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2016
ANNUAL
REPORT
Three-year Selected Financial Data
(Unaudited -- in thousands, except per share amounts)
Year Ended December 31
Result of operations
Net sales
Gross profit
Restructuring costs, net
Asset impairments
Operating income
Net interest expense
Net income (loss)
Earnings (Loss) Per Share Information:
Weighted average number of shares outstanding:
Basic
Diluted
Earnings (loss) per share:
Basic
Diluted
Non-GAAP Adjusted Results:
Non-GAAP adjusted operating income(1)
Non-GAAP adjusted earnings per share(1)
Other Information:
Net cash generated by operating activities
Depreciation and amortization
Additions to property, plant and equipment
Balance Sheet Data
Cash and cash equivalents
Goodwill and intangible assets
Property, plant and equipment, net
Total assets
Working capital
Long-term debt, including current maturities
Stockholders’ equity
2014
$3,829,614
1,397,269
19,267
12,096
577,449
(173,981)
236,772
186,905
191,450
$1.27
$1.24
$808,409
$2.23
$289,418
259,504
36,935
$729,321
2,712,814
289,371
4,917,058
1,351,805
2,668,898
1,307,619
2015
$3,807,828
1,345,820
29,488
90,784
181,593
(230,533)
(70,875)
189,876
189,876
$(0.37)
$(0.37)
$729,779
$1.86
$302,060
303,500
56,501
As of December 31
$562,884
4,838,119
528,706
7,502,631
1,319,548
5,243,651
1,222,720
2016
$4,923,621
2,033,589
42,875
38,522
574,750
(272,010)
222,838
192,470
196,459
$1.16
$1.13
$1,051,353
$2.64
$606,225
399,050
68,314
$428,228
4,567,369
474,990
7,141,986
1,135,946
4,562,010
1,394,084
Leadership TEAM
Marvin (Eddie) S. Edwards Jr.*
President and Chief Executive Officer
Mark A. Olson*
Executive Vice President
and Chief Financial Officer
Randall W. Crenshaw*
Executive Vice President
and Chief Operating Officer
Frank (Burk) B. Wyatt II*
Senior Vice President,
General Counsel and Secretary
Philip M. Armstrong Jr.*
Senior Vice President
Corporate Finance
Suzan M. Campbell
Senior Vice President
Tax
Bennett (Ben) Cardwell
Senior Vice President
Mobility Solutions Segment Leader
Michael A. Cross
Senior Vice President
and Chief Information Officer
Robert W. Granow*
Senior Vice President,
Corporate Controller
and Principal Accounting Officer
Peter U. Karlsson*
Senior Vice President
Global Sales
Morgan C.S. Kurk
Senior Vice President and
Chief Technology Officer
Jaxon D. Lang
Senior Vice President
Connectivity Solutions Segment Leader
Robyn T. Mingle*
Senior Vice President
Human Resources
Fiona E. Nolan
Senior Vice President
Marketing
Christopher A. Story
Senior Vice President
Global Supply Chain
Wendy H. Taylor
Vice President
Corporate Compliance
Investor Information
Annual meeting
Friday, May 5, 2017, 1:00 p.m. ET
JPMorgan Chase Conference Center
270 Park Avenue, 2nd Floor
New York, NY 10017
Corporate Headquarters
CommScope Holding Company, Inc.
1100 CommScope Place, SE
Hickory, NC 28602
www.commscope.com
+1 828.324.2200
800.982.1708 (U.S. only)
Transfer agent and registrar
American Stock Transfer
& Trust Company, LLC.
Shareholder Services Department
6201 15th Avenue
Brooklyn, NY 11219
info@amstock.com
+1 718.921.8124
800.937.5449 (U.S. only)
www.amstock.com
Investor Relations
Jennifer Crawford
+1 828.323.4970
investor.relations@commscope.com
Common Stock
Trades on NASDAQ under
the symbol “COMM”
(1) See reconciliation of GAAP measures to Non-GAAP measures (page 22)
* Section 16 Executive Officer
2016 Common Stock Price Range
High
Low
First Quarter ..................
$28.14
$19.37
Second Quarter .............
$33.09
$26.16
Third Quarter .................
$32.77
$28.28
Fourth Quarter ..............
$38.00
$29.88
2016 annual report
1
WELCOME TO THE
NEW COMMSCOPE
Eddie Edwards
President and Chief Executive Officer
2
THE NEW COMMSCOPE
TO OUR SHAREHOLDERS
We are proud to share with you
updates and insights regarding the
new CommScope, a company 40
years old yet transforming in dynamic
new ways.
In 2017, we eagerly enter the second
full year of transition following
one of our most transformative
acquisitions—the Broadband Network
Solutions (BNS) business acquired
from TE Connectivity in 2015.
Acquiring BNS nearly doubled our
size (by employees and revenue) and,
more importantly, strengthened our
capabilities and solutions. The result
is a significantly enhanced pool of
talent and ability to invent and deliver
in more meaningful ways.
As I wrote to you a year ago,
CommScope is better positioned
to accelerate industry innovation,
solve more wired and wireless
network challenges with an enhanced
fiber portfolio, and better serve
global customers in more markets
around the world. We have made
great progress in building the new
Acquiring BNS nearly
doubled our size by
employees and revenue
and, more importantly,
strengthened our
capabilities and solutions.
CommScope, a company uniquely
positioned to serve customers in
four major areas: wireline access
and distribution networks, wireless
networks (indoor and outdoor),
data centers and central offices, and
connected and efficient buildings.
Each area needs what we specialize
in—connectivity through network
infrastructure and the delivery of
more network bandwidth.
We enable bandwidth
and help our customers
deploy it more efficiently.
We are proud to have met or
exceeded our goals and measures to
date regarding the BNS integration,
and we remain excited for the vast
potential of the new CommScope.
Our combined strengths in fiber
connectivity and wireless are
well timed, as market demand for
converged networks increases.
In my travels and meetings, I reiterate
that CommScope has a strong
focus and clear purpose: We enable
bandwidth and help our customers
deploy it more efficiently. As
information and technology become
an ever-more meaningful part of our
daily lives, the need for bandwidth
will continue to increase. Demand
from our hyperconnected lifestyles
is what inspires us at CommScope to
(1) See reconciliation of GAAP measures to Non-GAAP measures (page 22)
advance and support our customers’
evolving infrastructure needs.
Though the world of communication
technology looks different from only a
decade ago, our values as a company
remain intact more than four decades
after our founding. Innovation, agility
and integrity form our foundation
and drive our business. Our recent
40th anniversary was a great
opportunity to proudly celebrate
the people and innovation that have
made CommScope successful, while
reinforcing the strengths that have us
positioned for an exciting future.
Innovation, agility and
integrity form our
foundation and drive
our business.
It is also with pride that in 2016 we
outperformed expectations, beat
our goals, and continued to work
diligently to earn our customers’ trust
and business. While tackling a major
acquisition integration, we increased
adjusted(1) earnings per share by 42
percent, more than doubled cash flow
from operations to $606 million, and
repaid nearly $700 million of debt.
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2016 annual report
3
We don’t rest on these achievements,
but continue to look for meaningful
ways to innovate and solve our
customers’ challenges. That’s why
we plan to spend over $200 million
each year on R&D and continue to
build on our portfolio of more than
10,000 patents.
We INCREASED ADJUSTED
EARNINGS PER SHARE BY
42 Percent.
Poised for Growth
The BNS acquisition was a defining
moment for our company. We
focused a great deal of 2016
on aligning and optimizing our
organizations, infrastructure and
product portfolios. We—and our
customers—have begun to realize
the strengths and benefits of this
combination: more innovation, more
customer challenges solved, more
global scale. These advantages,
combined with our diligent focus
on cost efficiencies and integration
synergies, have created new
momentum:
• Sales up 29 percent year
over year primarily because of
the BNS acquisition.
• More than $100 million of
synergy realization in 2016,
and we have raised our
three-year estimate twice.
• Adjusted(1) operating
income rose 44 percent.
• Significant reduction of our
net leverage due to strong
cash flow. We have already
paid down more than $800
million in debt since the BNS
acquisition closed.
• Carlyle, our private equity
2X
Cash Flow from operations
grew 2x in 2016
sponsor, has been steadfast in
supporting us, and was rewarded
for its commitment through
returns on its investment after
selling all its remaining shares
during 2016.
> $100M
in INTEGRATION synergies in 2016
We at CommScope have focused
our expertise on two core segments:
Mobility and Connectivity. The BNS
acquisition also gave us a more
balanced and diversified company.
(Mobility is now approximately
40 percent of the business, down
from 65 percent pre-acquisition.) It
opened up new markets and enabled
us to offer integrated services in a
world of converging networks, as
many Mobility customers are also
Connectivity customers. We were
also able to create new synergies
by in-sourcing certain product
manufacturing as opposed to buying
from others at higher cost.
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4
THE NEW COMMSCOPE
700K
1M
We have eliminated
nearly 700,000 SKUs out of
a portfolio of 1 million.
>$800M
DEBT REPAID SINCE
BNS ACQUISITION
Integration of the CommScope
and BNS business systems is
well underway. We have made
considerable progress in merging
nearly a dozen major legacy BNS
information technology systems
into CommScope’s single platform.
In 2016, we completed the first
major phase of system integration;
we are now on one system in North
America and parts of Latin America.
We plan to complete our system
integration in the remainder of the
world in 2017, with the goal of a
seamless experience for customers
and employees during the transition.
Importantly, we have also spent the
year aligning our cultures and gaining
new insights into our combined
strengths, talents and potential.
We are pleased to be ahead of our
goals in establishing a more unified
and focused CommScope.
In 2016, we completed
the first major phase of
system integration; we
are now on one system in
North America and parts
of Latin America.
Innovation and Scale
As one of CommScope’s core values,
innovation is a significant priority
for the company. We are fostering a
culture of invention, idea generation
and calculated risk taking. We also
look at innovation as an opportunity
to reduce complexity in our existing
systems and processes, and constantly
seek to improve everything we touch.
With bandwidth needs of
communications networks continuing
to grow, it is clear we must continue
to progress and innovate. The number
of connected devices per person
globally is expected to nearly double
in five years, with the average person
having more than six such devices in
2020.2 Data use on these devices has
increased and is expected to continue
to rise at exponential rates (about six
times over the next five years).3 This
rapid rate of growth and adoption of
new devices makes network latency
(response time) a far greater concern.
How great is the challenge for network
operators? The number of devices
connected to IP networks will be more
than three times the global population
by 2020.4 Globally, mobile data traffic
will increase eightfold between 2015
and 2020.5 In addition, hyperscale
data center builds are increasing
globally as the world’s largest
technology companies try to manage
exponential data traffic growth.
2. Cisco IBSG, 3. Ericsson Mobility Report, June 2016. 4. Cisco VNI 5. Ibid.
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2016 annual report
5
We are focusing innovation on
improving network latency and
reducing deployment time for
service providers. Our innovative
fiber solutions can save operators
significant time and money, as field
labor costs are a substantial portion
of overall network deployment costs.
By shifting labor from the “field to
the factory,” we make deployment
easier and faster. We are also working
with our service provider customers
on how new technologies such as
5G will be deployed so that they are
ready to address the bandwidth and
service needs of their customers.
Furthermore, with the continued
densification of wireless networks
expected for 5G, we have expanded
our indoor small cell and outdoor
metro cell solutions, while evolving
our distributed antenna system (DAS)
solutions. Lastly, we are part of many
of the industry groups developing
and testing network solutions for 5G,
further demonstrating our expertise
and commitment to innovation.
The Future Looks Bright
CommScope is a dynamic company in
a dynamic industry. We are optimistic
about 2017 and our future. In a
recent global customer survey we
conducted, no competing brand
performed higher than CommScope
across the measures of being
“trusted,” an “industry leader,” and
“having a proven track record.” We
are gratified that our customers
recognize our continual efforts and
achievements on their behalf.
We will continue to prioritize these
and other key obligations as we focus
on the following in 2017:
1. Complete the integration of BNS
and CommScope
2. Meet financial commitments
3. Become a preferred partner to
customers and others in the
industry
4. Innovate to solve problems that
matter most
5. Create a culture of team and
operational excellence
We are confident that our offerings
align well with market needs and, as
we continue to integrate and advance
CommScope, we believe the best
is yet to come. Thank you for your
continued support of CommScope.
Eddie Edwards
President and Chief Executive Officer
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6THE NEW COMMSCOPEMark Olson Executive Vice President and Chief Financial Officer171016_LOT 1_BODY_Commscope_AR_2017_v38.indd 63/7/17 5:07 PM 2016 annual report
7
EXECUTIVE Q&A
Eddie Edwards, president
and CEO, and Mark Olson,
executive vice president
and chief financial officer,
share answers to frequently
asked questions.
What is the status of the BNS
acquisition integration?
Mark Olson: The August 2015
acquisition of TE Connectivity’s
Broadband Network Solutions (BNS)
business was transformational. We
broadened our position as a leading
infrastructure provider, expanded
our platform for innovative solutions
and positioned CommScope for the
coming convergence of wireline and
wireless networks. The acquisition
helped balance our revenue base
and brought us industry-leading
fiber connectivity solutions. Most
importantly, it provided CommScope
with thousands of highly talented,
experienced employees who
share our passion for network
infrastructure and enabling a
connected lifestyle.
By any measure, we’re off to a
tremendous start. Although there
is work to be done, we’ve made
significant steps in the integration
process. In 2016, we established
new organizational structures,
streamlined manufacturing and
distribution facilities, delivered
significant synergies and completed
the North American phase of
business system integration. During
2017, we expect to execute business
system integrations outside of North
America and optimize our new
organizational structure.
What ARE tHE new technologies
CommScope is preparing for?
Eddie Edwards: Three of the key
networking trends that will impact
CommScope and the industry are:
What are the most promising
growth opportunities ahead?
MO: We believe that the industry
is in the early stages of a multiyear
fiber-optic network build, with
North America leading the way.
We see fiber continuing to be the
highest growth area for CommScope,
especially in fiber-to-the-X (FTTX)
applications and traditional and
cloud-scale data centers.
Although global wireless growth
remains uneven (as it always
has been), we expect long-term
growth opportunities due to the
evolving network architecture. The
transition toward 5G, densification,
virtualization and centralization of
wireless networks all create growth
opportunities for CommScope.
Another compelling driver is network
convergence. We’re beginning to see
large operators look at their wireless
and wireline networks as integrated
parts of their overall infrastructure,
and no longer view their capital
expenditures solely in terms of
how much will be spent on one
versus the other.
• Network convergence
• Cloud-scale data centers
• Momentum toward 5G
wireless networks
Rather than building upon
independent wireline and wireless
networks, operators are now shifting
toward networks that combine voice,
video and data communications into
a single converged platform. These
changes are expected to help them
increase network efficiency and
capabilities, improve asset utilization
and reduce cost. We expect that
fiber and wireless technologies
will be essential building blocks of
converged networks.
Cloud-scale data centers are one of
the biggest growth opportunities
in the enterprise market. Due to
increases in data traffic and migration
of applications to the cloud,
enterprises are shifting spending
toward multi-tenant (co-located) and
large cloud-scale data centers. We’ve
recently reorganized our sales and
marketing organizations to enhance
our ability to serve this market.
We believe we are particularly well
positioned for the transition to 5G.
We understand the complexity and
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8
THE NEW COMMSCOPE
challenges because of our 40 years
of networking expertise, and our
participation in various 5G-related
industry groups. Operators will also
need to densify their networks,
meaning more metro cells, small
cells, fiber and backhaul capability.
We are able to provide these tools
to help operators evolve their
networks toward both 5G and FTTX,
a powerful combination that will give
us competitive advantages in the
years to come.
You doubled cash flow from
operations in 2016 to over $600
million. What are your financial
priorities and where do you plan
to reinvest your cash?
MO: We are particularly proud of our
strong cash flow generation, which
provides tremendous opportunity
to us. We’ve repaid more than $800
million of debt since the acquisition
of BNS, and expect to repay over $1
billion of debt by year-end 2017. Our
priorities for cash are:
1. Reinvest in our business to drive
long-term success. This includes
investing more than $200
million annually in R&D and $80
million in capital expenditures,
while continuing to focus on
value-creating acquisition
opportunities.
2. Delever our balance sheet. When
we acquired BNS in August 2015,
our net leverage ratio was about
5x. By year-end 2016, our net
leverage ratio was approximately
3.7x, and we expect to be near
3x by year-end 2017.
3. Execute other shareholder-
friendly actions, which may
include share repurchases
or dividends.
What differentiates CommScope
from its competitors?
EE: We believe we stand out for a
variety of reasons, which include our:
• Deeply talented, richly
experienced and diverse global
team of employees.
We have numerous other strengths,
but these highlight how CommScope
is well-poised to deliver on
future opportunities and help our
customers every step of the way.
• More than 10,000 patents and
patent applications globally that
support our industry-leading
solutions.
• Global manufacturing and
distribution network, putting
us close to our customers and
delivering a level of consistent
operational excellence.
• Leading positions in the markets
we serve, as a global leader
in connectivity and essential
infrastructure solutions.
• Extensive global sales and partner
channels, especially our strong
relationships with customers in
more than 100 nations.
• Senior executives’
deep experience in the
communications infrastructure
industry, and our team’s strong
track record of establishing
leadership positions in new
markets, managing cash flows,
delivering profitable growth
across various economic cycles,
and integrating acquisitions.
• Integrated solutions for
wireless, enterprise, fiber-optic
and broadband networks,
combined with an increasing
focus on innovating through
R&D investment and strategic
acquisition.
What are some key areas of
focus for CommScope in 2017?
EE: CommScope’s high-level 2017
priorities build off of the significant
accomplishments of prior years and
will fuel our goal for long-term success.
Our two top priorities as a company
are to complete the integration of
BNS and CommScope, and to meet
our financial commitments, including
accelerating our growth, exceeding our
synergy targets and generating strong
cash flow.
Our other priorities feed directly into
our multiyear corporate strategy. We
aim to become a preferred partner
to customers and others in the
industry, playing a more integral role
in a broader ecosystem that brings
increasing value to those we serve.
We also are directing our innovation
efforts toward problems that
matter most, whether it is internal
(simplifying processes and reducing
complexity) or customer-facing.
Lastly and significantly, we will
continue our strides toward creating
a culture of team and operational
excellence, where CommScope
is viewed as a top employment
destination with a high-quality, high-
performance culture.
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92016 annual reportEddie Edwards President and Chief Executive Officer171016_LOT 1_BODY_Commscope_AR_2017_v43.indd 113/8/17 2:59 PM 10
THE NEW COMMSCOPE
RICH LEGACY,
BRIGHT FUTURE
Communications technology
continues to evolve at an astounding
rate. Exponential growth in
video and “universal mobility” are
revolutionizing how we connect
to each other, necessitating better
network coverage, greater
broadband access, and increased
capacity and data storage to meet
consumer demand.
Networks have changed radically over
the 40 years CommScope has been in
business. Our heritage of innovation
helps us continue to support and
grow the connected lifestyle of today,
where much of the world relies on an
omnipresent network for daily life.
Mobile access and instant information
are embedded into every aspect of
how we work, live and play. Demand
for ever-increasing performance from
our networks continues to grow at an
aggressive pace.
At CommScope, we face the
challenges of the future head on.
We work with our customers to help
accommodate explosive data needs
and solve their most fundamental
communications challenges. We
partner with them to design, install
and optimize their networks to
minimize energy consumption, reduce
labor, lessen deployment time and
improve latency.
We see operators converging their
networks onto a single wired and
wireless-based platform, one in
which the new CommScope is
ideally positioned with expertise and
innovative solutions to support.
From the backbone to the cloud,
then to the data center, office,
venue, home or personal device, we
help create the most efficient and
effective networks. Through our
fiber connectivity solutions or our
peerless antenna and RF solutions,
to every connector and software that
lies between, we are committed to
building faster connections for the
always-on lifestyle.
1
Connectivity
1
Connectivity Solutions (Wired)
CommScope provides state-of-the-art connectivity solutions and
network intelligence for indoor and outdoor wired communication
networks, including a broad portfolio of FTTX solutions.
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11
2
Mobility
2
Mobility Solutions (Wireless)
CommScope provides leading wireless RF network connectivity,
DAS solutions and distributed radio (small cell) solutions for
wireless communication networks.
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12
THE NEW COMMSCOPE
OUR TOP NEW FIBER AND
WIRELESS INNOVATIONS
Recently we unveiled the Top 40
innovations made by CommScope,
or one of its acquired companies,
as part of our 40th anniversary
celebration. We are proud of all
our innovations, past and present.
Now, we look to some of our
most promising wireless and fiber
innovations that we hope will become
essential building blocks for the
networks of the future. We believe
these achievements demonstrate
CommScope’s commitment, abilities
and track record in these pivotal areas
of expertise.
Fiber Indexing
Fiber Flex Foil
TENIO™ Fiber Closure System
What is it?
What is it?
What is it?
Indexing uses hardened connectivity
and 12-strand fiber cables in outside
plant environments to eliminate
splicing and enable faster plug-
and-play installations of fiber and
terminals for FTTX deployments.
What are the benefits?
The standardized approach can
speed rollouts of FTTX networks,
while reducing inventory needs and
providing cost savings.
A fiber flex foil is a fully automated,
compact fiber management system
for high-density data center
applications.
A modular gel-sealed fiber
closure system designed for
use in outside plant fiber access
(distribution, drop) networks.
What are the benefits?
What are the benefits?
It is smaller, more error-proof,
lighter, and more flexible compared
to conventional fiber management
systems, and is able to handle large
numbers of fibers.
It is 30 percent smaller than
comparable closures, and easier
and faster to install, requiring less
labor, increasing efficiency and
reducing costs.
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13
Sentinel® Class 4
Microwave Antenna
PowerShift®
OneCell® C-RAN
Small Cells
What is it?
What is it?
What is it?
The first cost-effective ETSI Class
4-compliant microwave antenna to
enable more same-area links with
high gain and low interference.
What are the benefits?
It allows higher network density with
low interference and makes spectrum
usage more efficient, considerably
lowering licensing costs.
A dynamic power supply solution
for cellular networks that optimizes
the energy delivered to radio units.
What are the benefits?
It conserves electricity by
dynamically regulating the power
supplied to radios and decreases
costs for network operators by
eliminating the need to replace
existing power cables.
An indoor small cell solution,
which uses Cloud RAN (C-RAN)
architecture to create a single cell
across multiple radios.
What are the benefits?
It eliminates the need for subscribers’
devices to hand off between cells
while multiplying capacity with
multiple virtual cells.
Powered FIBER
Cable System
FACT™ Optical
Distribution Frame
ION-E® In-Building Wireless
What is it?
What is it?
What is it?
A powered fiber cable system that
incorporates DC power and fiber-
based Ethernet connectivity in one
cable, extending power to a device up
to two miles away.
A fiber shelf/drawer platform that
secures cables without the need
for cable ties, cable channels and
lacing cords to ensure safe and easy
shelf movement.
What are the benefits?
What are the benefits?
It dramatically reduces the need for
complex engineering while lowering
the cost of furnishing electrical power
to remote devices, such as cameras,
radio access points and small cells.
It allows a toolless installation of the
shelf into the fiber frame, eliminating
the need for cable dressing and
enabling less-skilled technicians
to deploy fiber. It offers more
connections and is more compact.
A unified wireless infrastructure
leveraging Ethernet cabling and
frequency-agnostic remote antenna
units to deliver solutions to in-
building wireless coverage and
capacity issues.
What are the benefits?
It features multiband, multi-operator
and multitechnology capabilities.
It uses the standard IT structured
cabling infrastructure common
to most commercial buildings.
Frequency-agnostic remote access
units make it future-proof.
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14THE NEW COMMSCOPEFIBERCLOUD DATA CENTERMETRO CELL CONCEALMENTDAS/Small cEllOUTSIDE PLANTMACRO CELL TOWERCENTRAL OFFICETHE COMMSCOPE ECOSYSTEMClOud RAN NODES14THE NEW COMMSCOPE171016_LOT 1_BODY_Commscope_AR_2017_v38.indd 143/7/17 5:10 PM 152016 annual reportFIBERCATV HEADENDRESIDENTIAL/MDUINTELLIGENT BUILDINGCOLLEGE CAMPUSMICROWAVE BACKHAULFIBER BACKhaulPower SolutionsWe participate in the large and growing global market for connectivity and essential communications infrastructure. CommScope’s portfolio includes robust and innovative wireless and fiber connectivity solutions for today’s evolving needs. Our solutions are found in some of the largest venues and outdoor spaces; in data centers and buildings of all shapes, sizes and complexities; at wireless cell sites; in telecom central offices and cable headends; in FTTX deployments; and in airports, trains and tunnels. CommScope is at the forefront of enabling the connected lifestyle.LARGE VENUE WIRELESS2016 annual report15171016_LOT 1_BODY_Commscope_AR_2017_v38.indd 153/7/17 5:10 PM 16
THE NEW COMMSCOPE
COMMSCOPE AT A GLANCE
COMMSCOPE OVERVIEW
CommScope is one of the world’s
premier network infrastructure
providers. We enable and empower
many of the top-performing wireless,
telecommunications, business
enterprise, broadband and cable
television networks in existence today.
The most advanced networks run
on CommScope technology, serving
customers in more than 100 nations,
with more than 25,000 employees,
through a wide variety of wireless and
connectivity solutions.
Our size, reach, expertise and
operational precision position us to
enable the future of communications
around the globe. We are delivering
more innovation, smarter solutions
and greater scale for customers who
demand:
• More bandwidth and capacity
• Better performance and availability
• More efficient energy usage
• Simpler, faster technology
migrations
Our culture of innovation is supported
by a legacy of excellence. Our experts
helped write the standards for nearly
every evolution of wired and wireless
network technology. CommScope
was instrumental in the creation of:
• Cable television infrastructure
• The first wireless networks
• The first data centers
• The first intelligent buildings
Vital networks around the world run
on CommScope solutions.
$4,016,600,000
$3,321,900,000
$3,275,500,000
$3,024,900,000
$3,188,900,000
$1,930,800,000
Andrew
acquisition
FINANCIAL
CRISIS
2007
2008
2009
2010
2011
171016_LOT 1_BODY_Commscope_AR_2017_v38.indd 16
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2016 annual report
17
2016
~$5BILLION
Annual revenue
Global employees
>25,000
>10,000
GLOBAL PATENTS AND
PATENT APPLICATIONS
$3,829,600,000
$3,807,800,000
$4,923,600,000
$3,321,900,000
$3,480,100,000
$3,275,500,000
BNS
ACQUISiTION
Sales Dollars
2012
2013
2014
2015
2016
171016_LOT 1_BODY_Commscope_AR_2017_v38.indd 17
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18
THE NEW COMMSCOPE
Segment description
MOBILITY SOLUTIONS SEGMENT ~$2B (2016 revenue)
CommScope is a global leader in providing infrastructure for the most advanced
wireless networks. CommScope’s Mobility Solutions segment portfolio
includes the integral building blocks for cellular base station sites and related
connectivity; indoor, small cell and distributed antenna wireless systems; and
wireless network backhaul planning and optimization products and services.
Customers
• Wireless network operators
• Neutral hosts and managed
• Original equipment manufacturers
• Network backhaul operators
• Government agencies and municipalities
service providers
• Public venues
Business applications
Infrastructure solutions for:
• Cellular networks
• Specialized coverage and capacity for
• Indoor wireless coverage and capacity
large-scale events and venues
• Network densification
• Network backhaul
• Centralized RAN and Cloud RAN
Representative
products/solutions
• Outdoor sites:
• Indoor coverage and capacity:
◦ Base station antenna systems
◦ Distributed antenna systems
◦ Interconnectivity (fiber, hybrid fiber/
power and coaxial feeder cabling;
connectors and assemblies)
◦ RF conditioning (amplifiers, filters,
diplexers, combiners)
◦ Installation systems (mounts and
◦ Small cells
◦ Unified wireless infrastructure
◦ Repeaters, boosters and
radiating cabling
monopoles)
• Spectrum management consulting
and services
◦ Metro cell concealment solutions
◦ Design and installation services
◦ Pre-assembled and tested tower
top systems
◦ Backhaul and power systems
◦ Network optimization and testing
Industry drivers
• Growth in wireless data consumption
• Rapid adoption of consumer
technology (smartphones, tablets,
virtual reality, gaming)
• Operator drive to virtualization,
C-RAN and densification
• Global deployment of 4G LTE and pre-
standard 5G networks
• Mobility and wireless requirements
in enterprise buildings and large
public venues
• Network coverage needs in
tunnels, railways and other hard-to-
reach locations
171016_LOT 1_BODY_Commscope_AR_2017_v38.indd 18
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MOBILITY SOLUTIONS SEGMENT ~$2B (2016 revenue)
CONNECTIVITY SOLUTIONS SEGMENT ~$3B (2016 revenue)
2016 annual report
19
CommScope is a global leader in innovative fiber-optic and copper connectivity
solutions for use in business enterprise, telecommunications, cable television
and residential broadband networks. CommScope’s Connectivity Solutions
segment portfolio includes innovative solutions for indoor environments, such as
commercial buildings, data centers, central offices and cable television headends,
and outdoor environments, such as cable access and FTTX networks.
• Multiple system operators
• Small- to mid-sized businesses
• Broadband service providers
• Governments
• Telecommunications companies
• Data center owners and operators
• Global and large multinational
• Wireless network operators
companies
• Public venues
Infrastructure solutions for:
• Hyperscale and large data centers
• Fiber-to-the-premise networks
• Buildings and campus environments
• Telecom central offices
• Outside plant
• Indoor wireless
• Hybrid fiber coax networks
• Enterprise cloud services
• Telecom and broadband:
• Enterprise:
◦ Single mode and multimode fiber
and apparatus
◦ FTTX solutions
◦ High-capacity fiber and apparatus
◦ Plug-and-play hardened connector
systems for harsh environments
◦ Fiber distribution hubs and
management systems
◦ Central office connectivity
and equipment
◦ Coaxial cabling and apparatus
◦ Residential connectivity (amplifiers,
splitters, drop cable, interconnects)
◦ Closures, cabinets and terminals
◦ Conduit and cable-in-conduit
◦ High-density fiber connectivity
(shelves/panels, modules, trunks,
jumpers/arrays, cable)
◦ Pre-terminated fiber and
copper connectivity
◦ Fiber and central office LAN solutions
◦ Data center raceways and
cable assemblies
◦ Structured copper cabling systems
and apparatus
◦ Pre-terminated fiber and copper
cabling
◦ Intelligent infrastructure management
hardware and software
◦ Data center management
• Bandwidth demand
• Big Data
• Network security and reliability
• Cloud computing
• Internet of Things
• Efficiency and speed of deployment
• Need for greater monitoring
and management
• Indoor mobility
• Competition between traditional
operators and new entrants
171016_LOT 1_BODY_Commscope_AR_2017_v38.indd 19
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20THE NEW COMMSCOPECommScope’s leaders have adopted a sustainable philosophy on corporate responsibility that embraces our core company values and holds us accountable to produce smart solutions that respect people and the planet.Meaningful integrity is a decisive personal and company-wide commitment to enable faster, smarter and more sustainable solutions while demonstrating the utmost respect for our human and natural resources.Our commitment enables us to invest wisely in our future. By utilizing innovative technology, intelligent engineering and energy-efficient designs, we’re building sustainable networks that make our customers more agile while also preserving the natural ecosystems from which we source our raw materials. Our many sustainability efforts capture the essence of our long-term commitment to the people we employ, the customers we serve, the resources we use, the technologies we produce and the future we’re creating together.To learn more about corporate responsibility and sustainability at CommScope, please visit commscope.com/About-Us/Corporate-Responsi-bility-and-Sustainability/.INVESTING IN OUR FUTURE171016_LOT 1_BODY_Commscope_AR_2017_v38.indd 203/3/17 8:40 PM 212016 annual report12345678910BOARD OF DIRECTORS1. Austin A. Adams Audit Committee Member Former EVP and CIO of JPMorgan Chase2. Timothy T. Yates Audit Committee Chair Former CEO and President of Monster Worldwide, Inc.3. Campbell (Cam) R. Dyer Compensation Committee and Nominating Committee Member Managing Director The Carlyle Group4. Thomas J. Manning Audit Committee Member Lecturer in Law at The University of Chicago Law School5. Marvin (Eddie) S. Edwards Jr. President and Chief Executive Officer CommScope6. Frank M. Drendel Founder and Chairman* CommScope7. Joanne m. Maguire Former EVP Lockheed Martin Space Systems Company8. Stephen (Steve) C. Gray President and Chief Executive Officer Syniverse Holdings, Inc. Chairman of Gray Venture Partners9. Claudius (Bud) E. Watts IV Compensation Committee and Nominating Committee Chair Managing Director The Carlyle Group 10. L. William (Bill) Krause Compensation Committee and Nominating Committee Member Chairman, Veritas Holding Ltd. Retired Chairman & CEO, 3Com Corporation* Non-Executive Chairman171016_LOT 1_BODY_Commscope_AR_2017_v38.indd 213/3/17 8:40 PM 22
THE NEW COMMSCOPE
Reconciliation of gaap measures
to non-gaap adjusted measures
(Unaudited -- in millions, except per share amounts)
Year Ended December 31
Reconciliation of adjusted operation income
Operating income, as reported
Adjustments:
Amortization of purchased intangible assets
Restructuring costs, net
Equity-based compensation
Asset impairments
Purchase accounting adjustments(1)
Integration and transaction costs(2)
Total adjustments to operating income
Non-GAAP adjusted operating income
Reconciliation of adjusted NET income
Income (loss) before income taxes, as reported
Income tax expense, as reported
Net income (loss), as reported
Adjustments:
Total pretax adjustments to operating income
Pretax amortization of deferred financing costs & OID(3)
Pretax acquisition related interest(3)
Pretax loss on debt transactions(4)
Pretax net investment gains(4)
Tax effects of adjustments and other tax items(5)
Non-GAAP adjusted net income
Diluted EPS, as reported
Non-GAAP diluted EPS(6)
Reconciliation of adjusted FREE CASH FLOW
Cash flow generated by operating activities, as reported
Less: Additions to property, plant and equipment
Adjustments:
Capital spending for BNS acquisition integration
Cash paid for integration and transaction costs
Debt redemption premium
Non-GAAP adjusted free cash flow
2014
$577.4
178.3
19.3
21.1
12.1
(11.9)
12.1
231.0
$808.4
$317.1
(80.3)
$236.8
231.0
32.4
-
93.9
(12.3)
(155.1)
$426.7
$1.24
$2.23
$289.4
(36.9)
-
-
93.9
$346.4
2015
$181.6
220.6
29.5
28.7
90.8
81.7
96.9
548.2
$729.8
$(62.0)
(8.9)
$(70.9)
548.2
22.3
29.2
-
(2.7)
(164.4)
$361.7
$(0.37)
$1.86
$302.1
(56.5)
12.7
96.1
-
$354.4
2016
$574.8
297.2
42.9
35.0
38.6
0.6
62.3
476.6
$1,051.4
$272.6
(49.7)
$222.8
476.6
21.4
-
17.8
(0.5)
(218.9)
$519.2
$1.13
$2.64
$606.2
(68.3)
6.1
64.8
17.8
$626.6
(1) Reflects non-cash charges resulting from purchase accounting adjustments, including adjustments to the estimated fair value of contingent consideration payable.
(2) Reflects integration costs related to the acquisition of the BNS business, transaction costs related to potential and consummated acquisitions and costs related to secondary stock offerings.
(3) Included in interest expense.
(4) Included in other expense, net.
(5) The tax rates applied to adjustments reflect the tax expense or benefit based on the tax jurisdiction of the entity generating the adjustment. There are certain items for which we expect little or
no tax effect. Adjustments for 2016 reflect the exclusion of a decrease in a valuation allowance while 2015 adjustments reflect the exclusion of an increase in a valuation allowance.
(6) Diluted shares used in the calculation of non-GAAP adjusted diluted EPS for the years ended December 31, 2016, 2015 and 2014 are 196.5 million, 194.2 million and 191.5 million, respectively.
Note: Components may not sum to total due to rounding.
CommScope management believes that presenting operating income, net income, diluted EPS and cash flow information excluding the special items noted above provides meaningful information
to investors in understanding operating results and may enhance investors’ ability to analyze financial and business trends, when considered together with the GAAP financial measures. In addition,
CommScope management believes that these non-GAAP financial measures allow investors to compare period to period more easily by excluding items that could have a disproportionately
negative or positive impact on results in any particular period.
171016_LOT 1_BODY_Commscope_AR_2017_v38.indd 22
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FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2016
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
(State or other jurisdiction of
incorporation or organization)
1100 CommScope Place, SE
Hickory, North Carolina
(Address of principal executive offices)
28602
(Zip Code)
27-4332098
(I.R.S. Employer
Identification No.)
(828) 324-2200
(Telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $.01 per share
Name of each exchange on which registered
Nasdaq
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes No
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 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 and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted 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 and post such
files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. (Check one):
Accelerated filer
Large accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes No
The aggregate market value of the shares of Common Stock held by non-affiliates of the registrant was approximately $4,955
million as of June 30, 2016. For purposes of this computation, shares held by affiliates and by directors and officers of the
registrant have been excluded.
As of February 6, 2017 there were 193,946,169 shares of the registrant’s Common Stock outstanding.
Portions of the Registrant’s Proxy Statement for the 2017 Annual Meeting of Stockholders are incorporated by reference in
Part III hereof.
Documents Incorporated by Reference
CommScope Holding Company, Inc.
Form 10-K
December 31, 2016
Table of Contents
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Part II
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedule
Signatures
3
17
32
32
33
33
33
35
36
57
60
104
104
105
105
105
105
106
106
106
107
2
PART I
Unless the context otherwise requires, references to “CommScope Holding Company, Inc.,” “CommScope,” “the
Company,” “we,” “us,” or “our” are to CommScope Holding Company, Inc. and its direct and indirect subsidiaries
on a consolidated basis.
This Annual Report on Form 10-K includes forward-looking statements identified by certain terms and phrases
including but not limited to “intend,” “goal,” “estimate,” “expect,” “project,” “projections,” “plans,” “anticipate,”
“should,” “could,” “designed to,” “foreseeable future,” “believe,” “think,” “scheduled,” “outlook,” “target,”
“guidance” and similar expressions. Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date the statement was made. Item 1A, “Risk Factors,” of this Annual Report
on Form 10-K sets forth more detailed information about the factors that may cause our actual results to differ,
perhaps materially, from the views stated in such forward-looking statements. We are not undertaking any duty or
obligation to update any forward-looking statements to reflect developments or information obtained after the date
of this Annual Report on Form 10-K, except to the extent required by law.
ITEM 1.
BUSINESS
Company Overview
We are a global leader in providing infrastructure solutions for the core, access and edge layers of communications
networks. During 2016, CommScope celebrated its 40th anniversary serving the needs of communication networks.
Our portfolio includes robust and innovative wireless and fiber optic solutions for today’s evolving digital lifestyle.
Our talented and experienced global team helps customers increase bandwidth; maximize existing capacity; improve
network latency (i.e., response time) and performance; and simplify technology migration. Our solutions are found
in some of the largest venues and outdoor spaces; in data centers and buildings of all shapes, sizes and complexities;
at wireless cell sites; in telecom central offices and cable headends; in fiber-to-the-X (FTTX) deployments; and in
airports, trains, and tunnels. Vital networks around the world run on CommScope solutions.
We have a team of over 25,000 people to serve our customers in over 100 countries through a network of more than
30 world-class manufacturing and distribution facilities strategically located around the globe. Our customers
include substantially all of the leading global telecommunication operators and thousands of enterprise customers,
including many Fortune 500 enterprises, and leading multi-system operators (MSOs). We have long-standing, direct
relationships with our customers and serve them through a direct sales force and a global network of channel
partners.
On August 28, 2015, we completed the acquisition of TE Connectivity’s Broadband Network Solutions (BNS)
business in an all-cash transaction valued at approximately $3.0 billion. The BNS business provides fiber optic and
copper connectivity for wireline and wireless networks. Our results include net sales generated by the BNS business
of approximately $1.8 billion and $0.5 billion for the years ended December 31, 2016 and 2015, respectively.
During 2016, The Carlyle Group (Carlyle) sold the remaining portion of its ownership of our Company and no
longer holds any stock in CommScope.
As of January 1, 2016, we reorganized our internal management and reporting structure as part of the integration of the
BNS acquisition. The reorganization changed the information regularly reviewed by our chief operating decision maker
for purposes of allocating resources and assessing performance. As a result, we are reporting financial performance for
2016 based on these operating segments: CommScope Connectivity Solutions (CCS) and CommScope Mobility Solutions
(CMS). Prior to this change, we operated and reported based on the following operating segments: Wireless, Enterprise,
Broadband and BNS. Prior period amounts have been revised to conform to the 2016 presentation.
For the year ended December 31, 2016, our revenues were $4.92 billion and our net income was $222.8 million. For
further discussion of our current and prior year financial results, see Part II, Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements included in
Part II, Item 8 of this Annual Report on Form 10-K.
3
CommScope provides solutions for the core, access and edge layers of telecommunications networks. The core layer
is the central part of a network that provides very high-speed services to entities that are connected to the network.
The core layer includes data centers, headends and central offices and the high-speed networks that connect them.
The access layer connects subscribers and edge devices to the core and includes outside-plant distribution networks.
The access layer typically runs from a central office or wiring center to cell sites, commercial buildings or homes.
The edge layer is the entry point on or off the network. The edge network includes routers, certain wireless base
stations and building and campus networks, including single and multi-dwelling unit residences. The table below
summarizes 2016 revenue, global leadership position and solutions offerings for our two segments:
Connectivity Solutions (CCS)
Mobility Solutions (CMS)
2016 Revenue
$2,966 million
$1,958 million
Global
Leadership
Position
A global leader in connectivity and network
intelligence for indoor and outdoor network
applications
A global leader in merchant radio frequency
(RF) wireless network connectivity,
distributed antenna systems (DAS)
solutions and distributed radio (small cell)
solutions
Network
CORE
High density fiber connectivity (optical
distribution frames, shelves/panels,
modules, trunks, jumpers/arrays and cable)
Pre-terminated fiber/copper connectivity
Automated infrastructure management
Fiber optic raceways, closures and sealing
systems
Network
ACCESS
High-capacity fiber and apparatus
“Plug and Play” hardened connector systems
for harsh environments
Fiber optics and copper closures and sealing
systems
Fiber optic and coaxial cabling systems
Fiber distribution hubs and management
systems
Broadband MSO solutions
Automated infrastructure management
Macro, metro and small cell
solutions
Specialized antenna systems
Factory-assembled tower-top
solutions
Backhaul antennas and power
solutions
Metro cell concealment solutions
Single mode and multi-mode fiber and apparatus
Coaxial and structured copper cabling systems
Network
EDGE
and apparatus
Campus network fiber cabling systems
Physical layer maintenance
Automated infrastructure management
Intelligent building infrastructure
Metro cell concealment solutions
Active DAS and small cell solutions
Antennas and filters
Coax and powered fiber cabling systems
In-building cellular solutions
4
Industry Background
We participate in the large and growing global market for connectivity and essential communications infrastructure.
This market is being driven by the growth in bandwidth demand associated with the continued adoption of
smartphones, tablets and machine-to-machine (M2M) communication as well as the proliferation of data centers,
Big Data, cloud-based services, streaming media content and the Internet of Things (IoT). Telecommunications
operators are deploying 4G and fiber optic networks and are planning 5G networks to support the dramatic growth
in bandwidth demand. As users consume more data on smartphones, tablets and computers, enterprises face a
growing need for higher bandwidth networks, in-building cellular coverage and more robust, efficient and intelligent
data centers. MSOs are investing in their networks to deliver a competitive triple-play of services (voice, video and
high-speed data) and to maintain service quality. There are several major trends that we expect to drive network
deployments and investment, including:
Evolving Network Architecture
The pace of change in networking has increased as consumers and data-driven businesses utilize more bandwidth
and shift toward ubiquitous mobile applications. Exponential growth in video and “universal mobility” are
revolutionizing how we connect to each other and changing the network architecture needed to support consumer
demand. This trend requires better network coverage, greater broadband access and increased capacity and data
storage.
Operators are working to transition their networks to become faster and more efficient. CommScope sees several
key network trends that will continue to impact CommScope and the industry during 2017 and beyond:
1) Network Convergence: Operators are moving toward converged or multi-use network architectures.
Rather than building upon independent wireline and wireless networks, operators are now shifting toward
networks that combine voice, video and data communications into a single, converged network. These
changes are expected to help operators increase the efficiency and capability of the network, improve asset
utilization and reduce cost. We expect that fiber and wireless technologies will be essential building blocks
of converged networks.
2) Densification: As wireless operators work to meet consumer demand, they utilize three primary tools to
increase capacity: a) adding wireless spectrum, b) improving network efficiency and c) increasing network
density (i.e., adding more cell sites). Although the Company benefits from all three strategies, densification
of cell sites is expected to be a key driver as operators transition toward 5G networks. Densification
includes enhanced sectorization at macro cell sites, building new metro-level or small-cell sites and
establishing better in-building coverage. The Company expects that densification will require significant
fiber connectivity between wireless cell sites.
3) Virtualization and Centralization: Operators are virtualizing and centralizing wireless networks to make
them more flexible and efficient. The first step toward capacity virtualization is deploying centralized radio
access networks (CRAN). CRAN is a centralized computing architecture for radio networks which requires
installation of direct fiber connectivity to individual cell sites. By leveraging the signal carrying capacity of
fiber, operators can centrally control dozens or even hundreds of cell sites in the network. Centralizing
independent wireless base stations can support the efficient distribution of capacity, improve network
latency, reduce the amount of equipment needed at each individual cell site, and lower power and leasing
costs. These CRAN nodes will evolve to become “Cloud RAN” nodes as operators “virtualize” the network
by combining hardware and software network resources and network functionality into a single, software-
based administrative entity. Network virtualization also supports the transition to 5G.
4) Optimization: Deployment of wired and wireless networks is complex and costly. Operators are highly
focused on optimizing network resources and reducing the total cost of ownership. Optimization includes
techniques such as innovative fiber connectivity solutions to reduce installation time, network intelligence
to monitor equipment efficiency, spectrum reuse, offloading traffic into Wi-Fi and utilization of unlicensed
spectrum—especially inside buildings.
5
FTTX Deployments
Residential and business bandwidth consumption continues to grow substantially. The proliferation of over-the-top
video, multiscreen viewing, cloud services and social media are prompting operators to accelerate fiber
deployment. Operators can increase network capacity by installing fiber deeper into their networks. Although
consumer devices are increasingly connected to the network via a wireless connection such as LTE or Wi-Fi, these
wireless access points must have abundant backhaul capacity available to provide consumers the experience they
expect. Operators around the globe are deploying fiber-to-the-node (FTTN), fiber-to-the-premises (FTTP) and fiber-
to-the-distribution point (FTTdP) to build next generation networks. These networks use the capabilities of fiber to
enable consumers access to content at higher speeds with improved response time. As networks improve and deliver
higher speed and greater reliability, many operators are choosing to provide both residential and business services
over a common physical layer infrastructure, saving them time and money. In addition, with the coming
deployments of outdoor small cells and fixed wireless broadband to the home, these same service providers are
hoping to utilize this common physical layer infrastructure to provide connectivity to these wireless access points.
FTTX deployments in North America are expected to remain one of the largest growth drivers for the industry over
the next few years.
Shift in Enterprise Spending
Several trends in the enterprise market are expected to create opportunities and challenges. First, the shift toward
mobility in business enterprises is expected to impact the amount and type of structured copper connectivity needed
over the longer-term. As the bandwidth requirements for Wi-Fi and indoor cellular networks increase, more access
points will be needed throughout commercial buildings. As a result, enterprises are expected to adjust in-building
cabling designs to deliver both power and high-speed data to those devices. While enterprises continue to need
copper connectivity to power edge devices, enterprises are deploying fiber more extensively in both corporate
facilities and in data centers. Over the longer term, we expect the ongoing demand for fiber solutions to be
somewhat offset by decelerating demand for copper solutions in networks. Due to huge increases in data traffic and
migration of applications to the cloud, enterprises are also shifting spending toward multi-tenant (co-located) data
centers. In addition, new hyperscale cloud service providers now offer cloud data center services as a replacement to
in-house corporate data centers.
An increase in average data center size and the number of assets in a data center significantly raises the total cost of
ownership and the complexity of managing data center infrastructure. Data center operators strive to manage their
resources efficiently and to reduce energy consumption by monitoring all elements within the data center.
Automated infrastructure management software helps operators improve operational efficiency, maximize capability
and reduce costs by providing clear insight into cooling capacity, power usage, utilization, applications and overall
performance.
Momentum of 5G
Although not expected to be standardized before the end of the decade, 5G wireless is evolving from an industry
vision toward a tangible, next generation wireless technology. Some operators are already planning for a transition
to 5G wireless and have announced trials and pre-standard deployments of 5G technology. The primary uses for 5G
are expected to include:
o Enhanced mobile broadband—to support significant improvement in data rates and user
experience,
o
IoT and M2M communications to support the expected billions of connections between machines
as well as short bursts of information to other systems and
o Ultra-fast response time—to support applications like public safety, autonomous vehicles and
drones.
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Densification, virtualization and optimization of the network are all required to support 5G. Operators will need to
both acquire and launch new spectrum for 5G, as well as continue their strategy of re-allocation of spectrum from
one generation to another. Some of this spectrum will be at much higher frequencies and will use new technologies
to deliver exceptional amounts of bandwidth to subscribers. 5G also requires significant fiber to connect wireless
access points to each other to improve latency of the network. As operators transition toward 5G, they must also
manage fundamental network deployment issues of site acquisition, power, backhaul and in-building wireless
proliferation.
Metro Cell, DAS and Small Cell Investment to Enhance and Expand Wireless Coverage and Capacity
The traditional macro cell network requires mobile users to connect directly to macro cell base stations. Macro cells
are primarily designed to provide coverage over wide areas and typically transmit high power. They are not optimal
for dense urban areas where physical structures often create coverage gaps and capacity is frequently constrained.
Adding new macro cells or increasing the number of sectors on existing sites has been the traditional way to increase
mobile capacity and will continue to be an important layer of the network. As demand growth continues to outpace
capacity growth, new solutions are required for densely populated areas. Metro cells and indoor networks are
emerging as important layers of the network. Metro cells are smaller outdoor cell sites, located closer to the ground,
having a lower power level than a traditional macro cell site. Metro cells blend into their environment and are often
found integrated with traditional street furniture, which helps alleviate zoning restrictions that have made traditional
deployments difficult. Finally, there are small cell and DAS solutions that address the capacity and speed
requirements from an indoor perspective. These systems provide coverage and capacity to the indoor environment
and reduce the load from the macro and metro layers, which improves overall network performance. Small cell and
DAS systems may range from small single operator, single-band, low-capacity systems for use in enterprise
buildings to large multi-carrier, multi-technology, multi-band systems for use in high-capacity public venues.
Wireless operators view in-building coverage as a critical component of their network deployment strategies. Key
challenges for wireless operators in providing in-building cellular coverage are signal loss while penetrating
building structures and interference created by mobile devices while connected to macro cell sites. In-building DAS
solutions bring the antenna significantly closer to the user, which results in better coverage and capacity while
simultaneously reducing interference. In-building DAS provides seamless signal handover for users inside buildings
and can support multi-operator, multi-frequency and multi-protocol (2G, 3G, 4G) solutions. Small cells are self-
contained radio units that generally provide single frequency and single-provider service to a relatively small area,
similar to a Wi-Fi access point. The benefits of small cell technologies are becoming increasingly important with the
trend towards mobility in the enterprise market.
Operators also commonly use traditional DAS solutions to address outdoor capacity issues in urban areas, deploying
them in effect as metro cells. By deploying multi-band, multi-technology solutions in this way, operators can create
small coverage re-use areas, which optimizes use of existing licensed spectrum by increasing repeated usage of the
same frequencies within a defined coverage area.
Strategy
We believe consumer demand for bandwidth, competition among operators and continuous technology
advancements are driving communication network deployments and investment. We believe these trends position us
for future growth and value creation because of our leading positions across diverse and growing segments and
geographies, our platform of innovative solutions, complementary market opportunities and our strong financial
profile. We see growth opportunities in the markets we serve and it is our plan to capitalize on these opportunities by
providing our customers with products that can transform their networks with efficient solutions that optimize
network performance and deployment speed. Our strategy and 2017 priorities are to:
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Become a Preferred Partner to Our Customers
We plan to expand our industry leadership positions in fiber and wireless by developing value-creating partner
relationships with our customers, suppliers, distributors as well as our channel and technology partners. We intend
to expand these relationships by innovating, collaborating and selling with our customers. We expect to meet our
commitments and maintain our product quality while collaborating with our customers to provide solutions to their
key network challenges.
Relentlessly Focus on Innovation to Solve Critical Problems
We plan to build on our legacy of innovation and on our worldwide portfolio of patents and patent applications by
continuing to invest in research and development. We also intend to utilize our deep industry expertise to offer
unique perspectives to solve customers’ challenges. We intend to focus our investment on high growth markets.
Enhance Sales Growth
We expect to capitalize on our technology leadership, operational excellence, scale, market position, broad product
offerings and quality to generate growth opportunities by:
Differentiating with speed. We intend to make it easier for customers to do business with CommScope by
improving our business velocity related to decisions, delivery, sales and customer service.
Enabling growth. We intend to drive organic sales growth by refocusing on key markets and developing
processes and tools to turn new ideas into growth.
Continuing to drive solutions offerings. We intend to focus on selling solutions to our customers consistent
with their evolving needs, thereby enhancing our position as a strategic partner. With the addition of the
robust fiber portfolio of the BNS business, we have broadened our range of solutions.
Making strategic acquisitions. We will continue our disciplined approach to evaluating, executing and
integrating strategic acquisitions.
Expand Culture of Excellence
We strive to be viewed as a top employment destination where premier talent is hired, developed and retained. We
also intend to make high-performance and operational excellence the standard throughout the Company while
prioritizing collaboration and zero-tolerance for quality issues.
Complete the Integration of BNS and CommScope
We have successfully completed the first full year of our three-year BNS integration plan. During 2016, we
established a new organizational structure, streamlined manufacturing and distribution facilities, delivered
significant synergies and completed the North American phase of system integrations. During 2017, we expect to
execute system integrations outside of North America and optimize our new organizational structure and continue to
streamline our manufacturing and distribution operations.
Continue to Enhance Operational Efficiency and Cash Flow Generation
We continuously pursue strategic initiatives aimed at optimizing our resources by reducing manufacturing and
distribution costs and lowering our overall cost structure. We believe that we have a strong track record of
improving operational efficiency and successfully executing on formalized annual profit improvement plans, cost-
savings initiatives and working capital improvements to drive future profitability and cash flows. We intend to use
the cash we generate to invest in our business, reduce our indebtedness and make strategic acquisitions. We may
also consider returning capital to stockholders through stock repurchases.
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Operating Segments
On January 1, 2016, we reorganized our internal management and reporting structure as part of integrating the BNS
acquisition. The reorganization changed the information regularly reviewed by our chief operating decision maker
to allocate resources and assess performance. We are reporting financial performance based on these operating
segments: CCS and CMS. Prior to this change, we operated and reported based on the following operating
segments: Wireless, Enterprise, Broadband and BNS. Our consolidated results include the impact of the BNS
business subsequent to the acquisition date of August 28, 2015.
The distribution of net revenues between our two segments is as follows:
CCS
CMS
Total
Year Ended December 31,
2016
2015
2014
60.2%
39.8
100.0%
48.4 %
51.6
100.0 %
35.5%
64.5
100.0%
CommScope Connectivity Solutions Segment (CCS)
The CCS segment provides connectivity and network intelligence for indoor and outdoor network applications.
Indoor network solutions, which account for slightly over half of CCS net sales, are found in commercial buildings
and in the network core—which includes data centers, central offices and cable television headends. Our outdoor
network solutions are found in access and edge networks and include coaxial cabling, fiber optic cable and
connectivity solutions, including a robust portfolio of fiber optic connectors and fiber management systems. Fiber
optic solutions account for slightly less than half of CCS net sales.
Indoor Connectivity Solutions
We have a leading global market position in enterprise connectivity for data centers and commercial buildings. Our
solutions support mission-critical, high bandwidth applications. We integrate our structured cabling, connectors, in-
building cellular solutions and network intelligence capabilities to create physical layer solutions that enable voice,
video and data communication and building automation. We use proprietary modeling and simulation techniques to
optimize networks to provide performance that exceeds established standards. Our global network of partners offers
customers custom, turnkey network solutions that are tailored to each customer’s unique requirements.
We believe that our strong market position results from our differentiated technology, long-standing relationships
with customers and channel partners, strong brand recognition, premium product features and the performance and
reliability of our solutions. These comprehensive solutions, sold primarily under the SYSTIMAX, AMP
NETCONNECT and Uniprise brands, include optical fiber and twisted pair structured cable solutions, intelligent
infrastructure software and network rack and cabinet enclosures.
Our data center, central office and headend solutions include a robust portfolio of fiber optic connectors. We also
offer fiber management systems, patch cords and panels, complete cabling systems and cable assemblies for use in
offices and data centers. These connectivity solutions can deliver data speeds of more than 100 gigabits per second
(Gbps).
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Outdoor Connectivity Solutions
We have a leading global position in providing fiber optic and coaxial cable solutions that support the multichannel
video, voice and high-speed data services provided by telecommunications operators and MSOs. We provide a
broad portfolio of connectivity solutions including fiber-to-the-home (FTTH) equipment and headend solutions for
these customers. Our fiber optic connectivity solutions are primarily comprised of hardened connector systems,
fiber distribution hubs and management systems, couplers and splitters, “plug and play” multiport service terminals,
hardened optical terminating enclosures, high density cable assemblies, splices and splice closures. These products
are used in both local-area and wide-area networks and “last-mile” FTTH installations, including deployments of
FTTN, FTTP, and FTTdP to homes, businesses and cell sites. These networks use the capabilities of fiber to enable
consumers access to content at higher speeds and faster response times.
Our customers are pushing fiber deeper into networks. They are investing in broadband to deliver higher-speed data
to homes and businesses; fiber to macro cell towers, metro cells and small cells; and enabling network virtualization
in wireless networks. These networks are capital intensive with a high portion of deployment costs related to labor in
the field. We are focused on enabling solutions for our customers to build an effective and efficient FTTX network.
With our technological capabilities and diverse portfolio, we can help operators lower capital expenditures and
reduce the total cost of ownership by creating solutions that shift labor from the field to the factory. We have a
broad, technologically-advanced FTTX portfolio which we believe positions us to capitalize on the expected growth
in fiber networks.
CommScope Mobility Solutions Segment (CMS)
The CMS segment provides merchant RF wireless network solutions, as well as metro cell, DAS and small cell
solutions. Our macro cell site solutions can be found at wireless tower sites and on rooftops. Macro cell site
applications represent approximately three-quarters of our CMS segment net sales. Our metro cell solutions can be
found on street poles and on other urban structures. Our DAS and small cell solutions allow wireless operators to
increase spectral efficiency and enhance cellular coverage and capacity in challenging network conditions such as
commercial buildings, urban areas, stadiums and transportation systems.
Our solutions, marketed primarily under the Andrew brand, enable wireless operators to meet coverage and capacity
requirements for next generation networks. We focus our physical-layer solutions on all aspects of the Radio Access
Network (RAN) from the macro through the metro, to the indoor layer. Our macro cell site, metro cell site, DAS and
small cell solutions establish us as a global leader in RF infrastructure solutions for wireless operators and original
equipment manufacturers (OEMs). We strive to provide a one-stop source for managing the technology lifecycle of
a wireless network, including complete physical layer infrastructure solutions for 2G, 3G and 4G applications. In
preparation for 5G networks, we continue to invest heavily in relevant research and development, support customer
technology trials and actively participate in industry forums to help shape 5G standards. Our comprehensive
solutions include products for every major wireless protocol and allow wireless network operators to operate across
multiple frequency bands, reduce cost, achieve faster data rates, improve network latency and accelerate migration
to the latest wireless technologies. Our wireless solutions are built using a modular approach, which has allowed us
to leverage our core technology across generations of networks and mitigate technology risk. We provide a complete
portfolio of RF infrastructure products, and we are recognized for our leading technologies, best-in-class
performance, comprehensive product portfolio and global scale.
Our macro cell site solutions include base station antennas, microwave antennas, hybrid fiber-feeder and power
cables, coaxial cables, connectors and filters. We also provide a comprehensive portfolio at the base of the tower
including cabinets, platforms, fiber backhaul connectivity hubs and power solutions that allow operators to minimize
capital expenditures, operating expenses and deployment time.
Our metro cell solutions include RF delivery, equipment, housing and concealment. The fully integrated outdoor
systems include specialized antennas, filters/combiners, backhaul solutions, intra-system cabling and power
distribution, all minimized to fit an urban environment. These solutions facilitate site acquisition and improve RF
network performance in the metro area while minimizing interference with the macro layer. Furthermore, they
enable faster zoning approvals and expedite construction.
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Our small cell and DAS solutions are primarily comprised of distributed antenna systems and distributed cell
solutions. We have expanded our portfolio of wireless solutions through the 2015 acquisition of operations of
Airvana LP (Airvana), a leader in small cell solutions. This acquisition expanded our leadership and capabilities in
providing indoor wireless capacity and coverage. The combination of Airvana’s innovative small cell offerings and
our industry-leading DAS portfolio enables us to provide a broader range of solutions, addressing single-operator,
single-band, low capacity environments all the way through multi-carrier, multi-technology, multi-band, high
capacity environments.
Manufacturing and Distribution
We develop, design, fabricate, manufacture and assemble many of our products and solutions in-house at our
facilities located around the world. We have strategically located our manufacturing and distribution facilities to
provide superior service levels to customers. We utilize lower-cost geographies for high labor content products
while investing in largely automated plants in higher-cost regions close to customers. Most of our manufacturing
employees are located in lower-cost geographies such as Mexico, China, India and the Czech Republic. We
continually evaluate and adjust operations to improve service, lower cost and improve the return on our capital
investments. In addition, we utilize contract manufacturers for many of our product groups, including certain
cabinets and filter products. We added production capacity during 2016 to meet increased customer demand. We
expect to continue modifying global operations to adapt to changing product demand or business conditions.
Research and Development
Research and development is important to preserve and expand our position as a market leader and to provide the
most technologically advanced solutions in the marketplace. We invested over $200 million in research and
development during 2016 and expect to continue with substantial investments in future years. We intend to focus
our major research and development activities on high-growth opportunities such as FTTX, base-station antennas,
metro cell and small cell wireless deployment and data centers. We are also in the process of developing solutions
that support the convergence of wireline and wireless networks in preparation for 5G. Many of our professionals are
leaders and active contributors in standards-setting organizations which helps ensure that our products can be
formulated to achieve broad market acceptance.
Customers
Our customers include substantially all of the leading global telecom operators and thousands of enterprise
customers, including many Fortune 500 enterprises, and leading cable television providers or MSOs, which we serve
both directly and indirectly. Major customers and distributors include companies such as Anixter International Inc.,
Verizon Communications Inc., Graybar Electric Company, Inc., Comcast Corporation, Wesco International Inc.,
Charter Communications, Inc., Ericsson, Inc., T-Mobile, Talley Inc. and AT&T Inc. Other global customers include
Vodafone Group, Plc, America Movil, S.A.B. de C.V, Deutsche Telekom AG and NBN Co. Limited. We support
our global sales organization with regional service centers in locations around the world.
Products from our CMS segment are primarily sold directly to wireless operators, OEMs that sell equipment to
wireless operators or other service providers that deploy elements of wireless networks at the direction of wireless
operators. Our customer service and engineering groups maintain close working relationships with these customers
due to the significant amount of customization associated with some of these products. Direct sales to our top three
CMS segment operator customers represented 17% and 14% of our consolidated net sales for the years ended
December 31, 2016 and 2015, respectively. Sales to our top three OEM customers represented 5% and 6% of our
consolidated net sales for the years ended December 31, 2016 and 2015, respectively. No direct CMS segment
customer accounted for 10% or more of our consolidated net sales for the years ended December 31, 2016 and 2015.
Products from our CCS segment are primarily sold through independent distributors or system integrators. We also
sell directly to cable television system operators, broadband operators or service providers that deploy broadband
networks. Direct sales to our top three CCS segment customers, all of whom are distributors, represented 19% and
15% of our consolidated net sales for the years ended December 31, 2016 and 2015, respectively. Net sales to our
largest distributor, Anixter International Inc. and its affiliates (Anixter), accounted for 11% and 12% of our
consolidated net sales for the years ended December 31, 2016 and 2015, respectively.
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We generally have no minimum purchase commitments with any of our distributors, system integrators, value-added
resellers, wireless operators or OEM customers, and our contracts with these parties do not prohibit them from
purchasing or offering products or services that compete with ours. Although we maintain long-term relationships
with these parties and have not historically lost key customers, we have experienced variability in the level of
purchases by our key customers, and any significant reduction in sales to these customers, including as a result of
the inability or unwillingness of these customers to continue purchasing our products, or their failure to properly
manage their business with respect to the purchase of and payment for our products, could materially and adversely
affect our business, results of operations, financial condition and cash flows. See Part I, Item 1A, “Risk Factors.”
We employ a global manufacturing and distribution strategy to control production costs and improve service to
customers. We support our international sales efforts with sales representatives based in Europe, Latin America,
Asia and other regions throughout the world. Our net sales from international operations were $2.3 billion, $1.9
billion and $1.7 billion for the years ended December 31, 2016, 2015 and 2014, respectively.
Patents and Trademarks
We pursue an active policy of seeking intellectual property protection, including patents and registered trademarks,
for new products and designs. On a worldwide basis, we held approximately 10,600 patents and patent applications
and approximately 2,700 registered trademarks and trademark applications as of December 31, 2016. We consider
our patents and trademarks to be valuable assets, and while no single patent is material to our overall operations, we
believe the CommScope, Andrew, SYSTIMAX, HELIAX and AMP NETCONNECT trade names and related
trademarks are critical assets to our business. We intend to rely on our intellectual property rights, including our
proprietary knowledge, trade secrets and continuing technological innovation, to develop and maintain our
competitive position. We will continue to protect our key intellectual property rights.
Backlog and Seasonality
At December 31, 2016 and 2015 we had an order backlog of $612 million and $572 million, respectively. Orders
typically fluctuate from quarter to quarter based on customer demand and general business conditions. Our backlog
includes only orders that are believed to be firm. Sometimes, unfilled orders may be canceled prior to shipment of
goods, but cancellations historically have not been material. However, our current order backlog may not indicate
future demand.
Due to the variability of shipments under large contracts, customers’ seasonal installation considerations and
variations in product mix and in profitability of individual orders, we can experience significant quarterly
fluctuations in sales and operating income. Our operating performance is typically weaker during the first and fourth
quarters and stronger during the second and third quarters. These variations are expected to continue in the future. It
may be more meaningful to focus on annual rather than interim results.
Competition
The market for our products is highly competitive and subject to rapid technological change. We encounter
significant domestic and international competition across both segments of our business. Our competitors include
large, diversified companies — some of whom have substantially more assets and greater financial resources than
we do. We also face competition from small to medium-sized companies and less diversified companies that have
concentrated their efforts in one or more areas of the markets we serve. Our competitors include Amphenol
Corporation, Belden Inc., Berk-Tek (a Company of Nexans S.A.), Comba Telecom Systems Holding Ltd., Corning
Incorporated, Emerson Electric Co., Ericsson Inc., Huawei Technologies Co., Ltd., JMA Wireless, KATHREIN-
Werke KG, Nokia Corp, Panduit Corp., RFS (a division of Alcatel-Lucent SA), Leviton Manufacturing Co., Inc.,
Ortronics (a brand of Legrand NA, LLC), AFL (a subsidiary of Fujikura, Ltd.,), Sumitomo Corp, ACE Telecom,
LLC, ZTE Corp, SOLiD Technologies and SpiderCloud Wireless, Inc. We compete primarily on the basis of
delivering solutions, product specifications, quality, price, customer service and delivery time. We believe that we
differentiate ourselves in many of our markets based on our market leadership, global sales channels, intellectual
property, strong reputation with our customer base, the scope of our product offering, the quality and performance of
our solutions and our service and technical support.
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Competitive Strengths
We are a global leader in connectivity and essential infrastructure solutions for communications networks, and we
believe we hold leading market positions in our segments. Since our founding in 1976, CommScope has been a
leading brand in connectivity solutions for communications networks. In the wireless industry, Andrew is one of the
world’s most recognized brands and a global leader in RF solutions for wireless networks. In the enterprise market,
SYSTIMAX, Uniprise and AMP NETCONNECT are recognized as global market leaders in enterprise connectivity
solutions for business enterprise and data center applications.
We believe the following competitive strengths have been instrumental to our success and position us well for future
growth and strong financial performance:
Differentiated Solutions Supported by Ongoing Innovation and Significant Proprietary Intellectual Property (IP)
Our integrated solutions for wireless, enterprise, fiber optic and broadband networks are differentiated in the
marketplace and are a significant global competitive advantage. We invested over $200 million in research and
development during 2016 and expect to continue with substantial investments in future years. We have also added
significant IP and innovation through acquisitions, such as Airvana, which expanded our leadership and capabilities
in providing indoor wireless capacity and coverage and Argus Technologies (Argus), which enhanced our next-
generation base station antenna technology. Our ongoing innovation, supported by proprietary IP and technology
know-how, has allowed us to sustain this competitive advantage. The transformational BNS acquisition substantially
expanded our foundation of innovation with the addition of BNS’ approximately 7,000 patents and patent
applications worldwide. Further, BNS’ leading fiber technology will help us better address a transition to fiber
deployments deeper into networks and data centers as consumers and businesses generate increasing bandwidth
requirements. With these new innovative solutions, we expect to solve more customer communications challenges,
while providing greater opportunities to our business partners.
Integrated solutions. Our wireless network offerings include complete connectivity solutions supporting
2G, 3G and 4G wireless technologies for both macro and metro, as well as DAS and small cell sites. We
are also developing solutions that support the convergence of wireline and wireless networks in preparation
for 5G. We provide a complete portfolio of integrated RF solutions from the output of the base station (or
baseband processor) at the bottom of the tower to the antenna at the top of the tower. In the enterprise
market, we deliver a comprehensive solution including connectivity and cables, enclosures and network
intelligence software. In the FTTX market, we offer end-to-end solutions including connectors, cabling,
splice closures and fiber management systems. Our ability to provide integrated connectivity solutions for
wireless, enterprise, fiber optic and broadband networks makes us a value-added solutions provider to our
customers and gives us a significant competitive advantage.
Strong design capabilities and technology know-how. We have a long tradition of developing highly
engineered connectivity solutions, demonstrating superior performance across various generations of
networks. Our ongoing focus on engineering innovation has enabled us to create high quality products that
are reliable, have a desirable form factor and enable our customers to optimize the performance, flexibility,
installation time, energy consumption and space requirements of their network deployments.
Significant proprietary IP. Our proven record of innovation and decades of experience creating market-
leading technology products are evidenced by our approximately 10,600 patents and patent applications, as
well as our approximately 2,700 registered trademarks and trademark applications, worldwide. Our
significant proprietary IP, when combined with our deep engineering expertise, allows us to create industry
defining solutions for customers around the world.
Established Sales Channels and Customer Relationships
We serve customers in over 100 countries and have become a trusted advisor to many of them through our industry
expertise, quality products, leading technology and long-term relationships. These factors enable us to provide
mission-critical connectivity solutions that our customers need to build high-performing communication networks.
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Our customers include substantially all of the leading global telecom operators and thousands of enterprise
customers, including many Fortune 500 enterprises, and leading cable television providers or MSOs. We are a key
merchant supplier within the wireless infrastructure market and enjoy established sales channels across all
geographies and technologies. Our long-standing relationships with telecommunication operators enable us to work
closely with them in providing highly customized solutions aligned with their technology roadmaps. We have a
global sales force with sales representatives based in North America, Europe, Latin America, Asia and other regions,
and an extensive global network of channel partners including independent distributors, system integrators and
value-added resellers. Our sales force has direct relationships with our customers and generates demand for our
products, with a large portion of our sales fulfilled through channel partners. Our direct sales force and channel
partner relationships give us extensive reach and distribution capabilities to customers globally.
Global Scale and Manufacturing Footprint
Our global manufacturing and distribution footprint and worldwide sales force give us significant scale within our
addressable markets. We believe our scale and stability make us an attractive strategic partner to our large global
customers, and we have been repeatedly recognized by key customers for these attributes. In addition, our ability to
leverage our core competencies across our business coupled with our successful track record of operational
efficiencies has allowed us to improve our margins and cash flows while continuing to invest in research and
development and acquisitions targeting new products and new markets.
Our manufacturing and distribution facilities are strategically located to optimize service levels and product delivery
times. We also utilize lower-cost geographies for high labor content products and largely automated plants in higher-
cost regions. Over half of our manufacturing employees are in lower-cost geographies such as Mexico, China, India
and the Czech Republic. Our dynamic manufacturing and distribution organization allows us to:
Flex our capacity to meet market demand and expand our market position;
Provide high customer service levels due to proximity to the customer; and
Effectively integrate acquisitions and capitalize on related synergies.
Proven Management Team with Record of Operational Excellence and Successful M&A Integration
We have a strong track record of organically growing market share, establishing leadership positions in new
markets, managing cash flows, delivering profitable growth across multiple economic cycles and integrating large
and small acquisitions. Our senior management team has an average of over 20 years of experience in connectivity
solutions for the communications infrastructure industry.
We have a history of strong operating cash flow and have generated approximately $1.2 billion in cumulative
operating cash flow over the last three years. Our strong cash flow profile has allowed us to continue to invest in
innovative research and development, pursue strategic acquisitions, repay debt and return cash to stockholders prior
to our initial public offering in 2013 (the IPO). We continuously pursue strategic initiatives aimed at optimizing our
resources, reducing manufacturing and distribution costs and lowering our overall cost structure.
Throughout our history, we have successfully complemented our strong organic growth with strategic acquisitions.
Although we have not yet fully integrated the BNS business, we have already delivered substantial synergies,
completed significant system integrations and re-organized the business. We expect to have substantially completed
the BNS integration by the end of 2017. Our management team has effectively integrated other large acquisitions,
such as Andrew Corporation in 2007 and Avaya Connectivity Solutions in 2004. We have also executed tuck-in
acquisitions, such as Argus and Alifabs, to help expand our market opportunities and continue to solve our
customers’ business challenges in multiple growth areas. We have also made strategic minority investments in order
to gain access to key technologies or capabilities.
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Raw Materials
Our products are manufactured or assembled from both standard components and parts that are unique to our
specifications. Our internal manufacturing operations are largely process oriented and we use significant quantities
of various raw materials, including copper, aluminum, steel, brass, plastics and other polymers, fluoropolymers,
bimetals and optical fiber, among others. We use significant volumes of copper, aluminum, steel and polymers
manufacturing coaxial and twisted pair cables and antennas. Other parts are produced using processes such as
stamping, machining, molding and pressing from metals or plastics. Portions of the requirements for these materials
are purchased under supply arrangements where some portion of the unit pricing may be indexed to commodity
market prices for these metals. We may occasionally enter forward purchase commitments for a specific commodity
to mitigate our exposure to price changes for a portion of our anticipated purchases. Certain of the raw materials
utilized in our products may only be available from a few suppliers. We may, therefore, encounter availability issues
and/or significant price increases.
Our profitability may be materially affected by changes in the market price of our raw materials, most of which are
linked to the commodity markets. Prices for copper, aluminum, fluoropolymers and certain other polymers derived
from oil and natural gas have fluctuated substantially during the past several years. We have adjusted our prices for
certain products and may have to adjust prices again. Delays in implementing price increases, failure to achieve
market acceptance of price increases, or price reductions in response to a rapid decline in raw material costs, could
have a material adverse impact on the results of our operations.
In addition, some of our products are assembled from specialized components and subassemblies manufactured by
suppliers. We depend upon sole suppliers for certain key components for some of our products. If these sources
could not provide these components in sufficient quantity and quality on a timely and cost efficient basis, it could
materially impact our results of operations until another qualified supplier is found. We believe that our supply
contracts and our supplier contingency plans mitigate some of this risk.
Environment
We are subject to various federal, state, local and foreign environmental laws and regulations governing, among
other things, discharges to air and water, management of regulated materials, handling and disposal of solid and
hazardous waste, and investigation and remediation of contaminated sites. In addition, we are or may be subject to
laws and regulations regarding the types of substances allowable in certain of our products and the handling of our
products at the end of their useful life. Because of the nature of our business, we have incurred and will continue to
incur costs relating to compliance with or liability under these environmental laws and regulations. In addition, new
laws and regulations, new or different interpretations of existing laws and regulations, the discovery of previously
unknown contamination or the imposition of new remediation or discharge requirements, could require us to incur
costs or become the basis for new or increased liabilities that could have a material adverse effect on our financial
condition and results of operations. If we do not comply with these laws or sufficiently increase prices or otherwise
reduce costs to offset the increased cost of compliance, there could be a material adverse effect on our business,
financial condition and results of operations.
Efforts to regulate emissions of greenhouse gases (GHGs), such as carbon dioxide, have been underway throughout
the world which could increase the cost of raw materials, production processes and transportation of our products. If
we are unable to comply with such regulations or sufficiently increase prices or otherwise reduce costs to offset the
increased costs of compliance, GHG regulation could have a material adverse effect on our business, financial
condition and results of operations.
15
Certain environmental laws impose strict and in some circumstances joint and several liability on current or former
owners or operators of a contaminated property, as well as companies that generated, disposed of or arranged for the
disposal of hazardous substances at a contaminated property, for the costs of investigation and remediation of the
contaminated property. This can have the effect that an entity pays more than its fair share to address such
contamination. Our present and past facilities have been in operation for many years and over that time, in the
course of those operations, hazardous substances and wastes have been used, generated and occasionally disposed of
at such facilities. Consequently, from time to time it has been necessary to undertake investigation and remediation
projects at a few of these sites. There can be no assurance that the contractual indemnifications we have received
from prior owners and operators of certain of these facilities will continue to be honored. In addition, we have
disposed of waste products either directly or through third parties at numerous disposal sites, and from time to time
we have been and may be held responsible for investigation and clean-up costs at these sites, particularly where
those owners and operators have been unable to pay for investigation and clean-up. Also, there can be no guarantee
that new environmental requirements or changes in their enforcement or the discovery of previously unknown
conditions will not cause us to incur additional costs for environmental matters which could be material.
Employees
As of December 31, 2016 we had a team of over 25,000 people to serve our customers worldwide. The majority of
our employees are located outside of the United States. As a matter of policy, we seek to maintain good relations
with our employees at all locations. We are not subject to any collective bargaining agreements in the United States.
A significant portion of our international employees are members of unions or subject to workers’ councils or
similar statutory arrangements. From a Companywide perspective, we believe that our relations with our employees
and unions or workers’ councils are satisfactory though we have experienced challenges in certain countries and
may encounter more such challenges. Historically, periods of labor unrest or work stoppage have not had a material
impact on our operations or results.
Available Information
Our website (www.commscope.com) contains frequently updated information about us and our operations. Our
filings with the Securities and Exchange Commission (SEC) on Form 10-K, Form 10-Q, Form 8-K and Proxy
Statements and all amendments to those reports can be viewed and downloaded free of charge as soon as reasonably
practicable after the reports and amendments are electronically filed with or furnished to the SEC by accessing
www.commscope.com and clicking on Investors and then clicking on SEC Filings. The information contained on or
incorporated by reference to our website is not a part of this Annual Report on Form 10-K.
SEC Certifications
The certifications by the Chief Executive Officer and Chief Financial Officer of the Company, required under
Section 302 of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act), have been filed as exhibits to this Annual
Report on Form 10-K.
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ITEM 1A.
RISK FACTORS
The following is a cautionary discussion of risks, uncertainties and assumptions that we believe are significant to
our business. In addition to the factors discussed elsewhere in this Annual Report on Form 10-K, the following are
some of the important factors that, individually or in the aggregate, we believe could make our results differ
materially from those described in any forward-looking statements. It is impossible to predict or identify all such
factors and, as a result, you should not consider the following factors to be a complete discussion of risks,
uncertainties and assumptions.
BNS Acquisition Risks
The completion of the integration of the BNS business (the Acquired Business) into our business will be difficult,
costly and time-consuming and the anticipated benefits and cost savings of the BNS Acquisition (the Acquisition)
may take longer to realize or may not be realized at all.
We currently expect to realize annual cost savings of more than $200 million by 2018 related to the Acquisition. Our
ability to realize the anticipated benefits of the Acquisition is dependent, to a large extent, on our ability to complete
the integration of the two businesses. The combination of two independent businesses is a complex, costly and time-
consuming process and there can be no assurance that we will be able to successfully integrate the Acquired
Business into our business, or if such integration is successfully accomplished, that such integration will not be more
costly or take longer than presently contemplated. If we cannot successfully complete the integration within a
reasonable time frame, we may not be able to realize the anticipated benefits of the Acquisition, which could have a
material adverse effect on our share price, business, cash flows, results of operations and financial position.
Our ability to realize the expected synergies and benefits of the Acquisition is subject to a number of risks and
uncertainties, many of which are outside of our control. These risks and uncertainties include, among other things:
our ability to successfully complete the timely integration of information technology systems;
our ability to complete the effective integration of operations, standards, controls, policies and
procedures, and technologies, as well as the harmonization of differences in the business cultures of
legacy CommScope and the Acquired Business;
our ability to minimize the diversion of management attention from ongoing business concerns of
both our business and the Acquired Business during the process of integrating legacy CommScope
and the Acquired Business;
the risk that the Acquired Business may have liabilities we failed to or were unable to discover in the
course of performing due diligence;
the risk that integrating the Acquired Business’ workforce into the legacy CommScope workforce
may result in production disruptions or be more costly than anticipated;
greater than expected difficulties in achieving anticipated cost savings, synergies, business
opportunities and growth prospects from the combination; and
greater than expected difficulties in managing the expanded operations of a significantly larger and
more complex combined business.
We are relying on TE Connectivity (TE) to provide a wide range of services required to operate a significant
portion of the Acquired Business under Transition Services Agreements (TSAs) and such reliance is expected to
continue at least through most of 2017.
Due to the high level of integration of the Acquired Business with the remainder of TE’s business, it is highly
complex and time-consuming to separate the Acquired Business and effectively integrate it into our business. As a
result, we are dependent on TE to continue to perform elements of such critical functions as information technology,
finance, logistics and operations for portions of the Acquired Business under TSAs. It may be late in 2017 or later
before we are able to assume all of these functions and discontinue all of the support provided by TE under the
TSAs.
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While operating under these TSAs, we are exposed to various risks, including the following:
costs of operating the Acquired Business may be greater than we anticipated;
services provided under TSAs may not meet our requirements in a timely and effective manner; and
we may not be able to make operational changes or to get information necessary to realize the
anticipated synergies.
Competitive Risks
Our business is dependent on capital spending for data and communication networks by customers or end-users
of our products and reductions in such capital spending could adversely affect our business.
Our performance is dependent on customers’ or end-users’ capital spending for constructing, rebuilding, maintaining
or upgrading data and communication networks, which can be volatile or hard to forecast. Capital spending in the
communications industry is cyclical and can be curtailed or deferred on short notice. A variety of factors affect the
amount of capital spending in the communications industry and, therefore, our sales and earnings,
including: competing technologies; general economic conditions; seasonality of outside deployments; timing and
adoption of the global rollout of new technologies; customer specific financial or general market conditions;
availability and cost of capital; governmental regulation; demands for network services; competitive pressures,
including pricing pressures; acceptance of new services offered by our customers; industry consolidation; and real or
perceived trends or uncertainties in these factors. As a result of these factors, we may not be able to maintain or
increase our sales in the future, and our business, financial condition, results of operations and cash flows could be
materially and adversely affected.
A substantial portion of our business is derived from a limited number of key customers and channel partners.
We derived 23% of our 2016 consolidated net sales from our top three direct customers and channel partners,
including distributors, system integrators and value-added resellers. Our largest distributor, Anixter International
Inc., accounted for 11% of our 2016 consolidated net sales. The concentration of our net sales among these three
customers and other key customers and channel partners subjects us to a variety of risks that could have a material
adverse impact on our net sales and profitability, including, without limitation:
lower sales resulting from the loss of one or more of our key customers or channel partners;
renegotiations of agreements with key customers or channel partners resulting in materially less
favorable terms;
financial difficulties experienced by one or more of our key customers, channel partners or our
channel partners’ end customers, resulting in reduced purchases of our products and/or delays or
difficulties in collecting accounts receivable balances;
reductions in inventory levels held by channel partners and original equipment manufacturers
(OEMs) which may be unrelated to purchasing trends by the end customer;
consolidations in the telecommunications, wireless or cable television industries or other key end-
user markets resulting in delays in purchasing decisions, reduced or delayed purchases by the
merged businesses or increased leverage to reduce prices or renegotiate terms;
new or proposed laws or regulations affecting the telecommunications, wireless or cable television
industries or other key end-user markets resulting in reduced capital spending; and
increases in the cost of borrowing or otherwise raising capital and/or reductions in the amount of
debt or equity capital available to the telecommunications, wireless or cable television industries or
other key end-user markets resulting in reduced capital spending.
Additionally, the risks above may be further increased to the extent that we have significant indirect sales to one or
more end-users of our products (who may also be direct customers) with such indirect sales taking place through
numerous channel partners and/or OEMs.
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We generally have no minimum purchase commitments from any of our channel partners, OEMs or other
customers, and our contracts with these parties generally do not prohibit them from purchasing or offering products
or services that compete with ours. Although we maintain long-term relationships with these parties and have not
historically lost key customers, we have experienced variability in the level of purchases by our key customers and
end-users of our products, and any significant reduction in sales to these customers and end-users of our products,
including as a result of their inability or unwillingness to continue purchasing our products, or their failure to
properly manage their businesses with respect to the purchase of and payment for our products, could materially and
adversely affect our business, results of operations, financial condition and cash flows.
We face competitive pressures with respect to all of our major products.
Competition in our industry depends on a number of factors, including the level of customer capital spending,
innovative solution offerings, quality and timing of the introduction of new products, customer service and pricing.
In each of our major product groups, we compete with a substantial number of foreign and domestic companies,
some of which have greater financial, technical, marketing and other resources or lower operating costs. They may
also have broader product lines and market focus. This gives many of these enterprises a competitive advantage to
withstand any significant reduction in capital spending by customers in our markets over the long term. Further, our
industry is consolidating and the combination of any of our competitors could further increase these advantages and
result in competitors with an even broader market presence.
Some competitors may also be able to bundle their products and services together to meet the needs of a particular
customer and may be capable of delivering more complete solutions than we are able to provide which may cause us
to lose sales opportunities and revenue. Competitors’ actions, such as price reductions or the introduction of new
innovative products, and the use of exclusively price driven Internet auctions by customers have caused lost sales
opportunities in the past and may cause us to lose sales opportunities in the future. The rapid technological changes
occurring in the communications industry could also lead to the entry of new competitors against whom we may not
be able to compete successfully. In addition, if any of our competitors’ products or technologies were to become the
industry standard, our business would be negatively affected. Changes in trade policies (including some of those
contemplated by the new administration in the U.S.) could decrease the price competitiveness of our products and/or
increase our operating costs.
We cannot assure you that we will continue to compete successfully with our existing competitors or with new
competitors. If we are unable to compete in any of our markets at the same level as we have in the past or are forced
to reduce the prices of our products in order to continue to be competitive, our operating results, financial condition
and cash flows could be materially and adversely affected.
Changes to the regulatory environment in which our customers operate may negatively impact our business.
The telecommunications and cable television industries are subject to significant and changing federal and state
regulation, both in the U.S. and other countries, including regulations regarding the “Open Internet” or “net
neutrality.” We have benefited from government programs that encourage spending on our products. Changes to the
way in which internet service providers are regulated, changes in government programs in our industry or
uncertainty regarding future changes could adversely impact our customers’ decisions regarding capital spending,
which could decrease demand for our products.
Operational Risks
Our future success depends on our ability to anticipate and to adapt to technological changes and develop,
implement and market product innovations.
Many of our markets are characterized by advances in information processing and communications capabilities that
require increased transmission speeds and greater bandwidth. These advances require significant investments in
research and development in order to improve the capabilities of our products and develop new products that will
meet the needs of our customers. There can be no assurance that our investments in research and development will
yield marketable product innovations.
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We may not be successful in our ongoing innovation efforts if, among other things, our products are not cost
effective; brought to market in a timely manner; compliant with evolving industry standards; accepted in the market;
or recognized as meeting customer requirements. If we are not successful in our ongoing innovation efforts, these
failures could have a material adverse effect on our results of operations and financial condition.
If we do not stay current with product life cycle developments, our business may suffer.
A significant portion of our revenues are dependent on the commercial deployment of technologies based on 2G, 3G
and 4G wireless communications equipment and products. If we are not able to support our customers in an effective
and cost-efficient manner as they advance from 2G or 3G networks to 4G networks or as they expand the capacity of
their networks, our business will suffer. If we do not have competitively priced, market accepted products available
to meet our customers’ planned roll-out of 5G wireless communications systems, we may miss a significant
opportunity and our business, financial condition and results of operations could be materially and adversely
affected. In addition, a significant portion of our current revenue is also partially dependent on the core copper
enterprise business and we could experience unfavorable financial impacts if this business erodes at a significantly
increasing rate beyond current forecasts and we do not have adequate fiber-based solutions for our customers.
If our products, including material purchased from our suppliers, experience quality or performance issues, our
business may suffer.
Our business depends on delivering products of consistently high quality. To this end, our products are tested for
quality both by us and our customers. Nevertheless, many of our products are highly complex and testing procedures
used by us and our customers are limited to evaluating our products under likely and foreseeable failure scenarios.
For various reasons, once deployed, our products may fail to perform as expected. Performance issues could result
from faulty design, defective raw materials or components purchased from suppliers, problems in manufacturing or
installation errors. We have experienced such performance issues in the past and remain exposed to such
performance issues in the future. In some cases, recall of some or all affected products, product redesigns or
additional capital expenditures may be required to correct a defect. In addition, we generally offer warranties on
most products, the terms and conditions of which depend upon the product subject to the warranty. In some cases,
we indemnify our customers against damages or losses that might arise from certain claims relating to our products.
Future claims may have a material adverse effect on our business, financial condition and results of operations. Any
significant or systemic product failure could also result in lost future sales of the affected product and other products
as well as reputational damage.
Our business depends on effective management information systems.
We rely on effective management information systems for critical business operations, for strategic business
decisions and to maintain a competitive edge in the marketplace. We rely on our enterprise resource planning
systems to support such critical business operations as processing sales orders and invoicing; manufacturing;
shipping; inventory control; purchasing and supply chain management; human resources; and financial reporting.
We also rely on management information systems to produce information for business decision-making and
planning and to support e-commerce activities.
Our primary current major management information systems initiative is the completion of the integration of the
BNS business into our legacy CommScope management information systems. If we are unable to successfully
complete the integration, we could encounter difficulties that may cause us to experience a material adverse impact
on our business, lapses in internal controls over financial reporting or an inability to timely and accurately report our
financial results.
Our focus on the integration of the BNS business also creates the risk that we are not focusing enough on other
major management information system initiatives, such as expanding our digital platform to accommodate the
changing buying habits of our customers. Failure to maintain an adequate digital platform to produce information for
business decision-making and support e-commerce activities could have a material adverse impact on our business
through lost sales opportunities.
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The hardware and software of our management information systems infrastructure is aging. If we are unable to
maintain our IT infrastructure to support critical business operations and to produce information for business
decision-making activities, we could experience a material adverse impact on our business or an inability to timely
and accurately report our financial results.
Cyber-security incidents, including data security breaches or computer viruses, could harm our business by
exposing us to various liabilities, disrupting our delivery of products and services and damaging our reputation.
We rely extensively on information technology systems to operate our business. We rely on our information systems
and those of third parties for storing proprietary company information about our products and intellectual property,
as well as for processing customer orders, manufacturing and shipping products, invoicing our customers, tracking
inventory, supporting accounting functions and financial statement preparation, paying our employees and vendors,
and otherwise running our business. Additionally, we and others on our behalf store “personally identifiable
information” with respect to employees, vendors, customers and others. Despite implemented security measures, our
facilities, systems and procedures, and those of our third-party service providers, may be vulnerable to security
breaches, acts of vandalism, software viruses, misplaced or lost data, programming and/or human errors or other
similar events. In particular, unauthorized access to our computer systems or stored data could result in the theft or
improper disclosure of confidential or sensitive information, the deletion or modification of records or interruptions
in our operations. Any such events, including those involving the misappropriation, loss or other unauthorized
disclosure or use of confidential or sensitive information of the Company or our customers, vendors, employees or
others, whether by us or a third party, could subject us to civil and criminal penalties; expose us to liabilities to our
customers, employees, vendors, third parties or governmental authorities; disrupt our delivery of products and
services; and have a negative impact on our reputation. Any of these events could have a material adverse effect on
our business, financial condition and results of operations.
If our integrated global manufacturing operations suffer production or shipping delays, we may experience
difficulty in meeting customer demands.
We internally produce, both domestically and internationally, a portion of the components used in our finished
products. Disruption of our ability to produce at or distribute from these facilities due to failure of our manufacturing
infrastructure, information technology outage, labor disturbances, fire, electrical outage, natural disaster, acts of
terrorism, shipping interruptions or some other catastrophic event could have a material adverse effect on our ability
to manufacture products at our other manufacturing facilities in a cost-effective and timely manner, which could
have a material adverse effect on our business, financial condition and results of operations.
Capacity constraints, with respect to our internal facilities and/or existing or new contract manufacturers, could
have an adverse impact on our business.
We rely on unaffiliated contract manufacturers, both domestically and internationally, to produce certain products or
key components of products. If we do not have sufficient production capacity, either through our internal facilities
or independent contract manufacturers, to meet customer demand for our products, we may experience lost sales
opportunities and customer relations problems, which could have a material adverse effect on our business, financial
condition and results of operations.
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Supply Chain Risks
Our dependence on commodities subjects us to cost volatility and potential availability constraints.
Our profitability may be materially affected by changes in the market price and availability of certain raw materials,
most of which are linked to the commodity markets. The principal raw materials and components we purchase are
made of metals such as copper, steel, aluminum or brass; plastics and other polymers; and optical fiber. Fabricated
copper, steel and aluminum are used in the production of coaxial and twisted pair cables and polymers are used to
insulate and protect cables. Prices for copper, steel, aluminum, fluoropolymers and certain other polymers, derived
from oil and natural gas, have experienced significant volatility as a result of changes in the levels of global demand,
supply disruptions and other factors. As a result, we have adjusted our prices for certain products and may have to
adjust prices again in the future. Delays in implementing price increases or a failure to achieve market acceptance of
price increases has in the past and could in the future have a material adverse impact on our results of operations. In
an environment of falling commodities prices, we may be unable to sell higher-cost inventory before implementing
price decreases, which could have a material adverse impact on our business, financial condition and results of
operations.
We are dependent on a limited number of key suppliers for certain raw materials and components.
For certain of our raw material and component purchases, including certain polymers, copper rod, copper and
aluminum tapes, fine aluminum wire, steel wire, optical fiber, circuit boards and other electronic components, we
are dependent on a limited number of key suppliers.
Our key suppliers have in the past experienced and could in the future experience production, operational or
financial difficulties, or there may be global shortages of the raw materials or components we use. Our inability to
find sufficient sources of supply on reasonable terms could have a material adverse effect on our ability to
manufacture products in a cost-effective manner, which could have a material adverse effect on our gross margin
and results of operations.
We also source many of our components from international markets. Any changes in the laws and policies of the
U.S. affecting trade, including changes to certain of these laws or policies contemplated by the new administration
in the U.S., is a risk to us. To the extent there are unfavorable changes imposed by the U.S and/or retaliatory actions
taken by trading partners, such as the addition of new tariffs or trade restrictions, we may experience adverse
impacts on earnings and such changes could be material.
If contract manufacturers we rely on encounter production, quality, financial or other difficulties, we may
experience difficulty in meeting customer demands.
We rely on unaffiliated contract manufacturers, both domestically and internationally, to produce certain products or
key components of products. If our contract manufacturers encounter production, quality, financial or other
difficulties, including labor disturbances or geopolitical risks, and if acceptable alternative suppliers cannot be
identified, we may encounter difficulty in meeting customer demands. Any such difficulties could have a material
adverse effect on our business, financial results and results of operations.
Strategic Risks
We may not fully realize anticipated benefits from past or future acquisitions or equity investments.
We anticipate that a portion of any future growth of our business might be accomplished by acquiring existing
businesses, products or technologies. Although we expect to realize strategic, operational and financial benefits as a
result of our past or future acquisitions and equity investments, we cannot predict whether and to what extent such
benefits will be achieved. There are significant challenges to integrating an acquired operation into our business,
including, but not limited to: successfully managing the operations, manufacturing facilities and technology;
integrating the sales organizations; maintaining and increasing the customer base; retaining key employees,
suppliers and distributors; integrating management information systems and inventory, accounting and research and
development activities; and addressing operating losses that may exist related to individual facilities or product
lines. Further, many acquisitions involve new or developing technologies that may not achieve the expected results.
22
In addition, we might not be able to identify suitable acquisition opportunities or obtain any necessary financing on
acceptable terms. We might spend time and money investigating and negotiating with potential acquisition or
investment targets but not complete the transaction.
Any future acquisition could involve other risks, including the assumption of additional liabilities and expenses,
issuances of debt, incurrence of transaction and integration costs and diversion of management’s attention from
other business concerns, and such acquisition may be dilutive to our financial results. See “BNS Acquisition Risks”
for details related to that acquisition.
We may sell or discontinue one or more of our product lines, as a result of our evaluation of our products and
markets.
We periodically evaluate our various product lines and may, as a result, consider the divestiture or discontinuance of
one or more of those product lines. Any such divestiture or discontinuance could adversely affect our results of
operations, cash flows and financial position.
Divestitures of product lines have inherent risks, including the expense of selling the product line; the possibility
that any anticipated sale will not occur; possible delays in closing any sale; the risk of lower-than-expected proceeds
from the sale of the divested business; unexpected costs associated with the separation of the business to be sold
from our information technology and other operating systems; and potential post-closing claims for indemnification.
Expected cost savings may also be difficult to achieve or maximize due to a fixed cost structure, and we may
experience varying success in the timely reduction of fixed costs or transferring of liabilities previously associated
with the divested or discontinued business.
Difficulties may be encountered in the realignment of manufacturing capacity and capabilities among our global
manufacturing facilities that could adversely affect our ability to meet customer demands for our products.
We periodically realign manufacturing capacity among our global facilities in order to reduce costs by improving
manufacturing efficiency and to strengthen our long-term competitive position. The implementation of these
initiatives may include significant shifts of production capacity among facilities.
There are significant risks inherent in the implementation of these initiatives, including our failure to ensure the
following: there is adequate inventory on hand or production capacity to meet customer demand while capacity is
being shifted among facilities; there is no decrease in product quality as a result of shifting capacity; adequate raw
material and other service providers are available to meet the needs at the new production locations; equipment can
be successfully removed, transported and re-installed; and adequate supervisory, production and support personnel
are available to accommodate the shifted production.
In the event manufacturing realignment initiatives are not successfully implemented, we could experience lost future
sales and increased operating costs as well as customer relations problems, any of which could have a material
adverse effect on our business, financial condition and results of operations.
We may need to undertake additional restructuring actions in the future.
We have previously recognized restructuring charges in response to slowdowns in demand for our products and in
conjunction with implementation of initiatives to reduce costs and improve efficiency of our operations. Most
recently, we have undertaken a number of initiatives to support the BNS integration which included the closure of
certain domestic and international manufacturing facilities and various other workforce reductions. Restructuring
actions as a result of the BNS acquisition are expected to continue and may be material. As a result of other changes
in business conditions and other developments, we may need to initiate additional restructuring actions that could
result in workforce reductions and restructuring charges, which could be material.
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Financial Risks
Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations,
limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of
our variable rate debt and prevent us from meeting our obligations with respect to our indebtedness.
As of December 31, 2016, we had approximately $4.6 billion of indebtedness on a consolidated basis. See Note 6 in
the Notes to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for
additional details of our indebtedness. We had no outstanding loans under our revolving credit facility and
approximately $441.1 million in borrowing capacity, reflecting a borrowing base of $466.1 million and $25.0
million of outstanding letters of credit. Our ability to borrow under our revolving credit facility depends, in part, on
inventory, accounts receivable and other assets that fluctuate from time to time and may further depend on lenders’
discretionary ability to impose reserves and availability blocks and to recharacterize assets that might otherwise
incrementally decrease borrowing availability.
Our substantial indebtedness could have important consequences. For example, it could:
limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes;
require us to dedicate a substantial portion of our annual cash flow for the next several years to the
payment of interest on our indebtedness;
expose us to the risk of increased interest rates as, over the term of our debt, the interest cost on a
significant portion of our indebtedness is subject to changes in interest rates;
place us at a competitive disadvantage compared to certain of our competitors who have less debt;
hinder our ability to adjust rapidly to changing market conditions;
limit our ability to secure adequate bank financing in the future with reasonable terms and
conditions; and
increase our vulnerability to and limit our flexibility in planning for, or reacting to, a potential
downturn in general economic conditions or in one or more of our businesses.
In addition, the indentures and credit agreements governing our indebtedness contain affirmative and negative
covenants that limit our ability to engage in activities that may be in our long-term best interests. Our failure to
comply with those covenants could result in an event of default which, if not cured or waived, could result in the
acceleration of all of our debts.
Despite current indebtedness levels and restrictive covenants, we may incur additional indebtedness that could
further exacerbate the risks associated with our substantial financial leverage.
We may incur significant additional indebtedness in the future under the agreements governing our indebtedness.
Although the indentures and the credit agreements governing our indebtedness contain restrictions on the incurrence
of additional indebtedness, these restrictions are subject to a number of thresholds, qualifications and exceptions,
and the additional indebtedness incurred in compliance with these restrictions could be substantial. Additionally,
these restrictions permit us to incur obligations that, although preferential to our common stock in terms of payment,
do not constitute indebtedness.
In addition, if new debt is added or we buy back stock or pay dividends, the risks we face as a result of our leverage
would increase.
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To service our indebtedness, we will require a significant amount of cash and our ability to generate cash
depends on many factors beyond our control.
Our operations are conducted through our global subsidiaries and our ability to make cash payments on our
indebtedness will depend on the earnings and the distribution of funds from our subsidiaries. Certain of our
subsidiaries may have limitations or restrictions on paying dividends and otherwise transferring assets to us. Our
ability to make cash payments on and to refinance our indebtedness will depend upon our financial condition and
operating performance, which are subject to prevailing economic and competitive conditions and to financial,
business, legislative, regulatory and other factors beyond our control. We might not be able to maintain a level of
cash flows from operating activities or transfer sufficient funds from our subsidiaries to permit us to pay the
principal, premium, if any, and interest on our indebtedness.
If we are unable to generate sufficient cash flow or are otherwise unable to obtain funds necessary to meet required
payments of principal, premium, if any, and interest on our indebtedness or if we fail to comply with the various
covenants in the instruments governing our indebtedness and we are unable to obtain waivers from the required
lenders, we could be in default under the terms of the agreements governing such indebtedness. In the event of such
default, the holders of our indebtedness could elect to declare all the funds borrowed to be due and payable, together
with accrued and unpaid interest. The lenders under our revolving credit facility could elect to terminate their
commitments, cease making further loans and institute foreclosure proceedings against our assets. As a result, we
could be forced into bankruptcy or liquidation.
We may need to recognize additional impairment charges related to goodwill, identified intangible assets and
fixed assets.
We have substantial balances of goodwill and identified intangible assets. We are required to test goodwill for
possible impairment on the same date each year and on an interim basis if there are indicators of a possible
impairment. We are also required to evaluate amortizable intangible assets and fixed assets for impairment if there
are indicators of a possible impairment.
If, as a result of a general economic slowdown, deterioration in one or more of the markets in which we operate or in
our financial performance and/or future outlook, the estimated fair value of our long-lived assets decreases, we may
determine that one or more of our long-lived assets is impaired. Any resulting impairment charge could have a
material adverse effect on our financial condition and results of operations.
We may experience significant variability in our quarterly or annual effective income tax rate.
We have a large and complex international tax profile and a significant level of foreign tax credit carryforwards in
the U.S. and other carryforwards in various jurisdictions. Variability in the mix and profitability of domestic and
international activities, the level of repatriation of earnings from foreign affiliates, changes in tax laws, identification
and resolution of various tax uncertainties and the inability to realize foreign tax credits and other carryforwards
included in deferred tax assets, among other matters, may significantly impact our effective income tax rate in the
future. A significant increase in our quarterly or annual effective income tax rate could have a material adverse
impact on our results of operations.
There are proposals to change tax laws in many of the countries in which we do business. In particular, current U.S.
tax reform proposals could significantly impact how we are taxed on both domestic operations as well as on
earnings of foreign subsidiaries. Although we cannot predict whether, when or in what form proposed legislation
may pass, if enacted, certain proposed tax law changes could have a material adverse impact on our income tax
expense and cash flow.
We are commonly audited by various tax authorities. In the ordinary course of our business, there are many
transactions and calculations where the ultimate tax determination is uncertain. Significant judgment is required in
determining our worldwide provision for income taxes. Although we believe our tax estimates are reasonable, the
final determination of tax audits and any related litigation could be materially different from our historical income
tax provisions and accruals. The results of an audit or litigation could have a material effect on our financial
statements in the period or periods for which that determination is made.
25
Labor Related Risks
We may not be able to attract and retain key employees.
Our business depends upon our continued ability to hire and retain key employees, including our sales force,
operations management and skilled production workers, at our operations around the world. Competition for skilled
personnel and highly qualified managers in the industries in which we operate is intense. Our growth by acquisitions
creates challenges in retaining employees. As the corporate culture evolves to incorporate new workforces, some
employees may not find the new culture appealing. In addition, the pace of integration may cause retention issues
with our workforce due to integration fatigue. Difficulties in obtaining or retaining employees with the necessary
management, technical and financial skills needed to achieve our business objectives may have a material adverse
effect on our business, financial condition and results of operations.
Effective succession planning is important to our long-term success. We depend on our senior management team
and other key employees for strategic success. Some of our key employees are nearing retirement age. Failure to
ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic
planning and execution.
As our workforce ages, we are challenged to find and attract a younger population to replace them. Younger
generations are driven by progression and opportunity which may be limited by our current employee population.
Our growth potential may be limited if we fail to attract and retain competent employees or we are unable to sustain
necessary employment levels long-term.
Labor unrest could have a material adverse effect on our business, results of operations and financial condition.
While none of our U.S. employees are represented by unions, a significant part of our international employees are
members of unions or subject to workers’ councils or similar statutory arrangements. In addition, many of our direct
and indirect customers and vendors have unionized workforces. Strikes, work stoppages or slowdowns experienced
by these customers or vendors, contract manufacturers or other suppliers could have a negative impact on us.
Organizations responsible for shipping our products may also be impacted by labor disruptions. Any interruption in
the delivery of our products could harm our reputation, reduce demand for our products or increase costs and could
have a material adverse effect on us.
We have obligations under our defined benefit employee benefit plans and may be required to make plan
contributions in excess of current estimates.
At December 31, 2016, our net liability for pension and other postretirement benefits was $30.2 million (benefit
obligations of $382.7 million and plan assets of $352.5 million). See Note 10 in the Notes to the Consolidated
Financial Statements included elsewhere in this Annual Report on Form 10-K. Significant declines in the assets
and/or increases in the liabilities related to these obligations as a result of changes in actuarial estimates, asset
performance, interest rates or benefit changes, among others, could have a material adverse impact on our financial
position and/or results of operations.
The amounts and timing of the contributions we expect to make to our defined benefit plans reflect a number of
actuarial and other estimates and assumptions with respect to our expected plan funding obligations. The actual
amounts and timing of these contributions will depend upon a number of factors and the actual amounts and timing
of our future plan funding contributions may differ materially from those presented in this Annual Report on Form
10-K. If we elect to terminate one or more of these plans and settle the obligation through the purchase of annuities,
we could incur a charge and/or be required to make additional contributions and such amounts could be material.
Our financial condition may be adversely affected to the extent that we are required to make contributions to any of
our defined benefit plans in excess of the amounts assumed in our current projections.
26
International Risks
Our significant international operations expose us to economic, political and other risks.
We have significant international sales, manufacturing and distribution operations. We have major international
manufacturing and/or distribution facilities in, among other countries, Australia, Belgium, China, the Czech
Republic, Germany, India, Ireland, Mexico, Singapore and the United Kingdom (U.K.). For the years ended
December 31, 2016, 2015 and 2014, international sales represented approximately 46%, 51% and 45%, respectively,
of our consolidated net sales. In general, our international sales have lower gross margin percentages than our
domestic sales. To the extent international sales represent a greater percentage of our revenue, our overall gross
margin percentages may decline.
Our international sales, manufacturing and distribution operations are subject to the risks inherent in operating
abroad, including, but not limited to, risks with respect to currency exchange rate fluctuations; economic and
political destabilization; restrictive actions by foreign governments; wage inflation; nationalizations; the laws and
policies of the U.S affecting trade, anti-bribery, foreign investment and loans; foreign tax laws, including the ability
to recover amounts paid as value-added and similar taxes; potential restrictions on the repatriation of cash; reduced
protection of intellectual property; longer customer payment cycles; compliance with local laws and regulations;
armed conflict; terrorism; shipping interruptions; and major health concerns (such as infectious diseases). A
significant portion of our products sold in the U.S. are manufactured outside the U.S. We utilize lower-cost
geographies for high labor content products while investing in largely automated plants in higher-cost regions close
to customers. Most of our manufacturing employees are located in lower-cost geographies such as Mexico, China,
India and the Czech Republic. To the extent there are changes in U.S. trade policies, such as significant increases in
tariffs or duties for goods brought into the U.S., our competitive position may be adversely impacted and the
resulting effect on our earnings could be material.
Risks related to fluctuations in foreign currency rates can impact our sales, results of operations, cash flows and
financial position. Our foreign currency risk exposure is mainly concentrated in Chinese yuan, euro, Australian
dollar, Indian rupee, British pound and Mexican peso. We manage our foreign currency rate risks through regular
operating and financing activities and periodically use derivative financial instruments such as foreign exchange
forward contracts. There can be no assurance that our risk management strategies will be effective or that the
counterparties to our derivative contracts will be able to perform. In addition, foreign currency rates in many of the
countries in which we operate have at times been extremely volatile and unpredictable. We may choose not to hedge
or determine we are unable to effectively hedge the risks associated with this volatility. In such cases, we may
experience declines in sales and adverse impacts on earnings and such changes could be material.
27
Our international operations expose us to increased challenges in complying with anti-corruption laws and
regulations of the U.S. government and various international jurisdictions.
We are required to comply with the laws and regulations of the U.S. government and various international
jurisdictions, and our failure to comply with these rules and regulations may expose us to significant liabilities.
These laws and regulations may apply to companies, individual directors, officers, employees and agents, and may
restrict our operations, trade practices, investment decisions and partnering activities. In particular, we are subject to
U.S. and foreign anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act (FCPA). The
FCPA prohibits U.S. companies and their officers, directors, employees and agents acting on their behalf from
improperly offering, promising, authorizing or providing anything of value to foreign officials for the purposes of
influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The
FCPA also requires companies to keep books, records and accounts that accurately and fairly reflect transactions and
dispositions of assets and to maintain a system of adequate internal accounting controls. As part of our business, we
deal with state-owned business enterprises, the employees and representatives of which may be considered foreign
officials for purposes of the FCPA. We frequently rely on distributors, sales agents and other channel partners in
connection with our sales to these state-owned enterprises, and could be held responsible for the improper actions of
these third parties if we were to benefit from their actions, even though we may have limited control over them. We
are also subject to the U.K. Anti-Bribery Act, which prohibits both domestic and international bribery, as well as
bribery across both public and private sectors. In addition, some of the international locations in which we operate
lack a developed legal system and have elevated levels of corruption. As a result of our activities in these locations,
we are exposed to an increased risk of violating anti-corruption laws. Violations of these legal requirements are
punishable by criminal fines and imprisonment, civil penalties, disgorgement of profits, injunctions, debarment from
government contracts as well as other remedial measures. We have established policies and procedures designed to
assist us and our personnel in complying with applicable U.S. and international laws and regulations. However, our
employees, subcontractors or channel partners could take actions that violate these requirements, which could
adversely affect our reputation, business, financial condition and results of operations and such effects could be
material.
We are subject to governmental export and import controls that could subject us to liability or impair our ability
to compete in international markets.
Certain of our products are subject to export controls and may be exported only with the required export license or
through an export license exception. In addition, we are required to comply with certain U.S. and foreign sanctions
and embargos. If we were to fail to comply with applicable export licensing, customs regulations, economic
sanctions and other laws, we could be subject to substantial civil and criminal penalties, including fines for us and
incarceration for responsible employees and managers, and the possible loss of export or import privileges. In
addition, if our distributors fail to obtain appropriate import, export or re-export licenses or permits, we may also be
adversely affected through reputational harm and penalties. Obtaining the necessary export license for a particular
sale may be time-consuming and may result in the delay or loss of sales opportunities. Furthermore, export control
laws and economic sanctions prohibit the shipment of certain products to embargoed or sanctioned countries,
governments and persons. While we train our employees to comply with these regulations, we cannot assure that a
violation will not occur, whether knowingly or inadvertently. Any such shipment could have negative consequences
including government investigations, penalties, fines, civil and criminal sanctions, and reputational harm. Any
change in export or import regulations, economic sanctions or related legislation, shift in the enforcement or scope
of existing regulations, or change in the countries, governments, persons or technologies targeted by such
regulations, could result in our decreased ability to export or sell our products to existing or potential customers with
international operations. Any decreased use of our products or limitation on our ability to export or sell our products
could adversely affect our business, financial condition and results of operations and such effects could be material.
28
Litigation and Regulatory Risks
We may incur costs and may not be successful in protecting our intellectual property and in defending claims
that we are infringing the intellectual property of others.
We may encounter difficulties and significant costs in protecting our intellectual property rights or obtaining rights
to additional intellectual property to permit us to continue or expand our business. Other companies, including some
of our largest competitors, hold intellectual property rights in our industry and the intellectual property rights of
others could inhibit our ability to introduce new products unless we secure necessary licenses on commercially
reasonable terms.
In addition, we have been required, and may be required in the future, to initiate litigation in order to enforce patents
issued or licensed to us or to determine the scope and/or validity of a third party’s patent or other proprietary rights.
We also have been and may in the future be subject to lawsuits by third parties seeking to enforce their own
intellectual property rights, including against certain of the products or intellectual property that we have acquired
through acquisitions. Any such litigation, regardless of outcome, could subject us to significant liabilities or require
us to cease using proprietary third party technology and, consequently, could have a material adverse effect on our
results of operations and financial condition.
In certain markets, we may be required to address counterfeit versions of our products. We may incur significant
costs in pursuing the originators of such counterfeit products and, if we are unsuccessful in eliminating them from
the market, we may experience a reduction in the value of our products and/or a reduction in our net sales.
Compliance with current and future environmental laws and potential environmental liabilities may have a
material adverse impact on our business, financial condition and results of operations.
We are subject to various federal, state, local and foreign environmental laws and regulations governing, among
other things, discharges to air and water, management of regulated materials, handling and disposal of solid and
hazardous waste, and investigation and remediation of contaminated sites. In addition, we are or may be subject to
laws and regulations regarding the types of substances allowable in certain of our products and the handling of our
products at the end of their useful life. Because of the nature of our business, we have incurred and will continue to
incur costs relating to compliance with or liability under these environmental laws and regulations. In addition, new
laws and regulations, new or different interpretations of existing laws and regulations, the discovery of previously
unknown contamination or the imposition of new remediation or discharge requirements, could require us to incur
costs or become the basis for new or increased liabilities that could have a material adverse effect on our financial
condition and results of operations. For example, the European Union has issued Restriction of Hazardous
Substances Directive 2011/65/EU (RoHS 2), Registration, Evaluation, Authorization and restriction of Chemicals
(REACH) and Waste Electrical and Electronic Equipment Directive 2012/19/EU (WEEE) regulating the
manufacture, use and disposal of electrical goods and chemicals. If we do not comply with these and similar laws in
other jurisdictions or sufficiently increase prices or otherwise reduce costs to offset the increased cost of compliance,
it could have a material adverse effect on our business, financial condition and results of operations.
Efforts to regulate emissions of greenhouse gases (GHGs), such as carbon dioxide, are underway in the U.S. and
other countries which could increase the cost of raw materials, production processes and transportation of our
products. If we are unable to comply with such regulations or sufficiently increase prices or otherwise reduce costs
to offset the increased costs of compliance, GHG regulation could have a material adverse effect on our business,
financial condition and results of operations.
29
Certain environmental laws impose strict and in some circumstances joint and several liability on current or former
owners or operators of a contaminated property, as well as companies that generated, disposed of or arranged for the
disposal of hazardous substances at a contaminated property, for the costs of investigation and remediation of the
contaminated property. This can have the effect that an entity pays more than its fair share to address such
contamination. Our present and past facilities have been in operation for many years and over that time, in the
course of those operations, hazardous substances and wastes have been used, generated and occasionally disposed of
at such facilities. Consequently, from time to time it has been necessary to undertake investigation and remediation
projects at a few of these sites. There can be no assurance that the contractual indemnifications we have received
from prior owners and operators of certain of these facilities will continue to be honored. In addition, we have
disposed of waste products either directly or through third parties at numerous disposal sites, and from time to time
we have been and may be held responsible for investigation and clean-up costs at these sites, particularly where
those owners and operators have been unable to address such investigation and clean-up costs. Also, there can be no
guarantee that new environmental requirements or changes in their enforcement or the discovery of previously
unknown conditions will not cause us to incur additional costs for environmental matters which could be material.
Stockholder Equity Risks
We do not intend to pay dividends on our common stock and, consequently, the ability of investors to achieve a
return on their investment will depend on appreciation in the price of our common stock.
We do not intend to declare and pay dividends on our common stock for the foreseeable future. We currently intend
to invest our future earnings, if any, to reduce indebtedness and fund our growth; in addition, we may from time to
time make share repurchases. Therefore, the success of an investment of our common stock will depend upon any
future appreciation in their value, and there can be no guarantee that our common stock will appreciate in value. The
payment of future dividends will be at the discretion of our Board of Directors. In addition, the indentures and the
credit agreements governing our indebtedness also effectively limit our ability to pay dividends. As a consequence
of these limitations and restrictions, we may not otherwise be able to pay dividends on our common stock.
Provisions of our amended and restated certificate of incorporation and amended and restated bylaws and
Delaware law might discourage, delay or prevent a change of control of our company or changes in our
management and, as a result, depress the trading price of our common stock.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that
could discourage, delay or prevent a change in control of our company or changes in our management that the
stockholders of our company may deem advantageous. These provisions:
authorize 1,300,000,000 shares of common stock, which, to the extent unissued, could be issued by
the Board of Directors, without stockholder approval, to increase the number of outstanding shares
and to discourage a takeover attempt;
authorize the issuance, without stockholder approval, of blank check preferred stock that our Board
of Directors could issue to increase the number of outstanding shares and to discourage a takeover
attempt;
grant to the Board of Directors the sole power to set the number of directors and to fill any vacancy
on the Board of Directors;
limit the ability of stockholders to remove directors only “for cause” and require any such removal to
be approved by holders of at least three-quarters of the outstanding shares of common stock;
prohibit our stockholders from calling a special meeting of stockholders;
prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a
meeting of our stockholders;
provide that the Board of Directors is expressly authorized to adopt, or to alter or repeal our bylaws;
establish advance notice and certain information requirements for nominations for election to our
Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder
meetings;
30
establish a classified Board of Directors, with three staggered terms; and
require the approval of holders of at least three-quarters of the outstanding shares of common stock
to amend the bylaws and certain provisions of the certificate of incorporation.
These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our
company and may prevent our stockholders from receiving the benefit from any premium to the market price of our
common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of
these provisions may adversely affect the prevailing market price of our common stock if the provisions are viewed
as discouraging takeover attempts in the future. These provisions could also discourage proxy contests and make it
more difficult for our stockholders to elect directors of their choosing and cause us to take corporate actions other
than those our stockholders desire.
31
ITEM 1B.
None.
UNRESOLVED STAFF COMMENTS
ITEM 2.
PROPERTIES
Our facilities are used primarily for manufacturing, distribution and administration. Facilities primarily used for
manufacturing may also be used for distribution, engineering, research and development, storage, administration,
sales and customer service. Facilities primarily used for administration may also be used for research and
development, sales and customer service. As of December 31, 2016, our principal facilities, grouped according to
the facility’s primary use, were as follows:
Location
Administrative facilities:
Hickory, NC (1)
Joliet, IL (2)
Shakopee, MN
Lochgelly, United Kingdom (3)
Richardson, TX (1)
Richardson, TX
Manufacturing and distribution facilities:
Catawba, NC (1)
Claremont, NC (1)
Kessel-Lo, Belgium
Suzhou, China (4)
Suzhou, China (4)
Santa Teresa, NM
Juarez, Mexico
Juarez, Mexico (5)
Goa, India (4)
Reynosa, Mexico
Greensboro, NC (1)
Brno, Czech Republic
Mission, TX
Delicias, Mexico
Campbellfield, Australia
Bray, Ireland
Brno, Czech Republic
Buchdorf, Germany
Berkeley Vale, Australia
Vacant facilities and properties:
Orland Park, IL (1)(6)
Sidney, NE (7)
Sorocaba, Brazil (8)
Approximate
square feet
Principal segments
Owned or leased
84,000 Corporate headquarters
690,000 Corporate
177,000 CCS
132,000 CMS and CCS
100,000 CMS
75,000 CCS
1,000,000 CCS
583,000 CCS
554,000 CCS
414,000 CMS
363,000 CCS
334,000 CCS
327,000 CCS
304,000 CCS
298,000 CMS
279,000 CMS
196,000 CCS
166,000 CCS
150,000 CMS
139,000 CCS
133,000 CMS
130,000 CCS
120,000 CMS
109,000 CMS
99,000 CCS
— CMS
376,000 CCS
152,000 CMS
Owned
Leased
Leased
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Leased
Owned
Owned
Owned
Leased
Leased
Owned
Leased
Owned
Leased
Owned
Owned
Owned
Owned
Owned
(1) Our interest in each of these properties is encumbered by a mortgage or deed of trust lien securing our senior
secured credit facilities (see Note 6 in the Notes to Consolidated Financial Statements included elsewhere in
this Annual Report on Form 10-K).
(2) The former manufacturing portion of the Joliet facility is vacant and is currently being marketed for sublease.
(3) The former manufacturing portion of the Lochgelly, United Kingdom facility is vacant and is currently being
marketed for sale.
(4) The buildings in these facilities are owned while the land is held under long-term lease agreements.
32
(5)
The Juarez, Mexico location, known as Praderas, consists of three buildings subject to one lease. One of the
buildings consisting of 60,000 square feet is being subleased.
(6) The building at the Orland Park facility was demolished and cleared and the 73 acre parcel is vacant.
(7) The Sidney facility is currently being marketed for sale.
(8) The Sorocaba, Brazil facility is currently being marketed for sale.
We believe that our facilities and equipment generally are well maintained, in good condition and suitable for our
purposes and adequate for our present operations. While we currently have excess manufacturing capacity in certain
of our facilities, utilization is subject to change based on customer demand. We can give no assurances that we will
not have excess manufacturing capacity or encounter capacity constraints over the long term.
ITEM 3.
LEGAL PROCEEDINGS
We are either a plaintiff or a defendant in certain pending legal matters in the normal course of business.
Management believes none of these legal matters will have a material adverse effect on our business or financial
condition upon their final disposition.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Stock Price and Dividends
Our common stock is traded on the Nasdaq Global Select Market under the symbol COMM. The following table
sets forth the high and low sale prices as reported by Nasdaq for the periods indicated:
2015
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2016
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Common Stock
Price Range
High
Low
32.00 $
32.53 $
34.12 $
33.54 $
28.14 $
33.09 $
32.77 $
38.00 $
20.19
27.75
26.87
24.85
19.37
26.16
28.28
29.88
$
$
$
$
$
$
$
$
As of February 6, 2017, the approximate number of registered stockholders of record of our common stock was 370.
Although we have paid cash dividends from time to time in the past while we were a privately-held company, we do
not currently intend to pay dividends in the foreseeable future. The declaration and payment of any dividends in the
future will be determined by our Board of Directors, in its discretion, and will depend on a number of factors,
including our earnings, capital requirements, overall financial condition and contractual restrictions, including
covenants under our senior notes and senior secured credit facilities, which may limit our ability to pay dividends.
33
Issuer Purchases of Equity Securities
Our employees surrendered 27,402 of common shares at an average share price of $34.02 in the fourth quarter of
2016 and 143,000 of common shares at an average share price of $27.16 in 2016 to satisfy the minimum
withholding tax obligations related to restricted stock units that vested during the period.
Stock Performance Graph
The following graph compares cumulative total return on $100 invested on October 25, 2013 in each of
CommScope’s Common Stock, the Standard & Poor’s 500 Stock Index (S&P 500 Index) and the Standard & Poor’s
1500 Communications Equipment Index (S&P 1500 Communications Equipment). The return of the Standard &
Poor’s indices is calculated assuming reinvestment of dividends.
Comparison of Cumulative Total Return
$300
$250
$200
$150
$100
$50
$0
10/25/13
12/31/13
12/31/14
12/31/15
12/31/16
CommScope Holding Company, Inc.
S&P 500 Index
S&P 1500 Communications Equipment Index
Company / Index
CommScope Holding Company, Inc.
S&P 500 Index
S&P 1500 Communications Equipment
Base
Period
10/25/2013
100
100
100
INDEXED RETURNS
Period Ending
12/31/2013
12/31/2014
126.28
105.49
105.56
152.30
119.93
119.17
12/31/2015
172.72
121.58
105.84
12/31/2016
248.17
136.13
126.71
34
PART II
ITEM 6.
SELECTED FINANCIAL DATA
The following table presents our historical selected financial data as of the dates and for the periods indicated. The
data for each of the years presented are derived from our audited consolidated financial statements. The information
set forth below should be read in conjunction with our audited consolidated financial statements and notes thereto
and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of
this Annual Report.
Five-Year Summary of Selected Financial Data
(In thousands, except per share amounts)
2016
Year Ended December 31,
2014
2015
2013
2012
Results of Operations:
Net sales
Gross profit
Restructuring costs, net
Asset impairments
Operating income
Net interest expense
Net income (loss)
Earnings (Loss) Per Share Information:
Weighted average number of shares outstanding:
$4,923,621 $3,807,828 $3,829,614 $ 3,480,117 $3,321,885
2,033,589 1,345,820 1,397,269 1,200,940 1,060,681
22,993
40,907
238,238
(185,557)
5,353
22,104
45,529
577,449 329,714
(173,981) (205,492 )
19,396
236,772
29,488
90,784
181,593
(230,533)
(70,875)
42,875
38,552
574,750
(272,010)
222,838
19,267
12,096
Basic
Diluted
Earnings (loss) per share:
Basic
Diluted
Other Information:
Net cash generated by operating activities
Depreciation and amortization
Additions to property, plant and equipment
Cash dividends per share
192,470
196,459
189,876
189,876
186,905 160,641
191,450 164,013
154,708
155,517
$
$
1.16 $
1.13 $
(0.37) $
(0.37) $
1.27 $
1.24 $
0.12 $
0.12 $
0.03
0.03
$ 606,225 $ 302,060 $ 289,418 $ 237,701 $ 286,135
262,279
27,957
1.29
259,504 256,616
36,780
3.47 $
303,500
56,501
— $
399,050
68,314
— $
36,935
— $
$
2016
2015
As of December 31,
2014
2013
2012
Balance Sheet Data:
$ 428,228 $ 562,884 $ 729,321 $ 346,320 $ 264,375
Cash and cash equivalents
4,567,369 4,838,119 2,712,814 2,872,698 3,052,615
Goodwill and intangible assets
355,212
Property, plant and equipment, net
Total assets (1)
7,141,986 7,502,631 4,917,058 4,690,800 4,740,893
Working capital
737,638
1,135,946 1,319,548 1,351,805 860,042
Long-term debt, including current maturities (1) 4,562,010 5,243,651 2,668,898 2,471,297 2,418,399
1,394,084 1,222,720 1,307,619 1,088,016 1,182,282
Stockholders' equity
289,371 310,143
528,706
474,990
(1) As of June 30, 2015, the Company adopted new accounting guidance that requires debt issuance costs related
to a recognized debt liability be reported as a direct deduction from the carrying amount of that debt liability.
The guidance has been applied retrospectively to the prior periods presented.
35
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in
conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report
on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve
risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth under "Risk Factors" included in Part I, Item 1A
or in other parts of this Annual Report on Form 10-K.
OVERVIEW
We are a global provider of infrastructure solutions for the core, access and edge layers of communication networks.
Our solutions and services for wired and wireless networks enable high-bandwidth data, video and voice
applications. Our portfolio includes innovative wireless and fiber optic solutions for today’s evolving digital
lifestyle. Our global leadership position is built upon innovative technology, broad solution offerings, high-quality
and cost-effective customer solutions and global manufacturing and distribution scale. Our talented and experienced
global team helps customers increase bandwidth; maximize existing capacity; improve network latency (i.e.,
response time) and performance; and simplify technology migration. Our solutions are found in some of the largest
venues and outdoor spaces; in buildings and data centers of all sizes and complexities; at wireless cell sites; in
telecom central offices and cable headends; in fiber-to-the-X (FTTX) deployments; and in airports, trains, and
tunnels. Vital networks around the world run on CommScope solutions.
On August 28, 2015, we completed the acquisition of TE Connectivity’s Broadband Network Solutions (BNS)
business in an all-cash transaction valued at approximately $3.0 billion. The BNS business provides fiber optic and
copper connectivity for wireline and wireless networks and also provides small-cell distributed antenna system
(DAS) solutions for the wireless market. We believe the transaction has accelerated our strategy to drive profitable
growth by expanding our business into attractive adjacent markets and to broaden our position as a leading
communications infrastructure provider. In addition, the acquisition provides us with greater geographic and
business diversity. The BNS business generated revenues of approximately $1.8 billion for the year ended December
31, 2016 and $0.5 billion for the four-month period ended December 25, 2015. During the years ended December
31, 2016 and 2015, we recognized $62.3 million and $96.9 million, respectively, of integration and transaction costs
primarily related to the BNS acquisition. We will continue to incur costs as we complete the integration of BNS and
these costs may be material.
The results of the BNS business are reported in our consolidated financial statements from August 28, 2015 to
December 25, 2015 for the year ended December 31, 2015 and from December 26, 2015 to December 30, 2016 for
the year ended December 31, 2016. The BNS fiscal calendar included 53 weeks in 2016.
As of January 1, 2016, we reorganized our internal management and reporting structure as part of the integration of
the BNS acquisition. The reorganization changed the information regularly reviewed by our chief operating
decision maker for purposes of allocating resources and assessing performance. As a result, we are reporting
financial performance for 2016 based on our new operating segments: CommScope Connectivity Solutions (CCS)
and CommScope Mobility Solutions (CMS). Prior to this change, we operated and reported based on the following
operating segments: Wireless, Enterprise, Broadband and BNS. All prior year amounts throughout our
management’s discussion and analysis of financial condition and results of operations have been recast to reflect
these operating segment changes.
36
Our CCS segment offers both indoor and outdoor connectivity solutions. Indoor solutions are primarily delivered
through our SYSTIMAX, AMP NETCONNECT and Uniprise brands and offer a complete end-to-end physical
layer solution, including optical fiber and twisted pair structured cable solutions, intelligent infrastructure software
and network rack and cabinet enclosures. Our outdoor connectivity solutions include a broad portfolio of fiber-to-
the-home equipment and headend solutions. Our fiber optic connectivity solutions are primarily comprised of
hardened connector systems, fiber distribution hubs and management systems, couplers and splitters, “plug and
play” multiport service terminals, hardened optical terminating enclosures, high density cable assemblies, splices
and splice closures. The majority of the acquired BNS business is included in the CCS segment. Products from our
CCS segment are sold to large multinational companies, primarily through a global network of distributors, system
integrators and value-added resellers. Demand for CCS segment products depends primarily on information
technology spending by enterprises, such as communications projects in new data centers, buildings or campuses
and deployments of FTTX solutions.
Under our CMS segment, primarily through our Andrew brand, we are a global leader in providing merchant radio
frequency (RF) wireless network connectivity solutions, including macro cell site, metro cell site, DAS and small
cell solutions. The primary sources of revenue for our CMS segment are (i) product sales of primarily passive
transmission devices for the wireless infrastructure market including base station and microwave antennas, hybrid
fiber-feeder and power cables, coaxial cable connectors and equipment primarily used by wireless operators, (ii)
product sales of active electronic devices and services including filters and tower-mounted amplifiers and (iii)
engineering and consulting services and products like DAS that are used to extend and enhance the coverage of
wireless networks in areas where signals are difficult to send or receive such as large buildings, urban areas,
stadiums and transportation systems. Demand for CMS segment products depends primarily on capital spending by
wireless operators to expand their distribution networks or to increase the capacity of their networks.
To expand our CMS segment offerings, we acquired operations from Airvana LP (Airvana) in October 2015 for
approximately $45 million. This acquisition expanded our leadership and capabilities in providing indoor wireless
capacity and coverage. The combination of Airvana’s innovative small cell offerings and our industry-leading DAS
portfolio enables us to provide a broader range of solutions, addressing single-operator, single-band, low capacity
environments all the way through multi-carrier, multi-technology, multi-band, high capacity environments. Also
within our CMS segment, we acquired two businesses of United Kingdom-based Alifabs Group (Alifabs) in July
2014 for approximately $49 million. Alifabs designs and supplies metro cell enclosures, monopoles, smaller
streetworks towers and tower solutions for the United Kingdom telecommunications, utility and energy markets.
Our future financial condition and performance will be largely dependent upon: our ability to successfully complete
the integration of the BNS business; global spending by wireless operators; global spending by business enterprises
on information technology; investment by cable operators and communications companies in the video and
communications infrastructure; overall global business conditions; and our ability to manage costs successfully
among our global operations. Our profitability is also affected by the mix and volume of sales among our various
product groups and between domestic and international customers and competitive pricing pressures.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements have been prepared in conformity with generally accepted accounting
principles (GAAP) in the United States (U.S.). The preparation of these financial statements requires management to
make estimates and assumptions that affect the amounts reported in the financial statements and accompanying
notes. These estimates and their underlying assumptions form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other objective sources. Management bases its
estimates on historical experience and on assumptions that are believed to be reasonable under the circumstances
and revises its estimates, as appropriate, when changes in events or circumstances indicate that revisions may be
necessary.
37
The following critical accounting policies and estimates reflected in our financial statements are based on
management’s knowledge of and experience with past and current events and on management’s assumptions about
future events. While we have generally not experienced significant deviations from our critical estimates in the past,
it is reasonably possible that these estimates may ultimately differ materially from actual results. See Note 2 in the
Notes to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a
description of all of our significant accounting policies.
Business Combinations
We use the acquisition method of accounting for business combinations which requires assets acquired and
liabilities assumed be recorded at their fair values on the acquisition date. Goodwill represents the excess of the
purchase price over the fair value of the net assets acquired. The fair values of the assets acquired and liabilities
assumed are determined based upon management’s valuation and involves making significant estimates and
assumptions based on facts and circumstances that existed as of the acquisition date. We use a measurement period
following the acquisition date to gather information that existed as of the acquisition date that is needed to determine
the fair value of the assets acquired and liabilities assumed. The measurement period ends once all information is
obtained, but no later than one year from the acquisition date.
Revenue Recognition
We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or service has been
rendered, the selling price is fixed or determinable and collectability is reasonably assured. The majority of our
revenue comes from product sales. Revenue from product sales is recognized when the risks and rewards of
ownership have passed to the customer and revenue is measurable. Revenue is not recognized related to products
sold to contract manufacturers that the Company anticipates repurchasing in order to complete the sale to the
ultimate customer.
Revenue for certain of the Company’s products is derived from multiple-element contracts. The value of the revenue
elements within these contracts is allocated based on the relative selling price of each element. The relative selling
price is determined using vendor-specific objective evidence of selling price or other third party evidence of selling
price, if available. If these forms of evidence are unavailable, revenue is allocated among elements based on
management’s best estimate of the stand-alone selling price of each element.
We record reductions to revenue for anticipated sales returns as well as customer programs and incentive offerings,
such as discounts, allowances, rebates and distributor price protection programs. These estimates are based on
contract terms, historical experience, inventory levels in the distributor channel and other factors.
Management generally believes it has sufficient historical experience to allow for reasonable and reliable estimation
of these reductions to revenue. However, deteriorating market conditions could result in increased sales returns and
allowances and potential distributor price protection incentives, resulting in future reductions to revenue. If
management does not have sufficient historical experience to make a reasonable estimation of these reductions to
revenue, recognition of the revenue is deferred until management believes there is a sufficient basis to recognize
such revenue.
Inventory Reserves
We maintain reserves to reduce the value of inventory based on the lower of cost or net realizable value, including
allowances for excess and obsolete inventory. These reserves are based on management’s assumptions about and
analysis of relevant factors including current levels of orders and backlog, forecasted demand, market conditions and
new products or innovations that diminish the value of existing inventories. If actual market conditions deteriorate
from those anticipated by management, additional allowances for excess and obsolete inventory could be required.
38
Product Warranty Reserves
We recognize a liability for the estimated claims that may be paid under our customer warranty agreements to
remedy potential deficiencies of quality or performance of our products. The product warranties extend over periods
ranging from one to twenty-five years from the date of sale, depending upon the product subject to the warranty. We
record a provision for estimated future warranty claims based upon the historical relationship of warranty claims to
sales and specifically identified warranty issues. We base our estimates on historical experience and on assumptions
that are believed to be reasonable under the circumstances and revise our estimates, as appropriate, when events or
changes in circumstances indicate that revisions may be necessary. Although these estimates are based on
management’s knowledge of and experience with past and current events and on management’s assumptions about
future events, it is reasonably possible that they may ultimately differ materially from actual results, including in the
case of a significant product failure.
Tax Valuation Allowances, Liabilities for Unrecognized Tax Benefits and Other Tax Reserves
We establish an income tax valuation allowance when available evidence indicates that it is more likely than not that
all or a portion of a deferred tax asset will not be realized. In assessing the need for a valuation allowance, we
consider the amounts, character, source and timing of expected future deductions or carryforwards as well as sources
of taxable income and tax planning strategies that may enable utilization. We maintain an existing valuation
allowance until sufficient positive evidence exists to support its reversal. Changes in the amount or timing of
expected future deductions or taxable income may have a material impact on the level of income tax valuation
allowances. If we determine that we will not be able to realize all or part of a deferred tax asset in the future, an
increase to an income tax valuation allowance would be charged to earnings in the period such determination was
made.
We recognize income tax benefits related to particular tax positions only when it is considered more likely than not
that the tax position will be sustained if examined on its technical merits by tax authorities. The amount of benefit
recognized is the largest amount of tax benefit that is evaluated to be greater than 50% likely to be realized.
Considerable judgment is required to evaluate the technical merits of various positions and to evaluate the likely
amount of benefit to be realized. Lapses in statutes of limitations, developments in tax laws, regulations and
interpretations, and changes in assessments of the likely outcome of uncertain tax positions could have a material
impact on the overall tax provision.
We establish deferred tax liabilities for the estimated tax cost associated with foreign earnings that we do not
consider permanently reinvested. These liabilities are subject to adjustment if we determine that foreign earnings
previously considered to be permanently reinvested should no longer be so considered.
We also establish allowances related to value-added and similar recoverable taxes when it is considered probable
that those assets are not recoverable. Changes in the probability of recovery or in the estimates of the amount
recoverable are recognized in the period such determination is made and may be material to earnings.
39
Asset Impairment Reviews
Impairment Reviews of Goodwill
We test goodwill for impairment annually as of October 1 and on an interim basis when events occur or
circumstances indicate the carrying value may no longer be recoverable. Goodwill is evaluated at the reporting unit
level, which may be the same as a reportable segment or a level below a reportable segment. The goodwill
impairment test starts with a comparison of the carrying value of a reporting unit to its estimated fair value. We
estimate the fair value of a reporting unit through the use of a discounted cash flow (DCF) valuation model. The
significant assumptions in the DCF model are the annual revenue growth rate, the annual operating income margin
and the discount rate used to determine the present value of the cash flow projections. Among other inputs, the
annual revenue growth rate and operating income margin are determined by management using historical
performance trends, industry data, insight derived from customers, relevant changes in the reporting unit’s
underlying business and other market trends that may affect the reporting unit. The discount rate is based on the
estimated weighted average cost of capital as of the test date of market participants in the industry in which the
reporting unit operates. The assumptions used in the DCF model are subject to significant judgment and uncertainty.
Changes in projected revenue growth rates, projected operating income margins or estimated discount rates due to
uncertain market conditions, loss of one or more key customers, changes in technology, or other factors, could result
in one or more of our reporting units with a significant amount of goodwill failing the goodwill impairment test in
the future. It is possible that future impairment reviews may indicate additional impairments of goodwill, which
could be material to our results of operations and financial position. Our historical or projected revenues or cash
flows may not be indicative of actual future results.
2016 Interim Goodwill Analysis
During the first quarter of 2016, we reorganized our internal management and reporting structure and as a result
realigned our goodwill reporting units. We tested goodwill for possible impairment prior to the realignment and no
impairment was indicated. We then reallocated goodwill to the new reporting units based on relative fair value as
required by GAAP. After the reallocation, the goodwill impairment test was performed using a DCF model for each
of the new reporting units. One reporting unit in the CCS segment did not pass the goodwill impairment test, and a
$15.3 million goodwill impairment charge was recorded as of January 1, 2016.
2016 Annual Goodwill Analysis
The annual test of goodwill was performed for each of the reporting units with goodwill balances as of October 1,
2016. The test was performed using a DCF valuation model. The weighted average discount rates used in the 2016
annual test were 10.0% for the CCS reporting units and 10.5% for the CMS reporting units. These discount rates
were slightly higher than those used in the January 1, 2016 and the 2015 annual goodwill impairment tests. Based on
the estimated fair values generated by our DCF models, the reporting units passed the annual goodwill impairment
test and no impairment charge was deemed necessary. Future impairment tests could result in additional impairment
charges and these could be material.
Definite-Lived Intangible Assets and Other Long-Lived Assets
Management reviews definite-lived intangible assets, investments and other long-lived assets for impairment when
events or changes in circumstances indicate that their carrying values may not be fully recoverable. This analysis
differs from our goodwill impairment analysis in that an intangible or other long-lived asset impairment is only
deemed to have occurred if the sum of the forecasted undiscounted future net cash flows related to the assets being
evaluated is less than the carrying value of the assets. If the forecasted net cash flows are less than the carrying
value, then the asset is written down to its estimated fair value. Changes in the estimates of forecasted net cash flows
may cause additional asset impairments, which could result in charges that are material to our results of operations.
During 2016, the Company determined that certain intangible assets in the CCS segment were no longer recoverable
and recorded impairment charges of $15.0 million.
Also during 2016, the Company determined certain production assets acquired with the BNS business would no
longer be utilized and a $8.3 million impairment charge was recorded in the CCS segment to reduce the assets to
their estimated fair value.
40
Comparison of results of operations for the year ended December 31, 2016 with the year ended December 31,
2015
RESULTS OF OPERATIONS
Year Ended December 31,
2016
2015
Amount
% of Net
Sales
Amount
% of Net
Sales
Dollar
Change
%
Change
$ 4,923.6
Net sales
2,033.6
Gross profit
Operating income
574.8
Non-GAAP adjusted operating income (1) 1,051.4
Net income (loss)
222.8
Diluted earnings (loss) per share
$
1.13
See "Reconciliation of Non-GAAP Measures".
(1)
NM - Not meaningful
Net sales
Net sales
Domestic net sales
International net sales
(dollars in millions, except per share amounts)
100.0% $ 3,807.8
41.3 1,345.8
181.6
11.7
729.8
21.4
(70.9)
4.5
(0.37)
$
100.0 % $ 1,115.8
687.8
35.3
393.2
4.8
321.6
19.2
293.7
(1.9 )
1.50
$
Year Ended December 31,
Change
2016
$
4,923.6 $
2,634.9
2,288.7
2015
$
(dollars in millions)
3,807.8 $
1,869.4
1,938.4
1,115.8
765.5
350.3
29.3%
51.1
216.5
44.1
NM
NM
%
29.3%
40.9
18.1
Net sales. Net sales for 2016 included $1.24 billion of incremental net sales attributable to the BNS acquisition,
which reflects the additional eight months that the BNS business was owned in 2016 compared to 2015. Legacy
CommScope net sales for 2016 compared to the prior year were down $0.12 billion, or 3.8%, reflecting decreases
across all major geographical regions except the U.S. Net sales to customers located outside the U.S. comprised 46%
of total net sales for 2016 compared to 51% for 2015. Foreign exchange rate changes had a negative impact of
approximately 1% on net sales for 2016 compared to 2015.
From a segment perspective, net sales from the CCS segment increased 61.0% in 2016 compared to 2015 as a result
of the BNS acquisition. In addition to the incremental eight months of net sales included in 2016 compared with
2015, BNS net sales for 2016 also included 53 weeks in the fiscal year. Excluding the incremental net sales related
to the BNS acquisition, net sales from the CCS segment decreased by 6.4% in 2016 due to lower sales in
international markets. Net sales in 2016 from the CMS segment decreased slightly compared to the prior year
despite the addition of incremental net sales as a result of the BNS acquisition. For further details by segment, see
the section titled “Segment Results” below.
Gross profit, SG&A expense and R&D expense
Year Ended December 31,
Change
Gross profit
Gross margin percentage
SG&A expense
As a percent of sales
R&D expense
As a percent of sales
$
2016
2,033.6 $
41.3%
879.5
17.9%
200.7
4.1%
41
2015
(dollars in millions)
1,345.8
$
$
35.3%
687.4
18.1%
136.0
3.6%
%
687.8
51.1%
192.1
27.9
64.7
47.6
Gross profit (net sales less cost of sales). Gross profit for 2016 included $651.6 million of incremental gross profit
related to the BNS acquisition. This reflects the additional eight months that the BNS business was owned in 2016
compared to 2015 as well as the negative impact of the purchase accounting adjustments of $81.6 million that were
incurred in 2015, primarily related to the mark-up of inventory to its estimated fair value less the estimated costs
associated with its sale. The increase in gross margin percentage reflected favorable changes in geographic and
product mix and benefits from cost reduction initiatives as well as the impact of the purchase accounting
adjustments on 2015 gross margin percentage.
Selling, general and administrative expense. Selling, general and administrative (SG&A) expense for 2016
increased compared to the prior year primarily due to incremental SG&A costs from the acquired BNS business and
higher variable cash compensation expense partially offset by a decline in integration and transaction costs, lower
bad debt expense and the benefit of cost reduction initiatives. SG&A expense as a percent of sales in 2016 remained
in line with 2015. Excluding the impact of integration and transaction costs, SG&A as a percentage of sales
increased to 16.6% in 2016 from 15.5% in 2015 primarily due to the higher cost structure of the BNS business
compared to the legacy CommScope business.
Research and development. Research and development (R&D) expense increased in 2016 compared to the prior
year primarily as a result of the incremental R&D costs from the BNS and Airvana acquisitions, both of which were
acquired in the second half of 2015 and have historically made significant investments in R&D activities. Excluding
the impact of the BNS and Airvana acquisitions, R&D expense and R&D expense as a percentage of net sales
increased slightly in 2016 compared to 2015 primarily due to higher variable cash compensation expense.
Amortization of purchased intangible assets, Restructuring costs and Asset impairments
Year Ended December 31,
Change
2016
2015
$
(dollars in millions)
%
Amortization of purchased intangible assets
Restructuring costs, net
Asset impairments
$
297.2 $
42.9
38.6
220.6 $
29.5
90.8
76.6
13.4
(52.2 )
34.7%
45.4
(57.5)
Amortization of purchased intangible assets. The amortization of purchased intangible assets was higher in 2016
compared to the prior year primarily due to the additional amortization resulting from a full year of amortization
related to the BNS acquisition.
Restructuring costs, net. The restructuring costs in 2016 were primarily related to the integration of BNS. The
restructuring costs in 2015 were also primarily related to the integration of BNS but also included costs from the
first half of the year related to our efforts to realign and lower our overall cost structure. We expect to incur
additional pretax costs of $0.5 million to $1.0 million to complete actions announced to date. We expect to pay
$30.0 million to $31.5 million in 2017 and an additional $9.5 million to $10.5 million between 2018 and 2022
related to restructuring actions that have been initiated. As a result of the continuing BNS integration, additional
restructuring actions are expected to be identified and the resulting charges and cash requirements may be material.
Asset impairments. During 2016 we recorded impairment charges of $15.0 million within the CCS segment due to
the revised outlook for certain product lines that indicated their intangible assets would not be recoverable. Also
during 2016, we recorded impairment charges of $8.3 million related to certain long-lived assets acquired with the
BNS business no longer expected to be utilized in operations in the CCS segment. In addition, we recorded a $15.3
million goodwill impairment charge as of January 1, 2016 in the CCS segment as a result of the change in reportable
segments.
42
During 2015 we recorded goodwill impairment charges of $74.4 million in the CMS segment, primarily as a result
of lower projected future operating results for a certain reporting unit. Also during 2015, we determined that certain
intangible assets in the CMS segment were no longer recoverable and recorded a $5.5 million impairment charge. In
addition, we determined during 2015 that a note receivable related to a previous divestiture was impaired and
recorded a $10.9 million charge in the CCS segment.
Net interest expense, Other expense, net and Income taxes
Net interest expense
Other expense, net
Income tax expense
Year Ended December 31,
Change
2016
$
(272.0) $
(30.2)
(49.7)
2015
$
(dollars in millions)
(230.5) $
(13.1)
(8.9)
%
(41.5 )
(17.1 )
(40.8 )
18.0%
130.5
458.4
Net interest expense. The increase in net interest expense in 2016 compared to 2015 was driven by increases in our
long-term debt. In June 2015, we issued $1.5 billion of 6.0% senior notes due 2025 (the 2025 Notes) and $500.0
million of 4.375% senior secured notes due 2020 (the 2020 Notes) and we entered into a $1.25 billion term loan due
2022 (the 2022 Term Loan). The proceeds from the 2025 Notes and the 2022 Term Loan were used to fund, in part,
the BNS acquisition. The proceeds from the 2020 Notes were used to repay a portion of our existing term loans. We
incurred $67.0 million of incremental interest expense in 2016 as a result of the acquisition-related debt. In
connection with various debt repayments and redemptions, we wrote off $7.1 million and $6.7 million of debt
issuance costs and original debt discount in 2016 and 2015, respectively. These increases in interest expense were
partially offset by reductions in interest expense resulting from the debt repayments and redemptions as well as the
2016 amendment of our 2022 Term Loan to lower the margin on the interest rate from 3.00% to 2.50%.
Our weighted average effective interest rate on outstanding borrowings, including the amortization of debt issuance
costs and original issue discount was 5.24% as of December 31, 2016 and 5.50% as of December 31, 2015.
Other expense, net. In connection with the debt redeemed or repaid during 2016, we incurred redemption premiums
of $17.7 million and other fees of $1.2 million, both of which were included in other expense, net. Foreign exchange
losses of $9.5 million were included in other expense, net for 2016 compared to losses of $15.1 million for 2015.
During 2016 and 2015, we sold portions of our investment in Hydrogenics Corporation (Hydrogenics) that resulted
in pretax gains of $1.2 million and $2.7 million, respectively, which were recorded in other expense, net.
Income taxes. Our effective income tax rate of 18.2% for 2016 was lower than the statutory rate of 35% primarily
due to a reduction in tax expense related to the release of valuation allowances related to certain federal tax credit
carryforwards and certain other deferred tax assets. The effective income tax rate was also favorably affected by the
reduction of reserves for uncertain tax positions and earnings in foreign jurisdictions that we do not plan to
repatriate. These foreign earnings are generally taxed at rates lower than the U.S. Offsetting these decreases in 2016
was the effect of the provision for state income taxes as well as the goodwill impairment charge for which only
partial tax benefits were recorded.
Our effective income tax rate for 2015 was negatively impacted by tax valuation allowances related to federal tax
credit carryforwards, impairment charges for which minimal tax benefits were recorded and losses in certain
jurisdictions where we did not recognize tax benefits due to the likelihood of them not being realizable. These
negative impacts were partially offset by the favorable effects of earnings in foreign jurisdictions, lower levels of
planned repatriation as a result of funds used outside the U.S. for a portion of the BNS purchase price, benefits
recognized from adjustments related to prior years’ tax returns and a reduction in tax expense related to uncertain
tax positions.
43
Segment Results
Net sales by segment:
CCS
CMS
Consolidated net sales
Operating income by segment:
CCS
CMS
Consolidated operating income
Year Ended December 31,
2016
2015
Amount
% of Net
Sales
Amount
% of Net
Sales
Dollar
Change
%
Change
(dollars in millions)
$2,965.5
1,958.1
48.4 % $ 1,123.8
(8.0 )
51.6
$4,923.6 100.0 % $3,807.8 100.0 % $ 1,115.8
60.2 % $1,841.7
39.8 1,966.1
61.0 %
(0.4)
29.3 %
$ 291.2
283.6
$ 574.8
16.1
9.8 % $
14.5
165.5
11.7 % $ 181.6
0.9 % $ 275.1 1,708.7 %
8.4 118.1
71.4
4.8 % $ 393.2 216.5 %
Non-GAAP adjusted operating income by
segment:
CCS
CMS
$ 632.3
419.1
21.3 % $ 349.9
379.9
21.4
19.0 % $ 282.4
39.2
19.3
80.7 %
10.3
Non-GAAP consolidated adjusted
operating income (1)
$1,051.4
21.4 % $ 729.8
19.2 % $ 321.6
44.1 %
(1) See “Reconciliation of Non-GAAP Measures”.
CommScope Connectivity Solutions Segment
CCS segment net sales for 2016 were higher than the prior year in all major geographical regions as a result of the
BNS acquisition. CCS segment 2016 net sales included incremental net sales from the BNS acquisition of $1.21
billion. Legacy CommScope net sales in the CCS segment decreased across all major geographical regions except
the U.S. compared to 2015. The decrease was primarily due to lower sales of indoor network solutions. Foreign
exchange rate changes had a negative impact on legacy CommScope CCS segment net sales of approximately 1% in
2016 compared to 2015.
CCS segment operating income and non-GAAP adjusted operating income increased for 2016 compared to the prior
year primarily due to the acquisition of the BNS business. In addition, the CCS segment also benefited from cost
savings initiatives in 2016 partially offset by higher variable cash compensation costs. CCS segment operating
income for 2016 included asset impairment charges of $38.6 million which were excluded from the calculation of
non-GAAP adjusted operating income. CCS operating income for 2015 included an asset impairment charge of
$16.4 million, purchase accounting adjustments related to the BNS acquisition of $78.2 million and higher
integration and transactions costs, all of which were excluded from the calculation of non-GAAP adjusted operating
income.
We expect near-term and long-term demand for our indoor network CCS products to be driven by global
information technology spending and spending in core networks as the ongoing need for bandwidth and intelligence
in the network continues to create demand for high-performance connectivity solutions. We expect near-term and
long-term demand for our outdoor network CCS products to be driven by global deployment of FTTX applications,
new services in the access market (including backhaul capacity needed for 5G networks), ongoing maintenance
requirements of cable networks and residential construction market activity in North America. Uncertain global
economic conditions, variability in the levels of commercial and residential construction activity, uncertain levels of
information technology spending and reductions in the levels of distributor inventories may negatively affect
demand for our products. Over the longer term, the ongoing demand for fiber solutions is expected to be somewhat
offset by decelerating demand for copper solutions in networks.
44
CommScope Mobility Solutions Segment
The CMS segment experienced a slight decrease in net sales for 2016 compared to the prior year, with incremental
net sales from the BNS acquisition of $31.1 million. Legacy CommScope CMS segment net sales for 2016
decreased across all major geographical regions except the U.S., which benefited from an increase in spending by
certain domestic operators. Foreign exchange rate changes had a negative impact of approximately 1% on legacy
CommScope CMS segment net sales for 2016 compared to the prior year.
CMS segment operating income increased for 2016 primarily due to the unfavorable impact of the $74.4 million
goodwill impairment charge recorded in the prior year, which was excluded from the calculation of non-GAAP
adjusted operating income. CMS segment operating income and non-GAAP adjusted operating income also
increased in 2016 compared to 2015 due to more favorable geographic and product mix, partially offset by the effect
of lower sales volumes, higher variable cash compensation costs and increased R&D spending as we continue to
invest heavily in small cell technology.
Our sales to wireless operators can be volatile. We expect longer-term demand for our CMS products to be
positively affected by wireless coverage and capacity expansion in emerging markets and growth in mobile data
services (including 4G deployments) in developed markets. In addition, we expect the deployment of new
technologies such as 5G to have a positive impact on longer-term demand for our products. Uncertainty in the global
economy or a particular region or consolidation among wireless operators may slow the growth or cause a decline in
capital spending by wireless operators and negatively impact our net sales.
Comparison of results of operations for the year ended December 31, 2015 with the year ended December 31,
2014
Year Ended December 31,
2015
2014
Amount
% of Net
Sales
Amount
% of Net
Sales
Dollar
Change
%
Change
Net sales
Gross profit
Operating income
Non-GAAP adjusted operating income (1)
Net income (loss)
Diluted earnings (loss) per share
$ 3,807.8
1,345.8
181.6
729.8
(70.9)
(0.37)
$
(dollars in millions, except per share amounts)
100.0% $ 3,829.6
35.3 1,397.3
577.4
808.4
236.8
100.0% $
36.5
15.1
21.1
6.2
4.8
19.2
(1.9)
$
1.24
$
(21.8 )
(51.5 )
(395.8 )
(78.6 )
(307.7 )
(1.61 )
(1)
See "Reconciliation of Non-GAAP Measures".
Net sales
Net sales
Domestic net sales
International net sales
Year Ended December 31,
Change
2014
$
(dollars in millions)
3,829.6 $
2,107.6
1,722.0
(21.8 )
(238.2 )
216.4
2015
$
3,807.8 $
1,869.4
1,938.4
45
(0.6)%
(3.7)
(68.5)
(9.7)
(129.9)
(129.8)%
%
(0.6)%
(11.3)
12.6
Net sales. Net sales for 2015 included sales from the BNS business of $529.6 million. Excluding the BNS business,
the decrease in net sales for 2015 compared to the prior year was primarily attributable to lower net sales in the U.S.
mainly as a result of decreased spending by certain domestic wireless operators. In addition to the decline in the
U.S., net sales (excluding incremental net sales from the BNS business) in the Europe, Middle East and Africa
(EMEA) and Central and Latin America (CALA) regions were lower for 2015 compared to 2014 primarily due to
the negative impact of foreign exchange rate changes. Net sales in 2015 in the Asia Pacific (APAC) region
(excluding incremental net sales from the BNS business) were essentially unchanged compared to 2014. Foreign
exchange rate changes had a negative impact of approximately 3% on net sales for 2015 compared to 2014.
Including the BNS business, net sales increased in all major geographic regions except the U.S. Net sales to
customers outside the U.S. comprised 51% of total net sales for 2015 compared to 45% for 2014.
From a segment perspective, the year-over-year decrease in net sales for 2015 was driven by lower net sales in our
CMS segment. The CCS segment experienced higher net sales due to the addition of the acquired BNS business.
For further details by segment, see the section titled “Segment Results” below.
Gross profit, SG&A expense and R&D expense
Year Ended December 31,
Change
Gross profit
Gross margin percentage
SG&A expense
As a percent of sales
R&D expense
As a percent of sales
$
2015
1,345.8 $
35.3%
687.4
18.1%
136.0
3.6%
2014
(dollars in millions)
1,397.3
$
$
%
(51.5 )
(3.7)%
202.5
41.8
10.7
8.5
36.5%
484.9
12.7%
125.3
3.3%
Gross profit (net sales less cost of sales). Gross profit for 2015 was negatively affected by BNS business purchase
accounting adjustments of $81.6 million, primarily related to the mark-up of inventory to its estimated fair value less
the estimated costs associated with its sale. Excluding this additional cost, gross margin percent was 37.5% for 2015.
This increase in gross margin percent for 2015 compared to 2014 was primarily due to favorable product mix and
lower material costs partially offset by the impact of lower sales volumes.
Selling, general and administrative expense. SG&A expense for 2015 increased compared to 2014 primarily due to
an increase of $84.8 million of transaction and integration costs mainly resulting from the acquisition of the BNS
business. In addition, the inclusion of the BNS business contributed an additional $117.8 million in SG&A expense
for 2015 compared to 2014. During 2014, we recorded a $13.1 million reduction in SG&A expense resulting from
an adjustment to the estimated fair value of contingent consideration payable related to a 2013 acquisition.
Excluding transaction and integration costs, the addition of the BNS business and the adjustments to contingent
consideration payable, SG&A expense was $13.0 million lower for 2015 compared to 2014. This decrease was
primarily attributable to lower variable cash compensation costs that were offset partially by higher bad debt
expense.
Research and development. R&D expense increased in 2015 compared to 2014 due to $24.8 million of R&D costs
incurred by the BNS business and $5.3 million of R&D costs incurred by Airvana. Excluding the BNS business and
Airvana, R&D expense decreased for 2015 by $19.3 million compared to 2014, primarily as a result of a decline in
variable cash compensation costs and benefits from cost savings initiatives. Excluding the impact of the BNS
business and Airvana, R&D expense as a percentage of sales for 2015 was 3.2% compared to 3.3% for 2014.
46
Amortization of purchased intangible assets, Restructuring costs and Asset impairments
Year Ended December 31,
Change
2015
2014
$
(dollars in millions)
%
Amortization of purchased intangible assets
Restructuring costs, net
Asset impairments
$
220.6 $
29.5
90.8
178.3 $
19.3
12.1
42.3
10.2
78.7
23.7%
52.8
650.4
Amortization of purchased intangible assets. The amortization of purchased intangible assets was higher in 2015
compared to 2014 primarily due to the additional amortization resulting from the acquisition of the BNS business.
Restructuring costs, net. The restructuring costs recorded in 2015 were primarily related to the initial phases of
integrating the BNS business. The restructuring costs recognized in 2014 and the first half of 2015 were primarily
related to our continued efforts to realign and lower our overall cost structure.
Asset impairments. During 2015 and 2014, we recorded goodwill impairment charges of $74.4 million and $4.9
million, respectively, in the CMS segment, primarily as a result of lower projected future operating results for a
certain reporting unit. During 2015, we determined that certain intangible assets in the CCS segment were no longer
recoverable and recorded a $5.5 million impairment charge. Also during 2015, we determined a note receivable
related to a previous divestiture was impaired and recorded a charge for $10.9 million in the CCS segment. During
2014, we determined that certain intangible assets in the CCS segment were no longer recoverable and recorded a
$7.2 million impairment charge.
Net interest expense, Other expense, net and Income taxes
Net interest expense
Other expense, net
Income tax expense
Year Ended December 31,
Change
2015
$
(230.5) $
(13.1)
(8.9)
2014
$
(dollars in millions)
(174.0) $
(86.4)
(80.3)
(56.5 )
73.3
71.4
%
32.5%
(84.8)
(88.9)
Net interest expense. In June 2015, we issued the 2025 Notes and the 2020 Notes and we entered into the 2022
Term Loan. The proceeds from the 2025 Notes and the 2022 Term Loan were used in funding the acquisition of the
BNS business. We incurred $77.7 million of incremental interest expense in 2015 as a result of this acquisition-
related debt. The proceeds from the 2020 Notes were used to repay a portion of our existing term loans. In
connection with this repayment, $6.7 million of original issue discount and debt issuance costs were written off and
included in interest expense in 2015.
In May 2014, we issued $1.3 billion of senior notes at a weighted average stated interest rate of 5.25% and used
substantially all of the net proceeds to redeem $1.1 billion of 8.25% senior notes that were due in 2019 (the 2019
Notes). In connection with the redemption of the 2019 Notes, we wrote off $19.1 million of debt issuance costs to
interest expense in 2014.
Our weighted average effective interest rate on outstanding borrowings, including the amortization of debt issuance
costs and original issue discount was 5.50% as of December 31, 2015 and 5.38% as of December 31, 2014.
Other expense, net. Foreign exchange losses of $15.1 million were included in other expense, net for 2015
compared to losses of $2.7 million for 2014.
During 2015 and 2014, we sold portions of our investment in Hydrogenics that resulted in pretax gains of $2.7
million and $12.3 million, respectively, which were recorded in other expense, net. Other expense, net for 2014 also
included our share of losses in our equity investments of $1.5 million.
47
In connection with the redemption of the 2019 Notes in 2014, we recorded a redemption premium of $93.9 million,
which was included in other expense, net.
Income taxes. Our effective income tax rate for 2015 was negatively impacted by tax valuation allowances related
to federal tax credit carryforwards, impairment charges for which minimal tax benefits were recorded and losses in
certain jurisdictions where we did not recognize tax benefits due to the likelihood of them not being realizable.
These negative impacts were partially offset by the favorable effects of earnings in foreign jurisdictions, lower levels
of planned repatriation as a result of funds used outside the U.S. for a portion of the BNS purchase price, benefits
recognized from adjustments related to prior years’ tax returns and a reduction in tax expense related to uncertain
tax positions.
Our effective income tax rate of 25.3% for 2014 included reductions in tax expense related to reductions in reserves
for uncertain tax positions as a result of the lapse of statutes of limitations on certain matters. The benefits to the
income tax rate were partially offset by the impact of losses in certain jurisdictions where we did not recognize tax
benefits due to the likelihood of them not being realizable and the provision for state income taxes. Earnings in
foreign jurisdictions reduce our effective tax rate. This reduction is largely offset by providing for the cost of
repatriating the majority of these earnings.
Segment Results
Net sales by segment:
CCS
CMS
Consolidated net sales
Operating income by segment:
CCS
CMS
Consolidated operating income
Year Ended December 31,
2015
2014
Amount
% of Net
Sales
Amount
% of Net
Sales
Dollar
Change
%
Change
(dollars in millions)
$1,841.7
1,966.1
35.5 % $ 481.9
64.5 (503.7 )
$3,807.8 100.0 % $3,829.6 100.0 % $ (21.8 )
48.4 % $1,359.8
51.6 2,469.8
35.4 %
(20.4)
(0.6) %
$
16.1
165.5
$ 181.6
0.9 % $ 109.3
8.4
468.1
4.8 % $ 577.4
8.0 % $ (93.2 )
19.0 (302.6 )
15.1 % $ (395.8 )
(85.3) %
(64.6)
(68.5) %
Non-GAAP adjusted operating income by
segment:
CCS
CMS
$ 349.9
379.9
19.0 % $ 208.1
600.3
19.3
15.3 % $ 141.8
24.3 (220.4 )
68.1 %
(36.7)
Non-GAAP consolidated adjusted
operating income (1)
$ 729.8
19.2 % $ 808.4
21.1 % $ (78.6 )
(9.7) %
(1) See “Reconciliation of Non-GAAP Measures”.
CommScope Connectivity Solutions Segment
CCS segment net sales for 2015 were higher than the prior year across all major geographic regions due to the
acquisition of the BNS business. Excluding the incremental net sales related to the BNS business, CCS segment net
sales were down in 2015 driven by decreases in CALA offset partially by increases in the U.S. and APAC. The CCS
segment also continued to prune less profitable products from its portfolio, which resulted in lower sales for the
segment. Foreign exchange rate changes had a negative impact of approximately 1% on CCS segment net sales in
2015 compared to 2014.
48
CCS segment operating income decreased for 2015 as compared to 2014 primarily due to integration and transaction
costs of $82.3 million; purchase accounting charges related to the mark-up of inventory to its estimated fair value less
the estimate coast associated with its sales of $78.2 million; restructuring charges of $16.9 million; and asset
impairment charges of $16.4 million, all of which were not included in non-GAAP adjusted operating income. CCS
segment operating income for 2014 included a gain of $13.1 million related to adjustments to contingent consideration
payable and asset impairment charges of $7.2 million. These charges were not included in non-GAAP adjusted
operating income. CCS segment non-GAAP adjusted operating income increased for 2015 as compared to 2014
primarily due to the acquisition of the BNS business as well as favorable product mix, lower material costs and the
benefits of cost reductions and product rationalization.
CommScope Mobility Solutions Segment
The CMS segment experienced a substantial decrease in net sales for 2015 compared to 2014, primarily as a result
of lower sales in the U.S. due to a slowdown in spending by certain domestic operators. In addition to the slowdown
in the U.S. during 2015, CMS segment net sales were lower in the EMEA region. CMS segment net sales in the
APAC region were essentially unchanged year-over-year. The Airvana and Alifabs acquisitions provided
incremental net sales to the CMS segment of $20.4 million during 2015. Foreign exchange rate changes had a
negative impact of approximately 5% on CMS segment net sales for 2015 compared to 2014.
CMS segment operating income and non-GAAP adjusted operating income decreased substantially in 2015
compared to 2014 as a result of lower sales volumes. In addition to the decline in sales, CMS segment operating
income was negatively affected by a goodwill impairment charge of $74.4 million during 2015 compared to an
impairment charge of $4.9 million in 2014. These impairment charges are not reflected in non-GAAP adjusted
operating income. The CMS segment also recorded higher bad debt expense in 2015 as compared to 2014. The
CMS segment reflected benefits from lower variable cash compensation costs as a result of its lower operating
performance in 2015 as compared to 2014.
Liquidity and Capital Resources
The following table summarizes certain key measures of our liquidity and capital resources:
$
Cash and cash equivalents
Working capital (1), excluding cash and cash
equivalents and current portion of long-term debt
Availability under revolving credit facility
Long-term debt, including current portion
Total capitalization (2)
Long-term debt, including current portion, as a
percentage of total capitalization
December 31,
2016
2015
Dollar
Change
%
Change
428.2 $
(dollars in millions)
562.9 $
(134.7 )
720.2
441.1
4,562.0
5,956.1
769.2
278.2
5,243.7
6,466.4
(49.0 )
162.9
(681.7 )
(510.3 )
(23.9)%
(6.4)
58.6
(13.0)
(7.9)
76.6%
81.1%
(1) Working capital consists of current assets of $1,993.8 million less current liabilities of $857.8 million as of
December 31, 2016. Working capital consists of current assets of $2,004.6 million less current liabilities of
$685.1 million as of December 31, 2015.
(2) Total capitalization includes long-term debt, including the current portion, and stockholders’ equity.
49
Our principal sources of liquidity on a short-term basis are cash and cash equivalents, cash flows provided by
operations and availability under credit facilities. Refer to Note 6 in the Notes to Consolidated Financial Statements
included elsewhere in this Annual Report on Form 10-K for information regarding the terms of our credit facilities.
We believe these sources will be sufficient to meet our presently anticipated future cash needs. On a long-term basis,
our potential sources of liquidity also include raising capital through the issuance of debt and/or equity. The primary
uses of liquidity include debt service requirements (including voluntary debt repayments or redemptions), funding
working capital requirements, funding acquisitions, paying acquisition integration costs, capital expenditures, paying
restructuring costs, income tax payments (including cost of repatriation), funding pension and other postretirement
obligations and potential stock repurchases.
Cash and cash equivalents decreased during 2016 mainly due to our voluntary redemptions of $536.6 million of our
senior PIK toggle notes and payments of $162.5 of our senior secured term loans, largely offset by cash generated
by our operations. As of December 31, 2016, approximately 78% of our cash and cash equivalents were held
outside the U.S. Income taxes have been provided on foreign earnings such that there would be no significant
incremental income tax expense to repatriate the portion of this cash that is not required to meet operational needs of
our international subsidiaries.
Working capital, excluding cash and cash equivalents and current portion of long-term debt, decreased primarily due
to higher accrued liability balances resulting from the timing of payments of variable cash compensation costs as
well as higher accounts payable balances due to improved payment terms with vendors. These declines were offset
partially by higher accounts receivable balances due to less favorable payment terms with certain customers. The net
change in total capitalization during 2016 primarily reflected the payments of $699.1 million of our long-term debt,
partially offset by current year earnings.
Cash Flow Overview
Comparison for the year ended December 31, 2016 with the year ended December 31, 2015
Year Ended December 31,
2016
Dollar
Change
%
Change
2015
(dollars in millions)
Net cash generated by operating activities
Net cash used in investing activities
Net cash generated by (used in) financing activities
$
606.2 $
(54.6)
(674.4)
302.1 $
(3,050.6)
2,603.1
304.1
2,996.0
(3,277.5 )
100.7 %
(98.2)
NM
NM - Not meaningful
Operating Activities
During 2016, we generated $606.2 million of cash through operating activities compared to $302.1 million during
2015. The improvement was primarily due to higher adjusted operating income in the current year as a result of the
BNS acquisition. In addition, we benefited from initiatives to improve payment terms with vendors in 2016, the
impact of lower variable cash compensation payments than in the prior year and lower payments of integration and
transaction costs in 2016 compared to 2015. Cash paid for interest was $53.4 million higher for 2016 than in the
prior year primarily as a result of the incremental debt incurred to finance the acquisition of the BNS business. In
connection with the voluntary redemptions of the senior PIK toggle notes, we paid redemption premiums of $17.7
million. Cash paid for taxes was $26.4 million higher for 2016 compared to the prior year.
50
Investing Activities
Investment in property, plant and equipment during 2016 was $68.3 million, of which $6.1 million was related to
capital spending to support the integration of the BNS business. During 2015, investment in property, plant and
equipment was $56.5 million, of which $12.7 million was related to capital spending to support the integration of the
BNS business. The investment in property, plant and equipment was primarily related to supporting improvements
in manufacturing operations, including expanding production capacity, and investing in information technology
(including software developed for internal use).
During 2016, we sold a facility that was no longer being utilized for $3.7 million.
During 2016, we received $7.1 million in net settlements for working capital, pension and other adjustments related
to the BNS acquisition. We do not expect any additional material net settlements with TE Connectivity related to
the BNS acquisition. Also during 2016, we paid the final $1.0 million in purchase price payable related to the
Airvana acquisition.
During 2015, we acquired the BNS business and paid $2,957.5 million, net of cash acquired, using a combination of
cash on hand and proceeds from the issuance of long-term debt. Also in 2015, we acquired Airvana and paid $43.5
million, net of cash acquired, using cash on hand.
Financing Activities
During 2016, we voluntarily redeemed the remaining $536.6 million of our senior PIK toggle notes. We also made a
voluntary debt payment of $150.0 million on our senior secured term loan due 2018 (2018 Term Loan) as well as
mandatory debt repayments of $12.5 million on our 2022 Term Loan. Also in 2016, in connection with the
amendment of our 2022 Term Loan to reduce our interest rate, we recorded debt repayments and offsetting debt
proceeds of $19.8 million. We may voluntarily repay debt or repurchase our senior notes if market conditions are
favorable and the applicable indenture and the senior secured credit facilities permit such repayment or repurchase.
We also may refinance our existing debt to reduce interest rates, extend the term or adjust the total amount of fixed
or floating-rate debt.
As of December 31, 2016, we had no outstanding borrowings under our revolving credit facility and availability of
$441.1 million, reflecting a borrowing base of $466.1 million reduced by $25.0 million of letters of credit issued
under the revolving credit facility. In the third quarter of 2016, we increased our capacity under the revolver as
additional domestic collateral resulting from the BNS acquisition was added to the borrowing base.
During 2016, we received proceeds of $16.8 million and recognized $15.0 million of excess tax benefits primarily
related to the exercise of stock options. Also during 2016, employees surrendered 143,000 shares of our common
stock to satisfy their tax withholding requirements on vested restricted stock units, which reduced cash flows by $3.9
million.
During 2015, we received $500.0 million from the issuance of the 2020 Notes which was used, together with cash
on hand, to repay $500.0 million of our existing term loans and to pay the fees, costs and expenses related to the
issuance. In addition, we issued $1.5 billion of 2025 Notes and borrowed $1.25 billion under the 2022 Term Loan.
The proceeds from the 2025 Notes and the 2022 Term Loan were used to fund a substantial portion of the BNS
acquisition. In connection with these financing transactions and an amendment of our revolving credit facility, we
incurred $74.3 million of debt issuance costs. Also during 2015, we made a mandatory debt repayment of $3.1
million on the 2022 Term Loan and a voluntary repayment of $100.0 million on the 2018 Term Loan. We also
voluntarily repurchased $13.4 million of our senior PIK toggle notes and paid a $0.3 million premium related to the
repurchase. During 2015, we received proceeds of $25.6 million and recognized $24.8 million of excess tax benefits
primarily related to the exercise of stock options. Also during 2015, employees surrendered 24,656 shares of our
common stock to satisfy their tax withholding requirements on vested restricted stock units, which reduced cash
flows by $0.7 million.
51
Comparison for the year ended December 31, 2015 with the year ended December 31, 2014
Year Ended December 31,
2015
Dollar
Change
%
Change
2014
(dollars in millions)
Net cash generated by operating activities
Net cash used in investing activities
Net cash generated by financing activities
$
302.1 $
(3,050.6)
2,603.1
289.4 $
(76.0)
190.8
12.7
(2,974.6 )
2,412.3
4.4 %
NM
NM
NM - Not meaningful
Operating Activities
During 2015, we generated $302.1 million of cash through operating activities compared to $289.4 million during
2014. Cash flow from operations for 2015 included the payment of $96.1 million of integration and transaction
costs, primarily related to the acquisition of the BNS business. Cash flow from operations for 2014 included the
payment of a $93.9 million premium related to redeeming the 2019 Notes. Excluding the integration and transaction
costs paid in 2015 and the premium payment in 2014, we generated $10.5 million more from operating activities in
2015 compared to 2014 as lower operating performance in 2015 was more than offset by favorable changes in
working capital. Cash flow from operations improved in 2015 despite an increase of $23.9 million in cash paid for
taxes and an increase of $22.4 million in cash paid for interest due to the additional debt incurred in 2015 related to
the acquisition of the BNS business.
Investing Activities
During 2015, we acquired the BNS business and paid $2,957.5 million, net of cash acquired, using a combination of
cash on hand and proceeds from the issuance of long-term debt. Also during 2015, we acquired Airvana and paid
$43.5 million, net of cash acquired, using cash on hand. During 2014, we paid $46.7 million, net of cash acquired,
in connection with the Alifabs acquisition and we also received $4.7 million related to the final determination of the
iTRACS purchase price.
Investment in property, plant and equipment during 2015 was $56.5 million, of which $12.7 million was related to
capital spending to support the integration of the BNS business. The remainder of the investment in property, plant
and equipment was primarily related to supporting improvements to manufacturing operations as well as
investments in information technology (including software developed for internal use).
During 2015 and 2014, we received proceeds of $2.8 million and $12.8 million, respectively, related to the sale of a
portion of our investment in Hydrogenics. During 2014, we paid $15.0 million for the purchase of a non-controlling
interest in a company developing high-speed transceivers and photonic integrated circuit products.
Financing Activities
During 2015, we received $500.0 million from the issuance of the 2020 Notes which was used, together with cash
on hand, to repay $500.0 million of our existing term loans. In addition, we issued $1.5 billion of 2025 Notes and
borrowed $1.25 billion under the 2022 Term Loan. The proceeds from the 2025 Notes and the 2022 Term Loan
were used to fund a substantial portion of the acquisition of the BNS business. In connection with these financing
transactions and the amendment of our revolving credit facility, we paid $74.3 million of debt issuance costs during
2015.
During 2015, we made a mandatory debt repayment of $3.1 million on the 2022 Term Loan and a voluntary
repayment of $100 million on our senior secured term loan due 2018. We also voluntarily repurchased $13.4 million
of our senior PIK toggle notes and paid a $0.3 million premium related to the repurchase.
52
As of December 31, 2015, we had no outstanding borrowings under our revolving credit facility and the remaining
availability was $278.2 million, reflecting a borrowing base of $299.6 million reduced by $21.4 million of letters of
credit issued under the revolving credit facility. During 2015, we received proceeds of $25.6 million and recognized
$24.8 million of excess tax benefits primarily related to the exercise of stock options.
During 2014, we issued $1.3 billion of new senior notes at a weighted average interest rate of 5.25%. Proceeds from
the new senior notes were used to redeem the entire $1.1 billion of outstanding 2019 Notes. In connection with
issuing the new senior notes, we paid financing costs of $23.3 million during 2014. Also during 2014, we borrowed
and repaid $15.0 million under our revolving credit facility and repaid $8.8 million of our senior secured term loans.
During 2014, we received proceeds from stock option exercises and the related excess tax benefits of $23.5 million.
Reconciliation of Non-GAAP Measures
We believe that presenting certain non-GAAP financial measures enhances an investor’s understanding of our
financial performance. We further believe that these financial measures are useful financial metrics to assess our
operating performance from period to period by excluding certain items that we believe are not representative of our
core business. We also use certain of these financial measures for business planning purposes and in measuring our
performance relative to that of our competitors. We believe these financial measures are commonly used by
investors to evaluate our performance and that of our competitors. However, our use of the terms non-GAAP
adjusted operating income and non-GAAP adjusted EBITDA may vary from that of others in our industry. These
financial measures should not be considered as alternatives to operating income (loss), net income (loss) or any
other performance measures derived in accordance with U.S. GAAP as measures of operating performance or
operating cash flows or as measures of liquidity.
Our consolidated results include the impact of the BNS business subsequent to the acquisition date of August 28,
2015.
Although there are no financial maintenance covenants under the terms of our senior notes, there is a limitation,
among other limitations, on certain future borrowings based on an adjusted leverage ratio or a fixed charge coverage
ratio. These ratios are based on financial measures similar to adjusted EBITDA as presented below, but also give pro
forma effect to certain events, including acquisitions and savings from cost reduction initiatives such as facility
closures and headcount reductions. For the year ended December 31, 2016, our pro forma adjusted EBITDA, as
measured pursuant to indentures governing our notes, was $1,152.7 million, which included the impact of savings
from announced cost reduction initiatives ($20.9 million) so that the impact of the cost reduction initiatives are fully
reflected in the twelve-month period used in the calculation of the ratios. In addition to limitations under these
indentures, our senior secured credit facilities contain customary negative covenants. We believe we are in
compliance with the covenants under our indentures and senior secured credit facilities at December 31, 2016.
The following tables exclude the impact of the BNS and Airvana acquisitions for periods prior to their respective
acquisition:
53
Consolidated
Operating income
Adjustments:
Amortization of purchased intangible
assets
Restructuring costs, net
Equity-based compensation
Asset impairments
Integration and transaction costs (a)
Purchase accounting adjustments (b)
Non-GAAP adjusted operating income
Depreciation
Non-GAAP adjusted EBITDA
2016
Year Ended December 31,
2015
(in millions)
2014
$
574.8 $
181.6 $
577.4
297.2
42.9
35.0
38.6
62.3
0.6
1,051.4 $
80.5
1,131.8 $
220.6
29.5
28.7
90.8
96.9
81.7
729.8 $
60.6
790.3 $
178.3
19.3
21.1
12.1
12.1
(11.9)
808.4
48.8
857.2
$
$
(a) Reflects integration costs related to the acquisition of the BNS business, transaction costs related to potential
and consummated acquisitions and costs related to secondary stock offerings.
(b) Reflects non-cash charges resulting from purchase accounting adjustments. The 2014 adjustment also
includes $13.1 million for the reduction in the estimated fair value of contingent consideration payable related
to a previous acquisition.
CCS Segment
Operating income
Adjustments:
Amortization of purchased intangible assets
Restructuring costs, net
Equity-based compensation
Asset impairments
Integration and transaction costs
Purchase accounting adjustments
Non-GAAP adjusted operating income
2016
Year Ended December 31,
2015
(in millions)
2014
$
291.2 $
16.1 $
109.3
195.9
27.1
19.8
38.6
59.1
0.6
632.3 $
124.0
16.9
16.1
16.3
82.3
78.2
349.9 $
87.0
3.1
9.4
7.2
4.5
(12.5)
208.1
$
54
CMS Segment
Operating income
Adjustments:
Amortization of purchased intangible assets
Restructuring costs, net
Equity-based compensation
Asset impairments
Integration and transaction costs
Purchase accounting adjustments
Non-GAAP adjusted operating income
Note: Components may not sum to total due to rounding
2016
Year Ended December 31,
2015
(in millions)
2014
$
283.6 $
165.5 $
468.1
101.3
15.8
15.2
—
3.3
—
419.1 $
96.6
12.6
12.6
74.4
14.6
3.6
379.9 $
91.3
16.2
11.7
4.9
7.6
0.6
600.3
$
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2016:
Contractual Obligations
Long-term debt, including current
maturities (a)
Interest on long-term debt (a)(b)
Operating leases
Purchase obligations (c)
Pension and other postretirement
benefit liabilities (d)
Restructuring costs, net (e)
Unrecognized tax benefits (f)
Total contractual obligations
Total
Payments
Due
Amount of Payments Due per Period
2017
2018-2019
(in millions)
2020-2021
Thereafter
$
$
4,646.3 $
1,497.7
99.9
7.2
16.2
33.1
—
6,300.4 $
12.5 $
225.4
32.5
7.2
8.6
28.6
—
314.8 $
136.9 $ 1,175.0 $
389.0
442.2
23.5
36.3
—
—
3.2
4.5
—
1.9
—
—
623.1 $ 1,589.4 $
3,321.9
441.1
7.6
—
2.5
—
—
3,773.1
(a) No prepayment or redemption of any of our long-term debt balances has been assumed. Refer to Note 6 in the
Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for
information regarding the terms of our long-term debt agreements.
(b)
Interest on long-term debt excludes the amortization of deferred financing fees and original issue discount.
Interest on variable rate debt is estimated based upon rates in effect as of December 31, 2016.
(c) Purchase obligations include minimum amounts owed under take-or-pay or requirements contracts. Amounts
covered by open purchase orders are excluded as there is no contractual obligation until goods or services are
received.
(d) Amounts reflect expected contributions related to payments under the postretirement benefit plans through
2026 and expected pension contributions of $6.9 million in 2017 (see Note 10 in the Notes to Consolidated
Financial Statements included elsewhere in this Annual Report on Form 10-K).
(e) Future restructuring payments exclude payments due under lease arrangements which are included in
operating leases above.
55
(f) Due to the uncertainty in predicting the timing of tax payments related to our unrecognized tax benefits,
$45.9 million has been excluded from the presentation. We anticipate a reduction of up to $10.0 million of
unrecognized tax benefits during the next twelve months (see Note 11 in the Notes to Consolidated Financial
Statements included elsewhere in this Annual Report on Form 10-K).
Recent Accounting Pronouncements
Adopted in 2016
During the fourth quarter of 2016, we prospectively adopted Accounting Standards Update (ASU) No. 2015-11,
Simplifying the Measurement of Inventory. The guidance requires that inventory be measured at the lower of cost
and net realizable value, which is the estimated selling price in the ordinary course of business, less reasonably
predictable costs of completion, disposal and transportation. This guidance simplifies the prior guidance by
eliminating the options of measuring inventory at replacement cost or net realizable value less an approximate
normal profit margin. Adoption of this ASU did not have a material impact on our consolidated financial statements.
Issued but Not Adopted
In August 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-15, Cash Flow
Classification of Certain Cash Receipts and Cash Payments. The standard update amends or clarifies guidance on
classification of certain transactions in the statement of cash flows, including classification of debt prepayments,
debt extinguishment costs and contingent consideration payments after a business combination. ASU 2016-15 is
effective for us as of January 1, 2018 and early adoption is permitted. We are evaluating the impact of this new
guidance on the consolidated statement of cash flows and when it may be adopted.
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. The
new guidance replaces the current incurred loss method used for determining credit losses on financial assets,
including trade receivables, with an expected credit loss method. ASU No. 2016-13 is effective for us as of January
1, 2020 and early adoption is permitted. We are evaluating the impact of this new guidance on the consolidated
financial statements and when it may be adopted.
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting,
which simplifies several aspects of the accounting for employee equity-based payment transactions, including the
income tax consequences, classification of awards as either equity or liabilities and classification on the statement of
cash flows. ASU No. 2016-09 is effective for us as of January 1, 2017 and we do not expect that its application will
have a significant impact on income before income taxes; however, it may impact our net income because excess tax
benefits or deficiencies, which are currently reflected in additional paid in capital, must be reflected in income tax
expense under ASU No. 2016-09. The significance of the impact will depend on the intrinsic value at the time of
vesting or exercise of equity-based compensation awards. The impact to the Consolidated Statements of Cash Flows
will be to present excess tax benefits or deficiencies as an operating activity instead of a financing activity in 2017.
We also expect to make an accounting policy election to account for forfeitures as they occur instead of applying an
estimated forfeiture rate over the vesting period of the award.
In February 2016, the FASB issued ASU No. 2016-02, Leases, which supersedes the current leasing guidance in
Topic 840, Leases. Under the new guidance, lessees are required to recognize assets and lease liabilities for the
rights and obligations created by leased assets previously classified as operating leases. ASU No. 2016-02 is
effective for us as of January 1, 2019 and early adoption is permitted. We are evaluating the impact of this new
guidance on the consolidated financial statements and when it may be adopted.
56
In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and
Financial Liabilities, which modifies how entities measure equity investments (except those accounted for under the
equity method of accounting) and present changes in the fair value of financial liabilities; simplifies the impairment
assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to
identify impairment; changes presentation and disclosure requirements; and clarifies that an entity should evaluate
the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with
the entity’s other deferred tax assets. The guidance is effective for us as of January 1, 2018 and with the exception of
certain provisions, early adoption is not permitted. We are evaluating the impact of this new guidance on the
consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The new accounting
standard defines a single comprehensive model in accounting for revenue arising from contracts with customers and
supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of
the ASU is to recognize revenues when promised goods or services are transferred to customers in an amount that
reflects the consideration that is expected to be received for those goods or services. We will be required to adopt the
new standard, including subsequently issued clarifying guidance, as of January 1, 2018 using either: (i) full
retrospective application to each prior reporting period presented; or (ii) modified retrospective application with the
cumulative effect of initially applying the standard recognized at the date of initial application and providing certain
additional required disclosures. We plan to adopt the new accounting model as of January 1, 2018 using the
modified retrospective method.
During 2016, we completed an impact assessment and determined that adoption of the standard will likely result in
changes to revenue recognition related to the timing of when revenues are recognized for contracts containing both
product and service obligations. These contract revenues are currently accounted for using the multi-element
guidance and are primarily for metro cell, DAS and small cell solutions within the CMS segment. Due to the short-
term nature of these contracts, the ultimate impact to the Company’s consolidated financial statements will be based
on customer-specific contract terms in effect at adoption and could be material.
We believe that changes to our accounting policies, processes, internal controls and information systems will be
required to comply with this update. We are in the process of implementing the changes necessary to meet the new
standard’s reporting and disclosure requirements.
Off-Balance Sheet Arrangements
We are not a party to any significant off-balance sheet arrangements, except for operating leases.
Effects of Inflation and Changing Prices
We continually attempt to minimize the effect of inflation on earnings by controlling our operating costs and
adjusting our selling prices. The principal raw materials purchased by us (copper, aluminum, steel, plastics and other
polymers, bimetals and optical fiber) are subject to changes in market price as they are influenced by commodity
markets and other factors. Prices for copper, fluoropolymers and certain other polymers derived from oil and natural
gas have, at times, been volatile. As a result, we have adjusted our prices for certain products and may have to adjust
prices again in the future. To the extent that we are unable to pass on cost increases to customers without a
significant decrease in sales volume or must implement price reductions in response to a rapid decline in raw
material costs, these cost changes could have a material adverse impact on the results of our operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks related to changes in interest rates, foreign currency exchange rates and commodity
prices. We may utilize derivative financial instruments, among other methods, to hedge some of these exposures.
We do not use derivative financial instruments for speculative or trading purposes.
57
Interest Rate Risk
The table below summarizes the expected interest and principal payments associated with our variable rate debt
outstanding as of December 31, 2016 (mainly the $1.35 billion of variable rate term loans). The principal payments
presented below are based on scheduled maturities and assume no borrowings under the revolving credit facility.
The interest payments presented below assume the interest rates in effect as of December 31, 2016 (see Note 6 in the
Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K). The impact of
a 1% increase in the interest rate index (taking into account the impact of the LIBOR floor on the term loans) on
projected future interest payments on the variable rate debt is also included in the table below.
2017
2018
2020
2019
(dollars in millions)
2021
There-
after
Principal and interest payments
on variable rate debt
Average cash interest rate
Impact of 1% increase in interest rate index $
$
57.8 $ 165.7 $
3.38%
3.38%
12.2 $
13.4 $
53.2 $
3.38%
12.0 $
52.2 $
3.33 %
11.9 $
51.0 $ 1,210.2
3.27%
3.27 %
11.7
11.8 $
We also have $3.30 billion aggregate principal amount of fixed rate senior notes. The table below summarizes our
expected interest and principal payments related to our fixed rate debt at December 31, 2016.
2017
2018
2020
2019
(dollars in millions)
2021
There-
after
Principal and interest payments
on fixed rate debt
Average cash interest rate
Foreign Currency Risk
$ 180.1 $ 180.1 $ 180.1 $ 668.8 $ 792.0 $ 2,552.8
5.90%
5.55 %
5.46%
5.46%
5.46%
5.74 %
Approximately 46% and 51% of net sales for 2016 and 2015, respectively, were to customers located outside the
U.S. Significant changes in foreign currency exchange rates could adversely affect our international sales levels and
the related collection of amounts due. In addition, a significant decline in the value of currencies used in certain
regions of the world as compared to the U.S. dollar could adversely affect product sales in those regions because our
products may become more expensive for those customers to pay for in their local currency. Conversely, significant
increases in the value of foreign currencies as compared to the U.S. dollar could adversely affect profitability as
certain product costs increase relative to a U.S. dollar-denominated sales price. The foreign currencies to which we
have the greatest exposure include the Chinese yuan, euro, Australian dollar, Indian rupee, British pound and
Mexican peso. Local manufacturing provides a partial natural hedge and we continue to evaluate additional
alternatives to help us reasonably manage the market risk related to foreign currency exposures.
We use derivative instruments such as forward exchange contracts to manage the risk of fluctuations in the value of
certain foreign currencies. At December 31, 2016, we had foreign exchange contracts with a net unrealized loss of
$8.1 million, with maturities of up to six months and aggregate notional value of $328 million (based on exchange
rates as of December 31, 2016). These instruments are not leveraged and are not held for trading or speculation.
These contracts are not designated as hedges for accounting purposes and are marked to market each period through
earnings and, as such, there were no unrecognized gains or losses as of December 31, 2016 or 2015. See Note 7 in
the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for further
discussion of these contracts. We continuously evaluate the amount and type of derivative instruments utilized to
manage the market risk related to foreign currency exposures.
58
Commodity Price Risk
Materials, in their finished form, account for a large portion of our cost of sales. These materials, such as copper,
aluminum, steel, plastics and other polymers, bimetals and optical fiber, are subject to changes in market price as
they are influenced by commodity markets and supply and demand levels, among other factors. Management
attempts to mitigate these risks through effective requirements planning and by working closely with key suppliers
to obtain the best possible pricing and delivery terms. As of December 31, 2016, we had forward purchase
commitments outstanding under take-or-pay contracts for certain metals of approximately $7.2 million that we
expect to consume in the normal course of operations through the second quarter of 2017. We continuously evaluate
the amount and type of derivative instruments utilized to manage commodity price risk.
59
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Operations and Comprehensive Income (Loss)
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders’ Equity
Notes to Consolidated Financial Statements
61
63
64
65
66
67
60
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of CommScope Holding Company, Inc.
We have audited the accompanying consolidated balance sheets of CommScope Holding Company, Inc. as of
December 31, 2016 and 2015, and the related consolidated statements of operations and comprehensive income
(loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of CommScope Holding Company, Inc. at December 31, 2016 and 2015, and the consolidated
results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in
conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), CommScope Holding Company, Inc.’s internal control over financial reporting as of December 31, 2016,
based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 Framework) and our report dated February 22, 2017 expressed
an unqualified opinion thereon.
Charlotte, North Carolina
February 22, 2017
61
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of CommScope Holding Company, Inc.
We have audited CommScope Holding Company, Inc.’s internal control over financial reporting as of December 31,
2016, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). CommScope
Holding Company, Inc.’s management is responsible for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, CommScope Holding Company, Inc. maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2016, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the 2016 consolidated financial statements of CommScope Holding Company, Inc. and our report dated
February 22, 2017 expressed an unqualified opinion thereon.
Charlotte, North Carolina
February 22, 2017
62
\
CommScope Holding Company, Inc.
Consolidated Statements of Operations
and Comprehensive Income (Loss)
(In thousands, except per share amounts)
Net sales
Operating costs and expenses:
Cost of sales
Selling, general and administrative
Research and development
Amortization of purchased intangible assets
Restructuring costs, net
Asset impairments
Total operating costs and expenses
Operating income
Other expense, net
Interest expense
Interest income
Income (loss) before income taxes
Income tax expense
Net income (loss)
Earnings (loss) per share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
Comprehensive income (loss):
Net income (loss)
Other comprehensive income (loss), net of tax:
Foreign currency translation loss
Defined benefit plans:
Change in unrecognized actuarial gain (loss)
Change in unrecognized net prior service cost (credit)
Available-for-sale securities
Total other comprehensive loss, net of tax
Total comprehensive income (loss)
$
$
$
$
$
2016
4,923,621 $
Year Ended December 31,
2015
3,807,828 $ 3,829,614
2014
2,890,032
879,495
200,715
297,202
42,875
38,552
4,348,871
574,750
(30,171)
(277,534)
5,524
272,569
(49,731)
222,838 $
2,462,008
687,389
135,964
220,602
29,488
90,784
3,626,235
181,593
(13,061 )
(234,661 )
4,128
(62,001 )
(8,874 )
(70,875 ) $
2,432,345
484,891
125,301
178,265
19,267
12,096
3,252,165
577,449
(86,405)
(178,935)
4,954
317,063
(80,291)
236,772
1.16 $
1.13 $
(0.37 ) $
(0.37 ) $
1.27
1.24
192,470
196,459
189,876
189,876
186,905
191,450
$
222,838 $
(70,875 ) $
236,772
(93,528)
(80,137 )
(51,411)
(16,002)
96
(4,001)
(113,435)
109,403 $
3,571
(6,181 )
(5,383 )
(88,130 )
(159,005 ) $
(11,584)
(6,169)
11,892
(57,272)
179,500
See notes to consolidated financial statements.
63
CommScope Holding Company, Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
Assets
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts of
$17,211 and $19,392, respectively
Inventories, net
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net of accumulated depreciation
of $303,734 and $243,806, respectively
Goodwill
Other intangible assets, net
Other noncurrent assets
Total assets
Liabilities and Stockholders’ Equity
Accounts payable
Other accrued liabilities
Current portion of long-term debt
Total current liabilities
Long-term debt
Deferred income taxes
Pension and other postretirement benefit liabilities
Other noncurrent liabilities
Total liabilities
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value: Authorized shares: 200,000,000;
Issued and outstanding shares: None
Common stock, $0.01 par value: Authorized shares: 1,300,000,000;
Issued and outstanding shares: 193,837,437 and 191,368,727,
respectively
Additional paid-in capital
Retained earnings (accumulated deficit)
Accumulated other comprehensive loss
Treasury stock, at cost: 1,129,222 shares and 986,222 shares,
respectively
Total stockholders’ equity
Total liabilities and stockholders’ equity
December 31,
2016
2015
$
428,228 $
562,884
952,367
473,267
139,902
1,993,764
474,990
2,768,304
1,799,065
105,863
7,141,986 $
415,921 $
429,397
12,500
857,818
4,549,510
199,121
31,671
109,782
5,747,902
833,041
441,815
166,900
2,004,640
528,706
2,690,636
2,147,483
131,166
7,502,631
300,829
371,743
12,520
685,092
5,231,131
202,487
37,102
124,099
6,279,911
$
$
—
—
1,950
2,282,014
(589,556 )
(285,113 )
(15,211 )
1,394,084
7,141,986 $
$
1,923
2,216,202
(812,394)
(171,678)
(11,333)
1,222,720
7,502,631
See notes to consolidated financial statements.
64
CommScope Holding Company, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Operating Activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash generated by
operating activities:
Depreciation and amortization
Equity-based compensation
Deferred income taxes
Asset impairments
Excess tax benefits from equity-based compensation
Changes in assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Accounts payable and other accrued liabilities
Other noncurrent liabilities
Other noncurrent assets
Other
Net cash generated by operating activities
Investing Activities:
Additions to property, plant and equipment
Proceeds from sale of property, plant and equipment
Cash paid for acquisitions including purchase price adjustments, net of
cash acquired
Proceeds from sale of businesses and long-term investments
Cash paid for long-term investments
Other
Net cash used in investing activities
Financing Activities:
Long-term debt repaid
Long-term debt proceeds
Long-term debt financing costs
Proceeds from the issuance of common shares under equity-based
compensation plans
Excess tax benefits from equity-based compensation
Tax withholding payments for vested equity-based compensation
awards
Other
Net cash generated by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Year Ended December 31,
2015
2014
2016
$ 222,838 $
(70,875 ) $ 236,772
399,053
35,006
(100,878)
38,552
(14,993)
303,500
28,665
(101,826 )
90,784
(24,754 )
259,504
21,092
(33,278)
12,096
(11,411)
(100,867)
(31,996)
14,273
191,405
(35,950)
(1,834)
(8,384)
606,225
(6,984 )
162,164
(65,271 )
6,921
(13,320 )
(11,966 )
5,022
302,060
(18,824)
(4,324)
1,502
(109,922)
(49,265)
715
(15,239)
289,418
(68,314)
4,084
(56,501 )
3,417
(36,935)
4,575
6,098 (3,000,991 )
2,817
1,292
—
—
646
2,253
(54,587) (3,050,612 )
(41,794)
12,761
(15,000)
441
(75,952)
(718,914)
(619,056 ) (1,124,392)
19,764 3,246,875 1,315,026
(23,257)
(74,319 )
—
16,756
14,993
25,570
24,754
12,052
11,411
(3,878)
(3,094)
(698 )
—
(674,373) 2,603,126
(21,011 )
(166,437 )
729,321
—
—
190,840
(21,305)
(11,921)
383,001
(134,656)
562,884
346,320
$ 428,228 $ 562,884 $ 729,321
See notes to consolidated financial statements.
65
CommScope Holding Company, Inc.
Consolidated Statements of Stockholders' Equity
(In thousands, except share amounts)
Year Ended December 31,
2015
2016
2014
Number of common shares outstanding:
Balance at beginning of period
Issuance of shares under equity-based compensation plans
Shares surrendered under equity-based compensation plans
Balance at end of period
Common stock:
Balance at beginning of period
Issuance of shares under equity-based compensation plans
Balance at end of period
Additional paid-in capital:
Balance at beginning of period
Issuance of shares under equity-based compensation plans
Equity-based compensation
Tax benefit from shares issued under equity-based compensation
plans
Balance at end of period
Retained earnings (accumulated deficit):
Balance at beginning of period
Net income (loss)
Balance at end of period
Accumulated other comprehensive loss:
Balance at beginning of period
Other comprehensive loss, net of tax:
Balance at end of period
Treasury stock, at cost:
Balance at beginning of period
Net shares surrendered under equity-based compensation plans
Balance at end of period
Total stockholders' equity
191,368,727 187,831,389 185,861,777
1,969,612
—
193,837,437 191,368,727 187,831,389
3,561,994
(24,656 )
2,611,710
(143,000)
$
$
$
$
$
$
$
$
$
$
$
1,923 $
27
1,950 $
1,888 $
35
1,923 $
1,868
20
1,888
2,216,202 $
16,729
34,756
2,141,433 $ 2,101,350
12,052
16,620
25,570
25,087
14,327
2,282,014 $
24,112
11,411
2,216,202 $ 2,141,433
(812,394) $
222,838
(589,556) $
(741,519 ) $
(70,875 )
(812,394 ) $
(978,291)
236,772
(741,519)
(171,678) $
(113,435)
(285,113) $
(83,548 ) $
(88,130 )
(171,678 ) $
(26,276)
(57,272)
(83,548)
(11,333) $
(3,878)
(15,211) $
1,394,084 $
(10,635 ) $
(698 )
(11,333 ) $
(10,635)
—
(10,635)
1,222,720 $ 1,307,619
See notes to consolidated financial statements.
66
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements
(In thousands, unless otherwise noted)
1. BACKGROUND AND DESCRIPTION OF THE BUSINESS
CommScope Holding Company, Inc., along with its direct and indirect subsidiaries (CommScope or the Company),
is a global provider of infrastructure solutions for the core, access and edge layers of communication networks. The
Company’s solutions and services for wired and wireless networks enable high-bandwidth data, video and voice
applications. CommScope’s global leadership position is built upon innovative technology, broad solution offerings,
high-quality and cost-effective customer solutions and global manufacturing and distribution scale.
On August 28, 2015, the Company acquired TE Connectivity’s Broadband Network Solutions business (BNS) in an
all-cash transaction valued at approximately $3.0 billion. See Note 3 for additional discussion of the BNS
acquisition.
As of January 1, 2016, the Company reorganized its internal management and reporting structure as part of the
integration of the BNS acquisition. The reorganization changed the information regularly reviewed by the
Company’s chief operating decision maker for purposes of allocating resources and assessing performance. As a
result, the Company is reporting financial performance for 2016 based on its new operating segments: CommScope
Connectivity Solutions (CCS) and CommScope Mobility Solutions (CMS). Both CCS and CMS represent non-
aggregated reportable operating segments. Prior to this change, the Company operated and reported the following
operating segments: Wireless, Enterprise, Broadband and BNS. All prior year amounts in these consolidated
financial statements have been recast to reflect these operating segment changes.
As of December 31, 2015, funds affiliated with The Carlyle Group (Carlyle) owned 32.0% of the outstanding shares
of CommScope. During the year ended December 31, 2016, Carlyle sold its remaining shares and no longer holds
any stock in CommScope.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The accompanying consolidated financial statements include CommScope Holding Company, Inc., along with its
direct and indirect subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.
The BNS acquisition was accounted for using the acquisition method of accounting. The results of the BNS business
are reported in the Company’s consolidated financial statements from August 28, 2015 to December 25, 2015 for the
year ended December 31, 2015 and from December 26, 2015 to December 30, 2016 for the year ended December
31, 2016. The BNS fiscal calendar included 53 weeks in 2016.
Certain prior year amounts have been reclassified to conform to the current year presentation.
Cash and Cash Equivalents
Cash and cash equivalents represent deposits in banks and cash invested temporarily in various instruments with a
maturity of three months or less at the time of purchase.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are stated at the amount owed by the customer, net of allowances for estimated doubtful
accounts, discounts, returns and rebates. The Company maintains allowances for doubtful accounts for estimated
losses expected to result from the inability of its customers to make required payments. These estimates are based
on management’s evaluation of the ability of customers to make payments, focusing on historical experience,
known customer financial difficulties and the age of receivable balances. Accounts receivable are charged to the
allowance when determined to be no longer collectible.
67
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
Inventories
Inventories are stated at the lower of cost or net realizable value. Inventory cost is determined on a first-in, first-out
(FIFO) basis. Costs such as idle facility expense, excessive scrap and re-handling costs are expensed as incurred.
The Company maintains reserves to reduce the value of inventory to the lower of cost or net realizable value,
including reserves for excess and obsolete inventory.
Long-Lived Assets
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Upon application of acquisition accounting, property, plant and
equipment are measured at estimated fair value as of the acquisition date to establish a new historical cost basis.
Provisions for depreciation are based on estimated useful lives of the assets using the straight-line method. Useful
lives generally range from 10 to 35 years for buildings and improvements and 3 to 10 years for machinery and
equipment. Expenditures for repairs and maintenance are expensed as incurred. Assets that management intends to
dispose of and that meet held for sale criteria are carried at the lower of the carrying value or fair value less costs to
sell.
Goodwill and Other Intangible Assets
Goodwill is assigned to reporting units, which are operating segments or one level below the operating segment
level, based on the difference between the purchase price as allocated to the reporting units and the estimated fair
value of the identified net assets acquired as allocated to the reporting units. Purchased intangible assets with finite
lives are carried at their estimated fair values at the time of acquisition less accumulated amortization and any
impairment charges. Amortization is recognized on a straight-line basis over the estimated useful lives of the
respective assets (see Note 4).
Asset Impairments
Goodwill is tested for impairment annually or at other times if events have occurred or circumstances exist that
indicate the carrying value of the reporting unit may exceed its fair value. Goodwill impairment charges of $15.3
million, $74.4 million and $4.9 million were recorded during the years ended December 31, 2016, 2015 and 2014,
respectively. See Notes 4 and 8 for further discussion of these impairment charges.
Property, plant and equipment and intangible assets with finite lives are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying value of the assets may not be recoverable, based on the
undiscounted cash flows expected to be derived from the use and ultimate disposition of the assets. Assets identified
as impaired are carried at estimated fair value. During the years ended December 31, 2016, 2015 and 2014, the
Company recognized pretax impairment charges for long-lived assets, other than goodwill impairments, of $23.3
million, $5.5 million and $7.2 million, respectively. See Notes 4 and 8 for further discussion of these impairment
charges.
During the year ended December 31, 2015, the Company determined that a note receivable related to a previous
divestiture was likely impaired and recorded a $10.9 million impairment charge.
Due to uncertain market conditions, it is possible that future impairment reviews may indicate additional
impairments of goodwill and/or other intangible assets, which could result in charges that are material to the
Company’s results of operations.
68
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
Income Taxes
Deferred income taxes reflect the future tax consequences of differences between the financial reporting and tax
basis of assets and liabilities. The Company records a valuation allowance, when appropriate, to reduce deferred tax
assets to an amount that is more likely than not to be realized.
Tax benefits that result from uncertain tax positions may be recognized only if they are considered more likely than
not to be sustainable, based on their technical merits. The amount of benefit to be recognized is the largest amount
of tax benefit that is at least 50% likely to be realized.
The cumulative amount of undistributed earnings from foreign subsidiaries for which no U.S. taxes have been
provided was $606.1 million as of December 31, 2016. In addition, the Company does not provide for U.S. taxes
related to the foreign currency remeasurement gains and losses on its long-term intercompany loans with foreign
subsidiaries. These loans are not expected to be repaid in the foreseeable future, and the foreign currency gains and
losses are therefore recorded to accumulated other comprehensive loss.
Revenue Recognition
Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or service has been
rendered, the selling price is fixed or determinable and collectability is reasonably assured. The majority of the
Company’s revenue comes from product sales. Revenue from product sales is recognized when the risks and
rewards of ownership have passed to the customer and revenue is measurable. Revenue is not recognized related to
product sold to contract manufacturers that the Company anticipates repurchasing in order to complete the sale to
the ultimate customer.
Revenue for certain of the Company’s products is derived from multiple-element contracts. The value of the revenue
elements within these contracts is allocated based on the relative selling price of each element. The relative selling
price is determined using vendor-specific objective evidence of selling price or other third party evidence of selling
price, if available. If these forms of evidence are unavailable, revenue is allocated among elements based on
management’s best estimate of the stand-alone selling price of each element. Revenue is generally recognized upon
acceptance by the customer.
For sales to distributors, system integrators and value-added resellers (primarily for the CCS segment), revenue is
recorded at the net amount to be received after deductions for estimated discounts, allowances, returns, rebates and
distributor price protection programs. These estimates are determined based upon historical experience, contract
terms, inventory levels in the distributor channel and other related factors. Adjustments are recorded when
circumstances indicate revisions may be necessary. If management does not have sufficient historical experience to
make a reasonable estimation of these reductions to revenue, recognition of the revenue is deferred until
management believes there is a sufficient basis to recognize such revenue.
Product Warranties
The Company recognizes a liability for the estimated claims that may be paid under its customer warranty
agreements to remedy potential deficiencies of quality or performance of the Company’s products. These product
warranties extend over periods ranging from one to twenty-five years from the date of sale, depending upon the
product subject to the warranty. The Company records a provision for estimated future warranty claims as cost of
sales based upon the historical relationship of warranty claims to sales and specifically identified warranty issues.
The Company bases its estimates on assumptions that are believed to be reasonable under the circumstances and
revises its estimates, as appropriate, when events or changes in circumstances indicate that revisions may be
necessary. Such revisions may be material.
69
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
Shipping and Handling Costs
CommScope includes shipping and handling costs billed to customers in net sales and includes the costs incurred to
transport product to customers as cost of sales. Certain internal handling costs, which relate to activities to prepare
goods for shipment, are recorded in selling, general and administrative expense and were approximately $56.2
million, $29.3 million and $27.2 million for the years ended December 31, 2016, 2015 and 2014, respectively.
Advertising Costs
Advertising costs are expensed in the period in which they are incurred. Advertising expense was $20.0 million,
$13.6 million and $10.5 million for the years ended December 31, 2016, 2015 and 2014, respectively.
Research and Development
Research and development (R&D) costs are expensed in the period in which they are incurred. R&D costs include
materials and equipment that have no alternative future use, depreciation on equipment and facilities currently used
for R&D purposes, personnel costs, contract services and reasonable allocations of indirect costs, if clearly related to
an R&D activity. Expenditures in the pre-production phase of an R&D project are recorded as R&D expense.
However, costs incurred in the pre-production phase that are associated with output actually used in production are
recorded in cost of sales. A project is considered finished with pre-production efforts when management determines
that it has achieved acceptable levels of scrap and yield, which vary by project. Expenditures related to ongoing
production are recorded in cost of sales.
Derivative Instruments and Hedging Activities
CommScope is exposed to risks resulting from adverse fluctuations in commodity prices, interest rates and foreign
currency exchange rates. CommScope’s risk management strategy includes the use of derivative financial
instruments, such as forward contracts, options, cross currency swaps, certain interest rate swaps, caps and floors
and non-derivative financial instruments, such as foreign-currency-denominated loans, as hedges of these risks,
whenever management determines their use to be reasonable and practical. This strategy does not permit the use of
derivative financial instruments for trading or speculation. The Company did not designate any transactions as
hedges in the years ended December 31, 2016, 2015 or 2014. Derivative contracts are measured at fair value and are
marked to market each period through earnings. As such, there were no unrecognized gains or losses as of
December 31, 2016 or 2015. See Note 7 for further disclosure related to the derivative instruments and hedging
activities.
The Company has elected and documented the use of the normal purchases and sales exception for normal purchase
and sales contracts that meet the definition of a derivative financial instrument.
Foreign Currency Translation
For the years ended December 31, 2016, 2015 and 2014, approximately 46%, 51% and 45%, respectively, of the
Company’s net sales were to customers located outside the United States (U.S.). A portion of these sales were
denominated in currencies other than the U.S. dollar, particularly sales from the Company’s foreign subsidiaries.
The financial position and results of operations of certain of the Company’s foreign subsidiaries are measured using
the local currency as the functional currency. Revenues and expenses of these subsidiaries have been translated into
U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities of these subsidiaries have
been translated at the exchange rates as of the balance sheet date. Translation gains and losses are recorded to
accumulated other comprehensive loss.
70
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
Aggregate foreign currency gains and losses, such as those resulting from the settlement of receivables or payables,
foreign currency contracts and short-term intercompany advances in a currency other than the subsidiary’s
functional currency, are recorded currently in earnings (included in other expense, net) and resulted in losses of $9.5
million, $15.1 million and $2.7 million during the years ended December 31, 2016, 2015 and 2014, respectively.
Foreign currency remeasurement gains and losses related to certain long-term intercompany loans that are not
expected to be settled in the foreseeable future are recorded to accumulated other comprehensive loss. See Note 7
for disclosure of foreign currency gains and losses specifically related to foreign currency contracts.
Equity-Based Compensation
The estimated fair value of stock awards that are ultimately expected to vest is recognized as expense over the
requisite service periods. The Company records deferred tax assets related to compensation expense for awards that
are expected to result in future tax deductions for the Company, based on the amount of compensation cost
recognized and the Company’s statutory tax rate in the jurisdiction in which it expects to receive a deduction.
Differences between the deferred tax assets recognized for financial reporting purposes and actual tax deductions
reported on the Company’s income tax return are recorded in additional paid-in capital (if the tax deduction exceeds
the deferred tax asset) or in the Consolidated Statements of Operations and Comprehensive Income (Loss) as
additional income tax expense (if the deferred tax asset exceeds the tax deduction and no excess additional paid-in
capital exists from previous awards).
Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of
common shares outstanding during the period. Diluted earnings (loss) per share is based on net income (loss)
divided by the weighted average number of common shares outstanding plus the dilutive effect of potential common
shares outstanding during the period using the treasury stock method. Dilutive potential common shares include
outstanding equity-based awards (stock options, restricted stock units and performance share units). Certain
outstanding equity-based awards were not included in the computation of diluted earnings (loss) per share because
the effect was either antidilutive or the performance condition was not met (1.0 million, 5.9 million and 1.4 million
shares for the years ended December 31, 2016, 2015 and 2014, respectively). Antidilutive securities for the year
ended December 31, 2015 included 4.3 million shares of equity-based awards which would have been considered
dilutive if the Company had not been in a net loss position.
The following table presents the basis for the earnings (loss) per share computations:
Numerator:
Net income (loss) for basic and diluted earnings (loss)
per share
Denominator:
Year Ended December 31,
2015
2014
2016
$
222,838 $
(70,875 ) $
236,772
Weighted average common shares outstanding - basic
Dilutive effect of equity-based awards
Weighted average common shares outstanding - diluted
192,470
3,989
196,459
189,876
—
189,876
186,905
4,545
191,450
Earnings (loss) per share:
Basic
Diluted
$
$
1.16 $
1.13 $
(0.37 ) $
(0.37 ) $
1.27
1.24
71
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
Use of Estimates in the Preparation of the Financial Statements
The preparation of the accompanying consolidated financial statements in conformity with accounting principles
generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. These estimates and their underlying assumptions form
the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from
other objective sources. The Company bases its estimates on historical experience and on assumptions that are
believed to be reasonable under the circumstances and revises its estimates, as appropriate, when events or changes
in circumstances indicate that revisions may be necessary. Significant accounting estimates reflected in the
Company’s financial statements include the allowance for doubtful accounts; reserves for sales returns, discounts,
allowances, rebates and distributor price protection programs; inventory excess and obsolescence reserves; product
warranty reserves and other contingent liabilities; tax valuation allowances and liabilities for unrecognized tax
benefits; purchase price allocations; impairment reviews for investments, fixed assets, goodwill and other
intangibles; and pension and other postretirement benefit costs and liabilities. Although these estimates are based on
management’s knowledge of and experience with past and current events and on management’s assumptions about
future events, it is at least reasonably possible that they may ultimately differ materially from actual results.
Business Combinations
The Company uses the acquisition method of accounting for business combinations which requires assets acquired
and liabilities assumed to be recognized at their fair values on the acquisition date. Goodwill represents the excess of
the purchase price over the fair value of the net assets acquired. The fair values of the assets acquired and liabilities
assumed are determined based upon the Company’s valuation and involves making significant estimates and
assumptions based on facts and circumstances that existed as of the acquisition date. The Company uses a
measurement period following the acquisition date to gather information that existed as of the acquisition date that is
needed to determine the fair value of the assets acquired and liabilities assumed. The measurement period ends once
all information is obtained, but no later than one year from the acquisition date.
Concentrations of Risk
Non-derivative financial instruments used by the Company in the normal course of business include letters of credit
and commitments to extend credit, primarily accounts receivable. The Company generally does not require collateral
on its accounts receivable. These financial instruments involve risk, including the credit risk of nonperformance by
the counterparties to those instruments, and the maximum potential loss may exceed the reserves provided in the
Company’s balance sheet. See Note 14 for further discussion of customer-related concentrations of risk.
The Company manages its exposures to credit risk associated with accounts receivable using such tools as credit
approvals, credit limits and monitoring procedures. CommScope estimates the allowance for doubtful accounts
based on the actual payment history and individual circumstances of significant customers as well as the age of
receivables. In management’s opinion, as of December 31, 2016, the Company did not have significant unreserved
risk of credit loss due to the nonperformance of customers or other counterparties related to amounts receivable.
However, an adverse change in financial condition of a significant customer or group of customers or in the
telecommunications industry could materially affect the Company’s estimates related to doubtful accounts.
The principal raw materials purchased by CommScope (copper, aluminum, steel, plastics and other polymers,
bimetals and optical fiber) are subject to changes in market price as these materials are linked to various commodity
markets. The Company attempts to mitigate these risks through effective requirements planning and by working
closely with its key suppliers to obtain the best possible pricing and delivery terms.
72
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
Recent Accounting Pronouncements
Adopted in 2016
During the fourth quarter of 2016, the Company prospectively adopted Accounting Standards Update (ASU) No.
2015-11, Simplifying the Measurement of Inventory. The guidance requires that inventory be measured at the lower
of cost and net realizable value, which is the estimated selling price in the ordinary course of business, less
reasonably predictable costs of completion, disposal and transportation. This guidance simplifies the prior guidance
by eliminating the options of measuring inventory at replacement cost or net realizable value less an approximate
normal profit margin. Adoption of this ASU did not have a material impact on the Company’s consolidated financial
statements.
Issued but Not Adopted
In August 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-15, Cash Flow
Classification of Certain Cash Receipts and Cash Payments. The standard update amends or clarifies guidance on
classification of certain transactions in the statement of cash flows, including classification of debt prepayments,
debt extinguishment costs and contingent consideration payments after a business combination. ASU 2016-15 is
effective for the Company as of January 1, 2018 and early adoption is permitted. The Company is evaluating the
impact of this new guidance on the Company’s consolidated statement of cash flows and when it may be adopted.
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. The
new guidance replaces the current incurred loss method used for determining credit losses on financial assets,
including trade receivables, with an expected credit loss method. ASU No. 2016-13 is effective for the Company as
of January 1, 2020 and early adoption is permitted. The Company is evaluating the impact of this new guidance on
the Company’s consolidated financial statements and when it may be adopted.
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting,
which simplifies several aspects of the accounting for employee equity-based payment transactions, including the
income tax consequences, classification of awards as either equity or liabilities and classification on the statement of
cash flows. ASU No. 2016-09 is effective for the Company as of January 1, 2017. Its application is not expected to
have a significant impact on income before income taxes; however, it may impact the Company’s net income
because excess tax benefits or deficiencies, which are currently reflected in additional paid in capital, must be
reflected in income tax expense under ASU No. 2016-09. The significance of the impact will depend on the intrinsic
value at the time of vesting or exercise of equity-based compensation awards. The impact to the Consolidated
Statements of Cash Flows will be to present excess tax benefits or deficiencies as an operating activity instead of a
financing activity in 2017. The Company also expects to make an accounting policy election to account for
forfeitures as they occur instead of applying an estimated forfeiture rate over the vesting period of the award.
In February 2016, the FASB issued ASU No. 2016-02, Leases, which supersedes the current leasing guidance in
Topic 840, Leases. Under the new guidance, lessees are required to recognize assets and lease liabilities for the
rights and obligations created by leased assets previously classified as operating leases. ASU No. 2016-02 is
effective for the Company as of January 1, 2019 and early adoption is permitted. The Company is evaluating the
impact of this new guidance on the Company’s consolidated financial statements and when it may be adopted.
In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and
Financial Liabilities, which modifies how entities measure equity investments (except those accounted for under the
equity method of accounting) and present changes in the fair value of financial liabilities; simplifies the impairment
assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to
identify impairment; changes presentation and disclosure requirements; and clarifies that an entity should evaluate
the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with
the entity’s other deferred tax assets. The guidance is effective for the Company as of January 1, 2018 and with the
exception of certain provisions, early adoption is not permitted. The Company is evaluating the impact of this new
guidance on the Company’s consolidated financial statements.
73
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The new accounting
standard defines a single comprehensive model in accounting for revenue arising from contracts with customers and
supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of
the ASU is to recognize revenues when promised goods or services are transferred to customers in an amount that
reflects the consideration that is expected to be received for those goods or services. The Company will be required
to adopt the new standard, including subsequently issued clarifying guidance, as of January 1, 2018 using either: (i)
full retrospective application to each prior reporting period presented; or (ii) modified retrospective application with
the cumulative effect of initially applying the standard recognized at the date of initial application and providing
certain additional required disclosures. The Company plans to adopt the new accounting model as of January 1,
2018 using the modified retrospective method.
During 2016, the Company completed an impact assessment and determined that adoption of the standard will likely
result in changes to revenue recognition related to the timing of when revenues are recognized for contracts
containing both product and service obligations. These contract revenues are currently accounted for using the
multi-element guidance and are primarily for metro cell, DAS and small cell solutions within the CMS segment.
Due to the short-term nature of these contracts, the ultimate impact to the Company’s consolidated financial
statements will be based on customer-specific contract terms in effect at adoption, and could be material.
The Company believes that changes to its accounting policies, processes, internal controls and information systems
will be required to comply with this update. The Company is in the process of implementing the changes necessary
to meet the standard update’s reporting and disclosure requirements.
3. ACQUISITIONS
Broadband Network Solutions
On August 28, 2015, the Company acquired TE Connectivity’s BNS business for approximately $3.0 billion in an
all-cash transaction. Net sales of $1,770.3 million and $529.6 million related to the acquired business are reflected in
the Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31,
2016 and 2015, respectively, and are primarily reported in the CCS segment.
The purchase price for BNS was assigned to assets acquired and liabilities assumed based on their estimated fair
values as of the date of acquisition and the excess was allocated to goodwill. The following table summarizes the
preliminary allocation of the purchase price at the date of acquisition and the subsequent measurement period
adjustments to arrive at the final allocation of the purchase price at the acquisition date (in millions):
Cash and cash equivalents
Accounts receivable
Inventories
Other current assets
Property, plant and equipment
Goodwill
Identifiable intangible assets
Other noncurrent assets
Current liabilities
Noncurrent pension liabilities
Other noncurrent liabilities
Net acquisition cost
Amounts
Recognized as
of Acquisition
Date
Measurement
Period
Adjustments
Amounts
Recognized as of
Acquisition
Date (as
adjusted)
$
$
63.7 $
252.9
266.4
40.0
247.6
1,242.8
1,150.0
22.3
(224.2)
(30.5)
(27.1)
3,003.9 $
— $
(1.9 )
(12.3 )
1.6
(1.6 )
182.9
(63.5 )
3.0
(4.8 )
18.9
(107.8 )
14.5 $
63.7
251.0
254.1
41.6
246.0
1,425.7
1,086.5
25.3
(229.0)
(11.6)
(134.9)
3,018.4
74
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
The Company has recorded measurement period adjustments since the acquisition date primarily related to the
finalization of the valuation of inventory, intangible assets, plant and equipment, pension liabilities and deferred
taxes. The impact of these measurement period adjustments to the Consolidated Statements of Operations and
Comprehensive Income (Loss) were not material to 2016 or 2015 and if these adjustments had been applied at the
original acquisition date, the impact to current year and prior year periods would also have been immaterial.
The goodwill arising from the purchase price allocation of the BNS acquisition is believed to result from the
business’ reputation in the marketplace and assembled workforce. A significant portion of the goodwill is expected
to be deductible for income tax purposes.
Various valuation techniques were used to estimate the fair value of the assets acquired and the liabilities assumed
which use significant unobservable inputs, or Level 3 inputs as defined by the fair value hierarchy. Using these
valuation approaches requires the Company to make significant estimates and assumptions.
The table below summarizes the valuations of the intangible assets acquired that were determined by management to
meet the criteria for recognition apart from goodwill.
Customer contracts and relationships
Trademarks
Patents and technologies
Total amortizable intangible assets
Estimated Fair Value
(in millions)
$
$
686.2
53.3
347.0
1,086.5
Weighted Average
Estimated Useful Life
(in years)
12
7
7
There were certain foreign assets acquired and liabilities assumed in the BNS acquisition for which title did not
transfer at the acquisition date although the consideration was paid as part of the overall purchase price discussed
above. As of December 31, 2016, these transfers have been completed.
The BNS amounts included in the following pro forma information are based on their historical results prepared on a
carve-out basis of accounting and, therefore, may not be indicative of the actual results when operated as part of
CommScope. The pro forma adjustments represent management’s best estimates based on information available at
the time the pro forma information was prepared and may differ from the adjustments that may actually have been
required. Accordingly, the pro forma financial information should not be relied upon as being indicative of the
results that would have been realized had the acquisition occurred as of the date indicated or that may be achieved in
the future.
The following table presents unaudited pro forma consolidated results of operations for CommScope for the years
ended December 31, 2015 and 2014 as though the BNS acquisition had been completed as of January 1, 2014 (in
millions, except per share amounts):
Net sales
Net income
Net income per diluted share
$
Year Ended December 31,
2015
2014
4,978.4 $
46.7
0.24
5,721.4
157.3
0.82
These pro forma results reflect adjustments for net interest expense for the debt related to the acquisition;
depreciation expense for property, plant and equipment that has been adjusted to its estimated fair value;
amortization for intangible assets with finite lives identified separate from goodwill; equity-based compensation for
equity awards issued to BNS employees; and the related income tax impacts of these adjustments. The pro forma
results for the year ended December 31, 2015, exclude $93.6 million of integration and transaction costs related to
the BNS acquisition and $81.6 million of additional cost of goods sold related to the inventory mark up included in
the purchase price allocation as these costs are nonrecurring to the Company.
75
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
Airvana
On October 1, 2015, the Company acquired the assets and assumed certain liabilities of Airvana LP (Airvana), a
provider of small cell solutions for wireless networks. The Company paid $45.1 million ($44.5 million net of cash
acquired). Airvana provides 4G LTE and 3G small cell solutions that enable communication and access to
information and entertainment in challenging and high-value environments, such as office buildings and public
venues. Net sales of Airvana products reflected in the Consolidated Statements of Operations and Comprehensive
Income (Loss) were $17.1 million and $4.2 million for the years ended December 31, 2016 and 2015, respectively,
and are reported in the CMS segment.
The allocation of the purchase price, based on estimates of the fair values of assets acquired and liabilities assumed,
is as follows (in millions):
Cash and cash equivalents
Accounts receivable
Other assets
Property, plant and equipment
Goodwill
Identifiable intangible assets
Less: Liabilities assumed
Net acquisition cost
Estimated Fair
Value
0.6
4.2
3.8
2.5
20.4
19.1
(5.5)
45.1
$
$
The goodwill arising from the purchase price allocation of the Airvana acquisition is believed to result from the
company’s reputation in the marketplace and assembled workforce and is expected to be deductible for income tax
purposes.
4. GOODWILL AND OTHER INTANGIBLE ASSETS
The following table presents details of the Company’s intangible assets other than goodwill as of December 31,
2016 and 2015 (in millions):
Customer base
Trade names and trademarks
Patents and technologies
Non-compete agreements
Total intangible assets
2016
2015
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
$ 1,837.6 $
606.2
567.0
0.3
$ 3,011.1 $
757.7 $ 1,079.9 $ 1,929.5 $
608.7
426.5
179.7
528.8
292.7
274.3
0.3
—
0.3
1,212.0 $ 1,799.1 $ 3,067.3 $
587.0 $ 1,342.5
463.2
145.5
341.7
187.1
0.1
0.2
919.8 $ 2,147.5
During 2016, the Company determined that certain patent and technology intangible assets in the CCS segment were
no longer recoverable as a result of revisions to the outlook for a particular product line. Pretax charges of $15.0
million were recognized in asset impairments on the Consolidated Statements of Operations and Comprehensive
Income (Loss). During 2015, the Company determined that certain patent and technology intangible assets in the
CCS segment were no longer recoverable and recorded a pretax $5.5 million impairment charge in asset
impairments on the Consolidated Statements of Operations and Comprehensive Income (Loss).
76
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
The Company’s finite-lived intangible assets are being amortized on a straight-line basis over the weighted-average
amortization periods in the following table. The aggregate weighted-average amortization period is 11.8 years.
Customer base
Trade names and trademarks
Patents and technologies
Weighted-
Average
Amortization
Period
(in years)
11.0
18.9
6.8
Amortization expense for intangible assets was $297.2 million, $220.6 million and $178.3 million for the years
ended December 31, 2016, 2015 and 2014, respectively. Estimated amortization expense for the next five years is as
follows (in millions):
2017
2018
2019
2020
2021
Estimated
Amortization
Expense
$
265.3
254.1
225.2
219.1
199.6
As a result of the change in segments, goodwill was reallocated from the previous segments to the new segments.
The following table presents goodwill after the reallocation to the new reportable segments (in millions):
CCS
CMS
$
745.8
$
(5.7)
—
740.1
1,265.1
(18.6)
1,986.6
107.7
(16.8)
2,077.5 $
(36.2) $
—
(36.2)
—
(36.2)
(15.3)
(51.5) $
821.1 $
15.3
(3.3 )
833.1
69.7
(3.1 )
899.7
4.4
(2.3 )
901.8 $
(80.2 ) $
(4.9 )
(85.1 )
(74.4 )
(159.5 )
—
(159.5 ) $
Total
1,566.9
9.6
(3.3)
1,573.2
1,334.8
(21.7)
2,886.3
112.1
(19.1)
2,979.3
(116.4)
(4.9)
(121.3)
(74.4)
(195.7)
(15.3)
(211.0)
2,026.0 $
742.3 $
2,768.3
$
$
$
$
Goodwill, gross, as of December 31, 2013
Acquisitions and adjustments to purchase price allocations
Foreign exchange
Goodwill, gross, as of December 31, 2014
Acquisitions and adjustments to purchase price allocations
Foreign exchange
Goodwill, gross, as of December 31, 2015
Adjustments to purchase price allocations
Foreign exchange
Goodwill, gross, as of December 31, 2016
Accumulated impairment charges as of December 31, 2013
Impairment charges for year ended December 31, 2014
Accumulated impairment charges as of December 31, 2014
Impairment charges for year ended December 31, 2015
Accumulated impairment charges as of December 31, 2015
Impairment charges for year ended December 31, 2016
Accumulated impairment charges as of December 31, 2016
Goodwill, net, as of December 31, 2016
77
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
During 2016, management assessed goodwill for impairment due to the change in reportable segments, which also
resulted in changes to several reporting units. As a result, the Company performed impairment testing for goodwill
under the reporting unit structure immediately before the change and determined that no impairment existed. The
Company reallocated goodwill to the new reporting units under the new reporting structure and performed
impairment testing for goodwill under the new segment reporting structure immediately after the change and
determined that a $15.3 million goodwill impairment existed within one of the CCS reporting units at January 1,
2016. The impairment test was performed using a discounted cash flow (DCF) valuation model. The significant
assumptions in the DCF model are annual revenue growth rates, annual operating income margins and the discount
rate used to determine the present value of the cash flow projections. The discount rate was based on the estimated
weighted average cost of capital as of the test date for market participants in our reporting units’ industries.
Goodwill impairment charges of $74.4 million and $4.9 million were recorded during 2015 and 2014, respectively,
primarily due to lower future projected operating results for certain reporting units that are now part of the CMS
segment.
5. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
Allowance for Doubtful Accounts
Period
Year ended December 31, 2014
Year ended December 31, 2015
Year ended December 31, 2016
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
Deductions (1)
Balance at
End
of Period
$
12,617 $
8,797
19,392
772 $
12,508
(5,986)
4,592 $
1,913
(3,805 )
8,797
19,392
17,211
(1) Uncollectible customer accounts written off, net of recoveries of previously written off customer accounts.
Inventories
Raw materials
Work in process
Finished goods
Property, Plant and Equipment
Land and land improvements
Buildings and improvements
Machinery and equipment
Construction in progress
Accumulated depreciation
December 31,
2016
2015
126,027 $
135,848
211,392
473,267 $
114,329
131,030
196,456
441,815
December 31,
2016
2015
53,182 $
208,515
480,654
36,373
778,724
(303,734 )
474,990 $
55,751
219,953
463,955
32,853
772,512
(243,806)
528,706
$
$
$
$
Depreciation expense was $80.5 million, $60.6 million and $48.8 million during the years ended December 31,
2016, 2015 and 2014, respectively. No interest was capitalized during 2016, 2015 or 2014.
78
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
Other Accrued Liabilities
Compensation and employee benefit liabilities
Deferred revenue
Product warranty accrual
Accrued interest
Restructuring reserve
Income taxes payable
Value-added taxes payable
Accrued professional fees
Other
December 31,
2016
2015
169,923 $
25,859
21,631
8,586
30,438
49,984
14,885
10,621
97,470
429,397 $
108,852
23,811
17,964
12,468
24,480
38,417
24,880
14,303
106,568
371,743
$
$
Accumulated Other Comprehensive Loss
The following table presents changes in accumulated other comprehensive income (AOCI), net of tax, and
accumulated other comprehensive loss (AOCL), net of tax:
Foreign currency translation
Balance, beginning of period
Other comprehensive loss
Amounts reclassified from AOCL
Balance, end of period
Defined benefit plan activity
Balance, beginning of period
Other comprehensive income (loss)
Amounts reclassified from AOCL
Balance, end of period
Available-for-sale securities
Balance, beginning of period
Other comprehensive loss
Amounts reclassified from AOCI
Balance, end of period
Net AOCL, end of period
Year Ended December 31,
2015
2016
(160,620 ) $
(93,840 )
312
(254,148 ) $
(80,483)
(80,019)
(118)
(160,620)
(17,567 ) $
(13,048 )
(2,858 )
(33,473 ) $
(14,957)
3,814
(6,424)
(17,567)
6,509 $
(3,262 )
(739 )
2,508 $
(285,113 ) $
11,892
(3,735)
(1,648)
6,509
(171,678)
$
$
$
$
$
$
$
Amounts reclassified from net AOCL related to foreign currency translation and available-for-sale securities are
recorded in other expense, net in the Consolidated Statements of Operations and Comprehensive Income (Loss).
Defined benefit plan amounts reclassified from net AOCL are included in the computation of net periodic benefit
cost (income) and are primarily recorded in cost of sales and selling, general and administrative expenses in the
Consolidated Statements of Operations and Comprehensive Income (Loss).
79
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
Cash Flow Information
Cash paid during the period for:
Income taxes, net of refunds
Interest
6. FINANCING
6.00% senior notes due June 2025
5.50% senior notes due June 2024
5.00% senior notes due June 2021
Senior PIK toggle notes due June 2020
4.375% senior secured notes due June 2020
Senior secured term loan due December 2022
Senior secured term loan due January 2018
Senior secured revolving credit facility expires May 2020
Other
Total face value of debt
Less: Original issue discount, net of amortization
Less: Debt issuance costs, net of amortization
Less: Current portion
Total long-term debt
6.00% Senior Notes Due 2025
Year Ended December 31,
2015
2014
2016
$
148,984 $
260,773
122,571 $
207,331
98,636
184,925
December 31,
2016
2015
1,500,000 $
650,000
650,000
—
500,000
1,234,375
111,875
—
—
4,646,250 $
(5,857 )
(78,383 )
(12,500 )
4,549,510 $
1,500,000
650,000
650,000
536,630
500,000
1,246,875
261,875
—
19
5,345,399
(4,234)
(97,514)
(12,520)
5,231,131
$
$
$
CommScope Technologies LLC, a wholly owned subsidiary of the Company, is the borrower under the 6.00%
Senior Notes due June 15, 2025 (the 2025 Notes). Interest is payable on the 2025 Notes semi-annually in arrears on
June 15 and December 15 of each year. The Company used the proceeds from the June 2015 offering of the 2025
Notes, together with cash on hand and borrowings under the senior secured term loan facility due December 2022,
to finance the acquisition of the BNS business.
Each of the Company’s existing and future direct and indirect domestic subsidiaries that guarantees the senior
secured credit facilities guarantees the 2025 Notes on a senior unsecured basis. The 2025 Notes and the guarantees
are unsecured senior obligations ranking equal in right of payment to all of the Company’s and the guarantors’
existing and future senior indebtedness, including its senior secured credit facilities. However, the 2025 Notes and
guarantees are effectively junior to all of the Company’s and the guarantors’ existing and future secured debt,
including the 2020 Notes and its senior secured credit facilities, to the extent of the value of the assets securing such
secured debt. In addition, the 2025 Notes are structurally subordinated to all existing and future liabilities (including
trade payables) of the Company’s subsidiaries that do not guarantee the 2025 Notes, including indebtedness incurred
by certain of the Company’s non-U.S. subsidiaries under the revolving credit facility.
The 2025 Notes may be redeemed prior to maturity under certain circumstances. Upon certain change of control
events, the 2025 Notes may be redeemed at the option of the holders at 101% of their face amount, plus accrued and
unpaid interest. Prior to June 15, 2020, the 2025 Notes may be redeemed at a redemption price equal to 100% of
their principal amount, plus a make-whole premium (as defined in the indenture governing the 2025 Notes), plus
accrued and unpaid interest. On or prior to June 15, 2018, under certain circumstances, the Company may also
redeem up to 40% of the aggregate principal amount of the 2025 Notes at a redemption price of 106.0%, plus
accrued and unpaid interest, using the proceeds of certain equity offerings.
80
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
In connection with issuing the 2025 Notes, the Company incurred costs of $35.9 million during the year ended
December 31, 2015, which were recorded as a reduction of the carrying amount of the debt and are being amortized
over the term of the notes.
5.00% Senior Notes Due 2021 and 5.50% Senior Notes Due 2024
In May 2014, CommScope, Inc., a wholly owned subsidiary of the Company, issued $650.0 million of 5.00% Senior
Notes due June 15, 2021 (the 2021 Notes) and $650.0 million of 5.50% Senior Notes due June 15, 2024 (the 2024
Notes). Interest is payable on the 2021 Notes and the 2024 Notes semi-annually in arrears on June 15 and
December 15 of each year.
Proceeds from the 2021 Notes and the 2024 Notes were used to redeem the entire outstanding amount of the 8.25%
senior notes due January 2019 (the 2019 Notes) plus pay a redemption premium of $93.9 million, which was
included in other expense, net for the year ended December 31, 2014. The remainder of the net proceeds was
available for general corporate purposes. In connection with the redemption of the 2019 Notes, the Company wrote
off $19.1 million of debt issuance costs to interest expense during the year ended December 31, 2014.
The 2021 Notes and the 2024 Notes are guaranteed on a senior unsecured basis by CommScope, Inc. and its
domestic restricted subsidiaries, subject to certain exceptions, as described above for the 2025 Notes.
The 2021 Notes and the 2024 Notes may be redeemed prior to maturity under certain circumstances. Upon certain
change of control events, the 2021 Notes and the 2024 Notes may be redeemed at the option of the holders at 101%
of their face amount, plus accrued and unpaid interest to the date of purchase. Prior to June 15, 2017 in the case of
the 2021 Notes and June 15, 2019 in the case of the 2024 Notes, the 2021 Notes and the 2024 Notes may be
redeemed at a redemption price equal to 100% of their principal amount, plus a make-whole premium (as defined in
the indentures governing the 2021 Notes and the 2024 Notes), plus accrued and unpaid interest to the redemption
date. On or prior to June 15, 2017, under certain circumstances, the Company may also redeem up to 40% of the
aggregate principal amount of each series of the 2021 Notes and the 2024 Notes at a redemption price of 105.0% in
the case of the 2021 Notes or 105.5% in the case of the 2024 Notes, plus accrued and unpaid interest to the
redemption date using the proceeds of certain equity offerings.
In connection with issuing the 2021 Notes and the 2024 Notes, the Company incurred costs of $23.3 million during
the year ended December 31, 2014, which were treated as a reduction of long-term debt and are being amortized
over the terms of the notes.
Senior PIK Toggle Notes
In May 2013, the Company issued $550.0 million of 6.625%/7.375% Senior Payment-in-Kind Toggle Notes due
2020 (the senior PIK toggle notes) in a private offering.
In December 2015, the Company repurchased $13.4 million of the senior PIK toggle notes. The repurchase resulted
in a $0.3 million charge which is reflected in other expense, net. In connection with the repurchase, $0.2 million of
debt issuance costs were written off and included in interest expense.
During 2016, the Company voluntarily redeemed the remaining $536.6 million of the senior PIK toggle notes. The
redemptions resulted in a $17.7 million charge which is reflected in other expense, net. In connection with the
redemptions, $6.1 million of debt issuance costs were written off and included in interest expense.
4.375% Senior Secured Notes Due 2020
In June 2015, CommScope, Inc., a wholly owned subsidiary of the Company, issued $500.0 million of 4.375%
Senior Secured Notes due June 15, 2020 (the 2020 Notes). Interest is payable on the 2020 Notes semi-annually in
arrears on June 15 and December 15 of each year.
81
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
The Company used the net proceeds of the offering of the 2020 Notes, together with cash on hand, to repay the
entire principal amount outstanding under the term loan due 2017 and a portion of the principal amount outstanding
under the term loan due 2018.
The 2020 Notes are guaranteed on a senior secured basis by CommScope Holding Company, Inc. and its domestic
restricted subsidiaries, subject to certain exceptions, and are secured by a first priority lien on certain of the
Company’s non-current assets in the U.S. and a second priority lien on current assets in the U.S.
The 2020 Notes may be redeemed prior to maturity under certain circumstances. Upon certain change of control
events, the 2020 Notes may be redeemed at the option of the holders at 101% of their face amount, plus accrued and
unpaid interest. Prior to June 15, 2017, the 2020 Notes may be redeemed at a redemption price equal to 100% of
their principal amount, plus a make-whole premium (as defined in the indenture governing the 2020 Notes), plus
accrued and unpaid interest. Prior to June 15, 2017, under certain circumstances, the Company may also redeem up
to 40% of the aggregate principal amount of the 2020 Notes at a redemption price of 104.375%, plus accrued and
unpaid interest, using the proceeds of certain equity offerings.
In connection with issuing the 2020 Notes, the Company incurred costs of approximately $8.5 million during the
year ended December 31, 2015, which were recorded as a reduction of the carrying amount of the debt and are being
amortized over the term of the notes.
Senior Secured Credit Facilities
The Company’s asset-based revolving credit facility provides borrowing capacity of up to $550.0 million, subject to
certain limitations. The revolving credit facility expires in May 2020, subject to acceleration under certain
circumstances. As of December 31, 2016, the Company had no outstanding borrowings under its revolving credit
facility and the Company did not borrow under its revolving credit facility during the year ended December 31,
2016. As of December 31, 2016, the Company had availability of $441.1 million under its revolving credit facility,
after giving effect to borrowing base limitations and outstanding letters of credit.
In June 2015, the Company borrowed $1.25 billion, less $3.1 million of original issue discount, in a term loan due
December 2022 (the 2022 Term Loan) under its existing senior secured credit facilities. The Company used the
proceeds from the 2022 Term Loan, together with cash on hand and proceeds from the issuance of the 2025 Notes,
to finance the acquisition of the BNS business. The Company incurred costs of $29.7 million during the year ended
December 31, 2015 related to the additional borrowings under the term loan facility. These costs were recorded as a
reduction of the carrying amount of the debt and are being amortized over the term of the 2022 Term Loan. The
2022 Term Loan has scheduled maturities of $12.5 million per year due in equal quarterly installments with the
balance due at maturity.
During the year ended December 31, 2016, the Company amended the 2022 Term Loan to reduce the margin on the
interest rate. The interest rate is, at the Company’s option, either (1) the base rate (as described in the credit
agreement, as amended) plus a margin of 1.50% or (2) one-, two-, three- or six-month LIBOR or, if available from
all lenders, twelve-month LIBOR (selected at the Company’s option) plus a margin of 2.50%, subject to a LIBOR
floor of 0.75%. Before the amendment, the margin on the interest rate in (1) above was 2.00% and in (2) above was
3.00%. The Company recorded an additional $3.1 million of original issue discount in 2016 related to this
amendment.
During the year ended December 31, 2016, the Company repaid $150.0 million of its Term Loan due January 2018.
In connection with this voluntary repayment, $1.0 million of original issue discount and debt issuance costs were
written off and included in interest expense.
During the year ended December 31, 2015, the Company repaid $605.3 million of its senior secured term loans. In
connection with early voluntary repayments of term loans, $7.9 million of original issue discount and debt issuance
costs were written off and included in interest expense.
82
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
The senior secured term loans are secured by a first priority lien on certain of the Company’s non-current assets in
the U.S. and a second priority lien on current assets in the U.S. The asset-based revolving credit facility is secured
by a first priority lien on certain of the Company’s current assets in the U.S. and several European countries, and a
second priority lien on the Company’s non-current assets in the U.S.
The current portion of long-term debt reflects the $12.5 million of annual repayments under the 2022 Term Loan.
No portion of the senior secured term loans was reflected as a current portion of long-term debt as of December 31,
2016 related to the potentially required excess cash flow payment because no such payment is expected to be
required. There was no excess cash flow payment required in 2016 related to 2015.
Other Matters
The following table summarizes scheduled maturities of long-term debt as of December 31, 2016 (in millions):
Scheduled maturities of long-term debt
2017
$ 12.5
2018
2019
$ 124.4 $ 12.5
2020
Thereafter
2021
$ 512.5 $ 662.5 $ 3,321.9
The Company’s non-guarantor subsidiaries held $2,211 million, or 31%, of total assets and $615 million, or 11%, of
total liabilities as of December 31, 2016 and accounted for $2,101 million, or 43%, of net sales for the year ended
December 31, 2016. As of December 31, 2015, the non-guarantor subsidiaries held $2,848 million, or 38%, of total
assets and $468 million, or 8%, of total liabilities. For the year ended December 31, 2015, the non-guarantor
subsidiaries accounted for $1,723 million, or 45%, of net sales. All amounts presented exclude intercompany
balances.
The Company is dependent upon the earnings and cash flow of its subsidiaries to make certain payments, including
debt and interest payments. Certain subsidiaries may have limitations or restrictions on transferring funds to other
subsidiaries that may be necessary to meet those requirements.
The weighted average effective interest rate on outstanding borrowings, including the amortization of debt issuance
costs and original issue discount, was 5.24% at December 31, 2016 and 5.50% at December 31, 2015.
7. DERIVATIVES AND HEDGING ACTIVITIES
The Company uses forward contracts to hedge a portion of its exposure to balances denominated in currencies other
than the functional currency of various subsidiaries and to manage exposure to certain planned foreign currency
transactions in order to mitigate the impact of changes in exchange rates. As of December 31, 2016, the Company
had outstanding foreign exchange contracts with maturities of up to six months and aggregate notional values of
$328 million (based on exchange rates as of December 31, 2016). Gains and losses resulting from these contracts are
recognized in other expense, net and partially offset corresponding foreign exchange gains and losses on the
balances being hedged. These instruments are not held for speculative or trading purposes. These contracts are not
designated as hedges for hedge accounting and are marked to market each period through earnings.
The following table presents the balance sheet location and fair value of the Company’s derivatives:
Balance Sheet Location
Fair Value of Asset (Liability)
December 31,
2016
2015
Foreign currency contracts
Foreign currency contracts
Prepaid expenses and other current assets
Other accrued liabilities
$
289 $
(8,349 )
1,051
(5,945)
Total derivatives not designated as
hedging instruments
$
(8,060 ) $
(4,894)
83
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
The pretax impact of the foreign currency forward contracts, both matured and outstanding, on the Consolidated
Statements of Operations and Comprehensive Income (Loss) is as follows:
Foreign Currency Forward Contracts
Year ended December 31, 2016
Year ended December 31, 2015
Year ended December 31, 2014
Location of Loss
Other expense, net
Other expense, net
Other expense, net
$
Loss
Recognized
(21,470)
(14,309)
(10,273)
8. FAIR VALUE MEASUREMENTS
The Company’s financial instruments consist primarily of cash and cash equivalents, trade receivables, trade
payables, available-for-sale securities, debt instruments and foreign currency contracts. For cash and cash
equivalents, trade receivables and trade payables, the carrying amounts of these financial instruments as of
December 31, 2016 and December 31, 2015 were considered representative of their fair values due to their short
terms to maturity. The fair value of the Company’s available-for-sale securities were based on quoted market prices.
The fair values of the Company’s debt instruments and foreign currency contracts were based on indicative quotes.
Fair value measurements using quoted prices in active markets for identical assets and liabilities fall within Level 1
of the fair value hierarchy, measurements using significant other observable inputs fall within Level 2, and
measurements using significant unobservable inputs fall within Level 3.
The carrying amounts, estimated fair values and valuation input levels of the Company’s available-for-sale
securities, foreign currency contracts and debt instruments as of December 31, 2016 and December 31, 2015, are as
follows:
Assets:
Available-for-sale securities
Foreign currency contracts
Liabilities:
6.00% senior notes due 2025
5.50% senior notes due 2024
5.00% senior notes due 2021
Senior PIK toggle notes due 2020
4.375% senior secured notes due 2020
Senior secured term loan due 2022, at par
Senior secured term loan due 2018, at par
Foreign currency contracts
December 31, 2016
December 31, 2015
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Valuation
Inputs
$
5,212 $
289
5,212 $
289
11,683 $
1,051
11,683 Level 1
1,051 Level 2
650,000
650,000
—
500,000
673,530
669,500
—
513,100
1,500,000 1,585,350 1,500,000 1,430,700 Level 2
650,000 617,500 Level 2
650,000 619,125 Level 2
536,630 544,679 Level 2
500,000 500,000 Level 2
1,234,375 1,245,145 1,246,875 1,243,727 Level 2
261,875 260,068 Level 2
5,945 Level 2
111,875
8,349
112,364
8,349
5,945
84
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
Non-Recurring Fair Value Measurements
During the year ended December 31, 2016, the Company recorded the following pretax impairment charges that
resulted from fair value measurements based on Level 3 valuation inputs:
Goodwill impairment charge of $15.3 million related to one of the CCS reporting units in the first quarter
of 2016 as a result of impairment testing requirements under the new segment reporting structure.
Impairment charges of $7.4 million and $7.6 million in the third and fourth quarters of 2016, respectively,
to reduce certain intangible assets in the CCS segment to their estimated fair value.
Impairment charge of $8.3 million in the fourth quarter of 2016 to reduce certain long-lived assets no
longer expected to be utilized in operations in the CCS segment to its estimated fair value.
During the year ended December 31, 2015, the Company recorded the following pretax impairment charges that
resulted from fair value measurements based on Level 3 valuation inputs:
Goodwill impairment charge of $74.4 million related to the CMS segment as a result of reduced
expectations of future cash flows from one of its reporting units in the third quarter of 2015.
Impairment charge of $5.5 million related to certain intangible assets in the CCS segment that were no
longer recoverable as of December 31, 2015.
These fair value estimates are based on pertinent information available to management as of the valuation date.
Although management is not aware of any factors that would significantly affect these fair value estimates, such
amounts have not been comprehensively revalued for purposes of these financial statements since those dates, and
current estimates of fair value may differ significantly from the amounts presented.
9. RESTRUCTURING COSTS
Prior to the acquisition of the BNS business, the Company initiated restructuring actions to realign and lower its cost
structure primarily through workforce reductions and other cost reduction initiatives, including the cessation of
manufacturing operations at various facilities. Production capacity from these facilities has been shifted to other
existing facilities or unaffiliated suppliers. These actions are referred to as cost alignment restructuring actions.
Following the acquisition of BNS in 2015, the Company initiated a series of restructuring actions to integrate the
BNS operations (BNS integration restructuring actions) to achieve cost synergies. All charges related to these
restructuring actions are reported in restructuring costs, net.
The Company’s net pretax restructuring charges, by segment, were as follows:
CCS
CMS
Total
Year Ended December 31,
2015
2014
2016
$
$
27,098 $
15,777
42,875 $
16,937 $
12,551
29,488 $
3,076
16,191
19,267
Employee-related costs include the expected severance costs and related benefits as well as one-time severance
benefits that are accrued over the remaining period employees are required to work in order to receive such benefits.
Lease termination costs relate to the discounted cost of unused leased facilities, net of anticipated sub-lease income.
Fixed asset related costs include non-cash impairments or disposals of fixed assets associated with restructuring
actions in addition to the cash costs to uninstall, pack, ship and reinstall manufacturing equipment and the costs to
prepare the receiving facility to accommodate relocated equipment. These costs are expensed as incurred. Cash paid
is net of proceeds received from the sale of related assets.
85
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
As a result of restructuring and consolidation actions, the Company owns unutilized real estate at various facilities in
the U.S. and internationally. The Company is attempting to sell or lease this unutilized space. Additional impairment
charges may be incurred related to these or other excess assets.
The activity within the liability established for the cost alignment restructuring actions was as follows:
Balance as of December 31, 2013
Additional charge recorded
Cash paid
Foreign exchange and other non-cash items
Balance as of December 31, 2014
Additional charge recorded
Cash paid
Consideration received
Foreign exchange and other non-cash items
Balance as of December 31, 2015
Additional charge recorded
Cash paid
Consideration received
Foreign exchange and other non-cash items
Balance as of December 31, 2016
Employee-
Related
Costs
Lease
Termination
Costs
Fixed Asset
Related
Costs
$
$
17,173 $
6,625
(19,806)
(170)
3,822
3,024
(5,773)
—
(68)
1,005
71
(769)
—
4
311 $
1,399 $
8,048
(1,205)
1
8,243
865
(1,738)
—
—
7,370
298
(1,618)
—
—
6,050 $
— $
4,594
(3,357 )
(1,237 )
—
1,828
(247 )
2,986
(4,567 )
—
(203 )
—
3,656
(3,453 )
— $
Total
18,572
19,267
(24,368)
(1,406)
12,065
5,717
(7,758)
2,986
(4,635)
8,375
166
(2,387)
3,656
(3,449)
6,361
The Company has recognized restructuring charges of $89.0 million since January 2011 for cost alignment
restructuring actions. Additional pretax costs of $0.5 million to $1.0 million are expected to be incurred to complete
these previously announced initiatives. Cash payments of $2.0 million to $2.5 million are expected in 2017 and $5.0
million to $5.5 million between 2018 and 2022.
The activity within the liability established for the BNS integration restructuring actions was as follows:
Balance as of December 31, 2014
Liabilities assumed in BNS acquisition
Additional charge recorded
Cash paid
Foreign exchange and other non-cash items
Balance as of December 31, 2015
Additional charge recorded
Cash paid
Foreign exchange and other non-cash items
Balance as of December 31, 2016
Employee-
Related
Costs
Lease
Termination
Costs
Fixed Asset
Related
Costs
$
$
— $
9,000
23,771
(3,996)
(61)
28,714
35,848
(31,569)
(253)
32,740 $
— $
—
—
—
—
—
378
(256)
249
371 $
— $
—
—
—
—
—
6,483
(3,079 )
(3,404 )
— $
Total
—
9,000
23,771
(3,996)
(61)
28,714
42,709
(34,904)
(3,408)
33,111
In conjunction with the BNS acquisition, the Company assumed a liability of $9.0 million for BNS employee-related
restructuring initiated prior to the acquisition. The Company has recognized restructuring charges of $66.5 million
since the acquisition date for BNS integration actions. Additional pretax costs to complete previously announced
initiatives are not expected to be significant. Cash payments of $28.0 million to $29.0 million are expected in 2017
with additional payments of $4.5 million to $5.0 million between 2018 and 2020. Additional restructuring charges
related to BNS restructuring actions are expected and the resulting amounts may be material.
86
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
Restructuring reserves related to all actions were included in the Company’s Consolidated Balance Sheets as
follows:
Other accrued liabilities
Other noncurrent liabilities
Total liability
10. EMPLOYEE BENEFIT PLANS
Defined Contribution Plans
December 31,
2016
2015
$
$
30,438 $
9,034
39,472 $
24,480
12,609
37,089
The Company and certain of its subsidiaries have defined contribution retirement savings plans, the most significant
of which is a 401(k) plan in the U.S. These plans allow employees meeting certain requirements to contribute a
portion of their compensation on a pretax and/or after-tax basis in accordance with guidelines established by the
plans and the Internal Revenue Service or other tax authorities. The Company matches a percentage of the employee
contributions up to certain limits. With the BNS acquisition in 2015, the Company assumed various international
defined contribution retirement savings plans and BNS employees in the U.S. became eligible to participate in the
U.S. 401(k) plan. During the years ended December 31, 2016, 2015 and 2014, the Company made contributions to
defined contribution retirement savings plans of $24.5 million, $21.7 million and $19.6 million, respectively.
The Company maintains noncontributory and contributory deferred compensation plans. During the years ended
December 31, 2016, 2015 and 2014, the Company recognized pretax costs of $2.6 million, $1.4 million and $2.0
million, respectively, related to these plans. The liability was $32.5 million and $27.4 million as of December 31,
2016 and 2015, respectively.
Pension and Other Postretirement Benefit Plans
The Company sponsors defined benefit pension plans covering certain domestic former employees and certain
foreign current and former employees. With the acquisition of the BNS business, the Company assumed various
foreign defined benefit pension plans. Included in the defined benefit pension plans are both funded and unfunded
plans. The Company also sponsors postretirement health care and life insurance benefit plans that provide benefits to
certain domestic former employees and certain domestic full-time employees who retire from the Company. The
health care plans contain various cost-sharing features such as participant contributions, deductibles, coinsurance
and caps, with Medicare as the primary provider of health care benefits for eligible retirees. The accounting for the
health care plans anticipates future cost-sharing changes that are consistent with the Company’s expressed intent to
maintain a consistent level of cost sharing or capped benefits with retirees.
87
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
The following table summarizes information for the defined benefit pension and other postretirement benefit plans
based on a December 31 measurement date:
Pension Benefits
U.S. Plans
Non-U.S. Plans
Other
Postretirement
Benefits
U.S Plans
2016
2015
2016
2015
2016
2015
Change in benefit obligation:
Benefit obligation, beginning
Service cost
Interest cost
Plan participants' contributions
BNS acquisition
Actuarial loss (gain)
Plan amendments
Benefits paid, including settlements
Foreign exchange and other
Benefit obligation, ending
Change in plan assets:
Fair value of plan assets, beginning
Employer and plan participant contributions
BNS acquisition
Return on plan assets
Benefits paid, including settlements
Foreign exchange and other
Fair value of plan assets, ending
Funded status (benefit obligation in excess of
fair value of plan assets)
2,271
5,988
—
6,498
—
—
—
6,452
—
—
966
—
$159,973 $171,351 $203,117 $145,921 $ 16,696 $21,756
29
5,352
3
6,096
643
538
— 1,016 1,332
115
—
(876) (3,505)
—
(2,239 ) (3,461) (3,559)
—
$156,522 $159,973 $216,634 $203,117 $ 9,546 $16,696
—
(10,869) (10,890)
— (23,408) (10,361 ) —
(6,986) 39,296 (13,314 )
(7,073) 74,851 —
—
(6,861)
— (4,370)
—
152,661 160,325 199,915 147,324
6,119
9,103
—
261
—
13,585
(10,869) (10,890)
(5,877) 21,683
(6,861)
38 56,328 —
225 —
592 1,543
8,596 2,869 2,608
—
—
(2,239 ) (3,461) (3,559)
—
592
—
— (24,076) (10,319 ) —
$155,638 $152,661 $196,818 $199,915 $ — $
$
884 $
7,312 $ 19,816 $
3,202 $ 9,546 $16,104
The following table presents the balance sheet location of the Company's pension and postretirement liabilities and
assets:
Other accrued liabilities
Pension and other postretirement benefit liabilities
Other noncurrent assets
December 31,
U.S. Plans
Non-U.S. Plans
$
2016
(1,980) $
(10,068)
1,618
2015
(2,000) $
(21,416)
—
2016
(1,145 ) $
(21,603 )
2,932
2015
—
(15,686)
12,484
The accumulated benefit obligation for the Company’s U.S. defined benefit pension plans was $156,522 and
$159,973 as of December 31, 2016 and 2015, respectively and the accumulated benefit obligation for the
Company’s non-U.S. defined benefit pension plans was $175,016 and $160,087 as of December 31, 2016 and 2015,
respectively.
88
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
The following table summarizes information for the Company’s pension plans with an accumulated benefit
obligation in excess of plan assets:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
December 31,
U.S. Plans
2016
2015
$
2,502 $ 159,973 $
159,973
2,502
152,661
—
Non-U.S. Plans
2016
14,467 $
12,518
3,640
2015
15,913
11,364
17
The following table summarizes pretax amounts included in accumulated other comprehensive loss as of
December 31, 2016 and 2015:
Pension Benefits
U.S. Plans
Non-U.S. Plans
Other
Postretirement
Benefits
U.S. Plans
2016
2015
2016
2015
2016
2015
Unrecognized net actuarial gain (loss)
Unrecognized prior service credit
Total
$ (30,968) $ (37,508) $ (32,411) $ (8,661 ) $ 3,518 $ 4,023
— 18,137 17,987
—
$ (30,968) $ (37,508) $ (32,411) $ (8,661 ) $ 21,655 $ 22,010
—
—
Pretax amounts for net periodic benefit cost and other amounts included in other comprehensive income (loss) for
the defined benefit pension and other postretirement benefit plans consisted of the following components:
Pension Benefits
Year Ended December 31,
Service cost
Interest cost
Recognized actuarial loss
Expected return on plan assets
Net periodic benefit cost (income)
Changes in plan assets and benefit obligations
included in other comprehensive income (loss):
Change in unrecognized net actuarial loss (gain)
Total recognized in net periodic benefit cost and
included in other comprehensive income (loss)
U.S. Plans
2015
Non-U.S. Plans
2015
2016
2016
2014
$ — $ — $ — $ 5,352 $ 2,271 $
453
6,452 6,498 7,270 6,096 5,988 6,043
—
(7,002) (7,516) (7,883) (8,632 ) (7,357) (7,366)
(870)
(304) 2,932
(343)
116
309
954
373
923
675
52
2014
(6,540) 5,735 8,479 23,750 (6,867) 10,039
$(6,167) $ 5,392 $ 8,175 $26,682 $ (5,913) $ 9,169
89
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
Service cost
Interest cost
Recognized actuarial gain
Amortization of prior service credit
Net periodic benefit income
Changes in plan assets and benefit obligations included in other
comprehensive income (loss):
Change in unrecognized net actuarial loss (gain)
Change in unrecognized prior service credit
Total included in other comprehensive income (loss)
Total recognized in net periodic benefit cost and included in other
comprehensive income (loss)
Other Postretirement Benefits
Year Ended December 31,
U.S. Plans
$
2016
2015
2014
3 $
538
(1,382)
(4,220)
(5,061)
29 $
643
(1,132 )
(9,829 )
(10,289 )
86
901
(343)
(9,977)
(9,333)
505
(150)
355
(2,373 )
9,829
7,456
(2,734)
9,977
7,243
$
(4,706) $
(2,833 ) $
(2,090)
Amortization of amounts included in accumulated other comprehensive loss as of December 31, 2016 is expected to
increase (decrease) net periodic benefit cost during 2017 as follows:
Pension
Benefits
Other
Postretirement
Benefits
Total
Amortization of net actuarial loss (gain)
Amortization of prior service credit
Total
Assumptions
Non-U.S.
Plans
U.S. Plans
U.S. Plans
$
678 $
—
678 $
1,459 $
—
1,459 $
$
U.S. Plans
(115 ) $
(4,138 )
(4,253 ) $
(793) $
(4,138)
(4,931) $
Non-U.S.
Plans
1,459
—
1,459
Significant weighted average assumptions used in determining benefit obligations and net periodic benefit cost are
as follows:
Pension Benefits
2016
U.S. Plans
2015
2014
2016
Non-U.S. Plans
2015
2014
Benefit obligations:
Discount rate
Rate of compensation increase
Net periodic benefit cost:
Discount rate
Rate of return on plan assets
Rate of compensation increase
Benefit obligations:
Discount rate
Net periodic benefit cost:
Discount rate
3.94 % 4.19 % 3.89 % 2.38 % 3.52 % 3.75 %
— % — % — % 4.04 % 4.36 % 4.00 %
4.19 % 3.89 % 4.69 % 3.52 % 3.75 % 4.70 %
4.50 % 4.65 % 5.45 % 3.71 % 4.45 % 5.40 %
— % — % — % 4.18 % 4.00 % 4.30 %
Other Postretirement Benefits
U.S. Plans
2015
2014
2016
3.06%
3.46 %
3.15%
3.46%
3.15 %
3.50%
90
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
The Company considered the available yields on high-quality fixed-income investments with maturities
corresponding to the Company’s expected benefit obligations to determine the discount rates at each measurement
date.
Plan Assets
In developing the expected rate of return on plan assets, the Company considered the expected long-term rate of
return on individual asset classes. Expected return on plan assets is based on the market value of the assets.
Substantially all of the U.S. pension assets and a portion of the non-U.S. pension assets are managed by independent
investment advisors with an objective of transitioning to a portfolio of fixed income and absolute return investments
that matches the durations of the obligations as the funded status of each plan improves. The absolute return
investment fund is a diversified portfolio designed to achieve long-term total returns. The remainder of the non-U.S.
pension assets is invested with the objective of maximizing return.
Mutual funds classified as Level 1 are valued at net asset value, which is based on the fair value of the funds’
underlying securities. Certain mutual funds are classified as Level 2 because a portion of the funds’ underlying
assets are valued using significant other observable inputs. Other assets are primarily composed of fixed income
investments (including insurance and real estate products) and are valued based on the investment’s stated rate of
return, which approximates market interest rates.
The estimated fair values and the valuation input levels of the Company’s plan assets as of December 31, 2016 are
as follows:
Pension Benefits
U.S. Plans
Non-U.S. Plans
Other
Postretirement
Benefits
U.S. Plans
Level 1
Fair Value
Level 2
Fair Value
Level 1
Fair Value
Level 2
Fair Value
Level 1
Fair Value
Level 2
Fair Value
$
2,693 $
1,284
142,121
6,847
—
2,693
$ 155,638 $
— $
—
—
—
—
—
— $
— $
30,295
—
27,004
—
3,688
60,987 $
— $
29,618
—
81,242
18,727
6,244
135,831 $
— $
—
—
—
—
—
— $
—
—
—
—
—
—
—
Mutual funds:
U.S. equity
International equity
U.S. debt
International debt
Absolute return
Other
Total
The estimated fair values and the valuation input levels of the Company’s plan assets as of December 31, 2015 are
as follows:
Pension Benefits
U.S. Plans
Non-U.S. Plans
Other
Postretirement
Benefits
U.S. Plans
Mutual funds:
U.S. equity
International equity
U.S. debt
International debt
Other
Total
Level 1
Fair Value
Level 2
Fair Value
Level 1
Fair Value
Level 2
Fair Value
Level 1
Fair Value
Level 2
Fair Value
$
2,404 $
1,692
140,264
6,164
2,137
$ 152,661 $
— $
—
—
—
—
— $
— $
28,309
—
26,721
1,223
56,253 $
— $
50,240
—
91,772
1,650
143,662 $
— $
—
592
—
—
592 $
—
—
—
—
—
—
91
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
Expected Cash Flows
The Company expects to contribute $0.3 million to U.S defined benefit pension plans and $6.6 million to non-U.S.
defined benefit pension plans during 2017. The Company expects to contribute $1.7 million to U.S. other
postretirement benefit plans during 2017.
The following table summarizes projected benefit payments from pension and other postretirement benefit plans
through 2026, including benefits attributable to estimated future service (in millions):
2017
2018
2019
2020
2021
2022-2026
11. INCOME TAXES
$
Pension Benefits
U.S. Plans
Non-U.S. Plans
10.8 $
10.7
10.6
10.5
10.4
50.0
10.0 $
7.7
6.4
6.7
7.6
47.7
Other
Postretirement
Benefits
U.S Plans
1.7
1.7
1.5
1.0
0.9
2.5
Income (loss) before income taxes includes the results from domestic and international operations as follows:
U.S. companies
Non-U.S. companies
Income (loss) before income taxes
The components of income tax expense were as follows:
$
Year Ended December 31,
2015
2016
2,752 $ (243,796 ) $
2014
33,089
269,817 181,795 283,974
(62,001 ) $ 317,063
$ 272,569 $
Year Ended December 31,
2015
2014
2016
37,495 $
104,196
8,918
15,182
86,135
12,252
150,609 110,700 113,569
23,940 $
81,123
5,637
(76,843)
(24,023)
(12)
(81,913 )
(18,627 )
(1,286 )
(100,878) (101,826 )
8,874 $
49,731 $
(26,609)
(2,187)
(4,482)
(33,278)
80,291
Current:
Federal
Foreign
State
Current income tax expense
Deferred:
Federal
Foreign
State
Deferred income tax benefit
Total income tax expense
$
$
92
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
The reconciliation of income taxes calculated at the statutory U.S. federal income tax rate to the Company’s
provision for income taxes was as follows:
Year Ended December 31,
Provision for income taxes at federal statutory rate
State income taxes, net of federal tax effect (1)
Other permanent items
Goodwill related items
Federal tax credits
Change in unrecognized tax benefits
Foreign dividends and Subpart F income
Foreign earnings taxed at other than federal rate
Tax provision adjustments and revisions to prior years' returns
Change in valuation allowances
Other
Total provision for income taxes
2016
95,399 $
6,211
1,327
3,284
(1,772)
(11,061)
16,848
(31,527)
3,585
(34,012)
1,449
49,731 $
$
$
2014
2015
(21,700 ) $ 110,972
1,772
(2,131)
1,668
(2,538)
(22,206)
25,152
(33,965)
(1,973)
3,218
322
80,291
(608 )
1,086
25,518
(1,940 )
(2,484 )
256
(21,210 )
(4,796 )
33,505
1,247
8,874 $
(1) Presented net of federal tax effect and does not include tax expense related to valuation allowances.
93
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
The components of deferred income tax assets and liabilities and the classification of deferred tax balances on the
balance sheet were as follows (1):
Deferred tax assets:
Accounts receivable, inventory and warranty reserves
Employee benefits
Pension and postretirement benefits
Restructuring accruals
Foreign net operating loss and tax credit carryforwards
Federal net operating loss carryforwards
Federal tax credit carryforwards
State net operating loss and tax credit carryforwards
Transaction costs
Equity-based compensation
Unrecognized tax benefits
Other
Total deferred tax assets
Valuation allowances
Total deferred tax assets, net of valuation allowances
Deferred tax liabilities:
Intangible assets
Property, plant and equipment
Undistributed foreign earnings
Other
Total deferred tax liabilities
Net deferred tax liability
Deferred taxes as recorded on the balance sheet:
Noncurrent deferred tax asset (included with Other noncurrent assets)
Noncurrent deferred tax liability
Net deferred tax liability
$
December 31,
2016
2015
61,709 $
19,542
18,461
9,290
56,122
4,019
85,987
17,249
14,905
17,919
12,721
30,931
348,855
(60,136 )
288,719
63,374
10,173
10,039
9,761
61,945
3,498
95,623
17,070
13,958
14,885
21,527
26,855
348,708
(101,549)
247,159
(388,179 )
(38,825 )
(9,848 )
(4,110 )
(440,962 )
(152,243 ) $
(354,434)
(38,146)
(7,851)
(10,360)
(410,791)
(163,632)
46,878
(199,121 )
(152,243 ) $
38,855
(202,487)
(163,632)
$
$
(1) Amounts reflected in the 2015 column have been reclassified to conform with current year presentation.
The deferred tax asset for federal tax credit carryforwards as of December 31, 2016 relates to U.S. foreign tax credit
carryforwards that expire between 2017 and 2025. During the year ended December 31, 2016, the Company released
$28.9 million of valuation allowance against these deferred tax assets based on changes in outlook regarding the
level and mix of foreign and domestic earnings that improved the expected ability to realize these assets.
The deferred tax asset for state net operating loss and tax credit carryforwards as of December 31, 2016 includes
state net operating loss carryforwards (net of federal tax impact) of $15.8 million, which begin to expire in 2017,
and state tax credit carryforwards (net of federal tax impact) of $1.4 million which begin to expire in 2017. A
valuation allowance of $10.5 million has been established against these state income tax related deferred tax assets.
The deferred tax assets for foreign net operating losses and tax credit carryforwards as of December 31, 2016
include foreign net operating loss carryforwards (tax effected) of $44.0 million, which will begin to expire in 2017,
and foreign tax credit carryforwards of $12.1 million, which begin to expire in 2023. Certain of these foreign net
operating loss carryforwards are subject to local restrictions limiting their utilization. Valuation allowances of $45.6
million have been established related to these foreign deferred tax assets.
94
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
In addition to the valuation allowances detailed above, the Company has also established a valuation allowance of
$4.0 million against other deferred tax assets.
During the year ended December 31, 2016, the valuation allowance for deferred tax assets decreased by $41.4
million, primarily due to the changes in outlook for foreign tax credit carryforwards described above. Of that
decrease, $34.0 million reduced tax expense and the balance was related to changes in the underlying deferred tax
assets or was recorded as an adjustment to other comprehensive income.
As of December 31, 2016, a deferred tax liability of $9.8 million has been established to reflect the U.S. federal and
state tax cost associated with the planned repatriation of that portion of the Company’s undistributed foreign
earnings that are not considered to be permanently reinvested in foreign operations. The remaining amount of
undistributed earnings from foreign subsidiaries for which no incremental U.S. income taxes have been provided
was $606.1 million as of December 31, 2016 as these earnings are considered to be permanently reinvested in
foreign operations. Determination of the amount of unrecognized deferred income tax liability related to these
earnings is not practicable.
The following table reflects a reconciliation of the beginning and end of period amounts of gross unrecognized tax
benefits, excluding interest and penalties:
Balance at beginning of period
Increase related to prior periods
Decrease related to prior periods
Increase related to current periods
Decrease related to settlement with taxing authorities
Decrease related to lapse in statutes of limitations
Increase related to acquisition
Balance at end of period
Year Ended December 31,
2015
68,223 $
1,677
(2,094 )
914
—
(4,635 )
—
64,085 $
2016
64,085 $
742
(3,416)
—
(22)
(16,758)
3,681
48,312 $
2014
91,410
223
(1,275)
—
—
(22,135)
—
68,223
$
$
The Company’s liability for unrecognized tax benefits that, if recognized, would favorably affect the effective tax
rate in future periods was $39.5 million as of December 31, 2016. The Company operates in numerous jurisdictions
worldwide and is subject to routine tax audits on a regular basis. The determination of the Company’s unrecognized
tax benefits involves significant management judgment regarding interpretation of relevant facts and tax laws in
each of these jurisdictions.
Unrecognized tax benefits are reviewed and evaluated on an ongoing basis and may be adjusted for changing facts
and circumstances including the lapse of applicable statutes of limitation and closure of tax examinations. Although
the timing and outcome of such events are difficult to predict, the Company reasonably estimates that the balance of
unrecognized tax benefits, excluding the impact of accrued interest and penalties, may be reduced by up to $10.0
million within the next twelve months.
The Company provides for interest and penalties related to unrecognized tax benefits as income tax expense. As of
December 31, 2016 and 2015, the Company had accrued $8.9 million and $7.9 million, respectively, for interest and
penalties. During the years ended December 31, 2016, 2015 and 2014 the net expense (credit) for interest and
penalties recognized through income tax expense was $0.4 million, $(0.5) million and $(4.6) million, respectively.
95
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
The Company files state and local tax returns with statutes of limitation generally ranging from 3 to 4 years. The
Company is generally no longer subject to federal tax examinations for years prior to 2013 or state and local tax
examinations for years prior to 2012. Tax returns filed by the Company’s significant foreign subsidiaries are
generally subject to statutes of limitations of 3 to 7 years and are generally no longer subject to examination for
years prior to 2011. In many jurisdictions, tax authorities retain the ability to review prior years’ tax returns and to
adjust any net operating loss or tax credit carryforwards from these years that are available to be utilized in
subsequent periods. During 2016, the Company recognized $16.8 million related to the lapse of applicable statutes
of limitations and the conclusion of various domestic and foreign examinations.
The following table presents income tax expense (benefit) related to amounts presented in other comprehensive
income (loss):
Foreign currency translation
Defined benefit plans
Available-for-sale securities
Total
12. STOCKHOLDERS’ EQUITY
Equity-Based Compensation Plans
Year Ended December 31,
2015
2014
2016
$
$
(188) $
(1,659)
(2,360)
(4,207) $
(5,438 ) $
(3,714 )
(3,174 )
(12,326 ) $
(7,942)
(8,008)
7,351
(8,599)
On October 4, 2013, the Company’s Board of Directors approved the 2013 Long Term Incentive Plan (the 2013
Plan), effective October 24, 2013, authorizing 18.6 million shares for issuance. Awards under the 2013 Plan
may include stock, stock options, restricted stock, restricted stock units (RSUs), performance units, performance
share units (PSUs), performance-based restricted stock, stock appreciation rights and dividend equivalent rights for
employees and non-employee directors of the Company. Approval of the 2013 Plan canceled all shares authorized
but not issued under the CommScope, Inc. 2011 Incentive Plan. Awards granted prior to October 24, 2013 remain
subject to the provisions of the predecessor plans. As of December 31, 2016, 13.4 million shares were available for
future grants under the 2013 Plan.
As of December 31, 2016, $54.3 million of total unrecognized compensation expense related to non-vested stock
options, RSUs and PSUs are expected to be recognized over a remaining weighted average period of 1.4 years.
There were no significant capitalized equity-based compensation costs at December 31, 2016.
In March 2016, the Company modified certain stock option awards to extend the exercise period in the case of
retirement, death or disability. This modification resulted in a change in the fair value of the affected awards.
Incremental compensation cost of $1.6 million resulted from the modification and was fully recognized at the time
of the modification.
The following table shows a summary of the equity-based compensation expense included in the Consolidated
Statements of Operations and Comprehensive Income (Loss):
Selling, general and administrative
Cost of sales
Research and development
Total equity-based compensation expense
Year Ended December 31,
2015
2014
2016
$
$
26,709 $
4,665
3,632
35,006 $
21,829 $
3,844
2,992
28,665 $
15,592
3,160
2,340
21,092
96
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
Stock options
Stock options are awards that allow the recipient to purchase shares of the Company’s common stock at a fixed
price. Stock options are granted at an exercise price equal to the Company’s stock price at the date of grant. These
awards generally vest over one to three years following the grant date and have a contractual term of ten years.
The following table summarizes the stock option activity (in thousands, except per share amounts):
Weighted
Average Option
Exercise Price
Per Share
Weighted
Average Remaining
Contractual Term
in Years
Aggregate
Intrinsic Value
Shares
Options outstanding as of December 31, 2015
Granted
Exercised
Forfeited
Options outstanding as of December 31, 2016
Options exercisable at December 31, 2016
Options expected to vest at December 31, 2016
7,458 $
385 $
(2,116) $
(230) $
5,497 $
4,725 $
771 $
8.81
25.08
7.91
8.02
10.33
7.53
27.45
4.7
4.1
8.5
$
$
$
147,706
140,173
7,514
The total intrinsic value of options exercised during the years ended December 31, 2016, 2015 and 2014 was $50.6
million, $77.0 million and $35.7 million, respectively.
The exercise prices of outstanding options at December 31, 2016 were in the following ranges:
Options Outstanding
Options Exercisable
Range of Exercise Prices
$2.96 to $5.35
$5.36 to $5.67
$5.68 to $8.54
$8.55 to $8.90
$8.91 to $23.00
$23.01 to $33.12
$2.96 to $33.12
Shares
(in thousands)
Weighted
Average
Remaining
Contractual Life
(in years)
2.2
4.9
4.1
3.5
7.1
8.5
4.7
379
211
2,806
963
329
809
5,497
Weighted
Average Exercise
Price Per Share
$
$
$
$
$
$
$
2.96
5.57
5.74
8.60
22.73
27.99
10.33
Shares
(in thousands)
Weighted
Average Exercise
Price Per Share
2.96
5.57
5.74
8.60
22.73
29.73
7.53
379 $
197 $
2,806 $
963 $
329 $
51 $
4,725 $
The Company uses the Black-Scholes model to estimate the fair value of stock option awards at the date of grant.
Key inputs and assumptions used in the model include the grant date fair value of common stock, exercise price of
the award, the expected option term, stock price volatility, the risk-free interest rate and the Company’s projected
dividend yield. The risk-free interest rates reflect the yield on zero-coupon U.S. treasury securities with a term equal
to the option’s expected term. The expected life represents the period over which the Company’s employees are
expected to hold their options. Expected volatility is derived based on the historical Company volatility, as well as
volatilities from publicly traded companies operating in the Company's industry. The Company’s projected dividend
yield is zero. The Company believes that the valuation technique and the approach utilized to develop the underlying
assumptions are appropriate in estimating the fair values of its stock options. Estimates of fair value are not intended
to predict actual future events or the value ultimately realized by employees who receive equity awards. Subsequent
events are not indicative of the reasonableness of the original estimates of fair value made by the Company.
97
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
The following table presents the weighted average assumptions used to estimate the fair value of stock option
awards granted:
Expected option term (in years)
Risk-free interest rate
Expected volatility
Weighted average exercise price
Weighted average fair value at grant date
Restricted Stock Units
2016
Year Ended December 31,
2015
2014
6.0
1.4%
50.0%
25.08 $
12.09 $
5.6
1.6 %
43.0 %
29.38 $
13.74 $
5.0
1.5%
45.0%
23.02
9.41
$
$
RSUs entitle the holder to shares of common stock after a vesting period that generally ranges from one to three
years. The fair value of the awards is determined on the grant date based on the Company’s stock price. The RSUs
granted to BNS transferred employees in 2015 followed the remaining vesting schedule of their forfeited TE
Connectivity awards which was a four-year vesting period.
The following table summarizes the RSU activity (in thousands, except per share data):
Non-vested share units at December 31, 2015
Granted
Vested and shares issued
Forfeited
Non-vested share units at December 31, 2016
Restricted Stock
Units
Weighted
Average Grant
Date Fair Value
Per Share
1,567 $
1,635 $
(496 ) $
(187 ) $
2,519 $
29.37
24.93
30.90
26.86
26.37
The weighted average grant date fair value per unit of these awards granted during 2016, 2015 and 2014 was $24.93,
$31.06 and $22.99, respectively. The total fair value of RSUs that vested during the years ended December 31, 2016
and 2015 was $15.3 million and $3.4 million, respectively.
Performance Share Units
PSUs are stock awards in which the number of shares ultimately received by the employee depends on Company
performance against specified targets. Such awards typically vest over three years and the number of shares issued
can vary from 0% to 150% of the number of PSUs granted, depending on performance. The fair value of each PSU
is determined on the date of grant based on the Company’s stock price. Over the performance period, the number of
shares that are expected to be issued is adjusted upward or downward based upon the probable achievement of
performance targets. The ultimate number of shares issued and the related compensation cost recognized will be
based on the final performance metrics compared to the targets specified in the grants. For PSUs granted in 2015,
which had a combined 2015 and 2016 earnings-based performance measure, the minimum level of performance was
achieved but performance was below target resulting in a negative share performance adjustment. For PSUs granted
in 2016, which had a 2016 earnings-based performance measure, a better than target performance level was
achieved resulting in a positive share performance adjustment. These resulted in a net positive share performance
adjustment in 2016.
98
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
The following table summarizes the PSU activity (in thousands, except per share data):
Non-vested share units at December 31, 2015
Granted
Forfeited
Performance adjustment
Non-vested share units at December 31, 2016
Performance
Share Units
Weighted
Average Grant
Date Fair Value
Per Share
175 $
274 $
(11 ) $
7 $
445 $
30.76
25.05
30.76
27.65
27.20
The weighted average grant date fair value per unit of these awards granted during 2016 and 2015 was $25.05 and
$30.76, respectively.
13. COMMITMENTS AND CONTINGENCIES
The Company leases certain equipment and facilities under operating leases expiring at various dates through 2026.
Rent expense was $41.1 million, $30.7 million and $27.1 million for the years ended December 31, 2016, 2015 and
2014, respectively. Future minimum rental payments required under operating leases having an initial term in excess
of one year at December 31, 2016 are as follows (in millions):
2017
2018
2019
2020
2021
Thereafter
Total minimum lease payments
Operating Leases
32.5
$
20.9
15.4
12.5
11.0
7.6
99.9
$
The following table summarizes the activity in the product warranty accrual, included in other accrued liabilities:
Product warranty accrual, beginning of period
Accrual assumed in BNS acquisition
Provision for warranty claims
Warranty claims paid
Product warranty accrual, end of period
Year Ended December 31,
2015
2016
2014
17,964 $
—
10,745
(7,078)
21,631 $
17,054 $
1,900
9,298
(10,288 )
17,964 $
24,838
—
9,253
(17,037)
17,054
$
$
In addition, the Company is subject to various federal, state, local and foreign laws and regulations governing the
use, discharge, disposal and remediation of hazardous materials. Compliance with current laws and regulations has
not had, and is not expected to have, a materially adverse effect on the Company’s financial condition or results of
operations.
Legal Proceedings
The Company is either a plaintiff or a defendant in certain pending legal matters in the normal course of business,
including various matters assumed as part of the BNS acquisition. Management believes none of these legal matters
will have a material adverse effect on the Company’s business or financial condition upon final disposition.
99
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
14. INDUSTRY SEGMENTS, MAJOR CUSTOMERS, RELATED PARTY TRANSACTIONS AND
GEOGRAPHIC INFORMATION
Segment Information
As of January 1, 2016, the Company reorganized its internal management and reporting structure as part of
integrating the BNS acquisition. The reorganization changed the information regularly reviewed by the Company’s
chief operating decision maker to allocate resources and assess performance. The Company is reporting financial
performance for the 2016 fiscal year based on these operating segments: CommScope Connectivity Solutions (CCS)
and CommScope Mobility Solutions (CMS). Both CCS and CMS represent non-aggregated reportable operating
segments. All prior period amounts below have been recast to reflect these operating segment changes.
The CCS segment provides connectivity and network intelligence for indoor and outdoor network applications.
Indoor network solutions are found in commercial buildings and in the network core, which includes data centers,
central offices and cable television headends. These solutions include optical fiber and twisted pair structured
cabling solutions, intelligent infrastructure software, network rack and cabinet enclosures, patch cords and panels,
complete cabling systems and cable assemblies. central office connectivity and equipment and headend solutions for
the network core. Outdoor network solutions are found in both local-area and wide-area networks and “last-mile”
fiber-to-the-home installations. These solutions support the multichannel video, voice and high-speed data services
provided by telecommunications operators and multi-system operators. The Company’s fiber optic connectivity
solutions are primarily comprised of hardened connector systems, fiber distribution hubs and management systems,
couplers and splitters, “plug and play” multiport service terminals, hardened optical terminating enclosures, high
density cable assemblies, splices and splice closures.
The CMS segment provides merchant radio frequency (RF) wireless network connectivity solutions as well as metro
cell, DAS and small cell solutions to enable carriers’ 2G, 3G and 4G networks. These solutions enable wireless
operators to increase spectral efficiency and enhance cellular coverage and capacity in challenging network
conditions such as commercial buildings, urban areas, stadiums and transportation systems.
The CMS segment focuses on all aspects of the radio access network (RAN) from the macro through the metro, to
the indoor layer. Macro cell solutions can be found at wireless tower sites and on rooftops and include base station
antennas, microwave antennas, hybrid fiber-feeder and power cables, coaxial cables, connectors and filters. Metro
cell solutions can be found on street poles and on other urban, outdoor structures and include RF delivery and
connectivity solutions, equipment housing and concealment. These fully integrated outdoor systems comprise
specialized antennas, filters/combiners, backhaul solutions, intra-system cabling and power distribution, all
minimized to fit an urban environment.
The following table provides summary financial information by reportable segment (in millions):
Identifiable segment-related assets:
CCS
CMS
Total identifiable segment-related assets
Reconciliation to total assets:
Cash and cash equivalents
Deferred income tax assets
Total assets
December 31,
2016
2015
$
$
4,507.5 $
2,159.4
6,666.9
428.2
46.9
7,142.0 $
4,642.0
2,258.8
6,900.8
562.9
38.9
7,502.6
100
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
The Company’s measure of segment performance is adjusted operating income. The Company defines adjusted
operating income as operating income, adjusted to exclude amortization, asset impairments, equity-based
compensation and other items that the Company believes are useful to exclude in the evaluation of operating
performance from period to period because these items are not representative of the Company’s core business.
The following table provides net sales, adjusted operating income, depreciation and additions to property, plant and
equipment by reportable segment (in millions):
Net sales:
CCS
CMS
Consolidated net sales
Segment adjusted operating income:
CCS
CMS
Total segment adjusted operating income
Amortization of intangible assets
Restructuring costs, net
Equity-based compensation
Asset impairments
Integration and transaction costs
Purchase accounting adjustments
Consolidated operating income
Depreciation expense:
CCS
CMS
Consolidated depreciation expense
Additions to property, plant and equipment:
CCS
CMS
Consolidated additions to property, plant and equipment
2016
Year Ended December 31,
2015
2014
2,965.5 $
1,958.1
4,923.6 $
1,841.7 $
1,966.1
3,807.8 $
1,359.8
2,469.8
3,829.6
632.3 $
419.1
1,051.4
297.2
42.9
35.0
38.6
62.3
0.6
574.8 $
54.2 $
26.3
80.5 $
49.6 $
18.7
68.3 $
349.9 $
379.9
729.8
220.6
29.5
28.7
90.8
96.9
81.7
181.6 $
30.4 $
30.2
60.6 $
33.0 $
23.5
56.5 $
208.1
600.3
808.4
178.3
19.3
21.1
12.1
12.1
(11.9)
577.4
19.7
29.1
48.8
12.4
24.5
36.9
$
$
$
$
$
$
$
$
Customer Information
Net sales to Anixter International Inc. and its affiliates (Anixter) accounted for 11%, 12% and 11% of the
Company’s total net sales during the years ended December 31, 2016, 2015 and 2014, respectively. Sales to Anixter
primarily originate within the CCS segment. Other than Anixter, no direct customer accounted for 10% or more of
the Company’s total net sales for any of the above periods.
Accounts receivable from Anixter represented approximately 12% and 10% of accounts receivable as of
December 31, 2016 and 2015, respectively. Other than Anixter, no direct customer accounted for 10% or more of
the Company’s accounts receivable as of December 31, 2016 or 2015.
Related Party Transactions
There were no material related party transactions for the years ended December 31, 2016, 2015 or 2014.
101
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
Geographic Information
Sales to customers located outside of the United States comprised 46%, 51% and 45% of total net sales during the
years ended December 31, 2016, 2015 and 2014, respectively. Sales by geographic region, based on the destination
of product shipments, were as follows:
United States
Europe, Middle East and Africa (EMEA)
Asia Pacific (APAC)
Central and Latin America (CALA)
Canada
Consolidated net sales
2016
Year Ended December 31,
2015
2014
2,634.9 $
933.5
961.0
280.3
113.9
4,923.6 $
1,869.4 $
781.7
781.9
275.7
99.1
3,807.8 $
2,107.6
739.3
641.3
252.8
88.6
3,829.6
$
$
Long-lived assets, excluding intangible assets, consist substantially of property, plant and equipment. The
Company’s long-lived assets, excluding intangible assets, located in the U.S., EMEA, APAC and CALA regions
represented the following percentages of such long-lived assets: 52%, 21%, 20% and 7%, respectively, as of
December 31, 2016 and 50%, 22%, 20% and 8%, respectively, as of December 31, 2015.
102
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
Net sales
Gross profit
Operating income (1)(2)(3)
Net income (4)
Basic earnings per share
Diluted earnings per share
Net sales
Gross profit (5)
Operating income (loss) (1)(2)(3)(5)
Net income (loss) (4)
Basic earnings (loss) per share
Diluted earnings (loss) per share
First
Quarter 2016
Second
Quarter 2016
Third
Quarter 2016
Fourth
Quarter 2016
1,143,979 $
447,091
90,723
12,580
0.07 $
0.06 $
1,306,788 $
553,759
183,872
61,961
0.32 $
0.32 $
1,293,948 $
542,851
180,746
93,831
0.49 $
0.48 $
1,178,906
489,888
119,409
54,466
0.28
0.28
First
Quarter 2015
Second
Quarter 2015
Third
Quarter 2015
Fourth
Quarter 2015
825,400 $
293,204
93,140
39,476
0.21 $
0.20 $
867,290 $
314,695
109,398
45,592
0.24 $
0.24 $
972,597 $
338,891
(42,518 )
(80,796 )
(0.42 ) $
(0.42 ) $
1,142,541
399,030
21,573
(75,147)
(0.39)
(0.39)
$
$
$
$
$
$
(1) Operating income for the first, third and fourth quarters in 2016 included charges related to asset impairments of
$15,293, $7,375 and $15,884, respectively. Operating income (loss) for the third and fourth quarters in 2015
included charges related to asset impairments of $85,334 and $5,450, respectively.
(2) Operating income for the first, second, third and fourth quarters in 2016 included charges related to
restructuring costs of $6,072, $7,605, $10,826 and $18,372, respectively. Operating income (loss) for the first,
second, third and fourth quarters in 2015 included charges related to restructuring costs of $1,871, $1,894,
$6,868 and $18,855, respectively.
(3) Operating income for the first, second, third and fourth quarters in 2016 included charges related to integration
and transaction costs of $15,867, $14,473, $14,738 and $17,232, respectively. Operating income (loss) for the
first, second, third and fourth quarters in 2015 included charges related to integration and transaction costs of
$11,415, $9,863, $60,839 and $14,797, respectively.
(4) Net income for the fourth quarter in 2016 included a reversal of a tax valuation allowance of $24,543. Net
income (loss) for the fourth quarter in 2015 included a provision for a tax valuation allowance of $28,871.
(5) Gross profit and operating income (loss) for the third and fourth quarters in 2015 included purchase accounting
adjustments related to the mark-up of BNS inventory to its estimated fair value of $30,500 and $51,135,
respectively.
103
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of the Chief Executive Officer (CEO) and Chief Financial Officer (CFO),
evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by
this report.
Based on this evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this report,
these disclosure controls and procedures were effective and operating to provide reasonable assurance that
information that we are required to disclose in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the rules and forms of the Securities and
Exchange Commission, and that such information is accumulated and communicated to our management, including
our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
The management of CommScope is responsible for establishing and maintaining adequate internal control over
financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the
Exchange Act, as a process designed by, or under the supervision of, the company’s principal executive and
principal financial officers and effected by the company’s board of directors, management and other personnel, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated
financial statements for external purposes in accordance with generally accepted accounting principles and includes
those policies and procedures that:
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of
consolidated financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use
or disposition of the company’s assets that could have a material effect on the consolidated financial
statements.
CommScope’s management assessed the effectiveness of CommScope’s internal control over financial reporting as
of December 31, 2016. In making this assessment, CommScope’s management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated
Framework (2013). Based on this assessment, management concluded that, as of December 31, 2016,
CommScope’s internal control over financial reporting is effective based on the COSO internal control criteria.
CommScope’s independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report
on the effectiveness of CommScope’s internal control over financial reporting, which is included herein.
104
Changes in Internal Control over Financial Reporting
In conjunction with the integration of BNS, the Company continues to make changes to processes, policies and other
components of its internal control over financial reporting, including the consolidation of such operations into the
Company’s financial statements. During the remainder of the integration period, the Company will continue to rely
on TE Connectivity to provide various services under transition services agreements. During the quarter ended
December 31, 2016 the Company migrated the systems supporting the U.S., Mexican and Canadian operations from
TE Connectivity’s systems to the Company’s existing systems. Except for the activities described above, there have
been no changes in the Company’s internal control over financial reporting during the quarter ended December 31,
2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over
financial reporting.
Inherent Limitations of Disclosure Controls and Internal Control over Financial Reporting
Because of their inherent limitations, our disclosure controls and procedures and our internal control over financial
reporting may not prevent material errors or fraud. A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The
effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to
risks, including that the controls may become inadequate because of changes in conditions or that the degree of
compliance with our policies or procedures may deteriorate.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information responsive to this item is incorporated herein by reference to our Proxy Statement for our 2017
annual meeting of stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
Code of Ethics for Principal Executive and Senior Financial and Accounting Officers
We have adopted the CommScope Holding Company, Inc. Code of Ethics for Principal Executive and Senior
Financial and Accounting Officers (the Senior Officer Code of Ethics), a code of ethics that applies to our Chief
Executive Officer, Chief Financial Officer and Controller. The Senior Officer Code of Ethics is publicly available
on our web site at www.commscope.com. If we make an amendment to, or grant a waiver from, a provision of the
Senior Officer Code of Ethics, we will disclose the nature of such waiver or amendment on our web site.
ITEM 11.
EXECUTIVE COMPENSATION
The information responsive to this item is incorporated herein by reference to our Proxy Statement for our 2017
annual meeting of stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The information responsive to this item is incorporated herein by reference to our Proxy Statement for our 2017
annual meeting of stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
105
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information responsive to this item is incorporated herein by reference to our Proxy Statement for our 2017
annual meeting of stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information responsive to this item is incorporated herein by reference to our Proxy Statement for our 2017
annual meeting of stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents Filed as Part of this Report:
1. Audited Consolidated Financial Statements
The following consolidated financial statements of CommScope Holding Company, Inc. are included
under Part II, Item 8:
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended
December 31, 2016, 2015 and 2014
Consolidated Balance Sheets as of December 31, 2016 and 2015
Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and 2014
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2016, 2015 and
2014
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
All schedules are omitted because they are not applicable or the required information is shown in the
financial statements or notes thereto.
3. List of Exhibits. See Index of Exhibits included herein.
106
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DATE: February 22, 2017
COMMSCOPE HOLDING COMPANY
BY: /s/ MARVIN S. EDWARDS, JR.
Marvin S. Edwards, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K
has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates
indicated.
Signature
/s/ MARVIN S. EDWARDS, JR.
Marvin S. Edwards, Jr.
/s/ MARK A. OLSON
Mark A. Olson
/s/ ROBERT W. GRANOW
Robert W. Granow
/s/ FRANK M. DRENDEL
Frank M. Drendel
/s/ AUSTIN A. ADAMS
Austin A. Adams
/s/ CAMPBELL R. DYER
Campbell R. Dyer
/s/ STEPHEN C. GRAY
Stephen C. Gray
/s/ L. WILLIAM KRAUSE
L. William Krause
/s/ JOANNE M. MAGUIRE
Joanne M. Maguire
/s/ THOMAS J. MANNING
Thomas J. Manning
/s/ CLAUDIUS E. WATTS IV
Claudius E. Watts IV
/s/ TIMOTHY T. YATES
Timothy T. Yates
Title
President, Chief Executive
Officer and Director (Principal
Executive Officer)
Executive Vice President and
Chief Financial Officer (Principal
Financial Officer)
Senior Vice President, Corporate
Controller and Principal
Accounting Officer
Date
February 22, 2017
February 22, 2017
February 22, 2017
Director and Chairman of the Board
February 22, 2017
February 22, 2017
February 22, 2017
February 22, 2017
February 22, 2017
February 22, 2017
February 22, 2017
February 22, 2017
February 22, 2017
Director
Director
Director
Director
Director
Director
Director
Director
107
Exhibit No.
Description
Index of Exhibits
* 2.1
* 3.1
* 3.2
* 4.1
* 4.2
* 4.3
* 4.4
* 4.5
* 10.1
Stock and Asset Purchase Agreement, dated January 27, 2015, by and among CommScope Holding
Company, Inc., CommScope, Inc. and TE Connectivity Ltd. (Incorporated by reference to Exhibit
2.1 of the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed with the SEC on
January 28, 2015).
Amended and Restated Certificate of Incorporation of CommScope Holding Company, Inc.
(Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 10-Q (File No. 001-36146), filed
with the SEC on November 7, 2013).
Fourth Amended and Restated By-Laws of CommScope Holding Company, Inc. (as adopted
December 13, 2016) (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on
Form 8-K (File No. 001-36146), filed with the SEC on December 14, 2016).
Indenture governing the 5.000% Senior Notes due 2021 by and among CommScope, Inc. as Issuer,
the subsidiary guarantors named therein and Wilmington Trust, National Association, as trustee,
dated as of May 30, 2014, (including form of 5.000% Senior Note due 2021) (Incorporated by
reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed
with the SEC on June 2, 2014).
Indenture governing the 5.500% Senior Notes due 2024 by and among CommScope, Inc. as Issuer,
the subsidiary guarantors named therein and Wilmington Trust, National Association, as trustee,
dated as of May 30, 2014, (including form of 5.500% Senior Note due 2024) (Incorporated by
reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed
with the SEC on June 2, 2014).
Indenture governing the 4.375% Senior Notes due 2020, by and among CommScope, Inc., the
guarantors named therein and Wilmington Trust, National Association, as trustee and as collateral
agent, dated as of June 11, 2015, (including form of 4.375% Senior Note due 2020) (Incorporated by
reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed
with the SEC on June 12, 2015).
Indenture governing the 6.000% Senior Unsecured Notes due 2025 by and between the CommScope
Technologies Finance LLC and Wilmington Trust, National Association, as trustee, dated as of June
11, 2015 (including form of 6.000% Senior Note due 2025) (Incorporated by reference to Exhibit 4.2
to the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed with the SEC on June 12,
2015).
First Supplemental Indenture, dated August 28, 2015, by and among CommScope Technologies
LLC, the Guarantors party thereto and Wilmington Trust, National Association, as trustee
(Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No.
001-36146), filed with the SEC on August 28, 2015).
Revolving Credit and Guaranty Agreement, dated as of January 14, 2011, by and among Cedar I
Holding Company, Inc. (now CommScope Holding Company, Inc.), CommScope, Inc., as Parent
Borrower, the U.S. Co-Borrowers and European Co-Borrowers named therein, the guarantors
named therein, the Lenders from time to time party thereto, J.P. Morgan Securities LLC, as Lead
Arranger and Bookrunner, JPMorgan Chase Bank, N.A., as US Administrative Agent, and J.P.
Morgan Europe Limited, as European Administrative Agent and the Senior Managing Agents and
Documentation Agents named therein (the Revolving Credit Facility) (Incorporated by reference to
Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1 (File No. 333-190354),
originally filed with the SEC on August 2, 2013).
108
* 10.2
* 10.3
* 10.4
* 10.5
* 10.6
* 10.7
* 10.8
* 10.8.1
* 10.8.2
Exhibit No.
Description
Amendment No. 1 to the Revolving Credit Facility, dated as of March 9, 2012, among CommScope,
Inc., as Parent Borrower, the U.S. Borrowers, European Co-Borrowers and Guarantors named
therein, the Lenders party thereto, JPMorgan Chase Bank, N.A., as U.S. Administrative Agent, and
J.P. Morgan Europe Limited, as European Administrative Agent (Incorporated by reference to
Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-190354),
originally filed with the SEC on August 2, 2013).
Amendment No. 2 to the Revolving Credit Facility, dated as of May 21, 2015, among CommScope,
Inc., as Parent Borrower, CommScope Holding Company, Inc., as Holdings, the US Co-Borrowers
and European Co-Borrowers named therein, the Lenders party thereto, JPMorgan Chase Bank, N.A.,
as U.S. Administrative Agent, and J.P. Morgan Europe Limited, as European Administrative Agent
(Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No.
001-36146), originally filed with the SEC on May 22, 2015).
Revolving Credit Facility Pledge and Security Agreement, dated as of January 14, 2011, among
CommScope, Inc. (as successor by merger to Cedar I Merger Sub, Inc.) and the additional Grantors
party thereto, in favor of JPMorgan Chase Bank, N.A., as collateral agent and as administrative
agent for the Secured Parties referred to therein (Incorporated by reference to Exhibit 10.3 to the
Registrant’s Registration Statement on Form S-1 (File No. 333-190354), originally filed with the
SEC on August 2, 2013).
Patent Security Agreement, dated as of January 14, 2011, made by Allen Telecom LLC, Andrew
LLC and CommScope, Inc. of North Carolina in favor of JPMorgan Chase Bank, N.A., as Collateral
Agent (Incorporated by reference to Exhibit 10.4 to the Registrant’s Registration Statement on Form
S-1 (File No. 333-190354), originally filed with the SEC on August 2, 2013).
Trademark Security Agreement, dated as of January 14, 2011, made by Allen Telecom LLC,
Andrew LLC and CommScope, Inc. of North Carolina in favor of JPMorgan Chase Bank, N.A., as
Collateral Agent (Incorporated by reference to Exhibit 10.5 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-190354), originally filed with the SEC on August 2, 2013).
Copyright Security Agreement, dated as of January 14, 2011, made by Allen Telecom LLC, Andrew
LLC and CommScope, Inc. of North Carolina in favor of JPMorgan Chase Bank, N.A., as Collateral
Agent (Incorporated by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form
S-1 (File No. 333-190354), originally filed with the SEC on August 2, 2013).
Credit Agreement, dated as of January 14, 2011, among CommScope, Inc. (as successor by merger to
Cedar I Merger Sub, Inc.), as Borrower, CommScope Holding Company, Inc.(as successor by merger
to Cedar I Holding Company, Inc.), the Lenders from time to time party thereto, JPMorgan Chase
Bank, N.A. as Administrative Agent and Collateral Agent and J.P. Morgan Securities LLC as Arranger
and Sole Bookrunner (Incorporated by reference to Exhibit 10.7 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-190354), originally filed with the SEC on August 2, 2013).
Amendment Agreement, dated as of March 7, 2012, among CommScope, Inc., as Borrower,
CommScope Holding Company, Inc., the subsidiary guarantors party thereto, the Lenders from time
to time party thereto, JPMorgan Chase Bank, N.A. as Administrative Agent and Collateral Agent
and J.P. Morgan Securities LLC as Arranger and Sole Bookrunner (Incorporated by reference to
Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1 (File No. 333-190354),
originally filed with the SEC on August 2, 2013).
Amendment Agreement, dated as of March 8, 2013, among CommScope, Inc., as Borrower,
CommScope Holding Company, Inc., the subsidiary guarantors party thereto, the Lenders from time
to time party thereto, JPMorgan Chase Bank, N.A. as Administrative Agent and Collateral Agent ,
J.P. Morgan Securities LLC and Deutsche Bank Trust Company Americas, as syndication agent
(Incorporated by reference to Exhibit 10.9 to the Registrant’s Registration Statement on Form S-1
(File No. 333-190354), originally filed with the SEC on August 2, 2013).
109
Exhibit No.
Description
* 10.8.3
Amendment No. 3, dated as of December 3, 2013, to the Credit Agreement, dated as of January 14,
2011, among CommScope, Inc., as Borrower, CommScope Holding Company, Inc., the subsidiary
guarantors named therein, the several banks and other financial institutions or entities from time to
time parties thereto as Lenders, JPMorgan Chase Bank, N.A., as administrative agent and collateral
agent and the other agents and arrangers party thereto. (Incorporated by reference to Exhibit 10.1 to
the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed with the SEC on
December 3, 2013).
* 10.8.4
Amendment Agreement, dated as of October 31, 2016, to the Credit Agreement, dated as of January
11, 2011, among CommScope, Inc., as Borrower, CommScope Holding Company, Inc., as
Holdings, the several banks and other financial institutions or entities from time to time parties
thereto as Lenders, JPMorgan Chase Bank, N.A., as Administrative Agent and the other agents and
arrangers party thereto. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report
on Form 8-K (File No. 001-36146), filed with the SEC on October 31, 2016).
* 10.9
* 10.10
* 10.11
* 10.12
* 10.13
* 10.14
* 10.15
Term Loan Credit Facility Pledge and Security Agreement, dated as of January 14, 2011, among
CommScope, Inc. (as successor by merger to Cedar I Merger Sub, Inc.) and the additional Grantors
party thereto, in favor of JPMorgan Chase Bank, N.A., as collateral agent and as administrative
agent for the Secured Parties referred to therein (Incorporated by reference to Exhibit 10.10 to the
Registrant’s Registration Statement on Form S-1 (File No. 333-190354), originally filed with the
SEC on August 2, 2013).
Patent Security Agreement, dated as of January 14, 2011, made by Allen Telecom LLC, Andrew
LLC and CommScope, Inc. of North Carolina in favor of JPMorgan Chase Bank, N.A., as Collateral
Agent (Incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on
Form S-1 (File No. 333-190354), originally filed with the SEC on August 2, 2013).
Trademark Security Agreement, dated as of January 14, 2011, made by Allen Telecom LLC,
Andrew LLC and CommScope, Inc. of North Carolina in favor of JPMorgan Chase Bank, N.A., as
Collateral Agent (Incorporated by reference to Exhibit 10.12 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-190354), originally filed with the SEC on August 2, 2013).
Copyright Security Agreement, dated as of January 14, 2011, made by Allen Telecom LLC, Andrew
LLC and CommScope, Inc. of North Carolina in favor of JPMorgan Chase Bank, N.A., as Collateral
Agent (Incorporated by reference to Exhibit 10.13 to the Registrant’s Registration Statement on
Form S-1 (File No. 333-190354), originally filed with the SEC on August 2, 2013).
Holdings Guaranty, dated as of January 14, 2011, by CommScope Holding Company, Inc. in favor
of the Secured Parties referred to therein (Incorporated by reference to Exhibit 10.14 to the
Registrant’s Registration Statement on Form S-1 (File No. 333-190354), originally filed with the
SEC on August 2, 2013).
Subsidiary Guaranty, dated as of January 14, 2011, from the Subsidiary Guarantors named therein in
favor of the Secured Parties referred to therein (Incorporated by reference to Exhibit 10.15 to the
Registrant’s Registration Statement on Form S-1 (File No. 333-190354), originally filed with the
SEC on August 2, 2013).
Intercreditor Agreement, dated as of January 14, 2011, by and among CommScope Inc.,
CommScope Holding Company, Inc., certain Subsidiaries party thereto as a Guarantor, JPMorgan
Chase Bank, N.A., as administrative agent and collateral agent for the holders of Revolving Credit
Obligations, and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent for the
holders of Initial Fixed Asset Obligations (Incorporated by reference to Exhibit 10.16 to the
Registrant’s Registration Statement on Form S-1 (File No. 333-190354), originally filed with the
SEC on August 2, 2013).
110
Exhibit No.
Description
* 10.16
* 10.17
* 10.18
* 10.19
* 10.20
* 10.21
* 10.22
* 10.23
* 10.24
* 10.25
* 10.26
Incremental Joinder Agreement, dated August 28, 2015, by and among CommScope, Inc., as
Borrower, CommScope Holding Company, Inc., as Holdings, the Subsidiary Guarantors party
thereto, the lenders party thereto, JPMorgan Chase Bank, N.A. as Administrative Agent and
Collateral Agent, and JPMorgan Chase Bank, N.A., as Escrow Administrative Agent (Incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36146),
filed with the SEC on August 28, 2015).
Notes Pledge and Security Agreement, dated as of June 11, 2015, among CommScope, Inc., as a
Grantor and the additional Grantors party thereto, in favor of Wilmington Trust, National
Association, as collateral agent under the Indenture referred to therein (Incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed with the
SEC on June 12, 2015).
Amended and Restated Employment Agreement between Frank M. Drendel and CommScope, Inc.,
dated January 14, 2011, as amended on September 12, 2013 (Incorporated by reference to Exhibit
10.18 of Amendment No. 2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-
190354), filed with the SEC on September 12, 2013).
Employment Agreement between Randall W. Crenshaw and CommScope, Inc., dated January 14,
2011, as amended on September 12, 2013 (Incorporated by reference to Exhibit 10.19 of
Amendment No. 2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-190354),
filed with the SEC on September 12, 2013).
Employment Agreement between Marvin S. Edwards, Jr. and CommScope, Inc., dated January 14,
2011, as amended on September 12, 2013 (Incorporated by reference to Exhibit 10.20 of
Amendment No. 2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-190354),
filed with the SEC on September 12, 2013).
Employment Agreement between Mark A. Olson and CommScope, Inc., dated January 21, 2014
(Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No.
001-36146), filed with the SEC on January 23, 2014).
Form of Amended and Restated Severance Protection Agreement between CommScope, Inc. and
certain executive officers (Incorporated by reference to Exhibit 10.21 of Amendment No. 2 to the
Registrant’s Registration Statement on Form S-1 (File No. 333-190354), filed with the SEC on
September 12, 2013).
Form of Amendment to Severance Protection Agreement between CommScope, Inc. and certain
executive officers, effective June 3, 2016 (Incorporated by reference to Exhibit 10.2 of the
Registrant’s Quarterly Report on Form 10-Q (File No. 001-36146), filed with the SEC on July 28,
2016).
Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.22 of Amendment No.
2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-190354), filed with the SEC
on September 12, 2013).
Amended and Restated CommScope, Inc. 2006 Long Term Incentive Plan (as amended and restated
effective February 28, 2007) (Incorporated by reference to Exhibit 10.25 of Amendment No. 2 to the
Registrant’s Registration Statement on Form S-1 (File No. 333-190354), filed with the SEC on
September 12, 2013).
Amended and Restated CommScope Holding Company, Inc. 2011 Incentive Plan (as amended and
restated effective February 19, 2013) (Incorporated by reference to Exhibit 10.26 of Amendment
No. 2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-190354), filed with the
SEC on September 12, 2013).
111
Exhibit No.
Description
* 10.27
Forms of Nonqualified Stock Option Certificate under the Amended and Restated CommScope
Holding Company, Inc. 2011 Incentive Plan (Incorporated by reference to Exhibit 10.31 of
Amendment No. 2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-190354),
filed with the SEC on September 12, 2013).
** 10.28
CommScope Holding Company, Inc. Amended and Restated 2013 Long-Term Incentive Plan (as
amended and restated effective February 21, 2017).
* 10.29
* 10.30
* 10.31
* 10.32
* 10.33
* 10.34
* 10.35
* 10.36
* 10.37
* 10.38
Form of Restricted Stock Unit Award Certificate under the CommScope Holding Company, Inc.
2013 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.2 of the Registrant’s
Quarterly Report on Form 10-Q (File No. 001-36146), filed with the SEC on April 30, 2015).
Form of Performance Share Unit Award Certificate under the CommScope Holding Company, Inc.
2013 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.3 of the Registrant’s
Quarterly Report on Form 10-Q (File No. 001-36146), filed with the SEC on April 30, 2015).
Form of Non-Qualified Stock Option Certificate under the CommScope Holding Company, Inc.
2013 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.4 of the Registrant’s
Quarterly Report on Form 10-Q (File No. 001-36146), filed with the SEC on April 30, 2015).
CommScope Holding Company, Inc. Amendment to Outstanding Options, effective March 7, 2016
(Incorporated by reference to Exhibit 10.5 of the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-36146), filed with the SEC on April 28, 2016).
Form of Restricted Stock Unit Award Certificate under the CommScope Holding Company, Inc.
2013 Long-Term Incentive Plan (for grants in 2016 and later) (Incorporated by reference to Exhibit
10.2 of the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36146), filed with the SEC
on April 28, 2016).
Form of Performance Share Unit Award Certificate under the CommScope Holding Company, Inc.
2013 Long-Term Incentive Plan (for grants in 2016 and later) (Incorporated by reference to Exhibit
10.3 of the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36146), filed with the SEC
on April 28, 2016).
Form of Non-Qualified Stock Option Certificate under the CommScope Holding Company, Inc.
2013 Long-Term Incentive Plan (for grants in 2016 and later) (Incorporated by reference to Exhibit
10.4 of the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36146), filed with the SEC
on April 28, 2016).
CommScope Holding Company, Inc. Annual Incentive Plan, as amended February 17, 2016
(Incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-36146), filed with the SEC on April 28, 2016).
Amended and Restated CommScope, Inc. Supplemental Executive Retirement Plan (as amended
and restated effective April 9, 2009) (Incorporated by reference to Exhibit 10.30 of Amendment No.
2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-190354), filed with the SEC
on September 12, 2013).
First Amendment, dated January 12, 2011, to Amended and Restated CommScope, Inc.
Supplemental Executive Retirement Plan (Incorporated by reference to Exhibit 10.32 of
Amendment No. 2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-190354),
filed with the SEC on September 12, 2013).
* 10.39
CommScope Holding Company, Inc. Non-Employee Director Compensation Plan, as amended on
September 9, 2015 (Incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report
on Form 10-Q (File No. 001-36146), filed with the SEC on November 9, 2015).
112
Exhibit No.
* 10.40
Description
Form of Restricted Stock Unit Award Certificate under the CommScope Holding Company, Inc.
Non-Employee Director Compensation Plan, which is operated as a subplan of the CommScope
Holding Company, Inc. 2013 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.34
of the Registrant’s Annual Report on Form 10-K (File No. 001-36146), filed with the SEC on
February 20, 2014).
** 10.41
CommScope Holding Company, Inc. Deferred Compensation Plan (as amended and restated
effective January 1, 2017).
** 21.1
List of Subsidiaries
** 23.1
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
** 31.1
Certification of Principal Executive Officer pursuant to Rule 13a-14(a).
** 31.2
Certification of Principal Financial Officer pursuant to Rule 13a-14(a).
± 32.1
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished
pursuant to Item 601(b)(32)(ii) of Regulation S-K).
† 101.INS XBRL Instance Document, furnished herewith
† 101.SCH XBRL Schema Document, furnished herewith
† 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
† 101.INS XBRL Taxonomy Extension Label Linkbase Document
† 101.INS XBRL Taxonomy Extension Presentation Linkbase Document
† 101.INS XBRL Taxonomy Extension Definition Linkbase Document
*
**
†
±
Previously filed
Filed as an exhibit to the Company’s Form 10-K, filed with the Securities and Exchange Commission on
February 23, 2017.
In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed
not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities
Act of 1933, is deemed not filed for purposes of Section 18 of the Exchange Act of 1934, and otherwise is not
subject to liability under these sections.
In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 33-8238 and 34-47986, Final
Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in
Exchange Act Periodic Reports, the certification furnished in Exhibit 32.1 hereto is deemed to accompany this
Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certification
will not be deemed to be incorporated by reference into any filings under the Securities Act or the Exchange
Act, except to the extent that the registrant specifically incorporates it by reference.
113
Subsidiaries of the Registrant
CommScope, Inc.
CommScope, Inc. of North Carolina
CommScope Technologies LLC
CommScope Holdings Luxembourg S.a.r.l.
CommScope Holdings Luxembourg II S.a.r.l.
CS Netherlands C.V.
CommScope Netherlands B.V.
CommScope Asia Holdings B.V.
CommScope Asia (Suzhou) Technologies Co., Ltd.
CommScope EMEA Limited
CommScope Connectivity Belgium BVBA
CommScope Technologies AG
CommScope Connectivity LLC
CommScope Connectivity Solutions LLC
Allen Telecom LLC
CommScope Holdings (Germany) GmbH & Co. KG
Andrew Wireless Systems GmbH
CommScope Mauritius International Holdings Ltd.
CommScope Telecommunications (China) Co., Ltd.
Exhibit 21.1
Delaware (USA)
North Carolina (USA)
Delaware (USA)
Luxembourg
Luxembourg
Netherlands
Netherlands
Netherlands
China
Ireland
Belgium
Switzerland
Minnesota (USA)
Minnesota (USA)
Delaware (USA)
Germany
Germany
Mauritius
China
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-202490) and related
Prospectus of CommScope Holding Company, Inc. and the Registration Statement (Form S-8 No. 333-191959)
pertaining to the CommScope Holding Company, Inc. 2013 Long-Term Incentive Plan, the Amended and Restated
CommScope Holding Company, Inc. 2011 Incentive Plan, the Amended and Restated CommScope, Inc. 2006 Long-
Term Incentive Plan, the Amended and Restated CommScope, Inc. 1997 Long-Term Incentive Plan, the Andrew
Corporation Management Incentive Program, and the Options Granted to Non-Employee Directors Outside of a Plan
of our reports dated February 22, 2017, with respect to the consolidated financial statements of CommScope
Holding Company, Inc. and the effectiveness of internal control over financial reporting of CommScope Holding
Company, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2016.
Charlotte, North Carolina
February 22, 2017
Exhibit 31.1
MANAGEMENT CERTIFICATION
I, Marvin S. Edwards, Jr., certify that:
1. I have reviewed this annual report on Form 10-K of CommScope Holding Company, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Dated: February 22, 2017
/s/ Marvin S. Edwards, Jr.
Name: Marvin S. Edwards, Jr.
Title:
President, Chief Executive Officer and
Director (Principal Executive Officer)
Exhibit 31.2
I, Mark A. Olson, certify that:
MANAGEMENT CERTIFICATION
1. I have reviewed this annual report on Form 10-K of CommScope Holding Company, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Dated: February 22, 2017
/s/ Mark A Olson
Name: Mark A. Olson
Title:
Executive Vice President and Chief
Financial Officer (Principal Financial
Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of CommScope Holding Company, Inc. (the “Company”) on Form 10-K for
the year ended December 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), we, Marvin S. Edwards, Jr., President, Chief Executive Officer and Director of the Company, and Mark
A. Olson, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §
1350 as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Dated: February 22, 2017
/s/ Marvin S. Edwards, Jr.
Marvin S. Edwards, Jr.
President, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Mark A Olson
Mark A. Olson
Executive Vice President and Chief Financial
Officer
(Principal Financial Officer)
[THIS PAGE INTENTIONALLY LEFT BLANK]
Three-year Selected Financial Data
(Unaudited -- in thousands, except per share amounts)
Year Ended December 31
Result of operations
Net sales
Gross profit
Restructuring costs, net
Asset impairments
Operating income
Net interest expense
Net income (loss)
Earnings (Loss) Per Share Information:
Weighted average number of shares outstanding:
Basic
Diluted
Earnings (loss) per share:
Basic
Diluted
Non-GAAP Adjusted Results:
Non-GAAP adjusted operating income(1)
Non-GAAP adjusted earnings per share(1)
Other Information:
Net cash generated by operating activities
Depreciation and amortization
Additions to property, plant and equipment
Balance Sheet Data
Cash and cash equivalents
Goodwill and intangible assets
Property, plant and equipment, net
Total assets
Working capital
Long-term debt, including current maturities
Stockholders’ equity
2014
$3,829,614
1,397,269
19,267
12,096
577,449
(173,981)
236,772
186,905
191,450
$1.27
$1.24
$808,409
$2.23
$289,418
259,504
36,935
$729,321
2,712,814
289,371
4,917,058
1,351,805
2,668,898
1,307,619
2015
$3,807,828
1,345,820
29,488
90,784
181,593
(230,533)
(70,875)
189,876
189,876
$(0.37)
$(0.37)
$729,779
$1.86
$302,060
303,500
56,501
As of December 31
$562,884
4,838,119
528,706
7,502,631
1,319,548
5,243,651
1,222,720
2016
$4,923,621
2,033,589
42,875
38,522
574,750
(272,010)
222,838
192,470
196,459
$1.16
$1.13
$1,051,353
$2.64
$606,225
399,050
68,314
$428,228
4,567,369
474,990
7,141,986
1,135,946
4,562,010
1,394,084
Leadership TEAM
Marvin (Eddie) S. Edwards Jr.*
President and Chief Executive Officer
Mark A. Olson*
Executive Vice President
and Chief Financial Officer
Randall W. Crenshaw*
Executive Vice President
and Chief Operating Officer
Frank (Burk) B. Wyatt II*
Senior Vice President,
General Counsel and Secretary
Philip M. Armstrong Jr.*
Senior Vice President
Corporate Finance
Suzan M. Campbell
Senior Vice President
Tax
Bennett (Ben) Cardwell
Senior Vice President
Mobility Solutions Segment Leader
Michael A. Cross
Senior Vice President
and Chief Information Officer
Robert W. Granow*
Senior Vice President,
Corporate Controller
and Principal Accounting Officer
Peter U. Karlsson*
Senior Vice President
Global Sales
Morgan C.S. Kurk
Senior Vice President and
Chief Technology Officer
Jaxon D. Lang
Senior Vice President
Connectivity Solutions Segment Leader
Robyn T. Mingle*
Senior Vice President
Human Resources
Fiona E. Nolan
Senior Vice President
Marketing
Christopher A. Story
Senior Vice President
Global Supply Chain
Wendy H. Taylor
Vice President
Corporate Compliance
Investor Information
Annual meeting
Friday, May 5, 2017, 1:00 p.m. ET
JPMorgan Chase Conference Center
270 Park Avenue, 2nd Floor
New York, NY 10017
Corporate Headquarters
CommScope Holding Company, Inc.
1100 CommScope Place, SE
Hickory, NC 28602
www.commscope.com
+1 828.324.2200
800.982.1708 (U.S. only)
Transfer agent and registrar
American Stock Transfer
& Trust Company, LLC.
Shareholder Services Department
6201 15th Avenue
Brooklyn, NY 11219
info@amstock.com
+1 718.921.8124
800.937.5449 (U.S. only)
www.amstock.com
Investor Relations
Jennifer Crawford
+1 828.323.4970
investor.relations@commscope.com
Common Stock
Trades on NASDAQ under
the symbol “COMM”
(1) See reconciliation of GAAP measures to Non-GAAP measures (page 22)
* Section 16 Executive Officer
2016 Common Stock Price Range
High
Low
First Quarter ..................
$28.14
$19.37
Second Quarter .............
$33.09
$26.16
Third Quarter .................
$32.77
$28.28
Fourth Quarter ..............
$38.00
$29.88
1
CommScope
1100 CommScope Place, SE
Hickory, NC 28602
1.828.324.2200
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© 2017 CommScope, Inc. All Rights Reserved.
All trademarks identified by ® or ™ are registered trademarks or trademarks, respectively, of CommScope, Inc.