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8-K - FORM 8-K - CommScope Holding Company, Inc.d284459d8k.htm

Exhibit 99.1

 

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CommScope Reports Third Quarter 2016 Results

 

  Third Quarter Highlights

 

      Sales of $1.29 billion, up 33 percent year over year

 

      Gross margin of 42 percent

 

      GAAP operating income of $181 million

 

      Adjusted operating income (excludes special items) of $297 million, or 23 percent of sales

 

      Net income of $0.48 per diluted share

 

      Adjusted net income of $0.81 per diluted share, up 53 percent year over year

 

      Cash flow from operations of $257 million, up 128 percent year over year

 

 

HICKORY, NC, November 3, 2016—CommScope Holding Company, Inc. (NASDAQ: COMM), a global leader in infrastructure solutions for communications networks, reported sales of $1.29 billion and net income of $94 million, or $0.48 per diluted share, for the quarter ended September 30, 2016. Sales rose 33 percent year over year driven by incremental sales attributable to the BNS acquisition. Non-GAAP adjusted net income for the third quarter 2016 rose to $159 million, or $0.81 per diluted share. A reconciliation of reported GAAP results to non-GAAP results is attached.

In comparison, for the quarter ended September 30, 2015, CommScope reported sales of $973 million and a net loss of $81 million, or a loss of $0.42 per diluted share. Non-GAAP adjusted net income for the third quarter of 2015 was $103 million, or $0.53 per diluted share.

“We are pleased to deliver year-over-year revenue growth and strong bottom-line results, which exceeded our expectations. Our fiber-to-the-X and wireless technologies were catalysts for this strong performance, especially in North America,” said President and Chief Executive Officer Eddie Edwards. “Service providers continue to densify their wireless networks and push fiber deeper into their high-speed broadband networks. With our broad product portfolio, we are well positioned to enable customers to transition their networks to respond to the ever-growing demand for bandwidth.

“We are also pleased to continue to generate robust cash flow, which enabled us to complete the redemption of our remaining PIK notes during the quarter. In addition, we repriced our term loan due 2022, lowering the interest rate by 50 basis points. We are proud of our low cost of capital and solid foundational capital structure.”

Third Quarter 2016 Overview

Third quarter 2016 sales grew 33 percent year over year to $1.29 billion, which was consistent with guidance. On a pro forma basis for the BNS acquisition, revenue increased 4 percent year over year driven primarily by strong growth in our Connectivity Solutions segment, an extra week of BNS results in the current quarter and an increase in spending by certain domestic operators in the Mobility Solutions segment. Foreign exchange rate changes negatively affected revenue by 1 percent year over year.


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GAAP operating income in the third quarter of 2016 was $181 million and adjusted operating income in the quarter, which excludes amortization of purchased intangibles, integration and transaction costs, restructuring costs and other special items, increased 48 percent year over year to $297 million. This increase was driven by higher-margin BNS products, benefits from cost reduction initiatives and favorable geographic and product mix.

GAAP net income for the third quarter of 2016 increased to $94 million. Excluding special items, third quarter adjusted net income increased 55 percent year over year to $159 million. Adjusted earnings were $0.81 per diluted share, up 53 percent year over year.

Third Quarter 2016 Segment Overview

Third quarter Connectivity Solutions segment sales increased 68 percent to $819 million, driven by incremental revenue from the BNS acquisition. On a pro forma basis for the BNS acquisition, Connectivity Solutions segment sales grew 9 percent year over year, driven by strong double-digit fiber growth in outdoor network solutions and an extra week of BNS results in the current quarter. Foreign exchange rate changes negatively affected revenue by approximately 1 percent from the year-ago period. In the quarter, Connectivity Solutions GAAP operating income was $105 million. Adjusted operating income increased 86 percent year over year to $189 million, or 23 percent of segment sales. The more than 230 basis point year-over-year increase in adjusted operating income margin was due primarily to higher-margin BNS products and benefits from cost reduction initiatives.

Mobility Solutions segment sales of $475 million declined 2 percent year over year due to tepid international spending and product rationalization. On a pro forma basis for the BNS acquisition, Mobility Solutions segment sales decreased 4 percent year over year. Higher spending by certain North American wireless operators was more than offset by a decline in other major geographic regions and product rationalization. Foreign exchange rate changes had a negative impact of approximately 1 percent on Mobility Solutions segment sales compared to the year-ago period. Mobility Solutions GAAP operating income was $76 million. Despite the modest revenue decline, adjusted operating income increased 8 percent to $107 million, or 23 percent of segment sales. The more than 200 basis point increase in adjusted operating income margin compared to the prior year was driven by favorable geographic and product mix and benefits from cost reduction initiatives. These increases were partially offset by lower sales volumes and increased R&D spending as we continue to invest in small cell technology.

Term Loan Repricing

In October, the company amended its senior secured term loan due December 2022 to reduce the margin on the interest rate from 3.0 percent to 2.5 percent. The 0.75 percent LIBOR floor remained unchanged.


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Outlook

CommScope management provided the following fourth quarter and full year 2016 guidance.

Fourth Quarter 2016 Guidance:

 

    Revenue of $1.14 billion – $1.19 billion

 

    Operating income of $111 million – $128 million

 

    Adjusted operating income of $220 million – $240 million

 

    Earnings per diluted share of $0.18 – $0.20, based on 197 million weighted average diluted shares

 

    Adjusted earnings per diluted share of $0.54 – $0.59, up 35 percent year over year at the midpoint

 

    Adjusted effective tax rate of 34 percent – 35 percent

Full Year 2016 Guidance:

 

    Revenue of $4.885 billion – $4.935 billion

 

    Operating income of $566 million – $583 million

 

    Adjusted operating income of $1.019 billion – $1.039 billion

 

    Earnings per diluted share of $1.03 – $1.05, based on 196 million weighted average diluted shares

 

    Adjusted earnings per diluted share of $2.57 – $2.62, up 40 percent year over year at the midpoint

 

    Adjusted effective tax rate of 34 percent – 35 percent

 

    Cash flow from operations of more than $550 million

A reconciliation of GAAP to non-GAAP outlook is attached.

Conference Call, Webcast and Investor Presentation

As previously announced, CommScope will host a conference call today at 8:30 a.m. ET in which management will discuss third quarter 2016 results. The conference call also will be webcast.

To participate in the conference call, dial 866-394-7514 (US and Canada only) or +1 706-758-2714. The conference identification number is 95331448. 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 CommScope’s Investor Relations page.

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 95331448 and will be available through December 3, 2016. A webcast replay will also be archived on CommScope’s website for a limited period of time following the conference call.


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About CommScope

CommScope (NASDAQ: COMM) helps companies around the world design, build and manage their wired and wireless networks. Our vast portfolio of network infrastructure includes some of the world’s most robust and innovative wireless and fiber optic solutions. Our talented and experienced global team is driven to 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; in telecom central offices and cable headends; in FTTx deployments; 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

This press release or any other oral or written statements made by us or on our behalf may include forward-looking statements which reflect our current views with respect to future events and financial performance. These forward-looking statements are generally 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 although not all forward-looking statements contain such terms. 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 ability to integrate the BNS business on a timely and cost-effective manner; our reliance on TE Connectivity for transition services for the BNS business; our ability to realize expected growth opportunities and cost savings from the BNS business; our dependence on customers’ capital spending on communication systems; concentration of sales among a limited number of customers and channel partners; changes in technology; industry competition and the ability to retain customers through product innovation, introduction and marketing; risks associated with our sales through channel partners; product performance issues and associated warranty claims; our ability to maintain effective management information systems and to successfully implement major systems initiatives; cyber-security incidents, including data security breaches or computer viruses; 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; 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 fully realize anticipated benefits from prior or future acquisitions or equity investments; 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; substantial indebtedness and maintaining compliance with debt covenants; our ability to incur additional indebtedness; our ability to generate cash to service our indebtedness; possible future impairment charges for fixed or intangible assets, including goodwill; income tax rate variability and ability to recover amounts recorded as value-added tax receivables; our ability to attract and retain qualified key employees; labor unrest; significant international operations expose us to economic, political and other risks, including 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; cost of protecting or defending intellectual property; costs and challenges of compliance with domestic and foreign environmental laws; and other factors beyond our control. These and other


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factors are discussed in greater detail in our 2015 Annual Report on Form 10-K. Although the information contained in this press release represents our best judgment as of the date of this report 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. Given these uncertainties, we caution you not to place undue reliance on these forward-looking statements, which speak only as of the date made. We are not undertaking any duty or obligation to update this information to reflect developments or information obtained after the date of this report, except as otherwise may be required by law.

 

Investor Contact:

Jennifer Crawford, CommScope

+1 828-323-4970

jennifer.crawford@commscope.com

 

Source: CommScope

  

News Media Contact:

Rick Aspan, CommScope

+1 708-236-6568

publicrelations@commscope.com


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CommScope Holding Company, Inc.

Condensed Consolidated Statements of Operations

(Unaudited — In thousands, except per share amounts)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2016     2015     2016     2015  

Net sales

   $ 1,293,948      $ 972,597      $ 3,744,715      $ 2,665,287   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expenses:

        

Cost of sales

     751,097        633,706        2,201,014        1,718,497   

Selling, general and administrative

     220,835        203,820        664,365        460,288   

Research and development

     48,430        31,100        152,554        86,818   

Amortization of purchased intangible assets

     74,639        54,287        224,270        143,697   

Restructuring costs, net

     10,826        6,868        24,503        10,633   

Asset impairments

     7,375        85,334        22,668        85,334   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     1,113,202        1,015,115        3,289,374        2,505,267   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     180,746        (42,518     455,341        160,020   

Other expense, net

     (7,546     (8,269     (21,898     (5,556

Interest expense

     (68,349     (73,387     (215,024     (158,752

Interest income

     1,023        1,276        4,750        3,336   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     105,874        (122,898     223,169        (952

Income tax (expense) benefit

     (12,043     42,102        (54,797     5,224   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 93,831      $ (80,796   $ 168,372      $ 4,272   
  

 

 

   

 

 

   

 

 

   

 

 

 
        

Earnings (loss) per share:

        

Basic

   $ 0.49      $ (0.42   $ 0.88      $ 0.02   

Diluted (a)

   $ 0.48      $ (0.42   $ 0.86      $ 0.02   
        

Weighted average shares outstanding:

        

Basic

     192,719        190,269        192,275        189,483   

Diluted (a)

     196,598        190,269        196,141        193,930   
        

(a) Calculation of diluted earnings per share:

        

Net income (loss) (basic)

   $ 93,831      $ (80,796   $ 168,372      $ 4,272   
        

Weighted average shares (basic)

     192,719        190,269        192,275        189,483   

Dilutive effect of stock awards

     3,879               3,866        4,447   
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator (diluted)

     196,598        190,269        196,141        193,930   
  

 

 

   

 

 

   

 

 

   

 

 

 

See notes to unaudited condensed consolidated financial statements included in our Form 10-Q.


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CommScope Holding Company, Inc.

Condensed Consolidated Balance Sheets

(Unaudited — In thousands, except share amounts)

 

     September 30, 2016     December 31, 2015  

Assets

    

Cash and cash equivalents

   $ 517,275      $ 562,884   

Accounts receivable, less allowance for doubtful accounts of $19,388 and $19,392, respectively

     966,839        833,041   

Inventories, net

     475,679        441,815   

Prepaid expenses and other current assets

     130,690        166,900   
  

 

 

   

 

 

 

Total current assets

     2,090,483        2,004,640   

Property, plant and equipment, net of accumulated depreciation

of $288,137 and $243,806, respectively

     499,842        528,706   

Goodwill

     2,803,227        2,690,636   

Other intangible assets, net

     1,905,255        2,147,483   

Other noncurrent assets

     112,834        131,166   
  

 

 

   

 

 

 

Total assets

   $ 7,411,641      $ 7,502,631   
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Accounts payable

   $ 417,546      $ 300,829   

Other accrued liabilities

     497,777        371,743   

Current portion of long-term debt

     12,500        12,520   
  

 

 

   

 

 

 

Total current liabilities

     927,823        685,092   

Long-term debt

     4,701,486        5,231,131   

Deferred income taxes

     202,429        202,487   

Pension and other postretirement benefit liabilities

     31,201        37,102   

Other noncurrent liabilities

     115,471        124,099   
  

 

 

   

 

 

 

Total liabilities

     5,978,410        6,279,911   

Commitments and contingencies

    

Stockholders’ equity:

    

Preferred stock, $.01 par value: Authorized shares: 200,000,000; Issued and outstanding shares: None

              

Common stock, $0.01 par value: Authorized shares: 1,300,000,000; Issued and outstanding shares: 192,868,939 and 191,368,727, respectively

     1,940        1,923   

Additional paid-in capital

     2,258,869        2,216,202   

Retained earnings (accumulated deficit)

     (644,022     (812,394

Accumulated other comprehensive loss

     (169,277     (171,678

Treasury stock, at cost: 1,101,820 shares and 986,222 shares, respectively

     (14,279     (11,333
  

 

 

   

 

 

 

Total stockholders’ equity

     1,433,231        1,222,720   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 7,411,641      $ 7,502,631   
  

 

 

   

 

 

 

See notes to unaudited condensed consolidated financial statements included in our Form 10-Q.


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CommScope Holding Company, Inc.

Consolidated Statements of Cash Flows

(Unaudited — In thousands)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2016     2015     2016     2015  

Operating Activities:

        

Net income (loss)

   $ 93,831      $ (80,796   $ 168,372      $ 4,272   

Adjustments to reconcile net income to net cash generated by operating activities:

        

Depreciation and amortization

     100,953        73,762        301,450        199,485   

Equity-based compensation

     8,375        5,677        26,621        21,055   

Deferred income taxes

     (45,920     (58,409     (94,239     (92,538

Asset impairments

     7,375        85,334        22,668        85,334   

Excess tax benefits from equity-based compensation

     (1,355     (5,030     (8,083     (19,194

Changes in assets and liabilities:

        

Accounts receivable

     41,195        2,126        (96,337     (116,131

Inventories

     (5,094     58,480        (23,480     67,518   

Prepaid expenses and other assets

     2,401        (49,163     12,540        (43,286

Accounts payable and other liabilities

     53,735        76,793        218,590        74,524   

Other

     1,160        3,696        (2,850     4,697   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash generated by operating activities

     256,656        112,470        525,252        185,736   

Investing Activities:

        

Additions to property, plant and equipment

     (17,476     (15,341     (49,660     (39,422

Proceeds from sale of property, plant and equipment

     195        46        3,935        219   

Cash paid for acquisitions including purchase price adjustments, net of cash acquired

     (3,549     (2,957,476     2,714        (2,957,476

Acquisition funds held in escrow

            2,746,875                 

Other

     1,831        171        3,487        3,268   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (18,999     (225,725     (39,524     (2,993,411

Financing Activities:

        

Long-term debt repaid

     (239,755     (49     (546,025     (502,566

Long-term debt proceeds

                          3,246,875   

Long-term debt financing costs

            (64,865            (73,890

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

     1,646        4,322        8,637        21,273   

Excess tax benefits from equity-based compensation

     1,355        5,030        8,083        19,194   

Tax withholding payments for vested equity-based compensation awards

     (150            (2,946       
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash generated by (used in) financing activities

     (236,904     (55,562     (532,251     2,710,886   

Effect of exchange rate changes on cash and cash equivalents

     479        (6,180     914        (14,570
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in cash and cash equivalents

     1,232        (174,997     (45,609     (111,359

Cash and cash equivalents, beginning of period

     516,043        792,959        562,884        729,321   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 517,275      $ 617,962      $ 517,275      $ 617,962   
  

 

 

   

 

 

   

 

 

   

 

 

 

See notes to unaudited condensed consolidated financial statements included in our Form 10-Q.


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CommScope Holding Company, Inc.

Reconciliation of GAAP Measures to Non-GAAP Adjusted Measures

(Unaudited — In millions, except per share amounts)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
         2016             2015             2016             2015      

Operating income (loss), as reported

   $ 180.7      $ (42.5   $ 455.3      $ 160.0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjustments:

        

Amortization of purchased intangible assets

     74.6        54.3        224.3        143.7   

Restructuring costs, net

     10.8        6.9        24.5        10.6   

Equity-based compensation

     8.4        5.7        26.6        21.1   

Asset impairments

     7.4        85.3        22.7        85.3   

Integration and transaction costs

     14.7        60.8        45.1        82.1   

Purchase accounting adjustments

            30.5        0.6        30.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments to operating income (loss)

     115.9        243.5        343.8        373.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 296.7      $ 201.0      $ 799.1      $ 533.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes, as reported

   $ 105.9      $ (122.9   $ 223.2      $ (1.0

Income tax (expense) benefit, as reported

     (12.0     42.1        (54.8     5.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss), as reported

   $ 93.8      $ (80.8   $ 168.4      $ 4.3   

Adjustments:

        

Total pretax adjustments to operating income (loss)

     115.9        243.5        343.8        373.4   

Pretax amortization of deferred financing costs & OID(1)

     6.1        3.9        16.9        17.1   

Pretax acquisition related interest (1)

            23.9               29.2   

Pretax loss on debt transactions (2)

     7.8               17.8          

Pretax net investment gains (2)

                   (0.5     (2.7

Tax effects of adjustments and other tax items(3)

     (64.3     (87.9     (147.8     (142.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted net income

   $ 159.3      $ 102.6      $ 398.6      $ 278.9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted EPS, as reported

   $ 0.48      $ (0.42   $ 0.86      $ 0.02   

Non-GAAP adjusted diluted EPS

   $ 0.81      $ 0.53      $ 2.03      $ 1.44   

(1) Included in interest expense.

(2) Included in other expense, net.

(3) 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


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CommScope Holding Company, Inc.

Segment Information

(Unaudited — In millions)

Sales by Segment(1)

 

                          % Change  
     Q3 2016      Q2 2016      Q3 2015      Sequential      YOY  

Connectivity Solutions

     819.2         778.0         489.0         5.3%         67.5%   

Mobility Solutions

     474.7         528.8         483.6         (10.2)%         (1.8)%   
  

 

 

    

 

 

    

 

 

       

Total Net Sales

   $ 1,293.9       $ 1,306.8       $ 972.6         (1.0)%         33.0%   
  

 

 

    

 

 

    

 

 

       

Non-GAAP Adjusted Operating Income by Segment(1)

  

                          % Change  
     Q3 2016      Q2 2016      Q3 2015      Sequential      YOY  

Connectivity Solutions

     189.5         168.5         101.6         12.5%         86.5%   

Mobility Solutions

     107.2         122.5         99.4         (12.5)%         7.8%   
  

 

 

    

 

 

    

 

 

       

Total Non-GAAP Adjusted Operating Income

   $ 296.7       $ 291.0       $ 201.0         2.0%         47.6%   
  

 

 

    

 

 

    

 

 

       

(1) As of January 1, 2016, the Company began reporting in two operating segments: Connectivity Solutions and Mobility Solutions. All prior period amounts have been restated to reflect these operating segment changes.

Components may not sum to total due to rounding

See Description of Non-GAAP Financial Measures


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CommScope Holding Company, Inc.

Pro Forma Sales

(Unaudited — In millions)

 

Pro Forma Sales(1)               
     Q1 2015      Q2 2015      Q3 2015      Q4 2015(2)      Full Year
2015
 

Legacy CommScope

   $ 825.4       $ 867.3       $ 831.5       $ 754.0       $ 3,278.2   

Legacy BNS

     424.9         471.0         415.8         388.5         1,700.2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Pro Forma Net Sales

   $ 1,250.3       $ 1,338.3       $ 1,247.3       $ 1,142.5       $ 4,978.4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Pro Forma Sales by Segment(1)

              
     Q1 2015      Q2 2015      Q3 2015      Q4 2015      Full Year
2015
 

Connectivity Solutions

   $ 717.6       $ 781.2       $ 750.4       $ 671.5       $ 2,920.7   

Mobility Solutions

     532.7         557.0         496.9         471.0         2,057.6   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Pro Forma Net Sales

   $ 1,250.3       $ 1,338.3       $ 1,247.3       $ 1,142.5       $ 4,978.4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

(1) As of January 1, 2016, the Company began reporting in two operating segments: Connectivity Solutions and Mobility Solutions. All prior period amounts have been restated to reflect these operating segment changes.

(2) As reported

Components may not sum to total due to rounding

See Description of Non-GAAP Financial Measures

The unaudited pro forma amounts are presented as though the BNS acquisition had been completed as of January 1, 2015. This pro forma information has not been prepared in accordance with U.S. generally accepted accounting principles. Accordingly, the pro forma financial information should not be relied upon as being indicative of the results that would have been realized.


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CommScope Holding Company, Inc.

Reconciliation of GAAP to Non-GAAP Adjusted Operating Income by Segment

(Unaudited — In millions)

Third Quarter 2016 Non-GAAP Adjusted Operating Income Reconciliation by Segment(1)

 

     Connectivity
Solutions
    Mobility
Solutions
    Total  

Operating income, as reported

   $ 104.8      $ 75.9      $ 180.7   

Amortization of purchased intangible assets

     49.4        25.2        74.6   

Restructuring costs, net

     8.4        2.5        10.8   

Equity-based compensation

     4.9        3.5        8.4   

Asset impairments

     7.4               7.4   

Integration and transaction costs

     14.6        0.2        14.7   
  

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 189.5      $ 107.2      $ 296.7   

Non-GAAP adjusted operating margin %

     23.1     22.6     22.9

Second Quarter 2016 Non-GAAP Adjusted Operating Income Reconciliation by Segment(1)

  

     Connectivity
Solutions
    Mobility
Solutions
    Total  

Operating income, as reported

   $ 92.9      $ 91.0      $ 183.9   

Amortization of purchased intangible assets

     50.6        25.4        76.0   

Restructuring costs, net

     6.6        1.0        7.6   

Equity-based compensation

     5.3        4.1        9.4   

Integration and transaction costs

     13.5        1.0        14.5   

Purchase accounting adjustments

     (0.4            (0.4
  

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 168.5      $ 122.5      $ 291.0   

Non-GAAP adjusted operating margin %

     21.7     23.2     22.3
Third Quarter 2015 Non-GAAP Adjusted Operating Income Reconciliation by Segment(1)   
     Connectivity
Solutions
    Mobility
Solutions
    Total  

Operating loss, as reported

   $ (33.9   $ (8.6   $ (42.5

Amortization of purchased intangible assets

     30.8        23.5        54.3   

Restructuring costs, net

     4.1        2.8        6.9   

Equity-based compensation

     3.4        2.2        5.7   

Asset impairments

     10.9        74.4        85.3   

Integration and transaction costs

     57.1        3.8        60.8   

Purchase accounting adjustments

     29.2        1.3        30.5   
  

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 101.6      $ 99.4      $ 201.0   

Non-GAAP adjusted operating margin %

     20.8     20.6     20.7

(1) As of January 1, 2016, the Company began reporting in two operating segments: Connectivity Solutions and Mobility Solutions. All prior period amounts have been restated to reflect these operating segment changes.

Components may not sum to total due to rounding

See Description of Non-GAAP Financial Measures


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CommScope Holding Company, Inc.

Adjusted Free Cash Flow

(Unaudited — In millions)

Adjusted Free Cash Flow

 

     Q3 2016     Q3 2015  

Cash flow from operations

   $ 256.7      $ 112.5   

Integration and transaction costs

     16.6        52.7   

Redemption premium

     7.8          

Capital expenditures

     (17.5     (15.3

Capex related to BNS integration

     2.5        3.8   
  

 

 

   

 

 

 

Adjusted Free Cash Flow

   $ 266.1      $ 153.7   
  

 

 

   

 

 

 

See Description of Non-GAAP Financial Measures

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

 

     Q3
2016
    Q2
2016
    Q1
2016
    Q4
2015
    Q3
2015
 

Operating income (loss), as reported

   $ 180.7      $ 183.9      $ 90.7      $ 21.6      $ (42.5

Amortization of purchased intangible assets

     74.6        76.0        73.6        76.9        54.3   

Restructuring costs, net

     10.8        7.6        6.1        18.9        6.9   

Equity-based compensation

     8.4        9.4        8.8        7.6        5.7   

Asset impairments

     7.4               15.3        5.5        85.3   

Integration and transaction costs

     14.7        14.5        15.9        14.8        60.8   

Purchase accounting adjustments

            (0.4     1.0        51.2        30.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 296.7      $ 291.0      $ 211.4      $ 196.4      $ 201.0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating margin %

     22.9     22.3     18.5     17.2     20.7
          

Depreciation

     20.2        20.4        19.6        21.9        15.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted EBITDA

   $ 316.9      $ 311.4      $ 231.1      $ 218.2      $ 216.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Components may not sum to total due to rounding

See Description of Non-GAAP Financial Measures


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CommScope Holding Company, Inc.

Reconciliation of GAAP Measures to Non-GAAP Adjusted Measures

(Unaudited - In millions, except per share amounts)

 

     Outlook  
     Three Months
Ending
        
     December 31,
2016
     Full Year
2016
 

Operating income

     $111 - $128         $566 - $583   
  

 

 

    

 

 

 

Adjustments:

     

Amortization of purchased intangible assets

     $71         $295   

Equity-based compensation

     $9         $36   

Restructuring costs, integration costs and other (1)

     $29 - $32         $122 - $125   
  

 

 

    

 

 

 

Total adjustments to operating income

     $109 - $112         $453 - $456   
  

 

 

    

 

 

 

Non-GAAP adjusted operating income

     $220 - $240         $1,019 - $1,039   
  

 

 

    

 

 

 
     

Diluted earnings per share

     $0.18 - $0.20         $1.03 - $1.05   
  

 

 

    

 

 

 

Adjustments(2):

     

Total adjustments to operating income

     $0.36 - $0.38         $1.54 - $1.56   

Debt-related costs and other special items(3)

     $0.00 - $0.01         $0.00 - $0.01   
  

 

 

    

 

 

 

Non-GAAP adjusted diluted earnings per share

     $0.54 - $0.59         $2.57 - $2.62   
  

 

 

    

 

 

 

(1) Reflects projections for restructuring costs, integration and transaction costs and other special items. Actual adjustments may vary from projections.

(2) The tax rates applied to projected adjustments reflect the tax expense or benefit based on the expected tax jurisdiction of the entity generating the projected adjustments. There are certain items for which we expect little or no tax effect.

(3) Reflects projections for amortization of debt issuance costs, loss on debt extinguishment, net investment gains or losses and other tax items. Actual adjustments may vary from projections.

Our actual results may be impacted by additional events for which information is not currently available, such as additional restructuring activities, asset impairments, debt extinguishments, additional transaction and integration costs, foreign exchange rate fluctuations and other gains or losses related to events that are not currently known or measurable.

See Caution Regarding Forward-Looking Statements and Description of Non-GAAP Financial Measures.