EX-99.1 2 a07-12455_1ex99d1.htm EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

COMMSCOPE ANNOUNCES RECORD FIRST QUARTER 2007 RESULTS

·                  Operating income rises to $64 million and operating margin more than doubles year over year to 14.6%

·                  Diluted EPS more than doubles year over year to $0.63

·                  Record first quarter sales of $435 million, up 24% year over year

·                  Orders of $460 million, up 15% year over year

·                  CommScope raises 2007 outlook


Hickory, NC—(April 26, 2007) CommScope, Inc. (NYSE: CTV), a global leader in infrastructure solutions for communications networks, today announced record first quarter results for the period ended March 31, 2007.  The company reported first quarter sales of $435.5 million and net income of $45.9 million, or $0.63 per diluted share.

For the first quarter of 2006, CommScope reported sales of $352.3 million and net income of $12.7 million, or $0.19 per diluted share.  The reported first quarter 2006 net income included total after-tax charges of $2.4 million related to restructuring costs.  Excluding this special item, adjusted earnings were $15.2 million, or $0.22 per diluted share.

“We are excited to start 2007 with record first quarter results that exceeded expectations,” said Frank M. Drendel, CommScope Chairman and Chief Executive Officer.  “We delivered solid top-line growth in every business segment while improving operating performance.  The global manufacturing initiatives, which were implemented throughout 2006, made a significant contribution to our bottom line.  These major restructurings at key facilities around the globe, higher sales volume and lower than expected commodity costs drove our record first quarter performance.  We have also raised calendar year 2007 financial guidance to reflect our positive outlook.

“Leading global companies are placing great demands on their communications networks.  We strive to provide our customers with solutions that are part of the essential fabric for higher-bandwidth networks of the future,” stated Drendel.  “We believe that our momentum remains strong as we execute this strategy and build upon CommScope’s unique position in the ‘last mile’ of telecommunications.”

Sales Overview

Sales for the first quarter of 2007 increased 23.6% year over year, primarily driven by increased customer demand in all segments and price increases implemented during 2006 in response to higher raw material costs.   The company experienced particularly strong sales growth in the Carrier segment. Below is a sales summary:




 

 

 

First

 

Fourth

 

First

 

 

 

 

 

Sales by Segment

 

Quarter

 

Quarter

 

Quarter

 

% Change

 

($ in millions)

 

2007

 

2006

 

2006

 

YOY 

 

Sequential

 

 

 

 

 

 

 

 

 

 

 

 

 

Enterprise

 

$

200.9

 

$

187.5

 

$

172.1

 

16.7

%

7.1

%

Broadband

 

148.1

 

144.0

 

125.9

 

17.6

%

2.8

%

Carrier

 

87.1

 

62.4

 

54.7

 

59.2

%

39.6

%

Inter-segment eliminations

 

(0.6

)

(0.2

)

(0.4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total CommScope Net Sales

 

$

435.5

 

$

393.7

 

$

352.3

 

23.6

%

10.6

%

 

Enterprise segment sales rose 16.7% year over year to $200.9 million, primarily due to higher sales volume, price increases implemented in 2006 in response to increases in raw material costs and the continued success of new products like the innovative iPatch® Real Time Infrastructure Management System.  Enterprise sales growth was strongest year over year in the European, Middle Eastern and African (EMEA) and North American (NAR) regions.

Broadband segment sales rose to $148.1 million, up 17.6% year over year primarily due to price increases implemented in the first half of 2006, higher sales volume and the positive impact of a product line acquisition completed in March 2006.  Broadband sales grew as cable operators invested in their networks to support the “triple play” of video, data and voice services. Broadband sales growth was strongest year over year in the Central and Latin American (CALA) and NAR regions.

Carrier segment sales increased 59.2% year over year to $87.1 million.  The outstanding year-over-year and sequential growth is primarily due to a significant increase in activity as large domestic wireline carriers deploy broadband services to their customers.  As previously mentioned, the Carrier segment has been CommScope’s fastest growing yet most volatile segment.

Total international sales for the first quarter of 2007 rose 19.4% year over year to $128.0 million, or approximately 29.4% of total company sales.

External orders booked in the first quarter of 2007 were $459.6 million, up 14.8% from the year-ago quarter.

Other First Quarter Highlights

·                  In the first quarter of 2007, CommScope announced a definitive agreement to acquire substantially all the assets and assume certain 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.  The transaction, which is subject to due diligence and customary closing conditions, is expected to close in the second quarter of 2007.

·                  CommScope announced that it had more than doubled its year-over-year shipments of Extremeflex® 50-ohm aluminum cable products for wireless transmission systems.   Some key advantages of the Extremeflex aluminum solution include improved flexibility, lighter tower load and lower life cycle costs.  Extremeflex aluminum products have been accepted by major domestic carriers as well as international carriers in every major region of the world.




 

·                  CommScope also introduced a new line of universal connectors and tools for wireless transmission systems.  CommScope’s EZfit-Series™ connectors and tools are engineered to fit both smooth-wall and traditional corrugated line cables.  The company expects its new connectors and tools to provide lower connector insertion loss and improved return loss for higher-performance cable systems.

·                  Gross margin for the first quarter of 2007 was 30.3%, up 620 basis points year over year.  The gross margin improvements were primarily due to higher sales volume, favorable mix and the positive impact of operating efficiencies resulting from the company’s global manufacturing initiatives.

·                  SG&A for the first quarter of 2007 was $59.7 million or 13.7% of sales, compared to $54.2 million or 15.4% of sales in the year-ago quarter.  SG&A declined as a percentage of sales primarily due to higher sales levels.

·                  First quarter 2007 results include $2.6 million of pretax, equity-based compensation expense, compared to $1.0 million in the year-ago quarter.

·                  Operating income for the first quarter of 2007 was $63.7 million, or 14.6% of sales.  In the year-ago quarter, operating income was $19.3 million, or 5.5% of sales.  Excluding restructuring cost, operating income would have been $23.1 million, or 6.6% of sales, for the year-ago quarter.

·                  Total depreciation and amortization expense was $12.4 million for the first quarter of 2007.

·                  Net cash provided by operating activities in the first quarter of 2007 was $10.7 million.  Capital spending in the quarter was $4.1 million.

Outlook
CommScope management provided the following guidance for the second quarter and calendar year 2007:

Second Quarter 2007

·             For the second quarter of 2007, revenue is expected to be $490 - $510 million and operating margin is expected to be 14.5% - 15.5%, excluding special items.

·             The effective tax rate is expected to be 30% - 34%.

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 $1.84 - $1.89 billion and operating margin of 13.5% - 14.5%, excluding special items.

·             The effective tax rate is expected to be 30% - 34%.

The company’s previous calendar year 2007 guidance was sales of $1.72-$1.76 billion and operating margin around the 12% level, excluding special items.




 

“We are pleased with the strong start in our 2007 financial performance and our improved calendar year outlook,” said Jearld L. Leonhardt, Executive Vice President and Chief Financial Officer.  “We expect operating margin in the second half of 2007 to be lower than the first half of the year primarily due to increasing raw material costs and a cautious view of the historically volatile Carrier segment.”

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 +1-415-537-1802. 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 21336728 and it will be available through Thursday, May 3.  A webcast replay will also be archived on CommScope’s website for a limited period of time following the conference call.

About CommScope

CommScope (NYSE: CTV — www.commscope.com) is a world leader in infrastructure solutions for communication networks.  Through its SYSTIMAX® Solutions™ 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 cabling solutions.

Forward-Looking Statements

This press release contains forward-looking statements regarding, among other things, the business position, plans, outlook, revenues, margins, earnings, global manufacturing initiatives, acquisitions, 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. These forward-looking statements are identified by the use of certain terms and phrases, including but not limited to “intend,” “goal,” “estimate,” “expect,” “project,” “plans,” “anticipate,” “should,” “designed to,” “foreseeable future,” “believe,” “think,” “scheduled,” “outlook,” “guidance” and similar expressions. Forward-looking statements are not a guarantee of performance and are subject to a number of risks, uncertainties and other factors that could cause the actual results to differ materially from those currently expected.  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; volatility in raw material costs and the effect of related price changes; changes in the technology deployed by cable television or other telecommunication companies; the risk that customers might cancel orders placed or that orders currently placed may reduce orders in the future; the risk that our internal production capacity and that of our contract manufacturers may be insufficient to meet customer demand for our products; continuing consolidation among our customers; competitive pricing and acceptance of our 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; the possibility of further restructuring actions; the timing, completion, integration and realization of expected synergies related to the pending acquisition of the assets of Signal Vision, Inc. and our ability to realize anticipated benefits from prior or future acquisitions; possible future impairment charges for fixed or intangible assets; increased obligations under employee benefit plans; ability to achieve expected sales and operating income goals; costs of protecting or defending our intellectual property; ability to obtain capital on commercially reasonable terms; adequacy and availability of insurance; costs and challenges of compliance with domestic and foreign environmental laws; variability in expected tax




 

rate and ability to recover amounts recorded as value added tax receivables; product performance issues and associated warranty claims; ability to successfully implement major systems initiatives; regulatory changes affecting us or the industries we serve; authoritative changes in generally accepted accounting principles by standard-setting bodies; environmental remediation issues; terrorist activity or armed conflict; political instability; major health concerns; and any statements of belief and any statements of assumptions underlying any of the foregoing.  For a more complete description of factors that could cause such a difference, please see CommScope’s filings with the Securities and Exchange Commission, which are available on CommScope’s website or at www.sec.gov.  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

Investor Relations

(828) 323-4848




CommScope, Inc.

Condensed Consolidated Statements of Operations

(Unaudited — In thousands, except per share amounts)

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2007

 

2006

 

Net sales

 

$

435,452

 

$

352,254

 

Operating costs and expenses:

 

 

 

 

 

Cost of sales

 

303,508

 

267,515

 

Selling, general and administrative

 

59,682

 

54,177

 

Research and development

 

7,869

 

7,465

 

Restructuring costs

 

729

 

3,749

 

Total operating costs and expenses

 

371,788

 

332,906

 

Operating income

 

63,664

 

19,348

 

Other income (expense), net

 

169

 

638

 

Interest expense

 

(1,893

)

(1,985

)

Interest income

 

4,496

 

2,053

 

Income before income taxes

 

66,436

 

20,054

 

Income tax expense

 

(20,581

)

(7,327

)

Net income

 

$

45,855

 

$

12,727

 

Net income per share:

 

 

 

 

 

Basic

 

$

0.76

 

$

0.22

 

Assuming dilution (a)

 

$

0.63

 

$

0.19

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

Basic

 

60,247

 

56,724

 

Assuming dilution (a)

 

73,632

 

70,667

 


(a) Calculation of net income per share, assuming dilution:

 

 

 

 

 

Net income (basic)

 

$

45,855

 

$

12,727

 

Convertible debt add-back (b)

 

629

 

629

 

Numerator (assuming dilution)

 

$

46,484

 

$

13,356

 

Weighted average shares (basic)

 

60,247

 

56,724

 

Dilutive effect of:

 

 

 

 

 

Stock options (c)

 

1,534

 

2,373

 

Phantom stock, restricted stock and performance units

 

357

 

76

 

Convertible debt (b)

 

11,494

 

11,494

 

Denominator (assuming dilution)

 

73,632

 

70,667

 

 

(b) In March 2004, the Company issued $250 million of 1% convertible senior subordinated debentures, which are convertible into shares of common stock at a conversion rate of 45.9770 shares per $1,000 principal amount representing a conversion price of $21.75 per share. These debentures are convertible into shares of CommScope common stock under specific circumstances as described in the Company’s Form 10-K for the year ended December 31, 2004.

(c) Options to purchase approximately 0.5 million and 0.6 million common shares were excluded from the computation of net income per share, assuming dilution, for the three months ended March 31, 2007 and March 31, 2006, respectively, because they would have been antidilutive.




 

CommScope, Inc.

Condensed Consolidated Balance Sheets

(Unaudited — In thousands, except share amounts)

 

 

March 31,

 

December 31,

 

 

 

2007

 

2006

 

Assets

 

 

 

 

 

Cash and cash equivalents

 

$

296,686

 

$

276,042

 

Short-term investments

 

163,082

 

151,868

 

Total cash, cash equivalents and short-term investments

 

459,768

 

427,910

 

Accounts receivable, less allowance for doubtful accounts of
$13,017 and $13,461, respectively

 

230,292

 

186,824

 

Inventories

 

168,473

 

153,596

 

Prepaid expenses and other current assets

 

12,647

 

14,914

 

Deferred income taxes

 

27,312

 

24,556

 

Total current assets

 

898,492

 

807,800

 

Property, plant and equipment, net

 

237,788

 

242,012

 

Goodwill

 

151,381

 

151,378

 

Other intangibles, net

 

62,761

 

63,967

 

Deferred income taxes

 

13,762

 

15,493

 

Other assets

 

21,893

 

21,823

 

Total Assets

 

$

1,386,077

 

$

1,302,473

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Accounts payable

 

$

82,223

 

$

74,927

 

Other accrued liabilities

 

91,409

 

95,316

 

Current portion of long-term debt

 

23,800

 

13,000

 

Total current liabilities

 

197,432

 

183,243

 

Long-term debt

 

257,050

 

271,100

 

Pension and postretirement benefit liabilities

 

92,634

 

89,995

 

Other noncurrent liabilities

 

27,797

 

19,031

 

Total Liabilities

 

574,913

 

563,369

 

Commitments and contingencies

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

Preferred stock, $.01 par value; Authorized shares:20,000,000; Issued and outstanding shares: None at March 31, 2007 and December 31, 2006

 

 

 

Common stock, $.01 par value; Authorized shares: 300,000,000; Issued shares, including treasury stock: 71,138,199 at March 31, 2007 and 69,934,533 at December 31, 2006; Issued and outstanding shares: 60,938,199 at March 31, 2007 and 59,734,533 at December 31, 2006

 

711

 

699

 

Additional paid-in capital

 

563,161

 

532,344

 

Retained earnings

 

386,621

 

346,821

 

Accumulated other comprehensive loss

 

6,206

 

4,775

 

Treasury stock, at cost: 10,200,000 shares at March 31, 2007 and December 31, 2006

 

(145,535

)

(145,535)

 

Total Stockholders’ Equity

 

811,164

 

739,104

 

Total Liabilities and Stockholders’ Equity

 

$

1,386,077

 

$

1,302,473

 

 

 




CommScope, Inc.

Condensed Consolidated Statements of Cash Flows
(Unaudited — In thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2007

 

2006

 

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

Net income

 

$

45,855

 

$

12,727

 

Adjustments to reconcile net income to net cash provded by (used in) operating activties:

 

 

 

 

 

Depreciation and amortization

 

12,372

 

14,216

 

Equity-based compensation

 

2,641

 

1,020

 

Deferred income taxes

 

(4,855

)

1,614

 

Changes in assets and liabilities

 

(45,332

)

(47,969

)

Net cash provided by (used in) operating activties

 

10,681

 

(18,393

)

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

Additions to property, plant and equipment

 

(4,077

)

(6,762

)

Net purchases of short-term investments

 

(11,214

)

(6,645

)

Proceeds from disposal of fixed assets

 

85

 

297

 

Acquisition of MC2 product line

 

 

(13,810

)

Net cash used in investing activties

 

(15,206

)

(26,920

)

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

Principal payments on long-term debt

 

(3,250

)

(3,250

)

Proceeds from the issuance of shares under equity-based compensation plans

 

19,295

 

27,670

 

Tax benefit from the issuance of shares under equity-based compensation plans

 

8,893

 

7,143

 

Net cash provided by financing activties

 

24,938

 

31,563

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

231

 

427

 

 

 

 

 

 

 

Change in cash and cash equivalents

 

20,644

 

(13,323

)

Cash and cash equivalents, beginning of period

 

276,042

 

146,549

 

Cash and cash equivalents, end of period

 

$

296,686

 

$

133,226

 

 




CommScope, Inc.

Sales and Operating Income by Reportable Segment
(Unaudited — In millions)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2007

 

2006

 

Net Sales :

 

 

 

 

 

Enterprise

 

$

200.9

 

$

172.1

 

Broadband

 

148.1

 

125.9

 

Carrier

 

87.1

 

54.7

 

Inter-segment eliminations

 

(0.6

)

(0.4

)

Consolidated Net Sales

 

$

435.5

 

$

352.3

 

 

 

 

 

 

 

Operating Income:

 

 

 

 

 

Enterprise

 

$

29.5

 

$

11.3

 

Broadband

 

21.6

 

8.0

 

Carrier

 

12.6

 

 

Consolidated Operating Income

 

$

63.7

 

$

19.3