Jennifer Crawford - Manager-Investor Relations Mark A. Olson - Chief Financial Officer & Executive Vice President Marvin S. Edwards - President, Chief Executive Officer & Director.

Vijay K. Bhagavath - Deutsche Bank Securities, Inc. Jess Lupert - Wells Fargo Securities LLC Ashwin X. Kesireddy - JPMorgan Securities LLC George Charles Notter - Jefferies LLC Shawn M. Harrison - Longbow Research LLC Victor W. Chiu - Raymond James & Associates, Inc. Kulbinder S.

Garcha - Credit Suisse Securities (USA) LLC (Broker) Steven Fox - Cross Research LLC Timothy J. Quillin - Stephens, Inc..

Good morning. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the CommScope's Third Quarter 2015 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you.

And I would like to turn the call over to Jennifer Crawford, Manager of Investor Relations. Please go ahead..

Thanks, Brent. Good morning and thank you for joining us today to discuss CommScope's third quarter 2015 results. With me on the call are Eddie Edwards, CommScope's President and CEO; Mark Olson, CommScope's Executive Vice President and CFO; and Phil Armstrong, CommScope's Senior Vice President of Corporate Finance.

You can find the slides that accompany this review on our Investor Relations website. Before we begin the presentation, I will cover a few housekeeping items. On slide two, you will find our cautionary language related to forward-looking statements.

During this conference call, we will make forward-looking statements regarding our financial position, plans and outlook that are based on information currently available to management, management's belief 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.

For a more detailed description of factors that could cause such a difference, please see our third quarter 2015 10-Q filed earlier this morning and other SEC filings. And providing forward-looking statements, the company is not undertaking any duty or obligation to update these statements as a result of new information, future events or otherwise.

Please note that all dollar figures and percentages are approximations. In addition to GAAP information, we will provide certain non-GAAP measures. We believe that presenting these non-GAAP or adjusted measures provides additional meaningful information to investors.

Detailed reconciliations of GAAP to adjusted measures can be found in the appendix to our slide presentation. Slide three is our agenda for this morning.

Mark Olson will provide an overview of the quarter, highlight our four segments' performance, discuss cash flow and liquidity, and then provide our outlook for the first quarter and calendar year 2016. Finally, Eddie will discuss our progress on the BNS integration and make closing comments before we open the line for Q&A.

To make sure everyone has the opportunity to ask a question on today's call, we request you ask one question and return to the queue for any additional questions. I will now turn it over to Mark Olson.

Mark?.

generated $112 million in cash from operations; invested $12 million in capital expenditures, net of spending related to BNS integration; and paid $53 million in transaction and integration costs, primarily related to the BNS acquisition. Adjusted free cash flow for the quarter was $154 million.

Adjusted free cash flow for the 12 months ended September 30, 2015 was $345 million. We ended the quarter with $942 million of total liquidity, comprised of $618 million in cash and cash equivalents and availability under our credit facility of $324 million. Finally, I'll cover our outlook on slide 10.

Our guidance excludes amortization of purchased intangibles, restructuring costs, transaction and integration costs, purchase accounting and other special items. Our fourth quarter outlook assumes relatively stable business conditions.

For the fourth quarter, which includes now a full quarter of results from our transformational BNS acquisition, we expect revenue of $1.125 billion to $1.2 billion, up approximately 40% year-over-year at the midpoint.

Adjusted operating income of $175 million to $205 million, up approximately 37% year-over-year at the midpoint and adjusted earnings of $0.39 to $0.44 per diluted share, up approximately 11% year-over-year at the midpoint of $0.42 per diluted share. Our fourth quarter outlook reflects a more cautious view of the current business environment.

While we are beginning to see more constructive spending patterns in North America, weakness in the Europe, Middle East and Africa region and ongoing foreign exchange headwinds continue to present a challenge. As we've noted many times, our Wireless business is lumpy and timing of operator spending can make forecasting challenging.

However, we remain confident in our global market position and our ability to respond to any business environment. We have a strong history of operational excellence and we'll continue our relentless focus on driving earnings and cash flow through profitable revenue, integration of BNS and through effective cost management.

We're currently in the early stages of developing our 2016 business outlook for the combined CommScope and BNS businesses, which we'll provide in our next earnings call. Despite the challenging business environment, we are pleased to report that the BNS acquisition remains on track.

With that, I'll turn the call over to Eddie to discuss BNS integration progress and thoughts on the quarter before the operator opens the call for Q&A.

Eddie?.

broadens our leading position across diverse and growing segments; significantly expands our platform for innovative solutions; and creates complementary market opportunities. Innovation and synergies teams are fully engaged across the company and making good progress.

Since the closing in late August, we have established business and sales executive leadership teams. We're developing new business organizations, initiating new market strategies, and executing on our three-year synergy plan. In the first month of ownership, we took actions that achieved several million dollars in annualized synergies.

We remain confident in our ability to achieve a $150 million in cost synergies over three years. As we have previously highlighted, we expect to incur integration and restructuring costs of $125 million to $175 million in order to achieve these synergies.

These costs will include charges by items such as severance, plant rationalizations and equipment moves, restructuring as well as short term overlap and duplication of G&A costs.

We're already adding to CommScope staff to handle transaction or transition issues and manage the combined business prior to coming off the transition service agreements or TSAs. We expect to incur the bulk of these costs during 2016.

We believe that the faster we can exit from the various TSA agreements, the faster we'll be able to drive long-term synergies. Overall, we have made solid progress in the two months following the close of the acquisition. We intend to provide quarterly updates of annualized synergies and a full update at our Analyst Day in mid-2016.

In summary, I would also like to thank the global CommScope team for their hard work and commitment to the BNS integration. We've accomplished much in the short period of time, but there is still a lot of work to be done.

Additionally, we are pleased with the continuous strength in our Enterprise business, which benefited from fiber growth in data centers and we are proud of our Broadband team, which again delivered year-over-year margin expansion. As we have noted many times, our quarter-to-quarter Wireless business can be lumpy.

However, we believe continued global investment in LTE coverage and capacity over licensed spectrum will remain a strategic initiative for wireless operators over the long term. As a result, we remain confident in our long term growth prospect.

In addition, the strong fiber connectivity portfolio that BNS brings to CommScope positions us to benefit from the global shift towards fiber in next-generation communication networks. Overall, we remain focused on positioning the company for long-term success, by delivering profitable growth while managing cost effectively.

Now, we'll be happy to answer all your questions. And I'll turn the call back over to Brent..

Thank you, sir. Your first question comes from the line of Vijay Bhagavath with Deutsche Bank. Please go ahead..

Yes. Thanks, guys. Yes. Hi, it's Vijay. I took on late coverage of CommScope from Brian Modoff, so looking forward to working with your team..

We as well..

Yes, hi. So, two questions if I may. One is, give us kind of an update on anything latest in terms of OpEx synergies. With the TE's BNS business you had stated $150 million prior and then we've anecdotally picked up plus $200 million potential for OpEx synergies. So I'd like to get your view. Thanks..

As I said earlier in my part of the narrative, we will update you on a quarterly basis, I think in some detail and re-gauge where we are in our analyst meeting early next year. We have made progress across the board.

We've had teams that have started as of the day of closing to work on OpEx, CapEx and every other sort of synergy, including revenue that can be imagined. So we're not going to get granular into those expenses today, but we will update you at our next quarterly call..

Yes, excellent. And then a quick follow-up on the wireless network upgrades, I mean we do acknowledge this has been an unusually weak year for wireless coverage capacity upgrades.

Heading into next year, what are the carriers telling you when you talk to them in terms of what might be the catalysts or the drivers for them to jumpstart or prestart network update activity, especially capacity upgrades heading into next year.

Would it just be as obvious as traffic growth, then having to catch up with traffic growth with capacity upgrades? Or would it be some other catalyst that would motivate them to do wireless upgrade activity? Wireless overall returning back to positive growth next year. Like to get your thoughts. Thanks..

I think as Mark said, we have seen some resurgence in North America in the last few weeks. It's been a slow period of time for the last several months, but we have started in the last few weeks to see some increased spending by some of the larger carriers.

This capacity or coverage is something that will continue and I think that at least I've seen some deterioration or service over the last few months, as the spending did slow down, not just from one but more than one carrier within North America. And so that's something that people are going to demand that they have this coverage everywhere.

We are seeing Mexico become more important in the I guess the North American area as the expansion has taken place there. And the coming spectrum auctions and the utilization of the spectrum that has been auctioned in the past year is going to be something that the carriers would want to get a return on.

So I think all of us taken as a whole will create demand for growth. The growth that we saw in 2014 was abnormal to what we normally see.

We prefer a more linear, if there is such a thing in the wireless business, a more linear growth pattern, but we do see a great future for this business, albeit lumpy and are happy with our position and our growing position in this market..

Thanks, Vijay. Brent, can we have the next question, please..

Your next question comes from the line of Jess Lupert with Wells Fargo Securities. Please go ahead..

Hi, guys. A question, but first a clarification.

Just in the Q4 guide, can you help us understand what the expectation is for the BNS business, so we can model that and get a better sense of how you're thinking about some of the other segments?.

Jess, now that we have BNS fully onboard and integrated into our results. When we give guidance, we typically have done that on a consolidated basis and we plan to continue to follow that protocol.

We will, as we've done here in the September quarter, break out the operating performance on an actuals basis, but we will guide on a combined company basis.

But one comment that I did make to clarify is that we only had one month, September, in our quarter results, and the 18% of adjusted operating margin that was a bit above what has been the historical performance here.

And because it's only one month, we would encourage from a modeling standpoint to think about that at least over the near-term back at its more historical range of the low teens, but they do have same type of seasonal performance or patterns that the legacy CommScope does; stronger in the second and third quarters, and then a bit softer in the fourth and first quarters..

That's helpful.

And then maybe just moving on to the Wireless business, given the decline we've seen in 2015 tracking for, it looks like a 20% or 25% down year, should we be expecting return to better than trend line growth in 2015? Do you expect some of the projects that have been pushed out to come back? And it sounds like you've seen a bit of a change internationally.

So we'd love to understand where the delta is coming from internationally, and if there is any change in your thought process as you look out towards 2016? How are you thinking about that international business relative to the overall Wireless business next year? Thanks..

I think there's two areas of expectation next year relative to Wireless. I think India has been very strong this year. We would expect that to get back to more normal spend rate. Europe has declined, I think, as Mark pointed out, from 28% growth for two quarters in succession to flat or to down in this quarter.

We believe that the need for growth in the LTE will drive European growth over a period of time. And we think that the recovery of spending in the wireless market should drive growth here in North America and other places. We are hurt by FX in the territories outside of the U.S. And so that will continue to impact us to some level.

But as far as where the numbers are for 2016, we are very early into that process and we'll talk about that as to what those numbers may be, but today is too soon I think..

And, Eddie, in the U.S.

would it be reasonable to assume the recovery would be more weighted towards the second half of the year?.

I think probably so. We're in the process now of some orders starting to come in that have some impact in Q1, but I would think as these guys do, their budget process is not finished on January 1.

It's finished sometime in late Q1 to early Q2, and the spending really doesn't start until that commitment is made for the engineering groups and all of that to go and do their deployment.

So I would anticipate that that would be weighted towards that area, and I think also in the spectrum builds as well what we're seeing in talking to our customers..

Thanks Jess.

Brett, can we have the next question please?.

Yes. Your next question comes from the line of Rod Hall with JPMorgan. Please go ahead..

Yes, hi. Thanks for taking my question. This is Ashwin on behalf of Rod. Can you give us more context around the asset impairment particularly on the microwave segment? I'm just wondering if there are any specific contracts or customers that triggered you to think that future operating results there will be lower..

Sure. Well, when we were taken private back in 2011, the accounting rules say that we'll book up goodwill and you kind of fill the glass to the brim and then you have forecasts that go out from that point. And we have various reporting units that hold goodwill within the Wireless segment. You saw us last year do a very modest impairment there.

It was about $7 million in the year ago period, and so we test our goodwill or look for indicators each quarter, and in our microwave business their future projections were below the line that we had utilized back in the 2011 period.

And so it's simply for that factor, it's not a loss of a customer contract or we wouldn't point to any particular geographic region. It's simply following U.S. GAAP rules that talk about what indicators of impairment are, and given that our microwave business has softened its outlook, that was cause for us to go back and revisit that..

Okay, thanks. If I may ask one more question.

On the Q4 outlook, how should we think about growth in different segments? Do you expect Enterprise to continue to grow and the rest of the segments decline or any change in thinking there?.

No, we expect the continuation of growth. We've had seven consecutive quarters now of growth in the Enterprise business. Fiber has been a nice component of that and we anticipate that Enterprise will continue it's – it's been low- to mid-single digit type growth, but we expect that pattern to continue going forward..

Thanks..

Thank you..

Your next question comes from the line of George Notter with Jefferies. Please go ahead..

Hey, guys. Thanks very much. I guess I wanted to ask about the BNS business. If I go through the 10-Q filing and I look at your last 12 months result and I net that against to what you showed us on the quarter, I guess it looks like BNS was really quite light relative to what we were certainly thinking.

What's going on there since you guys acquired the business? It feels like it's deteriorated to some degree and I'd love to get a better sense for kind of the bigger picture of BNS? And then the operating margins, the 18%, I think you said they're going to be low teens.

Do you feel consistent about where the profitability in that business is looking forward? Thanks..

Yes. I'll start with your last question first, George. If you went back, we have filed in 8-Ks over the past nine months, 12 months or so what the operating performance of the BNS business has been, and they have done consistently in the low-teens, anywhere between 12% and 14%.

And so that's what we would encourage folks to think about, at least in the immediate near-term periods. The September month was a one-month, we would call it, an anomaly. It's in there for a portion of the quarter, but not indicative of a run rate type business.

And then if I went back to the first part of your question, Wireless is embedded in the BNS results. So that's a component of that $141 million. Over time, as these businesses are integrated, we would expect to see that shift and the Wireless component of the business will move into the traditional CommScope Wireless segment.

And then again just speaking broadly across the BNS businesses, FX is a much more meaningful component. The traditional CommScope businesses, we sell 70% to 75% of our revenue in U.S. dollars. It's below 50% in the BNS businesses. And so they are more exposed to and impacted by foreign currency rate changes..

Got it. That's helpful. Thank you..

Your next question comes from the line of Shawn Harrison with Longbow Research. Please go ahead..

Hi. Good morning.

Can you hear me?.

Yes..

Okay. I wanted to talk on BNS as well. I've got two aspects to the story.

Just in terms of how we think the synergies will roll on in 2016, be it front-half weighted, back-half weighted, any elaboration there? And then second, just cash flow of the combined company, as we look ahead, what is kind of a run rate cash flow basis for the combined entity and how quickly will you use that to reduce debt?.

I don't know Eddie, if you want to talk to the synergies....

I think the synergies is you would probably see more action in the latter part of the year. I think we've set the first year at $50 million and we feel very comfortable at that target for the year. We've gotten a good start so far. But these things are not immediate, generally, and they do take some time to roll out.

Our teams are working very hard across all disciplines, sales and operations, to get as much done within this current fiscal year as we can to start next year with a good start. So those things are happening, but you will see acceleration over the period certainly starting now..

And, Shawn, to your question on sources, uses of cash, we do plan to use, our estimate, between $125 million and $175 million of cash to fully consummate those synergies. Most of that we expect will fall into 2016. We continue to expect north of $500 million per year in free cash flow beginning in 2017.

And given that we have $600 million of cash on the balance sheet currently, we do expect to begin a pattern of debt repayment within the next few quarters..

Thank you..

Your next question comes from the line of Simon Leopold with Raymond James. Please go ahead..

Hi, guys. This is Victor Chiu in for Simon. I just wanted to follow up of George's question, a bit on the BNS performance. It was a bit lower than we were expecting.

So, I just wanted to see if you could maybe just elaborate if that was a reflection of – just the overall environment being softer or were there specific issues that occurred? And how that was relative to your expectations, maybe, I don't know, were there any revenue overlap? Is there any revenue dyssynergy between the segments that had any impact on the results?.

Well, in revenue dyssynergies, I think the BNS folks feel that during the latter parts of the consummation of the transaction that people talked to us or others more than they talked to them and that could have had some impact.

I think the impact of copper in the – not pricing but copper in the enterprise declining at a faster pace within the BNS business than it did within CommScope, I think that impacted their business somewhat. But, we're seeing nothing that gives us pause as to doing the transaction.

This is a great team of people and intellectual property that's going to take CommScope to the next level. And so, I think what you've seen or maybe observed is the short term phenomena that we will see fiber expand in the marketplace and we now are a key player in that market. So, very excited about what we have..

And again, Victor, I would just point out is that, if you're looking at the month of September, the $141 million, that that has not been indicative run rate annualized type top line number necessarily. And that foreign exchange has had a high single-digit impact on revenue year-over-year in this business..

Okay.

So, barring the macro issues, the segment kind of performed relatively in line with what you were looking for?.

Yes, they were. And the outlook is as well..

Thank you..

Your next question comes from the line of Kulbinder Garcha with Credit Suisse. Please go ahead..

Thanks. And I've a question I guess for Eddie. On the Wireless business, I guess over the last year, let's say, the assets decline probably hasn't surprised you that much, maybe the magnitude of the decline feels like it has.

So when you look back over the last 12 months, what do you think has been underestimated on CommScope's part and in terms of what makes it slightly bit different from previous ones. And then given where we're at today, are we close to a trough level of revenues.

When I think about on the Wireless business, I think about you're seeing some activity in the U.S. We have some visibility it sounds like in emerging markets and next year I would have thought the spectrum build out – the build out in North America into spectrum would be a positive for you guys as well.

I don't see – and the base of revenues is quite low. So what are the negative or the cautious factors that we wouldn't see next year, returning to some sort of reasonable growth rate. What should we be thinking about at least in asking for guidance more in terms of the plus and the minuses as we think going into next year? Many thanks..

Yeah. My opinion is that 2014 is the anomaly. We saw spending that was abnormal here in North America with a large customer; that has adjusted. The other way is they've reconciled their need. I think they're doing prudent things to manage their business.

We think our position in the market if anything has strengthened, certainly in the developed countries, and so we're not at all hesitant about where this market is going.

We've made investments in alternate technology that outside of BNS, that I have talked about personally over a long period of time as to when small cells, it was more determined as to what that was going to be, we would enter that market and probably not organically, and I think that's what we've done there.

So, I think we've taken the right steps to address the market. We do not create demand in this market, we respond to it. We have great relationships and positions with each of the customers here in North America as well as the rest of the world.

So, that's a market that has been lumpy and you can't find a straight line hardly anywhere in any of the businesses within the wireless business. So, we have to address that, that's something that we've done over decades, not just when it's been part of CommScope, but earlier. And in my experience at other places, it's been the same there.

So, it's just the market that we have to work hard and stay abreast of and make sure our factories operationally can adjust to both the ups and the downs..

Your next question comes from the line of Steven Fox with Cross Research. Please go ahead..

Thanks. Good morning.

Can you hear me, okay?.

Yes..

Okay. Just talking about your fiber portfolio a little bit, it looks like it's contributed more to recent growth and also obviously the BNS deal is going to contribute more going forward.

Eddie, can you maybe just talk big picture on the near-term drivers for fiber, why is currently doing better? And then as we look out into the next year, any specifics around where you think that demand will come from, application and region would be helpful? Thanks..

Hey, thanks, Steve. We think in fiber that we outgrew what we've been able to hear from the market. We're very pleased both from the BNS standpoint, as well as the CommScope standpoint now as one. So, we're happy with what we see there.

I think the big growth drivers are going to be continuing the datacenter growth in fiber as well as the FTTx that we get solely from the BNS acquisition. So, we go from being a small player in the, I guess, the hyper scales to a major player and on par with others.

And so, we're excited about what that's going to bring, I think it's going to change the whole outlook of how we look at our business, and the technologies and technologists that we're gaining with this to go along with the very skilled people within the former CommScope are going to make us a more wonderful player in this marketplace..

Your final question comes from the line of Tim Quillin with Stephens. Please go ahead..

Hey, good morning.

Just housekeeping question and a little bit more substantive question, but Mark, could you just tell us how you plan to do segment reporting over the next few quarters, how long are you going to breakout BNS separately and when in the future will you start including the BNS numbers and the other segments' results?.

Sure. Well, as you know, Tim, the kind of the golden rule around segment reporting is through the eyes of management. And so, that's how we've reported it here in the third quarter and we will report it as a standalone segment in the fourth quarter.

My expectations are that come the beginning of the year that the Wireless business of BNS will be now fully integrated into the legacy CommScope Wireless business which would make of course natural sense. And so that you will see that shift effective in the first quarter as far as BNS is concerned.

And then moving forward, as the integration plans unfold, we may need to adapt our segment reporting to make sure that it stays in line with organization changes and we continue to report through the eyes of management..

Okay. Fair enough.

And then Eddie, as you think about the North American wireless service providers and their CapEx plans and their need for network densification, it creates a somewhat complex technical outlook for them and so there is a lot of different ways that they can go about their network densification, but I'm just wondering as you look at just North America and especially the U.S.

and think about your business, where do you think you're going to grow faster in terms of macro, metro, DAS, small cells now and then Wi-Fi if you're contemplating some kind of move into Wi-Fi? Thank you..

I think, Tim, the benefit we have is that we play in each of those areas.

And so we're somewhat indifferent as to where it comes, but I think you're going to have – according to what people say, you're going to have fewer macro sites, but you're going to have metro and small cell and continuing that size where you want to have new proposed or multicarrier applications.

The benefit we have is that we now are a player in the small cell as well as DAS, so we can migrate us that chain wherever we need to, anywhere from a femto, pico to a full-fledged multichannel capability in the smaller environment.

We have new products coming out in street furniture, poles and platforms for smaller cell environments for more of a metro cell environment.

So, we sell very similar products outside of DAS in small cell for both metro and macro sites, some are just smaller than their bigger brothers, but we're comfortable in all those areas and a bit indifferent as to where it comes from..

Okay. Thank you very much..

Thank you. I'd now like to turn the call back over to Eddie Edwards for closing remarks..

Okay, Brent. Thanks very much. And thank each of you for being on the call today. We appreciate your continued interest in CommScope. We're very comfortable with the global market position that we have, our ability to respond to the business environment, whether it be good or bad.

We remain totally focused upon driving earnings and cash flow through profitable sales. The integration of BNS, we've talked about is going well, and we're extremely happy at having that cost manageable continue to be a total priority of what CommScope is. So, we look forward to the next quarter. We look forward to talking to you again next year.

So, thanks very much..

Thank you. This concludes today's conference call. You may now disconnect..