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8-K - 8-K - CommScope Holding Company, Inc.d538808d8k.htm

Exhibit 99.1

 

LOGO

CommScope Reports Fourth Quarter 2017 Results

 

  Fourth Quarter 2017 Performance

 

    Sales of $1.12 billion, consistent with guidance

 

    GAAP operating income of $92 million and non-GAAP adjusted operating income (excluding special items) of $199 million

 

    GAAP net income of $0.27 per diluted share

 

    Non-GAAP adjusted net income (excluding special items) of $0.47 per diluted share, consistent with guidance

 

  Calendar Year 2017 Performance

 

    Sales of $4.56 billion, consistent with guidance

 

    GAAP operating income of $478 million and non-GAAP adjusted operating income (excluding special items) of $882 million

 

    GAAP net income of $0.98 per diluted share

 

    Non-GAAP adjusted net income (excluding special items) of $2.14 per diluted share, consistent with guidance

 

 

HICKORY, NC, February 15, 2018—CommScope Holding Company, Inc. (NASDAQ: COMM), a global leader in infrastructure solutions for communications networks, reported sales of $1.12 billion and net income of $54 million, or $0.27 per diluted share, for the quarter ended December 31, 2017. Non-GAAP adjusted net income for the fourth quarter of 2017 was $91 million, or $0.47 per diluted share. A reconciliation of reported GAAP results to non-GAAP results is attached.

In comparison, for the quarter ended December 31, 2016, CommScope reported sales of $1.18 billion and net income of $54 million, $0.28 per diluted share. Non-GAAP adjusted net income for the fourth quarter of 2016 was $121 million, or $0.61 per diluted share.

“We are pleased to deliver fourth quarter results consistent with our expectations despite lingering volatility in customer order patterns and near-term raw material cost pressures,” said President and Chief Executive Officer Eddie Edwards. “While 2017 was challenging across the industry, we made significant progress in strengthening CommScope for the long term. During the year, we substantially completed a complex systems integration, delivered on significant product development, extended a long-term optical fiber supply partnership and achieved our capital allocation priorities of strategically reinvesting in the business while repaying debt and returning capital to shareholders.


“Looking ahead, we are expecting more normalized customer order patterns and preparing to capitalize on numerous global developments to ensure we return to growth in 2018. We believe there are significant opportunities ahead and are confident in our ability to leverage FirstNet and fiber deep network deployments, expansion within the hyperscale data centers and our compelling quick turn capabilities. We have developed a platform of world-class differentiated solutions and services and are well positioned for value creation in 2018 and beyond.”

Fourth Quarter 2017 Overview

Fourth quarter 2017 sales decreased 5 percent year over year with growth in the Europe, Middle East and Africa (EMEA) and Central America and Latin America (CALA) regions more than offset by declines in other regions, most notably in the U.S. Foreign exchange rate changes positively impacted revenue by about 1.5 percent year over year.

GAAP operating income in the fourth quarter of 2017 declined 23 percent year over year to $92 million. Non-GAAP adjusted operating income, which excludes amortization of purchased intangibles, integration and transaction costs, restructuring costs and other special items, declined 21 percent year over year to $199 million. The decreases in operating income and non-GAAP adjusted operating income were primarily driven by lower sales volumes and the impact from higher commodity prices, partially offset by the benefit of cost reduction initiatives and lower incentive compensation expense.

Fourth Quarter 2017 Segment Overview

Fourth quarter Connectivity Solutions segment sales increased 2 percent year over year to $694 million with growth in international markets more than offsetting a modest decline domestically. Foreign exchange rate changes positively impacted revenue by about 1 percent from the year-ago period.

Connectivity Solutions GAAP operating income increased 11 percent year over year to $48 million, while non-GAAP adjusted operating income decreased 10 percent year over year to $125 million. GAAP operating income improved year over year due to lower integration and transaction costs in 2017 and an impairment charge recorded in 2016. The decrease in non-GAAP adjusted operating income was primarily driven by higher commodity prices, partially offset by the benefit of cost reduction initiatives.

Fourth quarter Mobility Solutions segment sales declined 14 percent year over year to $427 million. Year-over-year growth in the EMEA region was more than offset by declines in all other major geographic regions, most notably North America. Foreign exchange rate changes had a positive impact of about 2 percent on sales compared to the year-ago period.


Mobility Solutions GAAP operating income declined 43 percent year over year to $43 million, and non-GAAP adjusted operating income decreased 35 percent year over year to $74 million. Both GAAP and non-GAAP adjusted operating income were impacted by lower sales volumes, partially offset by lower incentive compensation expense.

Full Year 2017 Overview

For 2017, sales declined 7 percent to $4.56 billion driven by overall softness in the market that was exacerbated by M&A-related pauses in customer spending. Foreign exchange rate changes had a negligible impact to sales in 2017 compared to the prior year.

GAAP operating income decreased 17 percent to $478 million and non-GAAP adjusted operating income declined 16 percent to $882 million versus prior year results, primarily due to lower sales volumes, unfavorable geographic and product mix and the negative impact from higher commodity prices. These declines were partially offset by cost reduction initiatives and lower incentive compensation expense. CommScope realized over $170 million in BNS cost synergies during the two years ended December 31, 2017. It plans to realize at least an additional $30 million by the end of 2018.

Full Year 2017 Segment Overview

Connectivity Solutions segment sales declined 5 percent to $2.81 billion, primarily due to declines in all major geographic regions except the EMEA region. Foreign exchange rate changes had a negligible impact to sales in 2017 compared to the prior year.

Connectivity Solutions GAAP operating income declined 17 percent to $242 million. Non-GAAP adjusted operating income for the segment decreased 17 percent to $526 million, or 19 percent of sales. The decreases in GAAP and non-GAAP adjusted operating income were driven by lower sales volumes, price reductions, unfavorable geographic and product mix and higher commodity costs. The decreases were partly offset by cost reduction initiatives and lower incentive compensation expense.

Mobility Solutions segment sales declined 11 percent to $1.75 billion with declines in all major geographic regions. Foreign exchange rate changes had a negligible impact on sales in 2017 compared to the prior year.

Mobility Solutions GAAP operating income declined 17 percent to $236 million. Non-GAAP adjusted operating income for the segment decreased by 15 percent to $356 million, or 20 percent of sales. The decline was largely due to lower sales volumes, price reductions and unfavorable geographic mix, partly offset by lower incentive compensation expense.


Stock Repurchase Program

In 2017, the Board of Directors authorized two separate $100 million stock repurchases of CommScope’s outstanding common stock. Since the initial authorization, the company repurchased $175 million of its common stock, or 4.8 million shares, at an average cost of $36.50 per share. There is $25 million remaining authorized under the stock repurchase program that expires on July 31, 2018.

Debt Repayment

The company voluntarily repaid a net $210 million in debt during 2017 and delivered on its target to repay more than $1 billion of its debt since the BNS acquisition in August 2015. The next debt maturity is not until 2021.

Outlook

CommScope management provided the following first quarter and full year 2018 guidance.

First Quarter 2018 Guidance:

 

    Revenue of $1.085 billion – $1.135 billion

 

    Operating income of $93 million – $108 million

 

    Non-GAAP adjusted operating income of $175 million – $195 million

 

    Non-GAAP adjusted effective tax rate of approximately 29 percent – 30 percent

 

    Earnings per diluted share of $0.13 – $0.16, based on 196 million weighted average diluted shares

 

    Non-GAAP adjusted earnings per diluted share of $0.44 – $0.49

Full Year 2018 Guidance:

 

    Revenue of $4.675 billion – $4.825 billion

 

    Operating income of $615 million – $660 million

 

    Non-GAAP adjusted operating income of $935 million – $985 million

 

    Non-GAAP adjusted effective tax rate of approximately 29 percent – 30 percent

 

    Earnings per diluted share of $1.46 – $1.58, based on 196 million weighted average diluted shares

 

    Non-GAAP adjusted earnings per diluted share of $2.56 – $2.71

 

    Cash flow from operations > $600 million

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

Management currently expects a non-GAAP adjusted effective tax rate for 2018 to be in the range of 29 percent to 30 percent. This non-GAAP adjusted effective tax rate does not reflect any potential impact from finalizing the estimated one-time benefits realized in the fourth quarter of 2017 resulting from the U.S. Tax Cuts and Jobs Act.


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 fourth quarter and full year 2017 results and 2018 guidance. The conference call will also be webcast.

To participate in the conference call, dial 844-397-6169 (US and Canada only) or +1 478-219-0508. The conference identification number is 9657389. 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.

A webcast replay will be archived on CommScope’s website for a limited period of time following the conference call.

END

About CommScope

CommScope (NASDAQ: COMM) helps design, build and manage wired and wireless networks around the world. As a communications infrastructure leader, we shape the always-on networks of tomorrow. For more than 40 years, our global team of more than 20,000 employees, innovators and technologists have empowered customers in all regions of the world to anticipate what’s next and push the boundaries of what’s possible. Discover more at http://www.commscope.com/

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Investor Contact:

Jennifer Crawford, CommScope

+1 828-323-4970

jennifer.crawford@commscope.com

News Media Contact:

Rick Aspan, CommScope

+1 708-236-6568

publicrelations@commscope.com

Non-GAAP Financial Measures

CommScope management believes that presenting certain non-GAAP financial measures enhances an investor’s understanding of our financial performance. CommScope management further believes that these financial measures are useful in assessing CommScope’s operating performance from period to period by excluding certain items that we believe are not representative of our core business.


CommScope management also uses certain of these financial measures for business planning purposes and in measuring CommScope’s performance relative to that of its competitors. CommScope management believes these financial measures are commonly used by investors to evaluate CommScope’s performance and that of its competitors. However, CommScope’s use of the terms non-GAAP adjusted operating income, non-GAAP adjusted EBITDA, non-GAAP adjusted net income and non-GAAP adjusted earnings per share may vary from that of others in its industry. These financial measures should not be considered as alternatives to operating income (loss), net income (loss) or any other performance measures derived in accordance with U.S. GAAP as measures of operating performance, operating cash flows or liquidity.

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 that 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,” “target,” “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 dependence on customers’ capital spending on data and 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, and marketing; risks associated with our sales through channel partners; changes to the regulatory environment in which our customers operate; product quality or 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, ransomware 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 or that of contract manufacturers may be insufficient to meet customer demand or quality standards; 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 for certain raw material and components; the risk that our contract manufacturers encounter production, quality, financial or other difficulties; 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 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 deferred tax assets; our ability to attract and retain qualified key employees; labor unrest; obligations under our defined benefit employee benefit plans may require plan contributions in excess of current estimates; significant international operations exposing 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; changes in the laws and policies in the United States affecting trade; cost of protecting or defending intellectual property; costs and challenges of compliance with domestic and foreign environmental laws; risks associated with stockholder activism, which could cause us to incur significant expense, hinder execution of our business strategy and impact the trading value of our securities; and other factors beyond our control. These and other factors are discussed in greater detail in our 2017 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.


CommScope Holding Company, Inc.

Condensed Consolidated Statements of Operations

(Unaudited — In thousands, except per share amounts)

 

     Three Months Ended     Year Ended  
     December 31,     December 31,  
     2017     2016     2017     2016  

Net sales

   $ 1,120,432     $ 1,178,906     $ 4,560,582     $ 4,923,621  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expenses:

        

Cost of sales

     705,778       689,018       2,788,688       2,890,032  

Selling, general and administrative

     190,697       215,130       794,291       879,495  

Research and development

     44,942       48,161       185,222       200,715  

Amortization of purchased intangible assets

     68,099       72,932       270,989       297,202  

Restructuring costs, net

     19,261       18,372       43,782       42,875  

Asset impairments

     —         15,884       —         38,552  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     1,028,777       1,059,497       4,082,972       4,348,871  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     91,655       119,409       477,610       574,750  

Other expense, net

     (1,626     (8,273     (15,040     (30,171

Interest expense

     (64,290     (62,510     (257,059     (277,534

Interest income

     437       774       4,221       5,524  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     26,176       49,400       209,732       272,569  

Income tax (expense) benefit

     27,405       5,066       (15,968     (49,731
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 53,581     $ 54,466     $ 193,764     $ 222,838  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

        

Basic

   $ 0.28     $ 0.28     $ 1.01     $ 1.16  

Diluted (a)

   $ 0.27     $ 0.28     $ 0.98     $ 1.13  

Weighted average shares outstanding:

        

Basic

     190,826       193,305       192,430       192,470  

Diluted (a)

     195,074       197,401       196,811       196,459  

(a) Calculation of diluted earnings per share:

        

Net income (basic and diluted)

   $ 53,581     $ 54,466     $ 193,764     $ 222,838  

Weighted average shares (basic)

     190,826       193,305       192,430       192,470  

Dilutive effect of stock awards

     4,248       4,096       4,381       3,989  
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator (diluted)

     195,074       197,401       196,811       196,459  
  

 

 

   

 

 

   

 

 

   

 

 

 

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,  
     2017     2016  
Assets     

Cash and cash equivalents

   $ 453,977     $ 428,228  

Accounts receivable, less allowance for doubtful accounts of $13,976 and $17,211, respectively

     898,829       952,367  

Inventories, net

     444,941       473,267  

Prepaid expenses and other current assets

     146,112       139,902  
  

 

 

   

 

 

 

Total current assets

     1,943,859       1,993,764  

Property, plant and equipment, net of accumulated depreciation of $390,389 and $303,734, respectively

     467,289       474,990  

Goodwill

     2,886,630       2,768,304  

Other intangible assets, net

     1,636,084       1,799,065  

Other noncurrent assets

     107,804       105,863  
  

 

 

   

 

 

 

Total assets

   $ 7,041,666     $ 7,141,986  
  

 

 

   

 

 

 
Liabilities and Stockholders’ Equity     

Accounts payable

   $ 436,737     $ 415,921  

Other accrued liabilities

     286,980       429,397  

Current portion of long-term debt

     —         12,500  
  

 

 

   

 

 

 

Total current liabilities

     723,717       857,818  

Long-term debt

     4,369,401       4,549,510  

Deferred income taxes

     134,241       199,121  

Pension and other postretirement benefit liabilities

     25,140       31,671  

Other noncurrent liabilities

     141,341       109,782  
  

 

 

   

 

 

 

Total liabilities

     5,393,840       5,747,902  

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: 190,906,110 and 193,837,437, respectively

     1,972       1,950  

Additional paid-in capital

     2,334,071       2,282,014  

Retained earnings (accumulated deficit)

     (395,998     (589,556

Accumulated other comprehensive loss

     (86,603     (285,113

Treasury stock, at cost: 6,336,144 shares and 1,129,222 shares, respectively

     (205,616     (15,211
  

 

 

   

 

 

 

Total stockholders’ equity

     1,647,826       1,394,084  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 7,041,666     $ 7,141,986  
  

 

 

   

 

 

 

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     Year Ended  
     December 31,     December 31,  
     2017     2016     2017     2016  

Operating Activities:

        

Net income

   $ 53,581     $ 54,466     $ 193,764     $ 222,838  

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

        

Depreciation and amortization

     95,469       97,603       378,012       399,053  

Equity-based compensation

     10,278       8,385       41,850       35,006  

Deferred income taxes

     (51,499     (6,639     (71,475     (100,878

Asset impairments

     —         15,884       —         38,552  

Changes in assets and liabilities:

        

Accounts receivable

     37,691       (4,530     96,745       (100,867

Inventories

     41,868       (8,516     53,658       (31,996

Prepaid expenses and other current assets

     21,188       (12,332     (1,273     14,273  

Accounts payable and other accrued liabilities

     9,785       (46,263     (154,691     191,405  

Other noncurrent liabilities

     28,673       (16,872     14,644       (35,950

Other noncurrent assets

     (8,197     12,231       (8,418     (1,834

Other

     12,044       (4,310     43,470       10,619  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash generated by operating activities

     250,881       89,107       586,286       640,221  

Investing Activities:

        

Additions to property, plant and equipment

     (17,569     (18,654     (68,721     (68,314

Proceeds from sale of property, plant and equipment

     408       149       5,424       4,084  

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

     —         3,384       (105,249     6,098  

Proceeds from sale of businesses and long-term investments

     —         1       9,898       1,292  

Payments upon settlement of net investment hedge

     (7,558     —         (7,558     —    

Other

     —         57       —         2,253  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (24,719     (15,063     (166,206     (54,587

Financing Activities:

        

Long-term debt repaid

     (185,000     (172,889     (990,379     (718,914

Long-term debt proceeds

     —         19,764       780,379       19,764  

Debt issuance and modification costs

     —         (4,318     (8,363     (4,318

Debt extinguishment costs

     —         —         (14,800     (17,779

Cash paid for repurchase of common stock

     —         —         (175,000     —    

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

     1,146       8,119       9,949       16,756  

Tax withholding payments for vested equity-based compensation awards

     (449     (932     (15,405     (3,878
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

     (184,303     (150,256     (413,619     (708,369

Effect of exchange rate changes on cash and cash equivalents

     876       (12,835     19,288       (11,921
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in cash and cash equivalents

     42,735       (89,047     25,749       (134,656

Cash and cash equivalents at beginning of period

     411,242       517,275       428,228       562,884  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 453,977     $ 428,228     $ 453,977     $ 428,228  
  

 

 

   

 

 

   

 

 

   

 

 

 

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,  
     2017     2016     2017     2016  

Operating income, as reported

   $ 91.7     $ 119.4     $ 477.6     $ 574.8  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjustments:

        

Amortization of purchased intangible assets

     68.1       72.9       271.0       297.2  

Restructuring costs, net

     19.3       18.4       43.8       42.9  

Equity-based compensation

     10.3       8.4       41.9       35.0  

Asset impairments

     —         15.9       —         38.6  

Integration and transaction costs

     9.8       17.2       48.0       62.3  

Purchase accounting adjustments

     —         —         —         0.6  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments to operating income

     107.5       132.8       404.7       476.6  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 199.1     $ 252.2     $ 882.3     $ 1,051.4  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes, as reported

   $ 26.2     $ 49.4     $ 209.7     $ 272.6  

Income tax (expense) benefit, as reported

     27.4       5.1       (16.0     (49.7
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income, as reported

   $ 53.6     $ 54.5     $ 193.8     $ 222.8  

Adjustments:

        

Total pretax adjustments to operating income

     107.5       132.8       404.7       476.6  

Pretax amortization of deferred financing costs & OID (1)

     6.6       4.4       25.4       21.4  

Pretax loss on debt transactions (2)

     —         —         16.0       17.8  

Pretax net investment gains (2)

     —         —         (9.0     (0.5

Tax effects of adjustments and other tax items (3)

     (76.6     (71.1     (210.5     (218.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted net income

   $ 91.1     $ 120.6     $ 420.4     $ 519.2  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted EPS, as reported

   $ 0.27     $ 0.28     $ 0.98     $ 1.13  

Non-GAAP adjusted diluted EPS

   $ 0.47     $ 0.61     $ 2.14     $ 2.64  

 

(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. Given the complexities of the U.S. tax legislation enacted in late 2017, we applied a non-GAAP effective tax rate of 35% for the fourth quarter, consistent with the adjusted rate in prior quarters in 2017.

Note: Components may not sum to total due to rounding

See Description of Non-GAAP Financial Measures


CommScope Holding Company, Inc.

Sales by Region

(Unaudited — In millions)

Sales by Region

 

                   % Change  
     Q4 2017      Q4 2016      YOY  

United States

   $ 561.9      $ 623.7        (9.9 )% 

Europe, Middle East and Africa

     243.9        240.1        1.6  

Asia Pacific

     224.0        224.8        (0.4

Central and Latin America

     68.5        67.9        0.9  

Canada

     22.1        22.4        (1.3
  

 

 

    

 

 

    

Total Net Sales

   $ 1,120.4      $ 1,178.9        (5.0 )% 
  

 

 

    

 

 

    

Sales by Region

 

                   % Change  
     Full Year 2017      Full Year 2016      YOY  

United States

   $ 2,449.4      $ 2,634.9        (7.0 )% 

Europe, Middle East and Africa

     942.5        933.5        1.0  

Asia Pacific

     828.3        961.0        (13.8

Central and Latin America

     245.6        280.3        (12.4

Canada

     94.8        113.9        (16.8
  

 

 

    

 

 

    

Total Net Sales

   $ 4,560.6      $ 4,923.6        (7.4 )% 
  

 

 

    

 

 

    

 


CommScope Holding Company, Inc.

Segment Information

(Unaudited — In millions)

Sales by Segment

 

                          % Change  
     Q4 2017      Q3 2017      Q4 2016      Sequential     YOY  

Connectivity Solutions

   $ 693.8      $ 708.7      $ 681.3        (2.1 )%      1.8

Mobility Solutions

     426.6        420.1        497.6        1.5     (14.3 )% 
  

 

 

    

 

 

    

 

 

      

Total Net Sales

   $ 1,120.4      $ 1,128.8      $ 1,178.9        (0.7 )%      (5.0 )% 
  

 

 

    

 

 

    

 

 

      

Non-GAAP Adjusted Operating Income by Segment

 

                          % Change  
     Q4 2017      Q3 2017      Q4 2016      Sequential     YOY  

Connectivity Solutions

   $ 125.4      $ 139.3      $ 139.5        (10.0 )%      (10.1 )% 

Mobility Solutions

     73.6        84.2        112.7        (12.6 )%      (34.7 )% 
  

 

 

    

 

 

    

 

 

      

Total Non-GAAP Adjusted Operating Income

   $ 199.1      $ 223.5      $ 252.2        (10.9 )%      (21.1 )% 
  

 

 

    

 

 

    

 

 

      

Sales by Segment

                   % Change  
     2017      2016      YOY  

Connectivity Solutions

   $ 2,809.8      $ 2,965.5        (5.3 )% 

Mobility Solutions

     1,750.8        1,958.1        (10.6 )% 
  

 

 

    

 

 

    

Total Net Sales

   $ 4,560.6      $ 4,923.6        (7.4 )% 
  

 

 

    

 

 

    

Non-GAAP Adjusted Operating Income by Segment

 

                   % Change  
     2017      2016      YOY  

Connectivity Solutions

   $ 526.3      $ 632.3        (16.8 )% 

Mobility Solutions

     356.0        419.1        (15.1 )% 
  

 

 

    

 

 

    

Total Non-GAAP Adjusted Operating Income

   $ 882.3      $ 1,051.4        (16.1 )% 
  

 

 

    

 

 

    

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, 2017 Non-GAAP Adjusted Operating Income Reconciliation by Segment  
     Connectivity
Solutions
    Mobility
Solutions
    Total  

Operating income, as reported

   $ 242.0     $ 235.6     $ 477.6  

Amortization of purchased intangible assets

     175.5       95.5       271.0  

Restructuring costs, net

     36.6       7.2       43.8  

Equity-based compensation

     24.4       17.5       41.9  

Integration and transaction costs

     47.9       0.2       48.0  
  

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 526.3     $ 356.0     $ 882.3  

Non-GAAP adjusted operating margin %

     18.7     20.3     19.3
Year Ended December 31, 2016 Non-GAAP Adjusted Operating Income Reconciliation by Segment  
     Connectivity
Solutions
    Mobility
Solutions
    Total  

Operating income, as reported

   $ 291.2     $ 283.6     $ 574.8  

Amortization of purchased intangible assets

     195.9       101.3       297.2  

Restructuring costs, net

     27.1       15.8       42.9  

Equity-based compensation

     19.8       15.2       35.0  

Asset impairments

     38.6       —         38.6  

Integration and transaction costs

     59.1       3.3       62.3  

Purchase accounting adjustments

     0.6       —         0.6  
  

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 632.3     $ 419.1     $ 1,051.4  

Non-GAAP adjusted operating margin %

     21.3     21.4     21.4

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 2017 Non-GAAP Adjusted Operating Income Reconciliation by Segment

 

 

     Connectivity
Solutions
    Mobility
Solutions
    Total  

Operating income, as reported

   $ 48.2     $ 43.4     $ 91.7  

Amortization of purchased intangible assets

     44.8       23.3       68.1  

Restructuring costs, net

     16.6       2.6       19.3  

Equity-based compensation

     6.0       4.3       10.3  

Integration and transaction costs

     9.8       —         9.8  
  

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 125.4     $ 73.6     $ 199.1  

Non-GAAP adjusted operating margin %

     18.1     17.3     17.8

Third Quarter 2017 Non-GAAP Adjusted Operating Income Reconciliation by Segment

 

     Connectivity
Solutions
    Mobility
Solutions
    Total  

Operating income, as reported

   $ 71.2     $ 55.6     $ 126.8  

Amortization of purchased intangible assets

     44.2       24.1       68.3  

Restructuring costs, net

     5.6       (0.2     5.4  

Equity-based compensation

     6.4       4.6       11.0  

Integration and transaction costs

     11.9       0.2       12.0  
  

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 139.3     $ 84.2     $ 223.5  

Non-GAAP adjusted operating margin %

     19.7     20.0     19.8

Fourth Quarter 2016 Non-GAAP Adjusted Operating Income Reconciliation by Segment

 

     Connectivity
Solutions
    Mobility
Solutions
    Total  

Operating income, as reported

   $ 43.3     $ 76.1     $ 119.4  

Amortization of purchased intangible assets

     47.7       25.3       72.9  

Restructuring costs, net

     11.0       7.3       18.4  

Equity-based compensation

     4.7       3.7       8.4  

Asset impairments

     15.9       —         15.9  

Integration and transaction costs

     16.9       0.3       17.2  
  

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 139.5     $ 112.7     $ 252.2  

Non-GAAP adjusted operating margin %

     20.5     22.7     21.4

Components may not sum to total due to rounding

 

See Description of Non-GAAP Financial Measures

 

 


CommScope Holding Company, Inc.

Adjusted Free Cash Flow

(Unaudited — In millions)

 

Adjusted Free Cash Flow

        
     Q4 2017     Q4 2016     Full Year
2017
    Full Year
2016
 

Cash flow from operations

   $ 250.9     $ 89.1     $ 586.3     $ 640.2  

Integration and transaction costs

     8.4       17.0       50.6       64.8  

Capital expenditures

     (17.6     (18.7     (68.7     (68.3

Capex related to BNS integration

     —         1.2       —         6.1  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Free Cash Flow

   $ 241.7     $ 88.6     $ 568.2     $ 642.8  
  

 

 

   

 

 

   

 

 

   

 

 

 

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

 

     Q4 2017     Q3 2017     Q2 2017     Q1 2017     Q4 2016  

Operating income, as reported

   $ 91.7     $ 126.8     $ 137.8     $ 121.4     $ 119.4  

Amortization of purchased intangible assets

     68.1       68.3       67.0       67.6       72.9  

Restructuring costs, net

     19.3       5.4       13.8       5.4       18.4  

Equity-based compensation

     10.3       11.0       11.2       9.4       8.4  

Asset impairments

     —         —         —         —         15.9  

Integration and transaction costs

     9.8       12.0       12.6       13.5       17.2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 199.1     $ 223.5     $ 242.4     $ 217.3     $ 252.2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating margin %

     17.8     19.8     20.6     19.1     21.4

Depreciation

     20.8       20.6       20.2       20.0       20.2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted EBITDA

   $ 219.9     $ 244.1     $ 262.6     $ 237.3     $ 272.5  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Components may not sum to total due to rounding

 

See Description of Non-GAAP Financial Measures

 


CommScope Holding Company, Inc.

Reconciliation of GAAP Measures to Non-GAAP Adjusted Measures

(Unaudited — In millions, except per share amounts)

 

     Outlook  
     Three Months Ended         
     March 31,
2018
     Full Year
2018
 

Operating income

   $ 93 - $108      $ 615 - $660  
  

 

 

    

 

 

 

Adjustments:

     

Amortization of purchased intangible assets

   $ 70      $ 265  

Equity-based compensation

   $ 12      $ 55  

Restructuring costs, integration costs and other (1)

   $ 0 - $5      $ 0 - $5  
  

 

 

    

 

 

 

Total adjustments to operating income

   $ 82 - $87      $ 320 - $325  
  

 

 

    

 

 

 

Non-GAAP adjusted operating income

   $ 175 - $195      $ 935 - $985  
  

 

 

    

 

 

 

Diluted earnings per share

   $ 0.13 - $0.16      $ 1.46 - $1.58  
  

 

 

    

 

 

 

Adjustments (2):

     

Total adjustments to operating income

   $ 0.30 - $0.32      $ 1.20 - $1.25  

Debt-related costs and other special items (3)

   $ 0.01      $ (0.10) - $(0.12
  

 

 

    

 

 

 

Non-GAAP adjusted diluted earnings per share

   $ 0.44 - $0.49      $ 2.56 - $2.71  
  

 

 

    

 

 

 

 

(1) Reflects projections for restructuring costs, integration 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, gains on defined benefit plan terminations and 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.