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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
___________________________________
DATE OF REPORT: NOVEMBER 4, 2002
DATE OF EARLIEST EVENT REPORTED: NOVEMBER 4, 2002
COMMSCOPE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-12929 36-4135495
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification Number)
incorporation
or organization)
1100 COMMSCOPE PLACE, SE
HICKORY, NORTH CAROLINA 28602
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (828) 324-2200
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Item 9. Regulation FD Disclosure.
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On November 4, 2002, the registrant issued a press release relating to
its financial results for the third quarter of 2002, the termination of its
existing revolving loan credit facility (which has no outstanding
indebtedness and was scheduled to terminate on December 31, 2002) and the
obtaining of temporary financial covenant waivers for the period commencing
on September 30, 2002 and through and including December 31, 2002 under its
$11 million eurodollar credit agreement and its $13 million operating lease.
The full text of the press release is set forth below:
"COMMSCOPE REPORTS THIRD QUARTER 2002 RESULTS
HICKORY, NC -- (NOVEMBER 4, 2002) CommScope, Inc. (NYSE: CTV) today
reported third quarter results for the period ended September 30, 2002.
CommScope reported sales of $147.8 million and a net loss of $19.6 million
or $0.32 per share for the third quarter. The loss included noncash
impairment charges of $0.26 per share and after-tax equity in losses of OFS
BrightWave, LLC of $0.10 per share, which are discussed below.
For the same period last year, net income was $6.3 million and earnings
were $0.12 per diluted share. Third quarter 2001 results included pretax
charges of $9.3 million or $0.11 per diluted share, net of tax, related to
the financing and formation of the original joint venture arrangements with
The Furukawa Electric Co., Ltd. of Japan (Tokyo: 5801), which were
subsequently restructured.
CommScope's sales for the third quarter were $147.8 million compared to
$177.7 million in the year-ago quarter and $155.0 million in the second
quarter of 2002. Third quarter 2002 domestic sales were stable sequentially
at $120.8 million largely due to strong sales to AT&T Broadband, but
declined from $143.4 million in the prior year primarily due to lower sales
to Adelphia as well as lower sales of fiber optic cable and wireless
products. International sales for the third quarter were $27.0 million,
compared to $33.9 million in the second quarter and $34.3 million in the
third quarter of 2001.
Orders booked in the third quarter of 2002 were $145.5 million, compared to
$141.6 million in the same quarter last year and $157.2 million in the
second quarter of 2002.
"While business conditions remain challenging as reflected in our reported
results, we believe we continue to position the company to take advantage
of an eventual market recovery," said Frank M. Drendel, CommScope Chairman
and Chief Executive Officer. "For example, we recently enhanced our
strategic relationship with Furukawa while reducing our outstanding shares.
During the third quarter, we built upon our strong market position,
generated solid free cash flow and lowered our cost structure."
On a pro forma basis, excluding only impairment charges and the Company's
after-tax share of net losses in OFS BrightWave, CommScope earned $2.7
million or $0.04 per share for the third quarter of 2002.
IMPAIRMENT CHARGES
------------------
The noncash impairment charges of $25.1 million ($15.8 million, net of tax,
or $0.26 per share) recorded during the third quarter primarily relate to
underutilized and idle production equipment due to the ongoing severe
downturn in telecommunications. The charges were:
o $15.1 million ($0.15 per share) related to wireless cable production
assets.
o $5.3 million ($0.06 per share) related to fiber cable production
assets.
o $3.0 million ($0.03 per share) related to other telecom cable
production assets.
o $1.7 million ($0.02 per share) related to other production assets.
OFS BRIGHTWAVE
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OFS BrightWave's performance continues to reflect the extremely difficult
global business conditions for optical fiber and fiber cable. During the
third quarter of 2002, OFS BrightWave had revenues of $21.0 million, a
negative gross profit of $35.7 million and a net loss of $54.0 million,
which included net special charges of $4.8 million, primarily related to
employee separation costs.
CommScope recorded a charge of $6.4 million or $0.10 per share of after-tax
equity in losses of OFS BrightWave related to its minority ownership in
this venture during the third quarter. The Company acquired an 18.4%
ownership interest in OFS BrightWave, an optical fiber and fiber cable
venture between CommScope and Furukawa, during the fourth quarter of 2001
and CommScope is reporting results using the equity method of accounting
for this investment.
CASH FLOW AND LIQUIDITY
-----------------------
Net cash provided by operating activities for the third quarter was $26.8
million and capital expenditures for the quarter were $2.9 million,
resulting in $23.9 million of free cash flow (total cash from operations
less capital expenditures).
During the third quarter, CommScope also advanced $6.5 million to OFS
BrightWave under an existing $30 million revolving credit facility. As of
September 30, 2002, OFS owed CommScope $23.9 million under this facility.
The Company expects OFS to borrow the remaining $6.1 million available
under this facility during the fourth quarter.
The Company recently terminated its existing revolving credit facility,
which was scheduled to expire in December 2002. CommScope had no
outstanding indebtedness under this terminated facility and ended the third
quarter with $131.6 million of cash and cash equivalents on the balance
sheet.
The Company expects to enter into a new secured credit facility of up to
$125 million during the fourth quarter. In anticipation of this new primary
facility, the Company obtained temporary covenant waivers under its $11
million eurodollar credit agreement and a $13 million operating lease. If
the Company is unable to establish its new primary facility by year end, it
intends to further amend the eurodollar and operating lease agreements or
repay the obligations using existing cash balances.
COMMON STOCK PURCHASE
---------------------
CommScope and Furukawa announced in October that they had privately
purchased 10.2 million shares of CommScope common stock held by Lucent
Technologies Inc. (NYSE: LU). Lucent had acquired the CommScope common
stock in connection with CommScope's investment in OFS BrightWave in
November 2001.
The total purchase price for the 10.2 million-share block was approximately
$53.0 million or $5.20 per share. Furukawa purchased 7,656,900 shares,
which it plans to hold for investment purposes. CommScope repurchascd
2,543,100 shares, which it will hold as treasury stock. CommScope funded
its $13.2 million repurchase using existing cash balances.
OTHER THIRD QUARTER 2002 HIGHLIGHTS
-----------------------------------
o Broadband/Video sales worldwide decreased 4% sequentially and 14% year
over year to $120.3 million for the third quarter. A significant
year-over-year increase in sales to AT&T Broadband was more than
offset by lower sales to Adelphia and reduced sales of fiber optic
cable products. International sales continue to reflect the difficult
global business environment.
o Local Area Network (LAN) sales increased 4% year over year and 6%
sequentially to $24.2 million for the third quarter. The Company
redirected project business and utilized its strong brand recognition
to offset the previously announced loss of a leading distribution
channel. During the quarter, CommScope also announced the addition of
fiber optic connectivity components to its LAN product line through a
new marketing alliance with OFS.
o Wireless and Other Telecom sales were $3.3 million, down 52%
sequentially and down 78% year over year. Wireless and Other Telecom
sales continue to be affected by reduced infrastructure spending,
capital constraints and the uncertain global business environment.
CommScope recently named Ted Hally as Executive Vice President and
General Manager of its Wireless products group. The Company believes
that Hally's strong leadership capabilities and diverse international
experience will be tremendous assets to CommScope as it continues to
expand its wireless business globally. The Company expects to conduct
trials of its new flexible cable with several major European wireless
operators during the fourth quarter.
o Total Company gross margin for the third quarter was 18.3% compared to
24.7% in the year-ago period and 20.5% in the second quarter of 2002.
Gross margin for the quarter was affected by lower sales volumes,
product mix, ongoing pricing pressure for certain products and
included approximately $1 million in costs related to the previously
announced workforce reduction.
FOURTH QUARTER OUTLOOK
----------------------
Looking ahead to the fourth quarter, the Company expects sales in the
$125-$l35 million range and gross margin in the 18-19% range. "Forecasting
remains difficult due to business conditions and cautious customer
spending," said Jearld L. Leonhardt, Executive Vice President and Chief
Financial Officer. "While we expect lower sales as we move into the
traditionally weaker part of the year, we believe that our gross margin
will be comparable sequentially primarily due to the positive impact of our
cost reduction actions."
CONFERENCE CALL INFORMATION
---------------------------
CommScope will host a conference call to review third quarter 2002 results
at 4:30 p.m. Eastern Time today. 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, domestic and international callers
should dial 212-896-6107. 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 conference call will also be available via the Internet at:
http://www.firstcallevents.com/service/ajwz367543123gf12.html
If you are unable to participate on the call and would like to hear a
replay, you may dial 800-633-8284. International callers should dial
402-977-9140 for the replay. The replay ID is 20968729. The replay will be
available through Wednesday, November 6. A webcast replay will also be
archived for a limited period of time following the conference call via the
Internet on CommScope's web site (http://www.commscope.com).
CommScope is the world's largest manufacturer of broadband coaxial cable
for Hybrid Fiber Coaxial (HFC) applications and a leading supplier of
high-performance fiber optic and twisted pair cables for LAN, wireless and
other communications applications. Through its relationship with OFS,
CommScope has an ownership interest in one of the world's largest producers
of optical fiber and cable and has access to a broad array of connectivity
components as well as technology advanced optical fibers, including the
zero water peak optical fibers used in the production of the LightScope
ZWP(R) family of products.
(Minimum requirements to listen to the broadcast and replay on the
Internet: The Windows Media Player software, downloadable free from
http://www.microsoft.com/windows/windowsmedia/EN/default.asp, and at least
a 28.8Kbps connection to the Internet. If you experience problems listening
to the broadcast, send an email to webcastsupport@tfprn.com.)
This press release contains forward-looking statements regarding sales,
outlook and expectations for CommScope and OFS BrightWave that are based on
information currently available to management, management's beliefs and a
number of assumptions concerning future events. Forward-looking statements
are not a guarantee of performance and are subject to a number of
uncertainties and other factors, which could cause the actual results to
differ materially from those currently expected. The potential risks and
uncertainties that could cause actual results to differ materially include,
but are not limited to, expected demand from AT&T BroadBand and major
domestic MSOs, telecommunications industry capital spending; industry
consolidation; ability of our customers to secure adequate financing to
fund their infrastructure projects or to pay us; industry excess capacity;
changes or fluctuations in global economic conditions; financial
performance of OFS BrightWave; competitive pricing and acceptance of our
products; our ability to obtain financing and capital on commercially
reasonable terms; possible restrictions imposed on us by a new revolving
credit arrangement; possible future impairment charges; changes in cost and
availability of key raw materials; successful operation of bimetals
manufacturing and other vertical integration activities; successful
expansion and related operation of our facilities; developments in
technology; industry competition and the ability to retain customers;
regulatory changes affecting our industries; acquisition activities;
possible disruption due to customer or supplier bankruptcy reorganization
or restructuring; terrorist activity or armed conflict and other factors.
For a more detailed description of factors that could cause such a
difference please see CommScope's filings with the Securities and Exchange
Commission. In providing forward-looking statements, the Company does not
intend, and is not undertaking any duty or obligation to update these
statements as a result of new information, future events or otherwise.
CONTACTS:
Phil Armstrong Betsy Lambert, APR
Investor Relations Media Relations
(828) 323-4848 (828) 323-4873
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COMMSCOPE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED -- IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Nine Months Ended
September 30, September 30,
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2002 2001 2002 2001
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Net sales $147,819 $177,702 $462,584 $594,961
Operating costs and expenses
Cost of sales 120,743 133,755 368,360 449,910
Selling, general and administrative 20,508 19,019 82,801 61,564
Research and development 1,069 1,834 4,847 5,459
Amortization of goodwill - 1,340 - 4,023
Terminated acquisition costs - 9,294 - 9,294
Impairment charges for fixed assets
and investments 25,096 - 25,096 12,615
Total operating costs and expenses 167,416 165,242 481,104 542,865
Operating income (loss) (19,597) 12,460 (18,520) 52,096
Other income (expense), net 392 (472) 751 (603)
Interest expense (2,419) (2,211) (6,860) (6,285)
Interest income 696 294 1,702 669
Income (loss) before income taxes and
equity in losses of OFS BrightWave, LLC (20,928) 10,071 (22,927) 45,877
Provision for income tax benefit (expense) 7,725 (3,726) 8,465 (16,975)
Income (loss) before equity in losses of OFS
BrightWave, LLC (13,203) 6,345 (14,462) 28,902
Equity in losses of OFS BrightWave, LLC (6,359) - (49,239) -
Net income (loss) $(19,562) $ 6,345 $(63,701) $ 28,902
Net income (loss) per share:
Basic $ (0.32) $ 0.12 $ (1.03) $ 0.56
Assuming dilution $ (0.32) $ 0.12 $ (1.03) $ 0.55
Weighted average shares outstanding:
Basic 61,763 51,440 61,745 51,384
Assuming dilution (a) 61,763 52,350 61,745 52,208
(a) Calculation of weighted average shares outstanding,
assuming dilution:
Weighted average shares, basic 61,763 51,440 61,745 51,384
Dilutive effect of stock options* - 910 - 824
Weighted average shares, assuming dilution 61,763 52,350 61,745 52,208
* For the three months and nine months ended September 30, 2002, stock
options were antidilutive as a result of the net losses during the
respective periods, and were therefore excluded from the calculation of
net loss per share, assuming dilution.
COMMSCOPE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(Unaudited)
September 30, December 31,
2002 2001
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Assets
Cash and cash equivalents $ 131,575 $ 61,929
Accounts receivable, less allowance for doubtful accounts
of $14,502 and $12,599, respectively 80,438 105,402
Inventories 44,365 47,670
Prepaid expenses and other current assets 20,925 12,724
Deferred income taxes 19,483 18,143
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Total current assets 296,786 245,868
Property, plant and equipment, net 221,060 277,169
Goodwill, net of accumulated amortization of $59,518
and $59,493, respectively 151,322 151,307
Other intangibles, net of accumulated amortization of
$39,303 and $37,421, respectively 9,462 11,344
Deferred income taxes 2,575 --
Investment in and advances to OFS BrightWave, LLC 112,489 196,860
Other assets 9,960 6,457
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Total Assets $ 803,654 $ 889,005
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Liabilities and Stockholders' Equity
Accounts payable $ 20,504 $ 16,339
Other accrued liabilities 34,336 27,753
Current portion of long-term debt 2,943 2,651
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Total current liabilities 57,783 46,743
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Long-term debt less current portion 190,657 191,918
Deferred income taxes __ 22,899
Other noncurrent liabilities 25,024 20,931
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Total Liabilities 273,464 282,491
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Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.01 par value; Authorized shares:
20,000,000; Issued and outstanding shares: None at
September 30, 2002 and December 31, 2001 -- --
Common stock, $.01 par value; Authorized shares:
300,000,000; Issued and outstanding shares:
61,762,667 at September 30, 2002; 61,688,256 at
December 31, 2001 618 617
Additional paid-in capital 382,995 381,823
Retained earnings 164,966 228,667
Accumulated other comprehensive loss (18,389) (4,593)
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Total Stockholders' Equity 530,190 606,514
-------------- --------------
Total Liabilities and Stockholders' Equity $ 803,654 $ 889,005
============== ==============
"
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on behalf of the
undersigned hereunto duly authorized.
Dated: November 4, 2002
COMMSCOPE, INC.
By: /s/ Frank B. Wyatt, II
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Frank B. Wyatt, II
Senior Vice President, General Counsel
and Secretary