We believe that our geographic
diversity combined with the breadth of our industry-leading product portfolio
helped us deliver strong results in the first quarter despite an uncertain North
American economic environment.
Global wireless growth and traffic, the ongoing proliferation of 3G mobile
data devices, as well as bandwidth intensive applications in the enterprise
and broadband markets continue to drive wireless and wireline telecommunications
operators and enterprises to invest in their communications infrastructure.
As a leader in each of the markets we serve, we remain excited about the
opportunities ahead.
Sales Overview
As a result of the ongoing integration of the Andrew and CommScope operations,
management determined that the companys four reporting segments would be the
Antenna, Cable and Cabinets Group (ACCG); Enterprise; Broadband; and Wireless
Network Solutions (WNS). These reporting segments align with the management
reporting structure that was implemented following the Andrew acquisition.
Sales more than doubled on a year-over-year basis primarily as a result of
the Andrew acquisition. On a combined basis that includes Andrews actual
sales for the first quarter of 2007, sales increased 7.1 percent. This
sales growth was primarily driven by increased spending by wireless operators
and changes in foreign exchange rates of $31 million, somewhat offset by lower
Broadband sales. Excluding the impact of changes in foreign exchange rates
and after adjusting for the January 2008 divestiture of the Satellite Communications
(SatCom) product line and other items, sales growth was approximately 5 percent
year over year.
ACCG sales increased 19.4 percent year over year to $479.0 million as wireless
operators continued to invest in expanding and upgrading their networks. ACCG
segment sales growth was strong in essentially all regions. The company
expects ongoing global capacity expansion by wireless operators in emerging
markets and significant mobile data services growth in developed markets to
provide wireless infrastructure opportunities over the long term.
Enterprise sales rose 5.3 percent year over year to $211.5 million. Sales
growth was primarily driven by higher international sales volumes. Enterprises
continued to invest in higher bandwidth solutions as employees work more collaboratively,
data centers expand, legacy security networks migrate to an IP-based platform
and buildings are configured with intelligent infrastructure. The ratification
of Category 6A standards, as well as electronics capable of delivering 10 Gb/s
bandwidth over copper to the desktop, should support ongoing demand for the
industry-leading SYSTIMAX® GigaSPEED X10D solution. While North American
Enterprise sales were essentially unchanged year over year, the Enterprise segment
grew primarily due to sales growth in all other regions.
Broadband sales declined 8.5 percent year over year to $135.5 million, primarily
due to the slowdown in outside plant construction in North America. Broadband
performance was negatively affected by lower sales volumes, a less favorable
product mix and higher raw material and other costs. CommScope continues
to believe that competition between domestic multiple system operators (MSOs)
and domestic wireline carriers should continue to drive investment by MSOs in
their networks.
WNS sales decreased 4.2 percent year over year to $180.6 million. WNS
results include sales related to the SatCom product line, which was divested
on January 31, 2008. SatCom revenue was $8.6 million in January
2008 and was $30.7 million in the March 2007 quarter. Excluding SatCom
revenue, WNS revenue grew approximately 9 percent year over year. The
WNS segment was positively affected by wireless operator investment in existing
networks and the deployment of new wireless networks in developing countries.
Customer orders booked in the first quarter of 2008 were $1.06 billion, up
10.2 percent from the year-ago quarter on a combined basis.
Operating Income
Operating income in the first quarter was $27.8 million. Excluding
purchase accounting adjustments, intangible amortization, acquisition related
expenses and restructuring, first quarter adjusted operating income was $112.1
million. Adjusted operating income, on a comparative basis, rose
24 percent year over year, primarily due to improved performance from the ACCG,
Enterprise and WNS segments, somewhat offset by weaker Broadband performance.
(A reconciliation to adjusted operating income for the quarters is attached.)
Other First Quarter Highlights
As a result of higher raw material costs, price increases
were announced on selected cable products in the ACCG, Enterprise and Broadband
segments.
Gross margin for the first quarter of 2008 was 21.5 percent
and includes $52.8 million of purchase accounting adjustments related to inventory
as well as $3.9 million of intangible amortization reflected in Cost of Sales.
Excluding these items, gross margin would have been 27.2 percent.
SG&A expense for the first quarter of 2008 was $128.0
million, or 12.7 percent of sales.
Total amortization of purchased intangible assets was
$28.5 million (of which $3.9 million is reflected in Cost of Sales). The
amortization relates primarily to the Andrew acquisition.
Total depreciation and amortization expense was $56.7
million for the first quarter of 2008, while capital spending in the quarter
was $11.8 million.
Despite a significant increase in cash outlays for interest
due to acquisition financing, net cash provided by operating activities rose
substantially year over year to $80.2 million.
CommScope reduced debt by $291 million during the first
quarter, which represented more than 10 percent of its total debt outstanding.
Substantially all of the Andrew 3¼ percent convertible senior subordinated
notes were converted and holders received merger consideration (primarily cash)
in the quarter. CommScope also agreed to the conversion, into CommScope
stock, of $50.5 million of its $250 million aggregate principal amount of 1
percent convertible senior subordinated notes during the quarter. As a
result of this conversion activity, the company recorded a $2.8 million pretax
charge in other expense.
CommScope completed the sale of its SatCom business to
Resilience Capital Partners in January 2008. The former SatCom business
is being operated as an independent company called ASC Signal Corporation. CommScope
owns a minority share (17.9 percent) of ASC Signal and provides certain transition
support services to the new company.
Integration and Cost Reduction Activities
CommScope integration activities are ahead of schedule and the company remains
confident that it can achieve or exceed its merger-related cost reduction targets.
The company also continues to review global operations in order
to identify cost reduction opportunities and enhance its long-term competitive
position.
The company recently announced that it plans to close its Jaguariuna, Brazil
broadband facility. The Jaguariuna facility, which employs approximately
200 people and produces broadband cable products, is expected to close by the
end of September, with most equipment redeployed to other CommScope facilities.
These changes do not affect the companys other Brazilian facility located
in Sorocaba or the companys ongoing commitment to providing Latin American
customers with high-performance wireless, enterprise and broadband solutions.
Separately, CommScope Europe S.P.R.L. has notified its Works Council of its
intention to discontinue production activities at its facility in Seneffe, Belgium.
A final decision on the proposed restructuring will be made after a consultation
period with the Works Council. The company also has notified employees
of its intent to proceed with the closing of its Capriate, Italy facility, acquired
as part of the Andrew acquisition. Some Capriate activities will be centralized
at the companys Agrate, Italy site. Discussions are ongoing to finalize these
and other consolidation plans.
As previously disclosed, and excluding one-time transition items, CommScope
expects total merger-related savings of approximately $90 million to $100 million
during calendar year 2009, of which approximately $50 million to $60 million
are expected to be achieved in calendar year 2008. The total cost savings
are expected to come from a combination of procurement savings, rationalization
of duplicate locations, streamlining overhead and integration of infrastructure,
and building upon best practices in technology and manufacturing. Transition
cash costs associated with these initiatives are expected to total approximately
$70 million to $80 million.
Outlook
CommScope management provided the following guidance for the second quarter
of 2008 and reiterated its calendar year 2008 guidance:
Second Quarter 2008
Expected revenue of $1.05 billion to $1.09 billion
Adjusted operating income target of $135 million to $145
million, excluding restructuring and transition costs as well as purchase accounting
adjustments related to the fair value write up of inventory and intangibles,
which results in increased charges for inventory and amortization.
Calendar Year 2008
CommScope management reaffirmed its previous 2008 calendar year guidance:
Expected revenue of $4.1 billion to $4.3 billion
Adjusted operating income target of $525 million to $575
million, excluding restructuring and transition costs as well as purchase accounting
adjustments related to the fair value write up of inventory and intangibles,
which results in increased charges for inventory and amortization. This
operating income target assumes that the company will be able to successfully
recover costs associated with rising raw material costs.
Expected tax rate of 34 percent to 36 percent on adjusted
pretax income
Approximately 81 million weighted average fully diluted
shares outstanding
More than $500 million of cash flow from operations expected
Expected capital expenditures of $80 million to $90 million
Significant cash restructuring and non-cash costs related
to purchase accounting adjustments expected
"We are particularly proud of our execution in the first quarter while managing
the significant task of integrating CommScope and Andrew," said Executive Vice
President and Chief Financial Officer Jearld Leonhardt." We achieved key integration
milestones and delivered solid financial performance, top-line growth and cash
flow during the quarter."
"Looking ahead, North American economic conditions remain uncertain and volatile
raw material costs remain a challenge.However, we expect to see positive
seasonal trends in the second quarter and believe we are in a strong position
to achieve the previously announced 2008 targets for sales and adjusted operating
income. We have a strong global portfolio and continue to expect
the ongoing, global demand for bandwidth to drive the need for infrastructure
solutions. We look forward to another successful year.
Conference Call Information
CommScope plans to host a call today at 5:00 p.m. EDT 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 on the conference call, domestic and international callers
should dial
+1 (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 CommScopes 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 (US only) or +1 402-977-9140 (outside US) for the
replay. The replay ID is 21381316 and it will be available through Tuesday,
May 6. A webcast replay will also be archived on CommScopes 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® 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.
END
Forward Looking Statement
This press release contains forward-looking statements regarding, among other
things, the announced global manufacturing changes, the Andrew acquisition,
business position, plans, outlook, integration, synergies and other financial
items relating to CommScope that are based on information currently available
to management, managements 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, continued
economic weakness and uncertainties, the challenges of achieving anticipated
synergies related to manufacturing initiatives; delays or challenges related
to removing, transporting or reinstalling equipment; the ability to retain qualified
employees and existing business alliances; 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
or quality standards for our 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 Andrews 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; the outcome of the TruePosition,
Inc. litigations 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 CommScopes filings with the Securities and Exchange Commission (SEC),
which are available on CommScopes 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: News
Media Contact:
Philip Armstrong, CommScope Rick
Aspan, CommScope
+1 828-323-4848 +1
708-236-6568
publicrelations@commscope.com
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