CommScope, Inc. (NYSE: CTV), a global leader in infrastructure solutions
for communications networks, today announced record second quarter
results for the period ended June 30, 2007. The company reported second
quarter sales of $519.1 million and net income of $61.1 million, or
$0.83 per diluted share.
For the second quarter of 2006, CommScope reported sales of $411.9
million and net income of $46.6 million, or $0.65 per diluted share. The
reported second quarter 2006 net income included an after-tax gain of
$18.6 million related to the recovery on a note receivable from OFS
BrightWave, LLC and after-tax charges of $2.6 million related to
restructuring costs. Excluding these special items, adjusted earnings
were $30.6 million, or $0.43 per diluted share.
“We are pleased to deliver another record quarter as we expand our
global leadership in infrastructure solutions for communications
networks,” said CommScope Chairman and Chief Executive Officer, Frank M.
Drendel. “We believe that customer demand for bandwidth remains strong
and we look forward to building upon positive industry fundamentals.
“We are also excited about the pending acquisition of Andrew
Corporation, which we announced last month. We are moving forward and
continue to expect the transaction to close before the end of 2007,”
Sales for the second quarter of 2007 increased 26.0 percent year over
year, driven by increased customer demand across all business segments
and price increases in the Enterprise and Broadband segments due to
higher material costs, which were implemented in the first half of 2006.
The company experienced particularly strong sales growth in the Carrier
segment. Below is a sales summary:
Enterprise segment sales rose 16.7 percent year over year to $239.4
million, primarily due to higher sales volume, favorable mix and price
increases implemented in 2006 in response to higher costs. CommScope
continues to experience success with its high-performance and
industry-leading products, including the SYSTIMAX® GigaSPEED® X10D
unshielded twisted pair cabling solution and the innovative iPatch® Real
Time Infrastructure Management System, as enterprises upgrade their
networks to manage expected bandwidth requirements. Enterprise sales
grew in all geographic regions.
Broadband segment sales rose 19.7 percent year over year to $163.4
million, primarily due to higher sales volumes, price increases
implemented in the first half of 2006 in response to higher material
costs and the positive impact of the Signal Vision, Inc. acquisition,
which closed on May 1, 2007. Competition between cable television and
telephone companies has resulted in ongoing investment in their networks
to support expanded video, data and voice services, which has stimulated
Broadband sales. Broadband sales growth in the quarter was strongest in
the Latin American and North American regions.
Carrier segment sales increased 64.4 percent year over year to $116.7
million. This robust growth is primarily the result of large domestic
wireline carriers continuing to deploy broadband services to their
customers. The Carrier segment has been CommScope’s fastest growing and
most volatile segment.
Total international sales for the second quarter of 2007 rose 20.5
percent year over year to $160.1 million, or approximately 30.8 percent
of total company sales.
External orders booked in the second quarter of 2007 were $548.3
million, up 12.2 percent from the year-ago quarter.
On June 27, 2007, CommScope and Andrew Corporation (NASDAQ: ANDW )
announced a definitive agreement, unanimously approved by their
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.
“With this acquisition, we are advancing CommScope’s position as a
worldwide leader in ‘last mile’ solutions and are creating important
cost reduction and growth opportunities that we believe will drive
increased shareholder value,” Drendel stated. “We intend to build upon
the complementary global product offerings to provide customers with a
broader array of infrastructure solutions for video, voice, data and
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 expected to close before the end of 2007 and 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. On July 16, 2007, CommScope
and Andrew submitted their pre-merger notification filings as required
under the Hart-Scott-Rodino Act.
Other Second Quarter Highlights
• CommScope was added to the annual FORTUNE 1000 list of the largest
corporations in the United States. With 2006 sales of $1.62 billion,
CommScope was ranked No. 11 in the “Network and Other Communications
Equipment” industry by FORTUNE magazine, alongside the nation’s other
leading communication technology companies.
• CommScope acquired substantially all the assets and assumed certain
current liabilities of Signal Vision, Inc., a leading supplier of
broadband radio frequency subscriber products. Signal Vision’s product
lines include passives, indoor amplifiers and addressable taps. Signal
Vision had revenues of less than $30 million in 2006.
• SYSTIMAX® Solutions™ extended its product portfolio through several
product introductions, including the global launch of the SYSTIMAX®
GigaSPEED® X10D FTP (Foiled Twisted Pair) solution. The GigaSPEED X10D
FTP solution was developed for customers around the world with a strong
preference for FTP solutions and is designed to support and exceed the
IEEE 802.3an 10GBASE-T (10 Gb/s Ethernet over twisted pair cabling)
standard ratified last summer. Earlier in the quarter, SYSTIMAX®
Solutions was the first to showcase a live 10GBASE-T demonstration over
100 meters using its GigaSPEED X10D UTP (Unshielded Twisted Pair)
cabling solution in concert with Solarflare Communications Solarstorm™
10GBASE-T server adapters.
• CommScope successfully deployed the BrightPath™ system with three
major broadband cable operators and has installations pending with three
additional cable customers. BrightPath is an innovative
Fiber-To-The-Home (FTTH) distribution system designed to work seamlessly
with existing Hybrid-Fiber-Coax (HFC) networks. BrightPath is fully
compatible with the existing DOCSIS-based headend and subscriber
equipment, which allows operators to cost-effectively deliver their
suite of analog, digital and interactive services over fiber to the
home. It can be deployed selectively in new build applications to
provide a competitive advantage with lower upfront cost and maintenance
relative to a traditional passive optical network (PON).
• Gross margin for the second quarter of 2007 was 31.3 percent, up
nearly 500 basis points year over year. The gross margin improvements
were primarily due to higher sales levels, the impact of cost management
efforts, favorable mix and the positive impact of price increases
implemented in 2006 for certain products in response to increases in the
cost of raw materials.
• SG&A for the second quarter of 2007 was $67.6 million or 13.0 percent
of sales, compared to $58.3 million or 14.1 percent of sales in the
year-ago quarter. SG&A declined as a percentage of sales primarily due
to higher sales levels.
• Second quarter 2007 results include $2.4 million of pretax
equity-based compensation expense in accordance with SFAS No. 123(R).
• Operating income for the second quarter of 2007 more than doubled year
over year to $86.4 million, or 16.6 percent of sales. In the year-ago
quarter, operating income was $38.1 million, or 9.2 percent of sales.
Excluding restructuring costs, operating income would have been $42.1
million, or 10.2 percent of sales, for the year-ago quarter.
• Total depreciation and amortization expense was $12.5 million for the
second quarter of 2007.
• Net cash provided by operating activities in the second quarter of
2007 was $47.2 million. Capital spending in the quarter was $7.2 million.
CommScope management provided the following guidance for the third
quarter and calendar year 2007, without giving effect to the proposed
acquisition of Andrew.
Third Quarter 2007
• For the third quarter of 2007, revenue is expected to be $510 - $530
million and operating margin is expected to be 15.5 percent to16.5
percent, excluding special items.
Calendar Year 2007
• For calendar year 2007, the company has increased its revenue and
operating margin guidance. CommScope now expects revenue in the range of
$1.90 - $1.94 billion and operating margin of 15.25 percent to 15.50
percent, excluding special items.
• The effective tax rate is expected to be 31 percent to 33 percent.
The company’s previous calendar year 2007 guidance was sales of $1.84 -
$1.89 billion and
operating margin of 13.5 percent to 14.5 percent, excluding special
“Our revised revenue guidance reflects expectations of continued
strength across all of our business segments,” said Executive Vice
President and Chief Financial Officer, Jearld L. Leonhardt. “However,
material costs continue to rise and we may not be able to fully recover
these costs in the short term. As a result of this volatility, we expect
operating margin in the second half of 2007 to be lower than the first
half of the year. Nonetheless, we are pleased to raise 2007 guidance and
to be in a position to achieve record calendar year financial
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
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 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
+1-402-977-9140 for the replay. The replay ID is 21344668 and it will be
available through Monday, August 6. A webcast replay will also be
archived on CommScope’s website for a limited period of time following
the conference call.
CommScope (NYSE: CTV – www.commscope.com)
is a world leader in infrastructure solutions for communication
networks. Through its SYSTIMAX® SolutionsTM and Uniprise® 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
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,” “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.
In connection with the proposed merger, CommScope intends to file a
registration statement with the SEC on Form S-4 and CommScope and Andrew
expect to mail a 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 WHEN THEY ARE AVAILABLE.
The registration statement and the proxy statement/prospectus will
contain important information about CommScope, Andrew, the merger, and
related matters. Investors and security holders will be able to 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
1100 CommScope Place, SE
Hickory, North Carolina 28602 U.S.A.
3 Westbrook Corporate Center
Westchester, Illinois 60154 U.S.A.
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 will be contained in the proxy statement/prospectus
and other relevant materials to be filed with the SEC when they become