**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

----

 

**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 June 30,  2006**                                                  |
| ** **     | **OR**                                                                                                  |
| ** **     | ** **                                                                                              |
| **o**          | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE**                                 |
| ** **     | **SECURITIES EXCHANGE ACT OF 1934**                                                                     |
| ** **     | ** **                                                                                              |

**Forthe transition periodfrom                     to**

**Commissionfile number 001-12929**

**CommScope, Inc.**

(Exact name of registrantas specified in its charter)
| **Delaware**(State or other jurisdiction of  incorporation or organization) | **36-4135495**(I.R.S. Employer  Identification No.) |
|-----------------------------------------------------------------------------|-----------------------------------------------------|

**1100 CommScope Place, SEP.O. Box 339Hickory, North Carolina**

(Address of principal executive offices)

**28602**

(Zip Code)

**(828)324-2200**

(Registrant’s telephonenumber, including area code)

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.

Yes x    No o

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer or anon-accelerated filer (as defined in Exchange Act Rule 12b-2).    Large accelerated filer x       Accelerated filer o      Non-accelerated filer 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 of July 28, 2006there were 58,996,966 shares of Common Stock outstanding.

 

 

----

 

**CommScope, Inc.Form 10-QJune 30, 2006Table 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  1A. Risk Factors                                                                              |                                                                                                       |   |
|                                                | Item 4. Submission of Matters to a Vote of Security  Holders                                        |                                                                                                       |   |
|                                                | Item 6.  Exhibits                                                                                   |                                                                                                       |   |
|                                                | Signatures                                                                                          |                                                                                                       |   |   |

 

 

2

----

 

 

**CommScope, Inc.Condensed Consolidated Statements of Operations(Unaudited—In thousands, except per share amounts)**

 
| ** **                                                                                  | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|---------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                  | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
|                                                                                        |       |                                            |       |                                          |       |   |   |   |   |
| Net sales                                                                                   |       | $                                               | 411,881    |                                          | $          | 336,711 |   | $ | 764,135 |   | $ | 645,765 |   |
|                                                                                        |       |                                            |       |                                          |       |   |   |   |   |
| Operating costs and  expenses:                                                              |       |                                            |       |                                          |       |   |   |   |   |
| Cost of sales                                                                               |       | 303,333                                         |       | 248,102                                       |       | 570,848 |   | 484,994 |   |
| Selling, general  and administrative                                                        |       | 58,253                                          |       | 54,016                                        |       | 112,430 |   | 107,898 |   |
| Research and  development                                                                   |       | 8,205                                           |       | 8,437                                         |       | 15,670 |   | 16,207 |   |
| Restructuring  costs                                                                        |       | 4,004                                           |       | 1,546                                         |       | 7,753 |   | 3,575 |   |
| Total operating  costs and expenses                                                         |       | 373,795                                         |       | 312,101                                       |       | 706,701 |   | 612,674 |   |
|                                                                                        |       |                                            |       |                                          |       |   |   |   |   |
| Operating income                                                                            |       | 38,086                                          |       | 24,610                                        |       | 57,434 |   | 33,091 |   |
| Other income  (expense), net                                                                |       | 27                                              |       | (612                                          | )          | 665 |   | (669 | ) |
| Interest expense                                                                            |       | (1,987                                          | )          | (2,289                                        | )          | (3,972 | ) | (4,367 | ) |
| Interest income                                                                             |       | 2,343                                           |       | 1,149                                         |       | 4,396 |   | 2,148 |   |
|                                                                                        |       |                                            |       |                                          |       |   |   |   |   |
| Income before  income taxes and gain on OFS BrightWave   note receivable                    |       | 38,469                                          |       | 22,858                                        |       | 58,523 |   | 30,203 |   |
| Income tax  expense before income tax provision on gain on   OFS BrightWave note receivable |       | (10,448                                         | )          | (6,554                                        | )          | (17,775 | ) | (8,365 | ) |
|                                                                                        |       |                                            |       |                                          |       |   |   |   |   |
| Income before  gain on OFS BrightWave note receivable                                       |       | 28,021                                          |       | 16,304                                        |       | 40,748 |   | 21,838 |   |
| Gain on OFS  BrightWave note receivable, net of tax of $11,175                              |       | 18,625                                          |       | —                                        |       | 18,625 |   | — |   |
|                                                                                        |       |                                            |       |                                          |       |   |   |   |   |
| Net income                                                                                  |       | $                                               | 46,646     |                                          | $          | 16,304 |   | $ | 59,373 |   | $ | 21,838 |   |
|                                                                                        |       |                                            |       |                                          |       |   |   |   |   |
| Net income per share:                                                                       |       |                                            |       |                                          |       |   |   |   |   |
| Basic                                                                                       |       | $                                               | 0.80       |                                          | $          | 0.30 |   | $ | 1.03 |   | $ | 0.40 |   |
| Assuming  dilution                                                                          |       | $                                               | 0.65       |                                          | $          | 0.25 |   | $ | 0.85 |   | $ | 0.34 |   |
|                                                                                        |       |                                            |       |                                          |       |   |   |   |   |
| Weighted average shares  outstanding:                                                       |       |                                            |       |                                          |       |   |   |   |   |
| Basic                                                                                       |       | 58,502                                          |       | 54,561                                        |       | 57,626 |   | 54,537 |   |
| Assuming dilution                                                                           |       | 72,221                                          |       | 67,065                                        |       | 71,519 |   | 67,036 |   |

 

See notes tocondensed consolidated financial statements.

3

----

 

 

** **

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

** **
| ** **                                                       | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                       | ** ** | **2006**          | ** ** | **2005**              | ** ** |
| ** **                                                       |       |              |       |                  |       |
| **Assets**                                                       |       |              |       |                  |       |
| Cash and cash  equivalents                                       |       | $                 | 185,338    |                  | $          | 146,549 |   |
| Short-term  investments                                          |       | 110,781           |       | 102,101               |       |
| Total cash, cash equivalents and short-term  investments         |       | 296,119           |       | 248,650               |       |
|                                                             |       |              |       |                  |       |
| Accounts  receivable, less allowance for doubtful accounts of    |       |              |       |                  |       |
| $14,226 and $13,644, respectively                                |       | 217,934           |       | 165,608               |       |
| Inventories                                                      |       | 156,199           |       | 123,603               |       |
| Prepaid expenses  and other current assets                       |       | 26,996            |       | 26,156                |       |
| Deferred income  taxes                                           |       | 26,872            |       | 25,245                |       |
| Total current assets                                             |       | 724,120           |       | 589,262               |       |
|                                                             |       |              |       |                  |       |
| Property, plant  and equipment, net                              |       | 239,821           |       | 252,877               |       |
| Goodwill                                                         |       | 151,371           |       | 151,356               |       |
| Other  intangibles, net                                          |       | 69,999            |       | 69,297                |       |
| Deferred income  taxes                                           |       | 16,535            |       | 24,623                |       |
| Other assets                                                     |       | 22,588            |       | 14,766                |       |
|                                                             |       |              |       |                  |       |
| Total Assets                                                     |       | $                 | 1,224,434  |                  | $          | 1,102,181 |   |
|                                                             |       |              |       |                  |       |
| **Liabilities and Stockholders’ Equity**                    |       |              |       |                  |       |
|                                                             |       |              |       |                  |       |
| Accounts payable                                                 |       | $                 | 91,257     |                  | $          | 63,444 |   |
| Other accrued  liabilities                                       |       | 88,204            |       | 100,498               |       |
| Current portion  of long-term debt                               |       | 13,000            |       | 13,000                |       |
| Total current liabilities                                        |       | 192,461           |       | 176,942               |       |
|                                                             |       |              |       |                  |       |
| Long-term debt                                                   |       | 277,800           |       | 284,300               |       |
| Pension and  postretirement benefit liabilities                  |       | 92,838            |       | 101,989               |       |
| Other noncurrent  liabilities                                    |       | 18,653            |       | 16,925                |       |
| Total Liabilities                                                |       | 581,752           |       | 580,156               |       |
|                                                             |       |              |       |                  |       |
| Commitments and contingencies                                    |       |              |       |                  |       |
|                                                             |       |              |       |                  |       |
| Stockholders’  Equity:                                      |       |              |       |                  |       |
| Preferred stock, $.01 par value; Authorized shares:  20,000,000; |       |              |       |                  |       |
| Issued and outstanding shares: None at June 30, 2006  and        |       |              |       |                  |       |
| December 31, 2005                                                |       | —            |       | —                |       |
| Common stock, $.01 par value; Authorized shares:  300,000,000;   |       |              |       |                  |       |
| Issued shares, including treasury stock: 69,065,654  at          |       |              |       |                  |       |
| June 30, 2006 and 66,073,347 at December 31, 2005;               |       |              |       |                  |       |
| Issued and outstanding shares: 58,865,654 at June  30, 2006      |       |              |       |                  |       |
| and 55,873,347 at December 31, 2005                              |       | 691               |       | 661                   |       |
| Additional paid-in capital                                       |       | 511,477           |       | 462,842               |       |
| Deferred equity compensation                                     |       | —            |       | (8,980                | )          |
| Retained earnings                                                |       | 276,061           |       | 216,688               |       |
| Accumulated other comprehensive loss                             |       | (12               | )          | (3,651                | )          |
| Treasury stock, at cost: 10,200,000 shares at June  30, 2006     |       |              |       |                  |       |
| and December 31, 2005                                            |       | (145,535          | )          | (145,535              | )          |
| Total Stockholders’ Equity                                  |       | 642,682           |       | 522,025               |       |
|                                                             |       |              |       |                  |       |
| Total  Liabilities and Stockholders’ Equity                 |       | $                 | 1,224,434  |                  | $          | 1,102,181 |   |

** **

**See notes to condensed consolidated financial statements.**

4

----

 

 

** **

**CommScope, Inc.Condensed Consolidated Statements of Cash Flows(Unaudited—In thousands)**
| ** **                                                   | ** ** | **Six Months Ended** | ** ** |
|--------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                   | ** ** | **June 30,**              | ** ** |
| ** **                                                   | ** ** | **2006**                       | ** ** | **2005** | ** ** |
|                                                         |       |                           |       |   |   |
| **Operating  Activities:**                                   |       |                           |       |   |   |
| Net income                                                   |       | $                              | 59,373     |   | $ | 21,838 |   |
| Adjustments to  reconcile net income to net cash provided by |       |                           |       |   |   |
| (used in) operating activities:                              |       |                           |       |   |   |
| Depreciation and amortization                                |       | 28,409                         |       | 30,616 |   |
| Equity based compensation                                    |       | 2,129                          |       | — |   |
| Deferred income taxes                                        |       | 6,904                          |       | (2,521 | ) |
| Gain on OFS BrightWave note receivable                       |       | (29,800                        | )          | — |   |
| Restructuring costs related to fixed asset  impairment       |       | —                         |       | 2,225 |   |
| Tax benefit from stock option exercises                      |       | —                         |       | 355 |   |
| Changes in assets and liabilities:                           |       |                           |       |   |   |
| Accounts receivable                                          |       | (51,446                        | )          | (42,403 | ) |
| Inventories                                                  |       | (26,902                        | )          | (2,314 | ) |
| Prepaid expenses and other current assets                    |       | 3,037                          |       | 2,669 |   |
| Accounts payable and other accrued liabilities               |       | 15,387                         |       | 16,732 |   |
| Other noncurrent liabilities                                 |       | (8,485                         | )          | (334 | ) |
| Other                                                        |       | (1,951                         | )          | 267 |   |
| Net cash  provided by (used in) operating activities         |       | (3,345                         | )          | 27,130 |   |
|                                                         |       |                           |       |   |   |
| **Investing  Activities:**                                   |       |                           |       |   |   |
| Additions to property, plant and equipment                   |       | (15,050                        | )          | (13,450 | ) |
| Proceeds from OFS BrightWave note receivable                 |       | 29,800                         |       | — |   |
| Acquisition of MC2 product line                         |       | (13,810                        | )          | — |   |
| Acquisition of Connectivity Solutions                        |       | —                         |       | 653 |   |
| Net proceeds from (purchases of) short-term  investments     |       | (8,680                         | )          | 11,479 |   |
| Proceeds from disposal of fixed assets                       |       | 550                            |       | 1,576 |   |
| Net cash  provided by (used in) investing activities         |       | (7,190                         | )          | 258 |   |
|                                                         |       |                           |       |   |   |
| **Financing  Activities:**                                   |       |                           |       |   |   |
| Principal payments on long-term debt                         |       | (6,500                         | )          | (6,500 | ) |
| Long-term financing costs                                    |       | —                         |       | (306 | ) |
| Proceeds from exercise of stock options                      |       | 42,035                         |       | 1,982 |   |
| Tax benefit from stock option exercises                      |       | 12,981                         |       | — |   |
| Net cash  provided by (used in) financing activities         |       | 48,516                         |       | (4,824 | ) |
|                                                         |       |                           |       |   |   |
| Effect of  exchange rate changes on cash                     |       | 808                            |       | (1,115 | ) |
|                                                         |       |                           |       |   |   |
| Change in cash  and cash equivalents                         |       | 38,789                         |       | 21,449 |   |
| Cash and cash  equivalents, beginning of period              |       | 146,549                        |       | 99,631 |   |
| Cash and cash  equivalents, end of period                    |       | $                              | 185,338    |   | $ | 121,080 |   |

** **

**Seenotes to condensed consolidated financial statements.**

5

----

 

 

** **

**CommScope, Inc.**

**Condensed Consolidated Statements ofStockholders’ Equity**

**and Comprehensive Income**

**(Unaudited—Inthousands, except share amounts)**

 
| ** **                                    | ** ** | **Six Months Ended** | ** ** |
|-----------------------------------------------|------------|--------------------------------|------------|
| ** **                                    | ** ** | **June 30,**              | ** ** |
| ** **                                    | ** ** | **2006**                       | ** ** | **2005** | ** ** |
|                                          |       |                           |       |   |   |
| Number of common  shares outstanding:         |       |                           |       |   |   |
| Balance at beginning of period                |       | 55,873,347                     |       | 54,487,745 |   |
| Issuance of shares for stock option exercises |       | 2,992,307                      |       | 175,425 |   |
| Issuance of shares to nonemployee directors   |       | —                         |       | 2,000 |   |
| Balance at end of period                      |       | 58,865,654                     |       | 54,665,170 |   |
|                                          |       |                           |       |   |   |
| Common stock:                                 |       |                           |       |   |   |
| Balance at beginning of period                |       | $                              | 661        |   | $ | 647 |   |
| Issuance of shares for stock option exercises |       | 30                             |       | 2 |   |
| Balance at end of period                      |       | $                              | 691        |   | $ | 649 |   |
|                                          |       |                           |       |   |   |
| Additional  paid-in capital:                  |       |                           |       |   |   |
| Balance at beginning of period                |       | $                              | 462,842    |   | $ | 432,839 |   |
| Issuance of shares for stock option exercises |       | 42,005                         |       | 1,980 |   |
| Tax benefit from stock option exercises       |       | 12,981                         |       | 355 |   |
| Expiration of registration rights             |       | 500                            |       | — |   |
| Impact of adoption of SFAS No. 123(R)         |       | (8,980                         | )          | — |   |
| Equity compensation expense recognized        |       | 2,129                          |       | — |   |
| Issuance of shares to nonemployee directors   |       | —                         |       | 30 |   |
| Balance at end of period                      |       | $                              | 511,477    |   | $ | 435,204 |   |
|                                          |       |                           |       |   |   |
| Retained  earnings:                           |       |                           |       |   |   |
| Balance at beginning of period                |       | $                              | 216,688    |   | $ | 166,710 |   |
| Net income                                    |       | 59,373                         |       | 21,838 |   |
| Balance at end of period                      |       | $                              | 276,061    |   | $ | 188,548 |   |
|                                          |       |                           |       |   |   |
| Accumulated  other comprehensive loss:        |       |                           |       |   |   |
| Balance at beginning of period                |       | $                              | (3,651     | ) | $ | (5,198 | ) |
| Other comprehensive income, net of tax        |       | 3,639                          |       | 1,823 |   |
| Balance at end of period                      |       | $                              | (12        | ) | $ | (3,375 | ) |
|                                          |       |                           |       |   |   |
| Treasury stock,  at cost:                     |       |                           |       |   |   |
| Balance at beginning and end of period        |       | $                              | (145,535   | ) | $ | (145,535 | ) |
|                                          |       |                           |       |   |   |
| Total stockholders’  equity              |       | $                              | 642,682    |   | $ | 475,491 |   |

 

 
| ** **                                                       | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|------------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                       | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| ** **                                                       | ** ** | **2006**                         | ** ** | **2005**                       | ** ** | **2006** | ** ** | **2005** | ** ** |
|                                                             |       |                             |       |                           |       |   |   |   |   |
| Comprehensive  income:                                           |       |                             |       |                           |       |   |   |   |   |
| Net income                                                       |       | $                                | 46,646     |                           | $          | 16,304 |   | $ | 59,373 |   | $ | 21,838 |   |
| Other  comprehensive income, net of tax:                         |       |                             |       |                           |       |   |   |   |   |
| Foreign currency  translation gain (loss) - foreign subsidiaries |       | 982                              |       | (3,248                         | )          | (379 | ) | (4,000 | ) |
| Foreign currency  transaction gain (loss) on long-term           |       |                             |       |                           |       |   |   |   |   |
| intercompany  loans - foreign subsidiaries                       |       | 321                              |       | 5,061                          |       | 4,770 |   | 4,682 |   |
| Gain (loss) on  derivative financial instrument                  |       |                             |       |                           |       |   |   |   |   |
| designated as a  net investment hedge                            |       | (581                             | )          | 783                            |       | (752 | ) | 1,141 |   |
| Total other  comprehensive income, net of tax                    |       | 722                              |       | 2,596                          |       | 3,639 |   | 1,823 |   |
|                                                             |       |                             |       |                           |       |   |   |   |   |
| Total comprehensive  income                                      |       | $                                | 47,368     |                           | $          | 18,900 |   | $ | 63,012 |   | $ | 23,661 |   |

 

See notes tocondensed consolidated financial statements.

6

----

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

**1.**   BACKGROUND AND BASIS OFPRESENTATION

**Background**

CommScope, Inc.,through its wholly owned subsidiaries (CommScope or the Company), is a worldleader in the design and manufacture of cable and connectivity solutions forcommunications networks.  The Companyfocuses on the ‘last mile’ in communications networks, which is thedistribution access, or final link to the customer.  The Company is a global leader in bothstructured cabling for business enterprise applications and broadband coaxialand fiber optic cables for the cable television industry. The Company alsodesigns, manufactures and markets a broad line of high-performanceelectronic, coaxial and fiber optic cable products for data networking,Internet access, wireless communication, telephony and other broadbandapplications. In addition, the Company is a leading provider of environmentallysecure enclosures in the United States.

**Basis ofPresentation**

The condensedconsolidated balance sheet as of June 30, 2006, the condensed consolidatedstatements of operations and comprehensive income for the three and six monthsended June 30, 2006 and 2005, and the condensed consolidated statements ofcash flows and stockholders’ equity for the six months ended June 30, 2006and 2005 are unaudited and reflect all adjustments of a normal recurring naturethat are, in the opinion of management, necessary for a fair presentation ofthe interim period financial statements. The results of operations for theinterim period are not necessarily indicative of the results of operations tobe expected for the full year.

The unaudited interimcondensed consolidated financial statements of CommScope have been preparedpursuant to the rules and regulations of the Securities and ExchangeCommission (SEC). Accordingly, certain information and footnote disclosuresnormally included in financial statements prepared in accordance withaccounting principles generally accepted in the United States of America havebeen condensed or omitted. The significant accounting policies followed by theCompany are set forth in Note 2 to the consolidated financial statementsin the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2005 (the 2005 Form 10-K). There were no changes in theCompany’s significant accounting policies during the three or six months ended June 30,2006 other than the adoption of Statement of Financial Accounting Standards(SFAS) No. 123(R), “Share-Based Payments” (SFAS No. 123(R)) as ofJanuary 1, 2006, which is discussed below. In addition, the Companyreaffirms the use of estimates in the preparation of the financial statementsas set forth in the 2005 Form 10-K. These interim condensed consolidatedfinancial statements should be read in conjunction with the Company’sDecember 31, 2005 audited consolidated financial statements and notesthereto included in the 2005 Form 10-K.

**Concentrations ofRisk**

Net sales to AnixterInternational Inc. and its affiliates (Anixter) accounted for approximately 32%and 31% of the Company’s total net sales during the three and six months ended June 30,2006, respectively, and approximately 35% and 34% of the Company’s total netsales during the three and six months ended June 30, 2005,respectively.  Sales to Anixter primarilyoriginate within the Enterprise segment. No other customer accounted for 10% ormore of the Company’s total net sales for the three and six months ended June 30,2006 and 2005.

Accounts receivable fromAnixter represented approximately 35% of net accounts receivable as of June 30,2006. No other customer accounted for 10% or more of the Company’s net accountsreceivable as of June 30, 2006.

**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

7

----

product subject to thewarranty. The Company records a provision for estimated future warranty claimsas cost of sales based upon the historical relationship of warranty claims tosales and specifically-identified warranty issues. The Company bases itsestimates on assumptions that are believed to be reasonable under thecircumstances and revises its estimates, as appropriate, when events or changesin circumstances indicate that revisions may be necessary.

Activityin the product warranty accrual, included in other accrued liabilities, for thethree and six months ended June 30, 2006 and 2005 consisted of thefollowing:

|                                                | ** ** | **Three Months EndedJune 30,** | ** ** | **Six Months EndedJune 30,** | ** ** |
|------------------------------------------------|------------|-----------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                     | ** ** | **2006**                                      | ** ** | **2005**                                    | ** ** | **2006** | ** ** | **2005** | ** ** |
| Product warranty  accrual, beginning of period |       | $                                             | 2,346      |                                        | $          | 1,433 |   | $ | 2,035 |   | $ | 1,531 |   |
| Provision for  warranty claims                 |       | 232                                           |       | 31                                          |       | 679 |   | 45 |   |
| Warranty claims  paid                          |       | —                                        |       | (135                                        | )          | (136 | ) | (247 | ) |
| Product warranty  accrual, end of period       |       | $                                             | 2,578      |                                        | $          | 1,329 |   | $ | 2,578 |   | $ | 1,329 |   |

 

**Commitments andContingencies**

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 Income PerShare**

Basic net income pershare is computed by dividing net income by the weighted average number ofcommon shares outstanding during the applicable period. Diluted net income pershare is based on net income adjusted for after-tax interest and amortizationof debt issuance costs related to convertible debt, if dilutive, divided by theweighted average number of common shares outstanding adjusted for the dilutiveeffect of stock options, restricted stock, phantom stock, performance units andconvertible securities (see Note 9).

Belowis a reconciliation of net income and weighted average common shares andpotential common shares outstanding for calculating diluted net income pershare:

|                                                                                                                        | ** ** | **Three Months EndedJune 30,** | ** ** | **Six Months EndedJune 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                                                             | ** ** | **2006**                                      | ** ** | **2005**                                    | ** ** | **2006** | ** ** | **2005** | ** ** |
| Numerator:                                                                                                             |       |                                          |       |                                        |       |   |   |   |   |
| Net income for basic net income per share                                                                              |       | $                                             | 46,646     |                                        | $          | 16,304 |   | $ | 59,373 |   | $ | 21,838 |   |
| Effect of assumed conversion of 1% convertible  senior subordinated debentures due 2024                                |       | 629                                           |       | 629                                         |       | 1,258 |   | 1,258 |   |
| Income available to common shareholders for  diluted net income per share                                         |       | $                                             | 47,275     |                                        | $          | 16,933 |   | $ | 60,631 |   | $ | 23,096 |   |
| Denominator:                                                                                                           |       |                                          |       |                                        |       |   |   |   |   |
| Weighted average number of common shares outstanding  for basic net income per share                                   |       | 58,502                                        |       | 54,561                                      |       | 57,626 |   | 54,537 |   |
| Effect of dilutive securities:                                                                                         |       |                                          |       |                                        |       |   |   |   |   |
| Employee stock options (a)                                                                                             |       | 2,073                                         |       | 1,010                                       |       | 2,277 |   | 1,005 |   |
| Restricted stock, phantom stock and performance  units                                                                 |       | 152                                           |       | —                                      |       | 122 |   | — |   |
| 1% convertible senior subordinated debentures due  2024                                                                |       | 11,494                                        |       | 11,494                                      |       | 11,494 |   | 11,494 |   |
| Weighted average  number of common and potential common shares outstanding for  diluted net income per share |       | 72,221                                        |       | 67,065                                      |       | 71,519 |   | 67,036 |   |

----

(a)             Optionsto purchase approximately 0.6 million and 3.3 million common shareswere excluded from the computation of net income per share, assuming dilution,for the three months ended June 30, 2006 and 2005, respectively, andoptions to purchase approximately 0.6 million and 4.5 million commonshares were excluded from the computation of net income per share, assumingdilution, for the six months ended June 30, 2006 and 2005, respectively,because they would have been antidilutive.

8

----

 

### **Equity-Based Compensation**

On January 1,2006, the Company adopted SFAS No. 123(R) using the modified prospectivetransition method to account for its equity-based compensation arrangements.The Company previously applied Accounting Principles Board (APB) Opinion No. 25,“Accounting for Stock Issued to Employees,” and related Interpretations andprovided the required pro forma disclosures of SFAS No. 123, “Accountingfor Stock-Based Compensation.”  See Note 9for the pro forma disclosures required for the three and six months ended June 30,2005.  The adoption of SFAS No. 123(R)did not materially affect the accounting for the equity-based compensationassociated with the Company’s previously awarded phantom stock or performanceunits, which was already based on the market price of the stock at date ofgrant. Under the modified prospective transition method, new and previouslygranted but unvested equity awards are recognized as compensation expense in theincome statement based on the estimated fair value of the award (net ofestimated forfeitures) at the grant date, and prior period results are notrestated. The Company estimates the fair value of stock options using theBlack-Scholes valuation model. The balance previously reflected as deferredequity compensation (a contra-equity account) was eliminated against additionalpaid-in capital (APIC) upon adoption of SFAS No. 123(R).

With the adoption of SFAS No. 123(R), the Companychanged its method of expense attribution for equity-based compensation forfuture awards from recognition over the nominal vesting period to recognitionover the requisite service period. Compensation expense for equity-based awardsgranted prior to January 1, 2006 will continue to be recognized over thenominal vesting period. For the three and six months ended June 30, 2006,additional pretax compensation expense of $0.3 million and $0.5 million,respectively, was recognized due to the continued use of the nominal vestingperiod for awards that were granted prior to January 1, 2006 toretirement-eligible employees.

TheCompany records deferred tax assets related to compensation expense for awardsthat are expected to result in future tax deductions for the Company, based onthe amount of compensation cost recognized and the Company’s statutory tax ratein the jurisdiction in which it expects to receive a deduction. Differencesbetween the deferred tax assets recognized for financial reporting purposes andactual tax deductions reported on the Company’s income tax return are recordedin APIC (if the tax deduction exceeds the deferred tax asset) or in theCondensed Consolidated Statement of Operations as additional income tax expense(if the deferred tax asset exceeds the tax deduction and no excess APIC existsfrom previous awards). In determining the amount of excess APIC at the adoptionof SFAS No. 123(R), the Company utilized the simplified alternativeprovided in FASB Staff Position FAS 123(R)-3, “Transition Election Related toAccounting for the Tax Effects of Share-Based Payment Awards” (FSP FAS123(R)-3).

Priorto the adoption of SFAS No. 123(R), the Company presented all tax benefitsresulting from the exercise of stock options as operating cash inflows in theCondensed Consolidated Statements of Cash Flows. SFAS No. 123(R) requiresthe benefit of tax deductions in excess of the compensation costs recognizedfor those options to be classified as financing cash inflows rather thanoperating cash inflows, on a prospective basis. As a result of utilizing thesimplified alternative provided under FSP FAS 123(R)-3, all tax benefitsresulting from the exercise of stock options that were vested as of theadoption of SFAS No. 123(R) will be classified as financing cash inflows.

**Impact of Newly Issued Accounting Standards**

In November 2004, the Financial AccountingStandards Board (FASB) issued SFAS No. 151, “Inventory Costs, an Amendmentof ARB No. 43, Chapter 4.” This statement is the result of efforts to converge U.S. accountingstandards for inventories with International Accounting Standards. SFAS No. 151requires that items such as idle

9

----

facilityexpense, excessive spoilage and rehandling costs be recognized as expenses inthe current period. It also requires that allocation of fixed productionoverhead to the costs of conversion be based on normal capacity of theproduction facilities. The Company adopted this standard January 1, 2006and its adoption did not have a material impact on the Company’s financialcondition, results of operations or cash flows.

In June 2006, the FASB issued Interpretation No.48, “Accounting for Uncertainty in Tax Positions” (FIN 48) to provideguidance on the recognition and measurement in financial statements ofuncertain tax positions taken or expected to be taken on tax returns.  FIN 48 also provides for new disclosureswith respect to unrecognized tax benefits. FIN 48 is effective for 2007 and a cumulative effect adjustmentwill be recognized in opening retained earnings for the impact of applying theguidance as of January 1, 2007.  TheCompany is not presently able to determine the impact of applying FIN 48.

**2.**    ACQUISITIONS

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 of thepurchase price, based on estimated fair values of the assets acquired, is asfollows:

|                                      | ** ** | **Amortization  Period** | ** ** | **Estimated Fair   Value** | ** ** |
|--------------------------------------|------------|--------------------------|------------|--------------------------------------|------------|
| ** **                           | ** ** | **(in years)**      | ** ** | **(in millions)**               | ** ** |
| Inventory                            |       |                     |       | $                                    | 4.9        |   |
| Other current  assets                |       |                     |       | 0.3                                  |       |
| Machinery and  equipment             |       |                     |       | 1.1                                  |       |
| Intangible  assets                   |       |                     |       |                                 |       |
| Customer relationships               |       | 10                       |       | 4.0                                  |       |
| Non-compete agreement                |       | 7                        |       | 1.7                                  |       |
| Other identifiable intangible assets |       | 10                       |       | 1.8                                  |       |
| Total purchase price                 |       |                     |       | $                                    | 13.8       |   |

 

The weighted average useful life of the intangibleassets acquired is 9.3 years.

In conjunction with the Company’s acquisition ofsubstantially all of the assets and assumption of certain liabilities of theConnectivity Solutions business of Avaya Inc. in January 2004, the Companyissued approximately 1.8 million shares of CommScope common stock. Theseunregistered shares included registration rights and the Company established aliability at the time the shares were issued for such registration costs. Duringthe six months ended June 30, 2006, the registration rights expired andthe Company reversed the liability that had been established, resulting in anincrease to additional paid-in capital of $0.5 million.

**3.**    BALANCE SHEETDATA

**Short-termInvestments**

At June 30, 2006 andDecember 31, 2005, the Company’s short-term investments were composed ofthe following:

|                     | ** ** | **June 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------|------------|-------------------------|------------|-----------------------------|------------|
| Available for  sale |       | $                       | 60,540     |                        | $          | 67,643 |   |
| Held-to-maturity    |       | 50,241                  |       | 34,458                      |       |
|                |       | $                       | 110,781    |                        | $          | 102,101 |   |

 

10

----

At June 30, 2006,the held-to-maturity short-term investments were composed of the following:

|                                  | ** ** | **Amortized Cost** | ** ** | **Gross   Unrealized   Gains** | ** ** | **Gross   Unrealized   Losses** | ** ** | **Fair Value** | ** ** |
|----------------------------------|------------|-------------------------|------------|------------------------------------------|------------|-------------------------------------------|------------|---------------------|------------|
| Corporate debt  obligations      |       | $                       | 34,941     |                                     | $          | —                                    |       | $                   | (41        | ) | $ | 34,900 |   |
| State and municipal  obligations |       | 15,300                  |       | —                                   |       | —                                    |       | 15,300              |       |
|                             |       | $                       | 50,241     |                                     | $          | —                                    |       | $                   | (41        | ) | $ | 50,200 |   |

 

At December 31,2005, the held-to-maturity short-term investments were composed of thefollowing:

|                                  | ** ** | **Amortized Cost** | ** ** | **Gross   Unrealized   Gains** | ** ** | **Gross   Unrealized   Losses** | ** ** | **Fair Value** | ** ** |
|----------------------------------|------------|-------------------------|------------|------------------------------------------|------------|-------------------------------------------|------------|---------------------|------------|
| Corporate debt  obligations      |       | $                       | 25,000     |                                     | $          | —                                    |       | $                   | (88        | ) | $ | 24,912 |   |
| State and municipal  obligations |       | 6,467                   |       | —                                   |       | (5                                        | )          | 6,462               |       |
| Federal agency notes             |       | 2,991                   |       | —                                   |       | (13                                       | )          | 2,978               |       |
|                             |       | $                       | 34,458     |                                     | $          | —                                    |       | $                   | (106       | ) | $ | 34,352 |   |

 

**Inventories**

|                 | ** ** | **June 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-----------------|------------|-------------------------|------------|-----------------------------|------------|
| Raw materials   |       | $                       | 57,501     |                        | $          | 49,936 |   |
| Work in process |       | 30,434                  |       | 26,002                      |       |
| Finished goods  |       | 68,264                  |       | 47,665                      |       |
|            |       | $                       | 156,199    |                        | $          | 123,603 |   |

 

**4.   LONG-TERM DEBT**

|                                                | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                     | ** ** | **2006**          | ** ** | **2005**              | ** ** |
| Senior secured  term loan                      |       | $                 | 30,000     |                  | $          | 36,500 |   |
| 1% convertible  senior subordinated debentures |       | 250,000           |       | 250,000               |       |
| IDA notes                                      |       | 10,800            |       | 10,800                |       |
|                                           |       | 290,800           |       | 297,300               |       |
| Less: current  portion                         |       | (13,000           | )          | (13,000               | )          |
|                                           |       | $                 | 277,800    |                  | $          | 284,300 |   |

 

See Note 10in the Notes to the Consolidated Financial Statements in the 2005Form 10-K for information on the terms and conditions of the seniorsecured credit facility. As of June 30, 2006, the Company had availabilityof approximately $86 million and no outstanding borrowings under thesenior secured revolving credit facility. The interest rate on the seniorsecured term loan was 6.74% and 6.17% at June 30, 2006 andDecember 31, 2005, respectively. Management believes the Company was incompliance with all of its covenants under this facility as of June 30,2006.

See Note 10 in the Notes to the ConsolidatedFinancial Statements in the 2005 Form 10-K for information on the termsand conditions of the 1% convertible senior subordinated debentures. Theestimated fair value of the Company’s convertible debentures as of June 30,2006 and December 31, 2005 was $372.2 million and $258.2 million,respectively.

**5.**   RESTRUCTURING CHARGES

**2005 RestructuringInitiatives**

In August 2005, the Board of Directors ofCommScope adopted global manufacturing initiatives to reduce 

11

----

costs by improving manufacturing efficiency and toenhance the Company’s long-term competitive position. Implementation of theseinitiatives includes shifting significant Enterprise and Broadband segmentcable production capacity among CommScope’s global facilities and the expectedclosing of a Broadband segment manufacturing facility in Scottsboro, Alabama inlate 2006. As a result of these initiatives, the Company recognized pretaxcharges of $34.5 million during 2005 and $4.0 million and $7.8 millionduring the three and six months ended June 30, 2006, respectively.

The activity within theliability (included in other accrued liabilities) for these restructuringinitiatives for the three and six months ended June 30, 2006 was asfollows:

|                                   | ** ** | **Employee-  Related  Costs** | ** ** | **Equipment  Relocation  Costs** | ** ** | **Asset  Impairment  Charges** | ** ** | **Total** | ** ** | ** ** |
|-----------------------------------|------------|-------------------------------|------------|----------------------------------|------------|--------------------------------|------------|-----------|------------|------------|
| Balance as of  March 31, 2006     |       | $                             | 2,177      |                             | $          | —                         |       | $         | —     |       | $ | 2,177 |   |   |
| Additional charge  recorded       |       | 2,092                         |       | 2,009                            |       | (97                            | )          | 4,004     |       |       |
| Cash paid                         |       | (2,337                        | )          | (2,009                           | )          | 97                             |       | (4,249    | )          |       |
| Balance as of June 30,  2006 |       | $                             | 1,932      |                             | $          | —                         |       | $         | —     |       | $ | 1,932 |   |   |
|                              |       |                          |       |                             |       |                           |       |      |       |       |
| Balance as of December  31, 2005  |       | $                             | 8,087      |                             | $          | —                         |       | $         | —     |       | $ | 8,087 |   |   |
| Additional  charge recorded       |       | 4,032                         |       | 3,818                            |       | (97                            | )          | 7,753     |       |       |
| Cash paid                         |       | (10,187                       | )          | (3,818                           | )          | 97                             |       | (13,908   | )          |       |
| Balance as of June 30,  2006 |       | $                             | 1,932      |                             | $          | —                         |       | $         | —     |       | $ | 1,932 |   |   |

 

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. Additional pretax employee-related costs of $0.5 millionto $1.0 million are expected to be recognized during the balance of 2006.

Equipment relocationcosts relate 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. These costs are recognized as the expenses areincurred and additional pretax costs of $1.5 million to $2.0 millionare expected to be recognized, substantially during the balance of 2006.

Asset impairment charges($14.0 million, pretax) were incurred during 2005 related to productionequipment that was identified as excess, pending consolidation of certainproduction operations in other facilities. As of June 30, 2006, land,buildings and equipment, with a carrying value of $20.3 million have beenclassified as held for sale at their estimated selling prices, less cost tosell.  Additional net impairment chargesor gains may be incurred upon the disposition of these assets.

**2004 RestructuringInitiatives**

In October 2004, the Board of Directors of Connectivity SolutionsManufacturing, Inc., a wholly owned subsidiary of the Company, adoptedorganizational and cost reduction initiatives at its Omaha, Nebraska facilityin order to improve its competitive position.

During the three and sixmonths ended June 30, 2005, pretax charges of $1.5 million and $3.6 million,respectively, were recognized in conjunction with these initiatives.  The activity within the liability for theserestructuring initiatives during the three and six months ended June 30,2006 was as follows:

|                                   | ** ** | **Employee-  Related  Costs** | ** ** | **Process  Improvement  Costs** | ** ** | **Asset  Impairment  Charges** | ** ** | **Total** | ** ** |
|-----------------------------------|------------|-------------------------------|------------|---------------------------------|------------|--------------------------------|------------|-----------|------------|
| Balance as of  March 31, 2006     |       | $                             | 89         |                            | $          | —                         |       | $         | —     |   | $ | 89 |   |
| Cash paid                         |       | (38                           | )          | —                          |       | —                         |       | (38       | )          |
| Balance as of June 30,  2006 |       | $                             | 51         |                            | $          | —                         |       | $         | —     |   | $ | 51 |   |
|                              |       |                          |       |                            |       |                           |       |      |       |
| Balance as of  December 31, 2005  |       | $                             | 173        |                            | $          | —                         |       | $         | —     |   | $ | 173 |   |
| Cash paid                         |       | (122                          | )          | —                          |       | —                         |       | (122      | )          |
| Balance as of June 30,  2006 |       | $                             | 51         |                            | $          | —                         |       | $         | —     |   | $ | 51 |   |

 

12

----

No future charges areanticipated in connection with these initiatives and the remainder of theliability is expected to be substantially paid during the balance of 2006.

**6.**   OFS BRIGHTWAVE, LLC

On June 30, 2006,CommScope received a payment of $29.8 million plus accrued interest infull satisfaction of the amount owed by OFS BrightWave, LLC (OFS BrightWave)under a $30 million Revolving Credit Agreement (the Agreement) datedNovember 16, 2001 and the Agreement was terminated.  The carrying value of the Note hadpreviously been reduced to zero as a result of recording CommScope’s equity inlosses of OFS BrightWave prior to the sale of CommScope’s equity interest inOFS BrightWave in June 2004 and an impairment charge of $11.1 millionat the time of the sale.

The recovery of the OFSBrightWave Note resulted in a pretax gain of $29.8 million ($18.6 millionafter-tax, or $0.26 per diluted share for the three and six months ended June 30,2006).

**7.**   DERIVATIVES AND HEDGING ACTIVITIES

As of June 30, 2006 and 2005, the only derivativefinancial instrument outstanding was a cross currency swap of U.S. dollars foreuros with a notional amount of $14 million. During the three and sixmonths ended June 30, 2005, the swap was designated and documented as ahedge of the Company’s net investment in its Belgian subsidiary to reduce thevolatility in stockholders’ equity caused by changes in euro exchange rates.Effective October 1, 2005, a portion of the hedging instrument wasdesignated as a hedge against fluctuations in the fair value of certain of theCompany’s euro-denominated assets. Losses of $163 and $211 (pretax) on theportion designated as a fair value hedge are reflected in the Company’sCondensed Consolidated Statements of Operations for the three and six monthsended June 30, 2006, respectively. The designations of the hedginginstrument were effective as of June 30, 2006 and 2005, and are expectedto continue to be effective for the duration of the agreement, resulting in noanticipated hedge ineffectiveness.

The fair value of thederivative instrument, reflected in other noncurrent liabilities, wasapproximately $7.0 million and $5.8 million as of June 30, 2006and December 31, 2005, respectively.

There were no materialreclassifications from other comprehensive income (loss) to earnings during thethree and six months ended June 30, 2006 and 2005.

Activityin the accumulated net loss on derivative instruments included in accumulatedother comprehensive loss consisted of the following:

|                                                                                               | ** ** | **Three Months  Ended June 30,** | ** ** | **Six Months  Ended June 30,** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                    | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
| Accumulated net  loss on derivative instruments, beginning of period                     |       | $                                               | (4,445     | )                                             | $          | (5,358 | ) | $ | (4,274 | ) | $ | (5,716 | ) |
| Net gain (loss)  on derivative financial instrument designated as a net investment hedge |       | (581                                            | )          | 783                                           |       | (752 | ) | 1,141 |   |
| Accumulated net loss on  derivative instruments, end of period                           |       | $                                               | (5,026     | )                                             | $          | (4,575 | ) | $ | (5,026 | ) | $ | (4,575 | ) |

 

During the three monthsended June 30, 2006 and 2005, the income tax expense (benefit) related tothe gain (loss) on the derivative financial instrument designated as a netinvestment hedge and reported within other comprehensive income was $(341) and$460, respectively. During the six months ended June 30, 2006 and 2005,the

13

----

income tax expense(benefit) related to the gain (loss) on the derivative financial instrumentdesignated as a net investment hedge and reported within other comprehensiveincome was $(442) and $670, respectively.

**8.    EMPLOYEEBENEFIT PLANS**

|                                        | ** ** | **Pension Benefits**                           | ** ** | **Other Postretirement  Benefits** | ** ** |
|----------------------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                             | ** ** | **Three Months Ended June 30,** | ** ** |
| ** **                             | ** ** | **2006**                                            | ** ** | **2005**                                | ** ** | **2006** | ** ** | **2005** | ** ** |
| Service cost                           |       | $                                                   | 825        |                                    | $          | 983 |   | $ | 1,128 |   | $ | 1,043 |   |
| Interest cost                          |       | 1,731                                               |       | 1,565                                   |       | 1,229 |   | 1,077 |   |
| Recognized  actuarial loss             |       | 14                                                  |       | —                                  |       | 140 |   | (92 | ) |
| Amortization of  prior service costs   |       | (97                                                 | )          | —                                  |       | (131 | ) | — |   |
| Amortization of  transition obligation |       | 10                                                  |       | 10                                      |       | — |   | — |   |
| Return on plan  assets                 |       | (1,972                                              | )          | (1,581                                  | )          | (139 | ) | (131 | ) |
| Net periodic benefit  cost             |       | $                                                   | 511        |                                    | $          | 977 |   | $ | 2,227 |   | $ | 1,897 |   |

 

|                                        | ** ** | **Six Months Ended June 30,** | ** ** |
|----------------------------------------|------------|---------------------------------------------------|------------|
| ** **                             | ** ** | **2006**                                          | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** |
| Service cost                           |       | $                                                 | 1,639      |   | $ | 1,974 |   | $ | 2,256 |   | $ | 2,096 |   |
| Interest cost                          |       | 3,456                                             |       | 3,135 |   | 2,458 |   | 2,229 |   |
| Recognized  actuarial loss             |       | 27                                                |       | — |   | 280 |   | (3 | ) |
| Amortization of  prior service costs   |       | (194                                              | )          | — |   | (263 | ) | — |   |
| Amortization of  transition obligation |       | 20                                                |       | 21 |   | — |   | — |   |
| Return on plan  assets                 |       | (3,939                                            | )          | (3,165 | ) | (278 | ) | (262 | ) |
| Net periodic benefit  cost             |       | $                                                 | 1,009      |   | $ | 1,965 |   | $ | 4,453 |   | $ | 4,060 |   |

 

The Company contributedapproximately $9.4 million and $14.6 million to its pension plans during thethree and six months ended June 30, 2006, respectively, and anticipatesmaking additional contributions of approximately $0.4 million to these plansduring 2006. The Company contributed approximately $1.0 million and $2.0 millionto the postretirement benefit plans during the three and six months endedJune 30, 2006, respectively, and anticipates making additionalcontributions of approximately $2.0 million to these plans during 2006.

**9.    EQUITY-BASEDCOMPENSATION PLANS**

On May 5, 2006, the stockholders of the Companyapproved the 2006 Long Term Incentive Plan (the 2006 Plan), authorizing 2.3million shares for issuance, of which no more than 1.5 million shares may befull value awards (stock, restricted stock, restricted stock units orperformance awards, as defined).  Awardsunder the 2006 Plan may include stock, stock options, restricted stock,restricted stock units, performance units, performance share units,performance-based restricted stock, stock appreciation rights and dividendequivalent rights for employees and non-employee directors of the Company.Approval of the 2006 Plan canceled all shares authorized but not issued underthe Amended and RestatedCommScope, Inc. 1997 Long-Term Incentive Plan (the 1997 Plan).  Awards granted prior to May 5, 2006 remainsubject to the provisions of the 1997 Plan.

PerformanceShare Units issued under the 2006 Plan or Performance Units issued under the1997 Plan (collectively PSUs) are stock awards in which the number of sharesultimately received by the employee depends on Company performance againstspecified targets.  Such awards vestafter three years if the performance targets are met. The fair value of each PSUis determined on the date of grant, based on the Company’s stock price and thelikelihood that performance targets will be achieved. Over the performanceperiod, the number of shares of stock that will be issued is adjusted upward ordownward based upon the probable achievement of performance targets. Theultimate number of shares issued and the related compensation cost recognizedwill be based on a comparison of the final performance metrics to the targetsspecified in the grants.

Restricted Stock Unit Awards issued under the 2006Plan or Phantom Stock Awards issued under the 1997 Plan (collectively RSUs)entitle the holder to shares of common stock after a three-year vesting period.The fair value of the awards is determined on the grant date based on theCompany’s stock price.

14

----

 

Stockoptions are awards that allow the employee to purchase shares of the Company’scommon stock at a fixed price. Stock options are granted at an exercise priceequal to or greater than the Company’s stock price at the date of grant. Theseawards generally vest one-third per year over the three years following thegrant date and have a contractual term of ten years.

Thefollowing table sets forth the total pretax equity-based compensation expenseresulting from PSUs, RSUs and stock options included in the CondensedConsolidated Statements of Operations for the three and six months ended June30, 2006 (in thousands):

|                                              | ** ** | **Three Months  Ended  June 30, 2006** | ** ** | **Six Months  Ended  June 30, 2006** | ** ** |
|----------------------------------------------|------------|-------------------------------------------------------|------------|-----------------------------------------------------|------------|
| Cost of sales                                |       | $                                                     | 328        |                                                | $          | 626 |   |
| Selling, general  and administrative expense |       | 664                                                   |       | 1,275                                               |       |
| Research and  development expense            |       | 117                                                   |       | 228                                                 |       |
| Total  equity-based compensation expense     |       | $                                                     | 1,109      |                                                | $          | 2,129 |   |

 

Asof June 30, 2006, $9.3 million of total unrecognized compensation costs relatedto non-vested awards are expected to be recognized over a remaining weightedaverage period of 2.1 years. There were no significant capitalized equity-basedcompensation costs at June 30, 2006.

Thefollowing table summarizes the stock option activity for the three and sixmonths ended June 30, 2006 (in thousands, except per share data):
| ** **                           | ** ** | **Shares** | ** ** | **Weighted  Average   Exercise  Price Per  Share** | ** ** | **Weighted  Average  Grant Date  Fair  Value Per  Share** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
|--------------------------------------|------------|------------|------------|--------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|---------------------------------|------------|
| Outstanding,  March 31, 2006    |       | 6,474      |       | $                                                            | 16.99      |                                                                |       |                            | $          | 80,119 |   |
| Granted                              |       | 3          |       | $                                                            | 29.82      |                                                                | $          | 13.74                           |       |   |   |
| Exercised                            |       | (1,023     | )          | $                                                            | 14.04      |                                                                |       |                            | $          | 16,942 |   |
| Expired or  forfeited                |       | (2         | )          | $                                                            | 23.80      |                                                                |       |                            |       |   |
| Outstanding, June 30,  2006          |       | 5,452      |       | $                                                            | 17.58      |                                                                |       |                            | $          | 78,715 |   |
|                                 |       |       |       |                                                         |       |                                                                |       |                            |       |
| Outstanding,  December 31, 2005 |       | 8,440      |       | $                                                            | 16.31      |                                                                |       |                            | $          | 42,705 |   |
| Granted                              |       | 10         |       | $                                                            | 22.49      |                                                                | $          | 10.25                           |       |   |   |
| Exercised                            |       | (2,992     | )          | $                                                            | 14.05      |                                                                |       |                            | $          | 38,131 |   |
| Expired or  forfeited                |       | (6         | )          | $                                                            | 35.59      |                                                                |       |                            |       |   |
| Outstanding, June 30, 2006           |       | 5,452      |       | $                                                            | 17.58      |                                                                |       |                            | $          | 78,715 |   |

 

Theexercise prices of outstanding options at June 30, 2006 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 $10.00                             |       | 889                             |       | 6.4                                                                      |       | $ | 7.92 |   | 889 |   | $ | 7.92 |   |
| $10.01 to $15.50                            |       | 688                             |       | 3.1                                                                      |       | $ | 13.82 |   | 628 |   | $ | 13.88 |   |
| $15.51 to $16.50                            |       | 1,409                           |       | 6.2                                                                      |       | $ | 15.93 |   | 1,409 |   | $ | 15.93 |   |
| $16.51 to $18.00                            |       | 767                             |       | 4.7                                                                      |       | $ | 17.16 |   | 767 |   | $ | 17.16 |   |
| $18.01 to $24.00                            |       | 1,096                           |       | 8.3                                                                      |       | $ | 19.13 |   | 901 |   | $ | 18.96 |   |
| $24.01 to $47.06                            |       | 603                             |       | 3.5                                                                      |       | $ | 37.38 |   | 600 |   | $ | 37.45 |   |
| $7.43 to $47.06                             |       | 5,452                           |       | 5.7                                                                      |       | $ | 17.58 |   | 5,194 |   | $ | 17.54 |   |

 

15

----

Asof June 30, 2006, the aggregate intrinsic value of exercisable stock optionswas $75.4 million, with a weighted average remaining contractual life of 5.6years.

Thefollowing table summarizes the PSU and RSU activity for the three and sixmonths ended June 30, 2006 (in thousands, except per share data):
| ** **                           | ** ** | **Units** | ** ** | **Weighted   Average Grant   Date Fair   Value Per   Share** | ** ** |
|--------------------------------------|------------|-----------|------------|-------------------------------------------------------------------------------------------------|------------|
| Outstanding,  March 31, 2006    |       | 489       |       | $                                                                                               | 20.01      |   |
| Granted                              |       | 2         |       | $                                                                                               | 29.82      |   |
| Forfeited                            |       | (2        | )          | $                                                                                               | 21.95      |   |
| Outstanding, June 30,  2006          |       | 489       |       | $                                                                                               | 20.04      |   |
|                                 |       |      |       |                                                                                            |       |
| Outstanding,  December 31, 2005 |       | 484       |       | $                                                                                               | 19.91      |   |
| Granted                              |       | 14        |       | $                                                                                               | 24.74      |   |
| Forfeited                            |       | (9        | )          | $                                                                                               | 20.25      |   |
| Outstanding, June 30, 2006           |       | 489       |       | $                                                                                               | 20.04      |   |

 

Thefollowing table summarizes the non-vested stock option, PSU and RSU activityfor the three and six months ended June 30, 2006 (in thousands):
| ** **                                 | ** ** | **Stock  Options** | ** ** | **PSUs and RSUs** | ** ** |
|--------------------------------------------|------------|--------------------|------------|-----------------------------|------------|
| Non-vested awards,  March 31, 2006    |       | 283                |       | 488                         |       |
| Granted                                    |       | 3                  |       | 2                           |       |
| Vested                                     |       | (28                | )          | (1                          | )          |
| Forfeited                                  |       | —             |       | (2                          | )          |
| Non-vested awards, June  30, 2006          |       | 258                |       | 487                         |       |
|                                       |       |               |       |                        |       |
| Non-vested awards,  December 31, 2005 |       | 293                |       | 484                         |       |
| Granted                                    |       | 10                 |       | 14                          |       |
| Vested                                     |       | (41                | )          | (2                          | )          |
| Forfeited                                  |       | (4                 | )          | (9                          | )          |
| Non-vested awards, June 30, 2006           |       | 258                |       | 487                         |       |

 

The Company’s pro formadisclosures of net earnings for periods prior to the adoption of SFASNo. 123(R) were determined under a fair value method as prescribed by SFASNo. 123. Key input assumptions used to estimate the fair value of stockoptions include the grant price of the award, the expected option term,volatility of the Company’s stock, the risk-free rate and the Company’sprojected dividend yield. The Company believes that the valuation technique andthe approach utilized to develop the underlying assumptions are appropriate inestimating the fair values of CommScope stock options. Estimates of fair valueare not intended to predict actual future events or the value ultimatelyrealized by employees who receive equity awards, and subsequent events are notindicative of the reasonableness of the original estimates of fair value madeby the Company under SFAS No. 123 or SFAS No. 123(R).

The fair value of stockoption awards was estimated using the Black-Scholes model with the followingweighted-average assumptions for the three and six months ended June 30, 2006and 2005:

16

----

 

|                                           | ** ** | **Three Months  Ended June 30,** | ** ** | **Six Months  Ended June 30,** | ** ** |
|-------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
| Expected option term  (in years)          |       | 5.0                                             |       | 4.0                                           |       | 5.0 |   | 4.0 |   |
| Risk-free interest rate                   |       | 4.9                                             | %          | 4.0                                           | %          | 4.5 | % | 4.0 | % |
| Expected volatility                       |       | 45                                              | %          | 41                                            | %          | 45 | % | 41 | % |
| Expected dividend yield                   |       | 0                                               | %          | 0                                             | %          | 0 | % | 0 | % |
| Weighted-average fair value at grant date |       | $                                               | 13.74      |                                          | $          | 5.53 |   | $ | 10.25 |   | $ | 5.68 |   |
|                                           |            |                                                 |            |                                               |            |  |  |  |  |  |  |  |  |

 

Hadthe Company accounted for equity-based compensation plans using the fair valuebased accounting method described by SFAS No. 123 for periods prior to2006, the Company’s basic and diluted net income per share for the three andsix months ended June 30, 2005, would have been as follows (in thousands,except per share data):

|                                                                                                                                                           | ** ** | **Three Months Ended  June 30, 2005** | ** ** | **Six Months Ended  June 30, 2005** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| Net income, as reported                                                                                                                                   |       | $                                                         | 16,304     |                                                    | $          | 21,838 |   |
| Deduct: Total  stock-based employee compensation expense determined under fair value based  method for all awards, net of related income tax effects |       | 1,601                                                     |       | 3,599                                                   |       |
| Pro forma net income  for basic net income per share                                                                                                      |       | 14,703                                                    |       | 18,239                                                  |       |
| Add: Effect of assumed  conversion of 1% convertible senior subordinated debentures due 2024                                                              |       | 629                                                       |       | 1,258                                                   |       |
| Pro forma net income  for diluted net income per share                                                                                                    |       | $                                                         | 15,332     |                                                    | $          | 19,497 |   |
| Net income per share:                                                                                                                                     |       |                                                      |       |                                                    |       |
| Basic—as  reported                                                                                                                                   |       | $                                                         | 0.30       |                                                    | $          | 0.40 |   |
| Basic—pro forma                                                                                                                                      |       | $                                                         | 0.27       |                                                    | $          | 0.33 |   |
| Diluted—as  reported                                                                                                                                 |       | $                                                         | 0.25       |                                                    | $          | 0.34 |   |
| Diluted—pro forma                                                                                                                                    |       | $                                                         | 0.23       |                                                    | $          | 0.29 |   |

 

On August 10, 2005,the Compensation Committee of the Company’s Board of Directors amended certainstock option agreements with employees to accelerate the vesting of certainoutstanding unvested stock options. Unvested options to purchase 2.1 millionshares with an average exercise price of $17.54 per share became exercisable asa result of the vesting acceleration. The intrinsic value of the stock optionson the acceleration date was $2.6 million. As a result of the acceleratedvesting, the Company recognized no compensation expense associated with theseoptions during the three and six months ended June 30, 2006. Had these optionsnot been accelerated, the Company would have recognized additional pre-taxcompensation expense for the three and six months ended June 30, 2006 of $1.6million and $3.3 million, respectively.

**10.**   SEGMENTS

The Company’s reportablesegments are defined by major product category as follows: Enterprise,Broadband and Carrier.

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.

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 structured cabling solutions for telephone central offices.. These products are primarily used by telecommunications service providers or “carriers.”

17

----

 

Thefollowing tables provide summary financial information for these reportablesegments as of June 30, 2006 and December 31, 2005 and for the threeand six months ended June 30, 2006 and 2005 (in millions):

|                                                    | ** ** | **As of**    | ** ** | **As of**        | ** ** |
|----------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                         | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
| ** **                                         | ** ** | **2006**          | ** ** | **2005**              | ** ** |
| Identifiable segment  related assets:              |       |              |       |                  |       |
| Enterprise                                         |       | $                 | 409.2      |                  | $          | 352.4 |   |
| Broadband                                          |       | 378.1             |       | 343.2                 |       |
| Carrier                                            |       | 97.6              |       | 108.0                 |       |
| Total identifiable  segment related assets         |       | 884.9             |       | 803.6                 |       |
|                                               |       |              |       |                  |       |
| Reconciliation to total  assets:                   |       |              |       |                  |       |
| Cash, cash  equivalents and short-term investments |       | 296.1             |       | 248.7                 |       |
| Deferred income  taxes                             |       | 43.4              |       | 49.9                  |       |
| Total assets                                       |       | $                 | 1,224.4    |                  | $          | 1,102.2 |   |

 

|                                | ** ** | **Three Months  Ended June 30,** | ** ** | **Six Months  Ended June 30,** | ** ** |
|--------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                     | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net sales:                     |       |                                            |       |                                          |       |   |   |   |   |
| Enterprise                     |       | $                                               | 205.1      |                                          | $          | 173.8 |   | $ | 377.2 |   | $ | 331.5 |   |
| Broadband                      |       | 136.5                                           |       | 109.9                                         |       | 262.4 |   | 218.0 |   |
| Carrier                        |       | 71.0                                            |       | 53.7                                          |       | 125.7 |   | 97.8 |   |
| Inter-segment eliminations     |       | (0.7                                            | )          | (0.7                                          | )          | (1.2 | ) | (1.5 | ) |
| Consolidated net  sales        |       | $                                               | 411.9      |                                          | $          | 336.7 |   | $ | 764.1 |   | $ | 645.8 |   |
|                           |       |                                            |       |                                          |       |   |   |   |   |
| Operating income  (loss):      |       |                                            |       |                                          |       |   |   |   |   |
| Enterprise                     |       | $                                               | 23.8       |                                          | $          | 22.2 |   | $ | 35.1 |   | $ | 31.1 |   |
| Broadband                      |       | 4.5                                             |       | 5.8                                           |       | 12.5 |   | 12.3 |   |
| Carrier                        |       | 9.8                                             |       | (3.4                                          | )          | 9.8 |   | (10.3 | ) |
| Consolidated operating  income |       | $                                               | 38.1       |                                          | $          | 24.6 |   | $ | 57.4 |   | $ | 33.1 |   |

** **

**11.   SUPPLEMENTALCASH FLOW INFORMATION**

|                                                                                                                                       | ** ** | **Six Months  Ended June 30,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                                                            | ** ** | **2006**                                      | ** ** | **2005** | ** ** |
| Cash paid during the  period for:                                                                                                     |       |                                          |       |   |   |
| Income taxes                                                                                                                          |       | $                                             | 7,747      |   | $ | 11,390 |   |
| Interest                                                                                                                              |       | 3,002                                         |       | 3,330 |   |
| Noncash investing and  financing activities:                                                                                          |       |                                          |       |   |   |
| Fair value, less  costs to sell, of held for sale assets transferred from property,  plant and equipment to other current assets |       | $                                             | 10,128     |   | $ | 10,190 |   |
|                                                                                                                                  |       |                                          |       |   |   |

 

18

----

 

**ITEM2.**                 MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussionand analysis of our financial condition and results of operations for the threeand six months ended June 30, 2006 and 2005 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 2005 AnnualReport on Form 10-K.

**Overview**

CommScope, Inc. is aworld leader in the design and manufacture of cable and connectivity solutionsfor communications networks. We focus on the ‘last mile’ in communicationsnetworks, which is the distribution access, or final link to the customer. Weare a global leader in both structured cabling for business enterprise applicationsand broadband coaxial and fiber optic cables for the cable television industry.We also design, manufacture and market a broad line of high-performanceelectronic, coaxial and fiber optic cable products for data networking,Internet access, wireless communication, telephony and other broadbandapplications. In addition, we are a leading provider of environmentally secureenclosures for telecommunication service providers in the United States.

**CRITICALACCOUNTING POLICIES**

There have been nochanges in our critical accounting policies or significant accounting estimatesas disclosed in our 2005 Annual Report on Form 10-K other than theimplementation of SFAS No. 123(R) as of January 1, 2006 on the modifiedprospective basis (see Notes 1 and 9 in the Notes to the Consolidated FinancialStatements included elsewhere in this Form 10-Q).

**COMPARISON OFRESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006WITH THE THREE AND SIX MONTHS ENDED JUNE 30, 2005**
| ** **                              | ** ** | **Three Months Ended June 30,** | ** ** | ** **    | ** ** | ** **     | ** ** |
|-----------------------------------------|------------|-----------------------------------------------------|------------|---------------|------------|----------------|------------|
| ** **                              | ** ** | **2006**                                            | ** ** | **2005**      | ** ** | ** **     | ** ** | ** ** | ** ** |
| ** **                              | ** ** | ** **                                          | ** ** | **% of** | ** ** | ** **     | ** ** | **% of** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                              | ** ** | **$**                                               | ** ** | **Net**       | ** ** | **$ **    | ** ** | **Net** | ** ** | **Dollar** | ** ** | **%** | ** ** |
| ** **                              | ** ** | **(millions)**                                      | ** ** | **Sales**     | ** ** | **(millions)** | ** ** | **Sales** | ** ** | **Change** | ** ** | **Change** | ** ** |
| Net sales                               |       | $                                                   | 411.9      |          | 100.0      | %              | $          | 336.7 |   | 100.0 | % | $ | 75.2 |   | 22.3 | % |
| Gross profit                            |       | 108.5                                               |       | 26.3          |       | 88.6           |       | 26.3 |   | 19.9 |   | 22.5 |   |
| SG&A expense                        |       | 58.3                                                |       | 14.1          |       | 54.0           |       | 16.0 |   | 4.2 |   | 7.8 |   |
| R&D expense                         |       | 8.2                                                 |       | 2.0           |       | 8.4            |       | 2.5 |   | (0.2 | ) | (2.8 | ) |
| Restructuring costs                     |       | 4.0                                                 |       | 1.0           |       | 1.5            |       | 0.4 |   | 2.5 |   | 159.0 |   |
| Gain on OFS BrightWave  note receivable |       | 18.6                                                |       | 4.5           |       | —         |       | — |   | 18.6 |   | 100.0 |   |
| Net income                              |       | 46.6                                                |       | 11.3          |       | 16.3           |       | 4.8 |   | 30.3 |   | 186.1 |   |
| Net income per diluted share            |       | 0.65                                                |       |          |       | 0.25           |       |   |   | 0.40 |   | 160.0 |   |
|                                         |            |                                                     |            |               |            |                |            |  |  |  |  |  |  |  |  |  |

 
| ** **                              | ** ** | **Six Months Ended June 30,** | ** ** | ** **    | ** ** | ** **     | ** ** |
|-----------------------------------------|------------|---------------------------------------------------|------------|---------------|------------|----------------|------------|
| ** **                              | ** ** | **2006**                                          | ** ** | **2005**      | ** ** | ** **     | ** ** | ** ** | ** ** |
| ** **                              | ** ** | ** **                                        | ** ** | **% of** | ** ** | ** **     | ** ** | **% of** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                              | ** ** | **$**                                             | ** ** | **Net**       | ** ** | **$**          | ** ** | **Net** | ** ** | **Dollar** | ** ** | **%** | ** ** |
| ** **                              | ** ** | **(millions)**                                    | ** ** | **Sales**     | ** ** | **(millions)** | ** ** | **Sales** | ** ** | **Change** | ** ** | **Change** | ** ** |
| Net sales                               |       | $                                                 | 764.1      |          | 100.0      | %              | $          | 645.8 |   | 100.0 | % | $ | 118.3 |   | 18.3 | % |
| Gross profit                            |       | 193.3                                             |       | 25.3          |       | 160.8          |       | 24.9 |   | 32.5 |   | 20.2 |   |
| SG&A expense                        |       | 112.4                                             |       | 14.7          |       | 107.9          |       | 16.7 |   | 4.5 |   | 4.2 |   |
| R&D expense                         |       | 15.7                                              |       | 2.1           |       | 16.2           |       | 2.5 |   | (0.5 | ) | (3.3 | ) |
| Restructuring costs                     |       | 7.8                                               |       | 1.0           |       | 3.6            |       | 0.6 |   | 4.2 |   | 116.9 |   |
| Gain on OFS BrightWave  note receivable |       | 18.6                                              |       | 2.4           |       | —         |       | — |   | 18.6 |   | 100.0 |   |
| Net income                              |       | 59.4                                              |       | 7.8           |       | 21.8           |       | 3.4 |   | 37.6 |   | 171.9 |   |
| Net income per diluted share            |       | 0.85                                              |       |          |       | 0.34           |       |   |   | 0.51 |   | 150.0 |   |
|                                         |            |                                                   |            |               |            |                |            |  |  |  |  |  |  |  |  |  |

 

19

----

 

**Net sales**

**Theincrease in net sales for the three and six months ended June 30, 2006over the comparable prior year periods is primarily attributed to domesticsales growth in each of our segments and international sales growth in ourEnterprise and Broadband segments. These increases are largely the result ofhigher sales volume levels and price increases implemented in response tohigher raw material costs.  For furtherdetails by segment, see the section titled “Segment Results” below.**

**Gross profit (netsales less cost of sales)**

Gross profit margin forthe three months ended June 30, 2006 was unchanged at 26.3% from the threemonths ended June 30, 2005. Gross profit margin for the six months endedJune 30, 2006 increased to 25.3% from 24.9% for the six months endedJune 30, 2005. The unchanged gross profit margin for the three monthsended June 30, 2006 and the modest increase for the six months ended June 30,2006 reflect the impact of substantially higher raw material costs, which weresubstantially offset by price increases, cost savings achieved as a result ofrestructuring activities and increased sales volumes.

We expect continuedvolatility in the costs of certain raw materials, such as copper, aluminum,steel, and plastics and other polymers, which are derived from oil and naturalgas.  The inability to achieve higherselling prices, higher sales volume and continued cost efficiencies to offsetincreases in the cost of raw materials could result in lower gross profit andgross profit margin.

**Selling, generaland administrative expense**

The increase in selling,general and administrative expense (SG&A) for the three and six monthsended June 30, 2006 as compared to the same periods in 2005 was primarilydue to higher marketing costs associated with the higher level of sales.  The reduction in SG&A expense as apercentage of net sales can be attributed to increased sales.

**Research anddevelopment**

Research and development(R&D) expense decreased by $0.2 million and $0.5 million for the three andsix months ended June 30, 2006, respectively, as compared to the sameperiods in 2005. R&D expense as a percentage of net sales decreasedmodestly to 2.0% and 2.1% for the three and six months ended June 30,2006, respectively, as compared to 2.5% for the comparable 2005 three and sixmonth periods. The ongoing R&D activities generally relate to bringing newproducts to market and to modifying existing products to better serve ourcustomers.

**RestructuringCosts**

We recognized pretaxrestructuring costs of $4.0 million and $7.8 million during the three and sixmonths ended June 30, 2006, respectively, compared with $1.5 million and $3.6million during the comparable periods ended June 30, 2005, respectively.The 2006 costs resulted from the continued implementation of the globalmanufacturing initiatives which began during the third quarter of 2005.  Included in the costs incurred during thethree and six months ended June 30, 2006 were employee-related costs of $2.1million and $4.0 million, respectively, which consisted of expected severancecosts and related fringe benefits, accrued over the remaining period employeesare required to work in order to receive benefits, and equipment relocationcosts of $2.0 million and $3.8 million, respectively, which consisted of costsdirectly related to shifting manufacturing capacity among our globalmanufacturing  facilities, includingcosts to uninstall, pack, ship and re-install equipment as well as costs toprepare the receiving facility to accommodate the equipment.  During the three and six months ended June30, 2005, we recognized pretax restructuring costs of $1.5 million and $3.6million, respectively, related to the continued implementation of theorganizational and cost reduction initiatives at the Omaha facility ofConnectivity Solutions Manufacturing, Inc., our wholly owned manufacturingsubsidiary, which began during the fourth quarter of 2004.

During the three and sixmonths ended June 30, 2006, we recognized $0.1 million of gains on the sale ofequipment that had been impaired in conjunction with the global manufacturinginitiatives.  As of June 30, 2006, thereis $20.3 million of real estate and equipment that, as a result of the globalmanufacturing initiatives, is considered held for sale.  The sales of these assets are expected to beconsummated in the next three to nine months and additional restructuring gainsor losses may be realized.

20

----

 

We anticipate that wewill recognize additional pretax employee-related and equipment relocationcharges of up to $3 million to complete the implementation of the globalmanufacturing initiatives.  The majorityof these costs are expected to be incurred during the balance of 2006.

**Net interestincome/expense**

We recognized netinterest income of $356 and $424 for the three and six months ended June 30,2006, respectively, compared to net interest expense of $1,140 and $2,219 forthe comparable prior year periods.  Thechanges were due to the impact of significantly higher balances of investedfunds (cash, cash equivalents and short-term investments) as well as improvedrates of return on invested balances as a result of increases in LIBOR andother short-term interest rates. Interest expense for the three and six month periods declined slightlyfrom the comparable prior year periods as a result of lower levels ofoutstanding debt due to scheduled principal repayments and a reduction in theinterest rate spreads on our senior secured credit facility due to improvementsin our fixed charge coverage ratio, offset by the impact of increases in LIBORand other short-term interest rates,  Ourweighted average effective interest rate on outstanding borrowings, includingamortization of associated long-term financing costs, was essentially unchangedat 2.76% as of June 30, 2006 compared to 2.74% as of December 31, 2005

**Income taxes**

Our effective income taxrate, excluding the impact of the gain on the OFS note receivable (seediscussion below), was 27% and 30% for the three and six months endedJune 30, 2006, respectively, compared to 29% and 28% for the three and sixmonths ended June 30, 2005, respectively. The reduction in our effectiveincome tax rate for the three months ended June 30, 2006 compared to the prioryear was primarily due to benefits realized as a result of favorable outcomeson various matters raised during federal and state income tax audits, partiallyoffset by losses incurred in certain foreign jurisdictions for which no taxbenefits have been recognized.  Theincrease in our effective rate for the six months ended June 30, 2006 comparedto the prior year was primarily due to reduced benefits from international activitiesthat are taxed at lower rates due to changes in the mix of earnings amongforeign and domestic entities, partially offset by the benefits realized as aresult of favorable outcomes on various matters raised during federal and stateincome tax audits.

**Gain on OFSBrightWave note receivable**

On June 30, 2006, wereceived a payment of $29.8 million plus accrued interest in full satisfactionof the amount owed by OFS BrightWave, LLC (OFS BrightWave) under a $30 millionRevolving Credit Agreement that was by its terms scheduled to be repaid nolater than November 16, 2006.  Thecarrying value of the note had previously been reduced to zero as a result ofrecording our equity in losses of OFS BrightWave prior to the sale of ourinterest in OFS BrightWave in June 2004 and an impairment charge of $11.1million at the time of the sale.  TheRevolving Credit Agreement was terminated on June 30, 2006.

The reported gain on theOFS BrightWave note receivable is net of a tax provision of $11.2 million.

**SegmentResults**

 

21

----

 
| ** **                           | ** ** | **Three Months Ended June 30,** | ** ** | ** **    | ** ** | ** ** | ** ** |
|--------------------------------------|------------|-----------------------------------------------------|------------|---------------|------------|------------|------------|
| ** **                           | ** ** | **2006**                                            | ** ** | **2005**      | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                           | ** ** | ** **                                          | ** ** | **%** of | ** ** | ** ** | ** ** | **% of** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                           | ** ** | ** **                                          | ** ** | **Net**       | ** ** | ** ** | ** ** | **Net** | ** ** | **Dollar** | ** ** | **%** | ** ** |
| ** **                           | ** ** | **Amount**                                          | ** ** | **Sales**     | ** ** | **Amount** | ** ** | **Sales** | ** ** | **Change** | ** ** | **Change** | ** ** |
| ** **                           | ** ** | **(dollars in millions)**                 | ** ** |
| Net sales by segment:                |       |                                                |       |          |       |       |       |   |   |   |   |   |   |
| Enterprise                           |       | $                                                   | 205.1      |          | 49.8       | %          | $          | 173.8 |   | 51.6 | % | $ | 31.3 |   | 18.0 | % |
| Broadband                            |       | 136.5                                               |       | 33.1          |       | 109.9      |       | 32.6 |   | 26.6 |   | 24.2 |   |
| Carrier                              |       | 71.0                                                |       | 17.2          |       | 53.7       |       | 16.0 |   | 17.3 |   | 32.2 |   |
| Inter-segment  eliminations          |       | (0.7                                                | )          | (0.1          | )          | (0.7       | )          | (0.2 | ) | — |   |   |   |
| Consolidated net sales               |       | $                                                   | 411.9      |          | 100.0      | %          | $          | 336.7 |   | 100.0 | % | $ | 75.2 |   | 22.3 | % |
|                                 |       |                                                |       |          |       |       |       |   |   |   |   |   |   |
| Total domestic sales                 |       | $                                                   | 279.0      |          | 67.7       | %          | $          | 223.2 |   | 66.3 | % | $ | 55.8 |   | 25.0 | % |
| Total international  sales           |       | 132.9                                               |       | 32.3          |       | 113.5      |       | 33.7 |   | 19.4 |   | 17.1 |   |
| Total worldwide sales                |       | $                                                   | 411.9      |          | 100.0      | %          | $          | 336.7 |   | 100.0 | % | $ | 75.2 |   | 22.3 | % |
|                                 |       |                                                |       |          |       |       |       |   |   |   |   |   |   |
| Operating income (loss)  by segment: |       |                                                |       |          |       |       |       |   |   |   |   |   |   |
| Enterprise                           |       | $                                                   | 23.8       |          | 11.6       | %          | $          | 22.2 |   | 12.7 | % | $ | 1.6 |   | 7.2 | % |
| Broadband                            |       | 4.5                                                 |       | 3.3           |       | 5.8        |       | 5.3 |   | (1.3 | ) | (22.4 | ) |
| Carrier                              |       | 9.8                                                 |       | 13.8          |       | (3.4       | )          | (6.3 | ) | 13.2 |   |   |   |
| Consolidated operating income        |       | $                                                   | 38.1       |          | 9.2        | %          | $          | 24.6 |   | 7.3 | % | $ | 13.5 |   | 54.9 | % |

 
| ** **                           | ** ** | **Six Months Ended June 30,** | ** ** | ** **    | ** ** | ** ** | ** ** |
|--------------------------------------|------------|---------------------------------------------------|------------|---------------|------------|------------|------------|
| ** **                           | ** ** | **2006**                                          | ** ** | **2005**      | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                           | ** ** | ** **                                        | ** ** | **%** of | ** ** | ** ** | ** ** | **% of** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                           | ** ** | ** **                                        | ** ** | **Net**       | ** ** | ** ** | ** ** | **Net** | ** ** | **Dollar** | ** ** | **%** | ** ** |
| ** **                           | ** ** | **Amount**                                        | ** ** | **Sales**     | ** ** | **Amount** | ** ** | **Sales** | ** ** | **Change** | ** ** | **Change** | ** ** |
| ** **                           | ** ** | **(dollars in millions)**               | ** ** |
| Net sales by  segment:               |       |                                              |       |          |       |       |       |   |   |   |   |   |   |
| Enterprise                           |       | $                                                 | 377.2      |          | 49.4       | %          | $          | 331.5 |   | 51.3 | % | $ | 45.7 |   | 13.8 | % |
| Broadband                            |       | 262.4                                             |       | 34.3          |       | 218.0      |       | 33.8 |   | 44.4 |   | 20.4 |   |
| Carrier                              |       | 125.7                                             |       | 16.5          |       | 97.8       |       | 15.1 |   | 27.9 |   | 28.5 |   |
| Inter-segment eliminations           |       | (1.2                                              | )          | (0.2          | )          | (1.5       | )          | (0.2 | ) | 0.3 |   |   |   |
| Consolidated net  sales              |       | $                                                 | 764.1      |          | 100.0      | %          | $          | 645.8 |   | 100.0 | % | $ | 118.3 |   | 18.3 | % |
|                                 |       |                                              |       |          |       |       |       |   |   |   |   |   |   |
| Total domestic  sales                |       | $                                                 | 524.0      |          | 68.6       | %          | $          | 429.0 |   | 66.4 | % | $ | 95.0 |   | 22.1 | % |
| Total  international sales           |       | 240.1                                             |       | 31.4          |       | 216.8      |       | 33.6 |   | 23.3 |   | 10.7 |   |
| Total worldwide  sales               |       | $                                                 | 764.1      |          | 100.0      | %          | $          | 645.8 |   | 100.0 | % | $ | 118.3 |   | 18.3 | % |
|                                 |       |                                              |       |          |       |       |       |   |   |   |   |   |   |
| Operating income  (loss) by segment: |       |                                              |       |          |       |       |       |   |   |   |   |   |   |
| Enterprise                           |       | $                                                 | 35.1       |          | 9.3        | %          | $          | 31.1 |   | 9.4 | % | $ | 4.0 |   | 12.9 | % |
| Broadband                            |       | 12.5                                              |       | 4.7           |       | 12.3       |       | 5.6 |   | 0.2 |   | 1.6 |   |
| Carrier                              |       | 9.8                                               |       | 7.8           |       | (10.3      | )          | (10.6 | ) | 20.1 |   |   |   |
| Consolidated operating  income       |       | $                                                 | 57.4       |          | 7.5        | %          | $          | 33.1 |   | 5.1 | % | $ | 24.3 |   | 73.4 | % |

* *

*Enterprise Segment*

The Enterprise segmentconsists mainly of structured cabling systems for business enterpriseapplications. The segment also includes coaxial cable for various video anddata applications that are not related to cable television.

The increase inEnterprise segment net sales for the three and six months ended June 30,2006 over the comparable prior year periods was primarily driven by the effectof price increases, higher sales volumes of certain products and theintroduction of new products.  Domesticsales were higher, reflecting the impact of price increases, increased salesvolumes of certain products and the introduction of new products.  International sales were also higher,particularly in the Asia Pacific and Central and Latin America regions,reflecting higher sales volumes and the

22

----

impact of priceincreases.  We implemented priceincreases for certain Enterprise products throughout 2005 and 2006 as a resultof significant increases in the cost of certain raw materials.

The improvement inEnterprise segment operating income for the three and six months ended June 30,2006 over the comparable prior year periods was primarily due to changes in theproduct mix towards products that generate higher margins and the impact ofcost control efforts.  The priceincreases that were realized were substantially offset by the impact ofincreased raw material costs.  Operatingresults were unfavorably impacted by higher restructuring costs ($2.8 millionand $5.8 million for the three and six months ended June 30, 2006,respectively, compared to $1.0 million and $2.2 million for the three and sixmonths ended June 30, 2005, respectively).

We expect long-termdemand for Enterprise products to continue to be driven by the ongoing need forbandwidth and high-performance structured cabling in the enterprise market andglobal information technology spending, among other things.  Our ability to benefit from this expectedcontinued demand will depend on whether we encounter any significantmanufacturing (through our internal facilities or contract manufacturers) orsupply constraints, among other factors.

*Broadband Segment*

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 increase in Broadbandsegment net sales for the three and six months ended June 30, 2006compared to the comparable prior year periods was due to strong domestic andinternational sales for most of our product lines.  This increase reflects the impact of priceincreases implemented in response to higher raw material costs and higher salesvolumes.  Domestic sales volume increasescan be attributed to continued infrastructure needs of our large cabletelevision system operator customers. Sales volumes increased in most international regions as a result of newprojects and ongoing system maintenance. Net sales for the three and six months ended June 30, 2006 include $3.7million and $4.4 million, respectively, related to the MC2 ® product line that was acquired from TrilogyCommunications on March 6, 2006.

The reduction inoperating income for the three months ended June 30, 2006 is primarilyattributed to a provision of $4.8 million included in cost of goods soldrelated to the portion of value added taxes receivable at our Braziliansubsidiary that are not believed to be recoverable.  The remaining balance of Brazilian valueadded taxes receivable of $12.0 million is believed to be recoverable and hasbeen classified as long-term in other assets on the Condensed ConsolidatedBalance Sheet as of June 30, 2006. Operating income for the three months ended June 30, 2006 would haveotherwise increased over the comparable prior year period as a result of highersales volumes and the impact of cost reduction efforts.  Restructuring costs related to theimplementation of our global manufacturing initiatives of $0.9 million alsocontributed to the reduction in operating income during the three months endedJune 30, 2006.  There were no such costsduring the comparable period of 2005.

Operating income for thesix months ended June 30, 2006 reflects the impact of strong sales volumes andprice increases, which were substantially offset by the impact of higher rawmaterial costs, the $4.8 million provision for the Brazilian value added taxesreceivable that are believed to be unrecoverable and $1.6 million ofrestructuring costs.  There were norestructuring costs incurred during the comparable period of 2005.

Our ability to increasesales and operating income in the Broadband segment depends on whether we areable to pass raw material price increases along to our customers, among otherfactors.

*Carrier Segment*

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

23

----

 

The Carrier segmentexperienced net sales growth for the three and six months ended June 30,2006 over the comparable prior year periods primarily due to the performance ofthe Integrated Cabinet Solutions (ICS) product group. The ICS business hasrapidly expanded and reflects an increase in shipments related to DigitalSubscriber Line (DSL) and other video and high-speed data services deploymentsby telephone companies.

Sales of wireless andExchangeMAX products were essentially unchanged for the three and six monthsended June 30, 2006 compared to the comparable prior year periods.

The improvement inCarrier segment operating income for the three and six months ended June 30,2006 over the comparable 2005 periods is primarily due to the higher salesvolume of ICS products and the impact of cost reduction initiatives.  Operating income for the three and six monthsended June 30, 2006 included $0.4 million of restructuring costs compared to$0.6 million and $1.4 million during the three and six months ended June 30,2005, respectively.

While we expect sales ofCarrier products to be somewhat volatile since customer spending is mainlyproject-driven, we remain optimistic about our opportunities for the ICS andwireless product groups. We anticipate strong sales growth for our ICS productgroup primarily due to video and high-speed data services deployments andfiber-to-the-node construction activity. Our ability to meet increased customer demand for ICS products willdepend on whether we have sufficient production capacity through our internaloperations and contract manufacturing arrangements, among other factors.  We also expect continuing expansion incellular telephone base stations, which provides growth opportunities for ourwireless product group, though the rate of growth and product profitability maybe adversely impacted by consolidation among wireless carriers, among otherfactors.

**LIQUIDITY ANDCAPITAL RESOURCES**

**Cash Flow Overview**

Ourprincipal sources of liquidity, both on a short-term and long-term basis, arecash and cash equivalents, short-term investments, cash flows provided byoperations and availability under credit facilities. A reduction in sales andprofitability could reduce cash provided by operations and limit availabilityunder credit facilities. In addition, increases in working capital, excludingcash, cash equivalents and short-term investments, related to increasing salescould reduce our operating cash flows in the short term until cash collectionsof accounts receivable catch up to the higher level of billings.

|                                                                                                                                | ** ** | **As of**    | ** ** | ** **            | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|------------|------------|
| ** **                                                                                                                     | ** ** | **June 30,** | ** ** | **December 31,** | ** ** | **Dollar** | ** ** | **%** | ** ** |
| ** **                                                                                                                     | ** ** | **2006**          | ** ** | **2005**              | ** ** | **Change** | ** ** | **Change** | ** ** |
| Cash, cash  equivalents and short-term investments                                                                             |       | $                 | 296.1      |                  | $          | 248.7      |       | 47.4 |   | 19.1 | % |
| Working capital,  excluding cash, cash equivalents and short-term investments and current  portion of long-term debt |       | 248.5             |       | 176.7                 |       | 71.8       |       | 40.6 |   |
| Long-term debt,  including current portion                                                                                     |       | 290.8             |       | 297.3                 |       | (6.5       | )          | (2.2 | ) |
| Book capital  structure                                                                                                        |       | 933.5             |       | 819.3                 |       | 114.2      |       | 13.9 |   |
| Long-term debt as a  percentage of book capital structure                                                                      |       | 31.2              | %          | 36.3                  | %          |       |       |   |   |
|                                                                                                                                |            |                   |            |                       |            |            |            |  |  |  |  |

 

24

----

 

Theincrease in cash, cash equivalents and short-term investments during the sixmonths ended June 30, 2006 was primarily driven by $42.4 million ofproceeds from the exercise of stock options and the $29.8 million repayment ofa note receivable from OFS BrightWave. These inflows of cash were somewhat offset by capital expenditures of$15.1 million and a $13.8 million investment to acquire the MC2 75-ohm trunk and distribution cable televisionproducts business and certain other assets from Trilogy Communications, Inc.

|                                                                                                                                            | ** ** | **Six Months Ended** | ** ** | ** ** | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|------------|------------|------------|------------|
| ** **                                                                                                                                 | ** ** | **June 30,**              | ** ** | **Dollar** | ** ** | **%**      | ** ** |
| ** **                                                                                                                                 | ** ** | **2006**                       | ** ** | **2005**   | ** ** | **Change** | ** ** | **Change** | ** ** |
| Net cash  provided by (used in) operating activities                                                                                       |       | $                              | (3.3       | )          | $          | 27.1       |       | $ | (30.4 | ) | (112.2 | )% |
| Depreciation and  amortization                                                                                                             |       | 28.4                           |       | 30.6       |       | (2.2       | )          | (7.2 | ) |
| Increase in  working capital, excluding cash, cash equivalents and short-term  investments and current portion of long-term debt |       | 71.8                           |       | 39.1       |       | 32.7       |       | 83.6 |   |
| Capital expenditures                                                                                                                       |       | 15.1                           |       | 13.4       |       | 1.7        |       | 12.7 |   |
|                                                                                                                                            |            |                                |            |            |            |            |            |  |  |  |  |  |

 

**OperatingActivities**

During the six monthsended June 30, 2006, operating activities utilized $3.3 million in cashcompared to providing $27.1 million during the six months ended June 30,2005.  During the six months endedJune 30, 2006, net income of $59.4 million, less the $29.8 million pretaxgain on OFS BrightWave note receivable, which is included in investing activities,and depreciation and amortization of $28.4 million were more than offset by a$51.4 million increase in accounts receivable and a $26.9 million increase ininventories. The increase in accounts receivable is primarily attributable toan increase in sales during the second quarter of 2006 over the fourth quarterof 2005.  Higher anticipated salesvolumes and increases in raw materials costs are the primary drivers of theincrease in inventory.

We expect to generate netcash from operations during 2006, primarily due to increased margins from salesof certain product groups and the impact of cost reduction efforts.

**InvestingActivities**

During the six months ended June 30, 2006, we received$29.8 million as a repayment of principal under our note receivable from OFSBrightWave.  This note was originallyfunded in 2001 in conjunction with our investment in OFS BrightWave.  During the three months ended March 31,2006, we acquired 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 purchased $8.6 million of investment securities during the sixmonths ended June 30, 2006 compared with generating $11.5 million of cashfrom maturing investment securities in the six months ended June 30, 2005.

Investments in property, plant and equipment duringthe six months ended June 30, 2006 increased by $1.7 million year-over-year to$15.1 million. The primary capital expenditures made during the first half of2006 related to continuing investments to support cost reduction initiativesand the expansion of our new manufacturing facility in Asia that will provideadditional production capability.

We currently expect totalcapital expenditures to be $35 million to $40 million in 2006 compared to $19.9million in 2005. The expected increase in capital spending during 2006 isprimarily for cost reduction efforts and additional production capability,largely in Asia.

25

----

 

**FinancingActivities**

***The exercise of 2.99 million stock options during the sixmonths ended June 30, 2006 generated $42.4 million of proceeds and $13.0million from the tax benefits generated by such stock option exercises.***

During the six monthsended June 30, 2006, we reduced the principal balance of our outstandinglong-term debt by $6.5 million in accordance with the scheduled maturitiesoutlined in our respective debt agreements.

On June 7, 2006, wefiled a shelf registration statement for the issuance of common or preferredstock, senior or subordinated debt, convertible debt securities, warrantsexercisable for any of the foregoing, or any combination thereof. Thisregistration statement was automatically effective upon filing, pursuant to SECrules, and no securities have been issued under this registration statement.

**Future Cash Needs**

We expect that ourprimary future cash needs will be to fund working capital, capitalexpenditures, debt service and employee benefit obligations. We contributed$16.6 million to defined benefit pension and other postretirement benefit plansduring the six months ended June 30, 2006 and expect to make additionalcontributions of approximately $2.4 million to such plans during 2006. Weexpect that our noncurrent employee benefit liabilities will be funded throughcash flow from future operations.  Inconjunction with our restructuring initiatives, we have accrued a liability ofapproximately $2.0 million as of June 30, 2006, which is expected to be substantiallypaid during 2006 with final cash settlements during the first quarter of 2007.

We believe that ourexisting cash, cash equivalents and short-term investments and cash flows fromoperations, combined with availability under our senior secured revolvingcredit facility, will be sufficient to meet our presently anticipated futurecash needs. We may, from time to time, borrow under our existing or a newcredit facility or issue securities, if market conditions are favorable, tomeet our future cash needs, to finance acquisitions or to reduce our borrowingcosts.

There were no materialchanges in our contractual obligations during the quarter endedJune 30, 2006.

**FORWARD-LOOKINGSTATEMENTS**

Certain statementsin this 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, transition, outlook, revenues, earnings, margins, accretion,synergies and other financial items, restructuring plans, sales and earningsexpectations, expected demand, cost and availability of key raw materials,internal and external production capacity and expansion, competitive pricing,relative market position and outlook. While we believe such statements arereasonable, the actual results and effects could differ materially from thosecurrently anticipated. These forward-looking statements are identified by the useof certain terms and phrases including but not limited to “intends,” “intend,” “intended,”“goal,” “estimate,” “estimates,” “expects,” “expect,” “expected,” “project,” “projects,”“projected,” “projections,” “plans,” “anticipates,” “anticipated,” “should,” “designedto,” “foreseeable future,” “believe,” “believes,” “think,” “thinks” and “scheduled”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 price increases; the challenges of executingour previously announced global manufacturing initiatives; the integration andexpected synergies related to the acquisition of the MC2®product line from Trilogy Communications, Inc.; customer demand for ourproducts and the ability to maintain existing business alliances with keyEnterprise, Broadband and Carrier customers or distributors; the risk that ourinternal production capacity and that of our contract manufacturers may beinsufficient to meet customer demand for our products; the risk that customersmight cancel orders placed or that orders currently placed may effect orders inthe future; continuing consolidation among our customers; competitive pricingand acceptance 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 expected 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; 

26

----

regulatory changes affecting us or the industries weserve; authoritative changes in generally accepted accounting principles bystandard-setting bodies; environmental remediation issues; terrorist activityor armed conflict; political instability; major health concerns; and anystatements of belief and any statements of assumptions underlying any of theforegoing. These and other factors are discussed in greater detail in Exhibit99.1 to this Form 10-Q. The information contained in this Form 10-Q representsour best judgment at the date of this report based on information currentlyavailable. However, we do not intend, and are not undertaking any duty orobligation, to update this information to reflect developments or informationobtained after the date of this report.

**ITEM3.**                    QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As disclosed inour Annual Report on Form 10-K for the year ended December 31, 2005,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, 2005. We have not acquired anynew derivative financial instruments since December 31, 2005 or terminatedany derivative financial instruments that existed at that date.

**ITEM4.**                    CONTROLSAND 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.

Other than theimplementation of a new enterprise resource planning (ERP) system, discussedbelow, there were no changes in our internal control over financial reportingduring the three months ended June 30, 2006 that have materially affected,or are reasonably likely to materially affect, our internal control overfinancial reporting.

During the threemonths ended June 30, 2006, we completed the migration of the ERP system,including the financial management module, used by certain of our affiliates inthe Europe/Middle East/Africa region to a common platform.  This initiative was the initial step intransitioning all of our operations to a common ERP system in order to improvethe effectiveness and efficiency of our operations.  This initiative was not in response to anyidentified weakness or deficiency in our internal control over financialreporting.

27

----

 

**PART II—OTHER  INFORMATION**

**ITEM 1A.**           RISK FACTORS

See Exhibit 99.1 tothis Form 10-Q.

**ITEM4.**                    SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company held itsAnnual Meeting of Stockholders (the Meeting) on May 5, 2006. Proxies forthe Meeting were solicited pursuant to Regulation 14A under the SecuritiesExchange Act of 1934, as amended. A total of 57,423,411 shares of Common Stockwith one vote each were entitled to vote at the Meeting and holders of51,518,755 shares voted in person or by proxy, constituting a quorum.

At the Meeting,two of the Company’s directors were elected for three-year terms ending at the2009 Annual Meeting of Stockholders by the vote set forth below:

 
| **Name of Director** | ** ** | ** ** | ** ** | **Votes For** | ** ** | **Votes Withheld** | ** ** |
|--------------------------------|------------|------------|------------|--------------------|------------|-------------------------|------------|
| Frank M. Drendel               |       | 49,815,483 |       | 1,703,272          |       |
| Richard C. Smith               |       | 50,498,136 |       | 1,020,619          |       |

 

The Company’s other fivedirectors, whose terms of office continue after the Meeting with terms expiringat the annual meetings in parentheses after their names, are Boyd L. George(2007), George N. Hutton, Jr. (2007), Katsuhiko (Kat) Okubo (2007), JuneE. Travis (2008) and James N. Whitson (2008).

A proposal toapprove the CommScope, Inc. 2006 Long Term Incentive Plan (the 2006 Plan) asadopted by the Company’s Board of Directors was approved by 38,721,624 votescast in favor, 6,189,814 votes cast against and 1,035,554 votes abstaining.

A proposal toratify the appointment of Deloitte & Touche LLP as independentauditors for the Company for the 2006 fiscal year by the Audit Committee of theBoard of Directors of the Company was approved by 50,063,348 votes cast infavor, 1,302,308 votes cast against and 153,099 votes abstaining.

**ITEM6.**                    EXHIBITS

| 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). |
| 99.1 | Forward-Looking Information                                                                                                                                                                                                                                   |

 

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Actof 1934, the Registrant has duly caused this report to be signed on its behalfby the undersigned thereunto duly authorized.
|                     |     | Commscope, Inc.                                         |
|---------------------|----------|---------------------------------------------------------|
|                |     |                                                    |
|                |     |                                                    |
| August 2, 2006 |     | /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*            |

 

 

28

----