SEC Filing | CommScope Holding Company, Inc.

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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, 2022


☐	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 21, 2022, there were 208,349,536 shares of Common Stock outstanding.

CommScope Holding Company, Inc.

Form 10-Q

September 30, 2022

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’ 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		42

Item 4. Controls and Procedures		43

Part II—Other Information:

Item 1. Legal Proceedings		44

Item 1A. Risk Factors		44

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		44

Item 3. Defaults Upon Senior Securities		44

Item 4. Mine Safety Disclosures		44

Item 5. Other Information		44

Item 6. Exhibits		45

Signatures		46

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,
	2022			2021			2022			2021
Net sales	$	2,381.4		$	2,105.3		$	6,910.2		$	6,362.6
Cost of sales		1,645.1			1,452.3			4,854.4			4,364.1
Gross profit		736.3			653.0			2,055.8			1,998.5
Operating expenses:
Selling, general and administrative		281.7			314.3			844.9			909.3
Research and development		161.9			167.8			498.0			515.6
Amortization of purchased intangible assets		134.6			153.0			414.3			461.9
Restructuring costs (credits), net		2.5			(3.1	)		53.1			100.2
Total operating expenses		580.7			632.0			1,810.3			1,987.0
Operating income		155.6			21.0			245.5			11.5
Other income (expense), net		5.4			(32.3	)		6.4			(29.8	)
Interest expense		(150.9	)		(148.6	)		(427.5	)		(424.1	)
Interest income		0.6			0.5			1.8			1.5
Income (loss) before income taxes		10.7			(159.4	)		(173.8	)		(440.9	)
Income tax (expense) benefit		12.2			35.2			(4.2	)		65.3
Net income (loss)		22.9			(124.2	)		(178.0	)		(375.6	)
Series A convertible preferred stock dividends		(14.9	)		(14.3	)		(44.1	)		(43.0	)
Net income (loss) attributable to common stockholders	$	8.0		$	(138.5	)	$	(222.1	)	$	(418.6	)

Earnings (loss) per share:
Basic	$	0.04		$	(0.68	)	$	(1.07	)	$	(2.06	)
Diluted	$	0.04		$	(0.68	)	$	(1.07	)	$	(2.06	)

Weighted average shares outstanding:
Basic		208.2			204.2			207.1			203.3
Diluted		211.3			204.2			207.1			203.3

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,
	2022			2021			2022			2021
Comprehensive loss:
Net income (loss)	$	22.9		$	(124.2	)	$	(178.0	)	$	(375.6	)
Other comprehensive loss, net of tax:
Foreign currency translation loss		(94.5	)		(40.9	)		(204.9	)		(70.7	)
Pension and other postretirement benefit activity		—			0.3			(1.3	)		0.9
Gain on hedging instruments		3.7			4.3			15.5			8.2
Total other comprehensive loss, net of tax		(90.8	)		(36.3	)		(190.7	)		(61.6	)
Total comprehensive loss	$	(67.9	)	$	(160.5	)	$	(368.7	)	$	(437.2	)

See notes to unaudited condensed consolidated financial statements.

CommScope Holding Company, Inc.

Condensed Consolidated Balance Sheets

(In millions, except share amounts)



	Unaudited September 30, 2022			December 31, 2021
Assets
Cash and cash equivalents	$	145.5		$	360.3
Accounts receivable, net of allowance for doubtful accounts of $60.9 and $63.7, respectively		1,675.9			1,532.6
Inventories, net		1,543.9			1,435.8
Prepaid expenses and other current assets		252.1			251.0
Total current assets		3,617.4			3,579.7
Property, plant and equipment, net of accumulated depreciation of $835.0 and $787.4, respectively		611.8			656.3
Goodwill		5,149.6			5,231.7
Other intangible assets, net		2,594.5			3,027.3
Other noncurrent assets		784.5			764.5
Total assets	$	12,757.8		$	13,259.5
Liabilities and Stockholders' Deficit
Accounts payable	$	999.2		$	1,160.7
Accrued and other liabilities		990.0			989.8
Current portion of long-term debt		32.0			32.0
Total current liabilities		2,021.2			2,182.5
Long-term debt		9,576.8			9,478.5
Deferred income taxes		180.8			208.2
Other noncurrent liabilities		431.6			490.8
Total liabilities		12,210.4			12,360.0
Commitments and contingencies
Series A convertible preferred stock, $0.01 par value		1,085.4			1,056.1
Stockholders' deficit:
Preferred stock, $0.01 par value: Authorized shares: 200,000,000;
Issued and outstanding shares: 1,085,386 and 1,056,144, respectively, Series A convertible preferred stock		—			—
Common stock, $0.01 par value: Authorized shares: 1,300,000,000; Issued and outstanding shares: 208,198,243 and 204,567,294, respectively		2.2			2.2
Additional paid-in capital		2,542.0			2,540.7
Accumulated deficit		(2,393.3	)		(2,215.3	)
Accumulated other comprehensive loss		(397.1	)		(206.4	)
Treasury stock, at cost: 12,645,562 shares and 10,970,585 shares, respectively		(291.8	)		(277.8	)
Total stockholders' deficit		(538.0	)		(156.6	)
Total liabilities and stockholders' deficit	$	12,757.8		$	13,259.5

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,
	2022			2021
Operating Activities:
Net loss	$	(178.0	)	$	(375.6	)
Adjustments to reconcile net loss to net cash generated by (used in) operating activities:
Depreciation and amortization		529.1			595.8
Equity-based compensation		45.3			61.0
Deferred income taxes		(75.2	)		(158.1	)
Changes in assets and liabilities:
Accounts receivable		(191.0	)		(36.2	)
Inventories		(153.3	)		(173.5	)
Prepaid expenses and other assets		(4.7	)		11.0
Accounts payable and other liabilities		(154.8	)		170.5
Other		(14.1	)		39.8
Net cash generated by (used in) operating activities		(196.7	)		134.7
Investing Activities:
Additions to property, plant and equipment		(78.7	)		(96.2	)
Proceeds from sale of property, plant and equipment		0.1			2.6
Payments upon settlement of net investment hedge		—			(18.0	)
Other		16.0			—
Net cash used in investing activities		(62.6	)		(111.6	)
Financing Activities:
Long-term debt repaid		(252.0	)		(1,274.0	)
Long-term debt proceeds		333.0			1,250.0
Debt issuance costs		—			(9.6	)
Debt extinguishment costs		—			(34.4	)
Dividends paid on Series A convertible preferred stock		(14.9	)		(43.0	)
Proceeds from the issuance of common shares under equity-based compensation plans		0.1			5.5
Tax withholding payments for vested equity-based compensation awards		(14.0	)		(24.7	)
Other		2.2			2.5
Net cash generated by (used in) financing activities		54.4			(127.7	)
Effect of exchange rate changes on cash and cash equivalents		(9.9	)		(5.8	)
Change in cash and cash equivalents		(214.8	)		(110.4	)
Cash and cash equivalent at beginning of period		360.3