<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 30, 1998
REGISTRATION NO. 333-62293
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
COMMSCOPE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------------
<TABLE>
<S> <C>
DELAWARE 36-4135495
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
OR ORGANIZATION)
</TABLE>
1375 Lenoir-Rhyne Boulevard
Hickory, North Carolina 28601
(828) 324-2200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
Jearld L. Leonhardt
Executive Vice President, Finance and Administration
COMMSCOPE, INC.
1375 Lenoir-Rhyne Boulevard
Hickory, North Carolina 28601
(828) 324-2200
(Name, address, including zip code, and telephone number, including area code,
of Agent for Service)
------------------------------
COPIES OF ALL COMMUNICATIONS, INCLUDING COMMUNICATIONS SENT TO AGENT FOR
SERVICE, SHOULD BE SENT TO:
<TABLE>
<S> <C>
Lois Herzeca, Esq. Robert E. Buckholz, Jr., Esq.
FRIED, FRANK, HARRIS, SULLIVAN & CROMWELL
SHRIVER & JACOBSON 125 Broad Street
One New York Plaza New York, New York 10004-2498
New York, New York 10004 (212) 558-4000
(212) 859-8000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
--------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement covers: (i) the distribution of 3,849,002 shares
of Common Stock, par value $.01 per share ("Common Stock"), of CommScope, Inc.,
a Delaware corporation, by Instrument Partners to its partners and the resale of
some of those shares by certain of the partners as Selling Stockholders; (ii)
the sale of 3,387,219 shares of Common Stock by another Selling Stockholder; and
(iii) the sale of up to 1,085,434 shares by the Company. The same Prospectus is
being used with respect to both the distribution and the sale of shares by the
Selling Stockholders and the Company.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED NOVEMBER 30, 1998
PROSPECTUS
6,750,000 SHARES
[LOGO]
COMMON STOCK
------------------
All of the 6,750,000 shares of Common Stock of CommScope, Inc. ("CommScope"
or the "Company") offered hereby are being sold by certain stockholders (the
"Selling Stockholders") of the Company. See "Selling Stockholders." The Company
will not receive any of the proceeds from the sale of the shares of Common Stock
by the Selling Stockholders.
The Common Stock is listed on the New York Stock Exchange under the symbol
"CTV." On November 27, 1998, the closing sale price of the Common Stock as
reported on the New York Stock Exchange was $15 3/8 per share. See "Price Range
of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING SELLING
PUBLIC DISCOUNT (1) STOCKHOLDERS (2)
<S> <C> <C> <C>
Per Share................................................ $ $ $
Total (3)................................................ $ $ $
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) The Company has agreed to pay certain expenses of the offering estimated at
$625,000.
(3) The Company has granted the Underwriters an option to purchase up to an
additional 1,012,500 shares of Common Stock, exercisable within 30 days
after the date hereof, solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public, Underwriting
Discount, Proceeds to Company and Proceeds to Selling Stockholders will be
$ , $ , $ and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made in New York, New York on or
about , 1998.
------------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
CIBC OPPENHEIMER
----------------
The date of this Prospectus is , 1998.
<PAGE>
[Caption: Communicating Quality through Cable]
[Pictures depicting: computer screen, reels of cable in warehouse, house,
cellular antenna
tower, mobile telephone, television entertainment center, two people holding a
television
remote control and image on television screen.]
[Logo][Caption: How Intelligence Travels.]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF COMMON STOCK TO COVER
SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE
DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN.
UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES TO THE "COMPANY" OR
"COMMSCOPE" INCLUDE COMMSCOPE, INC. AND ITS DIRECT OR INDIRECT SUBSIDIARIES
INCLUDING COMMSCOPE, INC. OF NORTH CAROLINA ("COMMSCOPE NC"), THE COMPANY'S
PRINCIPAL OPERATING SUBSIDIARY. EFFECTIVE ON JULY 28, 1997 (THE "DISTRIBUTION
DATE"), THE COMPANY WAS SPUN OFF (THE "DISTRIBUTION") FROM ITS FORMER PARENT
COMPANY, GENERAL INSTRUMENT CORPORATION (THE "DISTRIBUTING COMPANY"), THROUGH A
DISTRIBUTION OF THE COMPANY'S SHARES TO THE STOCKHOLDERS OF THE DISTRIBUTING
COMPANY. IMMEDIATELY FOLLOWING THE DISTRIBUTION, THE DISTRIBUTING COMPANY
CHANGED ITS CORPORATE NAME TO "GENERAL SEMICONDUCTOR, INC." ("GENERAL
SEMICONDUCTOR"). ON FEBRUARY 2, 1998 NEXTLEVEL SYSTEMS, INC. (WHICH WAS ALSO
SPUN OFF FROM THE DISTRIBUTING COMPANY) CHANGED ITS CORPORATE NAME TO GENERAL
INSTRUMENT CORPORATION ("GENERAL INSTRUMENT").
GENERAL
The Company is a leading worldwide designer, manufacturer and marketer of a
broad line of coaxial cables and other high-performance electronic and fiber
optic cable products primarily for communications applications including cable
television, telephony and Internet access. The Company is the largest
manufacturer and supplier of coaxial cable for hybrid fiber coaxial ("HFC")
cable systems in the United States, with over 50% market share in 1997 (by sales
volume), and is a leading supplier of coaxial cable for video distribution
applications such as satellite television and security surveillance. The Company
is also a leading provider of high-performance premise wiring for local area
networks ("LAN") and the Company's management believes that it has developed a
next generation wireless antenna cable. The Company sells its products to
approximately 2,500 customers in over 85 countries. The Company intends to
expand its global presence through its planned acquisition of Alcatel's cable
television ("CATV") coaxial cable business, which is Europe's largest
manufacturer of CATV coaxial cable.
For the year ended December 31, 1997, approximately 82% of the Company's
revenues were for the cable television and video distribution markets, 13% were
for LAN applications and 5% were for other high-performance cable markets
including cable for wireless applications, industrial and other wiring
applications. The Company's revenues and net income for the year ended December
31, 1997 were $599 million and $37 million, respectively. Approximately $200
million (33%) of the Company's revenues were from international customers.
The Company's management believes that the Company is the world's most
technologically advanced, low-cost provider of coaxial cable. As a result of the
Company's leading product offerings, cost-efficient manufacturing processes and
economies of scale resulting from its leading market share, management believes
that the Company is well-positioned to capitalize on the opportunity provided by
the convergence of video, voice and data and the resulting demand for bandwidth
and high speed access. The Company's management also believes that the following
industry trends will drive demand for its products: (i) the endorsement of HFC
cable systems by major cable, telephone and technology companies; (ii)
increasing use of the Internet; (iii) increasing demand for high speed LAN
access; and (iv) the continuing rapid deployment of wireless communications
systems worldwide.
The Company's management believes that, in 1997, the worldwide CATV coaxial
cable market was approximately $900 million, the domestic LAN cable market was
approximately $1.3 billion, and the worldwide wireless coaxial cable and
accessory market was approximately $1.0 billion. The Company intends to
strengthen its leading market share position in coaxial cable and to continue
its product leadership position in the LAN cable market, where it has been
gaining market share, and leverage its coaxial cable technology to further
penetrate the wireless coaxial cable market.
3
<PAGE>
GROWTH STRATEGY
The Company has adopted a growth strategy to expand, strengthen and leverage
its current market position as the leading worldwide supplier of coaxial cable
for broadband communications. The principal elements of the Company's growth
strategy are the following:
- CAPITALIZE ON HFC PARADIGM SHIFT. To date, a vast majority of video
networks worldwide, such as cable service provider networks, have adopted
the HFC network architecture for video service delivery. Recent events
involving major telecommunications and cable service providers create the
potential to expand the role of HFC networks from a video-centric focus to
a key platform for delivery of a variety of broadband services. These
events include AT&T Corporation's pending acquisition of
Tele-Communications, Inc. ("TCI"), Microsoft Corporation's $1 billion
investment in Comcast Cable Communications, Inc. ("Comcast"), Paul Allen's
acquisitions of Marcus Cable and Charter Communications, Inc. ("Charter")
and the recent success of high-speed cable data services such as @Home
Corporation and MediaOne. The Company believes that the HFC network
architecture provides the most cost-effective bandwidth into the home,
enabling both cable and telecommunications service providers to offer new
products and services such as high speed Internet access, video on demand,
Internet protocol ("IP") telephony and high-definition television
("HDTV"). The Company is well-positioned to benefit from the build out,
upgrade and maintenance of such networks in both domestic and
international markets.
- DEVELOP PROPRIETARY PRODUCTS AND EXPAND MARKET OPPORTUNITIES. The Company
maintains an active program to identify new market opportunities and
develop and commercialize products that leverage its core technology and
manufacturing competencies. This strategy has led to the development of
new products and entry into new markets such as satellite cables, LAN
cables, specialized coaxial based telecommunication cables, broadcast
audio and video cables and coaxial cables in conduit. For example, the
Company leveraged its coaxial cable technology to enter the LAN cable
market and developed UltraMedia-TM-, a high-end LAN cable product targeted
for high-speed LAN applications. The Company has also recently developed a
thin-wall foam flouronated-ethylene-propylene ("FEP") design for twisted
pair cables on which a patent is pending. In addition, the Company
leveraged its expertise in aluminum coaxial cable technology to develop
CellReach-Registered Trademark-, a superior copper coaxial cable solution
for the wireless antenna market. CellReach is a technologically superior
product with a lower total lifetime cost of ownership than the current
industry standard and has been installed to date in over 1,000 cellular
and personal communication services ("PCS") sites with leading service
providers such as Nextel Communications, Inc., Sprint Corporation and
BellSouth Corporation. The Company's internal product development strategy
is augmented by acquisitions of cable or related component businesses that
enhance the Company's existing product portfolio or that offer synergistic
cable-related growth opportunities.
- CONTINUOUSLY IMPROVE OPERATING EFFICIENCIES. The Company has invested
approximately $90 million in state-of-the-art manufacturing facilities and
new technologies during the past three fiscal years. These investments
have increased capacity and operating efficiencies, improved management
control and provided more consistent product quality. As a result, the
Company believes that it has become one of the few cable manufacturers
capable of satisfying volume production, time-to-market, time-to-volume
and technology requirements of customers in the communications industry.
The Company believes that its breadth and scale permit it to
cost-effectively invest in improving its operating efficiency through
investments in engineering and cost-management programs and to capture
value in the supply chain through vertical integration projects.
- LEVERAGE GLOBAL PLATFORM. In the past few years, the Company has become a
major supplier of coaxial cable to international markets, principally
Europe, Latin America and the Pacific Rim, for the cable television and
broadband services industries. In 1997, the Company had approximately 375
international customers in over 85 countries representing approximately
$200 million (33%) of the Company's 1997 revenue. To support its
international sales efforts, the Company has sales
4
<PAGE>
representatives based in Europe, Latin America and the Pacific Rim. In
addition, the Company is able to leverage its domestic cable customer base
with respect to those customers who are also equity investors in
international cable service providers. Although there is current
uncertainty in international markets, the Company believes that it is
well-positioned to benefit over the long-term from future international
growth opportunities. To further improve its ability to service
international customers as well as reduce shipping and importation costs,
the Company intends to establish or acquire international distribution
and/or manufacturing facilities. For example, the Company recently
announced its planned acquisition of Alcatel's CATV coaxial cable business
in Seneffe, Belgium. This acquisition gives CommScope access to
established European distribution channels and complementary coaxial cable
technologies. See "Business--Business Units-- International Markets."
- PROVIDE SUPERIOR CUSTOMER SERVICE. The Company believes that its coaxial
cable manufacturing capacity is greater than that of any other
manufacturer, which enables the Company to provide its customers a unique
high-volume service capability. As a result of its 24-hour, seven days per
week continuous manufacturing operations, the Company is able to offer
quick order turnaround services. In addition, management believes that the
ability to offer rapid delivery services, materials management and
logistics services to customers through the Company's private truck fleet
is an important competitive advantage.
SELLING STOCKHOLDERS
Two partnerships formed by affiliates of Forstmann Little & Co. currently
own 7,236,221 shares of Common Stock (approximately 14.7% of the outstanding
shares of Common Stock as of November 15, 1998). Prior to the closing of the
Offering, one of such partnerships will distribute (the "FL Distribution")
3,849,002 shares of Common Stock to the general and limited partners of such
partnership in accordance with the terms of its partnership agreement. The
shares of Common Stock to be sold by the Selling Stockholders in the Offering
consist of shares received by certain of such partners in the FL Distribution
and shares owned by the other partnership. Following the consumation of the
Offering, the partnerships will no longer own any shares of Common Stock of the
Company.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Selling
Stockholders:................................... 6,750,000 shares (1)
Common Stock to be Outstanding After the
Offering........................................ 49,202,555 shares (1) (2)
Use of Proceeds................................... The Company will not receive any of the proceeds
from the sale of shares of Common Stock by the
Selling Stockholders. If the over-allotment option
is exercised by the Underwriters in full, the
Company will receive proceeds of approximately
$ (net of underwriting discounts and
expenses payable by the Company). The Company
currently intends to use the net proceeds from the
sale of shares by the Company for general
corporate purposes. See "Use of Proceeds."
New York Stock Exchange Symbol.................... CTV
</TABLE>
- ------------------------
(1) Does not include 1,012,500 shares of Common Stock subject to purchase from
the Company upon exercise by the Underwriters of their over-allotment
option.
(2) Does not include 1,284,593 shares issuable upon the exercise of outstanding
employee stock options as of November 15, 1998.
RISK FACTORS
Purchasers of Common Stock in the Offering should carefully consider the
risk factors set forth under the caption "Risk Factors" and the other
information included in this Prospectus prior to making an investment decision.
See "Risk Factors."
5
<PAGE>
SUMMARY FINANCIAL DATA
The following table presents summary historical financial data of the
Company. The consolidated results of operations data for each of the four years
ended December 31, 1997 and consolidated balance sheet data at the end of each
year are derived from the Company's audited consolidated financial statements.
The consolidated results of operations data for the year ended December 31, 1993
and consolidated balance sheet data at December 31, 1993 are derived from
consolidated financial statements of CommScope NC which were part of the audited
consolidated financial statements of the Distributing Company. The consolidated
financial data as of and for the nine months ended September 30, 1997 and 1998
are derived from the unaudited consolidated financial statements of the Company
that, in the opinion of management, reflect all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of its financial
condition and results of operations as of such dates and for such periods. The
results for the nine months ended September 30, 1998 are not necessarily
indicative of the results that may be expected for the full year.
The "Pro Forma Information for the Distribution" presented below is
unaudited and has been prepared giving effect to the Distribution as if it had
occurred at the beginning of each period presented by utilizing the historical
consolidated statements of income of CommScope which were adjusted to reflect a
net debt level of $275 million at the beginning of each period presented at an
assumed weighted average borrowing rate of 6.35% plus the amortization of debt
issuance costs associated with the new borrowings. The historical and pro forma
financial information may not be indicative of the Company's future performance
and does not necessarily reflect what the financial position and results of
operations of the Company would have been had the Company operated as a
separate, stand-alone entity during the periods presented.
The information set forth below should be read in conjunction with the
Company's audited consolidated financial statements included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and the
Company's unaudited condensed consolidated financial statements included in the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September
30, 1998 (both of which are incorporated herein by reference) and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other financial information included elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS, UNLESS OTHERWISE NOTED, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales........................................ $ 341,789 $ 445,328 $ 485,160 $ 572,212 $ 599,216 $ 454,434 $ 425,545
Gross profit..................................... 98,124 127,862 129,428 155,089 141,000 110,552 97,546
Operating income................................. 64,713 87,770 85,263 100,254 79,182 64,752 50,514
Net income....................................... 27,336 45,096 47,331 57,122 37,458 34,529 26,252
PRO FORMA INFORMATION FOR THE DISTRIBUTION (1):
Pro forma net income............................. -- -- -- $ 51,908 $ 34,604 $ 31,675 --
Weighted average number of shares outstanding:
Basic.......................................... -- -- -- 49,105 49,107 49,106 49,169
Diluted........................................ -- -- -- 49,200 49,238 49,268 49,505
Earnings per share--pro forma except for the nine
months ended September 30, 1998:
Basic.......................................... -- -- -- $ 1.06 $ 0.70 $ 0.65 $ 0.53
Diluted........................................ -- -- -- $ 1.06 $ 0.70 $ 0.64 $ 0.53
OTHER INFORMATION:
Earnings before net interest, taxes and
depreciation and amortization (EBITDA) (2)..... $ 80,892 $ 104,188 $ 102,597 $ 121,045 $ 96,606 $ 80,829 $ 70,919
Depreciation and amortization.................... 16,180 16,422 17,219 18,952 21,677 15,527 18,341
Capital expenditures............................. 10,122 33,089 27,281 33,218 29,871 24,809 16,198
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets..................................... $ 336,281 $ 397,843 $ 412,378 $ 479,885 $ 483,539 $ 504,127 $ 483,089
Working capital.................................. 31,928 69,269 72,908 107,220 112,786 111,398 97,549
Long-term debt, including current maturities
(3)............................................ -- -- 10,800 10,800 265,800 270,800 213,800
Stockholders' equity (3)......................... 300,786 343,169 339,177 393,560 150,032 147,039 177,413
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
6
<PAGE>
(FOOTNOTES FROM PREVIOUS PAGE)
- ------------------------------
(1) Pro forma net income, weighted average number of shares outstanding and
basic and diluted earnings per share have not been presented for 1993, 1994
and 1995 since the Company, through its wholly-owned subsidiary CommScope
NC, was formerly a wholly-owned indirect subsidiary of the Distributing
Company with no separately issued or outstanding equity securities prior to
July 28, 1997, the date of the Distribution. The unaudited pro forma
information for 1996, 1997 and the nine months ended September 30, 1997, has
been prepared utilizing the historical consolidated statements of income of
CommScope adjusted to reflect a net debt level of $275 million at the
beginning of each period presented at an assumed weighted average borrowing
rate of 6.35% plus the amortization of debt issuance costs associated with
the new borrowings and a total of 49.1 million common shares outstanding and
49.2 million common and common equivalent shares outstanding for basic and
diluted earnings per share, respectively. There is no pro forma information
for 1998 since the Distribution occurred prior to the beginning of the
period presented.
(2) EBITDA is presented not as an alternative measure of operating results or
cash flow (as determined in accordance with generally accepted accounting
principles), but rather to provide additional information related to the
Company's ability to service debt. The EBITDA measure included herein may
not be comparable to similarly titled measures reported by other companies.
For purposes of the EBITDA calculation, amortization of deferred financing
fees of $70 for 1997 and $32 and $112 for the nine months ended September
30, 1997 and 1998, respectively, is excluded from net interest. These
amounts are included in depreciation and amortization.
(3) Giving effect to the Distribution as if it had occurred on December 31,
1996, on a pro forma basis long-term debt and stockholders' equity were
$276,800 and $128,348, respectively.
7
<PAGE>
RISK FACTORS
IN ADDITION TO THE MATTERS DESCRIBED IN THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN, THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE COMMON STOCK OFFERED HEREBY:
FACTORS RELATING TO THE DISTRIBUTION
In a transaction that was consummated on July 28, 1997, the Distributing
Company (i) transferred all the assets and liabilities relating to the
manufacture and sale of broadband communications products used in the cable
television, satellite and telecommunications industries to its then wholly-owned
subsidiary NextLevel Systems, Inc. (now renamed "General Instrument
Corporation") and all the assets and liabilities relating to the manufacture and
sale of coaxial, fiber optic and other electronic cable used in the cable
television, satellite and other industries to the Company (then a wholly-owned
subsidiary of the Distributing Company) and (ii) then distributed all of the
outstanding shares of capital stock of each of NextLevel Systems, Inc. and the
Company to its stockholders in the Distribution.
The Distribution Agreement, dated as of June 12, 1997, among the Company,
General Instrument and the Distributing Company (the "Distribution Agreement")
and certain other agreements executed in connection with the Distribution
(collectively, the "Ancillary Agreements") allocate among the Company, the
Distributing Company, and General Instrument and their respective subsidiaries
responsibility for various indebtedness, liabilities and obligations. It is
possible that a court would disregard this contractual allocation of
indebtedness, liabilities and obligations among the parties and require the
Company or its subsidiaries to assume responsibility for obligations allocated
to another party, particularly if such other party were to refuse or was unable
to pay or perform any of its allocated obligations.
Pursuant to the Distribution Agreement and certain of the Ancillary
Agreements, the Company has agreed to indemnify the other parties (and certain
related persons) from and after consummation of the Distribution with respect to
certain indebtedness, liabilities and obligations, which indemnification
obligations could be significant.
Although the Distributing Company has received a favorable ruling from the
Internal Revenue Service, if the Distribution were not to qualify as a tax free
spin-off (either because of the nature of the Distribution or because of events
occurring after the Distribution) under Section 355 of the Internal Revenue Code
of 1986, as amended, then, in general, a corporate tax would be payable by the
consolidated group of which the Distributing Company was the common parent based
upon the difference between the fair market value of the stock distributed and
the Distributing Company's adjusted basis in such stock. The corporate level tax
would be payable by General Semiconductor and could substantially exceed the net
worth of General Semiconductor. However, under certain circumstances, the
Company and General Instrument have agreed to indemnify General Semiconductor
for such tax liability. In addition, under the consolidated return rules, each
member of the consolidated group (including the Company and General Instrument)
is severally liable for such tax liability.
DEPENDENCE OF THE COMPANY ON THE CABLE TELEVISION INDUSTRY AND CABLE TELEVISION
CAPITAL SPENDING
The majority of the Company's revenues come from sales to the cable
television industry. Demand for the Company's products depends primarily on
capital spending by cable television operators for constructing, rebuilding or
upgrading their systems. The amount of this capital spending, and, therefore,
the Company's sales and profitability will be affected by a variety of factors,
including general economic conditions, acquisitions of cable television
operators by non-cable television operators, cable system consolidation within
the industry, the financial condition of domestic cable television operators and
their access to financing, competition from satellite and wireless television
providers and telephone companies, technological developments and new
legislation and regulation of cable television operators. There can be no
assurance that cable television capital spending will increase from historical
levels or that existing levels of cable television capital spending will be
maintained.
8
<PAGE>
In recent years, cable television capital spending has also been affected by
new legislation and regulation, on the federal, state and local level, and many
aspects of such regulation are currently the subject of judicial proceedings and
administrative or legislative proposals. During 1993 and 1994, the Federal
Communications Commission (the "FCC") adopted rules under the Cable Television
Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"),
regulating rates that cable television operators may charge for lower tiers of
service and generally not regulating the rates for higher tiers of service. In
1996, the Telecommunications Act of 1996 (the "Telecom Act") was enacted to
eliminate certain governmental barriers to competition among local and long
distance telephone, cable television, broadcasting and wireless services. The
FCC is continuing its implementation of the Telecom Act which, when fully
implemented, may significantly impact the communications industry and alter
federal, state and local laws and regulations regarding the provision of cable
and telephony services. Among other things, the Telecom Act eliminates
substantially all restrictions on the entry of telephone companies and certain
public utilities into the cable television business. Telephone companies may now
enter the cable television business as traditional cable operators, as common
carrier conduits for programming supplied by others, as operators of wireless
distribution systems, or as hybrid common carrier/cable operator providers of
programming on so-called "open video systems." The economic impact of the 1992
Cable Act, the Telecom Act and the rules thereunder on the cable television
industry and the Company is still uncertain.
Although the domestic cable television industry is comprised of
approximately 11,200 cable systems, a small number of cable television operators
own a majority of cable television systems and account for a majority of the
capital expenditures made by cable television operators. The loss of some or all
of the Company's principal cable television customers could have a material
adverse effect on the business of the Company.
TELECOMMUNICATIONS INDUSTRY COMPETITION AND TECHNOLOGICAL CHANGES AFFECTING THE
COMPANY
Many of the markets that the Company serves are characterized by advances in
information processing and communications capabilities which require increased
transmission speeds and greater capacity ("bandwidth") for carrying information.
These advances require ongoing improvements in the capabilities of wire and
cable products. The Company believes that its future success will depend in part
upon its ability to enhance existing products and to develop and manufacture new
products that meet or anticipate such changes. The failure to introduce
successful new or enhanced products on a timely and cost-competitive basis could
have an adverse impact on the Company's operations and financial condition.
Fiber optic technology presents a potential substitute for the products that
comprise the majority of the Company's sales. To date, fiber optic cables have
penetrated the cable television and LAN markets served by the Company in
high-bandwidth point-to-point and trunking applications. Fiber optic cables have
not, to date, significantly penetrated the local distribution and residential
application markets served by the Company because of the high relative cost of
electro-optic interfaces and the high cost of fiber termination and connection.
At the same time, advances in data transmission equipment and copper cable
technologies have increased the relative performance of copper-based cables
which are the Company's principal product offerings. However, a significant
decrease in the cost of fiber optic systems could make such systems superior on
a price/performance basis to copper systems. While the Company is a fiber optic
cable manufacturer and supplier to a small portion of the cable television
market and certain specialty markets, such a significant decrease in the cost of
fiber optic systems would likely have an adverse effect on the Company.
COMPETITION
The Company's coaxial, fiber optic and electronic cable products compete
with those of a substantial number of foreign and domestic companies, some with
greater resources, financial or otherwise, than the Company, and the rapid
technological changes occurring in the telecommunications industry could lead to
the entry of new competitors. Existing competitors' actions and new entrants may
have an adverse impact
9
<PAGE>
on the Company's sales and profitability. The Company believes that it enjoys a
strong competitive position in the coaxial cable market because of its position
as a low-cost, high-volume coaxial cable producer and its reputation as a
high-quality provider of state-of-the-art cables, along with its strong
orientation toward customer service. However, there can be no assurance that the
Company will continue to compete successfully with its existing competitors or
that it will be able to compete successfully with new competitors.
IMPACT OF PRICE FLUCTUATIONS OF RAW MATERIALS ON THE COMPANY; SOURCES OF RAW
MATERIALS
Fabricated aluminum, copper and plastics are the principal raw materials
purchased by the Company, and the Company's profitability may be affected by
changes in the market prices of these materials (which are linked to the
commodity markets). Historically the Company has generally been able to pass on
increases in the prices of these materials to its customers but has had some
difficulty doing so in recent years, and there can be no assurance that the
Company will be able to do so in the future. Additionally, significant increases
in the price of the Company's products due to increases in the cost of raw
materials could have a negative effect on demand for the Company's products.
A significant portion of the Company's raw material purchases are
bi-metallic center conductors for coaxial cables, nearly all of which are
purchased from Copperweld Corporation under a long-term supply arrangement
expiring in March 2000. In addition to bi-metallic wires, fine aluminum wire is
purchased primarily from a single source; neither of these major raw materials
could be readily replaced in sufficient quantities if all supplies from the
respective primary sources were disrupted for an extended period. Additionally,
flouronated-ethylene-propylene ("FEP") is the primary raw material used
throughout the industry for producing flame-retarding cables for LAN
applications. There are few worldwide producers of FEP and market supplies have
been periodically limited over the past several years. Availability of adequate
supplies of FEP will be critical to future LAN cable sales growth.
INTERNATIONAL OPERATIONS
The Company's sales to international markets will continue to be an
important focus of the Company in the future. Although the Company believes that
future growth in international markets will be a significant contributor to the
Company's overall business over the long-term, the current environment in the
international markets is having a negative impact on 1998 international sales.
There can be no assurance that international markets will expand in the future.
The Asian economic crisis, the strong U.S. dollar and consolidation and merger
activity among cable television operators in the United Kingdom and Brazilian
markets have also recently had a detrimental effect on the Company's
international sales.
International operations are subject to the usual risks inherent in sales
abroad, including risks with respect to currency exchange rates, economic and
political destabilization, restrictive actions by foreign governments,
nationalizations, the laws and policies of the United States affecting trade,
foreign investment and loans and foreign tax laws.
ENVIRONMENT
The Company is subject to various federal, state, local and foreign laws and
regulations governing the use, discharge and disposal of hazardous materials.
The Company's manufacturing facilities are believed to be in substantial
compliance with current laws and regulations. Compliance with current laws and
regulations has not had and is not expected to have a material adverse effect on
the Company's operations and financial condition.
The Company's present and past facilities have been in operation for many
years, and over that time in the course of those operations, such facilities
have used substances which are or might be considered hazardous, and the Company
has generated and disposed of wastes which are or might be considered
10
<PAGE>
hazardous. Therefore, it is possible that additional environmental issues may
arise in the future which the Company cannot now predict.
LEVERAGE; CERTAIN RESTRICTIONS UNDER CREDIT FACILITIES
The Company is substantially leveraged. The degree to which the Company is
leveraged could have important consequences, including the following: (i) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, product development, acquisitions, general
corporate purposes or other purposes may be impaired; (ii) a portion of the
Company's and its subsidiaries' cash flow from operations must be dedicated to
the payment of the principal of and interest on its indebtedness; (iii) the
Credit Agreement, dated as of July 23, 1997 (the "Credit Agreement"), among
CommScope NC, a wholly owned subsidiary of the Company, certain banks, and The
Chase Manhattan Bank, as Administrative Agent, contains certain restrictive
financial and operating covenants, including, among others, requirements that
the Company satisfy certain financial ratios; (iv) a significant portion of the
Company's borrowings are at floating rates of interest, causing the Company to
be vulnerable to increases in interest rates; (v) the Company's degree of
leverage may make it more vulnerable to a downturn in general economic
conditions; and (vi) the Company's degree of leverage may limit its flexibility
in responding to changing business and economic conditions.
In addition, in a lawsuit by an unpaid creditor or representative of
creditors, such as a trustee in bankruptcy, a court may be asked to void the
Distribution (in whole or in part) as a fraudulent conveyance and to require
that the stockholders return the special dividend (in whole or in part) to
General Semiconductor or require the Company to fund certain liabilities of
General Semiconductor and General Instrument for the benefit of creditors.
11
<PAGE>
THE COMPANY
The Company is a leading worldwide designer, manufacturer and marketer of a
broad line of coaxial cables and other high-performance electronic and fiber
optic cable products primarily for communications applications including cable
television, telephony and Internet access. The Company is the largest
manufacturer and supplier of coaxial cable for HFC cable systems in the United
States, with over 50% market share in 1997 (by sales volume), and is a leading
supplier of coaxial cable for video distribution applications such as satellite
television and security surveillance. The Company is also a leading provider of
high-performance premise wiring for LAN and the Company's management believes
that it has developed a next generation wireless antenna cable. The Company
sells its products to approximately 2,500 customers in over 85 countries.
Effective on July 28, 1997, the Company was spun-off from the Distributing
Company through a distribution of the Company's shares to the stockholders of
the Distributing Company. The Company's principal executive offices are located
at 1375 Lenoir-Rhyne Boulevard, Hickory, North Carolina 28601, and the telephone
number of the Company is (828) 324-2200.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of shares of
Common Stock by the Selling Stockholders. If the over-allotment option is
exercised by the Underwriters in full, the Company will receive proceeds of
approximately $ (net of underwriting discounts and expenses payable by the
Company). The Company currently intends to use the net proceeds from the sale of
shares by the Company for general corporate purposes.
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock and does not
anticipate paying such dividends in the foreseeable future. The Credit Agreement
limits the ability of the Company to pay cash dividends to its stockholders. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." Any determination to pay cash
dividends in the future will be at the discretion of the Company's Board of
Directors and will depend upon the Company's results of operations, financial
condition, contractual restrictions and other factors deemed relevant at that
time by the Company's Board of Directors.
PRICE RANGE OF COMMON STOCK
The Common Stock has been traded on the New York Stock Exchange ("NYSE")
since July 28, 1997 under the symbol "CTV." The following table sets forth the
high and low sale prices for the Common Stock as reported on the NYSE Composite
Tape for the periods indicated.
<TABLE>
<CAPTION>
COMMON
STOCK PRICE
RANGE
------------------
<S> <C> <C>
HIGH LOW
------- -------
1997
Third Quarter (beginning July 28).................................................................. $19 $12 3/4
Fourth Quarter..................................................................................... $14 7/16 $10 3/8
1998
First Quarter...................................................................................... $15 3/16 $11 5/8
Second Quarter..................................................................................... $17 7/16 $13 5/16
Third Quarter...................................................................................... $20 3/4 $ 9 3/8
Fourth Quarter (through November 27)............................................................... $15 7/8 $ 8 3/4
</TABLE>
On November 27, 1998, the closing sale price of the Common Stock on the NYSE
was $15 3/8 per share.
12
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of September 30, 1998 on an actual basis. No pro forma adjustments to
the consolidated capitalization of the Company is presented as it is assumed
that the Underwriters' over-allotment option for 1,012,500 shares is not
exercised. This table should be read in conjunction with the Company's
consolidated financial statements and the notes thereto, incorporated herein by
reference, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------
<S> <C>
(IN THOUSANDS,
EXCEPT SHARE DATA)
Cash and cash equivalents.............................................. $ 4,820
--------
--------
Long-term debt (1):
Credit Agreement................................................... $ 203,000
IDA Notes.......................................................... 10,800
--------
Total debt....................................................... 213,800
--------
Stockholders' equity:
Preferred stock, 20,000,000 shares authorized and none outstanding
Common stock, $.01 par value; 300,000,000 shares authorized and
49,202,555(2) shares issued and outstanding........................ 492
Additional paid-in capital........................................... 142,062
Retained earnings.................................................... 34,859
--------
Total stockholders' equity....................................... 177,413
--------
Total capitalization............................................. $ 391,213
--------
--------
</TABLE>
- ------------------------
(1) For information concerning the Company's outstanding debt, see Note 9 to the
audited consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, incorporated herein by reference.
(2) Does not include shares issued subsequent to September 30, 1998 pursuant to
the exercise of options.
13
<PAGE>
SELECTED FINANCIAL DATA
The following table presents selected historical financial data of the
Company. The consolidated results of operations data for each of the four years
ended December 31, 1997 and consolidated balance sheet data at the end of each
year are derived from the Company's audited consolidated financial statements.
The consolidated results of operations data for the year ended December 31, 1993
and consolidated balance sheet data at December 31, 1993 are derived from
consolidated financial statements of CommScope NC which were part of the audited
consolidated financial statements of the Distributing Company. The consolidated
financial data as of and for the nine months ended September 30, 1997 and 1998
are derived from the unaudited consolidated financial statements of the Company
that, in the opinion of management, reflect all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of its financial
condition and results of operations as of such dates and for such periods. The
results for the nine months ended September 30, 1998 are not necessarily
indicative of the results that may be expected for the full year.
The "Pro Forma Information for the Distribution" presented below is
unaudited and has been prepared giving effect to the Distribution as if it had
occurred at the beginning of each period presented by utilizing the historical
consolidated statements of income of CommScope which were adjusted to reflect a
net debt level of $275 million at the beginning of each period presented at an
assumed weighted average borrowing rate of 6.35% plus the amortization of debt
issuance costs associated with the new borrowings. The historical and pro forma
financial information may not be indicative of the Company's future performance
and does not necessarily reflect what the financial position and results of
operations of the Company would have been had the Company operated as a
separate, stand-alone entity during the periods presented.
The information set forth below should be read in conjunction with the
Company's audited consolidated financial statements included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and the
Company's unaudited condensed consolidated financial statements included in the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September
30, 1998 (both of which are incorporated herein by reference) and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other financial information included elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, UNLESS OTHERWISE NOTED, EXCEPT PER SHARE DATA)
RESULTS OF OPERATIONS:
Net sales.................................. $ 341,789 $ 445,328 $ 485,160 $ 572,212 $ 599,216 $ 454,434 $ 425,545
Gross profit............................... 98,124 127,862 129,428 155,089 141,000 110,552 97,546
Operating income........................... 64,713 87,770 85,263 100,254 79,182 64,752 50,514
Net income................................. 27,336 45,096 47,331 57,122 37,458 34,529 26,252
PRO FORMA INFORMATION FOR THE DISTRIBUTION (1):
Pro forma net income....................... -- -- -- $ 51,908 $ 34,604 $ 31,675 --
Weighted average number of shares
outstanding:
Basic.................................... -- -- -- 49,105 49,107 49,106 49,169
Diluted.................................. -- -- -- 49,200 49,238 49,268 49,505
Earnings per share--pro forma except for
the nine months ended September 30, 1998:
Basic.................................... -- -- -- $ 1.06 $ 0.70 $ 0.65 $ 0.53
Diluted.................................. -- -- -- $ 1.06 $ 0.70 $ 0.64 $ 0.53
OTHER INFORMATION:
Earnings before net interest, taxes and
depreciation and amortization (2)........ $ 80,892 $ 104,188 $ 102,597 $ 121,045 $ 96,606 $ 80,829 $ 70,919
Depreciation and amortization.............. 16,180 16,422 17,219 18,952 21,677 15,527 18,341
Capital expenditures....................... 10,122 33,089 27,281 33,218 29,871 24,809 16,198
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets............................... $ 336,281 $ 397,843 $ 412,378 $ 479,885 $ 483,539 $ 504,127 $ 483,089
Working capital............................ 31,928 69,269 72,908 107,220 112,786 111,398 97,549
Long-term debt, including current
maturities (3)........................... -- -- 10,800 10,800 265,800 270,800 213,800
Stockholders' equity (3)................... 300,786 343,169 339,177 393,560 150,032 147,039 177,413
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
14
<PAGE>
(FOOTNOTES FROM PREVIOUS PAGE)
- ------------------------------
(1) Pro forma net income, weighted average number of shares outstanding and
basic and diluted earnings per share have not been presented for 1993, 1994
and 1995 since the Company, through its wholly-owned subsidiary CommScope
NC, was formerly a wholly-owned indirect subsidiary of the Distributing
Company with no separately issued or outstanding equity securities prior to
July 28, 1997, the date of the Distribution. The unaudited pro forma
information for 1996, 1997 and the nine months ended September 30, 1997, has
been prepared utilizing the historical consolidated statements of income of
CommScope adjusted to reflect a net debt level of $275 million at the
beginning of each period presented at an assumed weighted average borrowing
rate of 6.35% plus the amortization of debt issuance costs associated with
the new borrowings and a total of 49.1 million common shares outstanding and
49.2 million common and common equivalent shares outstanding for basic and
diluted earnings per share, respectively. There is no pro forma information
for 1998 since the Distribution occurred prior to the beginning of the
period presented.
(2) EBITDA is presented not as an alternative measure of operating results or
cash flow (as determined in accordance with generally accepted accounting
principles), but rather to provide additional information related to the
Company's ability to service debt. The EBITDA measure included herein may
not be comparable to similarly titled measures reported by other companies.
For purposes of the EBITDA calculation, amortization of deferred financing
fees of $70 for 1997 and $32 and $112 for the nine months ended September
30, 1997 and 1998, respectively, is excluded from net interest. These
amounts are included in depreciation and amortization.
(3) Giving effect to the Distribution as if it had occurred on December 31,
1996, on a pro forma basis long-term debt and stockholders' equity were
$276,800 and $128,348, respectively.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE COMPANY'S FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S CONSOLIDATED
FINANCIAL STATEMENTS INCORPORATED BY REFERENCE IN THIS PROSPECTUS.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
HIGHLIGHTS
CommScope reported net income of $11 million ($0.23 per basic and diluted
share) for the quarter ended September 30, 1998, an increase of $4 million (54%)
from the quarter ended September 30, 1997 historical and pro forma net income of
$7 million ($0.14 per basic and diluted share pro forma).
For the nine months ended September 30, 1998, CommScope reported net income
of $26 million ($0.53 per basic and diluted share), a decrease of $9 million
(24%) from the nine months ended September 30, 1997 net income of $35 million.
On a pro forma basis, net income for the nine months ended September 30, 1997
was $32 million ($0.65 per basic share and $0.64 per diluted share).
Pro forma net income and earnings per share for 1997 reflect the impact of
CommScope's new capital structure immediately following the Distribution from
the Distributing Company which was consummated on the Distribution Date,
assuming that all common stock issued and long-term debt borrowings as of the
Distribution Date were outstanding since January 1, 1997.
Net income for the nine months ended September 30, 1998 includes a one-time
pre-tax gain of $2 million related to the sale of the Company's high-temperature
aerospace and industrial cables business. Excluding the gain, net income for the
nine months ended September 30, 1998 was $25 million ($0.50 per share).
NET SALES
Net sales for the third quarter and nine months ended September 30, 1998
increased $3 million (2%) to $150 million and decreased $29 million (6%) to $426
million, respectively, from the comparable prior year periods. The decrease in
net sales for the nine month period of 1998 compared to 1997 is due primarily to
a significant reduction in international sales due to the economic turmoil in
key overseas markets.
For the third quarter and nine months ended September 30, 1998 international
sales decreased by 20% and 35%, respectively, compared to the corresponding
periods in 1997, driven by reduced sales in the Asian and Latin American
markets. International sales for the nine months ended September 30, 1998
represented 24% of the Company's net sales compared to 35% for the comparable
period of 1997. However, international sales for the third quarter 1998
increased by 7% over the second quarter 1998.
Net sales to cable television and other video distribution markets ("CATV
Products") for the third quarter and nine months ended September 30, 1998
decreased $3 million (2%) to $119 million and $42 million (11%) to $336 million,
respectively, from the comparable prior year periods. These decreases primarily
reflect the lower international sales in 1998 as compared to 1997. Domestically,
excluding sales to telephone companies, sales of CATV Products increased by 13%
for the third quarter of 1998 compared to the third quarter of 1997.
Net sales for local area network and other data applications ("LAN
Products") for the third quarter and nine months ended September 30, 1998
decreased $1 million (6%) to $17 million and increased $5 million (10%) to $60
million, respectively, over the comparable prior year periods. The sales
decrease for LAN Products in the third quarter of 1998 is due to unanticipated
high inventory levels of LAN cables by customers which temporarily delayed
sales. The Company expects a return to more normal customer inventory levels as
early as the first quarter of 1999. The sales increase for the nine month period
of 1998
16
<PAGE>
compared to 1997 is due to continued growth of the LAN Products business. The
Company continues to capture market share through the continued development and
marketing of high-performance cable, such as the UltraMedia cable, which
supports gigabit transmission and exceeds the highest industry standards.
Sales of other cable products for the third quarter and nine months ended
September 30, 1998 were $14 million and $30 million, respectively, as compared
to $7 million and $22 million for the comparable periods in 1997.
GROSS PROFIT (NET SALES LESS COST OF SALES)
Gross profit for the third quarter and nine months ended September 30, 1998
was $37 million and $98 million, respectively, compared to $32 million and $110
million for the comparable prior year periods, an increase of 17% and a decrease
of 12%, respectively, for each period. The lower gross profit for the nine month
period of 1998 compared to 1997 is primarily the result of the lower sales and
slightly lower selling prices for CATV Products due to a competitive pricing
environment. Lower overhead costs in the nine month period ended September 30,
1997, driven primarily by reduced warranty-related provisions due to lower
expectations of claims, contributed partially to the higher 1997 gross profit.
The increase in gross profit for the third quarter of 1998 compared to 1997 is
due to slightly higher sales and other factors discussed below.
As a percentage of sales, gross profit declined from 24% for the nine months
ended September 30, 1997 to 23% for the comparable period of 1998. For the third
quarter 1998, gross profit as a percentage of sales was 25% compared to 22% for
the third quarter 1997 and 23% for the second quarter of 1998.
During the last half of fiscal 1997 gross profit percentages were negatively
affected by competitive pricing issues in the marketplace which reduced the
average selling price of the Company's products. Domestic pricing remained
relatively stable during the first three quarters of 1998. The improvement in
gross profit percentages also reflects the impact of the Company's focus on
engineered cost savings and manufacturing efficiencies which have positively
impacted gross profits in the second and third quarter of 1998. The Company
expects gross margins to remain relatively stable in the fourth quarter of 1998
with the potential to expand modestly in 1999, assuming selling prices remain
stable.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative ("SG&A") expense for the third quarter
and nine months ended September 30, 1998 was $13 million and $39 million,
respectively, compared to $13 million and $37 million during the comparable
periods in 1997. As a percentage of net sales, SG&A expense was 9% for the third
quarter and nine months ended September 30, 1998, compared to 9% and 8% for the
comparable periods in 1997.
RESEARCH AND DEVELOPMENT
Research and development expense as a percentage of net sales was 1% during
all periods presented. The Company has ongoing programs to develop new products
and market opportunities for its products and core capabilities and new
manufacturing technologies to achieve cost reductions.
OTHER INCOME, NET
In February 1998, the Company sold certain real and personal property and
inventories of its High-Temperature Aerospace and Industrial Cable Products
Business to Alcatel for an adjusted price of $13 million. The Company recognized
a pre-tax gain from the sale of $2 million ($0.03 per share, net of tax effect).
17
<PAGE>
INTEREST EXPENSE
Interest expense for the third quarter and nine months ended September 30,
1998, totaling $4 million and $12 million, respectively, represents actual
interest incurred on outstanding borrowings under the Company's credit
facilities. Interest expense for the third quarter and nine months ended
September 30, 1997 represents an allocation of net interest expense from the
Distributing Company, which was based upon CommScope's net assets as a
percentage of the total net assets of the Distributing Company, through the
Distribution Date and actual interest incurred on outstanding borrowings after
the Distribution Date.
Pro forma net interest expense for the third quarter and nine months ended
September 30, 1997, totaling $5 million and $14 million, respectively, reflects
the historical interest expense of the Company adjusted to reflect a net debt
level of $275 million at the beginning of 1997 presented at an assumed weighted
average borrowing rate of 6.35% plus the amortization of debt issuance costs
associated with the new borrowings incurred at the Distribution. These pro forma
net interest costs are not necessarily indicative of what the actual interest
costs would have been had CommScope operated as a separate, stand-alone entity.
The reduction in actual interest costs during 1998 as compared to the pro forma
interest costs for the comparable periods of 1997 is due to the reduction in
borrowings under the Company's credit facility since the Distribution.
INCOME TAXES
The effective tax rate was 36% for the third quarter and nine months ended
September 30, 1998 and 38% for the comparable periods of 1997. The provision for
income taxes for the three and nine months ended September 30, 1997 has been
determined as if the Company had filed separate tax returns under its previously
existing structure as an indirect wholly owned subsidiary of the Distributing
Company.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1997 WITH THE YEAR ENDED DECEMBER 31,
1996
NET SALES
Net sales for the year ended December 31, 1997 were $599.2 million compared
to $572.2 million in 1996, an increase of 5%. The following table presents the
Company's revenues (in millions) by product line and domestic versus
international sales for the years ended December 31, 1997 and 1996,
respectively:
<TABLE>
<CAPTION>
1997 % OF 1997 1996 % OF 1996
NET SALES NET SALES NET SALES NET SALES
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CATV Products........................................................ $ 491.5 82.0 $ 489.4 85.5
LAN Products......................................................... 76.6 12.8 66.5 11.6
Other products....................................................... 31.1 5.2 16.3 2.9
----------- ----- ----------- -----
Total........................................................ $ 599.2 100.0 $ 572.2 100.0
----------- ----- ----------- -----
----------- ----- ----------- -----
Domestic sales....................................................... $ 398.8 66.6 $ 371.3 64.9
International sales.................................................. 200.4 33.4 200.9 35.1
----------- ----- ----------- -----
Total........................................................ $ 599.2 100.0 $ 572.2 100.0
----------- ----- ----------- -----
----------- ----- ----------- -----
</TABLE>
Sales of CATV Products in 1997 were essentially equal to 1996 levels.
Domestically, sales of CATV were primarily to multiple system operators using
HFC networks, who continued their upgrading activities. Excluding sales to our
largest domestic customer, sales to domestic multiple system operators increased
by approximately 10% in 1997 as compared to 1996. These domestic sales increases
were mostly offset by lower sales volume to the Company's largest customer.
International sales of CATV Products, which represent most of the Company's
international sales activity, were also equal to 1996 international sales
levels. Excluding sales to Asia and the Pacific Rim
18
<PAGE>
market, international sales increased approximately 11% in 1997 compared to
1996. However, sales to the Pacific Rim region decreased by $15 million
primarily as a result of economic conditions in the region and changes in the
Australian market due to certain governmental regulation changes and other
events affecting the market for cable products in that country. CATV Products
sales to Australia were $10.3 million in 1997, a decrease of $14.4 million from
1996 sales of $24.7 million, and could potentially be lower in 1998.
Sales of LAN Products increased 15% in 1997 compared to 1996, primarily due
to higher sales volume for premise wiring of local area networks. The higher
sales volume of LAN Products has been achieved through the expansion of
manufacturing capacity and facilities dedicated to these products, the
introduction of cable products with enhanced electrical and physical performance
and the acquisition of LAN Products product lines from Teledyne Industries, Inc.
in May 1996.
Average selling prices for both CATV Products and LAN Products were down in
1997 compared to 1996, primarily attributable to competitive price reductions in
the market for these products, and offset favorable unit sales volume growth for
most products.
Sales of other products, which increased $14.8 million in 1997 compared to
1996, primarily represent sales of the High-Temperature Aerospace and Industrial
Cable Products Business, acquired along with certain other assets primarily used
in the production of certain LAN Products from Teledyne Industries, Inc. in May
1996. Sales of the High-Temperature Aerospace and Industrial Cable Products
Business totaled $16.5 million in 1997 and $7.3 million in 1996 subsequent to
the acquisition, representing $9.2 million of the increase in sales of other
products for 1997. In February 1998 the Company sold the facility, equipment and
inventories of the High-Temperature Aerospace and Industrial Cable Products
Business for approximately $13 million. Other sales, primarily of wiring
products used in telecommunication applications, totaled $14.6 million in 1997
compared to $9.0 million in 1996. Sales of CellReach products, included in other
sales, were less than 1% of net sales in both 1997 and 1996.
GROSS PROFIT (NET SALES LESS COST OF SALES)
Gross profit decreased $14.1 million, or 9%, to $141.0 million in 1997
compared to 1996 gross profit of $155.1 million. Gross profit as a percentage of
net sales was 23.5% in 1997 and 27.1% in 1996. The reduction in gross profit and
gross profit percentage is attributable to the competitive pricing in the
marketplace, increased raw material costs (particularly in aluminum and
plastics, which account for more than 50% of the Company's total raw material
costs), low gross profit percentages in the High-Temperature Aerospace and
Industrial Cable Products Business, and negative gross profit percentages
generated during the introduction phase of the CellReach product.
During 1997, particularly in the third and fourth quarters, the Company made
significant progress in the introduction of the CellReach product. More than 500
cellular and PCS sites were successfully installed with CellReach products,
including customers such as Nextel Communications Inc., BellSouth Corporation,
Sprint Corporation and Air Touch. The Company believes that this product offers
growth opportunities for 1998 and beyond because of its superior technical
performance and installed cost advantages and expects to achieve at least a
break-even gross profit on the CellReach product line in 1998. For 1997,
CellReach manufacturing start-up costs negatively impacted gross profit
percentage by approximately 70 basis points.
OPERATING EXPENSES
SG&A expense increased $6.1 million, or 14%, in 1997 to $50.4 million
compared to $44.3 million in 1996, primarily due to increased marketing and
selling expenditures in support of the higher sales volumes for CATV Products
and LAN Products and the development of a sales force to support the sale of
CellReach products. The Company increased its sales force, field support and
marketing activities to take advantage of increased growth opportunities in
international cable and network markets. General and
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administrative expenditures related to the Distribution also contributed
slightly to the increase in overall SG&A costs. As a percentage of net sales,
SG&A expense was 8.4% in 1997 and 7.7% in 1996.
Research and development expense increased $0.9 million, or 17%, to $6.2
million in 1997 compared to $5.3 million in 1996. The increase resulted from the
Company's ongoing programs to develop new products and market opportunities for
its products and core capabilities and from programs to develop new
manufacturing technologies designed to achieve cost reductions.
OTHER INCOME (EXPENSE), NET
Other expense, net was $4.2 million in 1997 and other income, net was $1.8
million in 1996. These amounts primarily reflect the Company's share of income
or loss generated by its 49% investment in an Australian joint venture (acquired
in August 1995).
Due to certain governmental regulation changes and other events affecting
the market for cable products in Australia during 1997, manufacturing operations
of the joint venture were suspended in August 1997 and formally discontinued by
decision of the joint venture's directors in December 1997. During the fourth
quarter of 1997, the Company recorded pre-tax charges of $3.9 million as other
expense to reduce its total current financial investment in the joint venture to
expected net realizable value. Net of tax benefits of $0.8 million, these
charges reduced 1997 net income by $3.1 million ($0.06 per share).
NET INTEREST EXPENSE AND INCOME TAXES
Net interest expense prior to the Distribution represents an allocation of
interest expense from the Distribution Company and was allocated based upon the
Company's net assets as a percentage of the total net assets of the Distribution
Company. Net interest expense subsequent to the Distribution represents the
actual interest expense on outstanding borrowings under the Company's credit
facilities offset by interest income earned primarily on money market cash
deposits. Net interest expense was $13.5 million in 1997 compared to $10.0
million in 1996.
On a pro forma basis, net interest expense was $18.1 million in 1997
compared to $18.4 million in 1996. Pro forma net interest expense reflects the
historical interest expense of the Company adjusted to reflect a net debt level
of $275 million at the beginning of each period presented prior to the
Distribution at an assumed weighted average borrowing rate of 6.35% for each
period plus the amortization of debt issuance costs associated with the new
borrowings. The reduction in pro forma net interest expense is attributable to
the reduction in borrowings under the Company's Credit Agreement since the
Distribution Date.
The provision for income taxes has been determined as if the Company had
filed separate tax returns under its existing structure for the periods
presented prior to the Distribution. The Company's effective tax rate was 38% in
both 1996 and in 1997 up to the Distribution. The effective tax rate for the
year ended December 31, 1997 was 39.1%, with the increase in the effective rate
attributable to the fourth quarter charges related to the Australian joint
venture which will be partially nondeductible for tax purposes. As an
independent taxpayer subsequent to the Distribution, the Company's effective tax
rates in future years could vary from historical effective tax rates depending
on the Company's future tax elections.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations was $59 million for the nine months ended
September 30, 1998 compared to $51 million for the comparable prior year period,
an increase of $8 million or 14%. This increase primarily results from lower
levels of working capital at September 30, 1998 as compared to December 31,
1997.
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Working capital was $98 million at September 30, 1998 compared to $113
million at December 31, 1997, a decrease of $15 million, or 14%. The decrease in
working capital is due to lower inventory levels and an increase in accounts
payable and accrued liabilities offset partially by an increase in accounts
receivable. Based on current levels of orders and backlog, management of the
Company believes that working capital levels are appropriate to support future
operations.
During the nine months ended September 30, 1998 the Company invested $16
million in equipment and facilities compared to $25 million for the comparable
period in 1997. The capital spending in each period was primarily attributable
to capacity expansion, particularly for LAN Products, equipment upgrades and
vertical integration projects to meet increased current and anticipated future
business demands. During the nine months ended September 30, 1998 the Company
received initial cash proceeds of $10 million related to the sale of its
High-Temperature Aerospace and Industrial Cable Products Business.
The Company's principal sources of liquidity both on a short-term and
long-term basis are cash flows provided by operations and funds available under
long-term credit facilities. During the nine months ended September 30, 1998 the
Company repaid $52 million under its revolving credit facility. Based upon its
analysis of the Company's consolidated financial position and the expected
results of its operations in the future, management believes that the Company
will have sufficient cash flows from future operations and the financial
flexibility to attract both short-term and long-term capital on acceptable terms
as may be needed to fund operations, capital expenditures and other growth
objectives. There can be no assurance, however, that future industry-specific
developments, general economic trends or other situations will not adversely
affect the Company's operations or its ability to meet its cash requirements.
In the normal course of business, CommScope uses various financial
instruments, including derivative financial instruments, for purposes other than
trading. Non-derivative financial instruments include letters of credit and
commitments to extend credit (accounts receivable). The Company controls its
exposure to credit risk associated with its financial instruments through credit
approvals, credit limits and monitoring procedures. At September 30, 1998, in
management's opinion, CommScope did not have any significant exposure to any
individual customer or counter-party, nor did CommScope have any significant
concentration of credit risk related to any financial instrument.
Derivative financial instruments utilized by CommScope, which are not
entered into for speculative purposes, include commodity pricing contracts,
foreign currency exchange contracts, and contracts hedging exposure to interest
rates. At September 30, 1998, the Company evaluated its commodity pricing and
foreign currency exchange exposures and concluded that it was not currently
beneficial to use financial instruments to hedge its current positions with
respect to those exposures. However, as of October 26, 1998 the Company entered
into an aluminum price swap agreement to effectively convert a small percentage
of third quarter 1999 aluminum purchases to a fixed price.
As of October 20, 1998, the Company had entered into interest rate swap
agreements to effectively convert an aggregate amount of $100 million of
outstanding variable-rate borrowings to a fixed-rate basis. Contracts for
notional amounts of $50 million each expire in April 1999 and October 2001,
respectively. Under the agreements, interest settlement payments will be made
quarterly based upon the spread between the three month LIBOR, as adjusted
quarterly, and fixed rates of 5.79% and 4.81%, respectively. Net payments or
receipts resulting from the swap agreements are recorded as adjustments to
interest expense in each quarter.
At September 30, 1998, the weighted average effective interest rate on
outstanding borrowings and associated credit fees under the Credit Agreement and
the Alabama State Industrial Development Authority Notes was 6.7%.
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NEWLY ISSUED ACCOUNTING STANDARDS
In June 1997, Statement of Financial Accounting Standard ("SFAS") No. 130,
"Reporting Comprehensive Income," was issued. SFAS No. 130 will require
disclosure of comprehensive income (which is defined as "the change in equity
during a period excluding changes resulting from investments by shareholders and
distributions to shareholders") and its components. SFAS No. 130 is effective
for fiscal years beginning after December 15, 1997, with reclassification of
comparative years required. The Company plans to provide appropriate financial
statement disclosures under SFAS No. 130 in its Form 10-K for the fiscal year
ended December 31, 1998. Had the new standard been applied for the three months
and nine months ended September 30, 1998, comprehensive income would not differ
from net income for all periods presented in the condensed consolidated
statements of income.
Also in June 1997, SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," was issued. SFAS No. 131 is effective for
fiscal years beginning after December 15, 1997. The Company plans to provide
appropriate financial statement disclosures under SFAS No. 131 in its Form 10-K
for the fiscal year ended December 31, 1998. SFAS No. 131 redefines how
operating segments are determined and requires disclosure of certain financial
and descriptive information about a company's operating segments. Management is
currently evaluating the effect of SFAS No. 131 on the Company's current
disclosures.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. The new standard requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
SFAS No. 133 is effective for the Company beginning with the year ending
December 31, 2000. Management is currently evaluating the effects of SFAS No.
133 on the Company's financial statements and current disclosures.
YEAR 2000
CommScope is currently addressing an issue common to most
companies--ensuring that its existing information technology ("IT") systems and
applications and other non-IT control devices are suitable for continued use
into and beyond the Year 2000. Many IT systems and applications and non-IT
control devices utilized by the Company use only two digits to identify a year
in the date field--and accordingly may recognize a date using "00" as the Year
1900 or some other date rather than the Year 2000. Failure to make appropriate
modifications or upgrades to critical IT systems and applications and non-IT
control devices could result in a system failure or miscalculations causing
significant disruptions to operations. Third parties with whom the Company
interacts also employ various computer systems with similar Year 2000 compliance
issues. Failure by third parties to adequately address their own Year 2000
compliance issues exposes the Company to business risks such as a reduced demand
for the Company's products or the lack of availability of critical raw materials
or services required for manufacturing the Company's products. CommScope's
products themselves--high performance, high bandwidth cables for the
telecommunications industry--are not affected by the Year 2000 problem. The Year
2000 compliance discussion below is based on information currently available to
the Company. Forward-looking statements concerning the Year 2000 issue should be
read in conjunction with the information set forth under the heading "Risk
Factors."
To address the Year 2000 compliance issue, the Company has appointed a
corporate-wide Year 2000 compliance project team which is responsible for
coordinating the identification, evaluation, and implementation of changes to IT
systems and applications and non-IT control devices necessary to achieve a Year
2000 date conversion. The Year 2000 compliance project team is also
investigating significant third parties to determine the effectiveness of their
efforts toward achieving Year 2000 compliance.
The Year 2000 compliance project team has designed a systematic methodology
toward addressing the Year 2000 compliance issue, which includes: (1)
identification and evaluation of IT systems and
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applications and non-IT control devices with Year 2000 compliance issues; (2)
implementation of changes to IT systems and applications and non-IT control
devices to achieve Year 2000 compliance; (3) testing of the corrective actions
taken to ensure Year 2000 compliance for the identified systems; and (4)
development of contingency plans in the event of the failure of third parties to
become Year 2000 compliant.
A database of internal IT systems and applications and non-IT control
devices which rely on date-sensitive computer logic has been developed to
provide a starting framework from which to address the significant issues
related to Year 2000 compliance. Each of these systems, applications and devices
is being classified as a priority A, B, or C issue. Both A and B priority items
are deemed as critical systems which must be modified or upgraded into Year 2000
compliance. Priority C items are non-critical IT and non-IT systems which will
be upgraded into Year 2000 compliance upon completion of the modification of A
and B priority items.
The Year 2000 compliance project team has also accumulated a database of
significant third parties. Each of these third parties is being contacted and
asked to provide responses which will allow the Company to assess their ability
to achieve Year 2000 compliance. The Company will also evaluate third party
compliance through internal testing, where feasible, to verify that the
modifications are effective.
Modifications to most written programs for IT systems and applications
(which initially were developed in-house) have been in progress by Company
personnel since early 1997. Substantially all IT systems and applications
acquired from external sources are being upgraded to Year 2000 compliant
versions (if they are not already) through system upgrades or through the
purchase of new systems. It is expected that the Company will achieve 70% Year
2000 compliance for critical internal IT systems and applications by the end of
1998, with 100% Year 2000 compliance by the third quarter of 1999. Virtually all
critical non-IT systems (including a variety of equipment control devices) are
currently being modified for Year 2000 compliance through upgrades to Year 2000
compliant devices.
The Company plans to test the effectiveness of corrective actions taken to
achieve Year 2000 compliance during 1999, but to date it has not performed
compliance testing on systems or applications for which Year 2000 modifications
have been made. As compliance testing is completed and a full assessment of the
risks from potential Year 2000 systems failures can be made, the Company plans
to develop Year 2000 contingency plans. These contingency plans will factor in
business and operating decisions related to the potential failure of significant
third parties to become Year 2000 compliant.
The Company currently does not believe that the costs of addressing Year
2000 compliance issues will be material to CommScope's results of operations,
financial condition or cash flows. The Company estimates that, through September
30, 1998, it has spent $250,000 to remediate Year 2000 compliance issues for IT
systems and applications and $100,000 for non-IT devices. Future expenditures to
remediate Year 2000 compliance issues are currently estimated at $500,000 for IT
systems and applications and $500,000 for non-IT devices. All anticipated
expenditures are expected to be financed through cash flows from future
operations.
The Company believes that the corrective actions implemented under the
direction of the Year 2000 compliance project team will be completed on a timely
basis in a cost-effective manner to ensure that the Company's internal systems
will be operational and suitable for continued use in the Year 2000 and beyond.
In addition, the Company believes that significant third parties will become
Year 2000 compliant or that adequate contingency plans will be developed and
implemented to ensure minimal business interruption to the Company's operations.
However, there can be no guarantee that problems associated with system failure
or deficient system operation due to Year 2000 compliance issues will not result
in an interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition.
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SUBSEQUENT EVENTS
In October 1998, the Company signed a definitive agreement to acquire
Alcatel's coaxial cable business in Seneffe, Belgium. The purchase price will be
finalized at the time of the closing, which is expected to occur in the fourth
quarter of 1998, and is expected to be in the $20 to $25 million range.
CommScope will also supply Alcatel with its future worldwide requirements of
CATV coaxial cable for a period of time to be determined. The acquisition gives
CommScope access to established European distribution channels and complementary
coaxial cable technologies.
EFFECTS OF INFLATION
The Company continually attempts to minimize any effect of inflation on
earnings by controlling its operating costs and selling prices. During the past
few years, the rate of inflation has been low and has not had a material impact
on the Company's results of operations.
The principal raw materials purchased by CommScope (fabricated aluminum,
copper and plastics) are subject to changes in market prices as these materials
are linked to the commodity markets. To the extent that CommScope is unable to
pass on cost increases to customers, the cost increases could have a significant
impact on the results of operations of CommScope. In 1997 commodity prices
related to raw materials made of aluminum, copper and plastics increased at
rates higher than general inflation. During 1998 commodity prices related to
these raw materials have moderated. Any future increases in commodity prices
related to raw materials used by the Company could have a negative effect on
future operating results.
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BUSINESS
The Company is a leading worldwide designer, manufacturer and marketer of a
broad line of coaxial cables and other high-performance electronic and fiber
optic cable products primarily for communications applications including cable
television, telephony and Internet access. The Company is the largest
manufacturer and supplier of coaxial cable for HFC cable systems in the United
States, with over 50% market share in 1997 (by sales volume), and is a leading
supplier of coaxial cable for video distribution applications such as satellite
television and security surveillance. The Company is also a leading provider of
high-performance premise wiring for LAN and the Company's management believes it
has developed a next generation wireless antenna cable. The Company sells its
products to approximately 2,500 customers in over 85 countries. The Company
intends to expand its global presence through its planned acquisition of
Europe's largest manufacturer of CATV coaxial cable.
For the year ended December 31, 1997, approximately 82% of the Company's
revenues were to the cable television and video distribution markets, 13% were
for LAN applications and 5% were for other high-performance cable markets
including cable for wireless applications, industrial and other wiring
applications. The Company's revenues and net income for the year ended December
31, 1997 were $599 million and $37 million, respectively. Approximately $200
million (33%) of the Company's revenues were from international customers.
The Company's management believes that the Company is the world's most
technologically advanced, low-cost provider of coaxial cable. As a result of the
Company's leading product offerings, cost-efficient manufacturing processes and
economies of scale resulting from its leading market share, management believes
that the Company is well-positioned to capitalize on the opportunity provided by
the convergence of video, voice and data and the resulting demand for bandwidth
and high speed access. The Company's management also believes that the following
industry trends will drive demand for its products: (i) the endorsement of HFC
cable systems by major cable, telephone and technology companies; (ii)
increasing use of the Internet; (ii) increasing demand for high speed LAN
access; and (iv) the continuing rapid deployment of wireless communications
systems worldwide.
The Company's management believes that, in 1997, the worldwide CATV coaxial
cable market was approximately $900 million, the domestic LAN cable market was
approximately $1.3 billion, and the worldwide wireless coaxial cable and
accessory market was approximately $1.0 billion. The Company intends to
strengthen its leading market share position in coaxial cable and to continue
its product leadership position in the LAN cable market, where it has been
gaining market share, and leverage its coaxial cable technology to further
penetrate the wireless coaxial cable market.
GROWTH STRATEGY
The Company has adopted a growth strategy to expand, strengthen and leverage
its current market position as the leading worldwide supplier of coaxial cable
for broadband communications. The principal elements of the Company's growth
strategy are the following:
- CAPITALIZE ON HFC PARADIGM SHIFT. To date, a vast majority of video
networks worldwide, such as cable service provider networks, have adopted
the HFC network architecture for video service delivery. Recent events
involving major telecommunications and cable service providers create the
potential to expand the role of HFC networks from a video-centric focus to
a key platform for delivery of a variety of broadband services. These
events include AT&T Corporation's pending acquisition of TCI, Microsoft
Corporation's $1 billion investment in Comcast, Paul Allen's acquisitions
of Marcus Cable and Charter, and the recent success of high-speed cable
data services such as @Home Corporation and MediaOne. The Company believes
that the HFC network architecture provides the most cost-effective
bandwidth into the home, enabling both cable and telecommunications
service providers to offer new products and services such as high speed
Internet access, video on
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demand, IP telephony and HDTV. The Company is well-positioned to benefit
from the build out, upgrade and maintenance of such networks in both
domestic and international markets.
- DEVELOP PROPRIETARY PRODUCTS AND EXPAND MARKET OPPORTUNITIES. The Company
maintains an active program to identify new market opportunities and
develop and commercialize products that leverage its core technology and
manufacturing competencies. This strategy has led to the development of
new products and entry into new markets such as satellite cables, LAN
cables, specialized coaxial based telecommunication cables, broadcast
audio and video cables and coaxial cables in conduit. For example, the
Company leveraged its coaxial cable technology to enter the LAN cable
market and developed UltraMedia, a high-end LAN cable product targeted for
high-speed LAN applications. The Company has also recently developed a
thin-wall foam FEP design for twisted pair cables on which a patent is
pending. In addition, the Company leveraged its expertise in aluminum
coaxial cable technology to develop CellReach, a superior copper coaxial
cable solution for the wireless antenna market. CellReach is a
technologically superior product with a lower total lifetime cost of
ownership than the current industry standard and has been installed to
date in over 1,000 cellular and PCS sites with leading service providers
such as Nextel Communications, Inc., Sprint Corporation and BellSouth
Corporation. The Company's internal product development strategy is
augmented by acquisitions of cable or related component businesses that
enhance the Company's existing product portfolio or that offer synergistic
cable-related growth opportunities.
- CONTINUOUSLY IMPROVE OPERATING EFFICIENCIES. The Company has invested
approximately $90 million in state-of-the-art manufacturing facilities and
new technologies during the past three fiscal years. These investments
have increased capacity and operating efficiencies, improved management
control and provided more consistent product quality. As a result, the
Company believes that it has become one of the few cable manufacturers
capable of satisfying volume production, time-to-market, time-to-volume
and technology requirements of customers in the communications industry.
The Company believes that its breadth and scale permit it to
cost-effectively invest in improving its operating efficiency through
investments in engineering and cost-management programs and to capture
value in the supply chain through vertical integration projects.
- LEVERAGE GLOBAL PLATFORM. In the past few years, the Company has become a
major supplier of coaxial cable to international markets, principally
Europe, Latin America and the Pacific Rim, for the cable television and
broadband services industries. In 1997, the Company had approximately 375
international customers in over 85 countries representing approximately
$200 million (33%) of the Company's 1997 revenue. To support its
international sales efforts, the Company has sales representatives based
in Europe, Latin America and the Pacific Rim. In addition, the Company is
able to leverage its domestic cable customer base with respect to those
customers who are also equity investors in international cable service
providers. Although there is current uncertainty in international markets,
the Company believes that it is well-positioned to benefit over the
long-term from future international growth opportunities. To further
improve its ability to service international customers as well as reduce
shipping and importation costs, the Company intends to establish or
acquire international distribution and/or manufacturing facilities. For
example, the Company recently announced its planned acquisition of
Alcatel's CATV coaxial cable business in Seneffe, Belgium. This
acquisition gives CommScope access to established European distribution
channels and complementary coaxial cable technologies. See "--Business
Units--International Markets."
- PROVIDE SUPERIOR CUSTOMER SERVICE. The Company believes that its coaxial
cable manufacturing capacity is greater than that of any other
manufacturer, which enables the Company to provide its customers a unique
high-volume service capability. As a result of its 24-hour, seven days per
week continuous manufacturing operations, the Company is able to offer
quick order turnaround services. In addition, management believes that the
ability to offer rapid delivery services, materials
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management and logistics services to customers through its private truck
fleet is an important competitive advantage.
BUSINESS UNITS
The Company manufactures and sells cable for three broad market segments:
CATV and other video applications, LAN applications and other cable products.
DOMESTIC CABLE TV MARKET. The Company designs, manufactures and markets
primarily coaxial cable, most of which is used in the cable television industry.
The Company manufactures two primary types of coaxial cable: semi-flexible,
which has an aluminum or copper outer tubular shield or outer conductor; and
flexible, which is typically smaller in diameter than semi-flexible coaxial
cable and has a more flexible outer conductor typically made of metallic tapes
and braided fine wires. Semi-flexible coaxial cables are used in the trunk and
feeder distribution portion of cable television systems, and flexible coaxial
cables (also known as drop cables) are used for connecting the feeder cable to a
residence or business or for some other communications applications. The Company
also manufactures fiber optic cable primarily for the cable television industry.
Cable television service traditionally has been provided primarily by cable
television system operators ("MSOs") that have been awarded franchises from the
municipalities they serve. In response to increasing competitive pressures, MSOs
have been expanding the variety of their service offerings not only for video,
but for Internet access and telephony, which generally requires increasing
amounts of cable and system bandwidth. MSOs have generally adopted, and the
Company's management believes that for the foreseeable future will continue to
adopt, HFC cable system designs when seeking to increase system bandwidth. Such
systems combine the advantages of fiber optic cable in transmitting clear
signals over a long distance without amplification, and the advantages of
coaxial cable in ease of installation, low cost and compatibility with the
receiving components of the customer's communications devices. The Company's
management believes that: (1) MSOs are likely to increase their use of fiber
optic cable for the trunk and feeder portions of their cable systems; (2) there
will be an ongoing need for high-capacity coaxial cable for the local
distribution and street-to-the-home portions of the cable system; and (3)
coaxial cable remains the most cost effective means for the transmission of
broadband signals to the home or business over shorter distances in cable
networks. For local distribution purposes, coaxial cable has the necessary
signal carrying capacity or bandwidth to handle upstream and downstream signal
transmission.
The construction, expansion and upgrade of cable systems require significant
capital investment by cable operators. MSOs have been significant borrowers from
the credit and capital markets, and, accordingly, capital spending within the
domestic cable television industry has historically been cyclical, depending to
a significant degree on the availability of credit and capital. The cable
television industry has also been subject to varying degrees of both national
and local government regulation, most recently, the Telecom Act and the 1992
Cable Act, and their implementing regulations adopted in 1993 and 1994. Regional
Bell Operating Companies ("RBOCs") and other telephone service providers have
generally been subject to regulatory restrictions which prevented them from
offering cable television service within their franchise telephone areas.
However, the Telecom Act removes or phases out many of the regulatory and sale
restrictions affecting MSOs and telephone operating companies in the offering of
video and telephone services. The Company's management believes that the Telecom
Act will encourage competition among MSOs, telephone operating companies and
other communications companies in offering video, telephone and data services
such as Internet access to consumers, and that providers of such services will
upgrade their present communications delivery systems. The Company has provided
coaxial cables to most major U.S. telephone operating companies, several of
which are installing broadband networks for the delivery of video, telephone and
other services to some portion of their telephone service areas. The broadband
networks proposed by some of the telephone companies utilize HFC technologies
similar to those employed by many cable television operators. See "Risk
Factors--Dependence of the Company on the Cable Television Industry and Cable
Television Capital Spending."
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INTERNATIONAL MARKETS. Cable system designs utilizing HFC technology are
increasingly being employed in international markets with low cable television
penetration. Based upon industry trade publications and reports from
telecommunications industry analysts, the Company's management estimates that
approximately 36% of the television households in Europe subscribe to some form
of multichannel television service as compared to a subscription rate of
approximately 70% in the United States. Based upon such sources, the Company's
management estimates that subscription rates in the Asia/Pacific Rim and Latin
American/Caribbean markets are even lower at approximately 17% and 12%,
respectively. In terms of television households, it is estimated that there were
approximately 248 million television households in Europe, approximately 377
million in Asia/Pacific Rim and approximately 93 million in Latin America and
the Caribbean. This compares to approximately 96 million television households
in the United States.
International sales of the Company's coaxial cables have increased steadily,
from approximately $66 million in 1992 to approximately $200 million in 1997. In
1997, the Company had sales in approximately 85 countries. Penetration of the
international marketplace has been accomplished through a network of
distributors and agents located in major countries where the Company does
business. The Company also employs 13 international direct territory managers to
supplement and manage its network of distributors and agents. In addition to new
customers developed by the Company's network of distributors and sales
representatives, many large U.S. cable television operators, with whom the
Company has had long established business relationships, are active investors in
cable television systems outside the United States.
While the Company's management expects long-term growth opportunities in
international markets, for the first nine months of 1998, international sales
decreased by approximately 35% as compared to the corresponding period in 1997,
due to monetary crises in key overseas markets, including the Pacific Rim and
South America. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations." However, in the long run, the Company's management
believes that continued growth in international markets, including the
developing markets in Asia, the Middle East and Latin America, and the expected
privatization of the telecommunications structure in many European countries,
represent significant future opportunities. While growth in international
revenues could serve to mitigate the effects of future capital spending cycles
by domestic cable operators, such growth may be subject to political and
economic uncertainties. See "Risk Factors--International Operations."
The Company has recently announced its planned acquisition of Alcatel's CATV
coaxial cable business in Seneffe, Belgium. This acquisition gives CommScope
access to established European distribution channels and complementary coaxial
cable technologies. CommScope will also supply Alcatel with its future worldwide
requirements of CATV coaxial cable for a period of time to be determined. The
Company believes that this acquisition provides access to key strategic markets
and creates the opportunity for growth in sales, cash flow and stockholder value
over the long term. While the Company expects the transaction to be neutral to
slightly negative to 1999 earnings, it expects it to be accretive thereafter.
The purchase price will be finalized at the time of the closing, which is
expected to be completed by the end of 1998, and is expected to be in the $20 to
$25 million range.
In 1995 the Company, along with Pacific Dunlop Ltd., began a joint venture
located near Melbourne, Australia to manufacture certain coaxial cables for the
Australian market. Due to accelerated construction activity, the majority of
cables supplied by the joint venture were manufactured by the Company's
facilities in the United States and exported into Australia. Export sales to
Australia totaled $20.2 million, $24.7 million and $10.3 million in 1995, 1996
and 1997, respectively. However, after a rapid two-year build out of major
Australian cities, the market transitioned from a construction market to
primarily a maintenance market. Further, due to financial and regulatory issues,
construction activity for the two major cable TV service providers was sharply
reduced in the second half of 1997. Because of these issues and the weakening
Southeast Asian economic outlook, the joint venture permanently ceased
manufacturing activities in December 1997. The Company took a $3.9 million
pre-tax charge in connection with the manufacturing shutdown in 1997 and is in
the process of liquidating the joint venture operation.
28
<PAGE>
VIDEO AND BROADCAST APPLICATIONS (NON-CABLE TELEVISION). Many specialized
markets or applications are served by multiple cable media (i.e., coaxial,
twisted pair (shielded or unshielded), fiber optic or combinations of each). The
Company has become a leading producer of composite cables made of flexible
coaxial and twisted copper pairs for full service communications providers
worldwide. In the satellite direct-to-home ("DTH") cable market, where
specialized composite coaxial and copper cables transmit satellite-delivered
video signals and antenna positioning/control signals, the Company has developed
a leading market position. DTH cables are specified by leading original
equipment manufacturers ("OEMs"), distributors and service providers. The
Company markets an array of premium metallic and optical cable products directed
at the broadcasting and video production studio market. Because of the Company's
position in other video transport markets and access to distribution channels
within the market, these products are viewed by the Company's management as a
growth opportunity, although there can be no assurance that the Company will be
able to penetrate this market successfully.
LAN MARKET. The proliferation of personal computers, and more broadly the
practice of distributed computing, has created a need for products which enable
users to share files, applications and peripheral equipment such as printers and
data storage devices. LANs, typically consisting of at least one dedicated
computer (a "server"), peripheral devices, network software and interconnecting
cables, were developed in response to this demand. The Company manufactures a
variety of twisted pair, coaxial and fiber optic cables to transmit data for LAN
applications. The most widely used cable design for this application consists of
four high-performance twisted pairs that are capable of transmitting data at
rates in excess of 155 mbps. The Company focuses its products and marketing on
cables with enhanced electrical and physical performance such as its recently
introduced UltraMedia unshielded twisted pair ("UTP"). The Company's management
believes that UltraMedia cable is among the highest performing UTP cables in the
industry. Copper and fiber optic composite cables are frequently combined in a
single cable to reduce installation costs and support multimedia applications.
CELLULAR COMMUNICATION APPLICATIONS. Management of the Company believes
that the rapid deployment of cellular or "wireless" communication systems
throughout the United States and the rest of the world presents a growth
opportunity for the Company. Semi-flexible coaxial cables are used to connect
the antennae located at the top of cellular antenna towers to the radios and
power sources located adjacent to or near the antenna site. In 1996 and 1997,
the Company developed CellReach products, a line of copper shielded
semi-flexible coaxial cables and related connectors and accessories to address
this market. The Company has significant manufacturing capacity in place for
this product line and is currently developing additional products and marketing
programs for CellReach for both the U.S. and certain international markets.
Management of the Company began receiving orders and making shipments of
CellReach in the first quarter of 1997. CellReach has been installed to date in
over 1,000 cellular and PCS sites with leading service providers such as Nextel
Communications, Inc., Sprint Corporation and BellSouth Corporation. There are,
however, larger, well established companies with significant financial resources
and brand recognition in the cellular market which have established marketing
channels for coaxial cables and accessories.
OTHER MARKETS. The Company has also developed a strategy for addressing
additional cable consuming markets. By combining narrowly focused product and
market management with its cable manufacturing and operational skills, the
Company is entering new markets for telephone central office, industrial control
and data, and other high-performance cable applications.
MANUFACTURING
The Company employs advanced cable manufacturing processes, the most
important of which are: thermoplastic extrusion for insulating wires and cables,
high-speed welding and swaging of metallic shields or outer conductors,
braiding, cabling and automated testing. Many of these processes are performed
on equipment that has been modified for the Company's purposes or specifically
built to the Company's
29
<PAGE>
specifications, often internally in the Company's own machine shop facilities.
The Company fabricates very few of the raw material components used in making
most of its cables, such as wire, tapes, tubes and similar materials, but the
Company's management believes such fabrication, to the extent economically
feasible, could be done by the Company instead of being outsourced. For example,
the Company recently announced plans to acquire the clad wire fabrication
equipment and technology of Texas Instruments Incorporated. This acquisition
allows the Company to further vertically integrate its processes, providing an
opportunity to significantly reduce cost. The manufacturing processes of the
three principal types of cable manufactured by the Company -- coaxial cables,
twisted copper pair cables and fiber optic cables -- are further described
below.
COAXIAL CABLES. The Company employs a number of advanced plastic and metal
forming processes in the manufacture of coaxial cable. Three fundamental process
sequences are common to almost all coaxial cables.
First, a plastic insulation material, called the dielectric, is melt
extruded around a metallic wire or center conductor. Current, state-of-the-art
dielectrics consist of foamed plastics to enhance the electrical properties of
the cable. Precise control of the foaming process is critical to achieve the
mechanical and electrical performance required for broadband services and
cellular communications applications. The Company's management believes that
plastic foam extrusion, using proprietary materials, equipment and control
systems, is a core competency of the Company.
The second step involves sheathing the dielectric material with a metallic
shield or outer conductor. Three basic shield designs and processes are used.
For semi-flexible coaxial cables, solid aluminum or copper shields are applied
over the dielectric by either pulling the dielectric insulated wire into a long,
hollow metallic tube or welding the metallic tube directly over the dielectric.
Welding allows the use of thinner metal, resulting in more flexible products.
The Company uses a proprietary welding process that achieves significantly
higher process speeds than those achievable using other cable welding methods.
The same welding process has led to extremely efficient manufacturing processes
of copper shielded products for cellular communications. For both hollow and
welded tubes, the cable is passed through tools that form the metallic shield
tightly around the dielectric.
Flexible coaxial cables, which are usually smaller in diameter than
semi-flexible coaxial cables, generally are made with the third shield design.
Flexible outer shield designs typically involve laminated metallic foils and
braided fine wires which are used to enhance flexibility which is more desirable
for indoor wiring or for connecting subscribers in drop cable applications.
The third and usually final process sequence is the melt extrusion of
thermoplastic jackets to protect the coaxial cable. A large number of variations
are produced during this sequence including: incorporating an integral strength
member; customer specified extruded stripes and printing for identification;
abrasion and crush resistant jackets; and adding moisture blocking fillers.
TWISTED COPPER PAIRS. Single copper wires are insulated using high-speed
thermoplastic extrusion techniques. Two insulated copper singles are then
twinned (twisted into an electrically balanced pair unit) in a separate process
and then bunched or cabled (the grouping of two or more pair units into larger
units for further processing) in one or more further processes depending on the
number of pairs desired within the completed cable. The cabled units are then
shielded and jacketed or simply jacketed without applying a metallic shield in
the jacketing process (the extrusion of a plastic jacket over a shielded or
unshielded cable core). The majority of the sales of the Company's twisted
copper pairs are derived from plenum rated unshielded twisted pair cables for
LAN applications. Plenum cables are cables rated under the National Electrical
Code as safe for installation within the air plenum areas of office buildings
due to their flame retarding and low smoke generating characteristics when
heated. Plenum cables are made from more costly thermoplastic insulating
materials, such as FEP. These materials have significantly higher extrusion
temperature profiles that require more costly extrusion equipment than
non-plenum rated cables. The Company believes that the processing of
plenum-rated materials is one of its core competencies. In
30
<PAGE>
addition, the Company recently announced an engineering breakthrough for the
extrusion of FEP. The patent pending thin-wall foam FEP process improves signal
velocity and uses significantly less raw material in a smaller diameter cable in
typical applications. The Company believes that this process enhances its
ability to grow and serve customers in all LAN segments. The Company intends to
incorporate the new foaming technology in its products over the next few months
and expects to reach full production capacity during 1999.
FIBER OPTIC CABLES. To manufacture fiber optic cables, the Company
purchases bulk uncabled optical fiber singles and colors and buffers them before
cabling them into unjacketed core units. Protective outer jackets and,
sometimes, shields and jackets are then applied in a final process before
testing. Manufacturing and test equipment for fiber optic cables are distinct
from that used to manufacture coaxial and copper twisted pair cables. The
majority of fiber optic cables produced by the Company are sold to the cable
television and LAN industry. Some of these fiber-optic cables are produced under
licenses acquired from other fiber and fiber optic cable manufacturers.
COMPOSITE CABLES. Cables that are combinations of some or all of coaxial
cables, copper singles or twisted copper pairs and fiber optic cables within a
single cable are also produced by the Company for a variety of applications. The
most significant of the composite cables manufactured by the Company are
combination coaxial and copper twisted pairs within a common outer jacket which
are being used by some telephone companies and cable operators to provide both
cable television services and telephone services to the same households over HFC
networks. Nearly all markets currently addressed by the Company have
applications for composite cables which the Company is capable of manufacturing.
RESEARCH AND DEVELOPMENT
The Company's research, development and engineering expenditures for the
creation and application of new and improved products and processes were $6
million, $5 million and $4 million for the years ended December 31, 1997, 1996
and 1995, respectively. The Company focuses its research and development efforts
primarily on those product areas that it believes have the potential for broad
market applications and significant sales within a one-to-three year period. The
Company's management anticipates that the level of spending on product
development activities will accelerate in future years. Total research and
development expenditures are expected to be approximately $7 million in 1998.
The widespread deployment of broadband services and HFC systems is expected to
provide opportunities for the Company to enhance its coaxial cable product lines
and to improve its manufacturing processes. Additionally, the Company's
management expects that its participation in the LAN, cellular communications
and other new markets now identified will require higher rates of product
development spending in relation to sales generated than has been the case in
recent years.
SALES AND DISTRIBUTION
The Company markets its products worldwide through a combination of more
than 80 direct sales, territory managers and manufacturers' representative
personnel. The Company supports its sales organization with regional service
centers in: North Carolina; California; Alabama; Birmingham, England; and
Melbourne, Australia. In addition, the Company utilizes local inventories, sales
literature, internal sales service support, design engineering services and a
group of product engineers who travel with sales personnel and territory
managers and assist in product application issues, and conduct technical
seminars at customer locations to support its sales organization. The Company
intends to expand its global presence through its planned acquisition of
Europe's largest manufacturer of CATV coaxial cable. See "--Business
Units--International Markets."
A key aspect of the Company's customer support and distribution chain is the
use of its private truck fleet. Management believes that the ability to offer
rapid delivery services, materials management and logistics services to
customers through its private truck fleet is an important competitive advantage.
31
<PAGE>
The Company's products are sold and used in a wide variety of applications.
The Company's products primarily are sold both directly to cable system
operators and telecommunications companies, OEMs and through distributors. There
has been a trend on the part of OEM customers to consolidate their lists of
qualified suppliers to companies that have a global presence, can meet quality
and delivery standards, have a broad product portfolio and design capability,
and have competitive prices. The Company has concentrated its efforts on service
and productivity improvements including advanced computer aided design and
manufacturing systems, statistical process controls and just-in-time inventory
programs to increase product quality and shorten product delivery schedules. The
Company's strategy is to provide a broad selection of products in the areas in
which it competes. The Company has achieved a preferred supplier designation
from many of its cable television, telephone and OEM customers.
Cable television services in the United States are provided primarily by
MSOs. It is estimated that the six largest MSOs account for more than 60% of the
cable television subscribers in the United States. The major MSOs include such
companies as TCI, Time Warner Cable, MediaOne of Delaware, Inc., Comcast and
Cablevision Systems Corporation. Many of the major MSOs are customers of the
Company, including those listed above. During 1997, sales to no single customer
accounted for 10% or more of the Company's net sales and TCI was the only
customer which accounted for 10% or more of the net sales of the Company during
1996 and 1995. Certain RBOCs and other telecommunications companies who have
recently begun providing cable television services have become significant
customers of the Company.
PATENTS
The Company pursues an active policy of seeking intellectual property
protection, namely patents, for new products and designs. The Company holds 56
patents worldwide and has 84 pending applications. Although the Company
considers its patents to be valuable assets, no single patent is considered to
be material to its operations as a whole. The Company intends to rely on its
proprietary knowledge and continuing technological innovation to develop and
maintain its competitive position.
BACKLOG
At December 31, 1997, 1996 and 1995, the Company had an order backlog of
approximately $55 million, $36 million and $33 million, respectively. Orders
typically fluctuate from quarter to quarter based on customer demand and general
business conditions. Backlog includes only orders for products scheduled to be
shipped within six months. Unfilled orders may be canceled prior to shipment of
goods; however, such cancellations historically have not been material. However,
significant elements of the Company's business, such as sales to the cable
television industry, distributors, the computer industry and other commercial
customers, generally have short lead times. Therefore, current order backlog may
not be indicative of future demand.
COMPETITION
The Company encounters competition in substantially all areas of its
business. The Company competes primarily on the basis of product specifications,
quality, price, engineering, customer service and delivery time. Competitors
include large, diversified companies, some of which have substantially greater
assets and financial resources than the Company, as well as medium to small
companies. The Company also faces competition from certain smaller companies
that have concentrated their efforts in one or more areas of the coaxial cable
market. The Company's management believes that it enjoys a strong competitive
position in the coaxial cable market due to its position as a low-cost,
high-volume coaxial cable producer and reputation as a high-quality provider of
state-of-the-art cables with a strong orientation toward customer service. The
Company's management also believes that it enjoys a strong competitive position
in electronic cable market due to the existence of one of the larger direct
field sales organizations within the LAN segment, the comprehensive nature of
its product line and its long established reputation for quality.
32
<PAGE>
RAW MATERIALS
In the manufacture of coaxial and twisted pair cables, the Company processes
metal tubes, tapes and wires including bi-metallic wires (wires made of aluminum
or steel with thin outer skins of copper) that are fabricated from high-grade
aluminum, copper and steel. Most of these fabricated metal components are
purchased under supply arrangements with some portion of the unit pricing
indexed to commodity market prices for these metals. The Company has adopted a
hedging policy pursuant to which it may, from time to time, attempt to match
futures contracts or option contracts for a specific metal with some portion of
the anticipated metal purchases for the same periods. Other major raw materials
used by the Company include polyethelenes, polyvinylchlorides, FEP and other
plastic insulating materials, optical fibers, and wood and cardboard shipping
and packaging materials. In 1997, approximately 14% of the Company's raw
material purchases were for bi-metallic center conductors for coaxial cables,
nearly all of which were purchased from Copperweld Corporation under a long-term
supply arrangement expiring in March 2000. However, the Company recently
announced plans to acquire the clad wire fabrication equipment and technology of
Texas Instruments Incorporated. At full capacity, this acquisition will give the
Company the ability to produce a significant portion of the bi-metal center
conductors used by the Company. In addition to bi-metallic wires, fine aluminum
wire, which is a smaller raw material purchase than bi-metallic wire, is
purchased primarily from a single source; neither of these major raw materials
could be readily replaced in sufficient quantities if all supplies from the
respective primary sources were disrupted for an extended period and the Company
was unable to vertically integrate the production of these products. There are
few worldwide producers of FEP and market supplies have been periodically
limited over the past several years. Availability of adequate supplies of FEP
will be critical to future LAN cable sales growth. The Company has demonstrated
an ability, on a limited basis, to successfully foam FEP. The Company's ability
to successfully foam FEP on a large scale commercial basis would help moderate
the impact of any limitation of the FEP supply. With respect to all other major
raw materials used by the Company, alternative sources of supply or access to
alternative materials are generally available. Supplies of all raw materials
used by the Company are generally adequate and expected to remain so for the
foreseeable future.
ENVIRONMENT
The Company uses some hazardous substances and generates some solid and
hazardous waste in the ordinary course of its business. Consequently, the
Company is subject to various federal, state, local and foreign laws and
regulations governing the use, discharge and disposal of hazardous materials.
Because of the nature of its business, the Company has incurred, and will
continue to incur, costs relating to compliance with such environmental laws.
Although the Company's management believes that it is in substantial compliance
with such environmental requirements, and the Company has not in the past been
required to incur material costs in connection therewith, there can be no
assurance its cost to comply with such requirements will not increase in the
future. Although the Company is unable to predict what legislation or
regulations may be adopted in the future with respect to environmental
protection and waste disposal, compliance with existing legislation and
regulations has not had and is not expected to have a material adverse effect on
the Company's operations and financial condition.
EMPLOYEES
At October 25, 1998, approximately 2,525 people were employed by the
Company. Substantially all employees are located in the United States. The
Company's management believes that its relations with its employees are
satisfactory.
33
<PAGE>
MANAGEMENT
BOARD OF DIRECTORS OF THE COMPANY
Set forth below are the persons who currently serve as directors of the
Company, each of whom has served since the Distribution. Nicholas C. Forstmann
intends to resign as a director in conjunction with, and prior to the
consummation of, the Offering.
<TABLE>
<CAPTION>
TERM
NAME AGE EXPIRES POSITION
- ------------------------------------------------ --- ----------- ------------------------------------------------
<S> <C> <C> <C>
Frank M. Drendel................................ 53 2000 Chairman of the Board and Chief Executive
Officer of the Company
Edward D. Breen................................. 42 1999 Director
Nicholas C. Forstmann........................... 51 2000 Director
Boyd L. George.................................. 56 2001 Director
George N. Hutton, Jr............................ 69 2001 Director
James N. Whitson................................ 63 1999 Director
</TABLE>
Frank M. Drendel has been Chairman and Chief Executive Officer of the
Company since the Distribution. He served as a director of General Instrument
Corporation of Delaware, Inc. ("GI Delaware"), a subsidiary of the Distributing
Company, and its predecessors from 1987 to March 1992, and was a director of the
Distributing Company until July 1997. He has served as President and Chairman of
CommScope NC, currently a subsidiary of the Company, from 1986 to 1997, and
Chief Executive Officer of CommScope NC since 1976. He is a director of General
Instrument, Nextel Communications, Inc., C-SPAN and the National Cable
Television Association.
Edward D. Breen is Chairman and Chief Executive Officer of General
Instrument. He has served in such capacity since December 1997, after having
served as Acting Chief Executive Officer and President of General Instrument
since October 1997. He was President of the Distributing Company's Broadband
Networks Group from February 1996 and Vice President of the Distributing Company
from November 1994 until July 1997. He continued in such positions for General
Instrument through October 1997. He was Executive Vice President, Terrestrial
Systems of the Distributing Company from October 1994 to January 1996 and Senior
Vice President of Sales of the Distributing Company from June 1988 to October
1994.
Nicholas C. Forstmann served as a director of GI Delaware from August 1990
to March 1992, and was a director of the Distributing Company until the
Distribution. He has been a General Partner of FLC Partnership, L.P., the
General Partner of Forstmann Little & Co., since he co-founded Forstmann Little
& Co. in 1978. He is a director of Gulfstream Aerospace Corporation.
Boyd L. George is Chairman of the Board and Chief Executive Officer of Alex
Lee, Inc. (subsidiaries of Alex Lee, Inc. include: Merchants Distributors, Inc.,
a wholesale food distributor; Institution Food House, a foodservice distributor;
and Lowes Food Stores, Inc., a retail operation). Mr. George has been Chairman
and Chief Executive Officer of Alex Lee, Inc. since the company was founded in
1992 and served as President from 1992 to 1995. Mr. George joined a subsidiary
of Alex Lee, Inc. in 1969 and has served, and continues to serve, in various
positions, including President, Chairman and Chief Executive Officer for such
subsidiary.
George N. Hutton, Jr. is and has been a private investor for more than ten
years. He is a former director of Sprint Corporation and of M/A Com Inc.
James N. Whitson has served as a director of Sammons Enterprises, Inc.
("SEI"), a privately-owned company engaged in life insurance, industrial and oil
field distribution, equipment sales and rentals, and bottled water, since 1973,
and as Executive Vice President and Chief Operating Officer of SEI from 1989
until March 1998 when he retired. He is a director/trustee of the Seligman Group
of Investment Companies and a director of C-SPAN.
34
<PAGE>
EXECUTIVE OFFICERS
Set forth below are the persons who currently serve as executive officers of
the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------- --- ----------------------------------------------------------------
<S> <C> <C>
Frank M. Drendel................ 53 Chairman of the Board and Chief Executive Officer
Brian D. Garrett................ 50 President and Chief Operating Officer
Jearld L. Leonhardt............. 50 Executive Vice President, Finance and Administration
Randall Crenshaw................ 41 Executive Vice President, Procurement/Logisitics
Frank J. Logan.................. 56 Executive Vice President, International
Larry W. Nelson................. 56 Executive Vice President, Development
Gene W. Swithenbank............. 59 Executive Vice President, Sales and Marketing
William R. Gooden............... 57 Senior Vice President and Controller
Frank B. Wyatt, II.............. 36 Vice President, General Counsel and Secretary
</TABLE>
Frank M. Drendel has been Chairman and Chief Executive Officer of the
Company since the Distribution. He has served as Chairman and President of
CommScope NC, currently a wholly-owned subsidiary of the Company, from 1986 to
the Distribution and has served as Chief Executive Officer of CommScope NC since
1976.
Brian D. Garrett has been President and Chief Operating Officer of the
Company since October 1997. He has served as Executive Vice President,
Operations of CommScope NC since 1997. From 1996 to 1997, he was Executive Vice
President and General Manager of the Network Cable Division of CommScope NC and
Vice President and General Manager of the Network Cable Division from 1986 to
1996.
Jearld L. Leonhardt has been Executive Vice President, Finance and
Administration of the Company since the Distribution. He was Treasurer of the
Company from the Distribution until September 1997. He has served as Executive
Vice President, Finance and Administration of CommScope NC since 1983 and
Treasurer of CommScope NC from 1983 until September 1997.
Randall Crenshaw has been Executive Vice President, Procurement/Logistics of
the Company since the Distribution. He has served as Executive Vice President,
Procurement/Logistics of CommScope NC since 1997. From 1994 to 1997, Mr.
Crenshaw was Vice President Operations for the Network Cable Division of
CommScope NC. Prior to that time, Mr. Crenshaw has held various positions with
CommScope NC since 1985.
Frank J. Logan has been Executive Vice President, International of the
Company since the Distribution. He has served as Executive Vice President,
International of CommScope NC since 1996. From 1989 to 1996, he was Vice
President, International of CommScope NC.
Larry W. Nelson has been Executive Vice President, Development of the
Company since the Distribution. He has served as Executive Vice President,
Development of CommScope NC since 1997. From 1988 to 1997, he was Executive Vice
President and General Manager of the Cable TV Division of CommScope NC.
Gene W. Swithenbank has been Executive Vice President, Sales and Marketing
of the Company since the Distribution. He has served as Executive Vice
President, Sales and Marketing for CommScope NC since 1997 and Executive Vice
President, CATV Sales and Marketing since 1996. From 1992 to 1996, Mr.
Swithenbank was Senior Vice President CATV Sales of CommScope NC.
William R. Gooden has been Senior Vice President and Controller of the
Company since the Distribution. He has served as Senior Vice President and
Controller of CommScope NC since 1996 and was Vice President and Controller from
1991 to 1996.
Frank B. Wyatt, II has been Vice President, General Counsel and Secretary of
the Company since the Distribution. He has served as Vice President of CommScope
NC since 1997 and General Counsel and Secretary of CommScope NC since 1996. From
1987 to 1996, he was an attorney with the law firm of Bell, Seltzer, Park &
Gibson (now Alston & Bird LLP).
35
<PAGE>
SELLING STOCKHOLDERS
Forstmann Little & Co. Subordinated Debt and Equity Management Buyout
Partnership-IV ("MBO-IV") and Instrument Partners, two partnerships formed by
affiliates of Forstmann Little & Co., currently own an aggregate of 7,236,221
shares of Common Stock (approximately 14.7% of the outstanding shares of Common
Stock as of November 15, 1998). Prior to the closing of this Offering,
Instrument Partners will consummate the FL Distribution by distributing
3,849,002 shares of Common Stock to its individual partners in accordance with
the terms of its partnership agreement. The shares of Common Stock to be sold in
the Offering (other than pursuant to the Underwriter's over-allotment option)
consist of shares owned by MBO-IV and shares received in the FL Distribution by
certain partners of Instrument Partners or their subsequent distributees.
Following the consummation of the Offering, MBO-IV and Instrument Partners will
no longer own any shares of Common Stock of the Company.
The following table sets forth certain information as of November 15, 1998
(or in certain cases, earlier dates) regarding the beneficial ownership of
Common Stock (i) immediately prior to the consummation of the Offering (assuming
the FL Distribution had occurred), and (ii) as adjusted to reflect the sale of
the shares of Common Stock pursuant to the Offering by each Selling Stockholder
participating in the Offering. Except as otherwise indicated, the persons or
entities listed below have sole voting and investment power with respect to all
shares of Common Stock beneficially owned by them, except to the extent such
power may be shared with a spouse. None of the Selling Stockholders has held a
position, office or had a material relationship with the Company since the
Distribution other than as a result of the ownership of shares of Common Stock
or interests in MBO-IV or Instrument Partners.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF NUMBER OF SHARES
BENEFICIALLY PERCENTAGE SHARES BENEFICIALLY PERCENTAGE OWNED
OWNED PRIOR TO OWNED BEFORE BEING OWNED AFTER AFTER THE
NAME OF BENEFICIAL OWNER THE OFFERING (1) THE OFFERING (1)(2) OFFERED (1) THE OFFERING (1) OFFERING (1)(2)(3)
- --------------------------------- ----------------- --------------------- ----------- ----------------- ---------------------
<S> <C> <C> <C> <C> <C>
MBO-IV........................... 3,387,219 6.9% 3,387,219 -- --
Bankers Trust Company as Trustee
for the GTE Service Corporation
Plans for Employees' Pensions
(4)............................. 85,983 * 76,783 9,200 *
Boston Safe Deposit and Trust
Company as Trustee for the
Employee Retirement Income Plan
Trust of Minnesota Mining and
Manufacturing Company (4)....... 240,990 * 76,783 164,207 *
Citibank F.S.B., solely as
Directed Trustee of the Delta
Master Trust (4)................ 76,783 * 76,783 -- --
General Electric Pension Trust... 767,829 1.6% 767,829 -- --
Kodak Retirement Income Plan
(4)............................. 189,983 * 76,783 113,200 *
Leeway & Co. c/o State Street
Bank & Trust Company (4)........ 1,502,269 3.1% 92,140 1,410,129 2.8%
New York State Common Retirement
Fund (4)........................ 230,349 * 230,349 -- --
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF NUMBER OF SHARES
BENEFICIALLY PERCENTAGE SHARES BENEFICIALLY PERCENTAGE OWNED
OWNED PRIOR TO OWNED BEFORE BEING OWNED AFTER AFTER THE
NAME OF BENEFICIAL OWNER THE OFFERING (1) THE OFFERING (1)(2) OFFERED (1) THE OFFERING (1) OFFERING (1)(2)(3)
- --------------------------------- ----------------- --------------------- ----------- ----------------- ---------------------
<S> <C> <C> <C> <C> <C>
Northern Trust Company as Trustee
for the TI Employees Pension
Trust
(4)............................. 76,783 * 76,783 -- --
State of Wisconsin Investment
Board (4)....................... 967,783 2.0% 76,783 891,000 1.8%
United Technologies Corporation
Master Retirement Trust (4)..... 61,426 * 61,426 -- --
Additional Selling Stockholders
receiving shares in the FL
Distribution (approximately 50
persons), each of whom is
selling less than shares
in the Offering and will
beneficially own less than 1% of
the outstanding Common Stock
after the Offering (4).......... 2,236,560 4.5% 1,750,339 486,221 *
</TABLE>
- ------------------------
* The percentage of shares of Common Stock beneficially owned does not exceed
one percent of the outstanding shares of Common Stock.
(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares of Common Stock that such person or
persons has the right to acquire within 60 days following November 15, 1998.
For purposes of computing the percentage of outstanding shares of Common
Stock held by each person or group of persons named above, any shares which
such person or persons has or have the right to acquire within 60 days
following November 15, 1998 are deemed to be outstanding, but are not deemed
to be outstanding for the purpose of computing the percentage ownership of
any other person.
(2) Based on 49,202,555 shares outstanding on November 15, 1998.
(3) Assumes that the Underwriters' over-allotment option is exercised in full by
the Underwriters.
(4) All share numbers and percentages are estimated and will be determined at
the time of the FL Distribution.
37
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
Pursuant to the Amended and Restated Certificate of Incorporation, the
authorized capital stock of the Company consists of (i) 300,000,000 shares of
Common Stock, of which 49,202,555 shares were issued and outstanding as of
November 15, 1998 and (ii) 20,000,000 shares of preferred stock, $.01 par value
per share ("Preferred Stock"), none of which were issued and outstanding as of
such date. All outstanding shares of Common Stock are, and the shares to be
issued by the Company, if the over-allotment option of the Underwriters is
exercised, will be, validly issued, fully paid and nonassessable.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share owned of
record on all matters submitted to a vote of stockholders. There are no
cumulative voting rights. Accordingly, the holders of a majority of the shares
voting for the election of directors can elect all the directors if they choose
to do so, subject to any voting rights of holders of Preferred Stock to elect
directors. Subject to the preferential rights of any outstanding series of
Preferred Stock, and to any restrictions on payment of dividends imposed by the
Credit Agreement, the holders of Common Stock will be entitled to such dividends
as may be declared from time to time by the Board from funds legally available
therefor, and will be entitled, after payment of all prior claims, to receive
PRO RATA all assets of the Company upon the liquidation, dissolution or winding
up of the Company. Holders of Common Stock have no redemption or conversion
rights or preemptive rights to purchase or subscribe for securities of the
Company. Certain provisions of the Certificate of Incorporation and By-Laws of
the Company have the effect of making more difficult an acquisition of control
of the Company in a transaction not approved by the Board of Directors.
PREFERRED STOCK
The authorized capital stock of the Company includes 20,000,000 shares of
Preferred Stock, none of which are currently issued or outstanding. The Board is
authorized to divide the Preferred Stock into series and, with respect to each
series, to determine the preferences and rights and the qualifications,
limitations or restrictions thereof, including the dividend rights, conversion
rights, voting rights, redemption rights and terms, liquidation preferences,
sinking fund provisions, the number of shares constituting the series and the
designation of such series. The Board could, without stockholder approval, issue
Preferred Stock with voting and other rights that could adversely affect the
voting power of the holders of Common Stock and which could have certain
antitakeover effects.
In connection with the Rights Plan, the Board has authorized 400,000 shares
of Series A Participating Preferred Stock (the "Series A Preferred"). No shares
of Series A Preferred are outstanding. For a description of the rights, powers
and preferences of the Series A Preferred, see "--Rights Plan."
RIGHTS PLAN
On June 10, 1997, the Board adopted a stockholder rights plan (the "Rights
Plan") pursuant to which one right (collectively, the "Rights") to purchase one
one-thousandth of a share of Series A Preferred would be distributed as a
dividend for each outstanding share of Common Stock at a purchase price of
$60.00 per one one-thousandth of a share of Series A Preferred, subject to
adjustment. The Rights are issuable on the terms and subject to the conditions
set forth in the Rights Plan. The Rights will expire no later than on the tenth
anniversary of the adoption of the Rights Plan in 2007. The Rights will be
exercisable on the earlier to occur of (i) the first date of public announcement
that a person or "group" (other than FLC Entities (as defined) to the extent FLC
Entities, individually or as a group, beneficially own no more than 20% of the
then outstanding Common Stock) has acquired beneficial ownership of 15% or more
of the outstanding Common Stock (except pursuant to a Permitted Offer, as
defined) (an "Acquiring Person"); and (ii) ten business days (or such later date
as the Board may determine) following
38
<PAGE>
the commencement of, or announcement of an intention to commence, a tender offer
or exchange offer the consummation of which would result in a person or group
becoming an Acquiring Person. "FLC Entities" means Instrument Partners, a New
York limited partnership, MBO-IV, a New York limited partnership, Theodore J.
Forstmann, Nicholas C. Forstmann, Wm. Brian Little, Steven B. Klinsky, Sandra J.
Horbach, Winston W. Hutchins and Thomas H. Lister and their affiliates and
associates who or which are considered as one person and references to the FLC
Entities include any or all such persons.
If any person or group becomes an Acquiring Person or commences a tender
offer upon consummation of which such person or group would become an Acquiring
Person, each Right not owned by such Acquiring Person or certain related parties
would entitle its holder to purchase, at the Right's then current exercise
price, shares of Common Stock, or, in the discretion of the Board, the number of
one one-thousandths of a share of Series A Preferred having a value of twice the
Right's exercise price. In addition, if, after a person or group becomes an
Acquiring Person, the Company is involved in a merger or other business
combination transaction in which the holders of all of the outstanding Common
Stock immediately prior to the consummation of the transaction are not the
holders of the surviving corporation's voting power or more than 50% of the
Company's assets or earning power is sold or transferred, each Right will
entitle its holder to purchase common shares of the acquiring company having a
value equal to two times the Right's then current exercise price.
The purchase price payable, and the shares issuable, upon exercise of the
Rights will be subject to adjustment from time to time as specified in the
Rights Plan. The Company will generally be entitled to redeem the Rights in
whole, but not in part, at $0.01 per Right at any time prior to the earlier to
occur of (i) a person becoming an Acquiring Person or (ii) expiration of the
Rights.
Shares of Series A Preferred purchasable upon exercise of the Rights will
not be redeemable. Each Share of Series A Preferred will be entitled to a
minimum preferential quarterly dividend payment of $10.00 per share but, if
greater, will be entitled to an aggregate dividend per share of 1,000 times the
dividend declared per share of Common Stock. In the event of liquidation of the
Company, the holders of Series A Preferred will be entitled to a minimum
preferential liquidation payment of $100.00, provided that they will be entitled
to an aggregate payment per share of at least 1,000 times the aggregate payment
made per share of Common Stock. Each share of Series A Preferred will have one
thousand votes, voting together with the Common Stock. These rights are
protected by customary antidilution provisions. In the event that the amount of
accrued and unpaid dividends on the Series A Preferred is equivalent to at least
six full quarterly dividends, the holders of the Series A Preferred will have
the right, voting as a class, to elect two directors in addition to the
directors elected by the holders of Common Stock until all dividends in default
on the Series A Preferred have been paid in full and dividends for the current
dividend period declared and funds therefor set apart.
TRANSFER AGENT
The Transfer Agent for the Common Stock is ChaseMellon Shareholder Services,
L.L.C.
39
<PAGE>
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
Goldman, Sachs & Co. and CIBC Oppenheimer Corp. are acting as Underwriters (the
"Underwriters") for the Offering. Subject to the terms and conditions set forth
in a purchase agreement ("the Purchase Agreement") among the Company, the
Selling Stockholders and the Underwriters, the Selling Stockholders have agreed
to sell to the Underwriters, and each of the Underwriters severally and not
jointly has agreed to purchase from the Selling Stockholders the number of
shares of Common Stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...........................................................
Goldman, Sachs & Co..............................................................
CIBC Oppenheimer Corp. ..........................................................
----------
Total.................................................................. 6,750,000
----------
----------
</TABLE>
In the Purchase Agreement, the several Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the shares of
Common Stock being sold pursuant to such agreement if any of the shares of
Common Stock being sold pursuant to such agreement are purchased. Under certain
circumstances, under the Purchase Agreement, the commitments of non-defaulting
Underwriters may be increased.
The Underwriters have advised the Company and the Selling Stockholders that
the Underwriters propose initially to offer the shares of Common Stock to the
public at the initial public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of $ per share of Common Stock. The Underwriters may allow, and such
dealers may reallow, a discount not in excess of $ per share of Common
Stock on sales to certain other dealers. After the initial public offering, the
public offering price, concession and discount may be changed.
The Company has granted an option to the Underwriters, exercisable for 30
days after the date of this Prospectus, to purchase up to an aggregate of
1,012,500 additional shares of Common Stock at the initial public offering price
set forth on the cover page of this Prospectus, less the underwriting discount.
The Underwriters may exercise this option solely to cover over-allotments, if
any, made on the sale of the Common Stock offered hereby. To the extent that the
Underwriters exercise this option, each Underwriter will be obligated, subject
to certain conditions, to purchase a number of additional shares of Common Stock
proportionate to such Underwriter's initial amount reflected in the foregoing
table.
The Company and the Selling Stockholders, who will collectively hold, after
the Offering, shares of Common Stock as a result of the FL Distribution
will agree, subject to certain exceptions, not to directly or indirectly (i)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of or otherwise dispose of or transfer any shares of Common Stock or
securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or thereafter acquired by the person executing the agreement
or with respect to which the person executing the agreement thereafter acquires
the power of disposition, or file a registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to the foregoing or
(ii) enter into any swap or other agreement that transfers, in whole or in part,
the economic consequence of ownership of the Common Stock whether any such swap
or transaction is to be settled by delivery of Common Stock or other securities,
in cash or otherwise, without the prior written consent of Merrill Lynch on
behalf of the Underwriters for a period of 90 days after the date of this
Prospectus.
40
<PAGE>
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including certain liabilities under
the Securities Act, or to contribute to payments the Underwriters may be
required to make in respect thereof.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase the Common Stock. As an
exception to these rules, the Underwriters are permitted to engage in certain
transactions that stabilize the price of the Common Stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing, or maintaining
the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offerings, I.E., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Underwriters may
reduce that short position by purchasing Common Stock in the open market. The
Underwriters may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.
The Underwriters may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Underwriters purchase shares of
Common Stock in the open market to reduce the Underwriters' short position or to
stabilize the price of the Common Stock, they may reclaim the amount of the
selling concession from the Underwriters and selling group members who sold
those shares as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of the Common Stock to the extent that it
discourages resales of the Common Stock.
None of the Company, the Selling Stockholders nor any of the Underwriters
makes any representation or prediction as to the direction or magnitude of any
effect that the transactions described above may have on the price of the Common
Stock. In addition, none of the Company, the Selling Stockholders nor any of the
Underwriters makes any representation that the Underwriters will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
The Underwriters have from time to time provided investment banking
financial advisory services to the Company and its affiliates, for which they
have received customary compensation, and may continue to do so in the future.
VALIDITY OF COMMON STOCK
Certain legal matters with respect to the validity of the Common Stock
offered hereby will be passed upon for the Company by Fried, Frank, Harris,
Shriver & Jacobson (a partnership including professional corporations), One New
York Plaza, New York, New York 10004-1980. The validity of the Common Stock will
be passed upon for the Underwriters by Sullivan & Cromwell, 125 Broad Street,
New York, New York 10004. Fried, Frank, Harris, Shriver & Jacobson renders legal
services to Forstmann Little & Co. on a regular basis.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1997 and
1996, the related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1997,
and the related financial statement schedule, incorporated in this Prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
41
<PAGE>
AVAILABLE INFORMATION
CommScope, Inc. is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports and
other information, as well as the Registration Statement and the consolidated
financial statements, schedules and exhibits thereto, may be inspected and
copied at the offices of the Commission at 450 Fifth Street, N.W., Washington
D.C. 20549 and at the following regional offices of the Commission: 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material or
any part thereof may also be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington D.C. 20549 at prescribed rates.
The Commission also maintains a Web site (http://www.sec.gov) from which such
reports, proxy statements and other information concerning the Company may be
obtained. The Common Stock is traded on the NYSE and such reports and other
information may also be inspected at the offices of the NYSE, 20 Broad Street,
New York, NY 10005.
The Company has filed with the Commission in Washington, D.C. a Registration
Statement (of which this Prospectus is a part and which term shall encompass any
amendments thereto) on Form S-3 under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain portions of which have been omitted as permitted by
the rules and regulations of the Commission. Statements contained herein
concerning the provisions of any document are not necessarily complete;
reference is made to the exhibits of the Registration Statement for a more
complete description of the matters involved, and each such statement shall be
deemed qualified in its entirety by such reference. For further information
pertaining to the shares offered hereby and to the Company, reference is made to
the Registration Statement, including the consolidated financial statements,
schedules and exhibits filed as a part thereof and incorporated therein by
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, and all documents incorporated by reference
therein, filed by the Company with the Commission pursuant to the Exchange Act
are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
2. The Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1998, June 30, 1998 and September 30, 1998, respectively;
3. The Company's Current Report on Form 8-K, dated November 30, 1998;
4. The description of its Common Stock set forth in its Registration
Statement on Form 8-A, dated April 24, 1997, as amended; and
5. All other documents filed by the Company with the Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of the offering covered by this
Prospectus will be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of such
documents.
The Company will provide, without charge, to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the information that has been or may be incorporated by reference
in this Prospectus, other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference into such documents). Such requests
should be directed to CommScope, Inc., Attention: Secretary, 1375 Lenoir-Rhyne
Boulevard, Hickory, NC 28601 (telephone (828) 324-2200).
42
<PAGE>
Any statement contained herein or in a document all or a portion thereof
which is incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document or portion thereof which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified shall not be deemed to constitute a part of this Prospectus except as
so modified, and any statement so superseded shall not be deemed to constitute
part of this Prospectus.
CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Registration Statement contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 which reflect,
among other things, the Company's current views with respect to its prospects,
its future performance and future events, all of which are subject to risks and
uncertainties. These forward-looking statements are identified by their use of
such terms and phrases as "intends," "intend," "intended," "goal," "estimate,"
"estimates," "expects," "expect," "expected," "project," "projects,"
"projected," "projections," "plans," "anticipates," "anticipated," "should,"
"designed to," "foreseeable future," "believe," "believes," and "scheduled."
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date the statement was made. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
The actual results of the Company may differ significantly from the results
discussed in the forward-looking statements. Factors that might cause such a
difference include (i) the factors discussed under "Risk Factors," (ii) the
factors discussed under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and (iii) the following factors: (a) the
general political, economic and competitive conditions in the United States,
Asia and other markets where the Company operates; (b) changes in capital
availability or costs, such as changes in interest rates, market perceptions of
the industry in which the Company operates, or security ratings; (c) employee
workforce factors, including issues relating to collective bargaining agreements
or work stoppages; (d) technological changes; (e) government action and
regulation; and (f) authoritative generally accepted accounting principles or
policy changes from such standard-setting bodies as the Financial Accounting
Standards Board and the Commission.
43
<PAGE>
[Logo][Caption: How Intelligence Travels.]
[Picture depicting certain of the Company's wire and cable products.]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 8
The Company............................................................... 12
Use of Proceeds........................................................... 12
Dividend Policy........................................................... 12
Price Range of Common Stock............................................... 12
Capitalization............................................................ 13
Selected Financial Data................................................... 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 16
Business.................................................................. 25
Management................................................................ 34
Selling Stockholders...................................................... 36
Description of Capital Stock.............................................. 38
Underwriting.............................................................. 40
Validity of Common Stock.................................................. 41
Experts................................................................... 41
Available Information..................................................... 42
Incorporation of Certain Documents by Reference........................... 42
</TABLE>
6,750,000 SHARES
[LOGO]
COMMON STOCK
--------------
P R O S P E C T U S
------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
CIBC OPPENHEIMER
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of expenses of the Company in
connection with the offering of the Common Stock being registered hereby, other
than underwriting discounts and commissions. All of the expenses are estimated,
except for the registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee....................... $ 44,265
NASD fees (estimated)..................................................... 16,300
Transfer agent and registrar fee and expenses............................. 18,250
Accounting fees and expenses.............................................. 75,000
Legal fees and expenses................................................... 300,000
Blue Sky expenses and counsel fees........................................ 5,000
Printing and engraving expenses........................................... 130,000
Miscellaneous............................................................. 36,185
---------
Total............................................................... $ 625,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorney's fees),
judgments, fines, and amounts paid in settlement in connection with specified
actions, suits, or proceedings whether civil, criminal, administrative, or
investigative, other than action by or in the right of the corporation (a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorney's fees) incurred in connection with the
defense or settlement of such action, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
charter, by-laws, disinterested director vote, stockholder vote, agreement, or
otherwise.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability for (i) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) payment of unlawful dividends or unlawful
stock purchases or redemptions, or (iv) any transaction from which the director
derived an improper personal benefit.
Article Sixth of the Amended and Restated Certificate of Incorporation of
the Company provides that directors of the Company shall not, to the fullest
extent permitted by the DGCL, be liable to the Company or any of its
stockholders for monetary damages for any breach of fiduciary duty as director.
The Certificate of Incorporation of the Company also provides that if the DGCL
is amended to permit further elimination or limitation of the personal liability
of directors, then the liability of the directors of the Company shall be
eliminated or limited to the fullest extent permitted by the DGCL as so amended.
The Company has entered into agreements to indemnify its directors and
officers in addition to the indemnification provided for in its Amended and
Restated Certificate of Incorporation and Amended and Restated By-Laws. These
agreements, among other things, indemnify the Company's directors and officers
to the fullest extent permitted by Delaware law for certain expenses (including
attorneys' fees), liabilities,
II-1
<PAGE>
judgments, fines and settlement amounts incurred by such person arising out of
or in connection with such person's service as a director or officer of the
Company or an affiliate of the Company.
The Company will maintain directors' and officers' liability insurance which
will provide for payment, on behalf of the directors and officers thereof and
its subsidiaries, of certain losses of such persons (other than matters
uninsurable under law) arising from claims, including claims arising under the
Act, for acts or omissions by such persons while acting as directors or officers
thereof and/or its subsidiaries, as the case may be.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<C> <C> <S>
1 -- Form of Purchase Agreement+
4.1 -- Amended and Restated Certificate of Incorporation of the Company*
4.2 -- Amended and Restated By-Laws of the Company*
4.3 -- Rights Agreement, dated as of June 12, 1997 between the Company and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent (the "Rights Agreement"), which
includes, as Exhibit A thereto, the Certificate of Designation, Preferences and
Rights of Series A Junior Participating Preferred Stock of the Company, as
Exhibit B thereto, the Form of Right Certificate and as Exhibit C thereto, the
Summary of Rights to Purchase Preferred Shares**
4.4 -- Specimen form of the Company's Common Stock Certificate***
5 -- Opinion of Fried, Frank, Harris, Shriver & Jacobson as to the validity of the
securities being registered+
23.1 -- Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 5)+
23.2 -- Independent Auditors' Consent of Deloitte & Touche LLP
24 -- Power of Attorney (included on signature page)+
</TABLE>
- ------------------------
+ Previously filed.
* Incorporated herein by reference from the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1997 (File No. 001-12929)
** Incorporated herein by reference from the Company's Registration Statement
on Form 8-A, filed with the Commission on June 30, 1997 (File No. 001-12929)
*** Incorporated herein by reference from the Company's Registration Statement
on Form S-4 filed with the Commission on June 13, 1997 (Reg. No. 333-23935)
All financial statement schedules are incorporated herein by reference from
the Company's Annual Report on Form 10-K for the year ended December 31, 1997
(File No. 001-12929) or have been omitted either because they are not required
or the information required to be set forth therein is included in the financial
statements or in the notes thereto.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the
II-2
<PAGE>
form of prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that the undertakings set forth in paragraphs (1)(i) and
(ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the registrant pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer, or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunder duly authorized, in the City of Hickory, State of North Carolina, on
November 30, 1998.
COMMSCOPE, INC.
BY: *
-----------------------------------------
Frank M. Drendel
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
SIGNATURE CAPACITY IN WHICH SIGNED DATE
- ------------------------------ --------------------------- -------------------
Chairman of the Board and
* Chief Executive Officer
- ------------------------------ (Principal Executive November 30, 1998
Frank M. Drendel Officer)
Executive Vice President,
/s/ JEARLD L. LEONHARDT Finance and
- ------------------------------ Administration (Principal November 30, 1998
Jearld L. Leonhardt Financial Officer)
* Senior Vice President and
- ------------------------------ Controller (Principal November 30, 1998
William R. Gooden Accounting Officer)
* Director
- ------------------------------ November 30, 1998
Edward D. Breen
* Director
- ------------------------------ November 30, 1998
Nicholas C. Forstmann
* Director
- ------------------------------ November 30, 1998
Boyd L. George
* Director
- ------------------------------ November 30, 1998
George N. Hutton
* Director
- ------------------------------ November 30, 1998
James N. Whitson
* /S/ JEARLD L. LEONHARDT
- ------------------------------
By: Jearld L. Leonhardt
AS ATTORNEY-IN-FACT
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION PAGE
- --------------- ------------------------------------------------------------------------------------------ ---------
<C> <S> <C>
1 -- Form of Purchase Agreement+
4.1 -- Amended and Restated Certificate of Incorporation of the Company*
4.2 -- Amended and Restated By-Laws of the Company*
4.3 -- Rights Agreement, dated as of June 12, 1997 between the Company and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent (the "Rights Agreement"), which includes, as
Exhibit A thereto, the Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock of the Company, as Exhibit B thereto, the Form of
Right Certificate and as Exhibit C thereto, the Summary of Rights to Purchase Preferred
Shares**
4.4 -- Specimen form of the Company's Common Stock Certificate***
5 -- Opinion of Fried, Frank, Harris, Shriver & Jacobson as to the validity of the securities
being registered+
23.1 -- Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 5)+
23.2 -- Independent Auditors' Consent of Deloitte & Touche LLP
24 -- Power of Attorney (included on signature page)+
</TABLE>
- ------------------------
+ Previously filed.
* Incorporated herein by reference from the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1997 (File No. 001-12929)
** Incorporated herein by reference from the Company's Registration Statement
on Form 8-A, filed with the Commission on June 30, 1997 (File No. 001-12929)
*** Incorporated herein by reference from the Company's Registration Statement
on Form S-4 filed with the Commission on June 13, 1997 (Reg. No. 333-23935)
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-62293 of CommScope, Inc. on Form S-3 of our
report dated February 2, 1998, appearing in the Annual Report on Form 10-K of
CommScope, Inc. for the year ended December 31, 1997, and to the reference to us
under the heading "Experts" in the Prospectus, which is part of such
Registration Statement.
/s/ DELOITTE & TOUCHE LLP
------------------------------------------------------------------------------
Deloitte & Touche LLP
Hickory, North Carolina
November 30, 1998
