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8-K - 8-K - CommScope Holding Company, Inc.d562347d8k.htm

Exhibit 99.1

 

LOGO

CommScope Reports Strong Second Quarter 2018 Results

- Reaffirms full year 2018 outlook -

 

   

Second Quarter 2018 Performance

 

   

Sales of $1.24 billion, up 6 percent year over year

 

   

GAAP operating income of $165 million

 

   

Non-GAAP adjusted operating income (excluding special items) of $251 million

 

   

GAAP net income of $0.34 per diluted share

 

   

Non-GAAP adjusted net income (excluding special items) of $0.68 per diluted share, up 13 percent year over year and at high end of guidance range

 

 

HICKORY, NC, July 31, 2018—CommScope Holding Company, Inc. (NASDAQ: COMM), a global leader in infrastructure solutions for communications networks, today reported results for the quarter ended June 30, 2018.

The company reported sales of $1.24 billion for the second quarter, compared with $1.17 billion during the same period in the prior year. During the second quarter of 2018, CommScope achieved net income of $66 million, or $0.34 per diluted share, which was an increase from the prior year period’s net income of $55 million, or $0.28 per diluted share. Non-GAAP adjusted net income for the second quarter of 2018 was $133 million, or $0.68 per diluted share, versus $119 million, or $0.60 per diluted share, in the second quarter of 2017. A reconciliation of reported GAAP results to non-GAAP results is attached.

“We are pleased to deliver solid second quarter results, which reflect our team’s focus on capitalizing on growth opportunities in our core markets while managing costs effectively,” said President and Chief Executive Officer Eddie Edwards. “The strong year-over-year growth in North America in our Mobility segment and Outdoor Network Solutions business reflects our industry-leading technology, scale and customer relationships.

“We remain committed to identifying and pursuing opportunities to drive solid growth in core and adjacent markets through innovation and accretive acquisitions. We are confident that the continued prudent investment in our business, strategic allocation of capital toward accretive M&A and a focus on operational efficiency will enable us to deliver continued growth and value to shareholders. Our platform of world-class, differentiated solutions and services continues to set CommScope apart.”


Second Quarter 2018 Overview

Sales were in line with expectations and increased 6 percent year over year as growth in the North America and Europe, Middle East and Africa (EMEA) regions more than offset lower sales in the Asia-Pacific region. Foreign exchange rate changes favorably impacted net sales by less than 1 percent.

GAAP operating income in the second quarter of 2018 increased 21 percent year over year to $165 million. Non-GAAP adjusted operating income, which excludes amortization of purchased intangibles, restructuring costs and other special items, increased 4 percent year over year to $251 million, or 20 percent of net sales. The increases in GAAP and non-GAAP adjusted operating income were primarily driven by higher North American sales volumes and cost reduction initiatives. These were partially offset by lower selling prices, higher input costs and the impact of unfavorable foreign exchange rate changes. In addition, GAAP operating income benefited from lower integration and restructuring costs.

Second Quarter 2018 Segment Overview

Second quarter Connectivity Solutions segment sales increased 2 percent year over year to $740 million driven primarily by strength in the EMEA region. Foreign exchange rate changes positively benefited net sales by less than 1 percent.

Connectivity Solutions GAAP operating income increased 15 percent year over year to $85 million largely due to lower integration and restructuring costs. Non-GAAP adjusted operating income decreased 2 percent year over year to $143 million, or 19 percent of segment net sales. Non-GAAP adjusted operating income decreased primarily due to higher input costs, lower selling prices and the impact of unfavorable foreign exchange rate changes. These declines were partially offset by the benefits from cost reduction initiatives and higher sales volumes.

Second quarter Mobility Solutions segment sales increased 11 percent year over year to $499 million driven by double-digit growth in North America coupled with less pronounced increases in Latin America and EMEA. This growth was offset by lower sales in the Asia-Pacific region. Foreign exchange rate changes favorably impacted net sales by approximately 1 percent.

Mobility Solutions GAAP operating income increased 27 percent year over year to $79 million, and non-GAAP adjusted operating income increased 13 percent year over year to $108 million, or 22 percent of segment net sales. Both GAAP and non-GAAP adjusted operating income benefited from higher North American sales volumes partially offset by lower selling prices and the impact of unfavorable foreign exchange rate changes.


Debt Repayment

CommScope has made solid progress identifying new opportunities to accelerate its long-term growth prospects. The company believes that enhancing strategic balance sheet flexibility will provide the best way to support long-term value creation.

As a result, the company will repay $400 million of its term loan on July 31, 2018 by utilizing $250 million of cash on hand and borrowing $150 million under its asset-backed revolving credit facility.

Outlook

CommScope management issued third quarter 2018 guidance and reaffirmed its guidance range for the full year 2018.

Third Quarter 2018 Guidance:

 

   

Revenue of $1.19 billion – $1.24 billion

 

   

Operating income of $145 million – $169 million

 

   

Non-GAAP adjusted operating income of $225 million – $250 million

 

   

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

 

   

Earnings per diluted share of $0.41 – $0.45, based on 195 million weighted average diluted shares

 

   

Non-GAAP adjusted earnings per diluted share of $0.63 – $0.68

Full Year 2018 Guidance:

 

   

Revenue of $4.675 billion – $4.825 billion

 

   

Operating income of $540 million – $585 million

 

   

Non-GAAP adjusted operating income of $870 million – $920 million

 

   

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

 

   

Earnings per diluted share of $1.18 – $1.30, based on 196 million weighted average diluted shares

 

   

Non-GAAP adjusted earnings per diluted share of $2.33 – $2.48

 

   

Cash flow from operations > $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 second quarter 2018 results and third quarter and full year 2018 guidance. The conference call will also be webcast.


To participate in the conference call, dial +1 844-397-6169 (US and Canada only) or +1 478-219-0508. The conference identification number is 4825208. 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/

Follow us on Twitter and LinkedIn and like us on Facebook.

Sign up for our press releases and blog posts.

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

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, introduction 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 contract manufacturers we rely on encounter production, quality, financial or other difficulties; our ability to integrate and 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, including the risk and uncertainty related to tariffs or a potential global trade war that may impact our products; costs 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 Quarterly Report on Form 10-Q 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     Six Months Ended  
     June 30,     June 30,  
     2018     2017     2018     2017  

Net sales

   $ 1,239,856     $ 1,174,090     $ 2,360,373     $ 2,311,375  

Operating costs and expenses:

        

Cost of sales

     768,546       702,325       1,477,663       1,385,803  

Selling, general and administrative

     185,197       207,640       370,328       419,461  

Research and development

     47,765       46,982       97,629       95,970  

Amortization of purchased intangible assets

     66,442       66,981       133,671       134,619  

Restructuring costs, net

     7,218       13,773       12,668       19,161  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     1,075,168       1,037,701       2,091,959       2,055,014  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     164,688       136,389       268,414       256,361  

Other income (expense), net

     (3,094     2,900       (2,111     (12,457

Interest expense

     (60,726     (61,417     (120,533     (130,971

Interest income

     2,057       1,730       3,491       2,604  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     102,925       79,602       149,261       115,537  

Income tax expense

     (37,003     (24,138     (49,604     (26,511
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 65,922     $ 55,464     $ 99,657     $ 89,026  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

        

Basic

   $ 0.34     $ 0.29     $ 0.52     $ 0.46  

Diluted (a)

   $ 0.34     $ 0.28     $ 0.51     $ 0.45  

Weighted average shares outstanding:

        

Basic

     192,162       193,092       191,767       193,555  

Diluted (a)

     195,186       197,218       195,346       198,173  

(a) Calculation of diluted earnings per share:

        

Net income (basic and diluted)

   $ 65,922     $ 55,464     $ 99,657     $ 89,026  

Weighted average shares (basic)

     192,162       193,092       191,767       193,555  

Dilutive effect of equity-based awards

     3,024       4,126       3,579       4,618  
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator (diluted)

     195,186       197,218       195,346       198,173  
  

 

 

   

 

 

   

 

 

   

 

 

 

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


CommScope Holding Company, Inc.

Condensed Consolidated Balance Sheets

(Unaudited — In thousands, except share amounts)

 

     June 30, 2018     December 31, 2017  
Assets             

Cash and cash equivalents

   $ 545,701     $ 453,977  

Accounts receivable, less allowance for doubtful accounts of $19,123 and $13,976, respectively

     1,023,716       898,829  

Inventories, net

     479,468       444,941  

Prepaid expenses and other current assets

     123,371       146,112  
  

 

 

   

 

 

 

Total current assets

     2,172,256       1,943,859  

Property, plant and equipment, net of accumulated depreciation of $413,832 and $390,389, respectively

     446,954       467,289  

Goodwill

     2,866,319       2,886,630  

Other intangible assets, net

     1,491,007       1,636,084  

Other noncurrent assets

     129,344       107,804  
  

 

 

   

 

 

 

Total assets

   $ 7,105,880     $ 7,041,666  
  

 

 

   

 

 

 
Liabilities and Stockholders’ Equity             

Accounts payable

   $ 487,521     $ 436,737  

Other accrued liabilities

     297,755       286,980  
  

 

 

   

 

 

 

Total current liabilities

     785,276       723,717  

Long-term debt

     4,374,209       4,369,401  

Deferred income taxes

     108,529       134,241  

Pension and other postretirement benefit liabilities

     23,006       25,140  

Other noncurrent liabilities

     111,591       141,341  
  

 

 

   

 

 

 

Total liabilities

     5,402,611       5,393,840  

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: 192,214,497 and 190,906,110, respectively

     1,989       1,972  

Additional paid-in capital

     2,361,365       2,334,071  

Retained earnings (accumulated deficit)

     (290,337     (395,998

Accumulated other comprehensive loss

     (148,632     (86,603

Treasury stock, at cost: 6,735,330 shares and 6,336,144 shares, respectively

     (221,116     (205,616
  

 

 

   

 

 

 

Total stockholders’ equity

     1,703,269       1,647,826  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 7,105,880     $ 7,041,666  
  

 

 

   

 

 

 

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


CommScope Holding Company, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited — In thousands)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2018     2017     2018     2017  

Operating Activities:

        

Net income

   $ 65,922     $ 55,464     $ 99,657     $ 89,026  

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

        

Depreciation and amortization

     88,944       90,052       178,349       190,453  

Equity-based compensation

     11,849       11,186       22,396       20,598  

Deferred income taxes

     (19,166     2,371       (24,610     (14,073

Changes in assets and liabilities:

        

Accounts receivable

     (65,915     24,292       (137,023     43,975  

Inventories

     (22,786     (23,111     (47,993     (42,243

Prepaid expenses and other assets

     23,894       10,541       (608     (1,773

Accounts payable and other liabilities

     25,469       (92,745     40,881       (120,777

Other

     (8,408     9,194       4,014       24,847  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash generated by operating activities

     99,803       87,244       135,063       190,033  

Investing Activities:

        

Additions to property, plant and equipment

     (17,268     (17,667     (30,844     (30,577

Proceeds from sale of property, plant and equipment

     3,241       4,623       6,225       4,978  

Proceeds upon settlement of net investment hedge

     1,331       —         1,331       —    

Other

     —         6,139       —         6,778  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (12,696     (6,905     (23,288     (18,821

Financing Activities:

        

Long-term debt repaid

     —         (30,379     —         (780,379

Long-term debt proceeds

     —         30,379       —         780,379  

Debt issuance and modification costs

     —         (2,248     —         (8,363

Debt extinguishment costs

     —         —         —         (14,800

Cash paid for repurchase of common stock

     —         (41,230     —         (100,000

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

     986       2,701       4,915       8,506  

Tax withholding payments for vested equity-based compensation awards

     (94     (100     (15,500     (14,858
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash generated by (used in) financing activities

     892       (40,877     (10,585     (129,515

Effect of exchange rate changes on cash and cash equivalents

     (15,031     7,392       (9,466     14,566  
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in cash and cash equivalents

     72,968       46,854       91,724       56,263  

Cash and cash equivalents at beginning of period

     472,733       437,637       453,977       428,228  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 545,701     $ 484,491     $ 545,701     $ 484,491  
  

 

 

   

 

 

   

 

 

   

 

 

 

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


CommScope Holding Company, Inc.    

Reconciliation of GAAP Measures to Non-GAAP Adjusted Measures    

(Unaudited — In millions, except per share amounts)    

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2018     2017     2018     2017  

Operating income, as reported

   $ 164.7     $ 136.4     $ 268.4     $ 256.4  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjustments:

        

Amortization of purchased intangible assets

     66.4       67.0       133.7       134.6  

Restructuring costs, net

     7.2       13.8       12.7       19.2  

Equity-based compensation

     11.8       11.2       22.4       20.6  

Integration and transaction costs

     1.0       12.6       2.5       26.2  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments to operating income

     86.4       104.6       171.3       200.6  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 251.1     $ 241.0     $ 439.7     $ 457.0  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes, as reported

   $ 102.9     $ 79.6     $ 149.3     $ 115.5  

Income tax expense, as reported

     (37.0     (24.1     (49.6     (26.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income, as reported

   $ 65.9     $ 55.5     $ 99.7     $ 89.0  

Adjustments:

        

Total pretax adjustments to operating income

     86.4       104.6       171.3       200.6  

Pretax amortization of deferred financing costs & OID (1)

     2.6       2.8       5.2       15.6  

Pretax loss on debt transactions (2)

     —         1.1       —         16.0  

Pretax net investment gains (2)

     —         (6.0     —         (6.6

Tax effects of adjustments and other tax items (3)

     (21.8     (39.4     (48.0     (92.8
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted net income

   $ 133.1     $ 118.6     $ 228.2     $ 221.8  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted EPS, as reported

   $ 0.34     $ 0.28     $ 0.51     $ 0.45  

Non-GAAP adjusted diluted EPS

   $ 0.68     $ 0.60     $ 1.17     $ 1.12  

 

(1)

Included in interest expense.

(2)

Included in other income (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


CommScope Holding Company, Inc.

Sales by Region

(Unaudited — In millions)

Sales by Region

 

                   % Change  
     Q2 2018      Q2 2017      YOY  

United States

   $ 714.6      $ 643.9        11.0

Europe, Middle East and Africa

     253.4        235.8        7.5  

Asia Pacific

     183.2        203.8        (10.1

Caribbean and Latin America

     61.6        56.1        9.8  

Canada

     27.1        34.5        (21.4
  

 

 

    

 

 

    

Total Net Sales

   $ 1,239.9      $ 1,174.1        5.6
  

 

 

    

 

 

    

CommScope Holding Company, Inc.

Segment Information

(Unaudited — In millions)

Sales by Segment

 

                          % Change  
     Q2 2018      Q1 2018      Q2 2017      Sequential     YOY  

Connectivity Solutions

   $ 740.5      $ 673.6      $ 725.7        9.9     2.0

Mobility Solutions

     499.4        446.9        448.4        11.7     11.4
  

 

 

    

 

 

    

 

 

      

Total Net Sales

   $ 1,239.9      $ 1,120.5      $ 1,174.1        10.7     5.6
  

 

 

    

 

 

    

 

 

      
Non-GAAP Adjusted Operating Income by Segment

 

                          % Change  
     Q2 2018      Q1 2018      Q2 2017      Sequential     YOY  

Connectivity Solutions

   $ 142.9      $ 108.7      $ 145.6        31.5     (1.9 )% 

Mobility Solutions

     108.2        79.9        95.4        35.4     13.4
  

 

 

    

 

 

    

 

 

      

Total Non-GAAP Adjusted Operating Income

   $ 251.1      $ 188.6      $ 241.0        33.1     4.2
  

 

 

    

 

 

    

 

 

      


CommScope Holding Company, Inc.

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

(Unaudited — In millions)

Second Quarter 2018 Non-GAAP Adjusted Operating Income Reconciliation by Segment

 

     Connectivity
Solutions
    Mobility
Solutions
    Total  

Operating income, as reported

   $ 85.4     $ 79.3     $ 164.7  

Amortization of purchased intangible assets

     45.0       21.4       66.4  

Restructuring costs, net

     4.7       2.5       7.2  

Equity-based compensation

     7.2       4.6       11.8  

Integration and transaction costs

     0.7       0.3       1.0  
  

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 142.9     $ 108.2     $ 251.1  

Non-GAAP adjusted operating margin %

     19.3     21.7     20.3
First Quarter 2018 Non-GAAP Adjusted Operating Income Reconciliation by Segment  
     Connectivity
Solutions
    Mobility
Solutions
    Total  

Operating income, as reported

   $ 53.2     $ 50.5     $ 103.7  

Amortization of purchased intangible assets

     45.5       21.8       67.2  

Restructuring costs, net

     2.4       3.1       5.5  

Equity-based compensation

     6.4       4.1       10.5  

Integration and transaction costs

     1.2       0.4       1.7  
  

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 108.7     $ 79.9     $ 188.6  

Non-GAAP adjusted operating margin %

     16.1     17.9     16.8
Second Quarter 2017 Non-GAAP Adjusted Operating Income Reconciliation by Segment  
     Connectivity
Solutions
    Mobility
Solutions
    Total  

Operating income, as reported

   $ 74.1     $ 62.3     $ 136.4  

Amortization of purchased intangible assets

     42.9       24.1       67.0  

Restructuring costs, net

     9.6       4.2       13.8  

Equity-based compensation

     6.5       4.7       11.2  

Integration and transaction costs

     12.5       0.2       12.6  
  

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 145.6     $ 95.4     $ 241.0  

Non-GAAP adjusted operating margin %

     20.1     21.3     20.5

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

 

     Q2 2018     Q2 2017  

Cash flow from operations

   $ 99.8     $ 87.2  

Integration and transaction costs

     —         16.7  

Capital expenditures

     (17.3     (17.7
  

 

 

   

 

 

 

Adjusted Free Cash Flow

   $ 82.5     $ 86.2  
  

 

 

   

 

 

 

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

 

     Q2 2018     Q1 2018     Q4 2017     Q3 2017     Q2 2017  

Operating income, as reported

   $ 164.7     $ 103.7     $ 90.3     $ 125.4     $ 136.4  

Amortization of purchased intangible assets

     66.4       67.2       68.1       68.3       67.0  

Restructuring costs, net

     7.2       5.5       19.3       5.4       13.8  

Equity-based compensation

     11.8       10.5       10.3       11.0       11.2  

Integration and transaction costs

     1.0       1.7       9.8       12.0       12.6  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 251.1     $ 188.6     $ 197.7     $ 222.1     $ 241.0  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted operating margin %

     20.3     16.8     17.6     19.7     20.5

Depreciation

     19.9       19.6       20.8       20.6       20.2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjusted EBITDA

   $ 271.1     $ 208.1     $ 218.5     $ 242.7     $ 261.3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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
September 30,

2018
    Full Year
2018
 

Operating income

   $ 145 - $169     $ 540 - $585  
  

 

 

   

 

 

 

Adjustments:

    

Amortization of purchased intangible assets

   $ 66     $ 265  

Equity-based compensation

   $ 12     $ 50  

Restructuring costs, integration costs and other (1)

   $ 2 - $3     $ 15 - $20  
  

 

 

   

 

 

 

Total adjustments to operating income

   $ 80 - $81     $ 330 - $335  
  

 

 

   

 

 

 

Non-GAAP adjusted operating income

   $ 225 - $250     $ 870 - $920  
  

 

 

   

 

 

 

Diluted earnings per share

   $ 0.41 - $0.45     $ 1.18 - $1.30  
  

 

 

   

 

 

 

Adjustments (2):

    

Total adjustments to operating income

   $ 0.31 - $0.33     $ 1.25 - $1.30  

Debt-related costs and other special items (3)

   $ (0.09) - $(0.10 )   $ (0.10) - $(0.12
  

 

 

   

 

 

 

Non-GAAP adjusted diluted earnings per share

   $ 0.63 - $0.68     $ 2.33 - $2.48  
  

 

 

   

 

 

 

 

(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.