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 June 30, 2023


☐	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 21, 2023, there were 211,919,401 shares of Common Stock outstanding.

CommScope Holding Company, Inc.

Form 10-Q

June 30, 2023

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		23

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		42

Item 6. Exhibits		43

Signatures		44

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,
	2023			2022			2023			2022
Net sales	$	1,918.4		$	2,300.2		$	3,919.9		$	4,528.8
Cost of sales		1,301.2			1,617.0			2,611.0			3,209.3
Gross profit		617.2			683.2			1,308.9			1,319.5
Operating expenses:
Selling, general and administrative		254.9			277.2			518.4			563.2
Research and development		153.2			165.4			306.6			336.1
Amortization of purchased intangible assets		101.4			139.0			227.8			279.7
Restructuring costs, net		35.5			38.5			31.4			50.6
Total operating expenses		545.0			620.1			1,084.2			1,229.6
Operating income		72.2			63.1			224.7			89.9
Other income, net		2.4			1.0			8.1			1.0
Interest expense		(168.5	)		(140.1	)		(333.6	)		(276.6	)
Interest income		1.9			0.5			4.4			1.2
Loss before income taxes		(92.0	)		(75.5	)		(96.4	)		(184.5	)
Income tax (expense) benefit		(8.4	)		14.5			(0.6	)		(16.4	)
Net loss		(100.4	)		(61.0	)		(97.0	)		(200.9	)
Series A convertible preferred stock dividends		(15.3	)		(14.7	)		(30.4	)		(29.2	)
Net loss attributable to common stockholders	$	(115.7	)	$	(75.7	)	$	(127.4	)	$	(230.1	)

Loss per share:
Basic	$	(0.55	)	$	(0.36	)	$	(0.61	)	$	(1.11	)
Diluted	$	(0.55	)	$	(0.36	)	$	(0.61	)	$	(1.11	)

Weighted average shares outstanding:
Basic		210.5			207.6			209.7			206.5
Diluted		210.5			207.6			209.7			206.5

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,
	2023			2022			2023			2022
Comprehensive loss:
Net loss	$	(100.4	)	$	(61.0	)	$	(97.0	)	$	(200.9	)
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss)		0.3			(93.7	)		20.7			(110.4	)
Pension and other postretirement benefit activity		—			—			(0.1	)		(1.3	)
Gain (loss) on hedging instruments		1.0			3.0			(0.5	)		11.8
Total other comprehensive income (loss), net of tax		1.3			(90.7	)		20.1			(99.9	)
Total comprehensive loss	$	(99.1	)	$	(151.7	)	$	(76.9	)	$	(300.8	)

See notes to unaudited condensed consolidated financial statements.

CommScope Holding Company, Inc.

Condensed Consolidated Balance Sheets

(In millions, except share amounts)


	Unaudited June 30, 2023			December 31, 2022
Assets
Cash and cash equivalents	$	418.1		$	398.1
Accounts receivable, net of allowance for doubtful accounts of $63.0 and $82.8, respectively		1,354.1			1,523.6
Inventories, net		1,454.2			1,588.1
Prepaid expenses and other current assets		198.5			216.4
Total current assets		3,424.9			3,726.2
Property, plant and equipment, net of accumulated depreciation of $908.9 and $873.5, respectively		565.8			609.6
Goodwill		4,079.2			4,072.4
Other intangible assets, net		2,246.3			2,473.5
Other noncurrent assets		849.5			803.7
Total assets	$	11,165.7		$	11,685.4
Liabilities and Stockholders' Deficit
Accounts payable	$	782.7		$	1,025.5
Accrued and other liabilities		906.9			1,050.0
Current portion of long-term debt		32.0			32.0
Total current liabilities		1,721.6			2,107.5
Long-term debt		9,380.9			9,469.6
Deferred income taxes		156.4			173.4
Other noncurrent liabilities		391.9			380.6
Total liabilities		11,650.8			12,131.1
Commitments and contingencies
Series A convertible preferred stock, $0.01 par value		1,130.8			1,100.3
Stockholders' deficit:
Preferred stock, $0.01 par value: Authorized shares: 200,000,000;
Issued and outstanding shares: 1,130,776 and 1,100,310, respectively, Series A convertible preferred stock		—			—
Common stock, $0.01 par value: Authorized shares: 1,300,000,000; Issued and outstanding shares: 211,912,464 and 208,371,426, respectively		2.3			2.2
Additional paid-in capital		2,558.7			2,542.9
Accumulated deficit		(3,599.2	)		(3,502.2	)
Accumulated other comprehensive loss		(276.2	)		(296.3	)
Treasury stock, at cost: 14,342,757 shares and 12,726,695 shares, respectively		(301.5	)		(292.6	)
Total stockholders' deficit		(1,615.9	)		(1,546.0	)
Total liabilities and stockholders' deficit	$	11,165.7		$	11,685.4

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,
	2023			2022
Operating Activities:
Net loss	$	(97.0	)	$	(200.9	)
Adjustments to reconcile net loss to net cash generated by (used in) operating activities:
Depreciation and amortization		303.5			356.3
Equity-based compensation		24.2			28.9
Deferred income taxes		(61.9	)		(26.2	)
Changes in assets and liabilities:
Accounts receivable		174.4			(86.4	)
Inventories		135.6			(151.4	)
Prepaid expenses and other assets		16.3			2.1
Accounts payable and other liabilities		(411.2	)		(28.8	)
Other		6.8			(2.7	)
Net cash generated by (used in) operating activities		90.7			(109.1	)
Investing Activities:
Additions to property, plant and equipment		(35.2	)		(55.1	)
Proceeds from sale of property, plant and equipment		41.6			—
Other		20.5			15.9
Net cash generated by (used in) investing activities		26.9			(39.2	)
Financing Activities:
Long-term debt repaid		(16.0	)		(176.0	)
Long-term debt repurchases		(75.0	)		—
Long-term debt proceeds		—			210.0
Tax withholding payments for vested equity-based compensation awards		(8.9	)		(14.0	)
Other		2.1			1.4
Net cash generated by (used in) financing activities		(97.8	)		21.4
Effect of exchange rate changes on cash and cash equivalents		0.2			(4.1	)
Change in cash and cash equivalents		20.0			(131.0	)
Cash and cash equivalents at beginning of period		398.1			360.3
Cash and cash equivalents at end of period	$	418.1		$	229.3

See notes to unaudited condensed consolidated financial statements.


CommScope Holding Company, Inc.
Condensed Consolidated Statements of Stockholders' Deficit
(Unaudited – In millions, except share amounts)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Number of common shares outstanding:
Balance at beginning of period		209,777,988			207,052,122			208,371,426			204,567,294
Issuance of shares under equity-based compensation plans		3,049,872			1,543,392			5,157,100			5,259,459
Shares surrendered under equity-based compensation plans		(915,396	)		(432,528	)		(1,616,062	)		(1,663,767	)
Balance at end of period		211,912,464			208,162,986			211,912,464			208,162,986
Common stock: