-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VUJT+n4DGVXWKLNzcTpbspsppseSRCY9JlsJj+fbdwRl3fLdWrjQdlUhpqRw1bww n95ZZyEwgEu/h+eV59eA3A== 0000895345-03-000711.txt : 20031027 0000895345-03-000711.hdr.sgml : 20031027 20031027081511 ACCESSION NUMBER: 0000895345-03-000711 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031027 ITEM INFORMATION: ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20031027 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMSCOPE INC CENTRAL INDEX KEY: 0001035884 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 364135495 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12929 FILM NUMBER: 03957479 BUSINESS ADDRESS: STREET 1: 1100 COMMSCOPE PLACE SE CITY: HICKORY STATE: NC ZIP: 28602 BUSINESS PHONE: 8283242200 MAIL ADDRESS: STREET 1: 1100 COMMSCOPE PLACE SE CITY: HICKORY STATE: NC ZIP: 28602 8-K 1 lh8k.txt =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 ----------------- DATE OF REPORT: OCTOBER 27, 2003 DATE OF EARLIEST EVENT REPORTED: OCTOBER 26, 2003 COMMSCOPE, INC. (Exact name of registrant as specified in its charter) DELAWARE 1-12929 36-4135495 (State or other (Commission File Number) (I.R.S. Employer jurisdiction of Identification Number) incorporation) 1100 COMMSCOPE PLACE, SE P.O. BOX 339 HICKORY, NORTH CAROLINA 28602 (Address of principal executive offices) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (828) 324-2200 =============================================================================== Item 5. Other Events. ------------- On October 26, 2003, CommScope, Inc. ("CommScope") and SS Holdings, LLC, a wholly owned subsidiary of CommScope, signed a definitive asset purchase agreement (the "Asset Purchase Agreement") with Avaya Inc., a Delaware corporation ("Avaya"), to acquire its Connectivity Solutions business for cash and securities valued at approximately $263,000,000. Under the terms of the Asset Purchase Agreement, Avaya will receive $210,000,000 in cash, an $18,000,000 convertible subordinated note from CommScope and $34,900,000 in CommScope common stock, subject to adjustment. CommScope will also assume up to approximately $75 million of other specified liabilities of ACS, primarily related to employee benefits. The transaction, which is subject to customary closing conditions and approval by necessary regulatory authorities, is expected to close within 90 days except with regard to certain international operations. Item 7. Financial Statements and Exhibits. ---------------------------------- (c) Exhibit Description ------- ----------- 99.1 CommScope, Inc. Press Release, dated October 27, 2003. 99.2 CommScope, Inc. Presentation, dated October 27, 2003. 99.3 CommScope, Inc. Press Release relating to third quarter financial results, dated October 27, 2003. Item 9. Regulation FD Disclosure. ------------------------- On October 27, 2003, CommScope issued a press release announcing the signing of the Asset Purchase Agreement, a copy of which is attached hereto as Exhibit 99.1 and is being furnished, not filed, pursuant to Item 9 of this Current Report on Form 8-K. On October 27, 2003, CommScope made the presentation attached hereto as Exhibit 99.2 via a conference call/webcast. The presentation was also posted to CommScope's website, www.commscope.com. The presentation is incorporated herein by reference and is being furnished, not filed, pursuant to Item 9 of this Current Report on Form 8-K. Item 12. Results of Operations and Financial Condition. ---------------------------------------------- On October 27, 2003, CommScope issued a press release relating to its financial results for the third quarter of 2003. A copy of the press release is attached hereto as Exhibit 99.3 and is being furnished, not filed, pursuant to Item 12 of this Current Report on Form 8-K. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned hereunto duly authorized. Dated: October 27, 2003 COMMSCOPE, INC. By:/s/ Frank B. Wyatt, II ---------------------------------- Frank B. Wyatt, II Senior Vice President, General Counsel and Secretary 3 INDEX OF EXHIBITS ----------------- Exhibit No. Description ----------- ----------- 99.1 CommScope, Inc. Press Release, dated October 27, 2003 99.2 CommScope, Inc. Presentation, dated October 27, 2003 99.3 CommScope, Inc. Press Release relating to third quarter financial results, dated October 27, 2003 4 EX-99.1.1 3 ex991_1.txt EXHIBIT 99.1 [COMPANY LOGO] COMMSCOPE P.O. Box 339, Hickory, NC 28603 INVESTOR CONTACT: MEDIA CONTACT: Phil Armstrong Paul Caminiti/Kim Levy Betsy Lambert CommScope Citigate Sard Verbinnen CommScope 828-323-4848 212-687-8080 828-323-4873 COMMSCOPE TO ACQUIRE AVAYA'S CONNECTIVITY SOLUTIONS BUSINESS FOR $263 MILLION IN CASH AND SECURITIES STRATEGIC ACQUISITION WOULD DOUBLE COMMSCOPE'S SIZE; ADDS SYSTIMAX(R) STRUCTURED CONNECTIVITY SOLUTIONS BUSINESS AND GIVES COMMSCOPE A LEADING POSITION IN THE GLOBAL ENTERPRISE LAN BUSINESS --------------------------------------------------------------------- HICKORY, NC, OCTOBER 27, 2003 - CommScope, Inc. (NYSE: CTV) announced today that it has signed a definitive agreement with Avaya Inc. (NYSE: AV) to acquire its Connectivity Solutions (ACS) business for cash and securities valued at approximately $263 million. ACS is a global leader in the design, development, manufacture and marketing of enterprise structured cabling solutions for Local Area Network (LAN) applications. ACS is also a U.S. leader in structured cabling and equipment for telephone central offices, as well as a leader in secure environmental enclosures for telecommunications applications. Enterprise structured cabling systems connect personal computers, workstations, phones, LANs, and other communication devices through buildings or across campuses. With the highly complementary addition of the connectivity solutions business, CommScope will be a global leader in the enterprise LAN business in addition to its current position as the world's largest manufacturer of broadband coaxial cable for Hybrid Fiber Coaxial (HFC) applications and a leading provider of fiber optic cable for HFC. CommScope also has a growing position in the wireless business. ACS had revenues for the twelve months ended September 30, 2003 totaling $542 million, according to Avaya's public information, while CommScope had revenues of $555 million for the same period (see attached Supplemental Information). The strategic acquisition of ACS enhances CommScope's global brand and market presence in the enterprise LAN business. ACS is recognized as the preeminent brand in structured cabling for LAN solutions, as well as for its technological innovation, particularly with its SYSTIMAX(R) end-to-end connectivity solutions for customers' on-premises voice and data networking needs. Additionally, CommScope's fiber optic cable technology, enhanced through its relationship with OFS, complements ACS' enterprise LAN product offering. Under the terms of the agreement, Avaya will receive $210 million in cash, an $18 million convertible subordinated note from CommScope and $34.9 million in CommScope common stock, subject to adjustment. The cash component of the transaction is expected to be funded primarily from CommScope's existing cash balances and through a new $150 million senior secured credit facility underwritten by Wachovia Securities. CommScope had $171 million in cash and cash equivalents on its balance sheet as of September 30, 2003. CommScope will purchase the net assets of ACS, including certain defined current liabilities and assets, which totaled approximately $300 million as of June 30, 2003, based upon Avaya's historical financial statements. CommScope will also assume up to approximately $75 million of other specified liabilities of ACS, primarily related to employee benefits. The transaction, which is subject to customary closing conditions and approval by necessary regulatory authorities, is expected to close within 90 days except with regard to certain international operations. CommScope expects to incur incremental transition costs of approximately $25 million during the first year of operating the ACS business, primarily related to information technology and other transition services. Excluding acquisition-related and transition costs, CommScope expects the acquisition of ACS to be accretive to earnings per share for calendar year 2004. Avaya's publicly-reported segment operating income for ACS includes corporate overhead allocations from Avaya primarily related to general and administrative expenses. CommScope believes that it can provide these services to ACS at a lower cost than Avaya's historical corporate allocation. "ACS is an excellent strategic fit and a logical step in the continued growth and development of CommScope as we execute our last mile strategy," said Frank M. Drendel, Chairman and Chief Executive Officer of CommScope. "This transaction represents a unique opportunity to acquire a preeminent industry player at an attractive valuation and establish CommScope as a global leader in the enterprise LAN area. As the recognized leader in data connectivity innovations, ACS has a premier range of products in SYSTIMAX, a successful R&D program, talented personnel and extensive global customer relationships. Drendel continued, "As we move forward, we believe we can further enhance the long-term growth and profitability of the SYSTIMAX product line through renewed focus and commitment to this business. We look forward to working with the talented ACS team." Wachovia Securities is serving as CommScope's financial advisor on the transaction and Fried, Frank, Harris, Shriver & Jacobson and Robinson, Bradshaw & Hinson are acting as the Company's principal legal advisors. ABOUT ACS - --------- ACS is the global leader in the design, development, manufacture and marketing of physical layer end-to-end structured cabling solutions for LAN applications and a U.S. leader in physical layer structured cabling solutions supporting central offices of telecommunications service providers. With 2,000 employees worldwide, ACS has a network of manufacturing and distribution facilities in North America, Europe and Asia/Pacific Rim. 2 ABOUT COMMSCOPE - --------------- CommScope is the world's largest manufacturer of broadband coaxial cable for Hybrid Fiber Coaxial (HFC) applications and a leading supplier of high-performance fiber optic and twisted pair cables for LAN, wireless and other communications applications. Through its relationship with OFS, CommScope has an ownership interest in one of the world's largest producers of optical fiber and cable and has access to a broad array of connectivity components as well as technologically advanced optical fibers, including the zero water peak optical fibers used in the production of the LightScope ZWP(TM) and LaserCore(R) families of cable products. Visit CommScope at its website: www.commscope.com. CONFERENCE CALL INFORMATION - --------------------------- CommScope will hold a conference call/webcast today at 10:00 a.m. EST to discuss the transaction and third quarter 2003 results. A replay will be available for two weeks after the call/webcast (please see information below). DATE: October 27, 2003 TIME: 10:00 a.m. EST DOMESTIC DIAL-IN NUMBER: 800.299.7635 INTERNATIONAL DIAL-IN-NUMBER: 617.786.2901 WEBCAST: www.commscope.com REPLAY AVAILABLE UNTIL 12:00 a.m. EST on November 10, 2003 DOMESTIC REPLAY: 888-286-8010, Pin 53366531 INTERNATIONAL REPLAY: 617-801-6888, Pin 53366531 WEBCAST REPLAY: www.commscope.com FORWARD-LOOKING STATEMENTS - -------------------------- This press release contains forward-looking statements regarding the business position, plans, outlook, revenues, earnings, accretion, synergies and other financial items, integration and restructuring plans, and anticipated timing of closing related to CommScope's planned acquisition of substantially all of the assets and certain liabilities of ACS that are based on information currently available to management, management's beliefs and a number of assumptions concerning future events. 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 to differ materially include, but are not limited to, the ability of the company to complete the acquisition; the challenges of integration and restructuring associated with the acquisition; the challenges of achieving anticipated synergies; the ability to retain qualified employees and existing business alliances; maintaining satisfactory relationships with represented employees; customer demand for ACS products, applications and service; any statements of belief and any statements of assumptions underlying any of the foregoing; expected demand from Comcast Corporation and other major domestic MSOs; telecommunications industry capital spending; industry consolidation; ability of our customers to secure adequate financing to fund their infrastructure projects or to pay us; product demand and industry excess capacity; changes or fluctuations in global business conditions; financial performance and limited control of OFS BrightWave; competitive pricing and acceptance of our products; changes in cost and availability of key raw materials, especially those that are available only from limited sources; ability to recover higher material and transportation costs from our customers through price increases; possible future impairment charges for goodwill and other long-lived assets; industry competition and the ability to retain customers; possible disruption due to customer or supplier bankruptcy, reorganization or restructuring; our ability to obtain financing and capital on commercially reasonable terms; covenant restrictions and our ability to comply with covenants in our debt agreements; successful operation of bimetals manufacturing and other vertical integration activities; successful expansion and related operation of our facilities; achievement of sales, growth and earnings goals; ability to achieve reductions in costs; ability to retain and attract key personnel; developments in technology; intellectual 3 property protection; product performance issues and associated warranties; regulatory changes affecting us or the industries we serve; acquisition activities and the ability to integrate acquisitions; environmental issues; terrorist activity or armed conflict; political instability; major health concerns and other factors. For a more complete description of factors that could cause such a difference, please see CommScope's filings with the Securities and Exchange Commission. 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. # # # 4
SUPPLEMENTAL INFORMATION (UNAUDITED - IN MILLIONS) -------------------------- Avaya Connectivity REVENUES CommScope (1) Solutions (2) - -------- ------------- ------------------- Quarter ended 12/31/02 $135.9 $121.0 Quarter ended 3/31/03 $129.4 $131.0 Quarter ended 6/30/03 $141.4 $143.0 Quarter ended 9/30/03 $148.7 $147.0 ------ ------ Revenues - twelve months ended 9/30/03 $555.4 $542.0 Avaya Connectivity OPERATING INCOME (LOSS) CommScope (1) Solutions (2) - ----------------------- ------------- ------------------- Quarter ended 12/31/02 $3.1 ($8.0) Quarter ended 3/31/03 $2.5 $3.0 Quarter ended 6/30/03 ($26.2) $3.0 Quarter ended 9/30/03 $8.3 $5.0 ------- ------ Operating Income (loss) - twelve months ended 9/30/03 ($12.3) $3.0 Depreciation/amortization - twelve months ended 9/30/03 $34.5 $28.0 (3) NOTE: These historical results are not necessarily indicative of results to be expected in future periods and not intended to reflect the ACS business on a pro forma consolidated basis with CommScope. COMMSCOPE ESTIMATED TRANSITION COST - ----------------------------------- CommScope estimates first year transition costs to be approximately $25 million primarily related to information technology and other transition services. COMMSCOPE ESTIMATED OVERHEAD COST - --------------------------------- Avaya Inc.'s publicly-reported segment operating income for ACS includes corporate overhead allocations from Avaya primarily related to general and administrative expenses. CommScope believes that it can provide these services to ACS at a lower cost than the historical Avaya corporate allocation. SOURCES: 1) CommScope data from quarterly and annual reports filed with the SEC and public press releases for the periods presented. Operating income (loss) includes impairment charges for fixed assets of $31.7 million in the quarter ended 6/30/03. 2) Avaya Connectivity Solutions data from segment data included in Avaya annual and quarterly reports filed with the SEC and quarterly segment detail included in public press releases for periods presented. For a complete presentation of ACS segment results, refer to Avaya's SEC filings and quarterly earnings press releases. 3) Depreciation for ACS provided by Avaya. 5
EX-99.1.2 4 ex991_2.txt [GRAPHIC] COMMSCOPE ACQUISITION OF AVAYA CONNECTIVITY SOLUTIONS (ACS) OCTOBER 27, 2003 CAUTIONARY STATEMENT This presentation contains forward-looking statements regarding the business position, plans, outlook, revenues, earnings, accretion, synergies and other financial items, integration and restructuring plans, and anticipated timing of closing related to CommScope's planned acquisition of substantially all of the assets and certain liabilities of ACS that are based on information currently available to management, management's beliefs and a number of assumptions concerning future events. 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 to differ materially include, but are not limited to, the ability of the company to complete the acquisition; the challenges of integration and restructuring associated with the acquisition; the challenges of achieving anticipated synergies; the ability to retain qualified employees and existing business alliances; maintaining satisfactory relationships with represented employees; customer demand for ACS products, applications and service; any statements of belief and any statements of assumptions underlying any of the foregoing; expected demand from Comcast Corporation and other major domestic MSOs; telecommunications industry capital spending; industry consolidation; ability of our customers to secure adequate financing to fund their infrastructure projects or to pay us; product demand and industry excess capacity; changes or fluctuations in global business conditions; financial performance and limited control of OFS BrightWave; competitive pricing and acceptance of our products; changes in cost and availability of key raw materials, especially those that are available only from limited sources; ability to recover higher material and transportation costs from our customers through price increases; possible future impairment charges for goodwill and other long-lived assets; industry competition and the ability to retain customers; possible disruption due to customer or supplier bankruptcy, reorganization or restructuring; our ability to obtain financing and capital on commercially reasonable terms; covenant restrictions and our ability to comply with covenants in our debt agreements; successful operation of bimetals manufacturing and other vertical integration activities; successful expansion and related operation of our facilities; achievement of sales, growth and earnings goals; ability to achieve reductions in costs; ability to retain and attract key personnel; developments in technology; intellectual property protection; product performance issues and associated warranties; regulatory changes affecting us or the industries we serve; acquisition activities and the ability to integrate acquisitions; environmental issues; terrorist activity or armed conflict; political instability; major health concerns and other factors. For a more complete description of factors that could cause such a difference, please see CommScope's filings with the Securities and Exchange Commission. 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. 2 COMMSCOPE CABLES THE 'LAST MILE' [GRAPHIC] o Leader in three key 'last mile' markets: o Broadband (HFC) o Local Area Network (LAN) o Wireless/Other Telecom o Strong competitive position: o World's largest & technology leader in coaxial cable for HFC o Technology leader in optical fiber/cable via strategic OFS relationship o Global scale o Solid balance sheet with good cash flow o Strategically positioned for recovery & future growth o Fundamental drivers of bandwidth continuing 3 ACS TRANSACTION SUMMARY o Definitive agreement with Avaya Inc. to buy the Avaya Connectivity Solutions (ACS) business o $263m (cash & securities) o Financing - $210m in cash from a combination of: o CommScope cash & cash equivalents ($171m @ 9/30/03) o New bank debt, primarily from a $150m senior secured credit facility - $18m convertible note to Avaya, subject to adjustment - $34.9m in CTV stock (currently 2.7m shares @ $12.90/share) o # shares subject to adjustment depending upon stock price at closing o # shares adjust if stock price is between $10-$13 o Maximum # of shares 3.5m; minimum # of shares 2.7m 4 ACS TRANSACTION SUMMARY (CONT'D) o The ACS business held for sale had net assets of ~$300m as of June 30, 2003, based on Avaya historical financials o CTV will also assume ~$75m of liabilities, primarily related to employee benefits o Expected closing within 90 days, except certain international operations o Subject to regulatory approval, other customary closing conditions & adjustment for changes in working capital o Opening balance sheet will reflect fair value adjustments as required by Accounting Principles Bulletin 16 5 TRANSACTION RATIONALE o Extends CommScope's position in the 'last mile' of telecom o Creates unique combination of world leaders in HFC cables & enterprise solutions - Global leader in coaxial cable for HFC - Global leader in enterprise structured cabling solutions - Domestic leader in fiber optic cable for HFC o Enhances global growth opportunities o Expands product & patent portfolio o Creates stronger platform to serve China & Asia/Pacific Rim o Potential for post-integration cost savings o Expected to be accretive for calendar year 2004, excluding acquisition-related & transition costs STRATEGIC, ACCRETIVE TRANSACTION AT A FAIR PRICE 6 AVAYA CONNECTIVITY SOLUTIONS (ACS) o ACS is: - SYSTIMAX(R): The world leader in enterprise structured cabling systems - EXCHANGEMAX(R): A domestic leader in structured cabling/equipment for telephone central offices - ICS (Integrated Cabinet Solutions): A domestic leader in secure environmental enclosures o Global brand recognition & established channels o Industry leading R&D & patent portfolio o Global manufacturing & logistics: - Omaha, NE; Ireland; Australia; Singapore; Netherlands; China - Approximately 2000 employees 7 ACS (SYSTIMAX(R)) SYSTIMAX(R) provides enterprises with a global end-to-end copper & fiber structured cabling solution for connecting phones, workstations, LANs, SANs & other critical communications devices through buildings or across campuses [GRAPHIC] Source: Avaya Inc. 8 ACS (EXCHANGEMAX(R)) Central office infrastructure with a focus on systems offerings Cable products - -------------- DS1, DS3, & voice frequency cable & wire, using UTP, STP, & coaxial technologies Connectivity products - --------------------- Cross-connect systems providing interconnection & test access for telecommunications equipment in central offices: [GRAPHIC] [GRAPHIC] o Digital Distribution Systems o Voice Frequency Main Distribution Frame Systems o Fiber Distribution Frame System o netSet(TM) Remote Provisioning System o Surge Protectors, Patch Cords, & Connectors Source: Avaya Inc. 9 ACS: INTEGRATED CABINET SOLUTIONS (ICS) o Integrated Cabinet Solutions designs wireless & wireline enclosures for electronic devices & equipment deployed in the outside plant & inside buildings o ICS has 28 years of designing & integrating robust, configurable enclosures. Over 300,000 cabinets have been deployed worldwide PowerHouse 52BP Cabinet 82A Cabinet Cabinet(TM) [GRAPHIC] [GRAPHIC] [GRAPHIC] Source: Avaya Inc. 10 ACS: BLUE CHIP CUSTOMER BASE SYSTIMAX(R) ExchangeMAX(R) ICS - ------------------------------------------------------------------------------- [COMPANY LOGOS] [COMPANY LOGOS] [COMPANY LOGOS] Anixter Anixter Alcatel Graybar Graybar Lucent Technologies BellSouth AT&T AFC The Home Depot SBC SBC Custom Cable Industries MMI Group BellSouth IBM BellSouth Verizon Verizon Lucent Technologies Qwest Cisco Systems Nortel Networks Merrill Lynch Verizon HP Qwest GE TSI Bank of America Sun Microsystems BT Intel Source: Avaya Inc. 11 GLOBAL ACS BUSINESS PARTNERS [MAP] NAR EMEA - --- ---- 8 Distributors 1 Distributor 475 VARs/Authorized Installers 81 VARs 400 SIs GLOBAL ------ 27 Distributors 1952 VARs/SIs CALA APAC - ---- ---- 3 Distributors 15 Distributors 4 VARs 12 VARs 310 SIs 670 SIs Source: Avaya Inc. 12 ACS SALES OVERVIEW (TWELVE MONTHS ENDED 9/30/03) SALES BY CATEGORY SALES BY REGION - ----------------- --------------- [PIE CHART] [PIE CHART] ExchangeMAX(R) Pacific Rim ICS Other SYSTIMAX(R) EMEA North America o Revenue of $542 million o Stable sales for the last five quarters o Significant international sales o 3% sequential increase in sales for Q403 (9/30/03) Source: Avaya Inc. 13 ACS HISTORICAL FINANCIALS (TWELVE MONTHS ENDED 9/30/03) Quarterly Revenue [BAR GRAPH] 121m 131m 143m 147m Dec. Qtr. Mar. Qtr Jun. Qtr Sept Qtr LTM revenue = $542m Quarterly Operating Income/(Loss) Depreciation Expense [BAR GRAPH] Op. Inc. -8 3 3 5 Deprec. 7 7 7 7 Dec. Qtr Mar. Qtr Jun. Qtr Sept Qtr LTM: Operating Inc. = $3m Depreciation expense = $28m Source: Avaya Inc. 14 ACS TRANSITION & PROFIT IMROVEMENT o Transition: - Renewed commitment to the business - Increased operational focus - CTV expects to incur incremental first-year transition costs of ~$25m o IT, consulting, marketing, human resources, payroll, legal & other o Profit Improvement: - Avaya's public results for ACS include corporate overhead allocations from Avaya (primarily G&A) - CTV believes it can provide the services at a lower cost than the historical Avaya corporate allocation, which is expected to improve ACS operating results by $20m/year - CTV has strong track record of effective cost management $20M/YEAR EXPECTED IMPROVEMENT IN ACS RESULTS 15 ACQUISITION SUPPORTS CTV STRATEGY o Build on core strengths in cable technology O Position CTV for growth in converging video / voice / data markets O Expand global LAN business - CommScope cable & connectivity partners - domestically - SYSTIMAX enterprise solutions - globally o Lead through excellence - World-class products, technology & service - State-of-the-art manufacturing facilities - Superior technical support - Superior customer care - Cost leadership through technology o Build upon manufacturing infrastructure & intellectual property portfolio o Grow global platform 16 BANDWIDTH DEMAND EXPECTED TO DRIVE NEED FOR INFRASTRUCTURE [GRAPHIC] o Wired & Wireless o HFC: broadband triple play - Video, voice & data - VOD, HDTV, music, gaming o FTTx / xDSL o Global wireless growth - More subscribers - More minutes - More services o Business (enterprise) infrastructure - LANs, WANs, wireless integration, PCs, 10G, data 17 COMMSCOPE'S HFC CABLE LEADERSHIP [GRAPHIC] Coaxial Cable Fiber Optic Cable o Global leader o A domestic leader o World's largest manufacturer o Improved market position o High-quality, low-cost producer o Strategic alliance with OFS o Unique vertical integration - Technology leader - Bimetallic wire production - Extraordinary patent - Fine wire drawing portfolio o Service leadership o Service leadership 18 BUILDING BLOCKS FOR CABLING THE 'LAST MILE' [GRAPHIC] Structured Cabling Solutions (ACS + CTV) World class operations & logistics HFC leadership (coaxial cable) Growing Wireless Position Customer service excellence HFC leadership (fiber optic cable) 19 THE NEW COMMSCOPE SALES BY CATEGORY SALES BY REGION - ----------------- --------------- [PIE CHART] [PIE CHART] Wireless/Other Telecom Latin America ICS Pacific Rim ExchangeMAX(R) EMEA Enterprise Solutions (SYSTIMAX(R), LAN) North America Broadband/Video NOTE: Chart intended to reflect approximate proportional size only. Not intended as a forecast. 20
COMMSCOPE COMPETITIVE ADVANTAGE PRODUCTS SERVICE OPERATIONS -------- ------- ---------- Complete cable portfolio Recognized industry leader Global manufacturing (Coax, fiber or twisted pair) Global distribution Scale Strong patent portfolio Private truck fleet Commitment to quality Wired or wireless Broad logistic capabilities Efficient operations Broadband, enterprise & other Logistics State-of-the-art technology Capacity Industry leading R&D
[DOWN ARROW] MARKET LEADERSHIP 21 COMMSCOPE CABLES THE 'LAST MILE' [GRAPHIC] Cable & Connectivity for Mobile Wireless In-Building Wireless For Voice & Data Central Office Connectivity & Cable Premise Premise Cable & Connectors Telco Business & Residential Access Networks (For Voice & Data) CATV Head End Residential CATV Networks (For Voice, Video, Data) 22 SUMMARY o Extends CommScope's position in the 'last mile' of telecom o Creates unique combination of world leaders in HFC cables & enterprise solutions - Global leader in coaxial cable for HFC - Global leader in enterprise structured cabling solutions - Domestic leader in fiber optic cable for HFC o Enhances global growth opportunities o Expands product & patent portfolio o Creates stronger platform to serve China & Asia/Pacific Rim o Potential for post-integration cost savings o Expected to be accretive for calendar year 2004, excluding acquisition-related & transition costs STRATEGIC, ACCRETIVE TRANSACTION AT A FAIR PRICE 23 [COMPANY LOGO] COMMSCOPE THIRD QUARTER 2003 RESULTS 24 COMMSCOPE Q303 RESULTS [GRAPHIC] o Improved results in sales, orders, profitability & cash flow o Sales of $148m (up 9% sequentially) 25 SALES & ORDERS [BAR GRAPH] Q302 Q402 Q103 Q203 Q303 SALES 148m 136m 129m 141m 149m ORDERS 146m 133m 135m 138m 152m o Strongest order input & sales since Q202 o Driven by improving domestic sales o International remains relatively stable at 18-19% of total sales o Fiber optic cable down moderately; but, still >10% of total sales 26 BROADBAND/VIDEO \ [BAR GRAPH] Q302 Q402 Q103 Q203 Q303 120.3m 117.9m 101.3m 108.5m 117.9m o 79% of sales o Q303 sales of $118m, up 9% sequentially: - Higher sales to essentially all MSOs - Comcast sales ~17% of total company sales o Some signs of stabilization: - Domestic improvement - Stable international sales last 5 qtrs. - Expect traditional Q4 softness 27 LOCAL AREA NETWORK [BAR GRAPH] Q302 Q402 Q103 Q203 Q303 24.2m 14.1m 23.0m 24.6m 24.0m o A domestic leader o 16% of sales o Strong competitive position o Fragmented market o Q303 sales of $24m, down slightly YOY & seq. o Expect traditional dip in Q4 28 WIRELESS/OTHER TELECOM [BAR GRAPH] Q302 Q402 Q103 Q203 Q303 3.3m 3.9m 5.1m 8.3m 6.8m o 5% of sales o Q303 sales of $7m, double YOY, but down 18% seq. - New customers - Steady progress o Compelling value proposition - Innovative technology - Superior electrical performance - Outperforms competitive (corrugated) technology - Outstanding reliability - Lowest life cycle cost 29 COMMSCOPE Q303 RESULTS [GRAPHIC] o Improved results in sales, orders, profitability & cash flow o Sales of $148m (up 9% sequentially) o Gross margin of 20.6% - Up 230 basis points YOY - Driven by lower costs and higher wireless sales o OFS BrightWave - OFS-B results: Revenue $25m; Gross Profit (-$14m); Net Loss (-$27m) - CommScope recorded non-cash equity in losses of OFS BrightWave of $0.05/share related to its minority ownership o Diluted EPS of $0.02 per share o Strong cash flow from operations 30 CASH FLOW & CAPEX [BAR GRAPH] Q302 Q402 Q103 Q203 Q303 Cash Flow 26.8m 31.7m 4.2m 18.4m 32.4m CapEx 2.9m 14.3m 1.8m 0.7m 1.6m Cash Balance 132m 120m 122m 140m 171m o Q303 cash flow reflects tax refund of $12.5m o Expect good cash flow from operations in Q403 o Expect CapEx <$10m for calendar year 2003 31 COMMSCOPE Q403 OUTLOOK [GRAPHIC] o Expect Q403 sales to be down from seasonally strong third quarter by 5-10% o Expect gross margin to be down as much as 100 basis points sequentially o Expect to generate good cash flow in Q403 o Outlook for Q403 does not take into account possible effects of pending ACS transaction 32 THANK YOU FOR YOUR TIME [GRAPHIC] QUESTIONS 33 EX-99.1.3 5 ex991_3.txt EXHIBIT 99.3 FOR IMMEDIATE RELEASE - ------------------------- COMMSCOPE REPORTS THIRD QUARTER 2003 RESULTS EARNINGS OF $0.02 PER SHARE ON SALES OF $149 MILLION - ------------------------------------------------------------------------------- HICKORY, NC -- (OCTOBER 27, 2003) CommScope, Inc. (NYSE: CTV) today announced third quarter results for the period ended September 30, 2003. The Company reported sales of $148.7 million and earnings of $1.1 million, or $0.02 per share, for the third quarter. The earnings included after-tax equity in losses of OFS BrightWave, LLC of $0.05 per share related to CommScope's minority ownership interest in this venture. For the third quarter of 2002, CommScope reported sales of $147.8 million and a net loss of $19.6 million or $0.32 per share. The 2002 loss included noncash impairment charges of $0.26 per share primarily related to underutilized and idle production equipment, and after-tax equity in losses of OFS BrightWave of $0.10 per share. CommScope's sales for the third quarter rose to $148.7 million, up from $141.4 million in the second quarter of 2003 and $147.8 million in the year-ago quarter. The 5% sequential rise in sales was due to stronger domestic Broadband/Video sales. The year-over-year sales increase was due to higher Wireless/Other Telecom sales. Local Area Network (LAN) sales were down slightly year over year and sequentially. Orders booked in the third quarter of 2003 were $152.2 million compared to $145.5 million in the third quarter of 2002 and $138.4 million in the preceding quarter. "We are pleased with the improved sales, profitability and cash flow during the third quarter and remain excited regarding the long-term opportunities in the 'last mile' of telecommunications," said Chairman and Chief Executive Officer Frank M. Drendel. "We believe that the planned acquisition of the Avaya Inc. (NYSE: AV) Connectivity Solutions (ACS) business, which we announced this morning, will further position CommScope for long-term success." OFS Brightwave Results - ---------------------- For the third quarter of 2003, OFS BrightWave had revenues of $25.3 million, a negative gross profit of $14.3 million and a net loss of $27.2 million. CommScope recorded after-tax charges of $3.1 million, or $0.05 per share, in the third quarter of 2003 for equity in losses of OFS BrightWave related to the Company's minority investment in this venture. CommScope Third Quarter 2003 Highlights - --------------------------------------- o Broadband/Video sales rose 9% sequentially to $117.9 million for the third quarter, but were down 2% from the year-ago period, primarily due to lower sales of fiber optic cable. Domestic sales increased sequentially to essentially all major broadband service providers, including Comcast. Sales to Comcast represented about 17% of total Company sales for the third quarter. Broadband/Video orders for the quarter were $121.6 million. o International sales were down slightly year over year and sequentially at $26.5 million. International orders for the third quarter were $26.0 million. o LAN sales for the quarter were $24.0 million, compared to $24.6 million for the second quarter and $24.2 million for the year ago period. LAN orders for the quarter were $23.7 million. o Wireless/Other Telecom sales were $6.8 million, more than double the third-quarter 2002 level of $3.3 million, but down 18% from the preceding quarter. CommScope continues to make progress communicating the Cell Reach(R) value proposition to customers and remains optimistic about long-term wireless opportunities. Wireless/Other Telecom orders were $6.9 million for the quarter. o Selling, general and administrative (SG&A) expense was $20.9 million in the third quarter of 2003, compared to $21.8 million in the preceding quarter and $20.5 million in the third quarter of 2002. o Gross margin for the third quarter of 2003 rose to 20.6%, compared to 20.4% in the preceding quarter and 18.3% in the year-ago quarter. Gross margin improved year over year primarily due to lower costs and higher wireless sales. o Cash provided by operating activities in the quarter was $32.4 million. This included a $13.5 million tax refund primarily related to the carryback of 2002 deductible losses from OFS BrightWave and the write-off of Adelphia receivables. Capital spending for the quarter was $1.6 million. The Company expects capital spending to be less than $10 million for calendar year 2003. o CommScope ended the third quarter of 2003 with $171.3 million in cash and cash equivalents, up substantially from $140.3 million at the end of the second quarter. CommScope Fourth Quarter 2003 Outlook - ------------------------------------- Looking ahead to the fourth quarter of 2003, CommScope Executive Vice President and Chief Financial Officer Jearld Leonhardt said, "We expect fourth quarter sales to decline 5-10% from the seasonally strong third quarter 2003 level. Gross margin may be down as much as 100 basis points sequentially, depending upon sales volume. This outlook does not take into account the effects of the pending transaction on the fourth quarter." 2 Conference Call Information - --------------------------- CommScope will hold a conference call/webcast today at 10:00 a.m. EST to discuss the planned acquisition of Avaya Connectivity Solutions (ACS) and third quarter 2003 results. A replay will be available for two weeks after the call/webcast (please see information below). DATE: October 27, 2003 TIME: 10:00 a.m. EST DOMESTIC DIAL-IN NUMBER: 800.299.7635 INTERNATIONAL DIAL-IN-NUMBER: 617.786.2901 WEBCAST: www.commscope.com REPLAY AVAILABLE UNTIL 12:00 a.m. EST November 10, 2003 DOMESTIC REPLAY: 888-286-8010, Pin 53366531 INTERNATIONAL REPLAY: 617-801-6888, Pin 53366531 WEBCAST REPLAY: www.commscope.com CommScope is the world's largest manufacturer of broadband coaxial cable for Hybrid Fiber Coaxial (HFC) applications and a leading supplier of high-performance fiber optic and twisted pair cables for LAN, wireless and other communications applications. Through its relationship with OFS, CommScope has an ownership interest in one of the world's largest producers of optical fiber and cable and has access to a broad array of connectivity components as well as technologically advanced optical fibers, including the zero water peak optical fibers used in the production of the LightScope ZWP(TM) family of products. (Minimum requirements to listen to the broadcast and replay on the Internet: The Windows Media Player software, downloadable free from http://www.microsoft.com/windows/windowsmedia/EN/default.asp, and at least a 28.8Kbps connection to the Internet. If you experience problems listening to the broadcast, send an email to webcastsupport@tfprn.com.) This press release contains forward-looking statements regarding sales, gross margin, cash flows, outlook and expectations for CommScope and CommScope's planned acquisition of substantially all of the assets and certain liabilities of ACS that are based on information currently available to management, management's beliefs and a number of assumptions concerning future events. 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 to differ materially include, but are not limited to, the ability of the company to complete the acquisition; the challenges of integration and restructuring associated with the acquisition; the challenges of achieving anticipated synergies; the ability to retain qualified employees and existing business alliances; maintaining satisfactory relationships with represented employees; customer demand for ACS products, applications and service; any statements of belief and any statements of assumptions underlying any of the foregoing; expected demand from Comcast Corporation and other major domestic MSOs; telecommunications industry capital spending; industry consolidation; ability of our customers to secure adequate financing to fund their infrastructure projects or to pay us; product demand and industry excess capacity; changes or fluctuations in global business conditions; financial performance and limited control of OFS BrightWave; competitive pricing and acceptance of our products; changes in cost and availability of key raw materials, especially those that are available only from limited sources; ability to recover higher material and transportation costs from our customers through price increases; possible future impairment charges for goodwill and other long-lived assets; industry competition and the ability to retain customers; possible disruption due to customer or supplier 3 bankruptcy, reorganization or restructuring; our ability to obtain financing and capital on commercially reasonable terms; covenant restrictions and our ability to comply with covenants in our debt agreements; successful operation of bimetals manufacturing and other vertical integration activities; successful expansion and related operation of our facilities; achievement of sales, growth and earnings goals; ability to achieve reductions in costs; ability to retain and attract key personnel; developments in technology; intellectual property protection; product performance issues and associated warranties; regulatory changes affecting us or the industries we serve; acquisition activities and the ability to integrate acquisitions; environmental issues; terrorist activity or armed conflict; political instability; major health concerns and other factors. For a more complete description of factors that could cause such a difference, please see CommScope's filings with the Securities and Exchange Commission. 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. CONTACTS: PHIL ARMSTRONG BETSY LAMBERT, APR INVESTOR RELATIONS MEDIA RELATIONS (828) 323-4848 (828) 323-4873 4
COMMSCOPE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED -- IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- ---------------------------- 2003 2002 2003 2002 ------------- ------------- ------------- ------------- Net sales $ 148,723 $ 147,819 $ 419,513 $ 462,584 ------------- ------------- ------------- ------------- Operating costs and expenses: Cost of sales 118,082 120,743 335,956 368,360 Selling, general and administrative 20,851 20,508 62,732 82,801 Research and development 1,486 1,069 4,530 4,847 Impairment charges for fixed assets - 25,096 31,728 25,096 ------------- ------------- ------------- ------------- Total operating costs and expenses 140,419 167,416 434,946 481,104 ------------- ------------- ------------- ------------- Operating income (loss) 8,304 (19,597) (15,433) (18,520) Other income, net 4 392 209 751 Interest expense (2,207) (2,419) (6,548) (6,860) Interest income 649 696 1,981 1,702 ------------- ------------- ------------- ------------- Income (loss) before income taxes and equity in losses of OFS BrightWave, LLC 6,750 (20,928) (19,791) (22,927) Provision for income tax (expense) benefit (2,498) 7,725 7,322 8,465 ------------- ------------- ------------- ------------- Income (loss) before equity in losses of OFS BrightWave, LLC 4,252 (13,203) (12,469) (14,462) Equity in losses of OFS BrightWave, LLC (3,130) (6,359) (40,857) (49,239) ------------- ------------- ------------- ------------- Net income (loss) $ 1,122 $ (19,562) $ (53,326) $ (63,701) ============= ============= ============= ============= Net income (loss) per share: Basic $ 0.02 $ (0.32) $ (0.90) $ (1.03) Assuming dilution $ 0.02 $ (0.32) $ (0.90) $ (1.03) Weighted average shares outstanding: Basic 59,220 61,763 59,220 61,745 Assuming dilution 59,610 61,763 59,220 61,745
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COMMSCOPE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS) (Unaudited) September 30, December 31, 2003 2002 -------------- -------------- ASSETS Cash and cash equivalents $ 171,293 $ 120,102 Accounts receivable, less allowance for doubtful accounts of $15,293 and $11,811, respectively 76,096 64,787 Inventories 34,880 36,254 Prepaid expenses and other current assets 12,535 20,737 Deferred income taxes 15,955 16,579 ------------- -------------- Total current assets 310,759 258,459 Property, plant and equipment, net 183,674 229,515 Goodwill, net of accumulated amortization of $59,562 and $59,520, respectively 151,350 151,334 Other intangibles, net of accumulated amortization of $41,809 and $39,930, respectively 6,956 8,835 Deferred income taxes 33,281 3,572 Investment in and advances to OFS BrightWave, LLC 46,556 111,528 Other assets 8,989 9,425 ------------- -------------- Total Assets $ 741,565 $ 772,668 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 19,572 $ 18,483 Other accrued liabilities 33,854 26,005 -------------- -------------- Total current liabilities 53,426 44,488 Long-term debt 183,300 183,300 Other noncurrent liabilities 34,638 27,345 -------------- -------------- Total Liabilities 271,364 255,133 Commitments and contingencies Stockholders' Equity Preferred stock, $.01 par value; Authorized shares: 20,000,000; Issued and outstanding shares: None at September 30, 2003 and December 31, 2002 -- -- Common stock, $.01 par value; Authorized shares: 300,000,000; Issued shares, including treasury stock: 61,762,667 at September 30, 2003 and December 31, 2002; Issued and outstanding shares: 59,219,567 at September 30, 2003 and December 31, 2002 618 618 Additional paid-in capital 383,541 383,541 Retained earnings 108,189 161,515 Accumulated other comprehensive loss (8,923) (14,915) Treasury stock, at cost: 2,543,100 shares at September 30, 2003 and December 31, 2002 (13,224) (13,224) -------------- -------------- Total Stockholders' Equity 470,201 517,535 -------------- -------------- Total Liabilities and Stockholders' Equity $ 741,565 $ 772,668 ============== ==============
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COMMSCOPE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED -- IN THOUSANDS) Nine Months Ended September 30, ---------------------------- 2003 2002 ------------- ------------ OPERATING ACTIVITIES: Net loss $ (53,326) $ (63,701) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 25,523 27,906 Equity in losses of OFS BrightWave, LLC, pretax 64,978 78,280 Impairment charges for fixed assets 31,728 25,096 Deferred income taxes (27,820) (26,421) Tax benefit from stock option exercises -- 128 Changes in assets and liabilities: 13,910 30,835 ------------- -------------- Net cash provided by operating activities 54,993 72,123 INVESTING ACTIVITIES: Additions to property, plant and equipment (4,088) (8,335) Proceeds from repayment of advance to OFS BrightWave, LLC -- 6,146 Proceeds from disposal of fixed assets 211 333 -------------- -------------- Net cash used in investing activities (3,877) (1,856) FINANCING ACTIVITIES: Principal payments on long-term debt -- (2,107) Long-term financing costs (1,215) (345) Proceeds from exercise of stock options -- 1,029 ------------- -------------- Net cash used in financing activities (1,215) (1,423) Effect of exchange rate changes on cash 1,290 802 ------------- -------------- Change in cash and cash equivalents 51,191 69,646 Cash and cash equivalents, beginning of period 120,102 61,929 ------------- -------------- Cash and cash equivalents, end of period $ 171,293 $ 131,575 ============= ============== 7
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