SEC Filing | CommScope Holding Company, Inc.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

View:

Download DOC

Download PDF

Download XLS

Download XBRL

10-Q

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 September 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 October 22, 2021 there were 204,498,997 shares of Common Stock outstanding.

CommScope Holding Company, Inc.

Form 10-Q

September 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 (Deficit)		6

Notes to Unaudited Condensed Consolidated Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		25

Item 3. Quantitative and Qualitative Disclosures About Market Risk		41

Item 4. Controls and Procedures		42

Part II—Other Information:

Item 1. Legal Proceedings		43

Item 1A. Risk Factors		43

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		43

Item 3. Defaults Upon Senior Securities		43

Item 4. Mine Safety Disclosures		43

Item 5. Other Information		43

Item 6. Exhibits		44

Signatures		45

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						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Net sales	$	2,105.3		$	2,168.1		$	6,362.6		$	6,304.1
Cost of sales		1,452.3			1,432.6			4,364.1			4,271.3
Gross profit		653.0			735.5			1,998.5			2,032.8
Operating expenses:
Selling, general and administrative		314.3			296.7			909.3			898.7
Research and development		167.8			184.6			515.6			541.1
Amortization of purchased intangible assets		153.0			158.1			461.9			473.5
Restructuring costs (credits), net		(3.1	)		40.3			100.2			83.6
Asset impairments		—			—			—			206.7
Total operating expenses		632.0			679.7			1,987.0			2,203.6
Operating income (loss)		21.0			55.8			11.5			(170.8	)
Other expense, net		(32.3	)		(16.9	)		(29.8	)		(30.2	)
Interest expense		(148.6	)		(147.2	)		(424.1	)		(437.7	)
Interest income		0.5			1.3			1.5			4.2
Loss before income taxes		(159.4	)		(107.0	)		(440.9	)		(634.5	)
Income tax (expense) benefit		35.2			(9.3	)		65.3			37.2
Net loss		(124.2	)		(116.3	)		(375.6	)		(597.3	)
Series A convertible preferred stock dividend		(14.3	)		(14.1	)		(43.0	)		(41.8	)
Net loss attributable to common stockholders	$	(138.5	)	$	(130.4	)	$	(418.6	)	$	(639.1	)

Loss per share:
Basic	$	(0.68	)	$	(0.66	)	$	(2.06	)	$	(3.26	)
Diluted	$	(0.68	)	$	(0.66	)	$	(2.06	)	$	(3.26	)

Weighted average shares outstanding:
Basic		204.2			196.9			203.3			195.9
Diluted		204.2			196.9			203.3			195.9

See notes to unaudited condensed consolidated financial statements.

CommScope Holding Company, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited – In millions)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Comprehensive loss:
Net loss	$	(124.2	)	$	(116.3	)	$	(375.6	)	$	(597.3	)
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss)		(40.9	)		63.7			(70.7	)		(1.3	)
Pension and other postretirement benefit activity		0.3			(0.1	)		0.9			(0.6	)
Gain (loss) on hedging instruments		4.3			(9.0	)		8.2			(21.9	)
Total other comprehensive income (loss), net of tax		(36.3	)		54.6			(61.6	)		(23.8	)
Total comprehensive loss	$	(160.5	)	$	(61.7	)	$	(437.2	)	$	(621.1	)

See notes to unaudited condensed consolidated financial statements.

CommScope Holding Company, Inc.

Condensed Consolidated Balance Sheets

(In millions, except share amounts)


	Unaudited September 30, 2021			December 31, 2020
Assets
Cash and cash equivalents	$	411.5		$	521.9
Accounts receivable, less allowance for doubtful accounts of $45.6 and $40.3, respectively		1,506.2			1,487.4
Inventories, net		1,252.2			1,088.9
Prepaid expenses and other current assets		268.6			256.3
Total current assets		3,438.5			3,354.5
Property, plant and equipment, net of accumulated depreciation of $775.1 and $705.7, respectively		664.6			684.5
Goodwill		5,253.7			5,286.5
Other intangible assets, net		3,179.9			3,650.4
Other noncurrent assets		715.3			600.9
Total assets	$	13,252.0		$	13,576.8
Liabilities and Stockholders' Equity (Deficit)
Accounts payable	$	1,170.1		$	1,010.8
Accrued and other liabilities		884.6			910.6
Current portion of long-term debt		32.0			32.0
Total current liabilities		2,086.7			1,953.4
Long-term debt		9,481.0			9,488.6
Deferred income taxes		199.1			206.2
Other noncurrent liabilities		526.8			531.8
Total liabilities		12,293.6			12,180.0
Commitments and contingencies
Series A convertible preferred stock, $0.01 par value		1,041.8			1,041.8
Stockholders' equity (deficit):
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: 204,247,592 and 200,095,232, respectively		2.2			2.1
Additional paid-in capital		2,536.3			2,512.9
Accumulated deficit		(2,128.3	)		(1,752.7	)
Accumulated other comprehensive loss		(217.5	)		(155.9	)
Treasury stock, at cost: 10,838,972 shares and 9,223,081 shares, respectively		(276.1	)		(251.4	)
Total stockholders' equity (deficit)		(83.4	)		355.0
Total liabilities and stockholders' equity (deficit)	$	13,252.0		$	13,576.8

See notes to unaudited condensed consolidated financial statements.

CommScope Holding Company, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited - In millions)


	Nine Months Ended
	September 30,
	2021			2020
Operating Activities:
Net loss	$	(375.6	)	$	(597.3	)
Adjustments to reconcile net loss to net cash generated by operating activities:
Depreciation and amortization		595.8			618.8
Equity-based compensation		61.0			90.0
Deferred income taxes		(158.1	)		(96.6	)
Asset impairments		—			206.7
Changes in assets and liabilities:
Accounts receivable		(36.2	)		200.9
Inventories		(173.5	)		(130.3	)
Prepaid expenses and other assets		11.0			32.2
Accounts payable and other liabilities		170.5			(25.0	)
Other		39.8			39.1
Net cash generated by operating activities		134.7			338.5
Investing Activities:
Additions to property, plant and equipment		(96.2	)		(73.5	)
Proceeds from sale of property, plant and equipment		2.6			0.2
Cash paid for Cable Exchange acquisition		—			(3.5	)
Payments upon settlement of net investment hedge		(18.0	)		—
Net cash used in investing activities		(111.6	)		(76.8	)
Financing Activities:
Long-term debt repaid		(1,274.0	)		(1,174.0	)
Long-term debt proceeds		1,250.0			950.0
Debt issuance costs		(9.6	)		(11.6	)
Debt extinguishment costs		(34.4	)		(14.9	)
Dividends paid on Series A convertible preferred stock		(43.0	)		—
Proceeds from the issuance of common shares under equity-based compensation plans		5.5			1.0
Tax withholding payments for vested equity-based compensation awards		(24.7	)		(10.3	)
Other		2.5			—
Net cash used in financing activities		(127.7	)		(259.8	)
Effect of exchange rate changes on cash and cash equivalents		(5.8	)		(17.3	)
Change in cash and cash equivalents		(110.4	)		(15.4	)
Cash and cash equivalent at beginning of period		521.9			598.2
Cash and cash equivalents at end of period	$	411.5		$	582.8

See notes to unaudited condensed consolidated financial statements.

CommScope Holding Company, Inc.

Condensed Consolidated Statements of Stockholders' Equity (Deficit)

(Unaudited - In millions, except share amounts)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Number of common shares outstanding:
Balance at beginning of period		204,154,201			195,997,230			200,095,232			194,563,530
Issuance of shares under equity-based compensation plans		97,750			1,469,968			5,768,251			3,513,837
Shares surrendered under equity-based compensation plans		(4,359	)		(476,531	)		(1,615,891	)		(1,086,700	)
Balance at end of period		204,247,592			196,990,667			204,247,592			196,990,667
Common stock:
Balance at beginning and end of period	$	2.1		$	2.0		$	2.1		$	2.0
Issuance of shares under equity-based compensation plans		0.1			0.1			0.1			0.1
Balance at end of period	$	2.2		$	2.1		$	2.2		$	2.1
Additional paid-in capital:
Balance at beginning of period	$	2,528.1		$	2,474.3		$	2,512.9		$	2,445.1
Issuance of shares under equity-based compensation plans		1.5			—			5.4			0.9
Equity-based compensation		21.0			34.0			61.0			90.0
Dividend on Series A convertible preferred stock		(14.3	)		(14.1	)		(43.0	)		(