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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2021

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to            

Commission file number 001-36146

 

CommScope Holding Company, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

27-4332098

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

1100 CommScope Place, SE

Hickory, North Carolina

(Address of principal executive offices)

28602

(Zip Code)

(828) 324-2200

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

COMM

 

The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of July 23, 2021 there were 204,201,881 shares of Common Stock outstanding.

 

 

 


 

 

 

CommScope Holding Company, Inc.

Form 10-Q

June 30, 2021

Table of Contents

 

Part I—Financial Information (Unaudited):

 

 

 

 

 

Item 1. Condensed Consolidated Financial Statements:

 

 

 

 

 

Condensed Consolidated Statements of Operations

 

2

 

 

 

Condensed Consolidated Statements of Comprehensive Loss

 

3

 

 

 

Condensed Consolidated Balance Sheets

 

4

 

 

 

Condensed Consolidated Statements of Cash Flows

 

5

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity

 

6

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

7

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

24

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

39

 

 

 

Item 4. Controls and Procedures

 

40

 

 

 

Part II—Other Information:

 

 

 

 

 

Item 1. Legal Proceedings

 

41

 

 

 

Item 1A. Risk Factors

 

41

 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

41

 

 

 

Item 3. Defaults Upon Senior Securities

 

41

 

 

 

Item 4. Mine Safety Disclosures

 

41

 

 

 

Item 5. Other Information

 

41

 

 

 

Item 6. Exhibits

 

42

 

 

 

Signatures

 

43

 

 

 

1

 


 

 

PART 1 -- FINANCIAL INFORMATION (UNAUDITED)

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

CommScope Holding Company, Inc.

Condensed Consolidated Statements of Operations

(Unaudited – In millions, except per share amounts)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net sales

 

$

2,185.3

 

 

$

2,102.8

 

 

$

4,257.3

 

 

$

4,136.0

 

Cost of sales

 

 

1,512.0

 

 

 

1,446.7

 

 

 

2,911.8

 

 

 

2,838.7

 

Gross profit

 

 

673.3

 

 

 

656.1

 

 

 

1,345.5

 

 

 

1,297.3

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

302.3

 

 

 

290.9

 

 

 

595.0

 

 

 

602.0

 

Research and development

 

 

176.3

 

 

 

176.1

 

 

 

347.8

 

 

 

356.5

 

Amortization of purchased intangible assets

 

 

154.2

 

 

 

157.6

 

 

 

308.9

 

 

 

315.4

 

Restructuring costs, net

 

 

58.9

 

 

 

19.6

 

 

 

103.3

 

 

 

43.3

 

Asset impairments

 

 

 

 

 

206.7

 

 

 

 

 

 

206.7

 

Total operating expenses

 

 

691.7

 

 

 

850.9

 

 

 

1,355.0

 

 

 

1,523.9

 

Operating loss

 

 

(18.4

)

 

 

(194.8

)

 

 

(9.5

)

 

 

(226.6

)

Other income (expense), net

 

 

1.5

 

 

 

(0.8

)

 

 

2.5

 

 

 

(13.3

)

Interest expense

 

 

(138.0

)

 

 

(141.4

)

 

 

(275.5

)

 

 

(290.5

)

Interest income

 

 

0.5

 

 

 

0.8

 

 

 

1.0

 

 

 

2.9

 

Loss before income taxes

 

 

(154.4

)

 

 

(336.2

)

 

 

(281.5

)

 

 

(527.5

)

Income tax benefit

 

 

0.6

 

 

 

15.1

 

 

 

30.1

 

 

 

46.5

 

Net loss

 

 

(153.8

)

 

 

(321.1

)

 

 

(251.4

)

 

 

(481.0

)

Series A convertible preferred stock dividend

 

 

(14.3

)

 

 

(13.9

)

 

 

(28.7

)

 

 

(27.7

)

Net loss attributable to common stockholders

 

$

(168.1

)

 

$

(335.0

)

 

$

(280.1

)

 

$

(508.7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.82

)

 

$

(1.71

)

 

$

(1.38

)

 

$

(2.60

)

Diluted

 

$

(0.82

)

 

$

(1.71

)

 

$

(1.38

)

 

$

(2.60

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

204.1

 

 

 

195.9

 

 

 

202.9

 

 

 

195.4

 

Diluted

 

 

204.1

 

 

 

195.9

 

 

 

202.9

 

 

 

195.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to unaudited condensed consolidated financial statements.

 

2

 


 

 

CommScope Holding Company, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited – In millions)

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(153.8

)

 

$

(321.1

)

 

$

(251.4

)

 

$

(481.0

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation gain (loss)

 

 

21.5

 

 

 

34.6

 

 

 

(29.8

)

 

 

(65.0

)

Pension and other postretirement benefit activity

 

 

0.3

 

 

 

 

 

 

0.6

 

 

 

(0.5

)

Gain (loss) on hedging instruments

 

 

(8.7

)

 

 

(5.3

)

 

 

3.9

 

 

 

(12.9

)

Total other comprehensive income (loss), net of tax

 

 

13.1

 

 

 

29.3

 

 

 

(25.3

)

 

 

(78.4

)

Total comprehensive loss

 

$

(140.7

)

 

$

(291.8

)

 

$

(276.7

)

 

$

(559.4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to unaudited condensed consolidated financial statements.

 

3

 


 

 

CommScope Holding Company, Inc.

Condensed Consolidated Balance Sheets

(In millions, except share amounts)

 

 

 

Unaudited

June 30, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

446.2

 

 

$

521.9

 

Accounts receivable, less allowance for doubtful accounts of

   $30.8 and $40.3, respectively

 

 

1,653.9

 

 

 

1,487.4

 

Inventories, net

 

 

1,150.2

 

 

 

1,088.9

 

Prepaid expenses and other current assets

 

 

247.1

 

 

 

256.3

 

Total current assets

 

 

3,497.4

 

 

 

3,354.5

 

Property, plant and equipment, net of accumulated depreciation

   of $759.1 and $705.7, respectively

 

 

667.7

 

 

 

684.5

 

Goodwill

 

 

5,272.3

 

 

 

5,286.5

 

Other intangible assets, net

 

 

3,336.9

 

 

 

3,650.4

 

Other noncurrent assets

 

 

653.5

 

 

 

600.9

 

Total assets

 

$

13,427.8

 

 

$

13,576.8

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,080.1

 

 

$

1,010.8

 

Accrued and other liabilities

 

 

983.9

 

 

 

910.6

 

Current portion of long-term debt

 

 

32.0

 

 

 

32.0

 

Total current liabilities

 

 

2,096.0

 

 

 

1,953.4

 

Long-term debt

 

 

9,484.8

 

 

 

9,488.6

 

Deferred income taxes

 

 

202.5

 

 

 

206.2

 

Other noncurrent liabilities

 

 

533.8

 

 

 

531.8

 

Total liabilities

 

 

12,317.1

 

 

 

12,180.0

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Series A convertible preferred stock, $0.01 par value

 

 

1,041.8

 

 

 

1,041.8

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value: Authorized shares: 200,000,000;

 

 

 

 

 

 

 

 

Issued and outstanding shares: 1,041,819 Series A convertible

preferred stock

 

 

 

 

 

 

Common stock, $0.01 par value: Authorized shares:

   1,300,000,000; issued and outstanding shares:

   204,154,201 and 200,095,232, respectively

 

 

2.1

 

 

 

2.1

 

Additional paid-in capital

 

 

2,528.1

 

 

 

2,512.9

 

Retained earnings (accumulated deficit)

 

 

(2,004.1

)

 

 

(1,752.7

)

Accumulated other comprehensive loss

 

 

(181.2

)

 

 

(155.9

)

Treasury stock, at cost: 10,834,613 shares and

   9,223,081 shares, respectively

 

 

(276.0

)

 

 

(251.4

)

Total stockholders' equity

 

 

68.9

 

 

 

355.0

 

Total liabilities and stockholders' equity

 

$

13,427.8

 

 

$

13,576.8

 

 

 

 

 

 

 

 

 

 

See notes to unaudited condensed consolidated financial statements.

4

 


 

CommScope Holding Company, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited - In millions)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2021

 

 

2020

 

Operating Activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(251.4

)

 

$

(481.0

)

Adjustments to reconcile net loss to

    net cash generated by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

392.8

 

 

 

408.9

 

Equity-based compensation

 

 

40.0

 

 

 

56.0

 

Deferred income taxes

 

 

(81.1

)

 

 

(69.4

)

Asset impairments

 

 

 

 

 

206.7

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(173.9

)

 

 

33.5

 

Inventories

 

 

(64.9

)

 

 

(73.5

)

Prepaid expenses and other assets

 

 

32.3

 

 

 

11.7

 

Accounts payable and other liabilities

 

 

169.0

 

 

 

62.7

 

Other

 

 

4.8

 

 

 

10.7

 

Net cash generated by operating activities

 

 

67.6

 

 

 

166.3

 

Investing Activities:

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(60.2

)

 

 

(47.7

)

Proceeds from sale of property, plant and equipment

 

 

1.3

 

 

 

0.1

 

Payments upon settlement of net investment hedge

 

 

(18.0

)

 

 

 

Net cash used in investing activities

 

 

(76.9

)

 

 

(47.6

)

Financing Activities:

 

 

 

 

 

 

 

 

Long-term debt repaid

 

 

(16.0

)

 

 

(116.0

)

Long-term debt proceeds

 

 

 

 

 

250.0

 

Dividends paid on Series A convertible preferred stock

 

 

(28.7

)

 

 

 

Proceeds from the issuance of common shares under equity-based

   compensation plans

 

 

3.9

 

 

 

0.9

 

Tax withholding payments for vested equity-based compensation

  awards

 

 

(24.6

)

 

 

(6.3

)

Net cash generated by (used in) financing activities

 

 

(65.4

)

 

 

128.6

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(1.0

)

 

 

(22.1

)

Change in cash and cash equivalents

 

 

(75.7

)

 

 

225.2

 

Cash and cash equivalent at beginning of period

 

 

521.9

 

 

 

598.2

 

Cash and cash equivalents at end of period

 

$

446.2

 

 

$

823.4

 

 

 

 

 

 

 

 

 

 

See notes to unaudited condensed consolidated financial statements.

 

5

 


 

 

CommScope Holding Company, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited - In millions, except share amounts)

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

203,996,914

 

 

 

195,807,913

 

 

 

200,095,232

 

 

 

194,563,530

 

Issuance of shares under equity-based compensation plans

 

 

173,285

 

 

 

229,571

 

 

 

5,670,501

 

 

 

2,043,869

 

Shares surrendered under equity-based compensation plans

 

 

(15,998

)

 

 

(40,254

)

 

 

(1,611,532

)

 

 

(610,169

)

Balance at end of period

 

 

204,154,201

 

 

 

195,997,230

 

 

 

204,154,201

 

 

 

195,997,230

 

Common stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning and end of period

 

$

2.1

 

 

$

2.0

 

 

$

2.1

 

 

$

2.0

 

Additional paid-in capital:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

2,526.0

 

 

$

2,455.7

 

 

$

2,512.9

 

 

$

2,445.1

 

Issuance of shares under equity-based compensation plans

 

 

 

 

 

 

 

 

3.9

 

 

 

0.9

 

Equity-based compensation

 

 

16.4

 

 

 

32.5

 

 

 

40.0

 

 

 

56.0

 

Dividend on Series A convertible preferred stock

 

 

            (14.3)

 

 

 

(13.9

)

 

 

            (28.7)

 

 

 

(27.7

)

Balance at end of period

 

$

2,528.1

 

 

$

2,474.3

 

 

$

2,528.1

 

 

$

2,474.3

 

Retained earnings (accumulated deficit):