CommScope Reports Third Quarter Results; In Talks with Furukawa to
Restructure Joint Venture Arrangements
HICKORY, N.C., Oct. 25 /PRNewswire/ -- CommScope, Inc. (NYSE: CTV -
news), a world leader in the manufacture of broadband and high-performance
communication cables, today announced third quarter results for the period
ended September 30, 2001. Earnings for the current quarter, excluding
charges related to structuring joint ventures with Furukawa, were $12.2
million, or $0.23 per diluted share compared to $0.43 per diluted share in
the third quarter of 2000. Including these charges, net income for the
current quarter was $6.3 million, or $0.12 per diluted share.
Sales for the third quarter decreased 31% to $177.7 million, compared
to $256.9 million in the third quarter of 2000. Declines in both revenues
and earnings reflect an ongoing global slowdown in telecommunications
spending. Domestic sales were $143.4 million in the current quarter,
compared to $197.4 million in the third quarter of 2000. International
sales were $34.3 million in the current quarter, compared to $59.5 million
in the same period last year.
Orders booked in the current quarter were $141.6 million, down 45%
from the $255.5 million booked in the third quarter of 2000.
"CommScope reported solid financial results in a challenging period
despite continuing weakness in the global telecommunications market," said
Frank M. Drendel, CommScope Chairman and Chief Executive Officer. "We
believe CommScope is a financially strong industry leader in broadband
communications, with a sound balance sheet and good cash flow."
Joint Venture Update
Given the uncertain economic environment and severe downturn in the
telecommunications market as well as associated difficulties in the
financing markets following the September 11th tragedy, CommScope is in
discussions with Furukawa Electric Co. Ltd of Japan (Tokyo 5801) to
restructure the previously announced joint venture arrangements between the
companies to acquire an interest in the fiber optic cable business of
Lucent Technologies (NYSE: LU - news). The Company expects to reduce its
investment and participation in the joint ventures due to the potential
restructuring. The joint ventures were being formed to operate a majority
of the optical fiber and fiber optic cable businesses within Lucent's
Optical Fiber Solutions (OFS) group, following the purchase of those
businesses from Lucent, which is expected to close this quarter.
As a result of restructuring discussions, the Company recorded pretax
charges of approximately $9.3 million, or approximately $0.11 per diluted
share, net of tax, related to the financing and formation of the original
joint venture arrangements.
"We are in discussions with Furukawa to restructure CommScope's
participation in the joint ventures given the current environment," said
Drendel. "We will announce the results of these negotiations as soon as an
agreement is reached."
Other Third-Quarter Details
* Broadband/Video sales worldwide decreased 28% year over year to
approximately $139.4 million for the current quarter.
International sales were $34.3 million for the current quarter,
down 42% year over year. Sales of fiber optic cable increased to
more than 15% of total Company sales in the quarter, primarily
for broadband applications.
* Local Area Network (LAN) sales rose 11% to $23.2 million for the
current quarter compared to $20.9 million for the same period
last year.
* Wireless and Other Telecom sales were $15.1 million in the
current quarter, down from $42.1 million in the same period last
year, due primarily to lower sales of Other Telecom products
related to telephone central office applications. While sales of
Wireless products were also down year over year, sales increased
modestly on a sequential basis.
* Total Company gross margin for the third quarter was
approximately 24.7%, up approximately 50 basis points from the
second quarter of 2001, due primarily to ongoing cost management
focus and moderating material costs. Excluding special charges,
operating margin was approximately 12.2%.
* Net cash provided by operating activities for the quarter was
approximately $42.6 million, excluding special charges. Capital
expenditures for the current quarter were $13.5 million.
"Despite a difficult economic environment, CommScope remained
profitable, improved gross margin sequentially and generated $29 million of
free cash flow during the third quarter, excluding special charges," said
Jearld L. Leonhardt, CommScope Chief Financial Officer and Executive Vice
President. "As we look forward, we expect the challenging business
conditions to continue to affect our performance and, currently expect
sales in the fourth quarter of 2001 to be down 10-20% sequentially. We will
continue to take appropriate actions to position CommScope for long-term
success."
Conference Call Information
The Company plans to hold a telephonic conference call at 10:00 a.m.
Eastern Time on Friday, October 26, 2001. To participate in the conference
call, domestic callers should dial 888-262-9189. International callers
should dial 973-872-3100 for the call. 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 also be available via the
Internet at: www.videonewswire.com/event.asp?id=1394.
If you are unable to participate in the call and would like to hear a
telephonic replay, you may dial 877-519-4471. International callers should
dial 973-341-3080 for the replay. The replay ID is 2925935. The replay will
be available through October 30, 2001. A webcast replay will also be
archived for a limited period of time following the conference call via the
Internet on CommScope's web site (http://www.commscope.com).
CommScope is the world's largest manufacturer of broadband coaxial
cable for Hybrid Fiber Coax (HFC) applications and is a leading supplier of
high- performance fiber optic and twisted pair cables for LAN, wireless and
other communications applications.
This press release contains forward-looking statements regarding sales
and outlook 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,
which 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 CommScope to restructure the joint venture arrangements with
Furukawa on acceptable terms, the ability of the company to implement cost
reductions in a timely manner and the success of those actions, worldwide
economic conditions, telecommunications industry capital spending, expected
demand from AT&T and others, excess capacity, changes in cost and
availability of key raw materials, successful implementation of the
bimetals operation and other vertical integration activities, pricing and
acceptance of CommScope's products, successful expansion and related
operation of our facilities, effective implementation of our integrated
information system, developments in technology, industry competition,
ability of our customers to secure adequate financing, regulatory changes
affecting our industries and other factors. For a more detailed 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
COMMSCOPE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED--IN THOUSANDS, EXCEPT NET INCOME PER SHARE AMOUNTS)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------- ----------------------------------
2001 2000 2001 2000
---------------- --------------- ---------------- ----------------
Net sales $ 177,702 $ 256,873 $ 594,961 $ 702,056
---------------- --------------- ---------------- ----------------
Operating costs and expenses:
Cost of sales 133,755 190,608 449,910 519,057
Selling, general and administrative 19,019 20,105 61,564 58,582
Research and development 1,834 5,158 5,459 13,751
Amortization of goodwill 1,340 1,341 4,023 4,026
Terminated acquisition costs 9,294 - 9,294 -
Impairment charges for fixed assets and investments - - 12,615 -
---------------- --------------- ---------------- ----------------
Total operating costs and expenses 165,242 217,212 542,865 595,416
---------------- --------------- ---------------- ----------------
Operating income 12,460 39,661 52,096 106,640
Other income (expense), net (472) 12 (603) 492
Interest expense (2,211) (2,635) (6,285) (7,611)
Interest income 294 39 669 484
---------------- --------------- ---------------- ----------------
Income before income taxes 10,071 37,077 45,877 100,005
Provision for income taxes (3,726) (14,089) (16,975) (37,997)
---------------- --------------- ---------------- ----------------
Net income $ 6,345 $ 22,988 $ 28,902 $ 62,008
================ =============== ================ ================
Net income per share:
Basic $ 0.12 $ 0.45 $ 0.56 $ 1.21
Assuming dilution (a) $ 0.12 $ 0.43 $ 0.55 $ 1.17
Weighted average shares outstanding:
Basic 51,440 51,229 51,384 51,106
Assuming dilution (a) 52,350 55,972 52,208 56,108
(a) Calculation of net income per share, assuming dilution:
Net income (basic) $ 6,345 $ 22,988 $ 28,902 $ 62,008
Convertible debt add-back * - 1,177 - 3,538
---------------- --------------- ---------------- ----------------
Numerator (assuming dilution) $ 6,345 $ 24,165 $ 28,902 $ 65,546
================ =============== ================ ================
Weighted average shares (basic) 51,440 51,229 51,384 51,106
Dilutive effect of:
Stock options 910 1,163 824 1,422
Convertible debt * - 3,580 - 3,580
---------------- --------------- ---------------- ----------------
Denominator (assuming dilution) 52,350 55,972 52,208 56,108
================ =============== ================ ================
<FN>
* On December 15, 1999, the Company issued $172.5 million in
convertible notes, which are convertible into shares of common
stock at a conversion rate of 20.7512 shares per $1,000
principal amount. The effect of the assumed conversion of these
notes was excluded from the calculation of net income per share,
assuming dilution, for the three and nine months ended September
30, 2001 because it would have been antidilutive in both
periods.
</FN>
COMMSCOPE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(Unaudited)
September 30, December 31,
2001 2000
----------------- -----------------
ASSETS
Cash and cash equivalents $ 40,928 $ 7,704
Accounts receivable, less allowance for doubtful accounts of
$13,206 and $9,187, respectively 144,511 197,536
Inventories 47,821 63,763
Prepaid expenses and other current assets 4,734 3,364
Deferred income taxes 20,146 17,296
----------------- -----------------
Total current assets 258,140 289,663
Property, plant and equipment, net 270,447 251,356
Goodwill, net of accumulated amortization of
$58,158 and $54,140, respectively 152,652 156,685
Other intangibles, net of accumulated amortization of
$36,765 and $34,796, respectively 12,000 13,969
Other assets 7,188 9,509
----------------- -----------------
Total Assets $ 700,427 $ 721,182
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 20,730 $ 39,958
Other accrued liabilities 41,855 38,481
Current portion of long-term debt 2,735 2,120
----------------- -----------------
Total current liabilities 65,320 80,559
Long-term debt, less current portion 192,870 225,316
Deferred income taxes 21,361 24,006
Other noncurrent liabilities 20,297 16,781
----------------- -----------------
Total Liabilities 299,848 346,662
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.01 par value; Authorized shares: 20,000,000;
Issued and outstanding shares: None at September 30, 2001 and
December 31, 2000 -- --
Common stock, $.01 par value; Authorized shares: 300,000,000;
Issued and outstanding shares: 51,466,154 at September 30, 2001;
51,263,703 at December 31, 2000 515 513
Additional paid-in capital 179,030 175,803
Retained earnings 229,704 200,802
Accumulated other comprehensive loss (8,670) (2,598)
----------------- -----------------
Total Stockholders' Equity 400,579 374,520
----------------- -----------------
Total Liabilities and Stockholders' Equity $ 700,427 $ 721,182
================= =================