Table ofContents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**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 September 30, 2008** |
| ** **                                                  | ** ** | ** **                                                                                              |
| **OR**                                                      |
| ** **                                                  | ** ** | ** **                                                                                              |
| **o**                                                       | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**For the transition periodfrom                     to                  **

** **

**Commission file number 001-12929**

** **

**CommScope, Inc.**

(Exact name ofregistrant as specified in its charter)

 

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

 

**1100 CommScope Place, SE**

**P.O. Box 339**

**Hickory, North Carolina**

(Address ofprincipal executive offices)

 

**28602**

(Zip Code)

 

**(828) 324-2200**

(Registrant’stelephone number, 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, anon-accelerated filer, or a smaller reporting company. See definitions of “largeaccelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2of the Exchange Act. (Check one):

 
| Large  accelerated filer x | Accelerated  filer o | Non-accelerated  filer o                        | Smaller  reporting company o |
|----------------------------|---------------------------|-------------------------------------------------|-----------------------------------|
|                       |                      | (Do  not check if a smaller  reporting company) |                              |

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o    No x

 

As of October 30,2008 there were 70,369,591 shares of Common Stock outstanding.

 

 

 

----

**Table of Contents**

** **

**CommScope, Inc.**

**Form 10-Q**

**September 30,2008**

**Tableof 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  (Loss)     |
|                                                                                                 |
| 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 1. Legal Proceedings                                                                            |
|                                                                                                 |
| Item 1A. Risk Factors                                                                                |
|                                                                                                 |
| Item 6. Exhibits                                                                                     |
|                                                                                                 |
| Signature                                                                                            |

 

2

----

Tableof Contents

 

**CommScope, Inc.**

**Condensed Consolidated Statementsof Operations**

**(Unaudited—In thousands, except per share amounts)**

 
| ** **                            | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|---------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                            | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                            | ** ** | **2008**                         | ** ** | **2007**                        | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                  |       |                             |       |                            |       |   |   |   |   |
| Net sales                             |       | $                                | 1,062,297  |                            | $          | 513,608 |   | $ | 3,154,768 |   | $ | 1,468,204 |   |
|                                  |       |                             |       |                            |       |   |   |   |   |
| Operating costs and expenses:         |       |                             |       |                            |       |   |   |   |   |
| Cost of sales                         |       | 765,824                          |       | 354,324                         |       | 2,331,209 |   | 1,014,382 |   |
| Selling, general and administrative   |       | 108,768                          |       | 68,082                          |       | 368,401 |   | 193,036 |   |
| Research and development              |       | 33,551                           |       | 8,288                           |       | 103,785 |   | 24,610 |   |
| Amortization of purchased intangibles |       | 24,294                           |       | 1,334                           |       | 73,398 |   | 3,623 |   |
| Restructuring costs                   |       | 2,356                            |       | 215                             |       | 25,124 |   | 1,113 |   |
| Total operating costs and expenses    |       | 934,793                          |       | 432,243                         |       | 2,901,917 |   | 1,236,764 |   |
|                                  |       |                             |       |                            |       |   |   |   |   |
| Operating income                      |       | 127,504                          |       | 81,365                          |       | 252,851 |   | 231,440 |   |
| Other income (expense), net           |       | (23                              | )          | 2,824                           |       | (16,017 | ) | 2,542 |   |
| Interest expense                      |       | (37,007                          | )          | (1,665                          | )          | (112,215 | ) | (5,339 | ) |
| Interest income                       |       | 5,958                            |       | 5,962                           |       | 15,543 |   | 16,248 |   |
|                                  |       |                             |       |                            |       |   |   |   |   |
| Income before income taxes            |       | 96,432                           |       | 88,486                          |       | 140,162 |   | 244,891 |   |
| Income tax expense                    |       | (11,745                          | )          | (28,213                         | )          | (26,308 | ) | (77,634 | ) |
| Net income                            |       | $                                | 84,687     |                            | $          | 60,273 |   | $ | 113,854 |   | $ | 167,257 |   |
|                                  |       |                             |       |                            |       |   |   |   |   |
| Earnings per share:                   |       |                             |       |                            |       |   |   |   |   |
| Basic                                 |       | $                                | 1.20       |                            | $          | 0.98 |   | $ | 1.64 |   | $ | 2.74 |   |
| Diluted                               |       | $                                | 1.05       |                            | $          | 0.81 |   | $ | 1.43 |   | $ | 2.27 |   |
|                                  |       |                             |       |                            |       |   |   |   |   |
| Weighted average shares outstanding:  |       |                             |       |                            |       |   |   |   |   |
| Basic                                 |       | 70,287                           |       | 61,661                          |       | 69,230 |   | 61,105 |   |
| Diluted                               |       | 81,175                           |       | 74,978                          |       | 80,843 |   | 74,500 |   |

 

See notes to unauditedcondensed consolidated financial statements.

 

3

----

Table of Contents

 

**CommScope, Inc.**

**CondensedConsolidated Balance Sheets**

**(Unaudited—In thousands, except shareamounts)**

 
| ** **                                                                                                                                                                                                                                                                                               | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                                                                                                                               | ** ** | **2008**               | ** ** | **2007**              | ** ** |
| **Assets**                                                                                                                                                                                                                                                                                               |       |                   |       |                  |       |
|                                                                                                                                                                                                                                                                                                     |       |                   |       |                  |       |
| Cash and cash equivalents                                                                                                                                                                                                                                                                                |       | $                      | 496,251    |                  | $          | 649,451 |   |
| Accounts receivable, less allowance for doubtful accounts of $18,847  and $22,154, respectively                                                                                                                                                                                                          |       | 825,374                |       | 793,366               |       |
| Inventories, net                                                                                                                                                                                                                                                                                         |       | 475,981                |       | 548,360               |       |
| Prepaid expenses and other current assets                                                                                                                                                                                                                                                                |       | 67,538                 |       | 133,737               |       |
| Deferred income taxes                                                                                                                                                                                                                                                                                    |       | 80,551                 |       | 106,476               |       |
| Total current assets                                                                                                                                                                                                                                                                                     |       | 1,945,695              |       | 2,231,390             |       |
|                                                                                                                                                                                                                                                                                                     |       |                   |       |                  |       |
| Property, plant and equipment, net                                                                                                                                                                                                                                                                       |       | 499,145                |       | 525,305               |       |
| Goodwill                                                                                                                                                                                                                                                                                                 |       | 1,278,468              |       | 1,211,214             |       |
| Other intangibles, net                                                                                                                                                                                                                                                                                   |       | 946,074                |       | 1,042,765             |       |
| Other noncurrent assets                                                                                                                                                                                                                                                                                  |       | 65,549                 |       | 95,897                |       |
|                                                                                                                                                                                                                                                                                                     |       |                   |       |                  |       |
| Total Assets                                                                                                                                                                                                                                                                                             |       | $                      | 4,734,931  |                  | $          | 5,106,571 |   |
|                                                                                                                                                                                                                                                                                                     |       |                   |       |                  |       |
| **Liabilities and Stockholders’  Equity**                                                                                                                                                                                                                                                           |       |                   |       |                  |       |
|                                                                                                                                                                                                                                                                                                     |       |                   |       |                  |       |
| Accounts payable                                                                                                                                                                                                                                                                                         |       | $                      | 325,752    |                  | $          | 350,615 |   |
| Other accrued liabilities                                                                                                                                                                                                                                                                                |       | 304,186                |       | 399,944               |       |
| Current portion of long-term debt                                                                                                                                                                                                                                                                        |       | 217,575                |       | 247,662               |       |
| Total current liabilities                                                                                                                                                                                                                                                                                |       | 847,513                |       | 998,221               |       |
|                                                                                                                                                                                                                                                                                                     |       |                   |       |                  |       |
| Long-term debt                                                                                                                                                                                                                                                                                           |       | 1,978,741              |       | 2,348,157             |       |
| Deferred income taxes                                                                                                                                                                                                                                                                                    |       | 253,444                |       | 268,647               |       |
| Pension and postretirement benefit liabilities                                                                                                                                                                                                                                                           |       | 103,891                |       | 108,275               |       |
| Other noncurrent liabilities                                                                                                                                                                                                                                                                             |       | 95,513                 |       | 103,263               |       |
| Total Liabilities                                                                                                                                                                                                                                                                                        |       | 3,279,102              |       | 3,826,563             |       |
|                                                                                                                                                                                                                                                                                                     |       |                   |       |                  |       |
| Commitments and contingencies                                                                                                                                                                                                                                                                            |       |                   |       |                  |       |
|                                                                                                                                                                                                                                                                                                     |       |                   |       |                  |       |
| Stockholders’ Equity:                                                                                                                                                                                                                                                                               |       |                   |       |                  |       |
| Preferred stock, $.01 par value; Authorized shares: 20,000,000; Issued  and outstanding shares: None at September 30, 2008 and December 31,  2007                                                                                                                                              |       | —                 |       | —                |       |
| Common stock, $.01 par value; Authorized shares: 300,000,000; Issued  shares, including treasury stock: 80,567,100 at September 30, 2008 and  77,070,029 at December 31, 2007; Issued and outstanding shares:  70,367,100 at September 30, 2008 and 66,870,029 at December 31,  2007 |       | 805                    |       | 770                   |       |
| Additional paid-in capital                                                                                                                                                                                                                                                                               |       | 967,464                |       | 856,452               |       |
| Retained earnings                                                                                                                                                                                                                                                                                        |       | 659,461                |       | 545,607               |       |
| Accumulated other comprehensive income (loss)                                                                                                                                                                                                                                                            |       | (26,366                | )          | 22,714                |       |
| Treasury stock, at cost: 10,200,000 shares at September 30, 2008  and December 31, 2007                                                                                                                                                                                                        |       | (145,535               | )          | (145,535              | )          |
| Total Stockholders’ Equity                                                                                                                                                                                                                                                                          |       | 1,455,829              |       | 1,280,008             |       |
|                                                                                                                                                                                                                                                                                                     |       |                   |       |                  |       |
| Total Liabilities and Stockholders’ Equity                                                                                                                                                                                                                                                          |       | $                      | 4,734,931  |                  | $          | 5,106,571 |   |

 

See notes to unaudited condensed consolidated financialstatements.

 

4

----

Table ofContents

 

**CommScope, Inc.**

**Condensed Consolidated Statements ofCash Flows**

**(Unaudited—In thousands)**

 
| ** **                                                                         | ** ** | **Nine Months Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                         | ** ** | **September 30,**          | ** ** |
| ** **                                                                         | ** ** | **2008**                        | ** ** | **2007** | ** ** |
|                                                                               |       |                            |       |   |   |
| **Operating Activities:**                                                          |       |                            |       |   |   |
| Net income                                                                         |       | $                               | 113,854    |   | $ | 167,257 |   |
| Adjustments to reconcile net income to net cash provided by operating  activities: |       |                            |       |   |   |
| Depreciation and amortization                                                      |       | 164,921                         |       | 37,285 |   |
| Equity-based compensation                                                          |       | 15,361                          |       | 7,747 |   |
| Changes in assets and liabilities:                                                 |       |                            |       |   |   |
| Accounts receivable                                                                |       | (51,684                         | )          | (65,526 | ) |
| Inventories                                                                        |       | 64,067                          |       | (30,634 | ) |
| Other assets and liabilities                                                       |       | (57,088                         | )          | 22,739 |   |
| Other                                                                              |       | 4,064                           |       | (355 | ) |
| Net cash provided by operating activities                                          |       | 253,495                         |       | 138,513 |   |
|                                                                               |       |                            |       |   |   |
| **Investing Activities:**                                                          |       |                            |       |   |   |
| Additions to property, plant and equipment                                         |       | (35,920                         | )          | (18,284 | ) |
| Net purchases of short-term investments                                            |       | —                          |       | (86,707 | ) |
| Proceeds from disposal of property, plant and equipment                            |       | 6,873                           |       | 10,957 |   |
| Proceeds from sale of product lines                                                |       | 9,009                           |       | — |   |
| Cash paid for acquisitions                                                         |       | (60,976                         | )          | (16,976 | ) |
| Other                                                                              |       | (5,012                          | )          | — |   |
| Net cash used in investing activities                                              |       | (86,026                         | )          | (111,010 | ) |
|                                                                               |       |                            |       |   |   |
| **Financing Activities:**                                                          |       |                            |       |   |   |
| Principal payments on long-term debt                                               |       | (329,603                        | )          | (22,550 | ) |
| Proceeds from the issuance of shares under equity-based compensation  plans        |       | 12,852                          |       | 34,667 |   |
| Tax benefit from the issuance of shares under equity-based  compensation plans     |       | 6,227                           |       | 16,305 |   |
| Other                                                                              |       | 343                             |       | — |   |
| Net cash (used in) provided by financing activities                                |       | (310,181                        | )          | 28,422 |   |
|                                                                               |       |                            |       |   |   |
| Effect of exchange rate changes on cash and cash equivalents                       |       | (10,488                         | )          | 1,349 |   |
|                                                                               |       |                            |       |   |   |
| Change in cash and cash equivalents                                                |       | (153,200                        | )          | 57,274 |   |
| Cash and cash equivalents, beginning of period                                     |       | 649,451                         |       | 276,042 |   |
| Cash and cash equivalents, end of period                                           |       | $                               | 496,251    |   | $ | 333,316 |   |

 

See notes to unaudited condensed consolidatedfinancial statements.

 

5

----

Tableof Contents

 

**CommScope, Inc.**

**CondensedConsolidated Statements of Stockholders’ Equity**

**andComprehensive Income (Loss)**

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

 
| ** **                                                           | ** ** | **Nine Months Ended** | ** ** |
|----------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                           | ** ** | **September 30,**          | ** ** |
| ** **                                                           | ** ** | **2008**                        | ** ** | **2007** | ** ** |
|                                                                 |       |                            |       |   |   |
| Number of common shares outstanding:                                 |       |                            |       |   |   |
| Balance at beginning of period                                       |       | 66,870,029                      |       | 59,734,533 |   |
| Issuance of shares under equity-based compensation plans             |       | 618,822                         |       | 1,947,908 |   |
| Issuance of shares for conversion of convertible debentures          |       | 2,878,249                       |       | — |   |
| Balance at end of period                                             |       | 70,367,100                      |       | 61,682,441 |   |
|                                                                 |       |                            |       |   |   |
| Common stock:                                                        |       |                            |       |   |   |
| Balance at beginning of period                                       |       | $                               | 770        |   | $ | 699 |   |
| Issuance of shares under equity-based compensation plans             |       | 6                               |       | 20 |   |
| Issuance of shares for conversion of convertible debentures          |       | 29                              |       | — |   |
| Balance at end of period                                             |       | $                               | 805        |   | $ | 719 |   |
|                                                                 |       |                            |       |   |   |
| Additional paid-in capital:                                          |       |                            |       |   |   |
| Balance at beginning of period                                       |       | $                               | 856,452    |   | $ | 532,344 |   |
| Issuance of shares under equity-based compensation plans             |       | 12,846                          |       | 34,647 |   |
| Tax benefit from shares issued under equity-based compensation plans |       | 6,227                           |       | 16,305 |   |
| Equity-based compensation expense recognized                         |       | 15,361                          |       | 7,747 |   |
| Issuance of shares for conversion of convertible debentures          |       | 76,578                          |       | — |   |
| Balance at end of period                                             |       | $                               | 967,464    |   | $ | 591,043 |   |
|                                                                 |       |                            |       |   |   |
| Retained earnings:                                                   |       |                            |       |   |   |
| Balance at beginning of period                                       |       | $                               | 545,607    |   | $ | 346,821 |   |
| Net income                                                           |       | 113,854                         |       | 167,257 |   |
| Impact of adoption of FIN 48                                         |       | —                          |       | (6,055 | ) |
| Balance at end of period                                             |       | $                               | 659,461    |   | $ | 508,023 |   |
|                                                                 |       |                            |       |   |   |
| Accumulated other comprehensive income (loss):                       |       |                            |       |   |   |
| Balance at beginning of period                                       |       | $                               | 22,714     |   | $ | 4,775 |   |
| Other comprehensive income (loss), net of tax                        |       | (49,080                         | )          | 8,071 |   |
| Balance at end of period                                             |       | $                               | (26,366    | ) | $ | 12,846 |   |
|                                                                 |       |                            |       |   |   |
| Treasury stock, at cost:                                             |       |                            |       |   |   |
| Balance at beginning and end of period                               |       | $                               | (145,535   | ) | $ | (145,535 | ) |
|                                                                 |       |                            |       |   |   |
| Total stockholders’ equity                                      |       | $                               | 1,455,829  |   | $ | 967,096 |   |

 
| ** **                                                                     | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                     | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                                                     | ** ** | **2008**                         | ** ** | **2007**                        | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                                                           |       |                             |       |                            |       |   |   |   |   |
| Comprehensive income (loss):                                                   |       |                             |       |                            |       |   |   |   |   |
| Net income                                                                     |       | $                                | 84,687     |                            | $          | 60,273 |   | $ | 113,854 |   | $ | 167,257 |   |
| Other comprehensive income (loss), net of tax:                                 |       |                             |       |                            |       |   |   |   |   |
| Foreign currency translation gain (loss)                                       |       | (72,748                          | )          | 1,394                           |       | (33,060 | ) | 2,238 |   |
| Foreign currency transaction gain (loss) on long-term intercompany  loans      |       | (4,375                           | )          | 2,015                           |       | (1,863 | ) | 5,229 |   |
| Loss on derivative financial instruments                                       |       | (7,601                           | )          | (429                            | )          | (12,907 | ) | (653 | ) |
| Amortization of unrecognized pension and other postretirement benefit  amounts |       | (184                             | )          | (208                            | )          | (606 | ) | (434 | ) |
| Loss on available-for-sale investments                                         |       | (644                             | )          | —                          |       | (644 | ) | — |   |
| Revaluation of unrecognized other postretirement benefit obligation            |       | —                           |       | 1,691                           |       | — |   | 1,691 |   |
| Total other comprehensive income (loss), net of tax                            |       | (85,552                          | )          | 4,463                           |       | (49,080 | ) | 8,071 |   |
|                                                                           |       |                             |       |                            |       |   |   |   |   |
| Total comprehensive income (loss)                                              |       | $                                | (865       | )                               | $          | 64,736 |   | $ | 64,774 |   | $ | 175,328 |   |

 

See notes to unaudited condensed consolidatedfinancial statements.

 

6

----

Tableof Contents

** **

**CommScope, Inc.**

**Notes to Unaudited Condensed ConsolidatedFinancial Statements**

**(In Thousands, Unless Otherwise Noted)**

 

**1.****            ****BACKGROUND AND BASIS OFPRESENTATION**

 

**Background**

** **

CommScope, Inc. andits wholly owned subsidiaries (CommScope or the Company) is a world leader ininfrastructure solutions for communications networks. With the December 27,2007 acquisition of Andrew Corporation (Andrew), the Company is a global leaderin providing radio frequency subsystem solutions for wireless networks. Throughits SYSTIMAX® and Uniprise® brands, the Company is also a global leader instructured cabling systems for business enterprise applications. In addition,CommScope is the premier manufacturer of coaxial cable for broadband cabletelevision networks and one of the leading North American providers ofenvironmentally secure cabinets for digital subscriber line (DSL) andFiber-to-the-Node applications.

 

**Basis ofPresentation**

** **

The condensedconsolidated balance sheet as of September 30, 2008, the condensedconsolidated statements of operations and comprehensive income (loss) for thethree and nine months ended September 30, 2008 and 2007, and the condensedconsolidated statements of cash flows and stockholders’ equity for the ninemonths ended September 30, 2008 and 2007 are unaudited and reflect alladjustments of a normal recurring nature that are, in the opinion ofmanagement, necessary for a fair presentation of the interim period financialstatements. The results of operations for the interim period are notnecessarily indicative of the results of operations to be expected for the fullyear.

 

The unauditedinterim condensed consolidated financial statements of CommScope have beenprepared pursuant to the rules and regulations of the Securities andExchange Commission (SEC). Accordingly, certain information andfootnote disclosures normally included in financial statements prepared inaccordance with accounting principles generally accepted in the United Statesof America have been condensed or omitted. The significant accounting policiesfollowed by the Company are set forth in Note 2 to the consolidatedfinancial statements in the Company’s Annual Report on Form 10-K for the yearended December 31, 2007 (the 2007 Form 10-K). There were no changesin the Company’s significant accounting policies during the three or ninemonths ended September 30, 2008 other than the implementation of Statementof Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements”(SFAS No. 157) and SFAS No. 159, “The Fair Value Option for FinancialAssets and Financial Liabilities” (SFAS No. 159) (see Note 7).  In addition, the Company reaffirms the use ofestimates in the preparation of the financial statements as set forth in the2007 Form 10-K. These interim condensed consolidated financial statementsshould be read in conjunction with the Company’s audited consolidated financialstatements and notes thereto included in the 2007 Form 10-K.

 

Certain prior yearamounts have been reclassified to conform to the current year presentation.

 

**Concentrations ofRisk**

** **

Net sales toAnixter International Inc. and its affiliates (Anixter) accounted forapproximately 11% of the Company’s total net sales during both the three andnine months ended September 30, 2008 and approximately 25% and 26% of theCompany’s total net sales during the three and nine months ended September 30,2007, respectively. Sales to Anixter primarily originate within the Enterprisesegment.

 

Net sales toAlcatel-Lucent, which primarily relate to their role as an original equipmentmanufacturer (OEM) for telecommunications companies, were less than 10% of theCompany’s total net sales during the three and nine months ended September 30,2008, but accounted for approximately 12% of the Company’s total net salesduring both the three and nine months ended September 30, 2007. Sales toAlcatel-Lucent primarily originate within the Antenna, Cable and Cabinets Groupsegment. Other than Anixter and Alcatel-Lucent, no customer accounted for 10%or more of the Company’s total net sales for the three and nine months ended September 30,2008 or 2007.

 

Accountsreceivable from Anixter represented approximately 14% of net accountsreceivable as of September 30, 2008. No other customer accounted for 10%or more of the Company’s net accounts receivable as of September 30, 2008.

 

7

----

Table of Contents

 

**Product Warranties**

** **

The Companyrecognizes a liability for the estimated claims that may be paid under itscustomer warranty agreements to remedy potential deficiencies in quality orperformance of the Company’s products. These product warranties extend overperiods ranging from one to twenty-five years from the date of sale, dependingupon the product subject to the warranty. The Company records a provision forestimated future warranty claims as cost of sales based upon the historicalrelationship of warranty claims to sales and specifically-identified warrantyissues. During the three and nine months ended September 30, 2008, theCompany recorded additions to the product warranty accrual as adjustments tothe Andrew preliminary purchase price allocation as a result of additionalinformation obtained regarding warranty exposure on certain products sold priorto CommScope’s acquisition of Andrew. The Company bases its estimates on assumptions that are believed to bereasonable under the circumstances and revises its estimates, as appropriate,when events or changes in circumstances indicate that revisions may benecessary.

 

The followingtable summarizes the activity in the product warranty accrual, included inother accrued liabilities, for the three and nine months ended September 30,2008 and 2007.  The beginning balance andthe activity for the three and nine months ended September 30, 2008include the activity related to legacy Andrew products.

 
| ** **                                    | ** ** | **Three Months ****Ended****September 30,** | ** ** | **Nine Months Ended********September 30,** | ** ** |
|-----------------------------------------------|------------|------------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **                                    | ** ** | **2008**                                                   | ** ** | **2007**                                                  | ** ** | **2008** | ** ** | **2007** | ** ** |
| Product warranty accrual, beginning of period |       | $                                                          | 36,242     |                                                      | $          | 3,712 |   | $ | 29,183 |   | $ | 2,090 |   |
| Provision for warranty claims                 |       | 2,981                                                      |       | 1,093                                                     |       | 12,350 |   | 2,936 |   |
| Revision of Andrew purchase price allocation  |       | 2,101                                                      |       | —                                                    |       | 16,263 |   | — |   |
| Warranty claims paid                          |       | (9,323                                                     | )          | (297                                                      | )          | (25,795 | ) | (518 | ) |
| Product warranty accrual, end of period       |       | $                                                          | 32,001     |                                                      | $          | 4,508 |   | $ | 32,001 |   | $ | 4,508 |   |

 

**Commitments andContingencies**

** **

In 2007, a jury ruled infavor of TruePosition, Inc., finding that Andrew had willfully infringed asingle TruePosition patent, and the jury awarded $45.3 million in damages toTruePosition (see Note 16 in the Notes to the Consolidated Financial Statementsin the 2007 Form 10-K). As a result of the jury verdict, a $45.3 millionliability was included in other accrued liabilities as of December 31,2007.  On July 31, 2008, the courtreduced the compensatory damages award to $18.6 million and awarded enhanceddamages of $4.7 million for willful infringement.  As a result, the liability as of September 30,2008 was $28.2 million (including interest), which represents the Company’sbest estimate of the probable liability to TruePosition. Subject to the outcomeof possible additional legal actions taken by the Company and/or TruePosition,the ultimate resolution of the TruePosition litigation may be materiallydifferent than the Company’s current estimate, which does not include legalfees the Company may incur in appeals or other proceedings. In addition to the TruePositionlitigation described above, CommScope is either a plaintiff or a defendant inpending legal matters in the normal course of business; however, managementbelieves none of these legal matters, other than the TruePosition litigation,will have a materially adverse effect on the Company’s financial statementsupon final disposition. In addition, CommScope is subject to various federal,state, local and foreign laws and regulations governing the use, discharge,disposal and remediation of hazardous materials. Compliance with current lawsand regulations has not had, and is not expected to have, a materially adverseeffect on the Company’s financial condition or results of operations.

 

As of September 30,2008, the Company had commitments of approximately $131 million to purchasemetals that are expected to be consumed during normal production.  Due to the recent declines in commodityprices, most of these commitments are at prices higher than market prices as ofSeptember 30, 2008.  The commitmentscover products that will be purchased through the fourth quarter of 2009.

 

**EarningsPer Share**

** **

### Basic earnings per share iscomputed by dividing net income by the weighted average number of common sharesoutstanding during the applicable period. Diluted earnings per share is basedon net income adjusted for after-tax interest and amortization of debt issuancecosts related to convertible debt, if dilutive, divided by the weighted averagenumber of common shares outstanding adjusted for the dilutive effect of stockoptions, restricted stock units, performance share units and convertiblesecurities.

 

8

----

Tableof Contents

 

Below is areconciliation of earnings and weighted average common shares and potentialcommon shares outstanding for calculating diluted earnings per share:

 
| ** **                                                                                                     | ** ** | **Three Months ****Ended****September 30,** | ** ** | **Nine Months Ended********September 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **                                                                                                     | ** ** | **2008**                                                   | ** ** | **2007**                                                  | ** ** | **2008** | ** ** | **2007** | ** ** |
| Numerator:                                                                                                     |       |                                                       |       |                                                      |       |   |   |   |   |
| Net income for basic earnings per share                                                                        |       | $                                                          | 84,687     |                                                      | $          | 60,273 |   | $ | 113,854 |   | $ | 167,257 |   |
| Effect of assumed conversion of convertible senior subordinated  debentures                                    |       | 499                                                        |       | 629                                                       |       | 1,644 |   | 1,887 |   |
| Income applicable to common shareholders for diluted earnings  per share                                  |       | $                                                          | 85,186     |                                                      | $          | 60,902 |   | $ | 115,498 |   | $ | 169,144 |   |
| Denominator:                                                                                                   |       |                                                       |       |                                                      |       |   |   |   |   |
| Weighted average number of common shares outstanding for basic  earnings per share                             |       | 70,287                                                     |       | 61,661                                                    |       | 69,230 |   | 61,105 |   |
| Effect of dilutive securities:                                                                                 |       |                                                       |       |                                                      |       |   |   |   |   |
| Employee stock options (a)                                                                                     |       | 862                                                        |       | 1,294                                                     |       | 931 |   | 1,436 |   |
| Restricted stock units and performance share units                                                             |       | 851                                                        |       | 529                                                       |       | 745 |   | 465 |   |
| Convertible senior subordinated debentures                                                                     |       | 9,175                                                      |       | 11,494                                                    |       | 9,937 |   | 11,494 |   |
| Weighted average number of common and potential common shares  outstanding for diluted earnings per share |       | 81,175                                                     |       | 74,978                                                    |       | 80,843 |   | 74,500 |   |

 

----

(a)    Optionsto purchase approximately 0.7 million and 0.8 million common shares wereexcluded from the computation of diluted earnings per share for the three andnine months ended September 30, 2008, respectively, because they wouldhave been anti-dilutive. No options to purchase common shares were excludedfrom the computation of diluted earnings per share for the three and ninemonths ended September 30, 2007.

 

**IncomeTaxes**

 

The Company adopted theprovisions of Financial Accounting Standards Board (FASB) Interpretation No. 48(FIN 48) as of January 1, 2007, resulting in a $4.2 million increase inthe liability for unrecognized tax benefits with an offsetting reduction toopening retained earnings. In addition, the Company reduced a long-termdeferred tax asset by $4.0 million with an offsetting reduction to openingretained earnings of $1.9 million and an increase of $2.1 million to long-livedassets as a purchase accounting adjustment related to the 2004 acquisition ofConnectivity Solutions.

 

The liability forunrecognized tax benefits and related interest and penalties under FIN 48 was$60.3 million at September 30, 2008 and $68.0 million at December 31,2007. Of the net decrease in this liability for the nine months ended September 30,2008, $3.9 million related to the effective settlement of various U.S. andforeign income tax audits that was recorded as a reduction of income taxexpense.  The remainder of the netdecrease was primarily related to amounts paid or transferred to income taxespayable, partially offset by increases in the liability recorded as part ofincome tax expense in the current year for remaining uncertain tax positions.

 

The Company’s effectiveincome tax rate was 12.2% and 18.8% for the three and nine months ended September 30,2008, respectively, compared to 32.0% for the three and nine months ended September 30,2007. Income before income taxes for the three and nine months ended September 30,2008 includes $1.4 million and $26.9 million, respectively, of charges,primarily related to restructuring initiatives, for which tax benefits have notbeen recognized. The merger of the legacy Andrew Brazilian entity into thelegacy CommScope Brazilian entity resulted in the partial release of valuationallowances carried against the legacy CommScope Brazilian net operating losscarryforwards.  This release provided a$5.0 million benefit to the tax provision for the three and nine months ended September 30,2008. Also included in income tax expense for the nine months ended September 30,2008 is the benefit of $3.9 million described above related to the settlementof tax audits. The Company’s effective tax rate reflects the benefits derivedfrom significant operations outside the U.S., which are generally taxed atrates lower than the U.S. statutory rate of 35%, partially offset by U.S. stateincome taxes and valuation allowances for losses in certain foreignjurisdictions for which tax benefits cannot be recognized.

 

**Goodwill**

** **

The Company’s goodwill that arose from transactionsprior to the Andrew acquisition ($154 million, which is primarily in theBroadband segment) is evaluated for impairment annually as of August 31and on an interim basis when events or circumstances change, indicating apotential impairment.  This goodwillimpairment evaluation as of August 31, 

 

9

----

Tableof Contents

 

2008 has been completed and did not indicate that thegoodwill was impaired.  The Company willcontinue to monitor the results and outlook of the supporting business, and ifthere is any indication of impairment, an update of the evaluation will beperformed.

 

The goodwill that arose from the Andrew acquisition($1,124 million) will also be evaluated annually for impairment, with theinitial evaluation to be performed as of October 1, 2008.  As of September 30, 2008, managementdoes not believe there is an indication of a potential impairment.

 

Evaluating goodwill for potential impairment requiressignificant judgment about market conditions, fair values of assets andliabilities, and estimates of future cash flows from operations.  Future evaluations of goodwill, either atannual evaluation dates or as a result of changes in events or circumstancesmay result in goodwill impairment charges and those charges could be material.

 

**Impactof Newly Issued Accounting Standards**

 

In December 2007,the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (SFASNo. 141(R)). SFAS No. 141(R) modifies how acquirers recognizeand measure the consideration transferred, identifiable assets acquired,liabilities assumed, noncontrolling interests and goodwill acquired in abusiness combination. SFAS No. 141(R) also requires that acquisitionrelated expenses and restructuring costs be expensed.  SFAS No. 141(R) will be implementedas of January 1, 2009 and will generally be effective, on a prospective basis,for transactions consummated on or after January 1, 2009.  Provisions of SFAS No. 141(R) relatedto the accounting for certain income tax assets and liabilities will also beeffective for acquisitions completed prior to the effective date.  As the impact of adopting SFAS No. 141(R) isdependent on future acquisitions, the Company is currently unable to determinethe impact of adopting this standard.

 

In December 2007,the FASB issued SFAS No. 160, “Noncontrolling Interests in ConsolidatedFinancial Statements” (SFAS No. 160). SFAS No. 160 establishesrequirements for ownership interests in subsidiaries held by parties other thanthe Company (i.e., minority interests) to be shown separate from theparent’s equity within the equity section of the consolidated statement offinancial position. Changes in the parent’s ownership interests are required tobe accounted for as equity transactions and any noncontrolling equityinvestments in unconsolidated subsidiaries must be measured initially at fairvalue. SFAS No. 160 will be implemented, on a prospective basis, as of January 1,2009.  Presentation and disclosurerequirements must be retrospectively applied to comparative financialstatements. Upon adoption, SFAS No. 160 is not expected to have a materialimpact on the Company’s consolidated financial position and results ofoperations.

 

In March 2008, theFASB issued SFAS No. 161, “Disclosures about Derivative Instruments andHedging Activities — an amendment of FASB Statement No. 133” (SFAS No. 161).SFAS No. 161 expands required disclosure about an entity’s derivativeinstruments and hedging activities and is effective for fiscal years beginningafter November 15, 2008.

 

In April 2008, theFASB issued FASB Staff Position (FSP) No. FAS 142-3, “Determination of theUseful Life of Intangible Assets,” which amends guidance regarding theassumptions used in determining the useful lives of intangible assets that maybe renewed or extended.  This FSP iseffective for fiscal years beginning after December 15, 2008 and is notexpected to have a material impact on the Company’s consolidated financialstatements.

 

In May 2008, theFASB issued FSP No. APB 14-1, “Accounting for Convertible Debt InstrumentsThat May Be Settled in Cash Upon Conversion (Including Partial CashSettlement),” which requires the liability and equity components of convertibledebt to be accounted for separately with interest expense recognized on theliability component at a non-convertible debt borrowing rate.  This FSP is effective for fiscal yearsbeginning after December 15, 2008 and is required to be appliedretrospectively to all past periods presented. The Company does not expect this FSP to have an impact on itsconsolidated financial statements based upon the convertible debt instruments currentlyoutstanding.

 

10

----

Table of Contents

 

**2.             ACQUISITIONS**

 

**AndrewCorporation**

 

On December 27,2007, CommScope completed its acquisition of Andrew. The total purchase priceconsisted of approximately $2.3 billion in cash and approximately5.1 million shares of CommScope common stock, with a value ofapproximately $255 million. The cash portion of the purchase price wasfunded primarily through $2.1 billion of borrowings under new seniorsecured credit facilities. The Company prepared the following preliminaryestimate of the acquisition date fair values of each major asset and liabilitycategory of Andrew as of September 30, 2008 (in millions):

 
| ** **                                                 | ** ** | **Estimated Fair  Value** | ** ** |
|------------------------------------------------------------|------------|--------------------------------|------------|
| Cash and cash equivalents                                  |       | $                              | 165.7      |   |
| Accounts receivable                                        |       | 591.3                          |       |
| Inventories                                                |       | 386.6                          |       |
| Other current assets                                       |       | 185.8                          |       |
| Property, plant and  equipment                             |       | 321.7                          |       |
| Identifiable intangible  assets                            |       | 965.0                          |       |
| Goodwill                                                   |       | 1,124.0                        |       |
| Other noncurrent assets                                    |       | 38.7                           |       |
| Total assets                                               |       | $                              | 3,778.8    |   |
| Accounts payable                                           |       | $                              | 277.7      |   |
| Other accrued liabilities                                  |       | 212.0                          |       |
| Current portion of  long-term debt                         |       | 234.2                          |       |
| Long-term debt                                             |       | 11.7                           |       |
| Noncurrent pension and  postretirement benefit liabilities |       | 35.9                           |       |
| Noncurrent deferred tax  liabilities                       |       | 403.1                          |       |
| Other noncurrent  liabilities                              |       | 48.2                           |       |
| Total liabilities                                          |       | $                              | 1,222.8    |   |
| Net acquisition cost                                       |       | $                              | 2,556.0    |   |

 

Revisions to the preliminary purchase price allocation fromthe initial allocation reflect new information received.  Such information included the determinationthat certain foreign earnings will be repatriated to the U.S., developments inthe TruePosition litigation, warranty exposure from certain products exhibitingperformance issues, asset valuations related to assets that were either sold orsubject to sales agreements, updated information in support of identifiableintangible asset valuations and initial restructuring plans that have been putinto place.  As additional information isobtained regarding these and other matters, including additional restructuringinitiatives, there may be further adjustments to the preliminary purchase priceallocation.

 

The table below summarizes preliminary valuations of theintangible assets acquired that were determined by management to meet thecriteria for recognition apart from goodwill. The values presented below arepreliminary estimates and are subject to change as management completes itsvaluation of the Andrew acquisition.

 
| ** **                          | ** ** | **Estimated Fair  Value** | ** ** | **Weighted Average  Amortization  Period** | ** ** |
|-------------------------------------|------------|--------------------------------|------------|-------------------------------------------------|------------|
| ** **                          | ** ** | **(in millions)**         | ** ** | **(in years)**                             | ** ** |
| Customer base                       |       | $                              | 549.0      |                                            | 7.1        |   |
| Trade names and trademarks          |       | 334.7                          |       | 23.0                                            |       |
| Patents and technologies            |       | 81.3                           |       | 6.6                                             |       |
| Total amortizable intangible assets |       | $                              | 965.0      |                                            | 12.6       |   |

 

The identifiable intangible assets were determined bymanagement to have finite lives. The useful lives for the customer base werebased on management’s forecasts of customer turnover, sales levels with majorcustomers and types of customers. The useful lives for the trade names andtrademarks were estimated based on the periods that the trade names andtrademarks have been in use and the absence of a definite plan to discontinuetheir use in the foreseeable future. The useful lives for the patents andtechnologies were based on review of historical lives of similar products, inconjunction with technology-specific factors and anticipated future trends inthe industry as well as the remaining lives of the related patents.

 

The goodwill arising from the preliminary purchase priceallocation is believed to be consistent with Andrew’s reputation in themarketplace (which is expected to lead to sales to new customers), synergiesexpected to be realized from 

 

11

----

Table of Contents

 

the acquisition and the going concern value of theassembled Andrew business. The goodwill is not expected to be deductible fortax purposes.

 

The Andrew amounts included in the following pro formainformation are based on Andrew’s historical results and, therefore, may not beindicative of the actual results when operated as part of CommScope. Thepro forma adjustments represent management’s best estimates based oninformation available at the time the pro forma information was preparedand may differ from the adjustments that may actually have been required.Accordingly, the pro forma financial information should not be relied uponas being indicative of the historical results that would have been realized hadthe acquisition occurred as of the date indicated or that may be achieved inthe future.

 

The following table presents pro forma consolidated resultsof operations for CommScope for the three and nine months ended September 30,2007 as though the acquisition had been completed as of January 1, 2007(in millions, except per share amounts):

 
| ** **     | ** ** | **Three Months Ended  September 30, 2007** | ** ** | **Nine Months Ended  September 30, 2007** | ** ** |
|----------------|------------|----------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| Net sales |       | $                                                              | 1,138.0    |                                                          | $          | 3,141.0 |   |
| Net loss       |       | (37.5                                                          | )          | (98.7                                                         | )          |
| Loss per share |       | (0.56                                                          | )          | (1.48                                                         | )          |
|                |            |                                                                |            |                                                               |            |  |  |

 

The pro forma results above reflect pro formaadjustments for net interest expense, depreciation, amortization and relatedincome taxes. No pro forma adjustments have been made to reverse assetimpairments or to provide a tax benefit for Andrew’s actual net losses.

 

Net income during the three and nine months ended September 30,2008 includes certain charges (benefits) that relate directly or indirectly tothe acquisition, as listed below on a pretax basis (in millions):

 
| ** **                                              | ** ** | **Three Months Ended  September 30, 2008** | ** ** | **Nine Months Ended  September 30, 2008** | ** ** |
|---------------------------------------------------------|------------|----------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| Purchase accounting inventory adjustment |       | $                                                              |  1.8  |                                                          | $          |  59.3 |   |
| Acquisition and integration related costs               |       | 0.4                                                            |       | 4.2                                                           |       |
| Alignment of certain employee benefit policies          |       | (10.0                                                          | )          | (10.0                                                         | )          |
|                                                         |            |                                                                |            |                                                               |            |  |  |

 

The Company has initiated making changes to variousemployee benefit plans to align benefit structures in conjunction with theintegration of Andrew and CommScope.  Asa result of changes implemented during the three months ended September 30,2008, the Company recognized a benefit of $10.0 million which is reflected as areduction of selling, general and administrative expenses.

 

On January 31, 2008, the Company sold the SatelliteCommunications (SatCom) product line acquired as part of the Andrew acquisitionto ASC Signal Corporation (ASC). The Company received $8.5 million incash, $2.5 million in notes receivable due April 30, 2010, a 17.9%ownership interest in ASC and the potential for up to an additional$25.0 million of cash if certain financial targets are met over a threeyear period from the date of the divestiture. In addition, the Company willreceive an additional note receivable for $2.5 million also due April 30,2010, upon completion of certain manufacturing asset transfers, expected to becompleted within one year of the sale. Net sales from the SatCom product linefor the nine months ended September 30, 2008 and 2007 were$13.7 million and $81.0 million, respectively.  No gain or loss was recognized on the sale ofSatCom.

 

On March 26, 2008, the Company entered into anagreement to divest its minority interest in Andes Industries, Inc.(Andes), which had been acquired as part of the Andrew acquisition.  The agreement was approved by the UnitedStates Department of Justice on April 24, 2008 and the transaction wasconsummated on April 28, 2008.  Nogain or loss was recognized on the disposal of the Andes interest.

 

**SignalVision, Inc.**

 

On May 1, 2007,CommScope acquired substantially all of the assets and assumed certain currentliabilities of Signal Vision, Inc., a leading supplier of broadband radiofrequency subscriber products, for approximately $19.0 million, of which $18.5million has been paid as of September 30, 2008 and the balance is payableby May 2009.  The acquisition isincluded within the Broadband segment and resulted in net sales of $5.1 millionand $15.2 million for the three and nine months ended September 30, 2008,respectively, and $6.9 million and $11.1 million for the three and nine monthsended September 30, 2007, respectively.

 

12

----

Table of Contents

 

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

 
| ** **                        | ** ** | **Estimated Fair  Value** | ** ** | **Amortization  Period** | ** ** |
|-----------------------------------|------------|--------------------------------|------------|--------------------------|------------|
| ** **                        | ** ** | **(in millions)**         | ** ** | **(in years)**      | ** ** |
| Inventory                         |       | $                              | 4.4        |                     |       |   |
| Accounts receivable               |       | 2.5                            |       |                     |       |
| Machinery and equipment           |       | 0.1                            |       |                     |       |
| Intangible assets:                |       |                           |       |                     |       |
| Customer base                     |       | 5.2                            |       | 9.7                      |       |
| Trade name                        |       | 0.7                            |       | 3.7                      |       |
| Patents and technologies          |       | 0.4                            |       | 10.0                     |       |
| Other                             |       | 3.0                            |       | 5.0                      |       |
| Goodwill                          |       | 3.1                            |       |                     |       |
| Less: Current liabilities assumed |       | (0.4                           | )          |                     |       |
| Total purchase price              |       | $                              | 19.0       |                     |       |   |

 

The weighted averageestimated useful life of the amortizable intangible assets acquired is 7.8years.

 

**3.****                                     ****BALANCE SHEET DATA**

 

**Inventories**

 
| ** **      | ** ** | **September 30,  2008** | ** ** | **December 31,  2007** | ** ** |
|-----------------|------------|------------------------------|------------|-----------------------------|------------|
| Raw materials   |       | $                            | 130,156    |                        | $          | 137,606 |   |
| Work in process |       | 124,559                      |       | 158,721                     |       |
| Finished goods  |       | 221,266                      |       | 252,033                     |       |
|            |       | $                            | 475,981    |                        | $          | 548,360 |   |

 

**Other CurrentAccrued Liabilities**

 
| ** **                                     | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                     | ** ** | **2008**               | ** ** | **2007**              | ** ** |
| Compensation and employee benefit  liabilities |       | $                      | 105,587    |                  | $          | 118,361 |   |
| Purchase price payable                         |       | 3,586                  |       | 61,240                |       |
| Litigation reserve                             |       | 28,208                 |       | 45,300                |       |
| Warranty reserve                               |       | 32,001                 |       | 29,183                |       |
| Restructuring reserve                          |       | 27,841                 |       | 34,695                |       |
| Other                                          |       | 106,963                |       | 111,165               |       |
|                                           |       | $                      | 304,186    |                  | $          | 399,944 |   |

 

**4.****                                     ****FINANCING**

 
| ** **                                        | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                        | ** ** | **2008**               | ** ** | **2007**              | ** ** |
| Seven-year senior secured term loan               |       | $                      | 1,330,248  |                  | $          | 1,350,000 |   |
| Six-year senior secured term loan                 |       | 650,000                |       | 750,000               |       |
| 1% convertible senior subordinated  debentures    |       | 199,550                |       | 250,000               |       |
| 3.25% convertible senior subordinated  debentures |       | —                 |       | 231,264               |       |
| Other                                             |       | 16,518                 |       | 14,555                |       |
|                                              |       | 2,196,316              |       | 2,595,819             |       |
| Less: current portion                             |       | (217,575               | )          | (247,662              | )          |
|                                              |       | $                      | 1,978,741  |                  | $          | 2,348,157 |   |

 

See Note 9 in theNotes to the Consolidated Financial Statements in the 2007 Form 10-K forinformation on the terms and conditions of the senior secured creditfacilities. As of September 30, 2008, the Company had availability ofapproximately $372 million and no outstanding borrowings under the seniorsecured revolving credit facility. The weighted average effective interest rateon outstanding borrowings under the above debt instruments, including theeffect of the interest rate swap (see Note 6 below) and amortization ofassociated loan fees was 6.25% and 6.23% at September 30, 2008 and December 31,2007, respectively. Management believes the Company was in compliance with allof its covenants under the senior secured credit facilities as of September 30,2008.

 

13

----

Table of Contents

 

On September 30,2008, the Company made a voluntary $100 million prepayment against its six-yearsenior secured term loan.  As a result ofthis prepayment, the Company wrote off $1.2 million in deferred financing feesto interest expense.

 

During the nine monthsended September 30, 2008, the Company agreed with certain holders of the1% convertible senior subordinated debentures to increase the conversion rateas an inducement for them to convert their debentures to common stock.  Accordingly, $50.45 million of the debentureswere converted into 2,393,513 shares of common stock (2,319,540 related to theoriginal conversion ratio and 73,973 related to the inducement).  As a result of the inducement, the Companyrecorded a $2.8 million pretax charge in other expense in the CondensedConsolidated Statement of Operations.

 

During the nine monthsended September 30, 2008, holders of the 3.25% convertible seniorsubordinated debentures assumed in the Andrew acquisition chose either toconvert their debentures into the contractual merger consideration or toreceive payment of principal plus accrued interest.  As a result, $207.6 million of cash was paidand 484,736 shares of CommScope common stock were issued.

 

See Note 9 in theNotes to the Consolidated Financial Statements in the 2007 Form 10-K forinformation on the terms and conditions of the 1% convertible seniorsubordinated debentures. The 1% convertible senior debentures are classified ascurrent liabilities as of September 30, 2008 because they may be redeemedby the holders on March 20, 2009.

 

**5.****                                     ****RESTRUCTURING CHARGES**

 

During the threeand nine months ended September 30, 2008, the Company recorded netrestructuring charges of $2,356 and $25,124, respectively.  The net restructuring charges for the threemonths ended September 30, 2008 were primarily composed of $1,443 relatedto further restructuring actions at the Company’s legacy CommScope Belgian andBrazilian manufacturing facilities and $840 related to restructuring actions atthe Company’s legacy CommScope Australian manufacturing facility.  The restructuring charges recognized duringthe three and nine months ended September 30, 2008 resulted from actionstaken to lower the overall manufacturing cost structure following the Andrewacquisition.  The Company’s pretaxrestructuring charges recognized by segment during the three and nine monthsended September 30, 2008 and 2007 were as follows:

 
| ** **                                | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                | ** ** | **2008**                                             | ** ** | **2007**                                            | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                      |       |                                                 |       |                                                |       |   |   |   |   |
| Antenna, Cable and Cabinets Group segment |       | $                                                    | —     |                                                | $          | — |   | $ | — |   | $ | 86 |   |
| Enterprise segment                        |       | 939                                                  |       | 149                                                 |       | 1,549 |   | 637 |   |
| Wireless Network Solutions segment        |       | —                                               |       | —                                              |       | — |   | — |   |
| Broadband segment                         |       | 1,417                                                |       | 66                                                  |       | 23,575 |   | 390 |   |
| Total                                     |       | $                                                    | 2,356      |                                                | $          | 215 |   | $ | 25,124 |   | $ | 1,113 |   |

 

14

----

Table of Contents

 

The activitywithin the liability (included in other accrued liabilities) for theserestructuring initiatives was as follows:

 
| ** **                                         | ** ** | **Employee-  Related  Costs** | ** ** | **Lease  Termination  Costs** | ** ** | **Asset  Impairment  Charges** | ** ** | **Equipment  Relocation  Costs** | ** ** | **Total** | ** ** |
|----------------------------------------------------|------------|-------------------------------|------------|-------------------------------|------------|--------------------------------|------------|----------------------------------|------------|-----------|------------|
| Balance as of June 30, 2008                   |       | $                             | 41,481     |                          | $          | 3,778                          |       | $                                | —     |      | $          | — |   | $ | 45,259 |   |
| Additional charge recorded                         |       | 2,236                         |       | —                        |       | 80                             |       | 40                               |       | 2,356     |       |
| Revision of Andrew purchase  price allocation |       | 1,548                         |       | 799                           |       | —                         |       | —                           |       | 2,347     |       |
| Cash paid                                          |       | (19,925                       | )          | (718                          | )          | —                         |       | (40                              | )          | (20,683   | )          |
| Foreign exchange and other non-cash items          |       | (1,260                        | )          | (98                           | )          | (80                            | )          | —                           |       | (1,438    | )          |
| Balance as of September 30, 2008              |       | $                             | 24,080     |                          | $          | 3,761                          |       | $                                | —     |      | $          | — |   | $ | 27,841 |   |
|                                               |       |                          |       |                          |       |                           |       |                             |       |      |       |
| Balance as of December 31, 2007               |       | $                             | 32,506     |                          | $          | 2,189                          |       | $                                | —     |      | $          | — |   | $ | 34,695 |   |
| Additional charge (recovery) recorded              |       | 24,790                        |       | 362                           |       | (200                           | )          | 172                              |       | 25,124    |       |
| Revision of Andrew purchase  price allocation |       | 6,453                         |       | 3,173                         |       | —                         |       | —                           |       | 9,626     |       |
| Cash paid                                          |       | (38,863                       | )          | (1,904                        | )          | —                         |       | (172                             | )          | (40,939   | )          |
| Foreign exchange and other non-cash items          |       | (806                          | )          | (59                           | )          | 200                            |       | —                           |       | (665      | )          |
| Balance as of September 30, 2008              |       | $                             | 24,080     |                          | $          | 3,761                          |       | $                                | —     |      | $          | — |   | $ | 27,841 |   |

 

Employee-relatedcosts include the expected severance costs and related benefits, accrued overthe remaining period employees are required to work in order to receiveseverance benefits.  Lease terminationcosts relate to the cost of vacating leased facilities, net of anticipatedsub-rental income.  Equipment relocationcosts relate to the costs to uninstall, pack, ship and reinstall manufacturingequipment as well as the costs to prepare the receiving facility to accommodatethe equipment. The Company expects to complete these restructuring actions bylate 2009. Additional charges and purchase accounting adjustments are expectedduring the balance of 2008 as further restructuring plans related to theintegration of Andrew operations and other cost reduction initiatives areimplemented.

 

As a result ofrestructuring and consolidation actions, there is unutilized real estate atvarious facilities in the U.S. and internationally, which is recorded inproperty, plant and equipment on the Condensed Consolidated Balance Sheets atthe lower of cost or estimated fair value. The Company is attempting to sell or lease this unutilized space. Asadditional restructuring initiatives are implemented, additional excessproperty may be identified and impairment charges, which may be material, maybe incurred.

 

**6.**                                      DERIVATIVESAND HEDGING ACTIVITIES

** **

In December 2007,the Company entered into an interest rate swap agreement to hedge thevariability of forecasted interest payments attributable to changes in interestrates on a portion of the term loans issued under the new senior secured creditfacilities. Through this swap, the Company fixed the following notional amountsat 4.1275% (before application of the applicable margin): $1.5 billionfrom December 27, 2007 through December 31, 2008; $1.3 billionduring 2009; $1.0 billion during 2010; and $400 million during 2011.The interest rate swap agreement was designated as a cash flow hedge atinception and such designation was substantially effective at September 30,2008 and is expected to continue to be effective for the duration of the swapagreement. During the three and nine months ended September 30, 2008,interest income (expense) of $0.2 million and $(1.5) million, respectively, wasrecognized as a result of hedge ineffectiveness related to the interest rateswap.  The fair value of the interestrate swap, reflected in other noncurrent liabilities, was $25.7 million as of September 30,2008 and $4.5 million as of December 31, 2007.

 

During the nine monthsended September 30, 2008, the Company paid approximately $5.0 million andamended its cross currency swap of U.S. dollars for euros to reduce thenotional amount from $14 million to $7 million. This payment is included as aninvesting use of cash on the Condensed Consolidated Statement of Cash Flows.Prior to this amendment, a portion of the swap was designated and documented asa hedge of the Company’s net investment in its Belgian subsidiary to reduce thevolatility in stockholders’ equity caused by changes in euro exchangerates.  Subsequent to this amendment, the

 

15

----

Table of Contents

 

entire swap isdesignated as a hedge against fluctuations in the fair value of certain of theCompany’s euro-denominated assets. Pretax gains (losses) of $1,025 and $(449)on the portion designated as a fair value hedge are reflected in the Company’sCondensed Consolidated Statements of Operations for the three months ended September 30,2008 and 2007, respectively. Pretax gains (losses) of $141 and $(539) on theportion designated as a fair value hedge are reflected in the Company’sCondensed Consolidated Statements of Operations for the nine months ended September 30,2008 and 2007, respectively.  Thedesignation of the hedging instrument as a fair value hedge was effective as ofSeptember 30, 2008 and is expected to continue to be effective for theduration of the agreement, resulting in no anticipated hedge ineffectiveness.The fair value of the hedging instrument, reflected in other noncurrentliabilities, was $4.0 million and $8.7 million as of September 30,2008 and December 31, 2007, respectively.

 

There were no reclassifications from othercomprehensive income (loss) to earnings related to derivatives and hedgingactivities during the three and nine months ended September 30, 2008 and2007.

 

Activity in theaccumulated net loss on derivative instruments included in accumulated othercomprehensive income (loss) consisted of the following:

 
| ** **                                                                           | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|------------------------------------------------|------------|
| ** **                                                                           | ** ** | **2008**                                        | ** ** | **2007**                                       | ** ** | **2008** | ** ** | **2007** | ** ** |
| Accumulated net loss on derivative instruments,  beginning of period            |       | $                                               | (14,155    | )                                              | $          | (5,425 | ) | $ | (8,849 | ) | $ | (5,201 | ) |
| Loss on cross currency swap designated as  a net investment hedge, net of taxes |       | —                                          |       | (429                                           | )          | (486 | ) | (653 | ) |
| Loss on interest rate swap designated as  a cash flow hedge, net of taxes       |       | (7,601                                          | )          | —                                         |       | (12,421 | ) | — |   |
| Accumulated net loss on derivative  instruments, end of period                  |       | $                                               | (21,756    | )                                              | $          | (5,854 | ) | $ | (21,756 | ) | $ | (5,854 | ) |

 

During the three monthsended September 30, 2008 and 2007, the income tax benefit related to theloss on the derivative financial instruments reported within othercomprehensive income (loss) was $(4,464) and $(251), respectively. During thenine months ended September 30, 2008 and 2007, the income tax benefitrelated to the loss on the derivative financial instruments reported withinother comprehensive income (loss) was $(7,580) and $(383), respectively.

 

**7.**                                      FAIRVALUE MEASUREMENTS

** **

As of January 1,2008, the Company implemented SFAS No. 157, which defines fair value,establishes a framework for measuring fair value as required by otheraccounting pronouncements and expands disclosure requirements.  In February 2008, the FASB issued FSP No. FAS157-2, which delays the effective date of SFAS No. 157 as it applies tonon-financial assets and liabilities that are not required to be measured atfair value on a recurring (at least annual) basis.  As a result of the delay, SFAS No. 157will be applied to non-financial assets and liabilities for fiscal yearsbeginning after November 15, 2008.

 

SFAS No. 157establishes a three-tier hierarchy for evaluating fair values based on theinputs utilized to measure the fair values as follows:

 

Level 1 – Observableinputs such as quoted prices in active markets;

 

Level 2 – Inputs other than quoted market prices in active markets thatare observable, either directly or indirectly; and

 

Level 3 – Inputs for which there is little or no observable marketdata, which requires the reporting entity to develop its own assumptions.

 

16

----

Table of Contents

 

For financial assets andliabilities measured at fair value as of September 30, 2008, the followingtable provides the quantitative disclosures regarding the fair value.  A market approach, based on prices or otherrelevant information from market transactions involving identical or comparableassets or liabilities, was used to determine the fair values.

 
| ** **                                                                                    | ** ** | **Fair Value as of  September 30, 2008** | ** ** | **Valuation  Inputs** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|-----------------------|------------|
| Cash and cash equivalents                                                                     |       | $                                                                 | 496,251    |                  | Level 1    |   |
| Auction rate securities (included in other  noncurrent assets) (1)                            |       | 3,545                                                             |       | Level 2               |       |
| Interest rate and cross currency swap  liabilities (included in other noncurrent liabilities) |       | (29,818                                                           | )          | Level 2               |       |
|                                                                                               |            |                                                                   |            |                       |            |  |

 

----

(1) Theoriginal principal amount of these auction rate securities is $5.8million.  Of the $2.3 million decline infair value, $1.3 million was determined by the Company to be other thantemporary and recorded in other expense ($0.7 million in 2007 and $0.6 millionin the nine months ended September 30, 2008).  The remainder of the decline in fair valuewas determined by the Company to be temporary and was recorded as a componentof other comprehensive income (loss) in the three and nine months ended September 30,2008.

 

The provisions of SFAS No. 159became effective for the Company as of January 1, 2008.  This standard gives companies the irrevocableoption to carry most financial assets or liabilities at fair value, withchanges in fair value recorded in earnings. The Company did not elect to carryany of its financial assets or liabilities at fair value under the provisionsof SFAS No. 159.

 

**8.****                                     ****EMPLOYEE BENEFIT PLANS**

** **
| ** **                            | ** ** | **Pension Benefits**                                | ** ** | **Other Postretirement  Benefits** | ** ** |
|---------------------------------------|------------|----------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                            | ** ** | **Three Months Ended September 30,** | ** ** |
| ** **                            | ** ** | **2008**                                                 | ** ** | **2007**                                | ** ** | **2008** | ** ** | **2007** | ** ** |
| Service cost                          |       | $                                                        | 830        |                                    | $          | 790 |   | $ | 843 |   | $ | 1,039 |   |
| Interest cost                         |       | 3,236                                                    |       | 1,808                                   |       | 1,510 |   | 1,319 |   |
| Recognized actuarial (gain) loss      |       | —                                                   |       | —                                  |       | (123 | ) | 26 |   |
| Amortization of prior service credit  |       | (193                                                     | )          | (193                                    | )          | (23 | ) | (21 | ) |
| Amortization of transition obligation |       | 13                                                       |       | 11                                      |       | — |   | — |   |
| Expected return on plan assets        |       | (3,712                                                   | )          | (2,198                                  | )          | (127 | ) | (119 | ) |
| Net periodic benefit cost             |       | $                                                        | 174        |                                    | $          | 218 |   | $ | 2,080 |   | $ | 2,244 |   |

 
| ** **                            | ** ** | **Nine Months Ended September 30,** | ** ** |
|---------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                            | ** ** | **2008**                                                | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** |
| Service cost                          |       | $                                                       | 2,563      |   | $ | 2,353 |   | $ | 2,527 |   | $ | 3,117 |   |
| Interest cost                         |       | 10,468                                                  |       | 5,413 |   | 4,528 |   | 3,957 |   |
| Recognized actuarial (gain) loss      |       | —                                                  |       | — |   | (371 | ) | 77 |   |
| Amortization of prior service credit  |       | (578                                                    | )          | (579 | ) | (65 | ) | (64 | ) |
| Amortization of transition obligation |       | 38                                                      |       | 33 |   | — |   | — |   |
| Expected return on plan assets        |       | (11,918                                                 | )          | (6,584 | ) | (379 | ) | (356 | ) |
| Net periodic benefit cost             |       | $                                                       | 573        |   | $ | 636 |   | $ | 6,240 |   | $ | 6,731 |   |

 

The Companycontributed approximately $0.5 million and $11.2 million to its pension plansduring the three and nine months ended September 30, 2008, respectively,and anticipates making additional contributions of approximately $0.5 millionto these plans during 2008. The Company contributed approximately$1.2 million and $3.5 million to the postretirement benefit plans duringthe three and nine months ended September 30, 2008, respectively, andanticipates making additional contributions of approximately $1.2 million tothese plans during 2008.

 

**9.****                                     ****EQUITY-BASED COMPENSATION PLANS**

 

As of September 30,2008, $35.3 million of unrecognized compensation costs related to non-vestedawards are expected to be recognized over a weighted average period of 2.0years. There were no significant capitalized equity-based compensation costs atSeptember 30, 2008.

 

17

----

Table of Contents

 

**Stock Options**

 

The following tablesummarizes the stock option activity for the three and nine months ended September 30,2008 (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 and expected to vest at  June 30, 2008      |       | 3,230      |       | $                                                      | 27.75      |                                                                |       |                            |       |   |
| Exercised                                                    |       | (220       | )          | $                                                      | 16.80      |                                                                |       |                            |       |   |
| Expired or forfeited                                         |       | (49        | )          | $                                                      | 63.64      |                                                                | $          | 6.36                            |       |   |   |
| Outstanding and expected to vest at  September 30, 2008 |       | 2,961      |       | $                                                      | 27.97      |                                                                |       |                            | $          | 35,155 |   |
|                                                         |       |       |       |                                                   |       |                                                                |       |                            |       |
| Outstanding and expected to vest at  December 31, 2007  |       | 3,585      |       | $                                                      | 28.45      |                                                                |       |                            |       |   |
| Granted                                                      |       | 278        |       | $                                                      | 41.22      |                                                                | $          | 20.85                           |       |   |   |
| Exercised                                                    |       | (607       | )          | $                                                      | 21.17      |                                                                |       |                            |       |   |
| Expired or forfeited                                         |       | (295       | )          | $                                                      | 60.31      |                                                                | $          | 4.37                            |       |   |   |
| Outstanding and expected to vest at  September 30, 2008 |       | 2,961      |       | $                                                      | 27.97      |                                                                |       |                            | $          | 35,155 |   |
| Exercisable at September 30, 2008                       |       | 2,500      |       | $                                                      | 26.45      |                                                                |       |                            | $          | 33,800 |   |

 

The total intrinsicvalue of options exercised during the three and nine months ended September 30,2008 was $7.0 million and $16.8 million, respectively.  The total intrinsic value of optionsexercised during the three and nine months ended September 30, 2007 was$7.2 million and $45.3 million, respectively. All of the non-vested options at September 30, 2008 are expected tovest as they are primarily held by senior management and directors.

 

The exercise prices ofoutstanding options at September 30, 2008 were in the following ranges:

 
| ** **                                  | ** ** | **Options Outstanding**    | ** ** | **Options Exercisable**                                             | ** ** |
|---------------------------------------------|------------|---------------------------------|------------|--------------------------------------------------------------------------|------------|
| **Range of Exercise Prices** | ** ** | **Shares  (in thousands)** | ** ** | **Weighted  Average  Remaining  Contractual Life  (in years)** | ** ** | **Weighted  Average  Exercise Price  Per Share** | ** ** | **Shares  (in thousands)** | ** ** | **Weighted  Average  Exercise Price  Per Share** | ** ** |
| $7.43 to $16.50                             |       | 1,043                           |       | 4.4                                                                      |       | $ | 13.28 |   | 1,043 |   | $ | 13.28 |   |
| $16.51 to $34.64                            |       | 972                             |       | 5.6                                                                      |       | $ | 21.39 |   | 811 |   | $ | 20.41 |   |
| $34.65 to $52.00                            |       | 591                             |       | 6.1                                                                      |       | $ | 41.21 |   | 291 |   | $ | 40.85 |   |
| $52.01 to $75.48                            |       | 355                             |       | 1.7                                                                      |       | $ | 67.06 |   | 355 |   | $ | 67.06 |   |
| $7.43 to $75.48                             |       | 2,961                           |       | 4.8                                                                      |       | $ | 27.97 |   | 2,500 |   | $ | 26.45 |   |

 

The Company uses theBlack-Scholes model to estimate the fair value of stock option awards. Keyinput assumptions used in the model to estimate the fair value of stock optionsinclude the grant price of the award, the expected option term, volatility ofthe Company’s stock, the risk-free rate and the Company’s projected dividendyield. The Company believes that the valuation technique and the approachutilized to develop the underlying assumptions are appropriate in estimatingthe fair values of CommScope stock options. Estimates of fair value are notintended to predict actual future events or the value ultimately realized byemployees who receive equity awards, and subsequent events are not indicativeof the reasonableness of the original estimates of fair value made by theCompany.  The following table presentsthe weighted average assumptions used to estimate the fair value of stockoption awards granted during the nine months ended September 30,2008.  No stock option awards weregranted in the three months ended September 30, 2008 or the three or ninemonths ended September 30, 2007.

 
| ** **                                | ** ** | **Nine Months Ended  September 30, 2008** | ** ** |
|-------------------------------------------|------------|---------------------------------------------------------------|------------|
| Expected option term (in years)           |       | 7.0                                                           |       |
| Risk-free interest rate                   |       | 3.0                                                           | %          |
| Expected volatility                       |       | 45                                                            | %          |
| Expected dividend yield                   |       | 0                                                             | %          |
| Weighted-average fair value at grant date |       | $                                                             | 20.85      |   |
|                                           |            |                                                               |            |  |

 

18

----

Table of Contents

 

**Performance Share Units**

 

The following tablesummarizes the performance share unit activity for the three and nine monthsended September 30, 2008 (in thousands, except per share data):

 
| ** **                                             | ** ** | **Performance  Share  Units** | ** ** | **Weighted  Average Grant  Date Fair  Value Per  Share** | ** ** |
|--------------------------------------------------------|------------|-------------------------------|------------|-------------------------------------------------------------------------|------------|
| Outstanding and non-vested at June 30,  2008      |       | 838                           |       | $                                                                       | 30.82      |   |
| Vested and shares issued                               |       | (3                            | )          | $                                                                       | 24.63      |   |
| Forfeited                                              |       | (10                           | )          | $                                                                       | 34.99      |   |
| Outstanding and non-vested at  September 30, 2008 |       | 825                           |       | $                                                                       | 30.80      |   |
|                                                   |       |                          |       |                                                                    |       |
| Outstanding and non-vested at  December 31, 2007  |       | 514                           |       | $                                                                       | 24.29      |   |
| Granted                                                |       | 329                           |       | $                                                                       | 41.22      |   |
| Vested and shares issued                               |       | (3                            | )          | $                                                                       | 24.63      |   |
| Forfeited                                              |       | (15                           | )          | $                                                                       | 37.28      |   |
| Outstanding and non-vested at September 30,  2008 |       | 825                           |       | $                                                                       | 30.80      |   |

 

**Restricted Stock Units**

 

The following tablesummarizes the restricted stock unit activity for the three and nine monthsended September 30, 2008 (in thousands, except per share data):

 
| ** **                                             | ** ** | **Restricted  Stock  Units** | ** ** | **Weighted  Average Grant  Date Fair  Value Per  Share** | ** ** |
|--------------------------------------------------------|------------|------------------------------|------------|-------------------------------------------------------------------------|------------|
| Outstanding and non-vested at June 30,  2008      |       | 945                          |       | $                                                                       | 33.00      |   |
| Granted                                                |       | 8                            |       | $                                                                       | 45.62      |   |
| Vested and shares issued                               |       | (9                           | )          | $                                                                       | 45.09      |   |
| Forfeited                                              |       | (8                           | )          | $                                                                       | 35.30      |   |
| Outstanding and non-vested at  September 30, 2008 |       | 936                          |       | $                                                                       | 32.98      |   |
|                                                   |       |                         |       |                                                                    |       |
| Outstanding and non-vested at  December 31, 2007  |       | 495                          |       | $                                                                       | 25.43      |   |
| Granted                                                |       | 475                          |       | $                                                                       | 41.28      |   |
| Vested and shares issued                               |       | (9                           | )          | $                                                                       | 45.09      |   |
| Forfeited                                              |       | (25                          | )          | $                                                                       | 36.18      |   |
| Outstanding and non-vested at  September 30, 2008 |       | 936                          |       | $                                                                       | 32.98      |   |

 

**10.          SEGMENTS**

 

As a result of theacquisition of Andrew, management reorganized its internal reporting structure,which consequently affects the Company’s reportable segments.  The Company’s four reportable segments, whichalign with the manner in which the business is managed, are as follows:Antenna, Cable and Cabinets Group (ACCG); Enterprise; Broadband; and WirelessNetwork Solutions (WNS).

 

The ACCG segmentincludes product offerings of primarily passive transmission devices for thewireless infrastructure market including base station antennas, coaxial cableand connectors and microwave antennas as well as secure environmentalenclosures for electronic devices and equipment used by wireline and wirelessproviders.  The ACCG segment is largelycomposed of product lines that were part of legacy Andrew.

 

The Enterprisesegment consists 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 WNS segment includes avariety of active electronic devices and services including power amplifiers,filters and tower mounted amplifiers, geolocation products, networkoptimization analysis systems, and engineering and consulting services as wellas products that are used to extend and enhance the coverage of wirelessnetworks in areas where signals are 

 

19

----

Tableof Contents

 

difficult to send or receive such as tunnels,subways, airports and commercial buildings. The WNS segment is entirely composed of product lines that were part oflegacy Andrew.

 

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 following tables provide summary assetinformation by segment as of September 30, 2008 and December 31, 2007(in millions):

 
| ** **                                | ** ** | **As of**         | ** ** | **As of**        | ** ** |
|-------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
| ** **                                | ** ** | **2008**               | ** ** | **2007**              | ** ** |
| Identifiable segment related assets:      |       |                   |       |                  |       |
| ACCG                                      |       | $                      | 2,392.5    |                  | $          | 2,560.0 |   |
| Enterprise                                |       | 388.9                  |       | 352.6                 |       |
| WNS                                       |       | 969.2                  |       | 1,048.7               |       |
| Broadband                                 |       | 407.4                  |       | 389.3                 |       |
| Total identifiable segment related assets |       | 4,158.0                |       | 4,350.6               |       |
|                                      |       |                   |       |                  |       |
| Reconciliation to total assets:           |       |                   |       |                  |       |
| Cash and cash equivalents                 |       | 496.3                  |       | 649.5                 |       |
| Deferred income taxes                     |       | 80.6                   |       | 106.5                 |       |
| Total assets                              |       | $                      | 4,734.9    |                  | $          | 5,106.6 |   |

 

                The following table presents the allocation ofgoodwill, including the preliminary goodwill allocation arising from the Andrewacquisition, to reportable segments as of September 30, 2008 and December 31,2007 (in millions):

 
| ** **           | ** ** | **As of**         | ** ** | **As of**        | ** ** |
|----------------------|------------|------------------------|------------|-----------------------|------------|
| ** **           | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
| ** **           | ** ** | **2008**               | ** ** | **2007**              | ** ** |
| Goodwill allocation: |       |                   |       |                  |       |
| ACCG                 |       | $                      | 796.1      |                  | $          | 760.9 |   |
| Enterprise           |       | 20.9                   |       | 20.9                  |       |
| WNS                  |       | 327.9                  |       | 295.9                 |       |
| Broadband            |       | 133.6                  |       | 133.5                 |       |
| Total goodwill       |       | $                      | 1,278.5    |                  | $          | 1,211.2 |   |

 

The followingtable provides net sales and operating income (loss) by segment for the threeand nine months ended September 30, 2008 and 2007 (in millions):

 
| ** **                    | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-------------------------------|------------|-------------------------------------------------|------------|------------------------------------------------|------------|
| ** **                    | ** ** | **2008**                                        | ** ** | **2007**                                       | ** ** | **2008** | ** ** | **2007** | ** ** |
| Net sales:               |       |                                            |       |                                           |       |   |   |   |   |
| ACCG                          |       | $                                               | 495.0      |                                           | $          | 112.3 |   | $ | 1,474.2 |   | $ | 316.2 |   |
| Enterprise                    |       | 236.5                                           |       | 240.4                                          |       | 691.0 |   | 680.6 |   |
| WNS                           |       | 174.7                                           |       | —                                         |       | 540.7 |   | — |   |
| Broadband                     |       | 159.0                                           |       | 161.2                                          |       | 458.3 |   | 472.7 |   |
| Inter-segment eliminations    |       | (2.9                                            | )          | (0.3                                           | )          | (9.4 | ) | (1.3 | ) |
| Consolidated net sales        |       | $                                               | 1,062.3    |                                           | $          | 513.6 |   | $ | 3,154.8 |   | $ | 1,468.2 |   |
|                          |       |                                            |       |                                           |       |   |   |   |   |
| Operating income (loss):      |       |                                            |       |                                           |       |   |   |   |   |
| ACCG                          |       | $                                               | 62.7       |                                           | $          | 21.9 |   | $ | 149.2 |   | $ | 52.8 |   |
| Enterprise                    |       | 46.1                                            |       | 42.5                                           |       | 123.0 |   | 119.8 |   |
| WNS                           |       | 4.8                                             |       | —                                         |       | (27.8 | ) | — |   |
| Broadband                     |       | 13.9                                            |       | 17.0                                           |       | 8.5 |   | 58.8 |   |
| Consolidated operating income |       | $                                               | 127.5      |                                           | $          | 81.4 |   | $ | 252.9 |   | $ | 231.4 |   |

 

20

----

Table of Contents

 

**11.**                               SUPPLEMENTALCASH FLOW INFORMATION

*** ***
| ** **                                                    | ** ** | **Nine Months Ended  September 30,** | ** ** |
|---------------------------------------------------------------|------------|------------------------------------------------|------------|
| ** **                                                    | ** ** | **2008**                                       | ** ** | **2007** | ** ** |
| Cash paid during the period for:                              |       |                                           |       |   |   |
| Income taxes, net of refunds                                  |       | $                                              | 18,823     |   | $ | 59,145 |   |
| Interest                                                      |       | 105,783                                        |       | 4,391 |   |
|                                                          |       |                                           |       |   |   |
| Noncash investing and financing activities:                   |       |                                           |       |   |   |
| Conversion of senior subordinated  debentures to common stock |       | $                                              | 76,607     |   | $ | — |   |
| Assets acquired under capital lease                           |       | 4,903                                          |       | — |   |

 

21

----

Table of Contents

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

 

The followingdiscussion and analysis of our financial condition and results of operationsfor the three and nine months ended September 30, 2008 and 2007 isprovided to increase the understanding of, and should be read in conjunctionwith, the unaudited condensed consolidated financial statements and accompanyingnotes included in this document as well as the audited consolidated financialstatements, related notes thereto and management’s discussion and analysis offinancial condition and results of operations, including management’sdiscussion and analysis about the application of critical accounting policies,included in our 2007 Annual Report on Form 10-K.

 

**Overview**

** **

### CommScope, Inc.is a world leader in infrastructure solutions for communications networks. Withthe acquisition of Andrew Corporation (Andrew), we are a global leader inproviding radio frequency subsystem solutions for wireless networks. Throughour SYSTIMAX® and Uniprise® brands, we are also a global leader in structuredcabling systems for business enterprise applications. In addition, we are thepremier manufacturer of coaxial cable for broadband cable television networksand one of the leading North American providers of environmentally securecabinets for digital subscriber line (DSL) and Fiber-to-the-Node applications.

###  

As a result of the acquisition of Andrew, managementreorganized its internal reporting structure and revised our reportablesegments.  Our four reportable segments,which align with the manner in which the business is managed, are as follows:Antenna, Cable and Cabinet Group (ACCG); Enterprise; Wireless Network Solutions(WNS); and Broadband.

 

**CRITICALACCOUNTING POLICIES**

** **

There have been no changes in our criticalaccounting policies or significant accounting estimates as disclosed in our2007 Annual Report on Form 10-K other than the implementation of SFAS No. 157,“Fair Value Measurements” and SFAS No. 159, “The Fair Value Option forFinancial Assets and Financial Liabilities.” See Note 7 to the Condensed Consolidated Financial Statements includedelsewhere in this Form 10-Q.

 

**COMPARISONOF RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008WITH THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007**

 
| ** **                                  | ** ** | **Three Months Ended September 30,**                          | ** ** | ** **         | ** ** | ** ** | ** ** |
|---------------------------------------------|------------|-----------------------------------------------------------------------------------|------------|--------------------|------------|------------|------------|
| ** **                                  | ** ** | **2008**                                                                          | ** ** | **2007**           | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                  | ** ** | ** **                                                                        | ** ** | **%**** of**  | ** ** | ** ** | ** ** | **%**** of** | ** ** | **Dollar** | ** ** | **%** | ** ** |
| ** **                                  | ** ** | **Amount**                                                                        | ** ** | **Net Sales** | ** ** | **Amount** | ** ** | **Net Sales** | ** ** | **Change** | ** ** | **Change** | ** ** |
| ** **                                  | ** ** | **(dollars in millions, except per share amounts)** | ** ** |
| Net sales                                   |       | $                                                                                 | 1,062.3    |               | 100.0      | %          | $          | 513.6 |   | 100.0 | % | $ | 548.7 |   | 106.8 | % |
| Gross profit                                |       | 296.5                                                                             |       | 27.9               |       | 159.3      |       | 31.0 |   | 137.2 |   | 86.1 |   |
| SG&A expense                            |       | 108.8                                                                             |       | 10.2               |       | 68.1       |       | 13.3 |   | 40.7 |   | 59.8 |   |
| R&D expense                             |       | 33.6                                                                              |       | 3.2                |       | 8.3        |       | 1.6 |   | 25.3 |   | 304.8 |   |
| Amortization of purchased intangible assets |       | 24.3                                                                              |       | 2.3                |       | 1.3        |       | 0.3 |   | 23.0 |   | 1,721.1 |   |
| Restructuring costs                         |       | 2.4                                                                               |       | 0.2                |       | 0.2        |       | 0.0 |   | 2.1 |   | 995.8 |   |
| Net income                                  |       | 84.7                                                                              |       | 8.0                |       | 60.3       |       | 11.7 |   | 24.4 |   | 40.5 |   |
| Diluted earnings per share                  |       | 1.05                                                                              |       |               |       | 0.81       |       |   |   | 0.24 |   | 29.6 |   |
|                                             |            |                                                                                   |            |                    |            |            |            |  |  |  |  |  |  |  |  |  |

 

22

----

Tableof Contents

 
| ** **                                  | ** ** | **Nine Months Ended September 30,**                           | ** ** | ** **         | ** ** | ** ** | ** ** |
|---------------------------------------------|------------|-----------------------------------------------------------------------------------|------------|--------------------|------------|------------|------------|
| ** **                                  | ** ** | **2008**                                                                          | ** ** | **2007**           | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                  | ** ** | ** **                                                                        | ** ** | **%**** of**  | ** ** | ** ** | ** ** | **%**** of** | ** ** | **Dollar** | ** ** | **%** | ** ** |
| ** **                                  | ** ** | **Amount**                                                                        | ** ** | **Net Sales** | ** ** | **Amount** | ** ** | **Net Sales** | ** ** | **Change** | ** ** | **Change** | ** ** |
| ** **                                  | ** ** | **(dollars in millions, except per share amounts)** | ** ** |
| Net sales                                   |       | $                                                                                 | 3,154.8    |               | 100.0      | %          | $          | 1,468.2 |   | 100.0 | % | $ | 1,686.6 |   | 114.9 | % |
| Gross profit                                |       | 823.6                                                                             |       | 26.1               |       | 453.8      |       | 30.9 |   | 369.7 |   | 81.5 |   |
| SG&A expense                            |       | 368.4                                                                             |       | 11.7               |       | 193.0      |       | 13.1 |   | 175.4 |   | 90.8 |   |
| R&D expense                             |       | 103.8                                                                             |       | 3.3                |       | 24.6       |       | 1.7 |   | 79.2 |   | 321.7 |   |
| Amortization of purchased intangible assets |       | 73.4                                                                              |       | 2.3                |       | 3.6        |       | 0.2 |   | 69.8 |   | 1,925.9 |   |
| Restructuring costs                         |       | 25.1                                                                              |       | 0.8                |       | 1.1        |       | 0.1 |   | 24.0 |   | 2,157.3 |   |
| Net income                                  |       | 113.9                                                                             |       | 3.6                |       | 167.3      |       | 11.4 |   | (53.4 | ) | (31.9 | ) |
| Diluted earnings per share                  |       | 1.43                                                                              |       |               |       | 2.27       |       |   |   | (0.84 | ) | (37.0 | ) |
|                                             |            |                                                                                   |            |                    |            |            |            |  |  |  |  |  |  |  |  |  |

 

**Netsales**

** **

**Theincrease in net sales for the three and nine months ended September 30,2008 over the comparable prior year periods is primarily attributable to theacquisition of Andrew on December 27, 2007.  Net sales for Andrew during the three andnine months ended September 30, 2008 were $594.2 million and $1,744.1 million,respectively, and are included in the ACCG and WNS segments.  Net sales of $11.3 million for the four dayperiod from December 28, 2007 to December 31, 2007 are included insales for the nine months ended September 30, 2008. For further details bysegment, see the section titled “Segment Results” below.**

** **

***We typically experience a slowdown in sales in the fourthquarter.  In addition to this normalslowdown, we expect fourth quarter 2008 demand for our products to be furtheraffected by continued weakness in sales of wireline cabinets and thedeterioration in general economic conditions. The uncertainty and volatility in global financial, currency andcommodity markets may adversely affect volume and pricing for many of ourproducts.***

*** ***

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

** **

The year-over-year increase in gross profit of$137.2 million and $369.8 million for the three and nine months ended September 30,2008, respectively, is primarily attributable to the acquisition ofAndrew.  Gross profit for the three andnine months ended September 30, 2008 was adversely affected by $1.8million and $59.3 million, respectively, of purchase accounting adjustments,primarily related to the effect on cost of sales of the step-up of the acquiredinventory to its estimated fair value less the costs to sell theinventory.  Cost of sales for the threeand nine months ended September 30, 2008 includes amortization ofpurchased intangibles of $3.8 million and $11.6 million, respectively, ascompared to $0.8 million and $2.6 million in comparable prior year periods.

 

Our gross profit margin for the three months ended September 30,2008 was 27.9% compared to 31.0% for the comparable prior year period.  The gross profit margin for the three monthsended September 30, 2008, excluding the impact of the purchase accountingadjustments and amortization expense discussed above, was 28.4%.  Our gross profit margin for the nine monthsended September 30, 2008 was 26.1% compared to 30.9% for the comparableprior year period.  The gross profitmargin for the nine months ended September 30, 2008, excluding the impactof the purchase accounting adjustments and amortization expense discussedabove, was 28.4%.  These adjusted grossprofit margins are lower than the prior periods reflecting legacy Andrewproducts whose historical gross profit margins were lower than those ofCommScope and a reduction in certain legacy CommScope product lines,particularly in the Broadband segment (see the section titled “Segment Results”below).

 

In response to increased raw material costs, weannounced price increases during 2008 for certain cable products within theACCG, Enterprise and Broadband segments. These price increases provided modest benefit to gross profit in thethird quarter. During the third quarter of 2008, prices for certain rawmaterials, particularly copper and aluminum, declined substantially.  As of September 30, 2008, we have $131million of forward purchase commitments for metals, most of which are in excessof market prices as of that date.  As rawmaterials covered by these commitments and current inventory balances are sold,we could experience an adverse impact on gross margin.  If raw material costs increase and we delayimplementing price increases or are unable to achieve market acceptance ofannounced or future price increases, gross profit may be adverselyaffected.  Price reductions in responseto further declines in raw material costs may also have an adverse impact ongross profit. We expect continued volatility in the costs of certain rawmaterials, particularly copper, aluminum, plastics and other polymers.

 

23

----

Tableof Contents

 

**Selling, generaland administrative expense**

 

The increase in selling,general and administrative expense (SG&A) for the three and nine monthsended September 30, 2008 as compared to the same periods in 2007 wasprimarily due to the acquisition of Andrew. Included in SG&A for the three and nine months ended September 30,2008 is a benefit of $10.0 million related to the release of a liabilityresulting from the alignment of certain employee benefit policies betweenlegacy CommScope and legacy Andrew.  Alsoincluded in the three and nine months ended September 30, 2008 areacquisition and integration related costs of $0.4 million and $4.2 million,respectively.  The reduction in SG&Aexpense as a percentage of net sales is a result of the higher sales levels andreflects cost savings synergies.

 

**Research anddevelopment**

** **

Research and development(R&D) expense increased by $25.3 million and $79.2 million for the three andnine months ended September 30, 2008, respectively, as compared to thesame periods in 2007 primarily as a result of the Andrew acquisition.  R&D expense as a percentage of net salesincreased to 3.2% and 3.3% for the three and nine months ended September 30,2008, respectively, as compared to 1.6% and 1.7% for the comparable 2007 threeand nine month periods.  Thisyear-over-year increase in R&D expense as a percentage of net salesreflects the higher level of R&D spending required to support the Andrewproducts, particularly those in the WNS segment. R&D activities generallyrelate to ensuring that our products are capable of meeting the developingtechnological needs of our customers, bringing new products to market andmodifying existing products to better serve our customers.

 

### **Amortization of purchased intangibles**

###  

As a result of the Andrew acquisition, we recognizedapproximately $965 million of identifiable intangible assets, which increasedour total amortization expense by $25.8 million to $28.0 million for the threemonths ended September 30, 2008 and by $78.7 million to $85.0 million forthe nine months ended September 30, 2008. Of the total amortization expense for the three and nine months ended September 30,2008, $3.8 million and $11.6 million, respectively, relates to patents andtechnologies and is included in cost of sales. In the comparable prior year periods, amortization expense of $0.8million and $2.6 million was included in cost of sales.

 

**Restructuringcosts**

** **

We recognized pretax restructuring costs of $2.4million and $25.1 million during the three and nine months ended September 30,2008, respectively, compared with $0.2 million and $1.1 million during thecomparable periods ended September 30, 2007, respectively.  The restructuring costs in the three monthsended September 30, 2008 included $1.4 million of charges related torestructuring actions at the Company’s legacy CommScope Belgian and Brazilianmanufacturing facilities and an $0.8 million charge related to restructuring actionsat the Company’s legacy CommScope Australian manufacturing facility.  The Belgian and Brazilian facilities haveprimarily supported the Broadband segment, while the Australian facility hasprimarily supported the Enterprise segment. The restructuring costs incurredduring the three and nine months ended September 30, 2008 resulted from aneffort to lower the overall manufacturing cost structure of the Companyfollowing the Andrew acquisition.

 

We anticipate that therewill be additional restructuring charges recognized and additions to theliability for restructuring activities through further adjustments to thepreliminary allocation of the Andrew purchase price during 2008.  We have announced the consolidation ofcertain legacy Andrew cable and antenna production operations, which willresult in the closure of locations in the Stratford, England area and changesat other facilities.  The costsassociated with this initiative, which have not yet been determined, areexpected to be recognized primarily as an adjustment to the preliminarypurchase price allocation. In addition, the planned closure of the legacyCommScope manufacturing facility in Australia is expected to result in furtherrestructuring charges of $3.0 million to $5.0 million.  We expect to complete these restructuringactions by late 2009. Additional restructuring initiatives related to theAndrew integration or cost reduction efforts are being evaluated and anyresulting charges or additions to the liability for restructuring activities asadjustments to the preliminary allocation of the Andrew purchase price could bematerial.

 

As a result of restructuring and consolidationactions, there is unutilized real estate at various facilities in the U.S. andinternationally.  We are attempting tosell or lease this unutilized space. As additional restructuring initiativesare implemented, additional excess real estate or equipment may be identifiedand impairment charges, which may be material, may be incurred.

 

**Other income(expense), net**

 

For the three andnine months ended September 30, 2008, net other expense includes $0.2million and $(11.6) million, 

 

24

----

Table of Contents

 

respectively, of foreignexchange gains (losses).  Also includedin net other expense for the nine months ended September 30, 2008, is a$2.8 million cost related to the inducement of $50.5 million of our 1% seniorsubordinated convertible debentures and a $0.6 million charge related toimpairment of our auction rate securities.

 

**Net interestincome (expense)**

 

We incurred net interestexpense of $31.0 million and $96.7 million during the three and nine monthsended September 30, 2008, respectively, compared to recognizing netinterest income of $4.3 million and $10.9 million for the three and ninemonths ended September 30, 2007, respectively. This change is the resultof the significant borrowings undertaken and the cash, cash equivalents andshort-term investments that were utilized to finance the Andrewacquisition.  Our weighted averageeffective interest rate on outstanding borrowings, including the interest rateswap and amortization of long-term financing costs, was 6.25% as of September 30,2008 compared to 6.23% as of December 31, 2007.

 

Interest expense for thethree and nine months ended September 30, 2008 includes a $0.2 millionbenefit and a $1.5 million charge, respectively, related to ineffectiveness onthe interest rate swap entered into to fix the interest rate on a portion ofthe debt incurred to finance the Andrew acquisition.  No material amount of additionalineffectiveness is expected over the remaining term of the interest rate swap.Also included in interest expense for the three and nine months ended September 30,2008 is a $1.2 million charge related to the write off of deferred financingfees related to a $100 million debt prepayment.

 

**Income taxes**

** **

Our effective income taxrate was 12.2% and 18.8% for the three and nine months ended September 30,2008, respectively, compared to 32.0% for the three and nine months ended September 30,2007. Income before income taxes for the three and nine months ended September 30,2008 includes $1.4 million and $26.9 million, respectively, of chargesprimarily related to restructuring initiatives, for which we do not expect torealize tax benefits. The merger of the legacy Andrew Brazilian entity into thelegacy CommScope Brazilian entity resulted in the partial release of valuationallowances carried against the legacy CommScope Brazilian net operating losscarryforwards.  This release provided a$5.0 million benefit to our tax provision for the three and nine months ended September 30,2008. Also included in the income tax provision for the nine months ended September 30,2008 is a benefit of $3.9 million related to the settlement of various U.S. andforeign income tax audits. The effective rate excluding these items was 17.1%and 21.0% for the three and nine months ended September 30, 2008, respectively.Our effective tax rate reflects the benefits derived from significantoperations outside the U.S., which are generally taxed at rates lower than theU.S. statutory rate of 35%, partially offset by U.S. state income taxes andvaluation allowances for losses in certain foreign jurisdictions for which wecannot record tax benefits.  Theeffective tax rate (excluding the items noted above) decreased from thecomparable prior year periods primarily due to a shift in the geographic mix ofearnings as a result of the Andrew acquisition.

 

**SegmentResults**

 

The pro forma informationprovided below is intended to show how CommScope’s results might have looked ifthe acquisition of Andrew had occurred as of January 1, 2007.  The Andrew amounts included in this pro formainformation are based on Andrew’s actual results and, therefore, may not beindicative of the actual results when operated as part of CommScope.  No pro forma adjustments have been made otherthan combining CommScope’s historical results with those of Andrew.  The pro forma financial information shouldnot be relied upon as being indicative of the historical results that wouldhave been realized had the acquisition occurred as of the date indicated orthat may be achieved in the future.

 

25

----

Table of Contents

 
|                                |   | **Actual**                                           |    | **Pro Forma**                                   |   |
|-------------------------------------|--------|------------------------------------------------------|---------|------------------------------------------------------|--------|
|                                |   | **Three Months Ended  September 30,** |    | **Three Months Ended  September 30,** |   |   |   |   |   |
|                                |   | **2008**                                             |    | **2007**                                             |   | **2007** |   |   |   |   |   |
|                                |   | **Amount**                                           |    | **% of Net  Sales**                        |   | **Amount** |   | **% of Net  Sales** |   | **Amount** |   | **% of Net  Sales** |   | **Dollar  Change** |   | **%****Change** |   |
|                                |   | **(dollars in millions)**                  |    |
| Net sales by segment:               |   |                                                 |    |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ACCG                                |   | $                                                    | 495.0   |                                                 | 46.6   | % | $ | 112.3 |   | 21.9 | % | $ | 504.3 |   | 44.3 | % | $ | (9.3 | ) | (1.8 | )% |
| Enterprise                          |   | 236.5                                                |    | 22.3                                                 |   | 240.4 |   | 46.8 |   | 240.4 |   | 21.1 |   | (3.9 | ) | (1.6 | ) |
| WNS                                 |   | 174.7                                                |    | 16.4                                                 |   | — |   | — |   | 232.4 |   | 20.4 |   | (57.7 | ) | (24.8 | ) |
| Broadband                           |   | 159.0                                                |    | 15.0                                                 |   | 161.2 |   | 31.4 |   | 161.2 |   | 14.2 |   | (2.2 | ) | (1.4 | ) |
| Inter-segment eliminations          |   | (2.9                                                 | )       | (0.3                                                 | )      | (0.3 | ) | (0.1 | ) | (0.3 | ) | — |   | (2.6 | ) | NM |   |
| Consolidated net sales              |   | $                                                    | 1,062.3 |                                                 | 100.0  | % | $ | 513.6 |   | 100.0 | % | $ | 1,138.0 |   | 100.0 | % | $ | (75.7 | ) | (6.7 | )% |
|                                |   |                                                 |    |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total domestic sales                |   | $                                                    | 493.8   |                                                 | 46.5   | % | $ | 345.1 |   | 67.2 | % | $ | 558.4 |   | 49.1 | % | $ | (64.6 | ) | (11.6 | )% |
| Total international sales           |   | 568.5                                                |    | 53.5                                                 |   | 168.5 |   | 32.8 |   | 579.6 |   | 50.9 |   | (11.1 | ) | (1.9 | ) |
| Total worldwide sales               |   | $                                                    | 1,062.3 |                                                 | 100.0  | % | $ | 513.6 |   | 100.0 | % | $ | 1,138.0 |   | 100.0 | % | $ | (75.7 | ) | (6.7 | )% |
|                                |   |                                                 |    |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income (loss) by segment: |   |                                                 |    |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ACCG                                |   | $                                                    | 62.7    |                                                 | 12.7   | % | $ | 21.9 |   | 19.5 | % | $ | 64.0 |   | 12.7 | % | $ | (1.3 | ) | (2.0 | )% |
| Enterprise                          |   | 46.1                                                 |    | 19.5                                                 |   | 42.5 |   | 17.7 |   | 42.5 |   | 17.7 |   | 3.6 |   | 8.5 |   |
| WNS                                 |   | 4.8                                                  |    | 2.7                                                  |   | — |   | — |   | (96.7 | ) | (41.6 | ) | 101.5 |   | NM |   |
| Broadband                           |   | 13.9                                                 |    | 8.7                                                  |   | 17.0 |   | 10.6 |   | 17.0 |   | 10.6 |   | (3.1 | ) | (18.2 | ) |
| Consolidated operating income       |   | $                                                    | 127.5   |                                                 | 12.0   | % | $ | 81.4 |   | 15.8 | % | $ | 26.8 |   | 2.4 | % | $ | 100.7 |   | 374.7 | % |

 
|                                 |       | **Actual**                                          |       | **Pro Forma**                                  |       |
|--------------------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------|------------|
|                                 |       | **Nine Months Ended  September 30,** |       | **Nine Months Ended  September 30,** |       |   |   |   |   |
|                                 |       | **2008**                                            |       | **2007**                                            |       | **2007** |   |   |   |   |   |
|                                 |       | **Amount**                                          |       | **% of Net  Sales**                       |       | **Amount** |   | **% of Net  Sales** |   | **Amount** |   | **% of Net  Sales** |   | **Dollar  Change** |   | **%****Change** |   |
| Net sales by segment: | ** ** | ** **                                          | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ACCG                                 |       | $                                                   | 1,474.2    |                                                | 46.7       | % | $ | 316.2 |   | 21.5 | % | $ | 1,372.3 |   | 43.7 | % | $ | 101.9 |   | 7.4 | % |
| Enterprise                           |       | 691.0                                               |       | 21.9                                                |       | 680.6 |   | 46.4 |   | 680.6 |   | 21.7 |   | 10.4 |   | 1.5 |   |
| WNS                                  |       | 540.7                                               |       | 17.1                                                |       | — |   | — |   | 616.7 |   | 19.6 |   | (76.0 | ) | (12.3 | ) |
| Broadband                            |       | 458.3                                               |       | 14.5                                                |       | 472.7 |   | 32.2 |   | 472.7 |   | 15.0 |   | (14.4 | ) | (3.0 | ) |
| Inter-segment eliminations           |       | (9.4                                                | )          | (0.2                                                | )          | (1.3 | ) | (0.1 | ) | (1.3 | ) | — |   | (8.1 | ) | NM |   |
| Consolidated net sales               |       | $                                                   | 3,154.8    |                                                | 100.0      | % | $ | 1,468.2 |   | 100.0 | % | $ | 3,141.0 |   | 100.0 | % | $ | 13.8 |   | 0.4 | % |
|                                 |       |                                                |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Total domestic sales                 |       | $                                                   | 1,500.9    |                                                | 47.6       | % | $ | 1,003.3 |   | 68.3 | % | $ | 1,597.4 |   | 50.9 | % | $ | (96.5 | ) | (6.0 | )% |
| Total international sales            |       | 1,653.9                                             |       | 52.4                                                |       | 464.9 |   | 31.7 |   | 1,543.6 |   | 49.1 |   | 110.3 |   | 7.1 |   |
| Total worldwide sales                |       | $                                                   | 3,154.8    |                                                | 100.0      | % | $ | 1,468.2 |   | 100.0 | % | $ | 3,141.0 |   | 100.0 | % | $ | 13.8 |   | 0.4 | % |
|                                 |       |                                                |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income (loss) by segment:  |       |                                                |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |
| ACCG                                 |       | $                                                   | 149.2      |                                                | 10.1       | % | $ | 52.8 |   | 16.7 | % | $ | 151.3 |   | 11.0 | % | $ | (2.1 | ) | (1.4 | )% |
| Enterprise                           |       | 123.0                                               |       | 17.8                                                |       | 119.8 |   | 17.6 |   | 119.8 |   | 17.6 |   | 3.2 |   | 2.7 |   |
| WNS                                  |       | (27.8                                               | )          | (5.1                                                | )          | — |   | — |   | (229.9 | ) | (37.3 | ) | 202.1 |   | (87.9 | ) |
| Broadband                            |       | 8.5                                                 |       | 1.9                                                 |       | 58.8 |   |  12.5 |   | 58.8 |   | 12.4 |   | (50.3 | ) | (85.5 | ) |
| Consolidated operating income        |       | $                                                   | 252.9      |                                                | 8.0        | % | $ | 231.4 |   | 15.8 | % | $ | 100.0 |   | 3.2 | % | $ | 152.9 |   | 152.9 | % |

 

*Antenna, Cable and Cabinet Group*

 

The ACCG segment includesproduct offerings of primarily passive transmission devices for the wirelessinfrastructure market including base station antennas, coaxial cable andconnectors, and microwave antennas and secure environmental enclosures forelectronic devices and equipment used by wireline and wirelesstelecommunications providers.

 

Higher internationalsales of most product lines, including the positive impact of foreign exchangerate changes, were offset by a decline in domestic sales in the ACCG segmentfor the three and nine months ended September 30, 2008 as compared to thepro forma net sales for the comparable 2007 periods.  For the three and nine months ended September 30,2008, the ACCG segment experienced particularly strong international growth inthe Central and Latin American and Asia Pacific regions.  In both the three and nine months ended September 30,2008, higher sales of microwave antennas and base station antennas were offsetby lower domestic wireline sales as compared to the pro forma sales in thecomparable 2007 periods.

 

In response to increasesin raw material costs during the first half of 2008, price increases wereannounced earlier in 2008 for certain ACCG cable products.  These price increases provided modest benefitto third quarter 2008 sales.

 

We expect demand for ourACCG products to be affected by wireless capacity expansion in emerging marketsand 

 

26

----

Table of Contents

 

growth in mobile dataservices in developed markets. Uncertainty in the global economy may negatively impact both of thesemarkets and consequently affect our net sales.

 

Operating income for theACCG segment for the three and nine months ended September 30, 2008includes approximately $16.8 million and $50.1 million, respectively, ofincremental intangible asset amortization expense resulting from thepreliminary purchase price allocation from the Andrew acquisition.  ACCG operating income for the nine monthsended September 30, 2008 also includes the negative impact of $31.7million from the step-up of inventory to its estimated fair value as a resultof the acquisition of Andrew. These increased costs were partially offset by a$3.3 million benefit related to the alignment of certain employee benefitpolicies between legacy CommScope and legacy Andrew included in both the threeand nine months ended September 30, 2008. Excluding these special items, ACCG operating income increased in thethree and nine months ended September 30, 2008 as compared to thecomparable pro forma 2007 periods primarily due to improved performance of thesegment’s wireless products, cost reductions and the benefit of the priceincreases.  These improvements weresomewhat offset by weaker wireline operating income in the current year periodsdue to declining sales.

 

*Enterprise*

 

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.

 

For both the three and nine months ended September 30,2008, domestic net sales in the Enterprise segment were lower than in thecomparable prior year periods. International net sales have continued to increase modestly in theEnterprise segment in 2008 as compared to 2007, particularly in the AsiaPacific and Europe, Middle East and Africa regions.  In response to higher raw material costs,price increases for several major product groups were announced in the secondand third quarters of 2008.  These priceincreases provided modest benefits to net sales during the three and ninemonths ended September 30, 2008.

 

We expect demand for Enterprise products to bedriven by the ongoing need for bandwidth and high-performance structuredcabling in the enterprise market and affected by global information technologyspending.  The deterioration of globaleconomic conditions may negatively affect demand for our products.

 

Enterprise segment operating income for the threeand nine months ended September 30, 2008 includes a $2.5 million benefitrelated to the alignment of certain employee benefit policies between legacyCommScope and Andrew.  Operating incomewas adversely affected by a $0.8 million and $0.9 million increase in restructuringcosts for the three and nine months ended September 30, 2008,respectively, compared to the same periods in 2007.  Excluding these special items, Enterprisesegment operating income for the three and nine months ended September 30,2008 is higher than the comparable prior year periods despite essentiallyunchanged net sales primarily due to an ongoing shift in mix toward highermargin products.

 

*Wireless Network Solutions*

 

The WNS segment includes avariety of active electronic devices and services including power amplifiers,filters and tower mounted amplifiers, geolocation products, networkoptimization analysis systems, and engineering and consulting services as wellas products that are used to extend and enhance the coverage of wireless networksin areas where signals are difficult to send or receive, such as tunnels,subways, airports and commercial buildings.

 

WNS segment net salesdecreased during the three and nine months ended September 30, 2008compared to the comparable pro forma 2007 periods primarily due to thedivestiture of the Satellite Communications (SatCom) product line on January 31,2008.  SatCom sales for the three andnine months ended September 30, 2008 were $2.1 million and $13.7 million,respectively, as compared to $27.2 million and $80.8 million for the pro formathree and nine months ended September 30, 2007.  The SatCom sales subsequent to itsdivestiture relate to manufacturing transition services.  Excluding the impact of SatCom, WNS segmentnet sales decreased 15.9% and 1.7% during the three and nine months ended September 30,2008, respectively, as compared to the comparable pro forma 2007 periods,primarily due to lower sales of power amplifiers and filters as well the impactof divesting other product lines.  Netsales in the WNS segment benefited from changes in foreign exchange rates inboth the three and nine months ended September 30, 2008. Net sales ofgeolocation products in the WNS segment are not material and are not expectedto be materially impacted by developments in the TruePosition litigation (see Part II—OtherInformation, Item 1—Legal Proceedings).

 

WNS segment operating incomefor the three and nine months ended September 30, 2008 improved over thecomparable pro forma prior year periods primarily due to asset impairments andlitigation charges of $89.1 million and 

 

27

----

Table of Contents

 

$197.9 million that were recorded in the pro formathree and nine months ended September 30, 2007, respectively.  WNS operating income for the three and ninemonths ended September 30, 2008 included the negative impact of $1.8million and $27.6 million, respectively, from inventory-related purchase accountingadjustments resulting from the acquisition of Andrew and $6.7 million and $16.1million, respectively, of incremental intangible amortization from the Andrewacquisition preliminary purchase price allocation.  WNS operating income for 2008 has beenfavorably affected by reduced SatCom losses as a result of the sale of theSatCom product line as well as the restructuring of our relationship with NokiaSiemens Networks for custom filter production.

 

*Broadband*

* *

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.

 

Broadband segment netsales declined in both the three and nine months ended September 30, 2008as compared to the comparable prior year periods due to a decrease in domesticsales that was partially offset by stronger international sales, particularlyin Central and Latin America. The slowdown in purchasing by our domesticcustomers is largely attributable to the deterioration in general economicconditions, particularly the residential housing market.  The increase in international sales reflectscontinued spending on new projects and system maintenance.  Net sales for the nine months ended September 30,2008 includes incremental net sales of $6.9 million related to the SignalVision product line that was acquired in May 2007.

 

The reduction inBroadband segment operating income for the three and nine months ended September 30,2008 as compared to the same periods in the prior year is due in part to anincrease of $1.4 million and $23.2 million in restructuring charges,respectively.  Although Broadband segmentoperating income benefited modestly from price increases announced earlier in2008, the impact of pricing was more than offset by the impact of higher rawmaterial prices, lower production volume due to the decline in domestic sales,a shift in mix toward less profitable products and product warranty charges of$4.6 million in the nine months ended September 30, 2008 related to anisolated manufacturing defect. Broadband segment operating income for the threeand nine months ended September 30, 2008 includes a $4.2 million benefitrelated to the alignment of certain employee benefit policies between legacyCommScope and Andrew.  Continuedvolatility in raw material costs and a continued slowdown in purchasing bycable system operators and may limit the improvement in operating income.

 

**LIQUIDITY ANDCAPITAL RESOURCES**

** **

The following table summarizes certain key measuresof our liquidity and capital resources.

 
| ** **                                                                                       | ** ** | **As of**                      | ** ** | ** **            | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|-----------------------|------------|------------|------------|
| ** **                                                                                       | ** ** | **September 30,**              | ** ** | **December 31,** | ** ** | **Dollar** | ** ** | **%** | ** ** |
| ** **                                                                                       | ** ** | **2008**                            | ** ** | **2007**              | ** ** | **Change** | ** ** | **Change** | ** ** |
| ** **                                                                                       | ** ** | **(dollars in millions)** | ** ** |
| Cash and cash equivalents                                                                        |       | $                                   | 496.3      |                  | $          | 649.5      |       | $ | (153.2 | ) | (23.6 | )% |
| Working capital, excluding cash and cash  equivalents and current portion of long-term debt |       | 819.5                               |       | 831.4                 |       | (11.9      | )          | (1.4 | ) |
| Long-term debt, including current portion                                                        |       | 2,196.3                             |       | 2,595.8               |       | (399.5     | )          | (15.4 | ) |
| Total capitalization (1)                                                                         |       | 3,652.1                             |       | 3,875.8               |       | (223.7     | )          | (5.8 | ) |
| Long-term debt as a percentage of total  capitalization                                          |       | 60.1                                | %          | 67.0                  | %          |       |       |   |   |
|                                                                                                  |            |                                     |            |                       |            |            |            |  |  |  |  |  |

 

----

(1)  Totalcapitalization includes long-term debt, including the current portion, and stockholders’equity.

 

Our principal sources ofliquidity, both on a short-term and long-term basis, are cash and cashequivalents, cash flows provided by operations and availability under creditfacilities. The primary uses of liquidity include funding working capitalrequirements (primarily inventory and accounts receivable, net of accountspayable and other accrued liabilities), debt service requirements, capitalexpenditures, payment of certain restructuring costs and funding of pension andother postretirement benefit obligations.

 

The decrease in cash andcash equivalents during the nine months ended September 30, 2008 wasprimarily driven by $207.6 million disbursed in conjunction with exchangingsubstantially all of the 3.25% convertible debentures assumed in the Andrewacquisition into merger consideration, the payment of $57.3 million as part ofthe merger consideration paid to former Andrew shareholders as their Andrewshares were presented, and a voluntary $100.0 million prepayment of our six-year

 

28

----

Tableof Contents

 

senior secured termloan.  These decreases were partiallyoffset by $253.5 million in net cash flow from operations.

 

The decrease in long-termdebt and the reduction in long-term debt as a percentage of totalcapitalization were primarily the result of the exchange of substantially allof the 3.25% convertible debentures for merger consideration, the negotiated conversionof a portion of the 1% convertible debentures into shares of our common stock,and the $100 million prepayment of our six-year senior secured term loan.  The decline in total capitalization wasprimarily driven by the cash portion of the merger consideration that wasexchanged for the 3.25% convertible debentures and the prepayment of thesix-year senior secured term loan, partially offset by earnings during the ninemonths ended September 30, 2008.

 

**Cash FlowOverview**

 
| ** **                                           | ** ** | **Nine Months Ended**     | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------------------------|------------|-------------------------------------|------------|------------|------------|------------|------------|
| ** **                                           | ** ** | **September 30,**              | ** ** | **Dollar** | ** ** | **%**      | ** ** |
| ** **                                           | ** ** | **2008**                            | ** ** | **2007**   | ** ** | **Change** | ** ** | **Change** | ** ** |
| ** **                                           | ** ** | **(dollars in millions)** | ** ** |
| Net cash provided by operating activities            |       | $                                   | 253.5      |       | $          | 138.5      |       | $ | 115.0 |   | 83.0 | % |
| Net cash used in investing activities                |       | (86.0                               | )          | (111.0     | )          | 25.0       |       | (22.5 | ) |
| Net cash provided by (used in) financing  activities |       | (310.2                              | )          | 28.4       |       | (338.6     | )          | NM |   |
|                                                      |            |                                     |            |            |            |            |            |  |  |  |  |  |

 

***Operating Activities***

 

During the nine monthsended September 30, 2008, operating activities generated $253.5 million incash compared to $138.5 million during the nine months ended September 30,2007.  During the nine months ended September 30,2008, net income of $113.9 million, depreciation and amortization of $164.9million and a decrease of $64.1 million in inventories were partially offset bya $51.7 million increase in accounts receivable.   The increase in accounts receivable isprimarily attributable to the increase in sales during the third quarter of2008 over the fourth quarter of 2007 as well as the shift in the mix of salesto more international customers whose payment terms are generally longer thandomestic customers.

 

We expect to continue togenerate net cash from operations during 2008, primarily due to operatingincome, including the impact of our cost reduction efforts, and the anticipatedreduction in the level of working capital excluding cash and cash equivalentsand the current portion of long-term debt.

 

***Investing Activities***

** **

Investment in property,plant and equipment during the nine months ended September 30, 2008increased by $17.6 million year over year to $35.9 million largely due tocapital expenditures made by the acquired Andrew business.  We currently expect total capitalexpenditures of $55 million to $65 million in 2008 compared to $27.9 million in2007. The expected capital spending during 2008 is primarily for expanding andupgrading production capability, cost reduction efforts and investments ininformation technology.

 

During the nine monthsended September 30, 2008, we received proceeds of approximately $9.0million primarily from the sale of the SatCom product line.  The proceeds from the sale of the SatComproduct line were used to reduce the principal outstanding under our seven-yearsenior secured term loan.

 

During the nine monthsended September 30, 2008, we paid an additional $59.5 million in connectionwith the Andrew acquisition.  Themajority ($57.3 million) of this cash outflow related to the payment of mergerconsideration to former Andrew shareholders. In the nine months ended September 30, 2008, we also paid $1.5million of the remaining $2.0 million balance related to the SVI acquisitionthat was completed in May 2007.

 

During the nine monthsended September 30, 2008, we paid approximately $5.0 million and amendedour cross currency swap of U.S. dollars for euros to reduce the notional amountfrom $14 million to $7 million.

 

***Financing Activities***

** **

In connection with theexchange of substantially all of our 3.25% convertible senior subordinateddebentures for merger consideration, we paid $207.6 million in cash, which isreflected as a financing use of cash, and issued 0.5 million shares ofCommScope common stock, which is reflected as a non-cash transaction.  In connection with the negotiated conversionof $50.5 million in face value of our 1% convertible senior subordinateddebentures, we issued 2.5 million shares of CommScope common stock, which isreflected as a non-cash transaction.  Wealso made other principal repayments of $122 million, primarily to reduce theamount outstanding under our six-year senior secured term loan.  As of September 30, 2008, ouravailability under the $400 million revolving credit portion of thefacilities was approximately $372 million due to 

 

29

----

Tableof Contents

 

$28 million of letters ofcredit issued under the facilities.  Wehad no outstanding borrowings under the revolving credit portion as of September 30,2008.

 

Management is evaluatingour capital structure and may consider various alternatives, including but notlimited to, reducing debt levels by making additional principal payments on ouroutstanding term loans, inducing additional conversions of some or all of our1% convertible debentures or raising additional capital.

 

**Future Cash Needs**

** **

We expect that ourprimary future cash needs will be debt service, working capital, capitalexpenditures, restructuring costs, disposition of TruePosition litigation andfunding pension and other postretirement benefit obligations. We paid $20.7 millionand $40.9 million of restructuring costs during the three and nine months endedSeptember 30, 2008, respectively, and expect to pay the majority of the$27.8 million liability for restructuring initiatives by the end of 2009.  We made contributions of $1.7 million and$14.8 million to our pension and other postretirement benefit plans during thethree and nine months ended September 30, 2008, respectively. We expect tomake additional contributions of up to $1.7 million to our pension and otherpostretirement benefit plans during 2008. To maintain funding levels requiredunder the Pension Protection Act of 2006 and similar requirements outside theU.S., we may make additional contributions during 2008 and/or in subsequentyears and these contributions could be material. We expect that our noncurrentemployee benefit liabilities will be funded through cash flow from futureoperations.

 

As our 1% convertiblesenior subordinated debentures are subject to a repurchase right at the optionof the holders on March 20, 2009, we are evaluating our alternatives toaddress the potential exercise of this right. The factors that may affect our choice of alternatives include cashavailability, constraints under our senior secured credit facilities andprevailing market conditions, among others. We believe that our existing cashand cash equivalents and cash flows from operations, combined with availabilityunder our senior secured revolving credit facility, will be sufficient to meetour presently anticipated future cash needs, including cash requirementsrelated to restructuring initiatives or other costs related to the Andrewintegration. We may, from time to time, borrow under our revolving creditfacility or issue securities, if market conditions are favorable, to meet ourfuture cash needs or to reduce our borrowing costs.

 

### **FORWARD-LOOKING STATEMENTS**

###  

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

 

These statements aresubject to various risks and uncertainties, many of which are outside ourcontrol, including, without limitation, continued global economic weakness anduncertainties, changes in cost and availability of key raw materials and ourability to recover these costs from our customers through pricing; customerdemand for our products and the ability to maintain existing business allianceswith key customers or distributors; the risk that our internal productioncapacity and that of our contract manufacturers may be insufficient to meetcustomer demand or quality standards for our products; the risk that customersmight cancel orders placed or that orders currently placed may reduce 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; the outcome ofnegotiations with represented employees; the challenges of achievinganticipated cost-reduction synergies expected from the acquisition of Andrew;delays or challenges related to removing, transporting or reinstallingequipment; concentration of sales among a limited number of customers ordistributors; fluctuations in interest rates; compliance with covenants in thesenior secured credit facilities; capital structure changes; significantinternational operations and the impact of variability in foreign exchangerates; the possibility of further restructuring actions; possible futureimpairment charges for fixed or intangible assets; increased obligations underemployee benefit plans; ability to achieve expected sales growth and earningsgoals; ability to achieve expected benefits from prior or future acquisitionsor equity investments; costs of protecting or defending our intellectualproperty; ability to obtain capital on commercially reasonable terms;variability in effective tax rate and ability to recover amounts recorded asvalue added tax receivables; the outcome of the TruePosition, Inc.litigations; regulatory changes affecting us or the industries we serve; and 

 

30

----

Tableof Contents

 

any statements of beliefand any statements of assumptions underlying any of the foregoing. These andother factors are discussed in greater detail in Part I - Item 1A to ourAnnual Report on Form 10-K for the year ended December 31, 2007 andin Part II - Item 1A in this Form 10-Q. The information contained inthis Form 10-Q represents our best judgment at the date of this reportbased on information currently available. However, we do not intend, and arenot undertaking any duty or obligation, to update this information to reflectdevelopments or information obtained after the date of this report.

 

**ITEM 3.**                    QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK

** **

We are exposed to market risks related to changes in interest rates,foreign currency exchange rates and commodity prices. We may utilize derivativefinancial instruments, among other methods, to hedge some of these exposures.We do not use derivative financial instruments for speculative or tradingpurposes.

 

*Interest Rate Risk*

 

The table below summarizes the combined interest and principal paymentsassociated with the variable rate term loans and interest rate swap we enteredinto in connection with the Andrew acquisition. The principal paymentspresented below are based on the scheduled maturities in the credit agreementafter the $100 million prepayment made on September 30, 2008. The interestpayments presented below assume the interest rate in effect as of September 30,2008 and include the impact of the interest rate swap, which serves to fix aportion of the interest payments on our variable rate debt. The projectedfuture payments on the interest rate swap reflected in the table below arebased on the forward interest rate curve in effect as of the date of the table.Settlement of the fair value of this hedging instrument as of September 30,2008 would have resulted in a loss of approximately $16.2 million, net oftax. The unrealized loss on this cash flow hedge is included in accumulatedother comprehensive income (loss). The impact of a 100 basis point increase ininterest rates on projected future interest payments related to the unhedgedportions of the term loans is also included in the table below.

 
| ** **                                                   | ** ** | **For the  balance of** | ** ** | **For the year ended December 31,** | ** ** | **There-** | ** ** | ** ** | ** ** |
|--------------------------------------------------------------|------------|-----------------------------------|------------|--------------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                                   | ** ** | **2008**                          | ** ** | **2009**                                                     | ** ** | **2010**   | ** ** | **2011**   | ** ** | **2012** | ** ** | **after** | ** ** | **Total** | ** ** |
| Principal and interest payments on variable  rate term loans |       | $                                 | 35.8       |                                                         | $          | 143.0      |       | $          | 139.4      |   | $ | 144.5 |   | $ | 346.0 |   | $ | 1,849.3 |   | $ | 2,658.0 |   |
| Average interest rate                                        |       | 6.4                               | %          | 6.3                                                          | %          | 6.2        | %          | 6.0        | %          | 5.9 | % | 5.9 | % |   |   |
| Interest rate swap payments (receipts)                       |       | 6.5                               |       | 17.4                                                         |       | 7.5        |       | (0.1       | )          | — |   | — |   | 31.3 |   |
| Impact of an increase in interest rates of  100 basis points |       | 1.2                               |       | 6.8                                                          |       | 9.7        |       | 15.4       |       | 18.1 |   | 27.3 |   | 78.5 |   |
|                                                              |            |                                   |            |                                                              |            |            |            |            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

We also have fixed rate convertible debentures outstanding. The fairvalue of these debentures is subject to fluctuations as our stock price andinterest rates change. The table below summarizes our expected interest andprincipal payments related to our fixed rate debt as well as the fair value ofthese instruments at September 30, 2008. We also assume in the table belowthat our 1% convertible debentures will not be redeemed until their scheduledmaturity in 2024, although we have the option to redeem earlier and thenoteholders have options to require us to repurchase them before their scheduledmaturity. The fair value of our 1% convertible debentures is based on quotedmarket prices.

 
| ** **                                          | ** ** | **For the  balance of** | ** ** | **For the year ended December 31,** | ** ** | **There-** | ** ** | ** ** | ** ** | **Fair** | ** ** |
|-----------------------------------------------------|------------|-----------------------------------|------------|--------------------------------------------------------------|------------|------------|------------|------------|------------|----------|------------|
| ** **                                          | ** ** | **2008**                          | ** ** | **2009**                                                     | ** ** | **2010**   | ** ** | **2011**   | ** ** | **2012** | ** ** | **After** | ** ** | **Total** | ** ** | **Value** | ** ** |
| Principal and interest payments on fixed  rate debt |       | $                                 | —     |                                                         | $          | 2.0        |       | $          | 2.0        |     | $          | 2.0 |   | $ | 2.0 |   | $ | 222.0 |   | $ | 230.0 |   | $ | 318.5 |   |
| Average interest rate                               |       | 1.0                               | %          | 1.0                                                          | %          | 1.0        | %          | 1.0        | %          | 1.0      | %          | 1.0 | % |   |   |   |   |
|                                                     |            |                                   |            |                                                              |            |            |            |            |            |          |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

*Foreign Currency Risk*

 

Approximately 54% and 52% of our net sales for the three and ninemonths ended September 30, 2008, respectively, were to customers locatedoutside the U.S. Significant changes in foreign currency exchange rates couldadversely affect our international sales levels and the related collection ofamounts due. In addition, a significant decline in the value of currencies usedin certain regions of the world as compared to the U.S. dollar could adverselyaffect product sales in those regions because our products may become moreexpensive for those customers to pay for in their local currency. Conversely,significant increases in the value of currencies as compared to the U.S. dollarcould adversely affect profitability as certain product costs increase relativeto a U.S. dollar-denominated sales price. At September 30, 2008, we werecontinuing to evaluate alternatives to help us reasonably manage the marketrisk related to foreign currency exposures.

 

31

----

Table ofContents

 

Asof September 30, 2008, we held a cross currency rate and forward foreignexchange swap agreement, which hedges a portion of our euro-denominated assetexposure. Under the swap agreement, we receive 4.0% interest in U.S. dollarsand pay 4.5% interest in euros.

 
| ** **                                | ** ** | **For the  balance of** | ** ** | **For the year ended December 31,** | ** ** | **There-** | ** ** | ** ** | ** ** | **Fair** | ** ** |
|-------------------------------------------|------------|-----------------------------------|------------|--------------------------------------------------------------|------------|------------|------------|------------|------------|----------|------------|
| ** **                                | ** ** | **2008**                          | ** ** | **2009**                                                     | ** ** | **2010**   | ** ** | **2011**   | ** ** | **2012** | ** ** | **After** | ** ** | **Total** | ** ** | **Value** | ** ** |
| Cross currency swap (Receive USD/Pay EUR) |       | $                                 | 0.1        |                                                         | $          | 4.2        |       | $          | —     |     | $          | — |   | $ | — |   | $ | — |   | $ | 4.3 |   | $ | 4.0 |   |
| Contract amount (USD)                     |       | $                                 | —     |                                                         | $          | 7.0        |       | $          | —     |     | $          | — |   | $ | — |   | $ | — |   | $ | 7.0 |   |   |   |
|                                           |            |                                   |            |                                                              |            |            |            |            |            |          |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

*CommodityPrice Risk*

 

Materials, intheir finished form, account for a large portion of our cost of sales. Thesematerials, such as copper, fabricated aluminum, steel, plastics and otherpolymers, bimetals and optical fiber, are subject to changes in market price asthey are influenced by commodity markets and supply and demand levels, amongother factors. Management attempts to mitigate these risks through effectiverequirements planning and by working closely with key suppliers to obtain thebest possible pricing and delivery terms. As of September 30, 2008, weevaluated our commodity pricing exposures and concluded that it was notcurrently practical to use derivative financial instruments to hedge ourcurrent commodity price risks. However, in response to volatility in thecommodity markets, we have entered into forward purchase commitments forcertain metals to be used in the normal course of business.  As of September 30, 2008, we wereobligated to purchase approximately $131 million of metals undertake-or-pay contracts through the end of 2009. Due to the decline in commodity prices during the third quarter of 2008,most of these commitments were above market prices as of September 30,2008.

 

**ITEM 4.**                    CONTROLS AND PROCEDURES

** **

Ourdisclosure controls 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 the rules andforms of the Securities and Exchange Commission. Our Chief Executive Officerand our Chief Financial Officer have reviewed the effectiveness of ourdisclosure controls and procedures as of the end of the period covered by thisreport and have concluded that the disclosure controls and procedures areeffective.

 

Therewere no changes in our internal control over financial reporting during thethree months ended September 30, 2008 that have materially affected, orare reasonably likely to materially affect, our internal control over financialreporting.

 

32

----

Table ofContents

 

**PART II—OTHER INFORMATION**

** **

**ITEM 1.**                    LEGAL PROCEEDINGS

** **

On October 25,2005, TruePosition, Inc. filed a complaint in the U.S. District Court forthe District of Delaware, alleging that Andrew’s sale of certain mobilelocation products to a customer located in the Middle East infringed aTruePosition patent. Mobile location systems installed in wireless networks areused to determine the position of mobile devices. The complaint sought, amongother things, injunctive relief and unspecified monetary damages.

 

On September 14,2007, a jury ruled in favor of TruePosition, finding that Andrew had willfullyinfringed a single TruePosition patent in providing a mobile location system tothe customer, and the jury awarded $45.3 million in damages to TruePosition.Management believed the verdict was in error and sought to have it reversedpursuant to various post-verdict motions.

 

On October 1,2007, TruePosition filed a motion seeking a permanent injunction and a motionseeking to increase the damages awarded, up to trebling the amount.TruePosition also sought to recover its attorneys’ fees and expenses as well asinterest on the judgment.

 

On July 31,2008, the trial court ruled on these pending motions.  Although the court’s order left a portion ofthe original jury verdict undisturbed, it reduced the compensatory judgmentamount from $45.3 million to $18.6 million plus interest. While the courtdenied TruePosition’s motion for trebling of damages, it enhanced the reduceddamage amount by 25%, bringing the total judgment to $23.25 million.  The court also rejected TruePosition’srequest for recovery of its attorneys’ fees and expenses.  The court also granted TruePosition’s motionfor a permanent injunction related to the products at issue and indicated thatit will enter such an injunction. The parties are currently engaged inproceedings before the trial court to determine the scope of the injunction andwhat amounts, if any, are owed for one phase of the project which the trialcourt had previously disallowed as too speculative.

 

CommScopedisagrees with the underlying verdict, the enhancement of damages and the entryof an injunction and continues to believe that the products at issue do notinfringe TruePosition’s patent. CommScope expects to appeal the remaining portion of the underlyingjudgment, as well as the injunction which the court indicated it will enter.

 

As aresult of the July 31, 2008 ruling in the case, our estimate of theprobable loss was reduced from $45.3 million to $28.2 million (includinginterest).  Subject to the outcome ofpossible additional legal actions taken by CommScope and/or TruePosition, theultimate resolution of the TruePosition litigation may be materially differentthan our current estimate, which does not include legal fees we may incur inappeals or other proceedings. The litigation with TruePosition may result inthe loss of future revenue opportunities, including opportunities tomanufacture and sell products using uplink time difference of arrival (U-TDOA)technology; however, we are not currently able to assess the likelihood ormagnitude of such potential lost opportunities.

 

Atissue in the litigation with TruePosition is a patent that TruePosition arguedwas infringed by an Andrew U-TDOA mobile location system that is being deployedunder multiple phases with the customer. Andrew was awarded the initial twophases with this customer for an expanded deployment of this strategic projectwhich, when completed, will cover approximately a thousand cell sites. Thereare additional phases, not all of which have been awarded by the customer. Thejury verdict included claims related to all such cell sites, including thosealready installed and those to be installed. The July 31, 2008 ruling inthe case awarded damages based upon the initial two phases of the project. Thecurrent proceedings address whether damages are due for a third phase thatAndrew was subsequently awarded but that the trial court had previously foundto be too speculative based on the evidence presented at trial. The patent atissue relates only to certain implementations using U-TDOA technology. As aresult, other customer installations and projects that use different mobilelocation technologies are not impacted.

 

In March 2008,TruePosition Inc. served Andrew with a complaint in a lawsuit filed in theSuperior Court, New Castle County in Delaware. The suit alleges that Andrew breached certain patent license royaltyobligations to TruePosition under a 2004 settlement agreement related to aprior lawsuit between the parties and alleges that Andrew owes TruePositionapproximately $30 million.  The Companybelieves it has valid defenses and will vigorously defend itself in thisaction.

 

We areeither a plaintiff or a defendant in other pending legal matters in the normalcourse of business. As a result of the Andrew acquisition, we became subject toadditional legal matters, including asserted and unasserted claims. Managementbelieves none of these other legal matters, other than that discussed above,will have a material adverse effect 

 

33

----

Table ofContents

 

on our business orfinancial condition upon their final disposition.

 

**ITEM 1A.  RISKFACTORS**

** **

The discussion andanalysis of our financial condition, results of operations and cash flows forthe three and nine months ended September 30, 2008 should be read in conjunctionwith the risk factors contained in Part I - Item 1A of our Annual Reporton Form 10-K for the year ended December 31, 2007 and the followingadditional risks and uncertainties relating to recent developments in globalfinancial and commodity markets.  Theserisks and uncertainties have the potential to have a material adverse impact onour business, financial condition and results of operations.

 

***Difficult andvolatile conditions in the capital, credit and commodities markets and in theoverall economy could materially adversely affect our financial position,results of operations and cash flows, and we do not know if  these conditions will improve in the nearfuture.***

 

Our financial position, results of operations and cashflows could be materially adversely affected by difficult conditions andsignificant volatility in the capital, credit and commodities markets and inthe overall economy. These factors, combined with declining business andconsumer confidence and increased unemployment, have precipitated an economicslowdown and fears of a possible recession. The difficult conditions in these markets and the overall economy affectour business in a number of ways. For example:

 
| · |   | As a result of the recent volatility in commodity  prices, we may encounter difficulty in achieving sustained market acceptance  of past or future price increases, which could materially adversely affect  our financial position, results of operations and cash flows. See “Risk  Factors—Our dependence on commodities subjects us to price fluctuations and  potential availability constraints which could materially adversely affect  our profitability” under Part I - Item 1A of our Annual Report on  Form 10-K for the year ended December 31, 2007. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| · |   | Although we believe we have sufficient liquidity  under our senior secured revolving credit facility to run our business, under  extreme market conditions there can be no assurance that such funds would be  available or sufficient, and in such a case, we may not be able to  successfully obtain additional financing on favorable terms, or at all.                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| · |   | To the extent that we repatriate foreign earnings in  response to cash requirements, we may experience higher and more volatile  effective income tax rates.                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| · |   | In order to respond to market conditions, we may  need to seek waivers from various provisions in our senior secured credit  facilities. There can be no assurance that we can obtain such waivers at a  reasonable cost, if at all.                                                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| · |   | Market conditions could cause the counterparties to  the derivative financial instruments we use to hedge our exposure to interest  rate and currency fluctuations to experience financial difficulties and, as a  result, our efforts to hedge these exposures could prove unsuccessful and,  furthermore, our ability to engage in additional hedging activities may  decrease or become more costly as a result of these conditions.                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| · |   | Recent market volatility has exerted downward  pressure on our stock price, which may make it more difficult for us to raise  additional capital in the future.                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| · |   | Market conditions could result in our key customers  experiencing financial difficulties and/or electing to limit spending, which  in turn could result in decreased sales and earnings for us. See “Risk  Factors—We are dependent on a limited number of  key customers or distributors for a substantial portion of the net sales in  each of our business segments” under Part I - Item 1A of our  Annual Report on Form 10-K for the year ended December 31, 2007.                                                                                           |

 

We do not know if marketconditions or the state of the overall economy will improve in the near future.

 
| **ITEM 6.** | ** ** | **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). |

 

34

----

**Tableof Contents**

** **

**SIGNATURE**

** **

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.                                        |
|-----------------------|----------|--------------------------------------------------------|
|                  |     |                                                   |
|                  |     |                                                   |
| November 5, 2008 |     | /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*            |

 

35

----