SEC Filing | CommScope Holding Company, Inc.

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comm-10q_20210630.htm

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

☐	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.

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

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.

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.

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.

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.

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):
Balance at beginning of period	$	(1,850.3	)	$	(