CommScope Holding 8K Other Events | COMM 2 Mar 15

Exhibit 99.2

THE BROADBAND NETWORK SOLUTIONS

BUSINESS OF TE CONNECTIVITY LTD.

CONDENSED COMBINED FINANCIAL STATEMENTS

As of December 26, 2014 and September 26, 2014 and

for the quarterly periods ended December 26, 2014 and

December 27, 2013

THE BROADBAND NETWORK SOLUTIONS BUSINESS OF TE CONNECTIVITY LTD.

INDEX TO CONDENSED COMBINED FINANCIAL STATEMENTS


	Page
Condensed Combined Statements of Operations for the Quarters Ended December 26, 2014 and December 27, 2013 (Unaudited)		3
Condensed Combined Statements of Comprehensive Income for the Quarters Ended December 26, 2014 and December 27, 2013 (Unaudited)		4
Condensed Combined Balance Sheets as of December 26, 2014 and September 26, 2014 (Unaudited)		5
Condensed Combined Statements of Business Unit Equity for the Quarters Ended December 26, 2014 and December 27, 2013 (Unaudited)		6
Condensed Combined Statements of Cash Flows for the Quarters Ended December 26, 2014 and December 27, 2013 (Unaudited)		7
Notes to Condensed Combined Financial Statements (Unaudited)		8

THE BROADBAND NETWORK SOLUTIONS BUSINESS OF TE CONNECTIVITY LTD.

CONDENSED COMBINED STATEMENTS OF OPERATIONS

(UNAUDITED)


	For the Quarters Ended
	December 26,			December 27,
	2014			2013
	(in thousands)
Net sales	$	417,062		$	463,983
Cost of sales		266,832			290,599

Gross margin		150,230			173,384
Selling expenses		50,184			59,149
General and administrative expenses		36,982			38,908
Research, development, and engineering expenses		25,082			24,331
Restructuring and other charges, net		1,658			1,714

Operating income		36,324			49,282
Interest income		201			142
Interest expense		(754	)		(760	)

Income before income taxes		35,771			48,664
Income tax expense		(9,589	)		(11,038	)

Net income	$	26,182		$	37,626

See Notes to Condensed Combined Financial Statements.

THE BROADBAND NETWORK SOLUTIONS BUSINESS OF TE CONNECTIVITY LTD.

CONDENSED COMBINED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	For the Quarters Ended
	December 26,			December 27,
	2014			2013
	(in thousands)
Net income	$	26,182		$	37,626
Other comprehensive income (loss):
Currency translation		(22,433	)		613
Adjustments to unrecognized pension benefit costs, net of income taxes		994			(166	)

Other comprehensive income (loss)		(21,439	)		447

Comprehensive income	$	4,743		$	38,073

See Notes to Condensed Combined Financial Statements.

THE BROADBAND NETWORK SOLUTIONS BUSINESS OF TE CONNECTIVITY LTD.

CONDENSED COMBINED BALANCE SHEETS

(UNAUDITED)


	December 26,		September 26,
	2014		2014
	(in thousands)
Assets
Current assets:
Cash and cash equivalents	$	16,975	$	16,864
Accounts receivable, net of allowance for doubtful accounts of $ 21,940 and $19,301, respectively		312,819		382,046
Inventories		239,212		239,157
Prepaid expenses and other current assets		47,570		70,803
Deferred income taxes		45,303		45,303

Total current assets		661,879		754,173
Property, plant, and equipment, net		197,514		205,500
Goodwill		586,587		588,982
Intangible assets, net		232,852		241,217
Deferred income taxes		171,942		168,423
Other assets		5,799		6,478

Total Assets	$	1,856,573	$	1,964,773

Liabilities and Business Unit Equity
Current liabilities:
Current maturities of long-term debt	$	89,474	$	89,497
Accounts payable		131,155		160,313
Accrued and other current liabilities		144,907		176,986
Deferred revenue		2,104		2,464

Total current liabilities		367,640		429,260
Long-term pension liabilities		7,149		8,409
Deferred income taxes		30,114		30,114
Income taxes		14,056		14,553
Other liabilities		31,952		32,473

Total Liabilities		450,911		514,809

Commitments and contingencies (Note 8)
Business Unit Equity:
Parent company investment		1,397,637		1,420,500
Accumulated other comprehensive income		8,025		29,464

Total Business Unit Equity		1,405,662		1,449,964

Total Liabilities and Business Unit Equity	$	1,856,573	$	1,964,773

See Notes to Condensed Combined Financial Statements.

THE BROADBAND NETWORK SOLUTIONS BUSINESS OF TE CONNECTIVITY LTD.

CONDENSED COMBINED STATEMENTS OF BUSINESS UNIT EQUITY

(UNAUDITED)


	Parent Company Investment			Accumulated Other Comprehensive Income			Total Business Unit Equity
	(in thousands)
Balance at September 26, 2014	$	1,420,500		$	29,464		$	1,449,964
Net income		26,182			—			26,182
Other comprehensive loss		—			(21,439	)		(21,439	)

Total comprehensive income (loss)		26,182			(21,439	)		4,743
Net decrease in Parent company investment		(49,045	)		—			(49,045	)

Balance at December 26, 2014	$	1,397,637		$	8,025		$	1,405,662

Balance at September 27, 2013	$	1,473,428		$	52,752		$	1,526,180
Net income		37,626			—			37,626
Other comprehensive income		—			447			447

Total comprehensive income		37,626			447			38,073
Net decrease in Parent company investment		(7,774	)		—			(7,774	)

Balance at December 27, 2013	$	1,503,280		$	53,199		$	1,556,479

See Notes to Condensed Combined Financial Statements.

THE BROADBAND NETWORK SOLUTIONS BUSINESS OF TE CONNECTIVITY LTD.

CONDENSED COMBINED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the Quarters Ended
	December 26, 2014			December 27, 2013
	(in thousands)
Cash Flows From Operating Activities:
Net income	$	26,182		$	37,626
Adjustments to reconcile income to net cash provided by operating activities:
Depreciation and amortization		15,327			16,645
Non-cash restructuring charges		76			1,061
Deferred income taxes		(3,519	)		(2,783	)
Provision for losses on accounts receivable and inventories		6,901			7,533
Share-based compensation expense		1,925			1,908
Changes in assets and liabilities
Accounts receivable, net		58,784			(1,304	)
Inventories		(11,350	)		(26,717	)
Prepaid expenses and other current assets		22,431			2,361
Accounts payable		(27,357	)		2,433
Accrued and other current liabilities		(32,108	)		(18,341	)
Other		(305	)		(1	)

Net cash provided by operating activities		56,987			20,421

Cash Flows From Investing Activities:
Capital expenditures		(6,886	)		(7,307	)
Proceeds from sale of property, plant, and equipment and other		9			(215	)

Net cash used in investing activities		(6,877	)		(7,522	)

Cash Flows From Financing Activities:
Repayment of long-term debt		(59	)		(53	)
Net financing activities with Parent and Parent’s subsidiaries		(49,079	)		(11,360	)

Net cash used in financing activities		(49,138	)		(11,413	)

Effect of currency translation on cash		(861	)		(323	)
Net increase in cash and cash equivalents		111			1,163
Cash and cash equivalents at beginning of period		16,864			22,473

Cash and cash equivalents at end of period	$	16,975		$	23,636

See Notes to Condensed Combined Financial Statements.

THE BROADBAND NETWORK SOLUTIONS BUSINESS OF TE CONNECTIVITY LTD.

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation

The unaudited Condensed Combined Financial Statements of the Broadband Network Solutions business (“BNS” or the “Company,” which may be referred to as “we, “us,” or “our”) of TE Connectivity Ltd. (“TE Connectivity” or “Parent”) have been prepared in United States (“U.S.”) dollars, in accordance with accounting principles generally accepted in the U.S. (“GAAP”). In management’s opinion, the unaudited Condensed Combined Financial Statements contain all normal recurring adjustments necessary for a fair presentation of interim results. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire fiscal year or any subsequent interim period.

The assets and liabilities in the Condensed Combined Financial Statements have been reflected on a historical cost basis, as included in the historical Condensed Consolidated Balance Sheets of Parent. The Condensed Combined Statements of Operations include allocations for a) certain support functions that are provided on a centralized basis by Parent and historically recorded at the business unit level, as well as b) corporate costs not historically allocated by Parent to the business unit level. These expenses include departmental charges related to executive office, finance, tax, treasury, human resources, information technology, and legal, among others. These expenses have been allocated to BNS on the basis of direct usage when identifiable, with the remainder allocated on a proportional basis of operating income, headcount or other measures of BNS or Parent. Management believes the assumptions underlying the Condensed Combined Financial Statements, including the assumptions regarding allocating general corporate expenses from Parent, are reasonable. Nevertheless, the Condensed Combined Financial Statements may not include the actual expenses that would have been incurred by BNS and may not reflect the combined results of operations, financial position, and cash flows had it been a stand-alone business during the periods presented. Actual costs that would have been incurred had BNS been a stand-alone business would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure.

The year-end balance sheet data was derived from audited financial statements, but does not include all of the information and disclosures required by GAAP. These financial statements should be read in conjunction with our audited Combined Financial Statements for the fiscal year ended September 26, 2014.

Unless otherwise indicated, references in the Condensed Combined Financial Statements to fiscal 2015 and fiscal 2014 are to our fiscal years ending September 25, 2015 and September 26, 2014, respectively.

2. Restructuring and Other Charges, Net

Restructuring and other charges, net consist primarily of restructuring charges related to employee severance.

Activity in our restructuring reserves during the first quarter of fiscal 2015 is summarized as follows:


	Balance at Beginning of Period		Charges		Changes in Estimate		Cash Payments			Non-Cash Items and Other⁽¹⁾			Balance at End of Period
	(in thousands)
Fiscal 2014 Actions	$	11,101	$	76	$	2	$	(1,039	)	$	(392	)	$	9,748
Pre-Fiscal 2014 Actions		44,930		1,469		52		(6,348	)		(1,802	)		38,301

Total Fiscal 2015 activity	$	56,031	$	1,545	$	54	$	(7,387	)	$	(2,194	)	$	48,049

(1)	Includes non-cash charges associated with asset write-offs and the effects of currency translation.

Activity in our restructuring reserves during the first quarter of fiscal 2014 is summarized as follows:


	Balance at Beginning of Period		Charges		Changes in Estimate			Cash Payments			Non-Cash Items and Other⁽¹⁾		Balance at End of Period
					(in thousands)
Fiscal 2013 Actions	$	63,864	$	2,026	$	(11	)	$	(4,605	)	$	467	$	61,741
Pre-Fiscal 2013 Actions		14,558		332		(633	)		(2,261	)		37		12,033

Total Fiscal 2014 activity	$	78,422	$	2,358	$	(644	)	$	(6,866	)	$	504	$	73,774

(1)	Includes non-cash charges associated with asset write-offs and the effects of currency translation.

Fiscal 2014 Actions

During fiscal 2014, we initiated a restructuring program associated with headcount reductions and manufacturing site closures. In connection with this program, during the quarter ended December 26, 2014, we recorded net restructuring charges of $78 thousand, primarily related to manufacturing site closures. We expect to complete all restructuring programs commenced in fiscal 2014 by the end of fiscal 2015. As of December 26, 2014, we do not expect to incur any additional charges related to restructuring actions commenced in fiscal 2014.

Pre-Fiscal 2014 Actions

In connection with the restructuring actions initiated prior to fiscal 2014, during the quarters ended December 26, 2014 and December 27, 2013, we recorded net restructuring charges of $1,521 thousand and $1,714 thousand, respectively. As of December 26, 2014, we expect to incur additional charges of approximately $1,077 thousand related to pre-fiscal 2014 actions.

Total Restructuring Reserves

Restructuring reserves included on the Condensed Combined Balance Sheets were as follows:


	December 26, 2014		September 26, 2014
	(in thousands)
Accrued and other current liabilities	$	35,201	$	43,182
Other liabilities		12,848		12,849

Restructuring reserves	$	48,049	$	56,031

3. Inventories

Inventories consisted of the following:


	December 26, 2014		September 26, 2014
	(in thousands)
Raw materials	$	42,542	$	46,267
Work in progress		54,550		61,484
Finished goods		142,120		131,406

Inventories	$	239,212	$	239,157

4. Goodwill

The changes in the carrying amount of goodwill were as follows:


	(in thousands)
September 26, 2014⁽¹⁾	$	588,982
Currency translation		(2,395	)

December 26, 2014⁽¹⁾	$	586,587

(1)	As of September 26, 2014 and December 26, 2014, there were no accumulated impairment losses related to the BNS reporting units.

5. Intangible Assets, Net

Intangible assets consisted of the following:


	December 26, 2014							September 26, 2014
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Amount		Amortization			Amount		Amount		Amortization			Amount
	(in thousands)
Intellectual property	$	232,520	$	(109,412	)	$	123,108	$	229,623	$	(105,466	)	$	124,157
Customer relationships		168,982		(62,708	)		106,274		169,577		(58,836	)		110,741
Other		6,211		(2,741	)		3,470		8,927		(2,608	)		6,319

Total	$	407,713	$	(174,861	)	$	232,852	$	408,127	$	(166,910	)	$	241,217

Intangible asset amortization expense was $7,772 thousand and $7,702 thousand during the first quarters of fiscal 2015 and 2014, respectively.

The aggregate amortization expense on intangible assets is expected to be as follows:


	(in thousands)
Remainder of fiscal 2015	$	23,211
Fiscal 2016		30,885
Fiscal 2017		30,868
Fiscal 2018		30,868
Fiscal 2019		30,868
Fiscal 2020		29,887
Thereafter		56,265

Total	$	232,852

6. Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following:


	December 26,		September 26,
	2014		2014
	(in thousands)
Accrued payroll and employee benefits	$	45,215	$	69,076
Restructuring reserves		35,201		43,182
Value-added and other duties and taxes payable		22,405		24,125
Income taxes payable		8,542		6,542
Deferred income taxes		3,627		3,627
Other		29,917		30,434

Accrued and other current liabilities	$	144,907	$	176,986

7. Debt

Debt, which is principally reflected in current maturities of long-term debt on the Condensed Combined Balance Sheets at December 26, 2014 and September 26, 2014, consists primarily of 3.50% convertible subordinated notes (the “2015 Notes”) due in July 2015. Parent will provide the funds, via an increase in Parent company investment, necessary to repay the 2015 Notes.

8. Commitments and Contingencies

Legal Proceedings

In the ordinary course of business, we are subject to various legal proceedings and claims, including patent infringement claims, product liability matters, employment disputes, disputes on agreements, other commercial disputes, environmental matters, antitrust claims, and tax matters, including non-income tax matters such as value added tax, sales and use tax, real estate tax, and transfer tax. Although it is not feasible to predict the outcome of these proceedings, based upon our experience, current information, and applicable law, we do not expect that the outcome of these proceedings, either individually or in the aggregate, will have a material effect on our results of operations, financial position, or cash flows.

9. Retirement Plans

Defined Benefit Pension Plans

The net periodic pension benefit cost for pension plans that were fully dedicated to the BNS business was as follows:


	December 26,			December 27,
	2014			2013
	(in thousands)
Service cost	$	1,118		$	1,031
Interest cost		502			646
Expected return on plan assets		(1,067	)		(1,152	)
Amortization of net actuarial loss		122			151
Amortization of prior service cost		60			—

Net periodic pension benefit cost	$	735		$	676

Shared Pension Plans

Certain BNS employees participate in various defined benefit pension plans sponsored by Parent (the “Shared Plans”). Pension expense, calculated as actuarially determined service and interest cost, for BNS employees that participate in these shared plans was $717 thousand and $839 thousand in the first quarters of fiscal 2015 and 2014, respectively. The Condensed Combined Balance Sheets do not include any liabilities associated with the Shared Plans.

10. Income Taxes

We recorded income tax provisions of $9,589 thousand and $11,038 thousand for the quarters ended December 26, 2014 and December 27, 2013, respectively. The tax provisions reflect income tax benefits recognized in connection with the profitability of certain entities operating in lower tax jurisdictions.

We record accrued interest as well as penalties related to uncertain tax positions as part of the provision for income taxes. As of December 26, 2014, we had recorded $4,806 thousand of accrued interest and penalties related to uncertain tax positions, all of which was recorded in income taxes on the Condensed Combined Balance Sheet. During the three months ended December 26, 2014, we recognized $200 thousand of expense related to interest and penalties on the Condensed Combined Statement of Operations. As of September 26, 2014, the balance of accrued interest and penalties was $5,150 thousand, all of which was recorded in income taxes on the Condensed Combined Balance Sheet.

BNS’s U.S. operations were included in various income tax returns which were filed on a unitary, consolidated, or stand-alone basis in multiple U.S. jurisdictions, which generally have statutes of limitations ranging from 3 to 4 years.

BNS’s non-U.S. operations were included in various income tax returns of non-U.S. subsidiaries which file income tax returns in the countries in which they have operations. Generally, these countries have statutes of limitations ranging from 3 to 10 years.

Although it is difficult to predict the timing or results of our worldwide examinations, we estimate that up to approximately $2,200 thousand of unrecognized income tax benefits, excluding the impact relating to accrued interest and penalties, could be resolved within the next twelve months.

We are not aware of any other matters that would result in significant changes to the amount of unrecognized income tax benefits reflected on the Condensed Combined Balance Sheet as of December 26, 2014.

11. Share Plans

Total share-based compensation expense, which was included in general and administrative expenses on the Condensed Combined Statements of Operations, was $1,925 thousand and $1,908 thousand during the first quarters of fiscal 2015 and 2014, respectively.

12. Related Party Transactions, Parent’s Net Investment, and Significant Transactions

Related Party Transactions

All significant intercompany transactions and accounts within BNS’s combined businesses have been eliminated. All intercompany transactions between BNS and Parent and/or Parent’s other subsidiaries have been included in the Condensed Combined Financial Statements as changes in Parent company investment. As the books and records of BNS were not kept on a separate-company basis, the determination of the average net balance due to or from Parent was not practicable.

Corporate Allocations and Parent Company Investment

Historically, Parent has provided services to, and funded certain expenses for BNS that have been included as a direct component of BNS’s historical accounting records, such as information technology, global operations, legal, and finance (the “direct allocations”). In addition, the Condensed Combined Financial Statements include general corporate expenses of Parent which were not historically allocated to BNS for certain support functions that are provided on a centralized basis within Parent and not recorded at the business unit level (“general corporate expenses”). The general corporate expenses often related to the same or similar functions as the direct allocations, but were not recorded at the

business unit level for Parent financial reporting purposes. For purposes of these stand-alone financial statements, the general corporate expenses have been allocated to BNS. The direct allocations and general corporate expenses are included in the Condensed Combined Statements of Operations as components of cost of sales; selling expenses; research, development, and engineering expenses; and general and administrative expenses, respectively, and accordingly, as a component of business unit equity. These expenses have been allocated to BNS on a pro rata basis of operating income. Management believes the assumptions underlying the Condensed Combined Financial Statements, including the assumptions regarding allocating general corporate expenses from Parent, are reasonable. Nevertheless, the Condensed Combined Financial Statements may not include all of the actual expenses that would have been incurred and may not reflect BNS’s combined results of operations, financial position, and cash flows had it been a stand-alone company during the periods presented. Actual costs that would have been incurred if BNS had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. The corporate allocations made during the first quarters of fiscal 2015 and 2014 of $37,803 thousand and $32,207 thousand, respectively, included both general corporate expenses of Parent which were not historically allocated to BNS of $10,458 thousand, and $8,125 thousand, respectively, and the direct allocations historically recorded on BNS’s accounting records of $27,345 thousand and $24,082 thousand, respectively.

All significant intercompany transactions between BNS and Parent are considered to be effectively settled for cash at the time the separation of BNS from Parent is recorded. As discussed above, the total net effect of the settlement of these intercompany transactions is reflected in the Condensed Combined Statements of Cash Flows as a financing activity and in the Condensed Combined Balance Sheets as Parent company investment.

13. Subsequent Events

BNS has evaluated subsequent events through February 13, 2015, the date the Condensed Combined Financial Statements were issued.

On January 27, 2015, Parent entered into a definitive agreement to sell BNS for $3 billion in cash, subject to a final working capital adjustment. The transaction is expected to close during calendar 2015 contingent on customary closing conditions and regulatory approvals. No other significant subsequent events have occurred through this date requiring adjustment to the Condensed Combined Financial Statements or disclosures.

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