CommScope Holding Company Inc (COMM) 2007 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the CommScope First Quarter Earnings Conference Call.

[OPERATOR INSTRUCTIONS.]

I would now like to turn the conference over to Mr. Phil Armstrong, Vice President, Investor Relations. Please go ahead, sir.

Thank you.

Good afternoon, and thank you for joining us on this call. Frank Drendel, CommScope's Chairman and Chief Executive Officer, Brian Garrett, CommScope's President and Chief Operating Officer, and Jearld Leonhardt, CommScope's Chief Financial Officer join me on the call.

During this conference call we may make forward-looking statements regarding our financial position, plans, potential acquisitions and outlooks 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.

For a more detailed description of factors that the could cause such a difference, please see the press release we issued today and 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. Also, please note that all dollar figures and percentages are approximations. After we review first quarter results and Frank makes some closing comments, we'll open the lines up for questions.

Jearld?

Thank you, Phil.

Today, CommScope announced first quarter results for the period ended March 31, 2007. The company reported record first quarter sales of $435 million and net income of $46 million, or $0.63 per diluted share.

Sales first quarter of 2007 increased 24% year-over-year primarily due to increased global sales volume and price increases implemented during 2006. We achieved solid sales growth in every business segment, and are optimistic about our outlook.

Enterprise sales rose 17% year-over-year to $201 million primarily due to the higher sales volume price increases implemented in 2006 in response to higher raw material costs, and the continued success of new products, like the innovative iPatch real-time infrastructure management system. Enterprise sales growth was strong both year-over-year in the European and North American regions.

We're continuing to see the same global trends in the enterprise market that drove strong 2006 enterprise performance. These trends include ongoing investment in information technology, new bandwidth-intensive applications, and data center consolidation. Large multinational companies are placing great demands on their communication networks. We provide these customers with cutting-edge solutions that are part of the essential fabric for higher bandwidth networks.

We believe we have expanded our market position with these global customers, and we see ongoing opportunity as they expand in emerging markets, build data centers and shift towards IP-everywhere business models.

Broadband sales rose to $148 million, up 18% year-over-year primarily due to price increases implemented in the first half of 2006 that were in response to higher raw material costs, higher sales volume, and the positive impact of product line acquisition that was completed in March 2006. Broadband sales grew as cable operators invested in their networks to support the triple play of video, data and voice services. Broadband sales growth was strongest year-over-year in Latin America and North America regions.

We experienced an unusually strong start to the year and are particularly pleased with the operating margin in the broadband segment, which has improved. With the ongoing fierce competition and convergence of services between telephone companies and cable television operators, we believe that the current business environment remains positive for our broadband segments.

During the first quarter we also announced a definitive agreement to acquire substantially all the assets and assume certain liabilities of Signal Vision, Incorporated, a leading supplier of broadband and radio frequency subscriber products. Signal Vision's product lines include passes, indoor amplifiers and addressable [taps]. The transaction, which is subject to customary closing conditions, is expected to close in the second quarter of 2007.

Carrier sales increased 59% year-over-year to $87 million. The outstanding year-over-year and sequential growth is primarily due to a significant increase in activity as large domestic wireline carriers deploy broadband services to their customers. We remain very excited about what could continue to be a significant multi-year opportunity.

While overall wireless sales declined year-over-year due to slower capital spending by domestic wireless carriers, we continue to make excellent progress with our broad line of aluminum cable products for the wireless industry. Shipments of our Extremeflex (inaudible) aluminum cable products have more than doubled year-over-year.

Some key advantages of the Extremeflex aluminum solution include improved flexibility, lighter tower load and lower lifecycle costs. Extremeflex aluminum products have been accepted by major domestic carriers, as well as international carriers in every major region of the world.

We also recently introduced a new line of universal connectors and tools for the wireless transmission systems. CommScope's EasyFit series connectors and tools are engineered to fit both smooth wall and traditional corrugated cables, while providing lower connector insertion loss and improved return loss.

In the first quarter of 2007 total international sales rose 19% year-over-year to $128 million, or approximately 29% of total company sales. European and Latin American region showed particularly strong year-over-year growth. Overall, external orders booked in the first quarter of 2007 were $460 million, up 15% from the year-ago quarter. The book-to-bill ratio for the quarter was 1.06 times.

Gross margin for the first quarter of 2007 was 30%, up more than 600 basis points year-over-year. The gross margin improvements were primarily due to higher sales volume, favorable mix and the positive impact of operating efficiencies resulting from the company's global manufacturing initiatives.

SG&A for the first quarter of 2007 was $60 million, or 14% of sales compared to $54 million, or 15% of sales in the year-ago quarter. SG&A expense declined as a percentage of sales primarily due to higher sales levels.

Research and development cost was $8 million for the quarter, or 2% of sales. CommScope continues to invest in new solutions and ideas to better address the communication infrastructure needs of our customers.

Operating income for the first quarter of 2007 more than doubled to $64 million, or 14.6% of sales. In the year-ago quarter, operating income was $19 million, or 5.5% of sales. Excluding restructuring costs, operating income, and the year-ago quarter would have been $23 million, or 6.6% of sales.

Now I'll turn to cash flow and balance sheet items. Net cash provided by operating activities in the first quarter of 2007 was $11 million compared to a net use of cash of $18 million in the year-ago quarter. Strong sequential sales utilized additional working capital in the quarter, but strong earnings funded this increase and helped generate positive operating cash flow for the quarter, which is typically a period when there is a net use of cash.

Total depreciation and amortization expense was $12 million, and capital spending was $4 million for the first quarter of 2007. CommScope received proceeds from the exercise of stock options of $19 million during the quarter. At March 31, 2007, long-term debt, including current maturities, declined to $281 million and was 26% of capital structure. CommScope ended the quarter with $460 million in cash, cash equivalents and short-term investments.

We have decided to redeem the outstanding $10.8 million of Alabama industrial development notes since we have closed our manufacturing facility in Alabama. These notes will be redeemed in the second quarter.

Looking ahead, we expect strong second quarter performance. We expect second quarter sales of around $490 to $510 million and operating margin of 14.5% to 15.5%, excluding any special items. This represents a sales increase of roughly 19% to 23% year-over-year, and a substantial increase in expected operating margin year-over-year.

We are also updating our calendar year 2007 guidance due to the continued strong demand across all business segments. We anticipate calendar year 2007 sales of $1.84 to $1.89 billion and operating margin of 13.5% to 14.5%, excluding any special items. This represents a sales increase of roughly 13% to 16% year-over-year. A significant increase in operating margin is also expected year-over-year particularly in the first half of 2007.

We expect operating margin in the second half of 2007 to be lower than the first half of the year primarily due to increasing raw material and other costs, as well as the cautious view of the historical volatile carrier [sect]. Overall, for calendar year 2007, we expect an effective tax rate in the 30 to 34% range.

In summary, we // with a strong start in our 2007 financial performance, but with our improved calendar year outlook, as well. Business conditions are currently favorable, and operating performance is solid. We believe we can deliver another year of very strong earnings growth.

Thank you, and now I'll turn it over to Frank for his comments.

Thank you, Jearld.

First of all, I'd like to thank all of our worldwide employees for the outstanding Flex manufacturing effort they did put out to deliver these strong results. In addition to that, I want to thank them for the continuing number one position in the world, and our number one position in all of our operating segments. And then, a special thank you to all the guys that have been with me for 30 years. CommScope made the Fortune 1000 once this year, and it's a big moment for us that have been here for 30 years building this company.

So, with that, I'll turn it over to the operator and we'll open it up with questions (inaudible). Operator?

Thank you. [OPERATOR INSTRUCTIONS.]

Marcus Kupferschmidt of Lehman Brothers.

I'd love to clarify, could you talk about in the quarter in terms of the growth, how much of that came from pricing increases versus volume and mix? And then, I have a follow-up.

Marcus, you're breaking up a little. Did you say you would like an analysis of the pricing versus the volume? Any particular segment?

Well, if you could start with the business, and if you could break it by segment, that's great, in terms of the year-over-year growth broken down by the pricing increases versus the volume-mix improvement.

Marcus? Brian. I'll give you the pieces here. Roughly speaking, in the broadband segment, about 60% of the increase was price, maybe 40% in volume. When you look at the enterprise segment, it's the flip of that, so it'd be 60% volume mix and 40% pricing. And then, when you look at the carrier space, the entirety of it will be volume.

Overall, 50-50, 60-40, somewhere in that category.

Super. And I guess could you talk about, looking over the course of the year, we talked about you've got to remain cautious on the carrier side. Do you see, year-over-year, the kind of growth you're seeing in the enterprise? Do you expect that to decelerate over the course of the year, and how do you think about what's going on now versus over the year?

Well, in the enterprise space, there will be continued strength throughout the year. Obviously, the guidance for the second quarter in enterprise, all the businesses will contribute to that guided growth in the second quarter, and will remain strong for the year. The expectations for the carrier space are strong as well. And it's just that we lose visibility after about a quarter in the carrier space, and we need to remain conservative.

Marcus, the good news is is that AT&T reported, and they're showing real strong connectivity in the program that they're delivering.

Ken Muth of Robert Baird.

On the order side, just noticing that book-to-bill clearly above one again, just kind of then the year-over-year though last year, which was again a strong year you had, you were at 1.3 book-to-bill. And then your orders kind of peaked in Q2 and then kind of were down from there. Again, all high numbers and hard comparisons, but is that kind of what you see trending this year as well and why you're maybe a little bit cautious, or is there something else?

Ken, we rarely think in terms -- I think we've talked to this in the past -- rarely think in terms of book-to-bill. Traditionally and by design, the business should be one-to-one. We don't like backlog. We rarely work on backlog.

In your analysis, what was extraordinary was last year. And if you recall, (1) we had copper commodities rising quickly, so there was a run on demand, if you will, in the first and second quarter. The other thing that happened is we were relocating the Omaha facility, and global capacities actually took a dip in that period.

So, as a result of those two, we grew backlog first and second quarter, and then we unwound it all in what was an extraordinary third quarter last year, if you recall. So, going forward, for all practical purposes in all of these segments, book-to-bill should remain very close to one.

But taking that one step further, I think if you look at the performance that our manufacturing facilities did in this quarter, it shows you our ability to run to the customers' requirements without having to depend on long backlogs.

And then at the Analyst Day, you guys were showing some new cabinets for fiber to the premise at AT&T. Is that something that will be starting to ramp later this year, or is that something that's ongoing now where AT&T is pushing those cabinets, or where do those cabinets set?

The cabinets you saw are a substantial part of our growth. They are a big part of our business, represent the biggest part of our carrier business today. They are being deployed by AT&T, and will remain strong for the remainder of the year.

But specifically, the fiber to the premise cabinets or those are the fiber to the node cabinets?

Oh, fiber to the node. Fiber to the premise, there are not large expectations in our forecast for that product.

OK. And then last question I had, could you just give us the update on the iPatch? I mean, it sounds a little bit like there's traction there. Could you just elaborate a little bit more?

Yes. It's been extraordinary for us. And as you'll recall, it's for both copper and Fiberoptic cable management at the patch panel. It has been broadly accepted. Growth is 2X year-over-year, and the exciting part about this capability, it is bringing us to accounts and differentiating us in accounts that, otherwise, we wouldn't be able to. So, it's been a big part of our success. It's an area that we're investing substantially in in R&D, as we have for the last year and a half, and we'll continue to.

Alan Bezoza of Oppenheimer.

One question I have is you look out over your business and kind of what people have been speculating on the big-picture macro fundamentals in the enterprise space. Are we at the point where you think that we're at a cycle here, and that the guys have gone through Y2K, haven't really spent much on the enterprise, and now have really begun to refocus and re-spend on that area?

Alan, I think it's the front end of a cycle. And we talk about what's happening in data centers, and I think you're current about that. It's all about globalization and the need to physically consolidate not only control but the human resources involved with data centers and data management.

And then, to your point about Y2K, certainly anything that was built in that era, the bandwidth is all but obsolete.

Alan, take it another step. If you look, even today's Wall Street Journal put out that, in fact, Sun and IBM have both introduced super-servers for video. And if you think about Y2K, there were no applications to speak [of for] video.

Now, all of these networks are looking at substantial video capacity. It's an entirely different environment that existed 10 years ago.

And one question on the cost side. When you look at the copper prices -- and I don't want to get too focused on short-term spot prices -- but what's the lag, would you say, between when you are impacted and what we see pricing today? In other words, some of the operating margin expansion that you've seen, is it related to some of the things we saw six months ago?

Sure. We said that, [what] copper was running, it'd be running into the wind for us, which it was. Even though we were expanding margins, it was difficult. And so, we benefited substantially in the first quarter with sequentially lower copper costs.

Alan, I think in copper particularly, there's probably a 30 to 90-day lag in terms of what's going on. We buy our coppers based on average cost for a given month, and so we're not buying on one particular spike. And we may have forward positions for very brief periods, out 30, 60 days. It helps smooth that, too. So, I would say in the 30 to 90-day sort of window.

And my last question is, so you've moved on capacity quite a bit, expanded some capacity in other regions, like China. Next year, if you're looking at some kind of number this year of 15% growth, and next year let's say 8 to 10% to be more conservative, are those numbers that you can achieve, given your current capacity?

The answer is yes. There will always be minor adjustments in capacity in various regions, but there's certainly no need for construction of new facilities. It's all part of the year-over-year cost reduction programs. I mean, part of the productivity gains come through speed increases and capacity, just through improved productivity. So, while there's no expectations, even in this high growth environment, for large capacity requirements moving forward.

And I think we've been very public. Our capital expenditure program is in the $30 million to $35 million range, way below [D&A]. So, we have proven that we can deliver the customer's need with zero backlog in this company, and the customers come to us, and we can deliver these kind of shipments of sales and earnings. We have a position in this market that is totally unique to others, given the speed and the velocity we can deliver these products.

George Notter of Jeffries.

The carrier business, a few questions there. I guess I was curious about the situation competitively. Are you seeing Emerson or others on the cabinet side? Is there some likelihood that those guys can get into AT&T at some point this year? And when do you expect to see that?

George, absolutely. I think that was pretty visible last year. Is our expectation that they'll be coming into the traditional AT&T? Of course, Emerson has always played a big part of the traditional Bellsouth business, and will remain there. And so, we'll all have a piece of that pie.

OK. Is it fair to say that they're not yet involved in Project Lightspeed, or are you seeing them today shipping into Lightspeed?

To date they've had a very, very small participation, and it will be growing throughout the remainder of this year.

And then on Qwest, it seems as if they've completed an RFP for a fiber to the node initiative. Can you give us a sense for what your participation might be there?

Well, it's a little early for that. There's Is that need to be dotted. But, our expectation is that we will participate substantially in that.

Any sense for timing? Would that be a 2008 event?

Probably can't talk about it, George.

Daryl Armstrong of CitiGroup.

This is Luke Li on behalf of Daryl Armstrong. If I look at the midpoint of the 2Q guidance and the full year guidance, it looks like the sales is a little bit front-end loaded if you compare last few years. Like, first half actually is a little light. We're a little light. So, can you give us some explanation why is the case?

Sure, Luke, and hello. We're raising guidance pretty substantially for the full year, obviously about 200 basis points in operating margin, or a little [look] in that range from our earlier guidance. When we pre-announced the March results, or pre-announced in March, I should say, we didn't have an update for the full year at that time.

We've been analyzing our results and, as we said, we see some higher raw material cost, and we remain cautious about our carrier segment, particularly in the second half of the year. The second quarter should be very strong, as indicated by our guidance, so we feel very good about the year overall and all periods improving over previous expectations

Maybe I can take a little cut at this. In the last 24 hours, 48 hours, you had Comcast report, you've had AT&T report, and everyone is gaining subscribers. So, someone is losing out there, and it's probably the DBS guys.

So, what's happening is you continue to have this demand pull-push situation that exists with subscriber growth that is allowing us to look forward into these businesses for additional mechanical growth and connectivity growth. Now, how long does that last? Hopefully forever, but it is very strong in this first quarter.

Simon Leopold of Morgan Keegan.

If we could get a little bit of a sense for your full year, how you're looking at the growth rates by your segment and how you see essentially the proportion of your business, your mix for the full year. Any kind of granularity you can give us around your assumptions?

If I understand the question, the mix for the full year?

Well, I think we said we were cautious somewhat about the carrier segment in the second half of the year. And so, in these estimates that we've provided for the full year, that would probably be less, or is less in our guidance than the first half of the year relative to revenue out of the carrier segment.

Other areas should continue to gather strength second and third quarter of this year, and post strength for the full year.

And I think we also have the advantage in broadband. Although it's small, it's a very profitable business, and the acquisition, which we will close this quarter in Signal Vision. So, we continue to tie on acquisitions, to tie on adjacent product lines to help build the three segments that we operate in.

Now, I think if we go back to your analyst meeting, you gave us some granularity of growth rates. You ranked them, I think carrier being the fastest grower, enterprise the second fastest, followed by broadband. And I think at that point you suggested broadband would not be a double-digit grower. At this point it looks like everything's a doubled-digit grower.

That's correct.

Could you update us maybe a little bit more detail, specifically enterprise broadband? Are we looking at something in the low teens as a growth rate over '06?

Yes. We obviously don't provide that sort of guidance routinely in terms of our segment, but for full year, we're talking about a 13% to 16% overall growth rate for the company. And as Brian said, all of those should be growing in double digits for the year.

Brian Coyne of Friedman Billings.

Just two things. First, on your broadband business, you guys had a nice result. Of course, Frank, as you mentioned, Comcast reported what looked at least to me like relatively strong CapEx number vis--vis their annual guidance. Did you guys see any direct impact from this? Was there any particular correlation?

There was a direct correlation across the entire industry. Everyone was up, with the exception of Cox, and they were basically flat year-over-year. But, all the operators were up. You finally got some real lift from Comcast and Time Warner in the Adelphia properties.

So, I think, given the results that the cable industry is having, and the triple -- and now coming the quad play with Sprint in the wireless addition of that, and also given the strength that AT&T reported, it looks like the loser in this race for the time being is the DBS guys, because obviously this growth is coming from new connects, and somebody has to be losing out there if you just do the macro math. So, we're seeing the best set of conditions we've seen in many years for these two industries.

Yes. The other thing I might say, Brian, you think about some of the big metropolitan markets for any of the MSOs, and you have a tendency to think of that market in terms of their infrastructure as being uniform, and they're really not, often. Pieces of that city may have been acquisitions in the past and may not be of the same robustness as their current specifications for plant. So, what you do is you have the MSOs -- they're investing in their infrastructure, trying to unify it and upgrade capability uniformly across each market. And the result of that -- for service reasons -- and the result of that is this growth that we're seeing, particularly in North America broadband business.

One additional thing, Brian, in broadband. Our outlook in that area does include expectations for revenues for Signal Vision, which we hope to close in this quarter, and could add a couple percent or so for the full year, several percent for the full year, but will only be in our numbers for hopefully a little over half a year here.

On the wireless business within your carrier segment, you said it dipped a little bit on lower spending. But as you take a step back, where do you think that can go over the next 12 months? Within that group, do you think that also grows double digits?

And then, I guess, again to just take a step back, which do you see is the bigger driver for that business over time, the aluminum substitution impact or the 3G upgrades?

3G is largely North American, and we're kind of -- with the exception of Sprint, pretty cautious about any expansion in the North American market in the second half.

We still see that as a consolidating business with a lot of prospect on what's going to happen with Wi-Fi, Clear Wire, Sprint's additional incentives. So, we're being very cautious on the wireless piece.

The other element of your question, can't fully quantify it for you at the moment, but we are having extraordinary response to our aluminum offering. And today, 50% of our sales have converted to aluminum.

The other thing that's happening as a result of that is emerging markets for us in Asia and parts of South America that we've been just prospecting over the last year and a half that responded very well to this product design and offering, and I think will be a growth opportunity for us, a substantial growth opportunity for us, in the second half.

Glen Anderson of CIBC World Markets.

Two questions. First, with regard to your cash balance, $460 million cash, that's quite a bit of cash. What is your thought with regards to how to put that to work? Has anything changed with respect to your strategy around M&A? And if so, where would you focus that effort?

And the second question is, in your cabinet business, my understanding is much of those sales go to AT&T. Has there been some diversification way from that specific customer in that business? Thanks.

Thanks, Glen. I'll answer the cash question. Again, we have not changed our outlook in terms of our strategic needs for our funding. We were very pleased with the cash performance in the quarter. As I said, the first quarter is typically a net use of cash, but we actually generate positive operating cash flow in the first quarter. A modest amount, $10 million, but it was good cash flow for the period. And that is our principal source of liquidity currently, and so we intend to use that for our strategic purposes.

We talked about an $11 million debt retirement that we expect to occur in the second quarter with some outstanding bonds, and also the Signal Vision acquisition, we'll need to fund that. And we are looking obviously at other acquisition opportunities that we would use those resources to fund when we find them.

I'll add to that. We currently have under review at least 10 to 15 very active opportunities for us. So, obviously we're very patient and we're very disciplined in what we acquire, but we will continue to look at those. If none of those turn out to be the right bolt for the company, then we would obviously look at doing something else with those assets.

Is there any particular area of the business where you are emphasizing that?

Excellent question. We are so fortunate that every one of our segments is number one in the world. So, we are allowing those general managers to bring forward to us opportunities in each of those segments. So, I couldn't say that we're leaning more to enterprise or to broadband or to carrier. It just depends on which one happens to hit the table at that particular time. All of them have some very interesting add-ons to our channel. Our channel is very unique and very strong into these markets.

On the fiber to the node question, there are diversification activities. I think you mentioned diversification specifically away from AT&T. there was some discussion earlier about Qwest interest. There are activities going on in the wireless industry in North America, which would be a diversification. But, AT&T is such a large footprint of North American. They'll always be a big, big piece of that business.

Is there an opportunity for international diversification?

Certainly there's opportunity. It's not the immediate focus right now. I think our perspective is that there's greener pastures here in North America for that business right now.

[OPERATOR INSTRUCTIONS.]

Jeff Beach of Stifel Nicolaus.

Two questions. The main one, just probably in my perspective, the most impressive SG&A performance in years, below last year's level. What's happening within SG&A to control this level of spending so much?

I think from a year ago, Jeff, I think we were actually up $60 million versus $54 million. I think we were up about 10%. But, our revenue has been growing faster than SG&A, and that's part of the efficiency that we would expect to get from that environment. We do expect to have higher costs as we move through the year in SG&A. That's part of our guidance as we invest particularly in sales and marketing areas to continue the revenue momentum that we have.

Jeff, I will tell you that Brian and I have reviewed these plans in detail, and it is a lot of (inaudible). We are going to add to the sales force in depth around the world to continue to build on this channel. We are performing so well that we have some of the most prime applicants from other companies coming to us wanting to come to work. So, we're going to take advantage of this opening and adding the sales.

OK. and I was referring to the SG&A being lower than the last couple of quarters. I thought it was a good performance.

Yes. It was lower than the fourth quarter for us.

The other question I have is, within your wireless business, can you give us any kind of a general sense as to the sales base of Extremeflex, if it's doubling? Is it getting to a size where it's important?

I think I said it was half of our sales in the first quarter of this year. And if you looked at the metric for what we produced in the quarter, it would be substantially higher than that, Jeff.

Eric Buck of Brean Murray.

A couple of questions. First, just on the enterprise business, the last several years you've had some seasonality in the fourth quarter. I assume there's no reason to believe it would be any different than that this year, or are there things happening there?

That's a good assumption.

OK. And then, within enterprise, can you talk about the migration from kind of CAT5 focus to CAT6 focus, where we are in that process?

Well, into CAT6 I would say we're well into it. I would consider that certainly a maturing part of the industry. From our perspective, Eric, CAT5E and CAT5 are all but obsolete, and these are the networks that are being displaced or pulled out at present. So, the market for any business or industry of scale is literally CAT6, this one-gigabit space. The emerging part is the CAT6A at 10G, and we're talking about that being 5% to 10% of our sales at present, year-over-year growing substantially, and it will become an increasing part of our business over the next couple years.

OK. And if you looked at the installed base out there, what's your guess of what has already been converted to at least 6?

To CAT6? I would say a very small percentage. I couldn't give you a number, Eric, because I literally don't know.

And then, finally, can you kind of update us on where you are in the efficiencies initiatives that you had? You had some left over in terms of savings to be realized this year. Are we now through that, and are there additional initiatives coming?

Well, there's always new initiatives every year that can constitute 50 to 75 projects per year. We have announced nothing of the scale that we did in '06 and '05, but as they're related to those specific projects, the big global manufacturing initiative, it concluded, from a physical standpoint or a financial standpoint, this quarter.

Part of that project was new technologies in manufacturing. Those technologies aren't mature. They'll continue to improve, and so we'll continue to see productivity improvement as we move throughout the year.

Kevin Sarsany of Next Generation.

I guess it's follow-up. I was going to ask it a different way, but a follow up to that last question is you were talking $20 million savings from the restructuring in 2006, an additional $20 million in 2007. Have you gotten all that $20 million in Q1?

Yes, Kevin. This is Jearld Leonhardt. Yes, I think as Brian said, from the first quarter after our announcement, I think we've been getting some benefits from these restructuring initiatives. The spending was spread out over, I don't know what, 18 months or something like that, that it took us, and the first quarter should end that spending, for all intents and purposes.

But, the benefits have been growing I think throughout the period, and [yes,] that's in the first quarter we should have seen the entirety of the expected benefits that we had announced and planned on getting. And to Brian's point, some of the things that were not in our guidance and that may still lay it -- [fly] ahead in terms of improved efficiencies as these processes mature.

I think you have to put it in two buckets. There was a restructuring charge, a global restructuring of manufacturing. Plants all over the world were re-planted and put into position [forwards], but there's a constant PIP program that Brian runs, profit improvement program, that literally depends on working through new designs, new product application, and that's very substantial to CommScope, and it has been for the past 25 years.

OK. But the carrier volatility, is that something you're seeing in their order pattern, or is it just based on historic -- we saw it in the fourth quarter. You guys were dead-on when you gave guidance.

Actually, we have excellent visibility in that segment for a quarter out. And so, I can tell you we feel very good about the second quarter. I would say we have moderate to good visibility into the third quarter. And I'm just saying that industry and the deployment of new technology just over 30 years, Kevin, it's subject to abrupt changes. And so, with very little insight into the fourth quarter, really all that we're saying is we're taking a conservative position.

And just on the wireless, the 50% of your aluminum product, that comes at a lower price, so that pretty heavy growth in the carrier year-over-year, it's probably even a little more impressive given that the aluminum product comes at a lower price. Is that correct?

Well, remember, the carrier numbers are a combination of our integrated cabinet business and the wireless business.

Right. I think about 12% is the fiber to the node, DSL, and the rest is wireless. And if half of the wireless is now being placed out there at a lower price, the overall carrier business is probably even better in volume terms than the number you put up.

Well, the cabinet piece is where we're talking about volatility and where the biggest strength has been, Kevin. So, that's the larger piece of that segment.

OK. And any plans on price increases with raw material coming back up?

So far, we are very stable in our position with these materials, so it'll have to move quite a bit before we'll consider that.

Operator, we'll take one more question.

Alan Bezoza of Oppenheimer.

Just one quick follow-up to go back to the acquisition you made. Kind of doesn't fit -- I mean it fits with your product lines, but doesn't really fit kind of what you said in the past as far as wanting [stuff] you can take advantage of your cost structure or whatnot. Clearly, you have the same sales channel.

But as you look towards new acquisitions, is it something we should expect another kind of epic change but something like Andrews, or is it more of just picking up the little companies?

Well, I mean, if you look at Signal Vision, it's a well-run entrepreneurial company the guy started. He's a lot like us, fits our mold. He's built a fabulous product line, and he's approved at all the major MSOs, but he just didn't have the resources and the scale to take it to where we believe we can take it. So, you go from three or four salesmen to this giant sales and distribution channel we have, and excellent quality, excellent reputation.

We continue to look at acquisitions as large as our company and as small as $15 million to $20 million, as a single product or a product line that would fit into our company.

Yes. I think one point, Alan, that apparatus is a significant part of our business. Signal Vision certainly fits in that apparatus sort of area. And as part of our strategy, as we talked about it at our December analyst meeting, is we're looking for solutions-based products, and certainly Signal Vision offers some opportunity to offer more solutions to our customers.

And I think, Alan, we want to move from a component company to a solutions provider. And I think it's evident with these results that we're clearly on the right track to continue to provide solutions to our customers in an expedited period where no one can achieve our scale and produce to the level we can produce and deliver as fast as we can.

So, is it still the case in your M&A strategy that -- things without flashing lights?

No. I think the issue with flashing lights is something that requires such heavy R&D expenditures that you might be obsoleted by a software adjustment. These splitters do not have any flashing lights.

No, I know. But, as far as going forward, still that's the same strategy that you want to take advantage of, more [passive type] equipment?

Yes. I think our strategy continues to be in the physical connectivity of solutions with warranties around solutions that continue to guarantee throughput without a lot of really heavy software applications to it.

That concludes our presentation. Frank, do you have any final comments?

Thank you to all of our investors, all of our employees, all of our customers. This was the best quarter we've had since we started the company, so we're [excited group].

So, with that, thank you for joining us.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.