What changed in this filing

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Item 1A. Risk Factors

2025-02-26 compared with 2024-02-29 · 28 added, 36 removed, 642 unchanged (9% of the section changed)

59 unchanged sentences

Capital spending in the communications industry is cyclical and can be curtailed or deferred on short notice.

We experienced a significant decrease in customer capital spending in 2023, which negatively impacted our results of operations, and we may continue to experience significant fluctuations in sales and operating income due to the volatility in our industry.

We experienced a decrease in customer capital spending in 2024, which negatively impacted our results of operations, and we may continue to experience significant fluctuations in sales and operating income due to the volatility in our industry.

A variety of factors affect the timing and amount of capital spending in the communications industry, including:

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For example, as networks become more virtualized, the functionality of our products is at risk of being subsumed by competitors who utilize software to provide the same functions as our products.

A related trend that could affect us is the emerging interest in distributed access architecture (DAA), which disaggregates some of the functions of the c onverged cable access platform (CCAP) and the access and transport platforms to enable deployment of these functions in ways that could reduce traditional operator capital expenditures in hybrid fiber-coaxial.

A related trend that could affect us is the emerging interest in distributed access architecture (DAA), which disaggregates some of the functions of the converged cable access platform (CCAP) and the access and transport platforms to enable deployment of these functions in ways that could reduce traditional operator capital expenditures in hybrid fiber-coaxial.

We have developed and deployed a line of DAA products, but some operators may not be aligned on the specific implementations of DAA and we could lose market share to competitors.

Service providers also have the goal of virtualizing CCAP management and control functions as they deploy DAA, and although we are developing a fully virtualized CCAP product, this could potentially enable new competitors to enter the market and reduce operator dependence on our products.

In our mobile wireless markets, the shift to 5G includes the deployment of new spectrum in higher frequency bands where larger available bandwidths enable a significant increase in network capacity.

In many cases, massive multiple-in-multiple-out (MIMO) technology (active antennas) is the most effective way to deliver coverage in these bands.

Consequently, 5G deployments present an inherent headwind to our traditional passive base station antenna business.

We are developing technologies and new products to address this shift from passive to active antennas, but we may not be able to completely offset this trend.

As there is technology evolution or transformation within the industry, whether it be DOCSIS 4.0, PON, Wi-Fi technology or the shift to 5G, there is a risk that our market position would be weakened.

As there is technology evolution or transformation within the industry, whether it be DOCSIS 4.0, PON or Wi-Fi technology, there is a risk that our market position would be weakened.

If any of our competitors’ products or technologies were to become the industry standard, our business would be negatively affected.

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We may be required to obtain additional financing in the future to address our liquidity needs, and subject to market conditions, we may seek to amend, refinance, restructure or repurchase our outstanding indebtedness and/or raise additional equity financing.

We currently believe that our existing cash and cash equivalents, combined with availability under our asset-based revolving credit facility (Revolving Credit Facility), will be sufficient to meet our presently anticipated future cash needs.

However, we may be required to obtain additional financing in the future to address our liquidity needs, and subject to market conditions, we may from time to time seek to amend, refinance, restructure, exchange or repurchase our outstanding indebtedness and/or raise additional equity or other financing.

For example, our $1.3 billion of 6.0% senior notes due June 15, 2025 will likely require us to seek refinancing or some other restructuring of our debt in 2024.

Any debt we incur in the future may have terms (including cash interest rate, financial covenants and covenants limiting our operating flexibility or ability to obtain additional financings) that are not favorable to us, and any such additional equity financing may dilute the economic and/or voting interests of our existing stockholders, may be preferred in right of payment to our outstanding common stock or confer other privileges to the holders and may contain financial or operational covenants that restrict our operating flexibility or ability to obtain additional financings.

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Any issuance of equity or debt may be for cash or in exchange for our outstanding securities or indebtedness, or a combination thereof.

We are aware that our outstanding debt securities and debt under our credit facilities are currently trading at substantial discounts to their respective principal amounts.

We are aware that certain of our outstanding debt securities and debt under our credit facilities are currently trading at discounts to their respective principal amounts.

In order to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, we may, from time to time, purchase such debt for cash, in exchange for common or preferred stock or debt, or for a combination thereof, in each case in open-market purchases and/or privately negotiated transactions, tender offers or exchange offers and upon such terms and at such prices as we may determine.

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As of December 31, 2024, we had approximately $9.4 billion of indebtedness.

As of December 31, 2023, we had no outstanding loans under our Revolving Credit Facility and the remaining availability was $688.0 million, reflecting a borrowing base subject to maximum capacity of $1,000.0 million reduced by $97.9 million of outstanding letters of credit.

As of December 31, 2024, we had $200.0 million of outstanding loans under our Revolving Credit Facility and the remaining availability was $449.3 million, reflecting a borrowing base subject to maximum capacity of $719.2 million reduced by $69.9 million of outstanding letters of credit.

1 Our ability to borrow under our Revolving Credit Facility depends, in part, on inventory, accounts receivable and other assets that fluctuate from time to time and may further depend on lenders’ discretionary ability to impose reserves and availability blocks.

Our interest cost on our senior secured term loan due 2026 (2026 Term Loan) and our Revolving Credit Facility, which make up about $3.1 billion of our indebtedness, is variable and subject to the risk of changes in interest rates.

As the Federal Reserve has increased interest rates in 2023, we have seen increased interest cost which has adversely impacted our results of operations and cash flows.

Our interest cost on our new senior secured term loan due 2029 (2029 Term Loan) and our Revolving Credit Facility, which make up about $3.4 billion of our indebtedness, is variable and subject to the risk of changes in interest rates.

As the Federal Reserve maintained higher interest rates in 2024, we have seen increased interest cost which has adversely impacted our results of operations and cash flows.

This may continue into 2025 if the Federal Reserve continues to maintain higher interest rates or chooses to raise interest rates further.

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• increase our vulnerability to and limit our flexibility in planning for, or reacting to, a potential downturn in general economic conditions or in one or more of our businesses.

The London Interbank Offered Rate (LIBOR) had historically been the reference interest rate in our variable rate debt agreements, but we transitioned our Revolving Credit Facility to Secured Overnight Financing Rate (SOFR) as the reference rate in 2022 and we amended our 2026 Term Loan to replace LIBOR with SOFR in the first half of 2023.

SOFR is calculated differently than LIBOR and they have inherent differences, which could give rise to uncertainties, including limited historical data and volatility.

While we do not expect the transition to SOFR to have a material adverse effect on our business, the full effects of the transition to SOFR remain uncertain.

Secured Overnight Financing Rate (SOFR) is currently the reference interest rate in our variable rate debt agreements and could give rise to uncertainties, including limited historical data and volatility.

While we do not expect the use of SOFR to have a material adverse effect on our business, the full effects remain uncertain.

1 In connection with the repayment of all outstanding amounts under our Revolving Credit Facility on January 31, 2025, the committed amount thereunder was reduced to $750.0 million, subject to borrowing base limitations.

In addition, the indentures and credit agreements governing our indebtedness contain affirmative and negative covenants that limit our ability to engage in activities that may be in our long-term best interests.

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We have recognized substantial impairment charges related to goodwill, including $571.4 million in 2023 and $1,119.6 million in 2022.

There were no asset impairment charges related to goodwill in 2021.

As of the October 2023 annual impairment test, the fair value of our ANS and Building and Data Center Connectivity (BDCC) reporting units equaled their respective carrying values and slight changes in significant assumptions or business factors could result in material impairment.

For the 2024 annual impairment test, we determined that the fair value of our reporting units exceeded the carrying value and that no impairment existed.

In the future, if we are unable to improve our results of operations and cash flows, or other indicators of impairment exist, such as a sustained significant decline in our share price and market capitalization, we may incur material charges against earnings relating to our remaining goodwill.

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Any change in the laws and policies of the U.S.

or other countries affecting trade is a risk to us.

or other countries affecting trade, including pursuant to policies of the new U.S.

administration, is a risk to us.

To the extent there are unfavorable changes imposed by the U.S.

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The implementation of these strategic initiatives may include significant shifts of production capacity among facilities and contract manufacturers.

We have done this in the past related to the integration of certain acquisitions, including the integration of the ARRIS business.

Also, in prior years, with some of the uncertainties in the U.S.

trade tariff environment, we transitioned manufacturing for certain impacted products to non-tariff countries.

For example, in the past, we have transitioned manufacturing for certain products in response to newly enacted tariffs.

In addition, in response to intermittent shutdowns of our facilities during the COVID-19 pandemic, we transitioned certain manufacturing to less impacted facilities.

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The separation, discontinuance or divestiture of a business or product line is subject to various risks and uncertainties that could disrupt or adversely affect our business.

To better optimize our portfolio of products, we have divested of the Home Networks business and we may in the future decide to separate, discontinue or divest of other businesses or product lines that we believe are not core to CommScope’s business, or where we believe the separation, discontinuation or divestiture will be accretive to stakeholders.

To better optimize our portfolio of products, we have recently divested the Home Networks segment, the OWN segment and the DAS business, and we may in the future decide to separate, discontinue or divest of other businesses or product lines that we believe are not core to CommScope’s business, or where we believe the separation, discontinuation or divestiture will be accretive to stakeholders.

A plan to separate, discontinue or divest a business or product line is complex in nature and can be affected by unanticipated developments or changes, including changes in the macroeconomic, regulatory or political environment, changes in credit or equity markets or changes in other market conditions.

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Upon completion, we would also be a smaller, less diversified company and may be more vulnerable to changing market conditions.

In addition, we will continue to incur ongoing costs some of which may exceed our estimates and may be stranded.

In addition, we will continue to incur certain ongoing costs, which will be shared across a smaller company and which may exceed our estimates.

Whether or not a separation plan is completed, our businesses may face risks and uncertainties, including, but not limited to:

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We may not fully realize anticipated benefits from past or future acquisitions or investments in other companies.

Our business strategy has historically relied, in part, on acquisitions to create growth, such as our acquisition of ARRIS in 2019 and our acquisition of TE Connectivity’s Broadband Network Solutions business (the BNS business) in 2015.

Our business strategy has historically relied, in part, on acquisitions to create growth, such as our acquisitions of Casa in 2024, ARRIS in 2019 and TE Connectivity’s Broadband Network Solutions business (the BNS business) in 2015.

We anticipate that a portion of our future growth may be accomplished by acquiring existing businesses, products or technologies.

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We rely on our ERP systems to support critical business operations such as processing sales orders and invoicing, manufacturing, shipping, inventory control, purchasing and supply chain management, human resources and financial reporting.

In 2020, we began the upgrade and integration of our ERP software to a newer, cloud-based version.

The first phase was completed in early 2021 and we completed the second phase in 2023, with limited disruption.

These upgrades and integrations do have risks and any future upgrades or integrations could disrupt our operations, divert management’s attention and have an adverse effect on our capital resources, financial condition, results of operations or cash flows.

Upgrades and integrations of new software or systems have risks and any future upgrades or integrations could disrupt our operations, divert management’s attention and have an adverse effect on our capital resources, financial condition, results of operations or cash flows.

We also rely on management information systems to produce information for business decision-making and planning and to support digital platforms.

Failure to maintain an adequate digital platform or to make additional investment in our digital platform to support e-commerce activities and improve our customer experience could have a material adverse impact on our business through lost sales opportunities.

Many of our systems rely on software and other products provided by third-parties.

Any outages or downtime of such third-party software, including due to defective updates, could have a material adverse impact on our business operations and results of operations.

If we are unable to maintain our management information systems, including our IT infrastructure, to support critical business operations, produce information for business decision-making activities and support digital customer experience activities, we could experience a material adverse impact on our business or an inability to timely and accurately report our financial results.

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the laws and policies of the U.S.

and other countries affecting trade and tariffs, anti-bribery, foreign investment and loans;

and other countries affecting trade and tariffs, including additional tariffs implemented or proposed by the new administration (and counter tariffs from other countries that may be implemented in response):

anti-bribery, foreign investment and loans;

foreign tax laws, including the ability to recover amounts paid as value-added and similar taxes;

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To the extent there are changes in U.S.

trade policies, such as significant increases in tariffs or duties for goods brought into the U.S., our competitive position may be adversely impacted and the resulting effect on our earnings could be material.

trade policies, which have been implemented and/or proposed by the new administration, such as significant increases in tariffs or duties for goods brought into the U.S., our competitive position may be adversely impacted and the resulting effect on our earnings could be material.

For a more complete discussion of our risks related to trade policies, see the risk factor, “Additional tariffs or a global trade war could increase the cost of our products, which could adversely impact the competitiveness of our products” under “International Risks” in this Item 1A, Risk Factors section.

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There is uncertainty about the future relationship between the U.S.

and various other countries, most significantly China, with respect to trade policies and tariffs.

administrations have called for substantial changes to U.S.

The current administration could have a different approach to U.S.

foreign trade policy with China as well as other countries, but there remains uncertainty.

and various other countries, most significantly China and Mexico, with respect to trade policies and tariffs.

administration has implemented and/or proposed substantial changes to U.S.

foreign trade policy with respect to China and other countries, including the possibility of imposing greater restrictions on international trade and significant increases in tariffs on goods imported into the U.S, but there remains uncertainty surrounding if and when all such changes may be implemented and the magnitude of any such changes.

This uncertainty about the future relationship between the U.S.

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We expect to continue to pass along some of these costs to our customers, but the increased cost could adversely affect the demand for products.

We have been successful in the past in shifting the manufacturing locations for the impacted products, but this takes time and results in additional one-time costs and these alternative locations may have higher ongoing manufacturing costs.

We have been successful in the past in shifting the manufacturing locations for some of the impacted products, but this takes time and results in additional one-time costs and these alternative locations may have higher ongoing manufacturing costs.

These cost increases could adversely affect the demand for our products and/or reduce margins, which could have a material adverse effect on our business and our earnings.

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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-K

Item 1A. Risk Factors