**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

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** **

**FORM 10-Q**

 
| **(Mark One)**                                                                                                                         | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------|------------|
| **x**                                                                                                                                  | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                   |       |   |
| **For the  quarterly period ended March 31, 2007**                                                                                |
|                                                                                                                                   |       |   |
| **OR**                                                                                                                                 |
|                                                                                                                                   |       |   |
| **o**                                                                                                                                  | ** ** | **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  001-12929**

**CommScope, Inc.**

(Exact name of registrant as specified in its charter)

 

| **Delaware**                     |   | **36-4135495**       |
|----------------------------------|--------|----------------------|
| (State or other  jurisdiction of |   | (I.R.S. Employer     |
| incorporation or  organization)  |   | Identification  No.) |

 

**1100 CommScope Place, SEP.O. Box 339Hickory, North Carolina**(Address of principal executive offices)

**28602**(Zip Code)

**(828) 324-2200**(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes x    No o

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer or a non-accelerated filer (asdefined in Exchange Act Rule 12b-2). Large accelerated filer x        Acceleratedfiler o        Non-acceleratedfiler o

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).Yes o    No x

As ofApril 19, 2007 there were 61,230,908 shares of Common Stock outstanding.

 

 

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**CommScope, Inc.Form 10-QMarch 31, 2007Table of Contents**

 
| Part I - Financial Information  (Unaudited):                                        |                                                                                        |
|------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|
|                                                                                     |                                                                                        |   |
| Item 1.                                                                                  | Condensed Consolidated Financial Statements:                                                |   |
| Condensed Consolidated Statements of Operations                                          |
| Condensed Consolidated Balance Sheets                                                    |
| Condensed Consolidated Statements of Cash Flows                                          |
| Condensed Consolidated Statements of Stockholders’  Equity and Comprehensive Income |
| Notes to Condensed Consolidated Financial Statements                                     |
|                                                                                     |                                                                                        |   |
| Item 2.                                                                                  | Management’s Discussion and Analysis of Financial  Condition and Results of Operations |
|                                                                                     |                                                                                        |   |
| Item 3.                                                                                  | Quantitative and Qualitative Disclosures About Market  Risk                                 |
|                                                                                     |                                                                                        |   |
| Item 4.                                                                                  | Controls and Procedures                                                                     |
|                                                                                     |                                                                                        |   |
| Part II  - Other Information:                                                       |
|                                                                                     |                                                                                        |   |
| Item 6.                                                                                  | Exhibits                                                                                    |
|                                                                                     |                                                                                        |   |
| Signatures                                                                               |                                                                                        |
|                                                                                          |                                                                                             |  |  |

 

 

2

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**CommScope, Inc.Condensed ConsolidatedStatements of Operations(Unaudited — Inthousands, except per share amounts)**

 
| ** **                            | ** ** | **Three Months Ended** | ** ** |
|---------------------------------------|------------|----------------------------------|------------|
| ** **                            | ** ** | **March 31,**               | ** ** |
| ** **                            | ** ** | **2007**                         | ** ** | **2006** | ** ** |
|                                  |       |                             |       |   |   |
| Net sales                             |       | $                                | 435,452    |   | $ | 352,254 |   |
|                                  |       |                             |       |   |   |
| Operating costs and  expenses:        |       |                             |       |   |   |
| Cost of sales                         |       | 303,508                          |       | 267,515 |   |
| Selling, general  and administrative  |       | 59,682                           |       | 54,177 |   |
| Research and  development             |       | 7,869                            |       | 7,465 |   |
| Restructuring  costs                  |       | 729                              |       | 3,749 |   |
| Total operating  costs and expenses   |       | 371,788                          |       | 332,906 |   |
|                                  |       |                             |       |   |   |
| Operating income                      |       | 63,664                           |       | 19,348 |   |
| Other income (expense),  net          |       | 169                              |       | 638 |   |
| Interest expense                      |       | (1,893                           | )          | (1,985 | ) |
| Interest income                       |       | 4,496                            |       | 2,053 |   |
|                                  |       |                             |       |   |   |
| Income before income  taxes           |       | 66,436                           |       | 20,054 |   |
| Income tax expense                    |       | (20,581                          | )          | (7,327 | ) |
|                                  |       |                             |       |   |   |
| Net income                            |       | $                                | 45,855     |   | $ | 12,727 |   |
|                                  |       |                             |       |   |   |
|                                  |       |                             |       |   |   |
| Net income per share:                 |       |                             |       |   |   |
| Basic                                 |       | $                                | 0.76       |   | $ | 0.22 |   |
| Assuming  dilution                    |       | $                                | 0.63       |   | $ | 0.19 |   |
|                                  |       |                             |       |   |   |
| Weighted average shares  outstanding: |       |                             |       |   |   |
| Basic                                 |       | 60,247                           |       | 56,724 |   |
| Assuming  dilution                    |       | 73,632                           |       | 70,667 |   |
|                                  |       |                             |       |   |   |

 

See notes to condensed consolidated financial statements.

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** **

**CommScope, Inc.Condensed Consolidated Balance Sheets(Unaudited — Inthousands, except share amounts)**

 
| ** **                                                                                                                                                                                                                                                                                      | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                                                                                                                      | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| **Assets**                                                                                                                                                                                                                                                                                      |       |               |       |                  |       |
| ** **                                                                                                                                                                                                                                                                                      |       |               |       |                  |       |
| Cash and cash  equivalents                                                                                                                                                                                                                                                                      |       | $                  | 296,686    |                  | $          | 276,042 |   |
| Short-term  investments                                                                                                                                                                                                                                                                         |       | 163,082            |       | 151,868               |       |
| Total cash, cash equivalents and short-term  investments                                                                                                                                                                                                                                        |       | 459,768            |       | 427,910               |       |
|                                                                                                                                                                                                                                                                                            |       |               |       |                  |       |
| Accounts receivable, less allowance for doubtful  accounts of $13,017 and $13,461, respectively                                                                                                                                                                                                 |       | 230,292            |       | 186,824               |       |
| Inventories                                                                                                                                                                                                                                                                                     |       | 168,473            |       | 153,596               |       |
| Prepaid expenses  and other current assets                                                                                                                                                                                                                                                      |       | 12,647             |       | 14,914                |       |
| Deferred income  taxes                                                                                                                                                                                                                                                                          |       | 27,312             |       | 24,556                |       |
| Total current assets                                                                                                                                                                                                                                                                            |       | 898,492            |       | 807,800               |       |
|                                                                                                                                                                                                                                                                                            |       |               |       |                  |       |
| Property, plant  and equipment, net                                                                                                                                                                                                                                                             |       | 237,788            |       | 242,012               |       |
| Goodwill                                                                                                                                                                                                                                                                                        |       | 151,381            |       | 151,378               |       |
| Other  intangibles, net                                                                                                                                                                                                                                                                         |       | 62,761             |       | 63,967                |       |
| Deferred income  taxes                                                                                                                                                                                                                                                                          |       | 13,762             |       | 15,493                |       |
| Other assets                                                                                                                                                                                                                                                                                    |       | 21,893             |       | 21,823                |       |
|                                                                                                                                                                                                                                                                                            |       |               |       |                  |       |
| Total Assets                                                                                                                                                                                                                                                                                    |       | $                  | 1,386,077  |                  | $          | 1,302,473 |   |
|                                                                                                                                                                                                                                                                                            |       |               |       |                  |       |
| **Liabilities and Stockholders’ Equity**                                                                                                                                                                                                                                                   |       |               |       |                  |       |
|                                                                                                                                                                                                                                                                                            |       |               |       |                  |       |
| Accounts payable                                                                                                                                                                                                                                                                                |       | $                  | 82,223     |                  | $          | 74,927 |   |
| Other accrued  liabilities                                                                                                                                                                                                                                                                      |       | 91,409             |       | 95,316                |       |
| Current portion  of long-term debt                                                                                                                                                                                                                                                              |       | 23,800             |       | 13,000                |       |
| Total current liabilities                                                                                                                                                                                                                                                                       |       | 197,432            |       | 183,243               |       |
|                                                                                                                                                                                                                                                                                            |       |               |       |                  |       |
| Long-term debt                                                                                                                                                                                                                                                                                  |       | 257,050            |       | 271,100               |       |
| Pension and  postretirement benefit liabilities                                                                                                                                                                                                                                                 |       | 92,634             |       | 89,995                |       |
| Other noncurrent  liabilities                                                                                                                                                                                                                                                                   |       | 27,797             |       | 19,031                |       |
| Total Liabilities                                                                                                                                                                                                                                                                               |       | 574,913            |       | 563,369               |       |
|                                                                                                                                                                                                                                                                                            |       |               |       |                  |       |
| Commitments and  contingencies                                                                                                                                                                                                                                                                  |       |               |       |                  |       |
|                                                                                                                                                                                                                                                                                            |       |               |       |                  |       |
| Stockholders’  Equity:                                                                                                                                                                                                                                                                     |       |               |       |                  |       |
| Preferred stock, $.01 par value; Authorized shares:  20,000,000;   Issued and outstanding shares: None at March 31, 2007 and December 31,  2006                                                                                                                                       |       | —             |       | —                |       |
| Common stock, $.01 par value; Authorized shares:  300,000,000; Issued shares, including treasury stock: 71,138,199 at March 31,  2007 and 69,934,533 at December 31, 2006; Issued and outstanding shares:  60,938,199 at March 31, 2007 and 59,734,533 at December 31, 2006 |       | 711                |       | 699                   |       |
| Additional paid-in capital                                                                                                                                                                                                                                                                      |       | 563,161            |       | 532,344               |       |
| Retained earnings                                                                                                                                                                                                                                                                               |       | 386,621            |       | 346,821               |       |
| Accumulated other comprehensive loss                                                                                                                                                                                                                                                            |       | 6,206              |       | 4,775                 |       |
| Treasury stock, at cost: 10,200,000 shares at March  31, 2007 and December 31, 2006                                                                                                                                                                                                             |       | (145,535           | )          | (145,535              | )          |
| Total Stockholders’ Equity                                                                                                                                                                                                                                                                 |       | 811,164            |       | 739,104               |       |
|                                                                                                                                                                                                                                                                                            |       |               |       |                  |       |
| Total  Liabilities and Stockholders’ Equity                                                                                                                                                                                                                                                |       | $                  | 1,386,077  |                  | $          | 1,302,473 |   |

 

See notes to condensed consolidated financialstatements.

 

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**CommScope, Inc.Condensed Consolidated Statements of Cash Flows(Unaudited — Inthousands)**

 
| ** **                                                                                   | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                                   | ** ** | **March 31,**          | ** ** |
| ** **                                                                                   | ** ** | **2007**               | ** ** | **2006** | ** ** |
|                                                                                         |       |                   |       |   |   |
| **Operating Activities:**                                                                    |       |                   |       |   |   |
| Net income                                                                                   |       | $45,855                |       | $12,727 |   |
| Adjustments to reconcile net income to net cash provided by (used in)  operating activities: |       |                   |       |   |   |
| Depreciation and  amortization                                                               |       | 12,372                 |       | 14,216 |   |
| Equity-based  compensation                                                                   |       | 2,641                  |       | 1,020 |   |
| Deferred income taxes                                                                        |       | (4,855                 | )          | 1,614 |   |
| Changes in assets and  liabilities:                                                          |       |                   |       |   |   |
| Accounts receivable                                                                          |       | (42,945                | )          | (25,465 | ) |
| Inventories                                                                                  |       | (14,512                | )          | (8,295 | ) |
| Prepaid expenses and  other current assets                                                   |       | 2,290                  |       | (958 | ) |
| Accounts payable and  other accrued liabilities                                              |       | 7,384                  |       | (10,729 | ) |
| Other noncurrent  liabilities                                                                |       | 2,494                  |       | (2,286 | ) |
| Other                                                                                        |       | (43                    | )          | (237 | ) |
| Net cash provided by (used in) operating activities                                          |       | 10,681                 |       | (18,393 | ) |
|                                                                                         |       |                   |       |   |   |
| **Investing Activities:**                                                                    |       |                   |       |   |   |
| Additions to property,  plant and equipment                                                  |       | (4,077                 | )          | (6,762 | ) |
| Net purchases of  short-term investments                                                     |       | (11,214                | )          | (6,645 | ) |
| Proceeds from disposal  of fixed assets                                                      |       | 85                     |       | 297 |   |
| Acquisition of MC2 product line                                                         |       | —                 |       | (13,810 | ) |
| Net cash used in investing activities                                                        |       | (15,206                | )          | (26,920 | ) |
|                                                                                         |       |                   |       |   |   |
| **Financing Activities:**                                                                    |       |                   |       |   |   |
| Principal payments on  long-term debt                                                        |       | (3,250                 | )          | (3,250 | ) |
| Proceeds from the  issuance of shares under equity-based  compensation plans            |       | 19,295                 |       | 27,670 |   |
| Tax benefit from the  issuance of shares under  equity-based  compensation plans        |       | 8,893                  |       | 7,143 |   |
| Net cash provided by financing activities                                                    |       | 24,938                 |       | 31,563 |   |
|                                                                                         |       |                   |       |   |   |
| Effect of exchange rate changes on cash                                                      |       | 231                    |       | 427 |   |
|                                                                                         |       |                   |       |   |   |
| Change in cash and cash equivalents                                                          |       | 20,644                 |       | (13,323 | ) |
| Cash and cash equivalents, beginning of period                                               |       | 276,042                |       | 146,549 |   |
| Cash and cash equivalents, end of period                                                     |       | $296,686               |       | $133,226 |   |

 

See notes to condensed consolidated financial statements.

5

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**CommScope, Inc.Condensed Consolidated Statements of Stockholders’ Equityand Comprehensive Income(Unaudited — In thousands, except share amounts)**

 
| ** **                                                            | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                            | ** ** | **March 31,**               | ** ** |
| ** **                                                            | ** ** | **2007**                         | ** ** | **2006** | ** ** |
|                                                                  |       |                             |       |   |   |
| Number of common  shares outstanding:                                 |       |                             |       |   |   |
| Balance at beginning of period                                        |       | 59,734,533                       |       | 55,873,347 |   |
| Issuance of shares under equity-based compensation  plans             |       | 1,203,666                        |       | 1,969,003 |   |
| Balance at end of period                                              |       | 60,938,199                       |       | 57,842,350 |   |
|                                                                  |       |                             |       |   |   |
| Common stock:                                                         |       |                             |       |   |   |
| Balance at beginning of period                                        |       | $                                | 699        |   | $ | 661 |   |
| Issuance of shares under equity-based compensation  plans             |       | 12                               |       | 20 |   |
| Balance at end of period                                              |       | $                                | 711        |   | $ | 681 |   |
|                                                                  |       |                             |       |   |   |
| Additional  paid-in capital:                                          |       |                             |       |   |   |
| Balance at beginning of period                                        |       | $                                | 532,344    |   | $ | 462,842 |   |
| Issuance of shares under equity-based compensation  plans             |       | 19,283                           |       | 27,650 |   |
| Tax benefit from shares issued under equity-based compensation  plans |       | 8,893                            |       | 7,143 |   |
| Equity-based compensation expense recognized                          |       | 2,641                            |       | 1,020 |   |
| Expiration of registration rights                                     |       | —                           |       | 500 |   |
| Reclassification due to adoption of SFAS No. 123(R)                   |       | —                           |       | (8,980 | ) |
| Balance at end of period                                              |       | $                                | 563,161    |   | $ | 490,175 |   |
|                                                                  |       |                             |       |   |   |
| Deferred  equity-based compensation:                                  |       |                             |       |   |   |
| Balance at beginning of period                                        |       | $                                | —     |   | $ | (8,980 | ) |
| Reclassification due to adoption of SFAS No. 123(R)                   |       | —                           |       | 8,980 |   |
| Balance at end of period                                              |       | $                                | —     |   | $ | — |   |
|                                                                  |       |                             |       |   |   |
| Retained  earnings:                                                   |       |                             |       |   |   |
| Balance at beginning of period                                        |       | $                                | 346,821    |   | $ | 216,688 |   |
| Net income                                                            |       | 45,855                           |       | 12,727 |   |
| Impact of adoption of FIN 48                                          |       | (6,055                           | )          | — |   |
| Balance at end of period                                              |       | $                                | 386,621    |   | $ | 229,415 |   |
|                                                                  |       |                             |       |   |   |
| Accumulated  other comprehensive income (loss):                       |       |                             |       |   |   |
| Balance at beginning of period                                        |       | $                                | 4,775      |   | $ | (3,651 | ) |
| Other comprehensive income, net of tax                                |       | 1,431                            |       | 2,917 |   |
| Balance at end of period                                              |       | $                                | 6,206      |   | $ | (734 | ) |
|                                                                  |       |                             |       |   |   |
| Treasury stock,  at cost:                                             |       |                             |       |   |   |
| Balance at beginning and end of period                                |       | $                                | (145,535   | ) | $ | (145,535 | ) |
|                                                                  |       |                             |       |   |   |
| Total stockholders’  equity                                      |       | $                                | 811,164    |   | $ | 574,002 |   |

 
| ** **                                                                                          | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                          | ** ** | **March 31,**               | ** ** |
| ** **                                                                                          | ** ** | **2007**                         | ** ** | **2006** | ** ** |
|                                                                                                |       |                             |       |   |   |
| Comprehensive  income:                                                                              |       |                             |       |   |   |
| Net income                                                                                          |       | $                                | 45,855     |   | $ | 12,727 |   |
| Other comprehensive income, net of tax:                                                             |       |                             |       |   |   |
| Foreign currency translation gain (loss)—foreign  subsidiaries                                 |       | 500                              |       | (1,361 | ) |
| Foreign currency transaction gain (loss) on  long-term intercompany loans—foreign subsidiaries |       | 1,146                            |       | 4,449 |   |
| Gain (loss) on derivative financial instrument designated  as a net investment hedge                |       | (102                             | )          | (171 | ) |
| Amortization of unrecognized pension and other postretirement  benefit amounts                      |       | (113                             | )          | — |   |
| Total other comprehensive income, net of tax                                                        |       | 1,431                            |       | 2,917 |   |
|                                                                                                |       |                             |       |   |   |
| Total  comprehensive income                                                                         |       | $                                | 47,286     |   | $ | 15,644 |   |
|                                                                                                |       |                             |       |   |   |

 

See notes to condensed consolidated financial statements.

 

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**CommScope, Inc.Notes to Condensed Consolidated Financial Statements(Unaudited—In Thousands, Unless Otherwise Noted)**

**1.****             BACKGROUND AND BASIS OF PRESENTATION**

**Background**

CommScope, Inc., through its wholly ownedsubsidiaries (CommScope or the Company), is a world leader in infrastructuresolutions for communications networks. Our highly engineered cable andconnectivity solutions enable a host of information-rich and interactiveservices that are delivered to the home, office and mobile devices. The Companyfocuses on the “last mile” in communications networks, which is thedistribution access or final link to the customer. The Company is a globalleader in structured cabling for business enterprise applications. The Companybelieves it is a global leader in broadband coaxial cables for the cabletelevision industry. The Company is an industry leader in the design andmanufacture of environmentally secure enclosures to integrate complex equipmentfor digital subscriber line (DSL) and Fiber-to-the-Node (FTTN) deployments bytelecommunication service providers in the United States. The Company alsodesigns, manufactures and markets a broad line of high-performance electronic,coaxial and fiber optic cable products for data networking, Internet access,wireless communication, telephony and other broadband applications.

#### **Basis ofPresentation**

The condensed consolidated balance sheet as ofMarch 31, 2007 and the condensed consolidated statements of operations,cash flows, stockholders’ equity and comprehensive income for the three monthsended March 31, 2007 and 2006 are unaudited and reflect all adjustments ofa normal recurring nature that are, in the opinion of management, necessary fora fair presentation of the interim period financial statements. The results ofoperations for the interim period are not necessarily indicative of the resultsof operations to be expected for the full year.

The unaudited interim condensed consolidated financialstatements of CommScope have been prepared pursuant to the rules and regulationsof the Securities and Exchange Commission (SEC). Accordingly, certaininformation and footnote disclosures normally included in financial statementsprepared in accordance with accounting principles generally accepted in theUnited States of America have been condensed or omitted. The significantaccounting policies followed by the Company are set forth in Note 2 to theconsolidated financial statements within the Company’s Annual Report onForm 10-K for the year ended December 31, 2006 (the 2006 Form 10-K).There were no changes in the Company’s significant accounting policies duringthe three months ended March 31, 2007 other than the adoption of FASBInterpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48),which is discussed below. In addition, the Company reaffirms the use ofestimates in the preparation of the financial statements as set forth in the2006 Form 10-K as well as the use of estimates in the recognition andmeasurement of tax benefits arising from uncertain tax positions as required byFIN 48. These interim condensed consolidated financial statements should beread in conjunction with the Company’s audited consolidated financialstatements and notes thereto included in the 2006 Form 10-K.

###### **Concentrationsof Risk**

Net sales to AnixterInternational Inc. and its affiliates (Anixter) accounted for approximately 30%and 28% of the Company’s total net sales during the three months endedMarch 31, 2007 and 2006, respectively. Sales to Anixter primarily originate within the Enterprise segment.

Net sales toAlcatel-Lucent, an original equipment manufacturer (OEM) for a largetelecommunications company, accounted for approximately 12% of the Company’stotal net sales during the three months ended March 31, 2007.  Sales to Alcatel-Lucent primarily originatewithin the Carrier segment.  Other thanAnixter and Alcatel-Lucent, no customer accounted for 10% or more of theCompany’s total net sales for the three months ended March 31, 2007 and 2006.

Accounts receivable fromAnixter represented approximately 34% and accounts receivable fromAlcatel-Lucent represented approximately 13% of net accounts receivable as ofMarch 31, 2007. No other customer accounted for 10% or more of the Company’snet accounts receivable as of March 31, 2007.

**Product Warranties**

The Company recognizes aliability for the estimated claims that may be paid under its customer warrantyagreements to remedy potential deficiencies of quality or performance of theCompany’s products. These product warranties extend over periods ranging fromone to twenty-five years from the date of sale, depending upon the productsubject to the warranty. The Company records a provision for estimated futurewarranty claims as cost of sales based upon the historical relationship of warrantyclaims to sales and specifically-identified warranty issues. The Company basesits estimates on 

7

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assumptions that arebelieved to be reasonable under the circumstances and revises its estimates, asappropriate, when events or changes in circumstances indicate that revisionsmay be necessary.

Activity in theproduct warranty accrual, included in other accrued liabilities, for the threemonths ended March 31, 2007 and 2006 consisted of the following:
| ** **                                     | ** ** | **2007** | ** ** | **2006** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|
| Product warranty  accrual, beginning of period |       | $        | 2,090      |     | $          | 2,035 |   |
| Provision for  warranty claims                 |       | 14       |       | 447      |       |
| Less: Warranty  claims paid                    |       | (1       | )          | (136     | )          |
| Product warranty  accrual, end of period       |       | $        | 2,103      |     | $          | 2,346 |   |

 

**Commitments and Contingencies**

CommScope is either aplaintiff or a defendant in pending legal matters in the normal course ofbusiness; however, management believes none of these legal matters will have amaterially adverse effect on the Company’s financial statements upon finaldisposition. In addition, CommScope is subject to various federal, state, localand foreign laws and regulations governing the use, discharge, disposal andremediation of hazardous materials. Compliance with current laws andregulations has not had, and is not expected to have, a materially adverseeffect on the Company’s financial condition or results of operations.

### **Net IncomePer Share**

### Basic netincome per share is computed by dividing net income by the weighted averagenumber of common shares outstanding during the applicable period. Diluted netincome per share is based on net income adjusted for after-tax interest andamortization of debt issuance costs related to convertible debt, if dilutive,divided by the weighted average number of common shares outstanding adjustedfor the dilutive effect of stock options, restricted stock, phantom stock,performance units and convertible securities.

Below is a reconciliation of net income and weightedaverage common shares and potential common shares outstanding for calculatingdiluted net income per share:

 
| ** **                                                                                                   | ** ** | **Three Months  Ended  March 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                                                   | ** ** | **2007**                                     | ** ** | **2006** | ** ** |
| Numerator:                                                                                                   |       |                                         |       |   |   |
| Net income for basic net income per share                                                                    |       | $                                            | 45,855     |   | $ | 12,727 |   |
| Effect of assumed conversion of 1% convertible  senior subordinated debentures due 2024                      |       | 629                                          |       | 629 |   |
| Income available to common shareholders for diluted  net income per share                                    |       | $                                            | 46,484     |   | $ | 13,356 |   |
|                                                                                                         |       |                                         |       |   |   |
| Denominator:                                                                                                 |       |                                         |       |   |   |
| Weighted average number of common shares outstanding  for basic net income per share                         |       | 60,247                                       |       | 56,724 |   |
| Effect of dilutive securities:                                                                               |       |                                         |       |   |   |
| Employee stock options (a)                                                                                   |       | 1,534                                        |       | 2,373 |   |
| Restricted stock, phantom stock and performance  units                                                       |       | 357                                          |       | 76 |   |
| 1% convertible senior subordinated debentures due  2024                                                      |       | 11,494                                       |       | 11,494 |   |
| Weighted average  number of common and potential common shares outstanding for diluted net  income per share |       | 73,632                                       |       | 70,667 |   |

 

----

(a)   Optionsto purchase approximately 0.5 million and 0.6 million common shares wereexcluded from the computation of net income per share, assuming dilution, forthe three months ended March 31, 2007 and 2006, respectively, because theywould have been antidilutive.

**Income Tax Uncertainties**

The Company adopted the provisions of FIN 48 as of January 1, 2007,resulting in a $4.2 million increase in the liability for unrecognized taxbenefits with an offsetting reduction to opening retained earnings.  In addition, the Company reduced a long-termdeferred tax asset by $4.0 million with an offsetting reduction to openingretained earnings of $1.9

8

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million and an increase of$2.1 million to long-lived assets as a purchase accounting adjustment.  In the three months ended March 31, 2007,there was a $0.6 million increase in the balance of unrecognized tax benefits.

The Company filesa consolidated U.S. federal income tax return as well as consolidated orindividual subsidiary returns in various states and foreign jurisdictions.  With few exceptions, the Company is no longersubject to U.S. federal, state and local or foreign income tax examinations bytaxing authorities for years before 1997. The Internal Revenue Service (IRS) commenced an examination of theCompany’s 2004 and 2005 U.S. income tax returns in 2006 that is expected to becompleted by the end of 2007.  As ofJanuary 1, 2007, the IRS has proposed certain significant adjustments to theCompany’s research and development tax credit positions related to years priorto 2004.  The Company is currentlyprotesting those proposed adjustments. If unsuccessful, the Company anticipates that it is reasonably possiblethat an additional payment will be made in the following twelve months and thatsuch payment would not be material to the Company’s financial position.  Any other positions for which it isreasonably possible that the unrecognized tax benefits may significantlyincrease or decrease in the next 12 months are also not expected to be materialto the Company’s financial position.

The Company’sunrecognized tax benefits of $15.0 million include $12.9 million that, ifrecognized, would favorably affect the effective tax rate in future periods.

The Companyrecognizes interest and penalties related to unrecognized tax benefits inincome tax expense.  As of January 1,2007, the Company had accrued approximately $4.7 million for the paymentof interest and penalties.  No materialchanges to the accrued amounts occurred in the three months ended March 31,2007.

**Impact of Newly Issued Accounting Standards**

**InSeptember 2006, the FASB issued SFAS No. 158, “Employers’ Accountingfor Defined Benefit Pension and Other Postretirement Plans—an amendment of FASBStatements No. 87, 88, 106, and 132(R).” SFAS No. 158 requires thatthe underfunded or overfunded position of defined benefit plans be fullyrecognized as a liability or asset on the balance sheet of the sponsor. SFASNo. 158 does not change how the expense related to such plans is determined.The Company’s accrued benefit liability was adjusted as of December 31,2006 to fully recognize the underfunded portion of the Company’s plans as aresult of implementing SFAS No. 158. The provisions of SFAS No. 158requiring that plan assets and obligations be measured as of the year-endbalance sheet date are not required to be adopted until December 31, 2008,though earlier adoption is permitted. The Company does not expect that therewill be a material impact on results of operations or financial position fromapplying the provisions to be adopted by 2008.**

In February 2007, the FASB issued SFAS No. 159, “TheFair Value Option for Financial Assets and Financial Liabilities,” which givescompanies the option to carry most financial assets or liabilities at fairvalue, with changes in fair value recorded in earnings.  The Company is required to adopt SFAS No. 159on January 1, 2008, though earlier adoption is permitted.  The Company currently does not plan tomeasure any of its financial assets and liabilities at fair value under theprovisions of SFAS No. 159 and, therefore, does not anticipate a materialimpact to its results of operations orfinancial position related to the adoption of this standard.

**2.****             ACQUISITIONS**

**MC****2 Product Line**

On March 6, 2006, CommScope acquired the assetssupporting the trunk and distribution cable television products business ofTrilogy Communications, Inc., along with certain other assets. Thepurchase price of $13.8 million was paid in cash. The products acquiredwere integrated into the Broadband segment.

The allocation ofthe purchase price, based on estimated fair values of the assets acquired, isas follows:

|                                      | ** ** | **Estimated Fair  Value  (in millions)** | ** ** | **Amortization  Period  (in years)** | ** ** |
|--------------------------------------|------------|----------------------------------------------------|------------|-------------------------------------------|------------|
| Inventory                            |       | $                                                  | 4.9        |                                      |       |   |
| Other current  assets                |       | 0.3                                                |       |                                      |       |
| Machinery and  equipment             |       | 1.1                                                |       |                                      |       |
| Intangible  assets:                  |       |                                               |       |                                      |       |
| Customer relationships               |       | 4.0                                                |       | 10.0                                      |       |
| Non-compete agreement                |       | 1.7                                                |       | 7.0                                       |       |
| Other identifiable intangible assets |       | 1.8                                                |       | 10.0                                      |       |
| Total purchase price                 |       | $                                                  | 13.8       |                                      |       |   |

 

The weighted averageuseful life of the intangible assets acquired is 9.3 years.

9

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**Signal Vision, Inc.**

In March 2007, the Company entered into an agreement toacquire substantially all of the assets and assume certain current liabilitiesof Signal Vision, Inc., a leading supplier of broadband radio frequencysubscriber products, for approximately $18 million, subject to certainadjustments. The acquisition, which is subject to due diligence and customaryclosing conditions, is expected to close during the second quarter of 2007.

**Connectivity Solutions**

In conjunctionwith the Company’s acquisition of substantially all of the assets andassumption of certain liabilities of the Connectivity Solutions business ofAvaya Inc. in January 2004, the Company issued approximately 1.8 millionshares of CommScope common stock. These unregistered shares includedregistration rights and the Company established a liability at the time theshares were issued for such registration costs. During the three months endedMarch 31, 2006, the registration rights expired and the Company reversedthe liability that had been established, resulting in an increase to additionalpaid-in capital of $500.

**3.****             BALANCE SHEET DETAILS**

**Short-termInvestments**

At March 31, 2007 and December 31, 2006, theCompany’s short-term investments were composed of the following:

 
| ** **          | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|---------------------|------------|--------------------|------------|-----------------------|------------|
| ** **          | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| Available for  sale |       | $                  | 163,082    |                  | $          | 131,868 |   |
| Held-to-maturity    |       | —             |       | 20,000                |       |
|                |       | $                  | 163,082    |                  | $          | 151,868 |   |

 

At March 31, 2007,there were no held-to-maturity short-term investments.   At December 31, 2006, theheld-to-maturity short-term investments were composed of the following:

 
| ** **                  | ** ** | **Amortized Cost** | ** ** | **Gross   Unrealized   Gains** | ** ** | **Gross   Unrealized   Losses** | ** ** | **Fair Value** | ** ** |
|-----------------------------|------------|-------------------------|------------|------------------------------------------|------------|-------------------------------------------|------------|---------------------|------------|
| Corporate debt  obligations |       | $                       | 10,000     |                                     | $          | —                                    |       | $                   | —     |   | $ | 10,000 |   |
| Federal agency  notes       |       | 10,000                  |       | —                                   |       | (3                                        | )          | 9,997               |       |
|                        |       | $                       | 20,000     |                                     | $          | —                                    |       | $                   | (3         | ) | $ | 19,997 |   |

 

**Inventories**

 
| ** **      | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-----------------|------------|--------------------|------------|-----------------------|------------|
| ** **      | ** ** | **2007**           | ** ** | **2006**              | ** ** |
|            |       |               |       |                  |       |
| Raw materials   |       | $                  | 56,710     |                  | $          | 56,888 |   |
| Work in process |       | 44,608             |       | 38,936                |       |
| Finished goods  |       | 67,155             |       | 57,772                |       |
|            |       | $                  | 168,473    |                  | $          | 153,596 |   |

 

**4.****             LONG-TERM DEBT**

 
| ** **                                     | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                     | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| Senior secured  term loan                      |       | $                  | 20,050     |                  | $          | 23,300 |   |
| 1% convertible  senior subordinated debentures |       | 250,000            |       | 250,000               |       |
| IDA notes                                      |       | 10,800             |       | 10,800                |       |
|                                           |       | 280,850            |       | 284,100               |       |
| Less: Current  portion                         |       | (23,800            | )          | (13,000               | )          |
|                                           |       | $                  | 257,050    |                  | $          | 271,100 |   |

 

See Note 9 in the Notes to the Consolidated FinancialStatements in the 2006 Form 10-K for information on the terms andconditions of the senior secured credit facility. As of March 31, 2007,the Company had availability of approximately $67 million and no outstandingborrowings under the senior secured revolving credit facility. The interestrate on the senior secured term loan was 6.86% and 6.87% at March 31, 2007and December 31, 2006, respectively. Management

10

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believesthe Company was in compliance with all of its covenants under this facility asof March 31, 2007.

See Note 9 in the Notes to the Consolidated FinancialStatements in the 2006 Form 10-K for information on the terms andconditions of the 1% convertible senior subordinated debentures and the IDAnotes. The estimated fair value of the Company’s convertible debentures as ofMarch 31, 2007 and December 31, 2006 was $500.7 million and $370.3million, respectively.  On April 10,2007, the Company notified the holders of the IDA notes of its intent to redeemthe IDA notes on May 1, 2007. Accordingly, the IDA notes are included in thecurrent portion of long-term debt as of March 31, 2007.

**5.   RESTRUCTURINGCHARGES**

In August 2005, the Board of Directors ofCommScope adopted global manufacturing initiatives to reduce costs by improvingmanufacturing efficiency and to enhance the Company’s long-term competitiveposition. Implementation of these initiatives includes shifting significantEnterprise and Broadband segment cable production capacity among CommScope’sglobal facilities, consolidating operations at the CSMI Omaha facility into onebuilding and closing a Broadband segment manufacturing facility in Scottsboro,Alabama in late 2006. As a result of these initiatives, the Company recognizedpretax charges during the three months ended March 31, 2007 and 2006 asfollows:  

|                                    | ** ** | **Enterprise  Segment** | ** ** | **Broadband  Segment** | ** ** | **Carrier  Segment** | ** ** | **Total** | ** ** |
|------------------------------------|------------|-------------------------|------------|------------------------|------------|----------------------|------------|-----------|------------|
| Three months  ended March 31, 2007 |       | $                       | 488        |                   | $          | 155                  |       | $         | 86         |   | $ | 729 |   |
| Three months ended  March 31, 2006 |       | 3,010                   |       | 739                    |       | —               |       | 3,749     |       |
|                                    |            |                         |            |                        |            |                      |            |           |            |  |  |  |  |

 

The activity within theliability (included in other accrued liabilities) for these restructuringinitiatives was as follows:
| ** **                       | ** ** | **Employee-  Related  Costs** | ** ** | **Equipment  Relocation  Costs** | ** ** | **Asset  Impairment  Charges** | ** ** | **Total** | ** ** |
|----------------------------------|------------|-------------------------------|------------|----------------------------------|------------|--------------------------------|------------|-----------|------------|
| Balance as of  December 31, 2006 |       | $                             | 1,510      |                             | $          | —                         |       | —    |       | $ | 1,510 |   |
| Additional  charge recorded      |       | (96                           | )          | 825                              |       | —                         |       | 729       |       |
| Cash paid                        |       | (1,061                        | )          | (825                             | )          | —                         |       | (1,886    | )          |
| Balance as of March 31,  2007    |       | $                             | 353        |                             | $          | —                         |       | —    |       | $ | 353 |   |

 

Employee-related costsinclude the expected severance costs and related fringe benefits, accrued overthe remaining period employees are required to work in order to receiveseverance benefits.  A pretax charge of$1.9 million was recognized in the three months ended March 31, 2006 foremployee-related costs.  Additionalpretax employee-related costs of less than $0.1 million are expected to berecognized during the balance of 2007.

Equipment relocation costsrelate directly to shifting manufacturing capacity among our globalmanufacturing facilities and include costs to uninstall, pack, ship andre-install equipment as well as the costs to prepare the receiving facility toaccommodate the equipment. A pretax charge of $1.8 million was recognized inthe three months ended March 31, 2006 for equipment relocation costs.  These costs are recognized as the expensesare incurred, and additional pretax costs of less than $0.3 million areexpected to be recognized during the balance of 2007.

No asset impairmentcharges were recognized during the three months ended March 31, 2007 or 2006.The Company is attempting to sell land and buildings that are no longer inuse.  These assets have a net carryingvalue of $15.6 million as of March 31, 2007 and $15.8 million as of December31, 2006 and are reflected as property, plant and equipment in the CondensedConsolidated Balance Sheets.  Additionalnet impairment charges or gains may be incurred or realized upon thedisposition of these or other excess assets.

**6.****   DERIVATIVES ANDHEDGING ACTIVITIES**

As of March 31, 2007 and 2006, the onlyderivative financial instrument outstanding was a cross currency swap of U.S.dollars for euros with a notional amount of $14 million. A portion of the swapwas designated and documented as a hedge of the Company’s net investment in itsBelgian subsidiary to reduce the volatility in stockholders’ equity caused bychanges in euro exchange rates and the remainder of the swap was designated asa hedge against fluctuations in the fair value of certain of the Company’seuro-denominated assets. Pretax losses of $41 and $48 on the portion designatedas a fair value hedge are reflected in the Company’s Condensed ConsolidatedStatements of Operations for the three months ended March 31, 2007 and2006, respectively. The designations of the hedging instrument were effectiveas of March 31, 2007 and 2006, and are expected to continue to be effectivefor the duration of the agreement, resulting in no anticipated hedgeineffectiveness.

The fair value of the derivative instrument, reflectedin other noncurrent liabilities, was approximately $7.3 million

 

11

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and$7.1 million as of March 31, 2007 and December 31, 2006,respectively.

There were no material reclassifications fromaccumulated other comprehensive income (loss) to earnings related toderivatives and hedging activities during the three months ended March 31,2007 and 2006.

Activity in the accumulated net loss on derivativeinstruments included in accumulated other comprehensive income (loss) consistedof the following:

|                                                                                             | ** ** | **Three Months  Ended  March 31,** | ** ** |
|---------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                                  | ** ** | **2007**                                     | ** ** | **2006** | ** ** |
| Accumulated net loss on  derivative instrument, beginning of period                         |       | $                                            | (5,201     | ) | $ | (4,274 | ) |
| Loss on derivative  financial instrument designated as a net investment hedge, net of taxes |       | (102                                         | )          | (171 | ) |
| Accumulated net loss on derivative instrument, end of period                                |       | $                                            | (5,303     | ) | $ | (4,445 | ) |

 

During the three months ended March 31, 2007 and2006, the income tax benefit related to the loss on the derivative financialinstrument designated as a net investment hedge and reported within othercomprehensive income was $60 and $101, respectively.

**7.****       EMPLOYEE BENEFIT PLANS**

|                                        | ** ** | **Pension Benefits**                        | ** ** | **Other Postretirement  Benefits** | ** ** |
|----------------------------------------|------------|--------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                             | ** ** | **Three Months Ended  March 31,** | ** ** |
| ** **                             | ** ** | **2007**                                         | ** ** | **2006**                                | ** ** | **2007** | ** ** | **2006** | ** ** |
| Service cost                           |       | $                                                | 778        |                                    | $          | 814 |   | $ | 1,039 |   | $ | 1,128 |   |
| Interest cost                          |       | 1,801                                            |       | 1,725                                   |       | 1,319 |   | 1,229 |   |
| Recognized actuarial  loss             |       | —                                           |       | 13                                      |       | 26 |   | 140 |   |
| Amortization of prior  service cost    |       | (193                                             | )          | (97                                     | )          | (22 | ) | (132 | ) |
| Amortization of  transition obligation |       | 11                                               |       | 10                                      |       | — |   | — |   |
| Return on plan assets                  |       | (2,191                                           | )          | (1,967                                  | )          | (118 | ) | (139 | ) |
| Net periodic benefit cost              |       | $                                                | 206        |                                    | $          | 498 |   | $ | 2,244 |   | $ | 2,226 |   |

 

The Company contributed approximately $0.2 million toits pension plans during the three months ended March 31, 2007 andanticipates making additional contributions of up to $4.3 million to theseplans during 2007. The Company contributed approximately $0.9 million to itsother postretirement benefit plans during the three months ended March 31,2007 and anticipates making additional contributions of approximately $2.5million to these plans during 2007.

**8. EQUITY-BASEDCOMPENSATION PLANS**

EffectiveJanuary 1, 2006, the Company adopted the fair value recognition provisionsof SFAS No. 123(R), “Share-Based Payment,” using the modified prospectivetransition method. The following table summarizes the impact of equity-based compensationexpense recognized in the Condensed Consolidated Statement of Operations forthe three months ended March 31, 2007 and 2006:

|                                                 | ** ** | **2007** | ** ** | **2006** | ** ** |
|-------------------------------------------------|------------|----------|------------|----------|------------|
| Cost of sales                                   |       | $        | 603        |     | $          | 298 |   |
| Selling, general and  administrative expense    |       | 1,783    |       | 611      |       |
| Research and  development expense               |       | 255      |       | 111      |       |
| Equity-based  compensation expense before taxes |       | 2,641    |       | 1,020    |       |
| Less: Related income  tax benefits              |       | (879     | )          | (340     | )          |
| Equity-based compensation expense, net of taxes |       | $        | 1,762      |     | $          | 680 |   |

 

Asof March 31, 2007, $19.6 million of total unrecognized compensation costsrelated to non-vested awards are expected to be recognized over a weightedaverage period of 1.9 years. There were no significant capitalized equity-basedcompensation costs at March 31, 2007.

**StockOptions**

Thefollowing table summarizes the stock option activity for the three months endedMarch 31, 2007 (in thousands, 

12

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except per share data):

|                                                             | ** ** | **Shares** | ** ** | **Weighted  Average Option  Exercise Price  Per Share** | ** ** | **Weighted Average  Grant Date  Fair Value  Per Share** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
|-------------------------------------------------------------|------------|------------|------------|------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------|------------|---------------------------------|------------|
| Outstanding and  expected to vest at December 31, 2006 |       | 4,742      |       | $                                                                      | 18.47      |                                                                        |       |                            |       |   |
| Exercised                                                   |       | (1,204     | )          | $                                                                      | 16.03      |                                                                        |       |                            |       |   |
| Expired or  forfeited                                       |       | (2         | )          | $                                                                      | 38.38      |                                                                        | $          | 16.43                           |       |   |   |
| Outstanding and  expected to vest at March 31, 2007    |       | 3,536      |       | $                                                                      | 19.29      |                                                                        |       |                            | $          | 83,521 |   |
| Exercisable at March 31, 2007                               |       | 3,207      |       | $                                                                      | 18.73      |                                                                        |       |                            | $          | 77,527 |   |
|                                                             |            |            |            |                                                                        |            |                                                                             |            |                                 |            |  |  |  |

 

The total intrinsicvalue of options exercised during the three months ended March 31, 2007and 2006 was $25.5 million and $21.2 million, respectively. All of thenon-vested options at March 31, 2007 are expected to vest as they areprimarily held by senior management and directors.

The exerciseprices of outstanding options at March 31, 2007 were in the followingranges:

|                                             | ** ** | **Options Outstanding**    | ** ** | **Options Exercisable**                                             | ** ** |
|---------------------------------------------|------------|---------------------------------|------------|--------------------------------------------------------------------------|------------|
| **Range of Exercise Prices** | ** ** | **Shares  (in thousands)** | ** ** | **Weighted  Average  Remaining  Contractual Life  (in years)** | ** ** | **Weighted  Average  Exercise Price  Per Share** | ** ** | **Shares  (in thousands)** | ** ** | **Weighted  Average  Exercise Price  Per Share** | ** ** |
| $7.43 to $16.50                             |       | 1,629                           |       | 5.6                                                                      |       | $ | 12.74 |   | 1,596 |   | $ | 12.70 |   |
| 16.51 to 24.00                              |       | 1,209                           |       | 6.3                                                                      |       | $ | 18.45 |   | 1,079 |   | $ | 18.27 |   |
| 24.01 to 42.90                              |       | 694                             |       | 4.4                                                                      |       | $ | 35.94 |   | 528 |   | $ | 37.67 |   |
| 42.91 to 47.06                              |       | 4                               |       | 3.0                                                                      |       | $ | 45.78 |   | 4 |   | $ | 45.78 |   |
| $7.43 to $47.06                             |       | 3,536                           |       | 5.6                                                                      |       | $ | 19.29 |   | 3,207 |   | $ | 18.73 |   |

 

**PerformanceShare Units**

The followingtable summarizes the performance share unit activity for the three months endedMarch 31, 2007 (in thousands, except per share data):

|                                                       | ** ** | **Units** | ** ** | **Weighted Average Grant  Date Fair Value  Per Share** | ** ** |
|-------------------------------------------------------|------------|-----------|------------|---------------------------------------------------------------------------------|------------|
| Outstanding and  non-vested at December 31, 2006 |       | 449       |       | $                                                                               | 23.26      |   |
| Forfeited                                             |       | (1        | )          | $                                                                               | 19.91      |   |
| Outstanding and non-vested at March 31, 2007          |       | 448       |       | $                                                                               | 23.34      |   |

 

**RestrictedStock Units**

The followingtable summarizes the restricted stock unit activity for the three months endedMarch 31, 2007 (in thousands, except per share data):

|                                                       | ** ** | **Units** | ** ** | **Weighted Average Grant  Date Fair Value  Per Share** | ** ** |
|-------------------------------------------------------|------------|-----------|------------|---------------------------------------------------------------------------------|------------|
| Outstanding and  non-vested at December 31, 2006 |       | 503       |       | $                                                                               | 24.78      |   |
| Granted                                               |       | 8         |       | $                                                                               | 36.81      |   |
| Forfeited                                             |       | (5        | )          | $                                                                               | 25.22      |   |
| Outstanding and non-vested at March 31, 2007          |       | 506       |       | $                                                                               | 24.97      |   |

 

**9.****             SEGMENTS**

The Company defines itsreportable segments by major product category, which is consistent with themanner in which the business is managed, as follows: Enterprise, Broadband andCarrier.

The Enterprise segmentconsists mainly of structured cabling systems for business enterpriseapplications and connectivity solutions for wired and wireless networks withinorganizations. The segment also includes coaxial cable for various video anddata applications that are not related to cable television.

13

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The Broadband segmentconsists mainly of coaxial cable, fiber optic cable and conduit for cabletelevision system operators. These products support multi-channel video, voiceand high-speed data services for residential and commercial customers usingHybrid Fiber Coaxial architecture.

The Carrier segmentconsists of secure environmental enclosures for electronic devices andequipment, cables and components used by wireless providers to connect antennaeto transmitters and connectivity solutions for telephone central offices. Theseproducts are primarily used by telecommunications service providers or “carriers.”

The following tables provide summary financialinformation by segment as of March 31, 2007 and December 31, 2006 andfor the three months ended March 31, 2007 and 2006 (in millions):

|                                                    | ** ** | **As of  March 31,  2007** | ** ** | **As of  December 31,  2006** | ** ** |
|----------------------------------------------------|------------|--------------------------------------|------------|-----------------------------------------|------------|
| Identifiable  segment-related assets:              |       |                                 |       |                                    |       |
| Enterprise                                         |       | $                                    | 386.3      |                                    | $          | 375.1 |   |
| Broadband                                          |       | 385.5                                |       | 365.0                                   |       |
| Carrier                                            |       | 113.4                                |       | 94.5                                    |       |
| Total identifiable  segment-related assets         |       | 885.2                                |       | 834.6                                   |       |
|                                               |       |                                 |       |                                    |       |
| Reconciliation to total  assets:                   |       |                                 |       |                                    |       |
| Cash, cash  equivalents and short-term investments |       | 459.8                                |       | 427.9                                   |       |
| Deferred income  taxes                             |       | 41.1                                 |       | 40.0                                    |       |
| Total assets                                       |       | $                                    | 1,386.1    |                                    | $          | 1,302.5 |   |

 

|                               | ** ** | **Three Months Ended  March 31,** | ** ** |
|-------------------------------|------------|--------------------------------------------------|------------|
| ** **                    | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| Net  sales:                   |       |                                             |       |   |   |
| Enterprise                    |       | $                                                | 200.9      |   | $ | 172.1 |   |
| Broadband                     |       | 148.1                                            |       | 125.9 |   |
| Carrier                       |       | 87.1                                             |       | 54.7 |   |
| Inter-segment  eliminations   |       | (0.6                                             | )          | (0.4 | ) |
| Consolidated net sales        |       | $                                                | 435.5      |   | $ | 352.3 |   |
|                          |       |                                             |       |   |   |
| Operating income:             |       |                                             |       |   |   |
| Enterprise                    |       | $                                                | 29.5       |   | $ | 11.3 |   |
| Broadband                     |       | 21.6                                             |       | 8.0 |   |
| Carrier                       |       | 12.6                                             |       | — |   |
| Consolidated operating income |       | $                                                | 63.7       |   | $ | 19.3 |   |

 

**10.****          SUPPLEMENTALCASH FLOW INFORMATION**

 

|                                                                                                                                                           | ** ** | **Three Months Ended  March 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                                                                                | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| Cash paid during the  period for:                                                                                                                         |       |                                             |       |   |   |
| Income taxes                                                                                                                                              |       | $                                                | 1,081      |   | $ | 1,681 |   |
| Interest                                                                                                                                                  |       | 2,047                                            |       | 2,190 |   |
|                                                                                                                                                      |       |                                             |       |   |   |
| Noncash investing and  financing activities:                                                                                                              |       |                                             |       |   |   |
| Asset previously  classified as held for sale transferred from prepaid and other current assets  to property, plant and equipment at estimated fair value |       | $                                                | —     |   | $ | 10,190 |   |

 

**11.          SUBSEQUENTEVENTS**

The Company consummated its acquisition ofsubstantially all of the assets and assumption of certain current liabilitiesof Signal Vision, Inc. on May 1, 2007.

The Company redeemed the $10.8 million of IDAnotes on May 1, 2007.

 

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#  

| **ITEM 2.** | ** ** | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |
|-------------|------------|-------------------------------------------------------------------------------------------------|
| ** **  | ** ** | ** **                                                                                      |

The following discussionand analysis of our financial condition and results of operations for the threemonths ended March 31, 2007 and 2006 is provided to increase theunderstanding of, and should be read in conjunction with, the unauditedcondensed consolidated financial statements and accompanying notes included inthis document as well as the audited consolidated financial statements, relatednotes thereto and management’s discussion and analysis of financial conditionand results of operations, including management’s discussion and analysis aboutthe application of critical accounting policies included in our 2006 AnnualReport on Form 10-K.

**Overview**

CommScope, Inc. is a world leader ininfrastructure solutions for communications networks. Our highly engineeredcable and connectivity solutions enable a host of information-rich andinteractive services that are delivered to the home, office and mobile devices.We focus on the “last mile” in communications networks, which is thedistribution access or final link to the customer. We believe we are a globalleader in structured cabling for business enterprise applications and a globalleader in broadband coaxial cables for the cable television industry. We alsodesign, manufacture and market a broad line of high-performance electronic,coaxial and fiber optic cable and related products for data networking,Internet access, wireless communication, telephony and other broadbandapplications. We are an industry leader in the design and manufacture ofenvironmentally secure enclosures to integrate complex equipment for digitalsubscriber line (DSL) and Fiber-to-the-Node (FTTN) deployments bytelecommunication service providers in the United States.

### **CRITICALACCOUNTING POLICIES**

There have been no changes in our critical accountingpolicies or significant accounting estimates as disclosed in our 2006 AnnualReport on Form 10-K other than the implementation of FASB InterpretationNo. 48, “Accounting for Uncertainty in Income Taxes,” (see Note 1 in the Notesto the Condensed Consolidated Financial Statements included elsewhere in thisForm 10-Q).

### **COMPARISONOF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2007 WITHTHE THREE MONTHS ENDED MARCH 31, 2006**

| ** **                    | ** ** | **Three Months Ended March 31,**                              | ** ** | ** **                    | ** ** | ** ** | ** ** |
|-------------------------------|------------|-----------------------------------------------------------------------------------|------------|-------------------------------|------------|------------|------------|
| ** **                    | ** ** | **2007**                                                                          | ** ** | **2006**                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                    | ** ** | **Amount**                                                                        | ** ** | **% of Net  Sales** | ** ** | **Amount** | ** ** | **% of Net  Sales** | ** ** | **Dollar  Change** | ** ** | **%   Change** | ** ** |
| ** **                    | ** ** | **(dollars in millions, except per share amounts)** | ** ** |
| Net sales                     |       | $                                                                                 | 435.5      |                          | 100.0      | %          | $          | 352.3 |   | 100.0 | % | $ | 83.2 |   | 23.6 | % |
| Gross profit                  |       | 131.9                                                                             |       | 30.3                          |       | 84.7       |       | 24.1 |   | 47.2 |   | 55.7 |   |
| SG&A expense              |       | 59.7                                                                              |       | 13.7                          |       | 54.2       |       | 15.4 |   | 5.5 |   | 10.2 |   |
| R&D expense               |       | 7.9                                                                               |       | 1.8                           |       | 7.5        |       | 2.1 |   | 0.4 |   | 5.4 |   |
| Restructuring  costs          |       | 0.7                                                                               |       | 0.2                           |       | 3.7        |       | 1.1 |   | (3.0 | ) | (80.6 | ) |
| Net income                    |       | 45.9                                                                              |       | 10.5                          |       | 12.7       |       | 3.6 |   | 33.1 |   | 260.3 |   |
| Net income per diluted  share |       | 0.63                                                                              |       |                          |       | 0.19       |       |   |   |   |   |   |   |
|                               |            |                                                                                   |            |                               |            |            |            |  |  |  |  |  |  |  |  |  |

 

**Net sales**

The increase in net sales for the three months endedMarch 31, 2007 over the comparable prior year period is attributable to growthin domestic sales for all three segments and growth in international sales forthe Broadband and Enterprise segments. The improvement in net sales can beattributed to sales volume increases from improved project business, thepositive impact of price increases implemented in 2006 for certain products inresponse to significant increases in the costs of raw materials and improvedeconomic conditions for the telecommunications industry. International salesincreased 19.4% year over year due primarily to strong customer demand.  International sales decreased as a percentageof total net sales from 30.4% for the three months ended March 31, 2006 to29.4% for the three months ended March 31, 2007, largely due to stronggrowth in Carrier segment sales, which are primarily domestic. For furtherdetails by segment, see the section titled “Segment Results” below.

### **Grossprofit (net sales less cost of sales)**

The year-over-year increase in gross profit of $47.2million and gross profit margin to 30.3% from 24.1% was primarily due to highersales levels, the impact of expense reduction efforts, an improvement in themix of products sold and the impact of price increases implemented in 2006 forcertain products in response to increases in costs of raw materials.

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We expect continued volatility in the costs of certainraw materials, particularly copper, aluminum and plastics and other polymers,which are derived from oil and natural gas. Changes in pricing in response tovolatility in raw material costs may reduce gross profit and gross profitmargin if we delay implementing price increases, are unable to achieve marketacceptance of future price increases or implement price reductions in responseto a rapid decline in raw material costs.

### **Selling,general and administrative expense**

The year-over-year increase in selling, general andadministrative expense (SG&A) of $5.5 million was partially due to highermarketing costs associated with the higher level of sales as well as a $1.2million increase in equity-based compensation. The decrease in SG&A expenseas a percentage of sales can be primarily attributed to the increased level ofnet sales.

### **Researchand development**

Research and development (R&D) expense increasedby $0.4 million year over year. R&D expense as a percentage of net salesdecreased modestly to 1.8% for the three months ended March 31, 2007compared to 2.1% for the three months ended March 31, 2006. Thisyear-over-year decrease in R&D expense as a percentage of net sales ismainly due to the increased level of net sales. The ongoing R&D activitiesgenerally relate to bringing new products to market and to modifying existingproducts to better serve our customers.

**Restructuring Costs**

We recognized pretax restructuring costs of $0.7million in the first quarter of 2007. These costs resulted from the continuedimplementation of the global manufacturing initiatives which began during thethird quarter of 2005. Included in the costs incurred during the first quarterof 2007 were equipment relocation costs of $0.8 million, which consisted ofcosts directly related to shifting manufacturing capacity among our globalmanufacturing facilities including costs to uninstall, pack, ship andre-install equipment as well as costs to prepare the receiving facility toaccommodate the equipment. There was also a credit of $0.1 million foremployee-related costs resulting from the release of severance accrual relatedto employees who accepted other positions with the Company once their positionswere eliminated.  During the firstquarter of 2006, we recognized $3.7 million of pretax restructuring costsrelated to the global manufacturing initiatives.

We anticipate that we will recognize additional pretaxrestructuring charges of up to $0.4 million during the balance of 2007 tocomplete the implementation of the global manufacturing initiatives.

As a result of restructuring actions, there continuesto be significant unutilized real estate at the Omaha facility as well as theunutilized Scottsboro, Alabama facility. We are attempting to sell or lease all of this unutilized space. As ofMarch 31, 2007, assets with a net book value of $15.6 million, which areclassified as property, plant and equipment, are being marketed for sale.  Additional charges, which are not expected tobe material, may be incurred in completing this process.

### **Netinterest income**

We recognized netinterest income of $2.6 million for the three months ended March 31,2007 compared to $0.1 million for the three months ended March 31,2006. The increase was due to the impact of significantly higher balances ofinvested funds (cash, cash equivalents and short-term investments) as well asimproved rates of return on invested balances. Interest expense declinedslightly as a result of lower levels of outstanding debt due to scheduledprincipal repayments. Our weighted average effective interest rate onoutstanding borrowings, including amortization of associated long-termfinancing costs, was essentially unchanged at 2.63% as of March 31, 2007compared to 2.68% as of December 31, 2006.

### **Incometaxes**

Our effective income tax rate was 31.0% for the threemonths ended March 31, 2007 compared to 36.5% for the three months endedMarch 31, 2006. The tax provision for the three months endedMarch 31, 2006 included $0.4 million related to adjustments of reservesestablished as a result of matters raised by various taxing authorities duringaudits of prior tax returns and other adjustments that resulted from thecompletion or amendment of prior year tax returns. The effective rate excludingthese items was 34.3%. Our effective tax rate reflects the benefits derivedfrom significant operations outside the U.S., which are generally taxed atrates lower than the U.S. statutory rate of 35%, offset to some extent by stateincome taxes. The benefits from international activities in lower tax ratejurisdictions were greater during the three months ended March 31, 2007than during the three months ended March 31, 2006 due to changes in themix of earnings among foreign and domestic entities.

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# **Segment Results**

 
| ** **                     | ** ** | **Three months  ended**

**March 31,**

**2007** | ** ** | **Three months  ended**

**March 31,**

**2006** | ** ** | ** ** | ** ** | ** **                    | ** ** |
|--------------------------------|------------|------------------------------------------------------------|------------|------------------------------------------------------------|------------|------------|------------|-------------------------------|------------|
| ** **                     | ** ** | **Amount**                                                 | ** ** | **% of Net  Sales**                              | ** ** | **Amount** | ** ** | **% of Net  Sales** | ** ** | **Dollar  Change** | ** ** | **%  Change** | ** ** |
| ** **                     | ** ** | **(dollars in millions)**                        | ** ** |
| Net sales by  segment:         |       |                                                       |       |                                                       |       |       |       |                          |       |   |   |   |   |
| Enterprise                     |       | $                                                          | 200.9      |                                                       | 46.1       | %          | $          | 172.1                         |       | 48.9 | % | $ | 28.8 |   | 16.7 | % |
| Broadband                      |       | 148.1                                                      |       | 34.0                                                       |       | 125.9      |       | 35.7                          |       | 22.2 |   | 17.6 |   |
| Carrier                        |       | 87.1                                                       |       | 20.0                                                       |       | 54.7       |       | 15.5                          |       | 32.4 |   | 59.2 |   |
| Inter-segment eliminations     |       | (0.6                                                       | )          | (0.1                                                       | )          | (0.4       | )          | (0.1                          | )          | (0.2 | ) |   |   |
| Consolidated net sales         |       | $                                                          | 435.5      |                                                       | 100.0      | %          | $          | 352.3                         |       | 100.0 | % | $ | 83.2 |   | 23.6 | % |
|                           |       |                                                       |       |                                                       |       |       |       |                          |       |   |   |   |   |
| Total domestic  sales          |       | $                                                          | 307.5      |                                                       | 70.6       | %          | $          | 245.1                         |       | 69.6 | % | $ | 62.4 |   | 25.5 | % |
| Total  international sales     |       | 128.0                                                      |       | 29.4                                                       |       | 107.2      |       | 30.4                          |       | 20.8 |   | 19.4 |   |
| Total worldwide  sales         |       | $                                                          | 435.5      |                                                       | 100.0      | %          | $          | 352.3                         |       | 100.0 | % | $ | 83.2 |   | 23.6 | % |
|                           |       |                                                       |       |                                                       |       |       |       |                          |       |   |   |   |   |
| Operating income  by segment:  |       |                                                       |       |                                                       |       |       |       |                          |       |   |   |   |   |
| Enterprise                     |       | $                                                          | 29.5       |                                                       | 14.7       | %          | $          | 11.3                          |       | 6.6 | % | $ | 18.2 |   | 161.1 | % |
| Broadband                      |       | 21.6                                                       |       | 14.6                                                       |       | 8.0        |       | 6.4                           |       | 13.6 |   | 170.0 |   |
| Carrier                        |       | 12.6                                                       |       | 14.5                                                       |       | —     |       |                          |       | 12.6 |   |   |   |
| Consolidated  operating income |       | $                                                          | 63.7       |                                                       | 14.6       | %          | $          | 19.3                          |       | 5.5 | % | $ | 44.4 |   | 230.1 | % |

 

*Enterprise Segment*

The Enterprise segment consists mainly of structuredcabling systems for business enterprise applications and connectivity solutionsfor wired and wireless networks within organizations. The segment also includescoaxial cable for various video and data applications that are not related tocable television.

The increase in Enterprise segment net sales wasprimarily driven by higher sales volume, price increases implemented during2006 for certain products in response to significant increases in the cost ofcertain raw materials and the introduction of new products. Domestic sales andsales in the Europe, Middle East and Africa region were particularly strong.

We expect demand for Enterprise products to be drivenby the ongoing need for bandwidth and high-performance structured cabling inthe enterprise market and affected by global information technology spending,among other things.

The improvement in Enterprise segment operating incomeis primarily attributable to higher sales volume, changes in product mixtowards products that generate higher margins and the impact of cost reductionsresulting from the global manufacturing initiatives.  The impact of price increases on operatingincome was substantially offset by increased raw material costs. Operatingincome was also favorably affected by a $2.5 million decrease in restructuringcosts for the three months ended March 31, 2007 compared to the threemonths ended March 31, 2006.

*Broadband Segment*

The Broadband segment primarily consists of coaxialcable, fiber optic cable and conduit for cable television system operators.These products support multi-channel video, voice and high-speed data servicesfor residential and commercial customers using Hybrid Fiber Coaxialarchitecture.

The increase in net sales of Broadband productsprimarily resulted from price increases, implemented during 2006 for certainproducts to mitigate the significant increase in raw material costs, and growthin domestic sales volume as well as sales growth in the Central and LatinAmerica region.  The domestic salesvolume growth can be primarily attributed to continued infrastructure needs ofour large cable television system operator customers. Net sales increased inmost international regions as a result of new projects and maintenanceprojects. Net sales for the three months ended March 31, 2007 includes$3.3 million related to the MC2® product line that was acquired from TrilogyCommunications, Inc. on March 6, 2006 compared to $0.7 million forthe three months ended March 31, 2006.

The improvement in Broadband segment operating incomereflects the impact of the cost reductions realized as a result of the globalmanufacturing initiatives as well as the impact of sales volume growth andprice increases, which were largely offset by the impact of raw material costincreases. Operating income for the three months ended March 31, 2007included restructuring costs of $0.2 million compared to $0.7 million duringthe three months ended March 31, 2006.

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*Carrier Segment*

The Carrier segment consists of secure environmentalenclosures for electronic devices and equipment, cables and components used bywireless providers to connect antennae to transmitters and structured cablingsolutions for telephone central offices. These products are primarily used bytelecommunications service providers or “carriers.”

The Carrier segment net sales increased substantiallyon a year over year basis, primarily as a result of Integrated CabinetSolutions (ICS) product group sales related to DSL and FTTN deployments bytelephone companies.  Net sales for theWireless and ExchangeMAX product groups within this segment decreased modestly,reflecting slowdowns in orders from wireless carriers and lower sales ofapparatus products used in telephone central offices.

While we expect sales of Carrier products to besomewhat volatile since customer spending is mainly project-driven, we remainoptimistic about our opportunities for the ICS and wireless product groups. Weanticipate growth in sales primarily due to FTTN construction activity and DSLdeployments, which provide opportunities for our ICS product group. We alsoexpect a resumption of expansion in cellular telephone base stations, whichaffects growth for our wireless product group.

The improvement in Carrier segment operating incomefor the three months ended March 31, 2007 over the comparable 2006 periodis primarily due to the substantially higher sales volume and the impact ofcost reductions realized as a result of the global manufacturing initiatives.

### **LIQUIDITYAND CAPITAL RESOURCES**

**Cash Flow Overview**

Our principal sources of liquidity both on ashort-term and long-term basis are cash and cash equivalents, short-terminvestments, cash flows provided by operations and availability under creditfacilities. A reduction in sales and profitability could reduce cash providedby operations and limit availability under credit facilities. In addition,increases in working capital, excluding cash, cash equivalents and short-terminvestments, related to increasing sales could reduce our operating cash flowsin the short term until cash collections of accounts receivable catch up to thehigher level of billings.

 
| ** **                                                                                                           | ** ** | **As of**                 | ** ** | ** **                  | ** ** | ** **         | ** ** |
|----------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|-----------------------------|------------|--------------------|------------|
| ** **                                                                                                           | ** ** | **March  31,  2007** | ** ** | **December 31,  2006** | ** ** | **Dollar  Change** | ** ** | **%  Change** | ** ** |
|                                                                                                                 |       |                           |       |                        |       |               |       |   |   |
| Cash, cash  equivalents and short-term investments                                                                   |       | $                              | 459.8      |                        | $          | 427.9              |       | $ | 31.9 |   | 7.5 | % |
| Working capital,  excluding cash, cash equivalents and short-term investments and current  portion of long-term debt |       | 265.1                          |       | 209.6                       |       | 55.5               |       | 26.5 |   |
| Long-term debt,  including current portion                                                                           |       | 280.9                          |       | 284.1                       |       | (3.2               | )          | (1.1 | ) |
| Book capital  structure                                                                                              |       | 1,092.0                        |       | 1,023.2                     |       | 68.8               |       | 6.7 |   |
| Long-term debt as a  percentage of book capital structure                                                            |       | 25.7                           | %          | 27.8                        | %          |               |       |   |   |
|                                                                                                                      |            |                                |            |                             |            |                    |            |  |  |  |  |  |

 

The increase in cash, cash equivalents and short-terminvestments during the quarter ended March 31, 2007 was primarily drivenby $28.2 million of proceeds and tax benefits realized from the exercise ofstock options and $10.7 million in cash flow from operations.  These increases were somewhat offset by $4.1million in capital expenditures and $3.3 million in principal payments oflong-term debt.

 
| ** **                                                                                                                       | ** ** | **Three months ended** | ** ** | ** ** | ** ** | ** ** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|------------|------------|------------|------------|
| ** **                                                                                                                       | ** ** | **March 31,**               | ** ** | **Dollar** | ** ** | **%**      | ** ** |
| ** **                                                                                                                       | ** ** | **2007**                         | ** ** | **2006**   | ** ** | **Change** | ** ** | **Change** | ** ** |
|                                                                                                                             |       |                             |       |       |       |       |       |   |   |
| Net cash  provided by (used in) operating activities                                                                             |       | $                                | 10.7       |       | $          | (18.4      | )          | $ | 29.1 |   | — |   |
| Depreciation and  amortization                                                                                                   |       | 12.4                             |       | 14.2       |       | (1.8       | )          | (12.7 | )% |
| Increase in  working capital, excluding cash, cash equivalents and short-term investments  and current portion of long-term debt |       | 55.5                             |       | 42.5       |       | 13.0       |       | 30.6 |   |
| Capital expenditures                                                                                                             |       | 4.1                              |       | 6.8        |       | (2.7       | )          | (39.7 | ) |
|                                                                                                                                  |            |                                  |            |            |            |            |            |  |  |  |  |  |

 

**Operating Activities**

During the three months ended March 31, 2007,operating activities provided $10.7 million in cash compared to

 

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utilizing$18.4 million in cash during the three months ended March 31, 2006. Duringthe three months ended March 31, 2007, net income of $45.9 million anddepreciation and amortization of $12.4 million were somewhat offset by a $42.9million increase in accounts receivable. The increase in accounts receivablecan be primarily attributed to an increase in sales in the first quarter of2007 over the fourth quarter of 2006.

We expect to continue to generate net cash fromoperations during 2007 primarily due to favorable margins from sales of certainproduct groups and the impact of our cost reduction efforts.

**Investing Activities**

Investment in property, plant and equipment during thefirst quarter of 2007 decreased by $2.7 million year over year to $4.1 million.The primary capital expenditures made during the first quarter of 2007 relatedto continuing investments to support cost reduction initiatives and improveoperating efficiency.

During the three months ended March 31, 2006, weacquired certain assets supporting the MC2 75-ohm trunk and distribution cable televisionproducts business and certain other assets from TrilogyCommunications, Inc. for a cash payment of $13.8 million.

We currently expect total capital expenditures of $30million to $40 million in 2007 compared to $31.6 million in 2006. The expectedcapital spending during 2007 is primarily for cost reduction efforts andadditional production capability.

**Financing Activities**

The exercise of 1.2 million stock options during thethree months ended March 31, 2007 generated $19.3 million of proceeds and$8.9 million from the tax benefits generated by such stock option exercises.

During the three months ended March 31, 2007, wereduced the principal balance of our outstanding long-term debt by $3.25 millionin accordance with the scheduled maturities outlined in our respective debtagreements.

**Future Cash Needs**

We expect that our primary future cash needs will beto fund working capital, capital expenditures, debt service, and employeebenefit obligations. In April 2007, we notified the holders of our IDA notes ofour intent to redeem the $10.8 million of IDA notes and the redemption occurredon May 1, 2007. We made contributions of $0.9 million to our otherpostretirement benefit plans during the three months ended March 31, 2007. Weexpect to make additional contributions of up to $6.8 million to our pensionand other postretirement benefit plans during 2007. We expect that ournoncurrent employee benefit liabilities will be funded through cash flow fromfuture operations.  On May 1, 2007, wefunded the approximately $18 million purchase price of our acquisition of theassets and assumption of certain current liabilities of Signal Vision, Inc.through existing cash and cash equivalents and short-term investments.

We believe that our existing cash, cash equivalentsand short-term investments and cash flows from operations, combined withavailability under our senior secured revolving credit facility, will besufficient to meet our presently anticipated future cash needs. We may, fromtime to time, borrow under our revolving credit facility or issue securities,if market conditions are favorable, to meet our future cash needs or to reduceour borrowing costs.

There were no material changes in our contractualobligations during the quarter ended March 31, 2007, other than theredemption of the $10.8 million of IDA notes on May 1, 2007, whichwas presented as a payment due after 5 years in the ContractualObligations section of our 2006 Annual Report on Form 10-K. Upon adoptionof FIN 48, our liability for unrecognized tax benefits was$10.8 million of which $8.3 million would be excluded from apresentation of contractual obligations due to the uncertainty in predictingthe timing of the related tax payments. The remainder of the liability would bepresented as a payment due in less than one year.

### **FORWARD-LOOKINGSTATEMENTS**

Certain statements inthis Form 10-Q that are other than historical facts are intended to be “forward-lookingstatements” within the meaning of the Securities Exchange Act of 1934, thePrivate Securities Litigation Reform Act of 1995 and other related lawsand include but are not limited to those statements relating to our businessposition, plans, outlook, revenues, earnings, margins, synergies and otherfinancial items, restructuring plans, sales and earnings expectations, expecteddemand, cost and availability of key raw materials, internal and externalproduction capacity and expansion, competitive pricing and relative marketposition. While we believe such statements are reasonable, the actual resultsand effects could differ materially from those currently anticipated. Theseforward-looking statements are identified by the use of certain terms andphrases including but not limited to “intend,” “goal,” “estimate,”  “expect,” “project,” “projections,” “plan,” “anticipate,”“should,” “designed to,” “foreseeable future,” “believe,” “think,” “scheduled,”“outlook,” “guidance” and similar expressions.

These statements are subject to various risks anduncertainties, many of which are outside our control, including, withoutlimitation, changes incost and availability of key raw materials and our ability to recover thesecosts from our customers through pricing; customer demand for our products andthe ability to maintain existing business alliances with key 

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customers or distributors; the risk that our internalproduction capacity and that of our contract manufacturers may be insufficientto meet customer demand for our products; the risk that customers might cancelorders placed or that orders currently placed may reduce orders in the future;continuing consolidation among our customers; competitive pricing andacceptance of our products; industry competition and the ability to retaincustomers through product innovation; possible production disruption due tosupplier or contract manufacturer bankruptcy, reorganization or restructuring;successful ongoing operation of our vertical integration activities; thepossibility of further restructuring actions; possible future impairmentcharges for fixed or intangible assets; increased obligations under employeebenefit plans; ability to achieve expected sales, growth and earnings goals;ability to achieve expected benefits from future acquisitions; costs ofprotecting or defending our intellectual property; ability to obtain capital oncommercially reasonable terms; adequacy and availability of insurance; costsand challenges of compliance with domestic and foreign environmental laws;variability in effective tax rate and ability to recover amounts recorded asvalue added tax receivables; product performance issues and associated warrantyclaims; ability to successfully implement major systems initiatives; regulatorychanges affecting us or the industries we serve; authoritative changes ingenerally accepted accounting principles by standard-setting bodies; politicalinstability; and any statements of belief and any statements of assumptionsunderlying any of the foregoing. These and other factors are discussedin greater detail in Item 1A to our Annual Report on Form 10-K for theyear ended December 31, 2006. The information contained in thisForm 10-Q represents our best judgment at the date of this report based oninformation currently available. However, we do not intend, and are notundertaking any duty or obligation, to update this information to reflectdevelopments or information obtained after the date of this report.

# **ITEM 3.****      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

As disclosed inour Annual Report on Form 10-K for the year ended December 31, 2006,our major market risk exposure relates to adverse fluctuations in commodityprices, interest rates and foreign currency exchange rates. We have establisheda risk management strategy that includes the reasonable use of derivative andnonderivative financial instruments primarily to manage our exposure to thesemarket risks. We believe our exposure associated with these market risks hasnot materially changed since December 31, 2006. We have not acquired anynew derivative financial instruments since December 31, 2006 or terminatedany derivative financial instruments that existed at that date.

# **ITEM 4.****      CONTROLS AND PROCEDURES**

Our disclosurecontrols and procedures are designed to ensure that information****required to be disclosed in reports thatwe file or submit under the Securities Exchange Act of 1934 is recorded,processed, summarized and reported within the time periods specified in therules and forms of the Securities and Exchange Commission. Our ChiefExecutive Officer and our Chief Financial Officer have reviewed theeffectiveness of our disclosure controls and procedures as of the end of theperiod covered by this report and have concluded that the disclosure controlsand procedures are effective.

There were nochanges in our internal control over financial reporting during the threemonths ended March 31, 2007 that have materially affected, or are reasonablylikely to materially affect, our internal control over financial reporting.

# **PART II— OTHER  INFORMATION**

# **ITEM 6.      EXHIBITS**

|        | 10.1   | CommScope, Inc. Annual Incentive Plan 2007  Financial Targets (Incorporated by reference from the Company’s Current  Report on Form 8-K dated March 22, 2007 (File No. 1-12929))                                                     |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                          |
|   | 31.1   | Certification of Chief Executive Officer pursuant to  Rule 13a-14(a).                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                          |
|   | 31.2   | Certification of Chief Financial Officer pursuant to  Rule 13a-14(a).                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                          |
|   | 32     | Certification of Chief Executive Officer and Chief  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). |

 

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**SIGNATURES**

Pursuant to the requirements of theSecurities Exchange Act of 1934, the Registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 
|                  |   | COMMSCOPE, INC.                                  |   |
|------------------|--------|-------------------------------------------------------|--------|
|             |   |                                                  |   |
|             |   |                                                  |   |
| May 1, 2007 |   | /s/ JEARLD  L. LEONHARDT                              |   |   |
| Date             |   | Jearld L.  Leonhardt                                  |   |
|             |   | Executive  Vice President and Chief Financial Officer |   |
|             |   | signing  both in his capacity as Executive Vice       |   |
|             |   | President  on behalf of the Registrant and as         |   |
|             |   | Chief  Financial Officer of the Registrant            |   |
|                  |        |                                                       |        |  |

 

 

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