What changed in this filing

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Item 1. Legal Proceedings

2024-11-12 compared with 2024-08-09 · 36 added, 14 removed, 79 unchanged (39% of the section changed)

12 unchanged sentences

Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all its debt.

Our Wells Fargo Credit Agreement along with the amendments thereto, contain various restrictive covenants which include, among others, provisions restricting our ability to:

Our Wells Fargo Credit Agreement along with the amendments thereto, contain various restrictive covenants which include, among others, provisions limiting our ability to:

• pay dividends or make other distributions or repurchase capital stock;

12 unchanged sentences

• maintain certain fixed charge coverage ratios;

• maintain minimum amounts of cash and cash equivalents.

As a result of these restrictions, we have been and may continue to be:

• maintain minimum amounts of cash and cash equivalents (during a Springing Covenant Period).

As a result of these covenants, we have been and may continue to be:

• limited in how we conduct our business;

• limited in how much additional funding we can draw on our line of credit;

• unable to raise additional debt or equity financing to operate during general economic or business downturns;

• unable to compete effectively or to take advantage of new business opportunities.

Our failure to comply with the restrictive covenants set forth in the Credit Agreement could result in defaults that accelerate the payment under such debt which would likely have a material adverse impact on our financial condition and results of operations.

• limited in our ability to raise additional debt to operate during general economic or business downturns;

• limited in our ability to compete effectively or to take advantage of new business opportunities.

Our failure to comply with the covenants set forth in the Credit Agreement could result in defaults that accelerate the payment under such debt which would likely have a material adverse impact on our financial condition and results of operations.

In addition, an event of default under the Credit Agreement would permit the lenders to terminate all commitments to extend further credit under the applicable facility.

Furthermore, if we were unable to repay the amounts due and payable under the Credit Agreement, the lenders could proceed against the collateral granted them to secure that indebtedness.

Furthermore, if we were unable to repay the amounts due and payable under the Credit Agreement, the lenders could proceed against the collateral granted to them to secure that indebtedness.

In the event our lenders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.

In addition, these defaults could impair our ability to access debt and equity markets.

In addition, these defaults could impair our ability to access debt and equity capital markets.

For additional information on our debt covenants, see "Liquidity & Capital Resources" in Part I, Item 2 of this report on Form 10-Q.

We require a significant amount of cash to service our indebtedness, our payment obligations to Adtran Networks shareholders under the DPLTA, and other obligations.

Our ability to generate cash depends on many factors beyond our control and any failure to service our outstanding indebtedness could harm our business, financial condition and results of operations.

Furthermore, we have entered into a DPLTA with Adtran Networks.

Additionally, pursuant to the terms of the DPLTA, each Adtran Networks shareholder (other than the Company) has received an offer to elect either (1) to remain an Adtran Networks shareholder and receive from us an Annual Recurring Compensation payment, or (2) to receive Exit Compensation.

For the nine months ended September 30, 2024, approximately 831 thousand shares of Adtran Networks stock were tendered to the Company.

This resulted in total Exit Compensation payments of approximately €15.7 million, or approximately $17.4 million, based on an exchange rate as of September 30, 2024, being paid to Adtran Networks shareholders.

Any failure to satisfy our payment obligations under the DPLTA could harm our business, financial condition and results of operations.

Our ability to make payments on and to refinance our indebtedness, to cover our payment obligations under the DPLTA, and to fund working capital needs and planned capital expenditures depends on our ability to generate cash in the future.

This, to a certain extent, is subject to general economic, financial, competitive, business, legislative, regulatory and other factors that are beyond our control.

If our business does not generate sufficient cash flow from operations, we do not sufficiently reduce costs in a timely manner, or if our future borrowings are not available to us in an amount sufficient to enable us and our subsidiaries to pay our indebtedness or to fund our other liquidity needs, we may need to raise additional debt or equity capital, refinance all or a portion of our indebtedness, sell assets, reduce or delay capital investments, any of which could have a material adverse effect.

The Company experienced revenue declines in the year ended December 31, 2023, and during the three and nine months ended September 30, 2024.

There can be no assurance that the Company will be successful in effecting its plans to preserve cash liquidity and maintain compliance with the Company's covenants on commercially reasonable terms or at all.

We may need to further reduce capital expenditure and/or take other steps to preserve working capital in order to ensure that we can meet our needs and obligations and maintain compliance with our debt covenants.

Our ability to raise additional debt capital or to restructure or refinance our indebtedness will depend on the condition of the capital markets and our financial condition at such time.

Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.

The terms of existing or future debt instruments or preferred stock may limit or prevent us from taking any of these actions.

In addition, any failure to make scheduled payments of interest and principal on our outstanding indebtedness or dividend payments on any future outstanding shares of preferred stock would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness or otherwise raise capital on commercially reasonable terms or at all.

Our inability to generate sufficient cash flow to satisfy our debt service, payment obligations to Adtran Networks shareholders under the DPLTA, and other obligations, or to refinance or restructure our obligations on commercially reasonable terms or at all, would have an adverse effect, which could be material, on our business, financial condition and results of operations.

Furthermore, if we raise additional funds through the issuance

of equity or securities convertible into equity, or undertake certain transactions intended to address our existing indebtedness, our existing stockholders could suffer dilution in their percentage ownership of the Company, or our leverage and outstanding indebtedness could increase.

Current capital market conditions, including the impact of inflation, have increased borrowing rates and can be expected to significantly increase our cost of capital as compared to prior periods should we seek additional funding.

Managing our inventory is complex and has included and may continue to include write downs of excess or obsolete inventory.

3 unchanged sentences

During the year ended December 31, 2023, we recognized write-downs of inventory of $24.3 million due to a discontinuation of certain product lines within our Network Solutions segment in connection with our business efficiency program.

Additionally, during the six months ended June 30, 2024, we recognized write-downs of inventory and other charges of $8.9 million as a result of a strategy shift which included discontinuance of certain items in connection with the Business Efficiency Program, of which, $4.1 million relates to inventory write-downs and $4.8 million relates to other charges.

Additionally, during the nine months ended September 30, 2024, we recognized write-downs of inventory and other charge s of $8.6 million as a result of a strategy shift which included discontinuance of certain items in connection with the Business Efficiency Program, of which, $4.1 million relates to inventory write-downs and $4.5 million relates to other charges.

Significant and unanticipated changes in our business could require additional charges for inventory write downs in a future period.

18 unchanged sentences

We have implemented new controls with respect to one material weakness, and we plan to initiate remediation plans with respect to the other material weaknesses.

These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.

These remediation measures have been time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.

Any failure to maintain effective internal control over financial reporting could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis.

If our financial statements are not accurate, investors may not have a complete understanding of our operations.

If our financial statements are not accurate, investors do not have a complete understanding of our operations.

Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC, the Federal Financial Supervisory Authority, or other regulatory authorities.

1 unchanged sentence

Ineffective internal control over financial reporting could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

We can provide no assurance that the measures that we have taken, are taking, and plan to take in the future will remediate the material weaknesses identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls.

failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls.

In addition, while we have strengthened our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.

16 unchanged sentences

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the six months ended June 30, 2024, we did not repurchase any shares of our common stock.

As of June 30, 2024, there is no current authorization to repurchase common stock.

During the nine months ended September 30, 2024, we did not repurchase any shares of our common stock.

As of September 30, 2024, there is no current authorization to repurchase common stock.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Legal Proceedings