CommScope Announces Fourth Quarter 2008 Results

CommScope, Inc. (NYSE: CTV):

• Fourth quarter sales of $862 million
• Net loss of $4.86 per share in the fourth quarter primarily due to $397 million non-cash impairment charges
• Adjusted operating income, excluding special items, of $95 million, up 13 percent year over year on a combined basis
• Fourth quarter debt repayment of over $150 million; further debt reduction planned

CommScope, Inc. (NYSE: CTV), a global leader in infrastructure solutions for communications networks, reported revenue of $861.8 million and a net loss of $342.4 million, or $4.86 per share, for the quarter ended December 31, 2008.

The reported net loss includes after-tax charges of approximately $359.5 million for the impairment of goodwill and other intangible assets, $17.7 million for the amortization of purchased intangibles and $8.8 million for restructuring and net other special items. Excluding special items, adjusted fourth quarter 2008 earnings were $43.6 million, or $0.55 of diluted earnings per share. (A reconciliation of reported GAAP results to adjusted results for the quarter is attached.)

For the fourth quarter of 2007, CommScope reported sales of $462.6 million and net income of $37.6 million, or $0.51 of diluted earnings per share. The reported net income included after-tax charges of $3.1 million for interest on new term loans, write-off of deferred financing fees and acquisition-related expenses from the acquisition of Andrew Corporation. The 2007 results of operations do not include Andrew results. (A reconciliation of fourth quarter 2007 GAAP operating income to adjusted operating income reflecting the entities on a combined basis and the current segment reporting structure is attached.)

"We entered 2008 immediately after the transformational acquisition of Andrew with an ambitious plan to successfully integrate two industry leaders into a single company,” said Chairman and Chief Executive Officer Frank Drendel. "We are proud of our progress and accomplishments, and met most of our operating goals despite the significant challenges of a global recession.

"For calendar year 2008, we increased cash flow from operations by more than 50 percent, reduced debt by more than $500 million and delivered more than $60 million in merger synergy savings. We believe that we have created a stronger company with a solid foundation for long-term success.”

Sales Overview

Sales increased substantially year over year primarily as a result of the Andrew acquisition. On a combined pro forma basis that includes Andrew’s actual sales for the fourth calendar quarter of 2007, sales decreased 14.6 percent. Excluding the negative impact of changes in foreign currency of $24.8 million and adjusting for the divestiture of the Satellite Communications (SatCom) product line, sales declined approximately 10 percent year over year on a combined basis. Sales declined mainly due to the challenging business environment in the second half of the year.

Antenna, Cable and Cabinet Group (ACCG) segment sales declined 12.2 percent year over year to $386.3 million, primarily due to significantly lower North American wireline sales. Wireline sales declined nearly 50 percent from the year ago quarter as major U.S. telecom providers slowed spending on environmentally secure enclosures. This North American decline more than offset robust wireless sales in the Asia Pacific region.

Enterprise segment sales declined 11.3 percent year over year to $194.1 million as a result of challenging global business conditions and reductions in channel inventories. Despite lower overall Enterprise sales volumes, sales of industry leading SYSTIMAX^® GigaSPEED^® X10D rose by nearly 20% year over year.

Broadband segment sales declined 13.1 percent year over year to $132.6 million, as weakness in residential construction continued to negatively affect volume and product mix.

Wireless Network Solutions (WNS) segment sales decreased 24.0 percent year over year to $150.2 million. The WNS year-over-year sales decline was largely due to the divestiture of the unprofitable SatCom business in the first quarter of 2008. Excluding SatCom sales of $21.3 million in the year-ago quarter, WNS sales declined 16.2 percent year over year. The WNS sales comparison was also negatively affected by the restructuring of an unprofitable relationship with a major OEM.

Total non-U.S. sales for the fourth quarter 2008 declined 5.4 percent year over year to $459.8 million, primarily due to changes in foreign exchange rates. Total non-U.S. sales were 53.4 percent of total company sales.

External customer orders booked in the fourth quarter 2008 were $753.0 million.

Operating Income Overview

An operating loss of $342.4 million was incurred in the fourth quarter of 2008. Excluding goodwill and intangible asset impairments, amortization of purchased intangible assets, restructuring and other special items, adjusted operating income in the fourth quarter of 2008 rose to $94.6 million, or 11.0 percent of sales. On a comparative basis, adjusted operating income rose 12.8 percent year over year, primarily due to improved performance of the WNS segment.

Commercial Highlights

CommScope’s Andrew Solutions was recognized for several major accomplishments, including:

• Being named by China Telecom as an approved vendor for its CDMA wireless network. Andrew was the only foreign-based vendor selected to provide cable products and antennas.
• Being the only foreign-based supplier to win Huawei’s Global Core Partner Award for superior performance as a global supplier. Andrew's base station antennas, cable products and microwave antennas are used in all of Huawei's CDMA, WCDMA, CDMA2000, and WiMAX networks.
• Being appointed by Nokia Siemens Networks to supply HELIAX® FXL aluminum cable and related products in support of a significant wireless network expansion in the Indian market.
• Winning a contract with Alcatel-Lucent Switzerland for providing radio frequency (RF) coverage solutions in the world's longest railway tunnel, the Gotthard Base Tunnel in Switzerland. Andrew will provision its ION™-M multi-band, multi-operator fiber distributed antenna system and RADIAX® radiating cables to spread reliable, high-performance wireless coverage throughout the tunnel.
• Signing a broad cooperation agreement with Entel PCS, one of the mobile telephony leaders in Chile, for Andrew's role in the expansion of the Entel PCS network in that country. Under the multi-year agreement between the companies, Andrew is designated a principal supplier--via its Chilean representative Raylex--of wireless equipment for deployment in Entel PCS's network, including antennas, coaxial cables, software tools, and repeater solutions for indoor and outdoor use.

Other Highlights

• Gross margin for the fourth quarter 2008 was 27.2 percent and includes $3.9 million of intangible amortization in Cost of Sales. Excluding this item, gross margin would have been 27.7 percent.
• SG&A expense for the fourth quarter 2008 was $112.0 million, or 13.0 percent of sales.
• Non-cash equity-based compensation for the fourth quarter 2008 was $3.5 million.
• Total depreciation and amortization expense was $53.7 million for the fourth quarter of 2008. Intangible amortization in the fourth quarter totaled $28.3 million.
• Net cash provided by operating activities in the quarter was $108.4 million.
• On December 24, 2008, CommScope amended the terms of its senior credit facility to allow it to make, on or prior to March 23, 2009, cash payments of up to $200 million in the aggregate to acquire, prepay, redeem or purchase its 1.00% Convertible Senior Subordinated Debentures (Debentures) due 2024. Total payments in excess of $100 million will permanently reduce availability under the revolving credit facility on a Dollar for dollar basis. Also, as part of the amendment, CommScope made a prepayment on the term loans of $150 million.
• During February 2009, the Company agreed with certain holders of the Debentures to exchange shares of its common stock for their Debentures. CommScope issued a total of 1.71 million shares for $24.0 million aggregate principal amount of Debentures.
• CommScope announced that the Debentures will be called for redemption on March 20, 2009. Approximately $176 million of the Debentures remain outstanding.

Goodwill and Other Intangible Asset Impairments

In the fourth quarter of 2008, the company recorded pre-tax, non-cash charges of $397.1 million for the impairment of goodwill and other purchased intangible assets. Of this total, $274.5 million was recorded in the WNS segment and $122.6 million was recorded in the ACCG segment. These charges resulted from increasing the estimated cost of capital used to discount the expected future cash flows and from reductions in the expectations for future cash flows for certain reporting units, primarily due to ongoing challenging market conditions.

Full Year 2008 Results

CommScope reported sales of $4.02 billion for 2008 and a net loss of $228.5 million or $3.29 per share. The Company’s 2008 results include after-tax charges of $359.5 million for the impairment of goodwill and other intangible assets as well as a number of other special items primarily related to the acquisition of Andrew. Excluding these special items, 2008 adjusted earnings would have been $264.8 million, or $3.31 per diluted share. (A reconciliation of reported GAAP results to adjusted results is attached.)

Outlook

Ongoing demand for bandwidth and increasing global demand for wireless services will be key drivers for CommScope in 2009. However, the company expects challenging business conditions early in the year. The company’s ability to forecast has been negatively affected by global economic turmoil, uncertainties in financial markets, currency fluctuations and commodity cost volatility. As a result, the company plans to provide specific financial guidance only for the first quarter of 2009, including the following:

• Revenue of $720 million to $770 million
• Adjusted operating income of $25 million to $45 million, excluding special items
• Significant non-cash charges for the induced conversion of debt
• Tax rate of 31 percent to 34 percent on adjusted pretax income
• A net loss on a GAAP basis

"While we expect a slow start to the year, we believe that our results should improve substantially in the seasonally strong second and third quarters,” said Executive Vice President and Chief Financial Officer Jearld Leonhardt. "We have recently seen a significant increase in wireless order rates and expect to benefit from higher sales volumes as we move through the year. We also expect to benefit from restructuring and other cost reduction actions that have already been initiated.

"Looking at cash flow and debt, we expect solid cash flow from operations in the first quarter. We intend to use our cash to further reduce both our term debt and convertible debt. Maintaining compliance with the financial covenants of our senior secured credit facility is also a high priority for us in 2009. We are planning to do so by managing our business carefully while continuing to reduce our debt.”

Conference Call Information

CommScope plans to host a call today at 5:00 p.m. EST to discuss fourth quarter results and full year results. You are invited to listen to the conference call or live webcast with Frank Drendel, chairman and CEO; Brian Garrett, president and COO; and Jearld Leonhardt, executive vice president and CFO.

To participate in the conference call, U.S. callers should dial +1 866-845-6585 and callers outside of the U.S. should dial +1 706-643-2944. The conference identification number is 82065867. Please plan to dial in 10 - 15 minutes before the start of the call to facilitate a timely connection. The live, listen-only audio of the call will be available through a link on the Investor Relations Presentations page of CommScope's website at www.commscope.com.

If you are unable to participate and would like to hear a replay, U.S. callers can dial +1 800-642-1687 and callers outside the U.S. can dial +1 706-645-9291 for the replay. The replay identification number is 82065867 and will be available through March 12, 2009. A webcast replay will also be archived on CommScope's website for a limited period of time following the conference call.

About CommScope

CommScope, Inc. (NYSE: CTV – www.commscope.com) is a world leader in infrastructure solutions for communication networks. Through its Andrew^® brand, it is a global leader in radio frequency subsystem solutions for wireless networks. Through its SYSTIMAX^® and Uniprise^® brands, CommScope is a world leader in network infrastructure solutions, delivering a complete end-to-end physical layer solution, including cables and connectivity, enclosures, intelligent software and network design services, for business enterprise applications. CommScope also is the premier manufacturer of coaxial cable for broadband cable television networks and one of the leading North American providers of environmentally secure cabinets for DSL and FTTN applications. Backed by strong research and development, CommScope combines technical expertise and proprietary technology with global manufacturing capability to provide customers with infrastructure solutions for evolving global communications networks in more than 130 countries around the world.

Forward Looking Statement

This press release contains forward-looking statements regarding, among other things, the business position, plans, outlook, integration, synergies and other financial items relating to CommScope that are based on information currently available to management, management's beliefs and a number of assumptions concerning future events. Statements made in the future tense, and statements using words such as "expect," "believe," "intend," "goal," "estimate," "project," "plans," "anticipate," "designed to," "long term view," "confident," "think," "scheduled," "outlook," "guidance" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not a guarantee of performance and are subject to a number of risks and uncertainties, many of which are difficult to predict and are beyond the control of CommScope, and therefore should be carefully considered. Factors that could cause actual results of CommScope to differ materially include, but are not limited to, continued global economic weakness and uncertainties and disruption in the credit and financial markets; changes in cost and availability of key raw materials and the potential effect on customer pricing; the challenges of achieving anticipated cost-reduction synergies expected from the acquisition of Andrew; delays or challenges related to removing, transporting or reinstalling equipment; the ability to retain qualified employees; customer demand for our products and the ability to maintain existing business alliances with key customers or distributors; competitive pricing and acceptance of products; industry competition and the ability to retain customers through product innovation; concentration of sales among a limited number of customers or distributors; customer bankruptcy; the risk that internal production capacity and that of contract manufacturers may be insufficient to meet customer demand or quality standards for our products; the outcome of negotiations with represented employees; the risk that customers might cancel orders placed or that orders currently placed may affect order levels in the future; continuing consolidation among customers; possible production disruption due to supplier or contract manufacturer bankruptcy, reorganization or restructuring; significant international operations and the impact of variability in foreign exchange rates; ability to integrate the CommScope and Andrew businesses; ability to fully realize anticipated benefits from prior or future acquisitions or equity investments; substantial indebtedness as a result of the acquisition of Andrew and maintaining compliance with debt covenants; capital structure changes; tax rate variability; realignment of global manufacturing capacity; protecting or defending intellectual property; ability to obtain capital on commercially reasonable terms; fluctuations in interest rates; the ability to achieve expected sales growth and earnings goals; the outcome of pending litigations and proceedings; and regulatory changes affecting us or the industries we serve. For a more complete description of factors that could cause such a difference, please see CommScope's filings with the Securities and Exchange Commission (SEC), which are available on CommScope's website or at www.sec.gov. In providing forward-looking statements, CommScope does not intend, and does not undertake any duty or obligation, to update these statements as a result of new information, future events or otherwise.