CommScope Reports Fourth Quarter 2014 Results

HICKORY, N.C.--()--CommScope Holding Company, Inc. (NASDAQ: COMM):

  • Fourth Quarter Results Consistent with Most Recent Guidance
    • Sales of $828 million
    • Operating Income of $76 million and adjusted operating income of $139 million, or 17 percent of sales
    • Net income of $0.25 per diluted share, compared to a loss of $0.05 per share
      in the prior year period
    • Adjusted net income grew 34 percent year over year to $73 million, resulting in adjusted earnings of $0.38 per diluted share
    • Solid fourth quarter adjusted free cash flow of $116 million
  • Outstanding Calendar Year 2014 Performance
    • Sales increased 10 percent year over year to $3.8 billion
    • Adjusted operating income rose 30 percent year over year to $808 million, or 21 percent of sales
    • Adjusted net income grew 63 percent year over year to $427 million, resulting in adjusted earnings of $2.23 per diluted share
    • Adjusted free cash flow of $346 million

CommScope Holding Company, Inc. (NASDAQ: COMM), a global provider of connectivity and essential infrastructure solutions for wireless, business enterprise and residential broadband networks, reported sales of $828 million and net income of $48 million, or $0.25 per diluted share for the quarter ended December 31, 2014. Non-GAAP adjusted net income for the fourth quarter was $73 million, or $0.38 per diluted share. A reconciliation of reported GAAP results to non-GAAP results is attached.

For the quarter ended December 31, 2013, CommScope reported sales of $847 million and a net loss of $9 million or a loss of $0.05 per diluted share. Non-GAAP adjusted net income for the fourth quarter of 2013 was $54 million, or $0.30 of adjusted earnings per diluted share.

“CommScope had an outstanding year by nearly all financial and operational measures,” said President and Chief Executive Officer Eddie Edwards. “We’re proud of our team’s accomplishments in 2014, in which we delivered 10 percent sales growth, generated record gross and operating margins and increased adjusted earnings per share by 39 percent. Our track record and the numerous strategic initiatives underway give us confidence that CommScope remains well-positioned for sustainable growth and success over the long-term.

“We intend to build upon this success through the planned acquisition of TE Connectivity’s Telecom, Enterprise and Wireless businesses. We believe this acquisition will broaden our position as a leading communications infrastructure provider and better position CommScope to meet the growing global demand for bandwidth in next generation networks.”

Fourth Quarter 2014 Overview

Fourth quarter 2014 sales declined 2 percent year over year to $828 million. Growth in the Enterprise and Broadband segments were more than offset by lower North American wireless sales. Foreign exchange rate changes negatively affected sales by 2 percent in the quarter compared to the prior year period.

After substantial growth in the first nine months of 2014, Wireless segment sales in the fourth quarter declined 9 percent year over year to $485 million. The fourth quarter decline was primarily due to a slowdown in North America, which was somewhat offset by growth in the Asia Pacific region. Foreign exchange rate changes had a negative impact of approximately 2 percent on Wireless segment sales in the fourth quarter compared to the prior year. Wireless adjusted operating income was $84 million for the quarter, down 25 percent year over year due mainly to the lower sales volumes.

Fourth quarter Enterprise segment sales increased 4 percent year over year to $213 million. The increase was primarily driven by growth in the Asia Pacific region. Enterprise adjusted operating income for the quarter increased 31 percent year over year to $43 million, or 20 percent of sales.

Fourth quarter Broadband segment sales increased 20 percent year over year to $131 million. The growth was primarily driven by increased investment in North America as cable operators push fiber technology deeper into their networks and invest to enhance the quality of their video and broadband offerings. The Broadband team delivered on its objective to return to historic levels of profitability by improving adjusted operating income substantially year over year to $13 million, or 10 percent of sales. The increase was driven by higher volumes and the benefit realized from ongoing cost reduction initiatives.

Operating income in the fourth quarter grew 27 percent to $76 million, compared to $60 million in the same period last year. Adjusted operating income, which excludes amortization of purchased intangibles, restructuring costs and other special items, declined 1 percent year over year to $139 million.

GAAP net income rose substantially to $48 million, compared to a net loss of $9 million in the same period last year. Excluding amortization of purchased intangibles, restructuring costs and other special items, fourth quarter adjusted net income increased 34 percent year over year to $73 million. Adjusted earnings were $0.38 per diluted share, up 27 percent year over year.

Adjusted net income and earnings per share rose mainly due to lower interest expense and a lower adjusted effective tax rate in the quarter. The company reduced interest expense by redeeming debt with the net proceeds from its initial public offering in October 2013 and through other refinancing activities. The lower effective tax rate in the quarter primarily resulted from higher pre-tax earnings, benefits of certain international tax structuring initiatives and legislation extending the R&D tax credit.

Calendar Year 2014 Overview

For the full year, sales increased 10 percent to $3.8 billion, primarily due to growth in the Wireless segment. Wireless sales increased significantly in North America, Asia-Pacific and Europe as a result of 4G/LTE rollouts in developed markets and 3G coverage buildouts in emerging markets. Wireless adjusted operating income was $600 million for the year, up 34 percent year over year due mainly to higher sales volumes, benefits from a favorable mix of products sold and successful cost reduction activities.

For full year 2014, Enterprise segment sales increased 3 percent. Large enterprises continue to invest in global information technology, data centers and commercial buildings in order to meet the ongoing demands for bandwidth and intelligence in networks. Enterprise adjusted operating income for the year increased 7 percent year over year to $167 million, or 20 percent of sales.

Broadband segment sales in 2014 rose 5 percent to $511 million, as double-digit growth in North America was somewhat offset by lower sales in other geographic regions. Broadband adjusted operating income more than doubled year over year to $42 million, or 8 percent of sales.

GAAP operating income increased 75 percent to $577 million, while GAAP net income was $237 million, or $1.24 per diluted share. Excluding the amortization of purchased intangible assets and other special items, the company generated $808 million in adjusted operating income, an increase of $188 million or 30 percent compared to 2013. Adjusted net income rose to $427 million or $2.23 per diluted share, up 63 percent and 39 percent, respectively, year over year. This year-over-year improvement is due mainly to higher sales volumes, favorable change in the mix of products sold, benefit from ongoing cost savings initiatives, lower interest expense and a lower adjusted effective tax rate.

Proposed Transaction with TE Connectivity

On January 28, 2015, CommScope announced an agreement to acquire TE Connectivity’s Telecom, Enterprise and Wireless businesses. TE Connectivity is a world leader in fiber optic connectivity for wireline and wireless networks, and the transaction is expected to be in excess of 20% accretive to CommScope’s adjusted earnings per share by the end of the first full year after closing and on a pro forma basis, excluding purchase accounting charges, transition costs and other special items. CommScope continues to expect the transaction will close by the end of 2015.

Outlook

CommScope management provided the following first quarter and full year 2015 guidance, which excludes the impact of the planned acquisition, amortization of purchased intangibles, restructuring costs, transaction and transition costs and other special items. As previously outlined, the company’s outlook reflects a temporary slowdown in North American wireless carrier spending, the negative impact of foreign exchange rate changes and on-going product line trimming in the Broadband segment.

First Quarter 2015 Guidance:

  • Revenue of $800 million – $850 million
  • Adjusted operating income of $135 million – $155 million
  • Adjusted earnings per diluted share of $0.33 – $0.38, based on a share count of 192 million weighted average diluted shares

Full Year 2015 Guidance:

  • Revenue of $3.65 billion – $3.80 billion
  • Adjusted operating income of $725 million – $775 million
  • Adjusted earnings per diluted share of $1.95 – $2.05, based on a share count of 194 million weighted average diluted shares
  • Strong free cash flow

Conference Call, Webcast and Investor Presentation

As previously announced, CommScope will host a conference call 8:30 a.m. ET today in which management will discuss fourth quarter and full year 2014 results. The conference call also will be webcast over the Internet.

To participate in the conference call, dial 866-394-7514 (US and Canada only) or +1 706-758-2714. The conference identification number is 61893265. Please plan to dial in 15 minutes before the start of the call to facilitate a timely connection. The live, listen-only audio of the call and corresponding presentation will be available through a link on the Investor Relations Events and Presentations page of CommScope’s website at www.commscope.com.

If you are unable to participate and would like to hear a replay, dial 855-859-2056 (US and Canada only) or +1 404-537-3406. The replay identification number is 61893265 and will be available through March 19, 2015. A webcast replay will also be archived on CommScope’s website for a limited period of time following the conference call.

About CommScope

CommScope (NASDAQ: COMM) helps companies around the world design, build and manage their wired and wireless networks. Our network infrastructure solutions help customers increase bandwidth; maximize existing capacity; improve network performance and availability; increase energy efficiency; and simplify technology migration. You will find our solutions in the largest buildings, venues and outdoor spaces; in data centers and buildings of all shapes, sizes and complexity; at wireless cell sites and in cable headends; and in airports, trains, and tunnels. Vital networks around the world run on CommScope solutions.

Non-GAAP Financial Measures

CommScope management believes that presenting certain non-GAAP financial measures provides meaningful information to investors in understanding operating results and may enhance investors' ability to analyze financial and business trends. Non-GAAP measures are not a substitute for GAAP measures and should be considered together with the GAAP financial measures. As calculated, our non-GAAP measures may not be comparable to other similarly titled measures of other companies. In addition, CommScope management believes that these non-GAAP financial measures allow investors to compare period to period more easily by excluding items that could have a disproportionately negative or positive impact on results in any particular period.

Forward Looking Statements

The press release includes forward-looking statements (including within the meaning of the Private Securities Litigation Reform Act of 1995) which reflect our current views with respect to future events and financial performance. These forward-looking statements are identified by their use of such terms and phrases as “intend,” “goal,” “estimate,” “expect,” “project,” “projections,” “plans,” “anticipate,” “should,” “could,” “designed to,” “foreseeable future,” “believe,” “think,” “scheduled,” “outlook,” “guidance” and similar expressions. This list of indicative terms and phrases is not intended to be all-inclusive.

These statements are subject to various risks and uncertainties, many of which are outside our control, including, without limitation, our dependence on customers’ capital spending on communication systems; concentration of sales among a limited number of customers or distributors; changes in technology; our ability to fully realize anticipated benefits from prior or future acquisitions or equity investments; industry competition and the ability to retain customers through product innovation, introduction and marketing; risks associated with our sales through channel partners; possible production disruptions due to supplier or contract manufacturer bankruptcy, reorganization or restructuring; the risk our global manufacturing operations suffer production or shipping delays causing difficulty in meeting customer demands; the risk that internal production capacity and that of contract manufacturers may be insufficient to meet customer demand or quality standards for our products; our ability to maintain effective information management systems and to successfully implement major systems initiatives; cyber-security incidents, including data security breaches or computer viruses; product performance issues and associated warranty claims; significant international operations and the impact of variability in foreign exchange rates; our ability to comply with governmental anti-corruption laws and regulations and export and import controls worldwide; our ability to compete in international markets due to export and import controls to which we may be subject; potential difficulties in realigning global manufacturing capacity and capabilities among our global manufacturing facilities, including delays or challenges related to removing, transporting or reinstalling equipment, that may affect our ability to meet customer demands for products; possible future restructuring actions; possible future impairment charges for fixed or intangible assets, including goodwill; increased obligations under employee benefit plans; cost of protecting or defending intellectual property; changes in laws or regulations affecting us or the industries we serve; costs and challenges of compliance with domestic and foreign environmental laws and the effects of climate change; changes in cost and availability of key raw materials, components and commodities and the potential effect on customer pricing; risks associated with our dependence on a limited number of key suppliers; our ability to attract and retain qualified key employees; allegations of health risks from wireless equipment; availability and adequacy of insurance; natural or man-made disasters or other disruptions; income tax rate variability and ability to recover amounts recorded as value-added tax receivables; labor unrest; risks of not realizing benefits from research and development projects; substantial indebtedness and maintaining compliance with debt covenants; our ability to incur additional indebtedness; ability of our lenders to fund borrowings under their credit commitments; changes in capital availability or costs, such as changes in interest rates, security ratings and market perceptions of the businesses in which we operate, or the ability to obtain capital on commercially reasonable terms or at all; our ability to generate cash to service our indebtedness; our ability to consummate the proposed acquisition (the “Acquisition”) of TE Connectivity’s Telecom, Enterprise and Wireless businesses (the “Business”) on a timely basis or at all; risks associated with antitrust approval of the Acquisition; our ability to integrate the Business on a timely and cost effective manner; our reliance on TE Connectivity for transition services for some period of time after closing of the Acquisition; our ability to realize expected growth opportunities and cost savings from the Acquisition; and other factors beyond our control. These and other factors are discussed in greater detail in our 2014 Annual Report on Form 10-K. Although the information contained in this presentation represents our best judgment as of the date of this presentation based on information currently available and reasonable assumptions, we can give no assurance that the expectations will be attained or that any deviation will not be material. However, we are not undertaking any duty or obligation to update this information to reflect developments or information obtained after the date of this presentation.

       
CommScope Holding Company, Inc.
Consolidated Statements of Operations
(Unaudited - In thousands, except per share amounts)
     
Three Months Ended Twelve Months Ended
December 31, December 31,
2014 2013 2014 2013
 
Net sales $ 827,895   $ 846,558   $ 3,829,614   $ 3,480,117  
 
Operating costs and expenses:
Cost of sales 542,475 554,715 2,432,345 2,279,177
Selling, general and administrative 129,376 147,457 484,891 502,275
Research and development 29,543 30,879 125,301 126,431
Amortization of purchased intangible assets 44,826 43,966 178,265 174,887
Restructuring costs, net 7,590 5,671 19,267 22,104
Asset impairments   (2,133 )   3,727     12,096     45,529  
Total operating costs and expenses   751,677     786,415     3,252,165     3,150,403  
 
Operating income 76,218 60,143 577,449 329,714
Other income (expense), net 4,188 (39,371 ) (86,405 ) (48,037 )
Interest expense (36,526 ) (60,790 ) (178,935 ) (208,599 )
Interest income   1,345     847     4,954     3,107  
 
Income (loss) before income taxes 45,225 (39,171 ) 317,063 76,185
Income tax benefit (expense)   2,586     30,259     (80,291 )   (56,789 )
 
Net income (loss) $ 47,811   $ (8,912 ) $ 236,772   $ 19,396  
 
 
Earnings (loss) per share:
Basic $ 0.25 $ (0.05 ) $ 1.27 $ 0.12
Diluted (a) $ 0.25 $ (0.05 ) $ 1.24 $ 0.12
 
Weighted average shares outstanding:
Basic 187,738 177,725 186,905 160,641
Diluted (a) 192,215 177,725 191,450 164,013
 
(a) Calculation of diluted earnings (loss) per share:
Net income (loss) (basic) $ 47,811 $ (8,912 ) $ 236,772 $ 19,396
 
Weighted average shares (basic) 187,738 177,725 186,905 160,641
Dilutive effect of stock options   4,477     -     4,545     3,372  
Denominator (diluted)   192,215     177,725     191,450     164,013  
 
 
See notes to consolidated financial statements included in our Form 10-K.
   
CommScope Holding Company, Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
 
 
December 31,
2014 2013
Assets
 
Cash and cash equivalents $ 729,321 $ 346,320

Accounts receivable, less allowance for doubtful accounts of $8,797 and $12,617, respectively

612,007 607,489
Inventories, net 367,185 372,187
Prepaid expenses and other current assets 67,875 71,818
Deferred income taxes   51,230     55,609  
Total current assets 1,827,618 1,453,423
 

Property, plant and equipment, net of accumulated depreciation of $207,342 and $183,965, respectively

289,371 310,143
Goodwill 1,451,887 1,450,506
Other intangible assets, net 1,260,927 1,422,192
Other noncurrent assets   126,082     97,791  
 
Total assets $ 4,955,885   $ 4,734,055  
 
Liabilities and Stockholders' Equity
 
Accounts payable $ 177,806 $ 251,639
Other accrued liabilities 289,006 332,280
Current portion of long-term debt   9,001     9,462  
Total current liabilities 475,813 593,381
 
Long-term debt 2,698,724 2,505,090
Deferred income taxes 339,945 386,527
Pension and postretirement benefit liabilities 29,478 40,349
Other noncurrent liabilities   104,306     120,692  
Total liabilities 3,648,266 3,646,039
 
Commitments and contingencies
 
Stockholders' equity:

Preferred stock, $.01 par value: Authorized shares: 200,000,000; Issued and outstanding shares: None at December 31, 2014 and 2013

Common stock, $0.01 par value: Authorized shares: 1,300,000,000; Issued and outstanding shares: 187,831.389 and 185,861,777 at December 31, 2014 and 2013, respectively

1,888 1,868
Additional paid-in capital 2,141,433 2,101,350
Retained earnings (accumulated deficit) (741,519 ) (978,291 )
Accumulated other comprehensive loss (83,548 ) (26,276 )

Treasury stock, at cost: 961,566 shares at December 31, 2014 and 2013

  (10,635 )   (10,635 )
Total stockholders' equity   1,307,619     1,088,016  
 
Total liabilities and stockholders' equity $ 4,955,885   $ 4,734,055  
 
 
See notes to consolidated financial statements included in our Form 10-K.
       
CommScope Holding Company, Inc.
Consolidated Statements of Cash Flows
(Unaudited -- In thousands)
   
Three Months Ended Twelve Months Ended
December 31,   December 31,
2014 2013 2014 2013
 
Operating Activities:
Net income (loss) $ 47,811 $ (8,912 ) $ 236,772 $ 19,396

Adjustments to reconcile net income (loss) to net cash generated by operating activities:

Depreciation and amortization 60,638 72,751 259,504 256,616
Equity-based compensation 5,361 3,451 21,092 16,108
Deferred income taxes (1,747 ) (55,450 ) (33,278 ) (40,722 )
Asset impairments (2,133 ) 3,727 12,096 45,529
Non-cash restructuring charges 459 8,314 1,237 11,179
Excess tax benefits from equity-based compensation (828 ) (220 ) (11,411 ) (229 )
Changes in assets and liabilities:
Accounts receivable 80,821 34,900 (18,824 ) (11,895 )
Inventories 45,347 (4,595 ) (4,324 ) (62,141 )
Prepaid expenses and other current assets (9,776 ) (11,691 ) 1,502 (27,257 )
Accounts payable and other accrued liabilities (88,695 ) 57,030 (109,922 ) 57,575
Other noncurrent liabilities (12,397 ) (1,620 ) (49,265 ) (21,944 )
Other noncurrent assets 9,089 1,855 715 (3,060 )
Other   (6,164 )   (13,106 )   (16,476 )   (1,454 )
Net cash generated by operating activities 127,786 86,434 289,418 237,701
 
Investing Activities:
Additions to property, plant and equipment (12,051 ) (9,051 ) (36,935 ) (36,780 )
Proceeds from sale of property, plant and equipment 2,963 1,999 4,575 3,237
Cash paid for acquisitions (1,620 ) (41,794 ) (55,770 )
Proceeds from sales of businesses and long-term investments 4,013 23,000 12,761 26,502
Cash paid for long-term investments (15,000 ) (750 )
Other   140         441     150  
Net cash generated by (used in) investing activities (6,555 ) 15,948 (75,952 ) (63,411 )
 
Financing Activities:
Long-term debt repaid (2,195 ) (702,580 ) (1,124,392 ) (907,817 )
Long-term debt proceeds 26 200,344 1,315,026 947,379
Net proceeds from the issuance of common stock 433,958 433,958
Long-term debt financing costs (1,433 ) (23,257 ) (14,560 )
Dividends paid (538,705 )
Cash paid to stock option holders (11,295 )

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

1,305 1,174 12,052 1,174
Excess tax benefits from equity-based compensation 828 220 11,411 229
Other               (32 )
Net cash generated by (used in) financing activities (36 ) (68,317 ) 190,840 (89,669 )
 
Effect of exchange rate changes on cash and cash equivalents   (8,308 )   210     (21,305 )   (2,676 )
 
Change in cash and cash equivalents 112,887 34,275 383,001 81,945
Cash and cash equivalents, beginning of period   616,434     312,045     346,320     264,375  
Cash and cash equivalents, end of period $ 729,321   $ 346,320   $ 729,321   $ 346,320  
 
 
See notes to consolidated financial statements included in our Form 10-K.
       
CommScope Holding Company, Inc.
Reconciliation of GAAP Measures to Non-GAAP Adjusted Measures
(Unaudited -- In millions, except per share amounts)
 
Three Months Ended Year Ended
December 31, December 31,
2014 2013 2014 2013
 
Operating income, as reported $ 76.2   $ 60.1   $ 577.4   $ 329.7  
Adjustments:
Amortization of purchased intangible assets 44.8 44.0 178.3 174.9
Restructuring costs, net 7.6 5.7 19.3 22.1
Equity-based compensation 5.4 3.5 21.1 16.1
Asset impairments (2.1 ) 3.7 12.1 45.5
Transaction costs 7.5 21.9 12.1 27.2
Purchase accounting adjustments(1) - 0.5 (11.9 ) 2.5
Adjustment of prior year warranty matter   -     2.1     -     2.1  
Total adjustments to operating income   63.2     81.4     231.0     290.4  
Non-GAAP adjusted operating income $ 139.4   $ 141.3   $ 808.4   $ 620.1  
 
Income before income taxes, as reported $ 45.2 $ (39.2 ) $ 317.1 $ 76.2
Income tax expense, as reported   2.6     30.3     (80.3 )   (56.8 )
Net income, as reported $ 47.8 $ (8.9 ) $ 236.8 $ 19.4
Adjustments:
Total pretax adjustments to operating income 63.2 81.4 231.0 290.4
Pretax amortization of deferred financing costs & OID(2) 3.2 15.1 32.4 26.6
Pretax loss on debt transactions (3) - 34.4 93.9 34.4
Pretax gain on sale of equity investment (3) (3.5 ) - (12.3 ) -
Tax effects of adjustments and other tax items(4)   (38.0 )   (67.7 )   (155.1 )   (108.7 )
Non-GAAP adjusted net income $ 72.6   $ 54.1   $ 426.7   $ 262.1  
 
Diluted EPS, as reported $ 0.25 $ (0.05 ) $ 1.24 $ 0.12
 
Non-GAAP adjusted diluted EPS $ 0.38 $ 0.30 $ 2.23 $ 1.60
 
(1) For the year ended December 31, 2014, includes the reduction in the estimated fair value of contingent consideration payable related to the Redwood acquisition.
(2) Included in interest expense.
(3) Included in other income (expense), net.
(4) The tax rates applied to adjustments reflect the tax expense or benefit based on the tax jurisdiction of the entity generating the adjustment. There are certain items for which we expect little or no tax effect.
 
Note: Components may not sum to total due to rounding.
 
See Description of Non-GAAP Financial Measures
       
CommScope Holding Company, Inc.
Reconciliation of GAAP to Non-GAAP Adjusted Operating Income by Segment
(Unaudited -- In millions)
 
 
Year Ended December 31, 2014 Non-GAAP Adjusted Operating Income by Segment
 

Wireless

Enterprise

Broadband

Total

Operating income, as reported $ 468.1 $ 99.8 $ 9.5 $ 577.4
 
Amortization of purchased intangible assets 91.3 69.4 17.6 178.3
Restructuring costs, net 16.2 0.1 2.9 19.3
Equity-based compensation 11.7 6.7 2.7 21.1
Asset impairments 4.9 - 7.2 12.1
Transaction costs 7.6 3.0 1.5 12.1
Purchase accounting adjustments   0.6       (12.5 )     -       (11.9 )
Non-GAAP adjusted operating income $ 600.3 $ 166.6 $ 41.5 $ 808.4
Non-GAAP adjusted operating margin 24.3 % 19.6 % 8.1 % 21.1 %
 
 
Year Ended December 31, 2013 Non-GAAP Adjusted Operating Income by Segment
 

Wireless

Enterprise

Broadband

Total

Operating income (loss), as reported $ 303.4 $ 66.7 $ (40.4 ) $ 329.7
 
Amortization of purchased intangible assets 88.1 68.4 18.4 174.9
Restructuring costs, net 24.3 5.1 (7.3 ) 22.1
Equity-based compensation 8.7 5.2 2.3 16.1
Asset impairments 9.4 - 36.2 45.5
Transaction costs 15.5 7.4 4.3 27.2
Purchase accounting adjustments - 2.5 - 2.5
Adjustment of prior year warranty matter   -       -       2.1       2.1  
Non-GAAP adjusted operating income $ 449.4 $ 155.3 $ 15.4 $ 620.1
Non-GAAP adjusted operating margin 20.7 % 18.8 % 3.2 % 17.8 %
 
Components may not sum to total due to rounding
 
See Description of Non-GAAP Financial Measures
       
CommScope Holding Company, Inc.
Segment Information
(Unaudited -- In millions)
 
Sales by Segment

(Unaudited -- In millions)

 
% Change
Q4 2014 Q3 2014 Q4 2013 Sequential YOY
Wireless $ 484.8 $ 633.0 $ 533.7 (23.4 ) % (9.2 ) %
Enterprise 212.5 218.0 205.2 (2.5 ) % 3.6 %
Broadband 130.6 149.5 109.1 (12.6 ) % 19.7 %
Inter-segment eliminations   (0.1 )   (0.1 )   (1.4 ) N/A N/A
 
Total Net Sales $ 827.9   $ 1,000.4   $ 846.6   (17.2 ) % (2.2 ) %
 
 
Non-GAAP Adjusted Operating Income by Segment

(Unaudited -- In millions)

 
% Change
Q4 2014

Q3 2014

Q4 2013 Sequential YOY
Wireless $ 84.0 $ 155.2 $ 111.9 (45.9 ) % (24.9 ) %
Enterprise 42.5 44.5 32.4 (4.5 ) % 31.2 %
Broadband   12.9     18.8     (3.0 ) (31.4 ) % (530.0 ) %
 
Total Non-GAAP Adjusted Operating Income $ 139.4   $ 218.5   $ 141.3   (36.2 ) % (1.3 ) %
 
 
Sales by Segment
 
% Change
2014 2013 YOY
Wireless $ 2,469.8 $ 2,174.2 13.6 %
Enterprise 850.5 827.9 2.7 %
Broadband 511.1 484.6 5.5 %
Inter-segment eliminations   (1.8 )   (6.6 ) N/A
 
Total Net Sales $ 3,829.6   $ 3,480.1   10.0 %
 
 
Non-GAAP Adjusted Operating Income by Segment
 
% Change
2014 2013 YOY
Wireless $ 600.3 $ 449.4 33.6 %
Enterprise 166.6 155.3 7.3 %
Broadband   41.5     15.4   169.5 %
 
Total Non-GAAP Adjusted Operating Income $ 808.4   $ 620.1   30.4 %
 
Components may not sum to total due to rounding
 
See Description of Non-GAAP Financial Measures
       
CommScope Holding Company, Inc.
Reconciliation of GAAP to Non-GAAP Adjusted Operating Income by Segment
(Unaudited -- In millions)
 
Fourth Quarter 2014 Non-GAAP Adjusted Operating Income Reconciliation by Segment
 
Wireless Enterprise Broadband Total
Operating income, as reported $ 47.8 $ 21.5 $ 6.9 $ 76.2
Amortization of purchased intangible assets 23.1 17.4 4.4 44.8
Restructuring costs, net 7.5 - 0.1 7.6
Equity-based compensation 3.0 1.7 0.7 5.4
Asset impairments (2.1 ) - - (2.1 )
Transaction costs   4.7     1.9     0.9     7.5  
Non-GAAP adjusted operating income $ 84.0 $ 42.5 $ 12.9 $ 139.4
Non-GAAP adjusted operating margin % 17.3 % 20.0 % 9.9 % 16.8 %
 
Third Quarter 2014 Non-GAAP Adjusted Operating Income Reconciliation by Segment
 
Wireless Enterprise Broadband Total
Operating income, as reported $ 113.8 $ 25.3 $ 11.9 $ 151.0
Amortization of purchased intangible assets 23.2 17.3 4.3 44.8
Restructuring costs, net 5.9 - 1.6 7.4
Equity-based compensation 3.1 1.8 0.7 5.6
Asset impairments 7.0 - - 7.0
Transaction costs 1.7 0.7 0.3 2.7
Purchase accounting adjustments   0.6     (0.6 )   -     -  
Non-GAAP adjusted operating income $ 155.2 $ 44.5 $ 18.8 $ 218.5
Non-GAAP adjusted operating margin % 24.5 % 20.4 % 12.6 % 21.8 %
 
 
Fourth Quarter 2013 Non-GAAP Adjusted Operating Income Reconciliation by Segment
 
Wireless Enterprise Broadband Total
Operating income (loss), as reported $ 57.4 $ 3.0 $ (0.3 ) $ 60.1
Amortization of purchased intangible assets 22.0 17.4 4.6 44.0
Restructuring costs, net 14.4 4.6 (13.3 ) 5.7
Equity-based compensation 1.9 1.1 0.5 3.5
Asset impairments 3.7 - - 3.7
Transaction costs 12.5 5.9 3.4 21.9
Purchase accounting adjustments - 0.5 - 0.5
Prior year warranty matter   -     -     2.1     2.1  
Non-GAAP adjusted operating income (loss) $ 111.9 $ 32.4 $ (3.0 ) $ 141.3
Non-GAAP adjusted operating margin % 21.0 % 15.8 % -2.8 % 16.7 %
 
 
Components may not sum to total due to rounding
 
See Description of Non-GAAP Financial Measures
       
CommScope Holding Company, Inc.

Adjusted Cash Flow

(Unaudited -- In millions)

 
 

Adjusted Cash Flow

(Unaudited -- In millions)

 
Q4 2014 Q4 2013

Full Year 2014

Full Year 2013

 
 
Cash flow from operations $ 127.8 $ 86.4 $ 289.4 $ 237.7
Capital expenditures (12.1 ) (9.1 ) (36.9 ) (36.8 )
Debt redemption premium - 33.0 93.9 33.0
Fee paid to terminate management agreement   -     20.2     -       20.2  
 
Adjusted Free Cash Flow $ 115.7   $ 130.5   $ 346.4   $ 254.1  
 

CommScope Holding Company, Inc.

Quarterly Adjusted Operating Income and Adjusted EBITDA

(Unaudited - In millions)

         
 
GAAP to Non-GAAP Adjusted Operating Income and Adjusted EBITDA Reconciliation

(Unaudited -- In millions)

 
 
Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013
Operating income, as reported $ 76.2 $ 151.0 $ 203.7 $ 146.5 $ 60.1
Amortization of purchased intangible assets 44.8 44.8 44.3 44.3 44.0
Restructuring costs, net 7.6 7.4 2.3 2.0 5.7
Equity-based compensation 5.4 5.6 6.5 3.7 3.5
Asset impairments (2.1 ) 7.0 7.2 - 3.7
Transaction costs 7.5 2.7 1.0 0.9 21.9
Purchase accounting adjustments - - (6.4 ) (5.4 ) 0.5
Adjustment of prior year warranty matter   -     -     -     -     2.1  
Non-GAAP adjusted operating income $ 139.4 $ 218.5 $ 258.5 $ 192.0 $ 141.3
Non-GAAP adjusted operating margin % 16.8 % 21.8 % 24.2 % 20.5 % 16.7 %
 
Depreciation   12.7     12.4     12.1     11.7     13.7  
Non-GAAP adjusted EBITDA $ 152.0   $ 230.9   $ 270.6   $ 203.7   $ 155.1  
 
 
Components may not sum to total due to rounding
 

See Description of NON-GAAP Financial Measures

Contacts

Investor Contacts:
Phil Armstrong, CommScope
+1 828-323-4848
or
News Media Contact:
Rick Aspan, CommScope
+1 708-236-6568
publicrelations@commscope.com

Release Summary

CommScope reports sales of $828 million and net income of $48 million for the quarter ended December 31, 2014. For the full year, sales increased 10 percent to $3.8 billion.

Contacts

Investor Contacts:
Phil Armstrong, CommScope
+1 828-323-4848
or
News Media Contact:
Rick Aspan, CommScope
+1 708-236-6568
publicrelations@commscope.com