CommScope Company Annual Report 2018

← All annual reports

FY2018 Annual Report · CommScope Company

Loading PDF…

2018 Annual Report

Shaping the Future of Communications

Three-year
selected financial data

(Unaudited —in thousands, except per share amounts)

Year Ended December 31

2016

$4,923,621

2,029,250

42,875

38,552

567,639

(272,010)

222,838

192,470

196,459

$1.16

$1.13

$1,044,244

$2.64

$640,221

399,050

68,314

$428,228

4,567,369

474,990

7,141,986

1,135,946

4,562,010

1,394,084

2017

$4,560,582

1,767,803

43,782

472,039

(252,838)

193,764

192,430

196,811

$1.01

$0.98

$876,705

$2.14

$586,286

378,012

68,721

As of December 31

$453,977

4,522,714

467,289

7,041,666

1,220,142

4,369,401

1,647,826

2018

$4,568,507

1,688,284

44,025

15,000

449,968

(235,000)

140,217

192,022

195,332

$0.73

$0.72

$837,989

$2.27

$494,144

357,458

82,347

$458,195

4,204,299

450,861

6,630,540

1,187,203

3,985,904

1,756,768

Result of operations

Net sales

Gross profit

Restructuring costs, net

Asset impairments

Operating income

Net interest expense

Net income

Earnings per share information:

Weighted average number of shares outstanding:

Basic

Diluted

Earnings per share:

Basic

Diluted

Non-GAAP adjusted results:

Non-GAAP adjusted operating income(1)

Non-GAAP adjusted earnings per share(1)

Other information:

Net cash generated by operating activities

Depreciation and amortization

Additions to property, plant, and equipment

Balance sheet data

Cash and cash equivalents

Goodwill and other intangible assets, net

Property, plant, and equipment, net

Total assets

Working capital

Long-term debt, including current maturities

Stockholders’ equity

(1) See reconciliation of GAAP measures to Non-GAAP measures (page 10).

2018 Annual Report

To our shareholders

CommScope experienced a diffi cult 2018 with perfor-

mance that did not meet our expectations, or the expec-

tations of our shareholders. We saw softer than expected

revenues as large North American operators shifted capital

allocation priorities—part of what we believe represents

a broader slow-down in spending associated with the

wind down of 4G/LTE before 5G-related investments gain

momentum.

In this challenging environment, we pulled the levers

within our control, taking steps to align the company’s

cost structure with current market dynamics, increase our

customer and revenue diversity and improve our resilience.

While we are not satisfi ed with our fi nancial performance,

these actions enabled us to offset some of the declines,

delivering sales results consistent with the prior year, mod-

est earnings growth and high profi tability with signifi cant

cash fl ow generation. We are confi dent the actions we

have taken will enable us to withstand continued industry

While 2018 was challenging, we do

not believe it is refl ective of the long-

term trajectory of CommScope or the

strength of our operating model.

As a combined company, CommScope and ARRIS are well

positioned to drive profi table growth in new markets,

capitalize on key emerging industry trends and shape the

future of wired and wireless communications. Together, we

strive to reach more customers and deliver greater share-

holder value over the long term.

Indeed, we expect the transaction to provide signifi cant

strategic and fi nancial benefi ts that include:

pressures, while also positioning us to capitalize on oppor-

• Increased earnings power through an expected 30-plus

tunities that emerge as market conditions improve.

percent accretion to CommScope adjusted earnings per

To that end, while 2018 was challenging, we do not

share in the fi rst full year;

believe it is refl ective of the long-term trajectory of

• Strengthened revenues and cash fl ows, with nearly

CommScope or the strength of our operating model. Our

strong market position, excellent customer relationships

$1 billion of cash fl ow from operations and $11.3 billion
of revenues(1), enabling rapid debt reduction and contin-

and unique solutions and services continue to differenti-

ued investments in innovation .

ate CommScope as operators prepare for an increasingly

network-dependent world.

• Signifi cant cost savings opportunities, with at least $150

million in annual cost synergies expected within three

Our favorable long-term view is further supported by our

years following closing of the transaction;

acquisition of ARRIS International, which was announced

in November and closed in April 2019. Early in 2018, we

took a hard look within to evaluate the long-term growth

prospects for our existing product portfolio. After com-

prehensively evaluating our business and the evolving

industry, we determined that a combination with ARRIS

provided what we believe is the best means to drive out-

sized growth in our core markets and unlock signifi cant,

• Expanded product offerings and R&D capabilities, with

the combined company holding approximately 15,000

patents and patent applications globally and spending

an average of approximately $800 million annually on

R&D spending;

• Essentially doubling our product addressable market

to approximately $60 billion; and

high-growth opportunities in adjacent markets. We are

• Approximately 30,000 employees operating in more

confi dent it puts CommScope on the trajectory toward a

than 100 nations.

bright, successful future.

(1) 12 months ending December 31, 2018

We also are pleased to resume our collaboration

2018 highlights

with The Carlyle Group, which invested $1 billion in

CommScope in connection with the ARRIS transaction.

We are excited to have Carlyle’s support and long-term

vision for our company. The firm was a great partner

to our management team in the past and we expect to

benefit from that relationship this time around, too.

As we prepared for this transformational combination

with ARRIS, my team and I also were focused on ensuring

CommScope is at its best operationally and competitive-

ly, including by solidifying our leadership positions in the

markets we serve.

CommScope operates in a cyclical industry. Our results

are heavily impacted by a concentrated base of network

operator customers and their spending cycles. The current

environment brings to mind what we and the broader

industry experienced about a decade ago. At that time, the

3G investment cycle in wireless was waning in developed

markets and the 4G/LTE rollouts had yet to reach scale.

As we did then, we have kept our customers and their

needs close to heart while investing in various operational

improvement and simplification initiatives that should bear

fruit in the years ahead. Examples include:

• Repositioning our global manufacturing network to drive

down costs and offset the impact of potential trade

impacts, including tariffs

• Value-engineering products impacted by pricing conces-

sions to offset up to two-thirds of any margin impact

In 2018, we worked collaboratively with our customers,

partners and others in the ecosystem to develop solutions

that address new industry opportunities, like 5G, and solve

customer needs in an increasingly network-dependent

world. Some highlights include:

• CommScope and Google partnered to develop, deploy

and operate an Environmental Sensing Capability (ESC)

network in support of the new Citizens Broadband

Radio Service (CBRS) spectrum band in the U.S.

• CommScope introduced new advanced base station

antenna technology that offers multiple data streams

and additional spectrum to help wireless operators reach

Gigabit LTE speeds on the road to 5G.

• CommScope Era was introduced for in-building wireless.

This all-digital, next generation C-RAN antenna system

leverages wireless operators’ initiatives to centralize and

virtualize baseband radio assets, a foundational design

concept for 5G networks.

• CommScope joined the fixed wireless access market with

the introduction of a new integrated antenna solution

based on xRAN open interface specifications. The open

interface allows wireless operators to mix and match

radio access network (RAN) hardware from multiple

vendors, providing more flexibility to address varying

requirements.

• CommScope demonstrated augmented reality (AR)

capabilities with its imVision® automated infrastructure

• Investing in modularization and automation to reduce

management solution so customers can “see” what’s

costs and increase efficiency in our fiber operations

going on in their local area networks.

• Investing in next generation emerging technologies such

• CommScope collaborated with Nokia to develop a

as CommScope OneCell C-RAN small cell solution and

Massive MIMO (multiple input/multiple output) inte-

CommScope Era platforms to deliver in-building LTE

grated antenna solution that enables network densifi-

solutions at lower costs than currently available

cation in support of mobile data traffic growth and the

• Joint pilot programs with major operators and OEMs

evolution to 5G.

in key 5G technologies such as fixed wireless and

• CommScope and Nokia also teamed up to develop a

Massive MIMO.

Efforts like the ones above—and many more—are happen-

ing across CommScope. Our markets and customers are

changing to address new opportunities and at a pace nev-

er seen before. We are doing the same. This type of work

is genuinely exciting for what it can mean for our future.

solution to reduce the interface complexity between

a base transceiver system (BTS) and active distributed

antenna system (DAS). Using Common Public Radio

Interface, the new solution reduces the space and power

requirements of an active DAS by removing the need for

the radio heads normally needed to feed an active DAS.

2018 Annual Report

• Enabling enterprise services—from autonomous vehi-

cles in factories to e-health services in hospitals—can

become a key business opportunity for wireless network

operators in 5G. To help operators seize such opportu-

nities, CommScope has designed its OneCell® C-RAN

small cell solution to deliver optimal in-building perfor-

mance and enhanced it to ensure smooth migration

to 5G.

• Repaying more than $1.4 billion of debt since the August

2015 BNS acquisition, equivalent to paying down nearly

half of the acquisition debt in three years.

In addition, we celebrated decades of excellence and in-

novation at two of our showcase manufacturing centers—

with the Goa, India center’s 20-year anniversary and the

We are optimistic about our future

and our favorable positioning with our

customers and in our markets.

• We have a track record of operational excellence to

maintain consistent margin performance despite market

volatility and periodic customer pricing pressure.

Kessel-lo, Belgium center’s 50-year anniversary. Quite an

With these and many other competitive advantages,

achievement by the employees at these facilities!

CommScope stands to benefit from attractive industry

During the year we also welcomed Alex Pease as our new

growth trends in a unique and distinctive way.

chief financial officer succeeding Mark Olson, who retired

In 2019, we also are laser-focused on successfully and

after a terrific 25-year career at our company (including

quickly combining with ARRIS, much like you have seen

Andrew Corporation). Alex’s hands-on approach and

from us with previous transactions. Core to this will be our

significant leadership, financial and operational experience

efforts to yield fast and lasting momentum with customers

have already proven to be incredible assets to our team.

and partners, and great teamwork and collaboration with

We look forward to continuing to benefit from his insights.

employees. We also will strive to meet or exceed our syn-

Looking Ahead: 2019 and Beyond

Despite the challenges faced in 2018, we are optimistic

about our future and our favorable positioning with our

customers and in our markets.

ergy targets and generate free cash flow that will enable

aggressive debt repayment.

Together with ARRIS, we aim to create a company that will

shape communications networks of the future through

a wider variety of technology and solutions and a more

expansive pool of employee talent—all to provide addi-

• We are a global leader in the markets we serve, and our

tional value and benefits to our customers, partners and

scale, integrated solutions, established sales channels

shareholders.

and strong customer relationships provide a sustainable

competitive advantage.

• Our global manufacturing and distribution network

and worldwide sales force provide us significant scale

to support our customers.

• We strive to solve our customers’ toughest challenges

by making their hardware easier and less costly to install,

optimize and maintain. We do this through strong

design capabilities and technology know-how and have

significant intellectual property and R&D investment

to support it.

Thank you for your continued support of CommScope.

Eddie Edwards

President and Chief Executive Officer

CommScope and ARRIS

Redeﬁ ning Tomorrow by Shaping the Future of Wired and Wireless Communications

CommScope aims to shape the future of communications and to help our customers with their infrastructure

needs—today and as networks continue to transform. We are advancing that goal through our acquisition of

ARRIS, which was announced in November and closed in early April 2019.

ARRIS is a global leader in entertainment and communications solutions focused on connecting people and

technologies. ARRIS combines hardware, software and services to enable advanced video experiences and

constant connectivity across a variety of environments—for service providers, commercial verticals, enterprises

and the people they serve.

Together, CommScope and ARRIS are well positioned to shape the future of wired and wireless

communications. Indeed, through this transaction, the combined company has a wider variety of technology

and solutions and a more expansive pool of employee talent to provide additional value and a broader range of

innovative solutions that work for network operators across the globe.

Eddie Edwards, CommScope’s president

and chief executive offi cer, and Alex

Pease, CommScope’s executive vice

president and chief ﬁ nancial offi cer,

address some frequently asked questions

about the ARRIS combination.

Eddie Edwards

Alex Pease

What are the chief

Eddie Edwards:

beneﬁ ts of this

transaction?

We expect this transaction to create new opportunities for both companies across mul-

tiple markets, while making us even more relevant and vital to our existing networking

customers. Together, CommScope and ARRIS have greater capabilities to shape the

future of wired and wireless communications and are well-positioned to benefi t from

several key industry trends, such as:

• Convergence of wired and wireless networks
• Fiber and mobility everywhere
• 5G
• Internet of Things

• Rapidly changing network and technology architectures

6
6

2018 Annual Report
2018 Annual Report

We have brought together two companies—established and respected leaders in their

respective markets—with a unique set of complementary assets and capabilities that are

expected to enable end-to-end communications infrastructure solutions, something that

neither company could achieve on its own. In talking with many customers, the enthusi-

asm and promise of our combination in their view is high. Like us, customers are eager to

benefi t from future combined capabilities, which we expect to include:

• Converged small cell solutions for licensed and unlicensed wireless spectrum via

combined WiFi and cellular capabilities

• Complementary wired and wireless communications infrastructure
• Integrated broadband access
• Private network solutions for industrial, enterprises and public venues

• Comprehensive connected and smart home solutions

Together, CommScope and ARRIS have a wider variety of technology and solutions and a

more expansive pool of employee talent to provide additional value and a broader range of

services to our customers and partners. The combined company consists of a team of near-

ly 30,000 talented innovators working to redefi ne tomorrow and help shape the future of

wired and wireless communications.

Eddie Edwards:

We believe the combination of the two companies creates numerous opportunities to

cross-sell, support customers in new ways and expand into adjacent markets. Although

potential revenue synergies are not refl ected in our publicly-disclosed synergy targets, we

What are potential

revenue synergies

of the combined

company and how

will you expand your

expect the potential uplift to be meaningful.

total addressable

market?

Q CommScope is highly

levered as a result of

the transaction. Will

this be a major concern

for the company?

Examples of potential revenue synergies include:

• Creating end-to-end residential broadband delivery with active components from ARRIS’

Network and Cloud business and passive components from CommScope’s outdoor
network solutions business.

• A promising enterprise market opportunity to provide indoor coverage and connectivity

via CommScope’s OneCell small cell solution using licensed spectrum and ARRIS’
unlicensed WiFi offering from Ruckus Networks.

• Greater opportunities with hyperscale data center operators with ARRIS’ professional

services business, which designs and implements large-scale data centers. This creates

a pull-through opportunity for CommScope’s vast fi ber connectivity solutions.

Because there is minimal overlap between the two companies, we believe there will be

numerous areas in which we can help each other immediately in serving customers.

Alex Pease:

We believe the net leverage is appropriate given the cash fl ow dynamics of our combined

businesses. It’s important to note that the combined company is expected to generate

nearly $1 billion of cash fl ow from operations in the fi rst complete year post-close, and we

expect to use free cash fl ow to aggressively pay down our debt.

CommScope also has a history of fl exing its balance sheet to fi nance strategic acquisitions

and then paying down debt quickly. We expect this to continue with ARRIS and we plan to

reduce net leverage to about 4.0x within two years post-close.

We have stress tested our business model and are comfortable with our balance sheet

in the event of an economic downturn.

Q Why is Carlyle’s

involvement in fund-

Alex Pease:

We are happy that Carlyle has chosen to reinvest in CommScope and is supporting

ing this transaction

this transaction. Carlyle is one of the world’s largest private equity fi rms, with deep

signiﬁ cant?

expertise in telecommunications and extensive knowledge of CommScope. As you

know, Carlyle took CommScope private in 2011 and fully exited its equity stake in

2016. CommScope remains one of Carlyle’s best performing investments in its history.

We view their participation as a strong endorsement of the transaction and our long-

term strategy. The fi rm was a great partner to our management team in the past and

we expect to benefi t from that relationship this time around, too.

Both companies are

Eddie Edwards:

technology-driven.

CommScope and ARRIS share a customer-focused culture that emphasizes

How will you nurture

innovation—a core value. Together, the two companies have approximately 15,000

innovation in the

patents and spend an average of approximately $800 million annually on research

future?

and development.

Innovation only matters if we and our employees are fi nding new ways to provide

effective, effi cient and game-changing solutions for our customers. That’s what this

combination with ARRIS is about. In fact, both companies have done well in recent

years in seeding a culture of innovation beyond what’s done traditionally by engineers

and other technologists. Innovation is owned by all of us and at every touchpoint of

the customer experience. We want employees to be comfortable proposing ideas

and encourage them to challenge the status quo. Through this combination, we will

work hard to harness the vast expertise across the combined company to develop new

initiatives that will drive growth and lead to fantastic customer experiences.

Alex Pease:

Combining with ARRIS is a critical step in fueling our future growth. We have es-

sentially doubled our product addressable market to more than $60 billion. We now

expect to be in a much better position to capitalize on long-term growth trends within

the communications industry, including network convergence, fi ber and mobility ev-

erywhere, 5G, Internet of Things, rapidly changing network and technology architec-

tures and others.

We know we have to grow faster and do so profi tably and consistently. Given

CommScope’s effi cient business model, a point of growth provides a far greater return

in profi tability—thus our desire and focus on reinvigorating our ability to fuel growth

and uncover new opportunities that feed into it. We believe ARRIS, with which we

have minimal overlap, provides us access to adjacent markets in which we can become

relevant, and expands our relationships and criticality with our existing long-standing

customers.

The transaction also is structured to deliver near-term fi nancial benefi ts, including an

expected 30-plus percent accretion to adjusted earnings per share in the fi rst full year

post-close and cost synergies of at least $150 million within three years.

How will this

transaction beneﬁ t

shareholders?

8
8

2018 Annual Report
2018 Annual Report

Accelerates CommScope’s aim to
shape the communications networks
of the future

STRATEGIC
FIT

COMPLEMENTARY
SOLUTIONS

ATTRACTIVE
FOOTPRINT

• Creates a combined

• Expect to provide a

• New product addressable

growth and cash flow
oriented company

• Compelling value

proposition to all key
stakeholders

• Complementary set of IP,
capabilities, leadership,
and customers

• Strong track record of

product commercialization

• Similar cultures expected
to lead to a seamless
integration

complete broadband
access solution from the
service provider’s facility
to the end customer’s
home

• Plans for end-to-end
wireless solutions
combining licensed and
unlicensed technologies
for indoor and 5G
networks

• Anticipate offering a
complete wired and
wireless private network

markets with diverse
product lineup and
geographies

• Expanded global footprint
with customers in over
150 countries

• Improved technical

expertise with
approximately 15,000
patents and boosted
R&D investment

Reconciliation of GAAP measures
to non-GAAP adjusted measures

(Unaudited—in millions, except per share amounts)

Year Ended December 31

Reconciliation of adjusted operating income
Operating income, as reported

Adjustments:

Amortization of purchased intangible assets

Restructuring costs, net

Equity-based compensation

Asset impairments
Integration and transaction costs(1)
Purchase accounting adjustments(2)
Non-GAAP adjusted operating income

Reconciliation of adjusted net income

Income before income taxes, as reported

Income tax expense, as reported

Net income, as reported

Adjustments:

Total pretax adjustments to operating income
Pretax amortization of deferred financing costs & OID(3)
Pretax pension and postretirement benefit plan terminations(4)
Pretax foreign currency loss on entity liquidation(4)
Pretax loss on debt transactions(4)
Pretax net investment gains(4)
Tax effects of adjustments and other tax items(5)

Non-GAAP adjusted net income

Diluted EPS, as reported
Non-GAAP adjusted diluted EPS(6)

Reconciliation of adjusted free cash flow
Cash flow generated by operating activities, as reported

Less: Additions to property, plant, and equipment

Adjustments:

Capital spending for BNS acquisition integration

Cash paid for integration and transaction costs

Non-GAAP adjusted free cash flow

Note: Components may not sum to total due to rounding.

2016
$567.6

297.2

42.9

35.0

38.6

62.3

0.6

2017
$472.0

271.0

43.8

41.9

48.0

$1,044.2

$876.7

$272.6

(49.7)

$222.8

476.6

21.4

17.8

(0.5)

(218.9)

$519.2

$1.13

$2.64

$640.2

(68.3)

6.1

64.8

$642.8

$209.7

(16.0)

$193.8

404.7

25.4

16.0

(9.0)

(210.5)

$420.4

$0.98

$2.14

$586.3

(68.7)

50.6

$568.2

2018
$450.0

264.6

44.0

44.9

15.0

19.5

$838.0

$170.7

(30.5)

$140.2

388.0

17.3

25.0

14.0

(142.0)

$442.5

$0.72

$2.27

$494.1

(82.3)

$411.8

(1) Reflects integration costs related to the acquisition of the BNS business, transaction costs related to potential and consummated acquisitions and costs related to secondary stock offerings.
(2) Reflects non-cash charges resulting from the application of acquisition accounting.
(3) Included in interest expense.
(4) Included in other expense, net.
(5) The tax rates applied to adjustments reflect the tax expense or benefit based on the tax jurisdiction of the entity generating the adjustment. There are certain items for which we expect little or no tax effect. Given
the complexities of the U.S. tax legislation enacted in late 2017, we applied a non-GAAP effective tax rate of 35% for the fourth quarter 2017, consistent with the adjusted rate in prior quarters of 2017.
(6) Diluted shares used in the calculation of non-GAAP diluted EPS for the years ended December 31, 2018, 2017 and 2016 were 195.3 million, 196.8 million and 196.5 million, respectively.

CommScope management believes that presenting operating income, net income, diluted EPS, and cash flow information excluding the special items noted above provides meaningful information to investors in
understanding operating results and may enhance investors’ ability to analyze financial and business trends, when considered together with the GAAP financial measures. In addition, CommScope management believes that
these non-GAAP financial measures allow investors to compare period-to-period more easily by excluding items that could have a disproportionately negative or positive impact on results in any particular period.

2018 Annual Report

FORM 10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(Mark One)
(cid:95)(cid:95)(cid:3) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the fiscal year ended December 31, 2018
OR

(cid:133)(cid:3) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the transition period from to
Commission file number: 001-36146

CommScope Holding Company, Inc.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
1100 CommScope Place, SE
Hickory, North Carolina
(Address of principal executive offices)

28602
(Zip Code)

27-4332098
(I.R.S. Employer
Identification No.)

(828) 324-2200
(Telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock, par value $.01 per share

Name of each exchange on which registered
Nasdaq

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes (cid:95)(cid:3)No (cid:133)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes (cid:133) No (cid:95)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:95) No (cid:133)
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit such files). Yes (cid:95) No (cid:133)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:95)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Accelerated filer
Large accelerated filer (cid:95)
(cid:133)
Non-accelerated filer(cid:3) (cid:133)
Smaller reporting company (cid:133)
Emerging growth company (cid:133)
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes (cid:133) No (cid:95)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. (cid:133)
The aggregate market value of the shares of Common Stock held by non-affiliates of the registrant was approximately $5,530
million as of June 30, 2018. For purposes of this computation, shares held by affiliates and by directors and officers of the
registrant have been excluded.
As of February 7, 2019 there were 192,380,278 shares of the registrant’s Common Stock outstanding.

Documents Incorporated by Reference
Portions of the registrant’s Proxy Statement for the 2019 Annual Meeting of Stockholders are incorporated by reference in Part
III hereof.

CommScope Holding Company, Inc.
Form 10-K
December 31, 2018
Table of Contents

Part I

Item 1. Business

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

Part II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases

of Equity Securities

Item 6. Selected Financial Data

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Part III

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

Part IV

Item 15. Exhibits and Financial Statement Schedules

Signatures

110

111

112

120

PART I

Unless the context otherwise requires, references to “CommScope Holding Company, Inc.,” “CommScope,” “the
Company,” “Registrant,” “we,” “us,” or “our” are to CommScope Holding Company, Inc. and its direct and indirect
subsidiaries on a consolidated basis.

This Annual Report on Form 10-K includes certain statements that constitute “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, which reflect our current views with respect to future events and financial performance.
These forward-looking statements are generally identified by their use of such terms and phrases as “intend,” “goal,”
“estimate,” “expect,” “project,” “projections,” “plans,” “anticipate,” “should,” “could,” “designed to,” “foreseeable
future,” “believe,” “think,” “scheduled,” “outlook,” “target,” “guidance” and similar expressions, although not all
forward-looking statements contain such terms. This list of indicative terms and phrases is not intended to be all-
inclusive. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only
as of the date the statement was made.

These statements are subject to various risks and uncertainties, many of which are outside our control. Item 1A,
“Risk Factors,” of this Annual Report on Form 10-K sets forth more detailed information about the factors that may
cause our actual results to differ, perhaps materially, from the views stated in such forward-looking statements.
Although the information contained in this Annual Report on Form 10-K represents our best judgment as of the date
of this report based on information currently available and reasonable assumptions, we can give no assurance that
the expectations will be attained or that any deviation will not be material. Given these uncertainties, we caution you
not to place undue reliance on these forward-looking statements, which speak only as of the date made. We are not
undertaking any duty or obligation to update any forward-looking statements to reflect developments or information
obtained after the date of this Annual Report on Form 10-K, except to the extent required by law.

ITEM 1.

BUSINESS

Company Overview

We are a global leader in providing infrastructure solutions for communications networks. Our portfolio includes
robust and innovative wireless, fiber optic and copper solutions for today’s evolving digital lifestyle. Our talented
and experienced global team helps customers increase bandwidth; maximize existing capacity; improve network
response time and performance; and simplify technology migration. Our solutions are found in some of the largest
venues and outdoor spaces; in data centers and buildings of all shapes, sizes and complexities; at wireless cell sites;
in telecom central offices and cable television headends; in fiber-to-the-X (FTTX) deployments; and in airports,
trains, and tunnels. Vital networks around the world run on CommScope solutions.

We have a team of over 20,000 people to serve our customers in over 100 countries through a network of more than
30 world-class manufacturing and distribution facilities strategically located around the globe. Our customers
include substantially all of the leading global telecommunication operators, data center managers, leading multi-
system operators (MSOs) and thousands of enterprise customers, including many Fortune 500 companies. We have
long-standing, direct relationships with our customers and serve them through a direct sales force and a global
network of channel partners.

On November 8, 2018, we announced an agreement to acquire ARRIS International plc (ARRIS) in an all cash
transaction with a total purchase price of approximately $7.4 billion, or $31.75 per share. We expect the transaction
to close during the first half of 2019. See “ARRIS Acquisition Rationale” under our “Strategy” section within this
Part I, Item 1, “Business” for a discussion of strategy behind the acquisition of ARRIS and see “ARRIS Acquisition
Risks” in Part I, Item 1A., “Risk Factors” for a discussion of risks related to the pending acquisition of ARRIS.

For the year ended December 31, 2018, our revenues were $4.57 billion and our net income was $140.2 million. For
further discussion of our current and prior year financial results, see Part II, Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements included in
Part II, Item 8 of this Annual Report on Form 10-K.

CommScope enables and empowers many of the top-performing wireless, telecommunications, business enterprise,
broadband and cable television networks in existence today by providing solutions for the service provider and
enterprise (including hyperscale and cloud data centers) markets. The table below summarizes 2018 revenue, global
leadership position and solutions offerings for our two segments:

Connectivity Solutions (CCS)

Mobility Solutions (CMS)

2018 Revenue

$2,813 million

$1,756 million

Global
Leadership
Position

A global leader in innovative fiber optic and
copper connectivity solutions for use in data
centers and business enterprise,
telecommunications, cable television and
residential broadband networks

A global leader in providing infrastructure
for the most advanced wireless networks

Service
Providers

(cid:120) High-capacity fiber and apparatus
(cid:120) Plug and play hardened connector systems

(cid:120) Base station antenna systems
(cid:120) Interconnectivity (fiber, hybrid

for harsh environments

(cid:120) FTTX solutions
(cid:120) Fiber distribution hubs and management

systems

(cid:120) Broadband MSO solutions
(cid:120) Intelligent infrastructure management

hardware and software

fiber/power and coaxial feeder cabling,
connectors and assemblies)

(cid:120) Radio frequency (RF) conditioning and
interference mitigation (amplifiers,
filters, diplexers and combiners)
(cid:120) Metro cell antenna and concealment

solutions

(cid:120) Residential connectivity (amplifiers, splitters,

(cid:120) Distributed antenna system (DAS) and

drop cable, interconnects)

small cell solutions

(cid:120) Fiber and central office LAN solutions

(cid:120) Microwave backhaul antennas and power

solutions

(cid:120) Single mode and multi-mode fiber and

(cid:120) In-building cellular solutions

Enterprise
(including
Hyperscale and
Cloud Data
Centers)

apparatus

(cid:120) Coaxial and structured copper cabling

systems and apparatus

(cid:120) Campus network fiber cabling systems
(cid:120) Intelligent infrastructure management

hardware and software

(cid:120) Quick-turn delivery of fiber and copper

assemblies

(cid:120) High density fiber connectivity

(shelves/panels, modules, trunks,
jumpers/arrays and cable)

(cid:120) Pre-terminated fiber and copper cable and

connectivity

(cid:120) Intelligent infrastructure management

hardware and software

(cid:120) Data center raceways and cable assemblies

Industry Background

We participate in the large and growing global market for connectivity and essential communications infrastructure.
This market is being driven by the growth in bandwidth demand associated with the continued demand of
smartphones, tablets and machine-to-machine (M2M) communication as well as the proliferation of data centers,
Big Data, cloud-based services, streaming media content and the Internet of Things (IoT). Telecommunications
operators are densifying 4G networks and deploying 5G and fiber optic networks to support the dramatic growth in
bandwidth demand. As users consume more data on smartphones, tablets and computers, enterprises face a growing
need for higher bandwidth networks, in-building cellular coverage and more robust, efficient and intelligent data
centers. Operators are investing in their networks to deliver a competitive triple-play of services (voice, video and
high-speed data) and to maintain service quality. There are several major trends that we expect to drive network
deployments and investment, including:

Evolving Network Architecture

The pace of change in networking has increased as consumers and data-driven businesses utilize more bandwidth
and shift toward ubiquitous mobile applications. Exponential growth in video and “universal mobility” are
revolutionizing how we connect to each other and changing the network architecture needed to support consumer
demand. This trend requires better network coverage, greater broadband access, and increased capacity and data
storage.

Operators are working to transition their networks to become faster and more efficient. CommScope sees several
key network trends that will continue to impact CommScope and the industry during 2019 and beyond:

1) Network Convergence: Operators are moving toward converged or multi-use network architectures.

Rather than building upon independent wireline and wireless networks, operators are now shifting toward
networks that combine voice, video and data communications into a single, converged network. In fact, we
are developing solutions that support the convergence of wireline and wireless networks for 5G. These
changes are expected to help operators increase the efficiency and capability of the network, improve asset
utilization and reduce cost. We expect that fiber and wireless technologies will continue to be essential
building blocks of converged networks. Convergence of fiber-based broadband networks and traditional
wireless networks will be essential for the success of 5G technologies.

2) Densification: As wireless operators work to meet consumer demand, they utilize three primary tools to

increase capacity: a) adding wireless spectrum, b) improving network efficiency and c) increasing network
density (i.e., adding more cell sites or sectors to an existing cell site). Although the Company benefits from
all three strategies, densification of cell sites is expected to be a key driver as operators transition toward
5G networks. A solid 4G network will be the foundation for 5G. Densification includes enhanced
sectorization at macro cell sites, building new metro cell or small cell sites and establishing better in-
building coverage. The Company expects that densification will require significant fiber cable and
connectivity between wireless cell sites (fronthaul, crosshaul and backhaul).

3) Virtualization and Centralization: Operators are virtualizing and centralizing wireless networks to make

them more flexible and efficient. The first step toward capacity virtualization is deploying centralized radio
access networks (CRAN). CRAN is a centralized computing architecture for radio networks which requires
installation of direct fiber connectivity to individual cell sites. By leveraging the signal carrying capacity of
fiber, operators can centrally control dozens or even hundreds of cell sites in the network. Centralizing
independent wireless base stations can support the efficient distribution of capacity, improve network
response time, reduce the amount of equipment needed at each individual cell site, and lower power and
leasing costs. These CRAN nodes will evolve to become “Cloud RAN” nodes as operators “virtualize” the
network by combining hardware and software network resources and network functionality into a single,
software-based administrative entity. Network virtualization also supports the transition to 5G.

4) Optimization: Deployment of wired and wireless networks is complex and costly. Operators are highly

focused on optimizing network resources and reducing the total cost of ownership. Optimization includes
techniques such as innovative fiber connectivity solutions to reduce installation time, network intelligence
to monitor equipment efficiency, precise antenna patterns to optimize cell site capacity, spectrum reuse,
offloading traffic onto Wi-Fi and utilization of unlicensed spectrum—especially inside buildings.

Fiber Deep Deployments

Residential and business bandwidth consumption continues to grow substantially. The proliferation of over-the-top
video, multiscreen viewing, cloud services and social media are prompting operators to accelerate fiber
deployment. Operators can increase network capacity by installing fiber deeper into their networks. Although
consumer devices are increasingly connected to the network via a wireless connection such as LTE or Wi-Fi, these
wireless access points must have abundant backhaul capacity available to provide consumers the experience they
expect. Operators around the globe are deploying fiber deep to build next generation networks. These networks use
the capabilities of fiber to enable consumers access to content at higher speeds with lower network response time.
As networks improve and deliver higher speed and greater reliability, many operators are choosing to provide both
residential and business services over a common physical layer infrastructure, saving them time and money. In
addition, with the deployments of metro cells, outdoor small cells and fixed wireless broadband to the home, these
same service providers are planning to utilize this common physical layer infrastructure to provide connectivity to
these wireless access points.

Shift in Enterprise Spending

Several trends in the enterprise market are expected to create opportunities and challenges. First, the shift toward
mobility in business enterprises is expected to impact the amount and type of structured copper connectivity needed
over the longer-term. As the bandwidth requirements for Wi-Fi and indoor cellular networks increase, more access
points will be needed throughout commercial buildings. As a result, enterprises are expected to adjust in-building
cabling designs to deliver both power and high-speed data to those devices. Power-over-ethernet is expected to
become increasingly important as the number of devices used for Wi-Fi and indoor cellular networks
multiplies. While enterprises continue to need copper connectivity to power edge devices, enterprises are deploying
fiber more extensively in data centers. Over the next several years, we expect the growing demand for fiber
solutions to result in decelerating demand for copper solutions in networks. Due to huge increases in data traffic and
migration of applications to the cloud, enterprises are also shifting spending toward multi-tenant (co-located) data
centers and hyperscale cloud service providers, which offer cloud data center services as a replacement to in-house
corporate data centers. Multi-tenant and hyperscale data center managers are focused on ultra-low loss, high density,
scalable fiber connectivity solutions.

An increase in average data center size and the number of assets in a data center significantly raises the total cost of
ownership and the complexity of managing data center infrastructure. Data center operators strive to manage their
resources efficiently and to reduce energy consumption by monitoring all elements within the data center.
Automated infrastructure management software helps operators improve operational efficiency, maximize capability
and reduce costs by providing clear insight into cooling capacity, power usage, utilization, applications and overall
performance.

Momentum of 5G

5G wireless is evolving from an industry vision toward a tangible, next generation wireless technology. Some
operators have begun a transition to 5G wireless and have announced trials and pre-standard deployments of 5G
technology. The primary benefits of 5G are expected to include:

(cid:120) Enhanced mobile broadband—to support significant improvement in data rates and user experience,

(cid:120)

IoT and M2M communications to support the expected billions of connections between machines as well as
short bursts of information to other systems, and

(cid:120) Ultra-fast response time—to support applications like public safety, autonomous vehicles and drones.

Densification, virtualization and optimization of the network are all required to support 5G. Operators will need to
both acquire and launch new spectrum for 5G, as well as continue their strategy of re-allocation of spectrum from
one generation to another. Some of this spectrum will be at much higher frequencies and will use new technologies
to deliver exceptional amounts of bandwidth to subscribers. 5G also requires significant fiber to connect wireless
access points to each other to improve the response time of the network. As operators transition toward 5G, they
must also manage the fundamental network deployment issues of site acquisition, power, backhaul and in-building
wireless proliferation.

Metro Cell, DAS and Small Cell Investment to Enhance and Expand Wireless Coverage and Capacity

The traditional macro cell network requires mobile users to connect directly to macro cell base stations. Macro cells
are primarily designed to provide coverage over wide areas and typically transmit high power. Alone, they are not
optimal for dense urban areas where physical structures often create coverage gaps and capacity is frequently
constrained. Adding new macro cells or increasing the number of sectors on existing sites has been the traditional
way to increase mobile capacity and will continue to be a foundational layer of the network. As demand growth
continues to outpace macro cell capacity growth, new solutions are required for densely populated areas. Metro cells
and indoor networks have emerged as important layers of the network. Metro cells are smaller outdoor cell sites,
located closer to the ground, having a lower power level than a traditional macro cell site. Metro cells blend into
their environment and are often found integrated with traditional street furniture, which helps alleviate zoning
restrictions that have made traditional deployments difficult. Finally, there are small cell and DAS solutions that
address the capacity and speed requirements from an indoor perspective. These systems provide coverage and
capacity to the indoor environment and reduce the load from the macro and metro layers, which improves overall
network performance. Small cell and DAS systems may range from small single operator, single-band, low-capacity
systems for use in enterprise buildings to large multi-carrier, multi-technology, multi-band systems for use in high-
capacity public venues.

Wireless operators view in-building coverage as a critical component of their network deployment strategies. Key
challenges for wireless operators in providing in-building cellular coverage are signal loss while penetrating
building structures and interference created by mobile devices while connected to macro cell sites. In-building DAS
solutions bring the antenna significantly closer to the user, which results in better coverage and capacity while
simultaneously reducing interference. In-building DAS provides seamless signal handover for users inside buildings
and can support multi-operator, multi-frequency and multi-protocol (2G, 3G, 4G and 5G) solutions. Small cells are
self-contained radio units that generally provide support for fewer bands from a single service provider to a
relatively small area, similar to a Wi-Fi access point. The benefits of small cell technologies are becoming
increasingly important with the trend towards mobility in the enterprise market.

Strategy

We believe consumer demand for bandwidth, competition among operators and continuous technology
advancements are driving communication network deployments and investment. We believe these trends position us
for future growth and value creation because of our leading positions across diverse and growing market segments
and geographies, our platform of innovative solutions, complementary market opportunities and our strong financial
profile. We see growth opportunities in the markets we serve, and it is our plan to capitalize on these opportunities
by providing our customers with products that can transform their networks with efficient solutions that optimize
network performance and deployment speed. Our strategy and 2019 priorities are to:

Become a Preferred Partner to Our Customers

We plan to expand our industry leadership positions in fiber and wireless by developing and enhancing value-
creating partner relationships with our customers, suppliers and distributors as well as our channel and technology
partners. We intend to expand these relationships by innovating, collaborating and selling with our customers. We
expect to meet our commitments and maintain our product quality while collaborating with our customers to provide
solutions to their key network challenges.

Relentlessly Focus on Innovation to Solve Critical Problems

We plan to build on our legacy of innovation and on our worldwide portfolio of patents and patent applications by
continuing to invest in research and development. We also intend to utilize our deep industry expertise to offer
unique perspectives to solve customers’ challenges. We intend to focus our investment on high growth markets.

Enhance Sales Growth

We expect to capitalize on our technology leadership, operational excellence, scale, market position, broad product
offerings and quality to generate growth opportunities by:

(cid:120) Differentiating with speed. We intend to make it easier for customers to do business with CommScope by

improving our business velocity related to decisions, delivery, sales and customer service.

(cid:120) Enabling growth. We intend to drive organic sales growth by refocusing on key markets and developing

processes and tools to turn new ideas into growth.(cid:3)

(cid:120) Continuing to drive solutions offerings. We intend to focus on selling solutions to our customers that align
with their evolving needs, thereby enhancing our position as a strategic partner. With the addition of our
high-speed migration portfolio and quick-turn delivery capabilities, we have broadened our range of
solutions. (cid:3)

(cid:120) Making strategic acquisitions. We expect to continue our disciplined approach to evaluating, executing and

successfully integrating strategic acquisitions.

Expand Culture of Excellence

We strive to be viewed as a top employment destination where premier talent is hired, developed and retained. We
also intend to make high-performance and operational excellence the standard throughout the Company while
prioritizing collaboration and zero-tolerance for quality issues.

Continue to Enhance Operational Efficiency and Cash Flow Generation

We continuously pursue strategic initiatives aimed at optimizing our resources by reducing manufacturing and
distribution costs and lowering our overall cost structure. We believe that we have a strong track record of
improving operational efficiency and successfully executing on formalized profit improvement plans, cost-savings
initiatives and working capital improvements to drive future profitability and cash flows. We intend to use the cash
we generate to invest in our business to make strategic acquisitions and reduce our indebtedness.

ARRIS Acquisition Rationale

CommScope and ARRIS will each bring a unique set of complementary assets and capabilities that together can
enable end-to-end wired and wireless communications infrastructure solutions that neither company could otherwise
achieve on its own. The acquisition of ARRIS is expected to help us access new and growing markets, and have
technology, solutions and employee talent that can provide additional value and benefit to our customers and
partners.

We believe that the combined company can drive profitable growth in new markets, shape the future of wired and
wireless communications, and position the new company to benefit from key industry trends, including network
convergence, fiber and mobility everywhere, 5G, IoT, and rapidly changing network and technology architectures.

This transaction is a critical step in fueling growth, stockholder value and customer benefits and we believe the
combined company will:

(cid:120) Be positioned to capitalize on positive industry trends. The combined company is expected to be well

positioned to benefit from key industry trends by combining best-in-class capabilities in network access
technology and infrastructure and creating end-to-end, comprehensive solutions. Trends such as network
convergence, fiber and mobility everywhere, the advent of 5G and fixed wireless access, IoT, and rapidly
changing network and technology architectures are expected to provide compelling long-term opportunities
for the combined company and its unique end-to-end communications infrastructure capabilities.

(cid:120) Unlock significant, high-growth segments and increase product addressable market. The company expects
to significantly increase its total product addressable market, with a unique set of complementary assets and
capabilities that enable end-to-end communications infrastructure solutions such as:

(cid:120) Converged small cell solutions for licensed and unlicensed wireless spectrum

(cid:120) Complementary wired and wireless communications infrastructure

(cid:120)

Integrated broadband access

(cid:120) Private network solutions for industrial settings, enterprises and public venues

(cid:120) Comprehensive connected and smart home solutions

(cid:120) Have expanded product offerings and R&D capabilities to meet diversified customer base. CommScope

and ARRIS will share strong technical expertise with approximately 15,000 patents and approximately
$800 million in combined 2018 research and development investments. The combined company is
expected to have a strong global footprint, serving customers across more than 100 countries.

(cid:120) Have a broad product portfolio delivering end-to-end communication solutions. ARRIS operates in three

reporting segments:

(cid:120) Customer Premises Equipment (CPE) – The CPE segment’s product solutions include set-top

boxes, gateways and subscriber premises equipment that enable service providers to offer voice,
video and high-speed data services to residential and business subscribers.

(cid:120) Network & Cloud (N&C) – The N&C segment’s product solutions include cable modem

termination systems, video infrastructure, distribution and transmission equipment and cloud
solutions that enable facility-based service providers to construct state-of-the-art residential and
metro distribution networks. The portfolio also includes a full suite of global services that offer
technical support, professional services and system integration offerings to enable solutions sales
of ARRIS’s end-to-end product portfolio.

(cid:120) Enterprise Networks (Enterprise) – The Enterprise segment focuses on enabling constant, wireless
and wired connectivity across complex and varied networking environments. It offers dedicated
engineering, sales and marketing resources to serve customers across a spectrum of enterprises —
including hospitality, education, smart cities, government, event venues, service providers and
more. Through its Ruckus brand, the Enterprise segment offers solutions like campus network
switches, Wi-Fi access points, smart wireless services and software, system management and
control solutions.

With the acquisition of the CPE, N&C and Enterprise businesses, we will have a product portfolio capable
of delivering end-to-end communication solutions to our customers around the world. The ARRIS
acquisition will provide us with opportunities for both new integrated product offerings as well as new use
cases to address customer demands in an evolving industry landscape.

(cid:120) Have a strong financial profile with cost savings opportunities. On a pro forma basis for the year ended
December 31, 2018, the combined company would have generated net revenues of approximately $11.3
billion. As a result of the combined company’s increased scale, we expect to achieve annual run-rate cost
savings of approximately $150 million within three years post-close, with synergies of approximately $60
million realized by the first year and approximately $125 million by the second year. These cost savings are
expected to be driven from synergies primarily in SG&A, logistics and procurement.

(cid:120) Generate significant cash and pay down debt. Given the increased scale and cash flow generation, as well

as both companies’ track records of successful integration, we expect to be in a position to de-lever rapidly.

Operating Segments

We report financial performance based on two operating segments: CommScope Connectivity Solutions (CCS) and
CommScope Mobility Solutions (CMS).

The distribution of net revenues between our two segments is as follows:

CCS
CMS
Total

Year Ended December 31,

2018

2017

2016

61.6 %
38.4
100.0 %

60.2 %
39.8
100.0 %

CommScope Connectivity Solutions Segment

Indoor Connectivity Solutions (primarily Enterprise – including Hyperscale and Cloud Data Centers)

We have a leading global market position in enterprise connectivity for data centers and commercial buildings. Our
solutions support mission-critical, high bandwidth applications. We integrate our structured cabling, connectors, in-
building cellular solutions and network intelligence capabilities to create physical layer solutions that enable voice,
video and data communication and building automation. We use proprietary modeling and simulation techniques to
optimize networks to provide performance that exceeds established standards. In August 2017, we acquired Cable
Exchange, a quick-turn supplier of fiber optic and copper assemblies for data, voice and video communication.
Through our Cable Exchange acquisition, we have expanded our capabilities and presence in the hyperscale and
cloud data center market. Our global network of partners offers custom, turnkey network solutions that are tailored
to each customer’s unique requirements. Data centers and other fiber solutions account for nearly one-third of indoor
network solutions net sales.

We believe that our strong market position results from our differentiated technology, long-standing relationships
with customers and channel partners, strong brand recognition, premium product features and the performance and
reliability of our solutions. These comprehensive solutions, sold primarily under the SYSTIMAX, NETCONNECT
and Uniprise brands, include optical fiber and twisted pair structured cable solutions, intelligent infrastructure
management hardware and software, and network rack and cabinet enclosures.

Our data center solutions include a robust portfolio of high-density fiber optic connectivity, including
shelves/panels, modules, trunks, jumpers/arrays and cable. We also offer fiber management systems, patch cords and
panels, pre-terminated fiber connectivity, complete cabling systems, and cable assemblies for use in offices and data
centers. These connectivity solutions can deliver data speeds of more than 100 gigabits per second (Gbps).

Outdoor Connectivity Solutions (Service Provider)

We have a leading global position in providing fiber optic and coaxial cable solutions that support the multichannel
video, voice and high-speed data services provided by telecommunications operators and MSOs. We provide a
broad portfolio of connectivity solutions including FTTH equipment. Our fiber optic connectivity solutions are
primarily comprised of hardened connector systems, fiber distribution hubs and management systems, couplers and
splitters, plug and play multiport service terminals, hardened optical terminating enclosures, high density cable
assemblies, optical distribution frames and splice closures. These products are used in both local-area and wide-area
networks, central offices and headends and “last-mile” FTTH installations, including deployments of fiber-to-the-
node (FTTN), fiber-to-the-premises (FTTP) and fiber-to-the-distribution point (FTTdP) to homes, businesses and
cell sites. These networks use the capabilities of fiber to enable consumers access to content at higher speeds and
faster response times.

Our customers are pushing fiber deeper into their networks. They are investing in broadband to deliver higher-speed
data to homes and businesses; fiber to macro cell towers, metro cells and small cells; and enabling network
virtualization in wireless networks. These networks are capital intensive with a high portion of deployment costs
related to labor in the field. We are focused on enabling solutions for our customers to build an effective and
efficient FTTX network. With our technological capabilities and diverse fiber connectivity portfolio, we can help
operators lower capital expenditures and reduce the total cost of ownership by creating solutions that shift labor
from the field to the factory. While the timing of cable and connectivity deployments can be difficult to predict, we
have a broad, technologically-advanced FTTX connectivity portfolio which we believe positions us to capitalize on
the expected growth in fiber networks.

CommScope Mobility Solutions Segment

Our solutions, marketed primarily under the Andrew brand, enable wireless operators to meet coverage and capacity
requirements for next generation networks. We focus our physical-layer solutions on all aspects of the Radio Access
Network (RAN) from the macro through the metro, to the indoor layer. Our macro cell site, metro cell site, DAS and
small cell solutions establish us as a global leader in RF infrastructure solutions for wireless operators and original
equipment manufacturers (OEMs). We strive to provide a one-stop source for managing the technology lifecycle of
a wireless network, including complete physical layer infrastructure solutions for 2G, 3G, 4G and 5G applications.
In preparation for 5G networks, we continue to invest heavily in relevant research and development, support
customer technology trials and actively participate in industry forums to help shape 5G standards. Our
comprehensive solutions include products for every major wireless protocol and allow wireless network operators to
operate across multiple frequency bands, reduce cost, achieve faster data rates, improve network response time and
accelerate migration to the latest wireless technologies. Our wireless solutions are built using a modular approach,
which has allowed us to leverage our core technology across generations of networks and mitigate technology risk.
We provide a complete portfolio of RF infrastructure products, and we are recognized for our leading technologies,
best-in-class performance, comprehensive product portfolio and global scale.

Our macro cell site solutions include base station antennas, microwave antennas, hybrid fiber-feeder and power
cables, coaxial cables, connectors and filters. We also provide a comprehensive portfolio at the base of the tower
including cabinets, platforms, fiber backhaul connectivity hubs and power solutions that allow operators to minimize
capital expenditures, operating expenses and deployment time.

Our metro cell solutions include RF delivery, equipment, housing and concealment. The fully integrated outdoor
systems include specialized antennas, filters/combiners, backhaul solutions, intra-system cabling and power
distribution, all minimized to fit an urban environment. These solutions facilitate site acquisition and improve RF
network performance in the metro area while minimizing interference with the macro layer. Furthermore, they
enable faster zoning approvals and expedite construction.

Our small cell and DAS solutions are primarily comprised of distributed antenna systems and distributed cell
solutions. The combination of our innovative small cell offerings and our industry-leading DAS portfolio enables us
to provide a broader range of solutions, addressing single-operator, single-band, low capacity environments all the
way through multi-carrier, multi-technology, multi-band, high capacity environments.

Manufacturing and Distribution

We develop, design, fabricate, manufacture and assemble many of our products and solutions in-house at our
facilities located around the world. We have strategically located our manufacturing and distribution facilities to
provide superior service levels to customers. We utilize lower-cost geographies for high labor content products
while investing in largely automated plants in higher-cost regions close to customers. Most of our manufacturing
employees are located in lower-cost geographies such as Mexico, China, India and the Czech Republic. We
continually evaluate and adjust operations to improve service, lower cost and improve the return on our capital
investments. In addition, we utilize contract manufacturers for many of our product groups, including certain
cabinets and filter products. We expect to continue modifying global operations to adapt to changing product
demand or business conditions. (cid:3)

Research and Development

Research and development is important to preserve and expand our position as a market leader and to provide the
most technologically advanced solutions in the marketplace. We invested $186 million in research and development
during 2018 and expect to continue with substantial investments in future years. We continue to focus our major
research and development activities on high-growth opportunities such as fiber optic connectivity for FTTX and data
centers, active and passive base-station antennas, and metro cell and small cell wireless solutions. We are also in the
process of developing solutions that support the convergence of wireline and wireless networks in preparation for
5G. Several of our professionals are leaders and active contributors in standards-setting organizations which helps
ensure that our products can be formulated to achieve broad market acceptance.

Customers

Our customers include substantially all of the leading global telecom operators, data center managers, leading cable
television providers or MSOs and thousands of enterprise customers, including many Fortune 500 companies, which
we serve both directly and indirectly. Major customers and distributors include companies such as Anixter
International Inc.; AT&T Inc.; Charter Communications, Inc.; Comcast Corporation; Ericsson, Inc.; Graybar
Electric Company, Inc.; KGP Co; Talley Inc.; T-Mobile; Verizon Communications Inc.; and Wesco International
Inc. We support our global sales organization with regional service centers strategically located around the world.

Products from our CCS segment are primarily sold indirectly to the end customer through independent distributors,
system integrators or value-added resellers. We also sell directly to cable television system operators, broadband
operators, or service providers that deploy broadband networks. Sales to our top three CCS segment customers
represented 17% and 18% of our consolidated net sales for the years ended December 31, 2018 and 2017,
respectively. Net sales to our largest customer, Anixter International Inc. and its affiliates (Anixter), accounted for
11% of our consolidated net sales for each of the years ended December 31, 2018 and 2017. No other CCS segment
customers accounted for 10% or more of our consolidated net sales for the years ended December 31, 2018 or 2017.

Products from our CMS segment are primarily sold to wireless operators, integrators or contractors that deploy
elements of wireless networks at the direction of wireless operators or OEMs that sell equipment to wireless
operators. Our customer service and engineering groups maintain close working relationships with these customers
due to the significant amount of customization associated with some of these products. Direct sales to our top three
CMS segment operator customers represented 11% and 13% of our consolidated net sales for the years ended
December 31, 2018 and 2017, respectively. No CMS segment customer accounted for 10% or more of our
consolidated net sales for the years ended December 31, 2018 and 2017. While we sell to most wireless operators
globally, our sales are concentrated within a small number of large operators.

We generally have no minimum purchase commitments with any of our distributors, system integrators, value-added
resellers, wireless operators or OEM customers, and our contracts with these parties do not prohibit them from
purchasing or offering products or services that compete with ours. Although we maintain long-term relationships
with these parties and have not historically lost key customers, we have experienced variability in the level of
purchases by our key customers. Any significant reduction in sales to these customers, including as a result of the
inability or unwillingness of these customers to continue purchasing our products, could materially and adversely
affect our business, financial condition, results of operations and cash flows. See Part I, Item 1A, “Risk Factors.”

We employ a global manufacturing and distribution strategy to control production costs and provide world-class
service to customers. We support our international sales efforts with sales representatives based in Europe, Latin
America, Asia and other regions throughout the world. Our net sales from international operations were $2.0 billion,
$2.1 billion and $2.3 billion for the years ended December 31, 2018, 2017 and 2016, respectively.

Patents and Trademarks

We pursue an active policy of seeking intellectual property protection, including patents and registered trademarks,
for new products and designs. On a worldwide basis, we held approximately 9,500 patents and patent applications
and approximately 2,300 registered trademarks and trademark applications as of December 31, 2018. We consider
our patents and trademarks to be valuable assets, and while no single patent is material to our overall operations, we
believe the CommScope, Andrew, SYSTIMAX, HELIAX and NETCONNECT trade names and related trademarks
are critical assets to our business. We intend to rely on our intellectual property rights, including our proprietary
knowledge, trade secrets and continuing technological innovation, to develop and maintain our competitive position.
We will continue to protect our key intellectual property rights.

Backlog and Seasonality

At December 31, 2018 and 2017 we had an order backlog of $500 million and $492 million, respectively. Orders
typically fluctuate from quarter to quarter based on customer demand and general business conditions. Our backlog
includes only orders that are believed to be firm. Sometimes, unfilled orders may be canceled prior to shipment of
goods, but cancellations historically have not been material. However, our current order backlog may not guarantee
future demand.

Due to the variability of shipments under large contracts, customers’ seasonal installation considerations and
variations in product mix and in profitability of individual orders, we can experience significant quarterly
fluctuations in sales and operating income. Our operating performance is typically weaker during the first and fourth
quarters and stronger during the second and third quarters. These variations are expected to continue in the future. It
may be more meaningful to focus on annual rather than interim results.

Competition

The market for our products is highly competitive and subject to rapid technological change. We encounter
significant domestic and international competition across both segments of our business. Our competitors include
large, diversified companies — some of whom have substantially more assets and greater financial resources than
we do. We also face competition from small to medium-sized companies and less diversified companies that have
concentrated efforts in one or more areas of the markets we serve. Our competitors include AFL (a subsidiary of
Fujikura, Ltd.,); Amphenol Corporation; Belden Inc.; Berk-Tek (a Company of Nexans S.A.); Comba Telecom
Systems Holding Ltd.; Corning Incorporated; Emerson Electric Co.; Ericsson Inc.; Huawei Technologies Co., Ltd.;
JMA Wireless; KATHREIN-Werke KG; Leviton Manufacturing Co., Inc.; Nokia Corp; Ortronics (a brand of
Legrand NA, LLC); Panduit Corp.; RFS (a subsidiary of Nokia Corp); SOLiD Technologies; Sumitomo Corp; and
ZTE Corp. We compete primarily on the basis of delivering solutions, product specifications, quality, price,
customer service and delivery time. We believe that we differentiate ourselves in many of our markets based on our
market leadership, global sales channels, intellectual property, strong reputation with our customer base, the scope
of our product offering, the quality and performance of our solutions, and our service and technical support.

Competitive Strengths

We are a global leader in connectivity and essential infrastructure solutions for communications networks, and we
believe we hold leading market positions in our segments. Since our founding in 1976, CommScope has been a
leading brand in connectivity solutions for communications networks. In the wireless industry, Andrew is one of the
world’s most recognized brands and a global leader in RF solutions for wireless networks. In the enterprise market,
SYSTIMAX, NETCONNECT and Uniprise are recognized as global market leaders in enterprise connectivity
solutions for business enterprise and data center applications.

We believe the following competitive strengths have been instrumental to our success and position us well for future
growth and strong financial performance:

Differentiated Solutions Supported by Ongoing Innovation and Significant Proprietary Intellectual Property (IP)

Our integrated solutions for wireless, enterprise, fiber optic and broadband networks are differentiated in the
marketplace and are a significant global competitive advantage. We invested $186 million in research and
development during 2018 and expect to continue with substantial investments in future years. We have also added
significant IP and innovation through acquisitions, such as the acquisition of Broadband Network Solutions (BNS)
from TE Connectivity, which added approximately 7,000 patents and patent applications worldwide and gave us
access to leading fiber technology that will help us better address a transition to fiber deployments deeper into
networks and data centers as consumers and businesses generate increasing bandwidth requirements; Airvana, which
expanded our leadership and capabilities in providing indoor wireless capacity and coverage; and Argus
Technologies (Argus), which enhanced our next-generation base station antenna technology. Our ongoing
innovation, supported by proprietary IP and technology know-how, has allowed us to sustain this competitive
advantage. With these new innovative solutions, we expect to solve more customer communications challenges,
while providing greater opportunities to our business partners.

(cid:120)

Integrated solutions. Our wireless network offerings include complete connectivity solutions supporting
2G, 3G and 4G wireless technologies for both macro and metro, as well as DAS and small cell sites. We
are also developing solutions that support the convergence of wireline and wireless networks in preparation
for 5G. We provide a complete portfolio of integrated RF solutions from the output of the base station (or
baseband processor) at the bottom of the tower to the antenna at the top of the tower. In the enterprise and
data center markets, we deliver a comprehensive solution including connectivity and cables, enclosures and
network intelligence software. In the FTTX market, we offer end-to-end solutions including connectors,
cabling, splice closures and fiber management systems. Our ability to provide integrated connectivity
solutions for wireless, enterprise, fiber optic and broadband networks makes us a value-added solutions
provider to our customers and gives us a significant competitive advantage.

(cid:120)

Strong design capabilities and technology know-how. We have a long tradition of developing highly
engineered connectivity solutions, demonstrating superior performance across various generations of
networks. Our ongoing focus on engineering innovation has enabled us to create high quality products that
are reliable, have a desirable form factor and enable our customers to optimize the performance, flexibility,
installation time, energy consumption and space requirements of their network deployments.

Significant proprietary IP. Our proven record of innovation and decades of experience creating market-
leading technology products are evidenced by our approximately 9,500 patents and patent applications, as
well as our approximately 2,300 registered trademarks and trademark applications, worldwide. Our
significant proprietary IP, when combined with our deep engineering expertise, allows us to create industry
defining solutions for customers around the world.

Established Sales Channels and Customer Relationships

We serve customers in over 100 countries and have become a trusted advisor to many of them through our industry
expertise, quality products, leading technology and long-term relationships. These factors enable us to provide
mission-critical connectivity solutions that our customers need to build high-performing communication networks.

Our customers include substantially all of the leading global telecom operators, data center managers, leading cable
television providers or MSOs and thousands of enterprise customers, including many Fortune 500 companies. We
are a key supplier within the wireless infrastructure market and enjoy established sales channels across all
geographies and technologies. Our long-standing relationships with telecommunication operators enable us to work
closely with them in providing highly customized solutions aligned with their technology roadmaps. We have a
global sales force with sales representatives based in North America, Europe, Latin America, Asia and other regions,
and an extensive global network of channel partners including independent distributors, system integrators and
value-added resellers. Our sales force has direct relationships with our customers and end users which generates
demand for our products, with a large portion of our sales fulfilled through channel partners. Our direct sales force
and channel partner relationships give us extensive reach and distribution capabilities to customers globally.

Global Scale, Manufacturing Footprint and Quality

Our global manufacturing and distribution footprint and worldwide sales force give us significant scale within our
addressable markets. We believe our scale, stability and quality make us an attractive strategic partner to our large
global customers, and we have been repeatedly recognized by key customers for these attributes. In addition, our
ability to leverage our core competencies across our business, coupled with our successful track record of
operational efficiencies, has allowed us to improve our margins and cash flows over time while continuing to invest
in research and development and acquisitions targeting new products and markets.

Our manufacturing and distribution facilities are strategically located to optimize service levels and product delivery
times. We also utilize lower-cost geographies for high labor content products and largely automated plants in higher-
cost regions. Over half of our manufacturing employees are in lower-cost geographies such as Mexico, China, India
and the Czech Republic. Our dynamic manufacturing and distribution organization allows us to:

(cid:120) Flex our capacity to meet market demand and expand our market position;

(cid:120) Deliver high-quality customer solutions;

(cid:120) Provide high customer service levels due to proximity to the customer; and

(cid:120) Effectively integrate acquisitions and capitalize on related synergies.

Proven Management Team with Record of Operational Excellence and Successful M&A Integration

We have a strong track record of organically growing market share, establishing leadership positions in new
markets, managing cash flows, delivering profitable growth across multiple economic cycles and integrating large
and small acquisitions. Our senior management team has extensive experience in connectivity solutions for the
communications infrastructure industry.

We have a history of strong operating cash flow and have generated over $1.7 billion in cumulative operating cash
flow over the last three years. Our strong cash flow profile has allowed us to continue to invest in innovative
research and development, pursue strategic acquisitions, repay debt and return cash to stockholders. We
continuously pursue strategic initiatives aimed at optimizing our resources, reducing manufacturing and distribution
costs and lowering our overall cost structure.

Throughout our history, we have successfully complemented our organic growth with strategic acquisitions. We
have completed the BNS business integration and we have delivered substantial synergies, completed significant
system integrations and re-organized the business. Our management team has effectively integrated other large
acquisitions, such as Andrew Corporation in 2007 and Avaya Connectivity Solutions in 2004. We have also
executed tuck-in acquisitions, such as Cable Exchange, Airvana, Argus and Alifabs, to help expand our market
opportunities and continue to solve our customers’ business challenges in multiple growth areas. We expect the
acquisition of ARRIS to accelerate our strategy to drive profitable growth by unlocking high growth markets,
increasing the product addressable market and position the combined company to capitalize on key industry trends
as a leading global communication infrastructure provider.

Raw Materials

Our products are manufactured or assembled from both standard components and parts that are unique to our
specifications. Our internal manufacturing operations are largely process oriented and we use significant quantities
of various raw materials, including aluminum, bimetals, brass, copper, plastics and other polymers, optical fiber and
steel, among others. We use significant volumes of copper, aluminum, steel and polymers in manufacturing coaxial
and twisted pair cables and antennas. Other parts are produced using processes such as stamping, machining,
molding and pressing from metals or plastics. Portions of the requirements for these materials are purchased under
supply arrangements where some portion of the unit pricing may be indexed to commodity market prices for these
metals. We may occasionally enter forward purchase commitments or otherwise secure availability for specific
commodities to mitigate our exposure to price changes for a portion of our anticipated purchases. Certain of the raw
materials utilized in our products may only be available from a few suppliers, and we may enter into longer term
agreements to secure access to certain key inputs. We may, therefore, encounter availability issues and/or significant
price increases.

Our profitability may be materially affected by changes in the market price of our raw materials, most of which are
linked to the commodity markets. Prices for aluminum, copper, plastics and certain other polymers derived from oil
and natural gas have fluctuated substantially during the past several years. We have adjusted our prices for certain
products and may have to adjust prices again. Delays in implementing price increases, failure to achieve market
acceptance of price increases, or price reductions in response to a rapid decline in raw material costs, could have a
material adverse impact on the results of our operations.

In addition, some of our products are assembled from specialized components and subassemblies manufactured by
suppliers. We depend upon sole suppliers for certain key components for some of our products. If these sources
could not provide these components in sufficient quantity and quality on a timely and cost efficient basis, it could
materially impact our results of operations until another qualified supplier is found. We believe that our supply
contracts and our supplier contingency plans mitigate some of this risk.

Environment

Employees

As of December 31, 2018, we had a team of over 20,000 people to serve our customers worldwide. The majority of
our employees are located outside of the United States (U.S.). As a matter of policy, we seek to maintain good
relations with our employees at all locations. We are not subject to any collective bargaining agreements in the U.S.
A significant portion of our international employees are members of unions or subject to workers’ councils or
similar statutory arrangements. From a companywide perspective, we believe that our relations with our employees
and unions or workers’ councils are satisfactory, though we have experienced challenges in certain countries and
may encounter more such challenges. Historically, periods of labor unrest or work stoppage have not had a material
impact on our operations or results.

Available Information

Our website (www.commscope.com) contains frequently updated information about us and our operations. Our
filings with the Securities and Exchange Commission (SEC) on Form 10-K, Form 10-Q, Form 8-K and Proxy
Statements and all amendments to those reports can be viewed and downloaded free of charge as soon as reasonably
practicable after the reports and amendments are electronically filed with or furnished to the SEC by accessing
www.commscope.com and clicking on Company, Investor Relations, Financial Information and then clicking on
SEC Filings. The information contained on or incorporated by reference to our website is not a part of this Annual
Report on Form 10-K.

ITEM 1A.

RISK FACTORS

The following is a cautionary discussion of risks, uncertainties and assumptions that we believe are significant to
our business. In addition to the factors discussed elsewhere in this Annual Report on Form 10-K, the following are
some of the important factors that, individually or in the aggregate, we believe could make our results differ
materially from those described in any forward-looking statements. It is impossible to predict or identify all such
factors and, as a result, you should not consider the following factors to be a complete discussion of risks,
uncertainties and assumptions related to us or our business.

ARRIS Acquisition Risks

The pending acquisition of ARRIS International plc (ARRIS) (the Pending Acquisition) may not be completed on
a timely basis, on anticipated terms, or at all, and there are uncertainties and risks to consummating the Pending
Acquisition.

The obligation of each party to consummate the Pending Acquisition is subject to the satisfaction of a number of
conditions set forth in the bid conduct agreement, as amended (the Bid Conduct Agreement) dated November 8,
2018, many of which are not within our control. Several conditions have been satisfied such as approval of the
acquisition by the ARRIS stockholders and expiration of the Hart-Scott Rodino Act waiting period in the U.S. Other
conditions that still need to be satisfied include the receipt of all remaining required consents, approvals or
clearances required by certain other foreign governmental authorities under applicable antitrust laws and the absence
of any legal restraint that prohibits the Pending Acquisition. Each party’s obligation to consummate the Pending
Acquisition is subject to certain additional closing conditions, including the accuracy of representations and
warranties and performance of each parties’ obligations required to be performed as well as others set forth in the
Bid Conduct Agreement. The failure to satisfy all of the required conditions could delay the completion of the
Pending Acquisition for a significant period of time or prevent it from occurring. Any delay in completing the
Pending Acquisition, including as a result of any litigation related to the Pending Acquisition, could prevent us from
realizing some or all of the benefits that we expect to achieve. Furthermore, subject to certain conditions, ARRIS
may at any time terminate the Bid Conduct Agreement as a result of a superior proposal to purchase its business.

We face risks and uncertainties due to the announcement of the Pending Acquisition, as well as the potential failure
to consummate the Pending Acquisition, including that:

(cid:120) CommScope does not currently control ARRIS, and will not control ARRIS until completion of the

acquisition, and until that time there can be no assurance that ARRIS will be operated in the same way it
would under CommScope’s control;

(cid:120)

the Pending Acquisition could have an adverse impact on our relationships with employees, customers and
suppliers, and prospective customers or other third parties may delay or decline entering into agreements
with us as a result of the announcement, whether or not the Pending Acquisition is consummated;

(cid:120) we incur significant transaction costs, including legal, financial advisory, accounting and other costs

relating to the Pending Acquisition, even if it is not consummated, and any delay in consummation of the
Pending Acquisition may increase these costs;

(cid:120) we have incurred significant indebtedness to fund the Pending Acquisition, and even if the Pending

Acquisition is not consummated and we do not utilize the proceeds, we are required to pay interest or
ticking fees until the Pending Acquisition is terminated;

(cid:120)

the attention of our management and employees may be diverted from pursuing other opportunities or
running day-to-day operations;

if the Pending Acquisition is not consummated, we will not realize any of the expected benefits of the
Pending Acquisition;

failure to consummate the Pending Acquisition could result in negative reactions from the financial markets
or in the investment community, including negative impacts on our stock price;

(cid:120) we may be subject to shareholder litigation related to the Pending Acquisition or failure to complete the

Pending Acquisition; and

(cid:120)

if the Bid Conduct Agreement is terminated before we complete the Pending Acquisition, under some
circumstances, including in the event CommScope fails to obtain the required antitrust approvals or is
unable to secure the financing necessary to consummate the Pending Acquisition, CommScope may have to
pay a termination fee to ARRIS of $250.0 million in cash.

The occurrence of any of these events, individually or in combination, could have a material adverse effect on our
business, financial position, results of operations and cash flows.

The integration of CommScope and ARRIS will be difficult, costly and time-consuming and the anticipated
benefits and cost savings may take longer to realize than expected or may not be realized at all. If we are unable
to integrate ARRIS effectively, we may not realize the anticipated benefits of the Pending Acquisition.

We currently expect to realize annual synergies and cost savings of approximately $150.0 million to be fully
achieved within three years of the closing of the Pending Acquisition, with approximately $60.0 million in the first
full year. We also expect to incur integration and restructuring costs of approximately $150.0 million to achieve
these synergies. These synergies are expected to come from all areas of our company, including sales, marketing,
general and administrative, operations and research and development. Our ability to realize the anticipated benefits
is dependent, to a large extent, on our ability to complete the integration of the two businesses. The combination of
two independent businesses is a complex, costly and time-consuming process and there can be no assurance that we
will be able to successfully integrate CommScope and ARRIS, or if such integration is successfully accomplished,
that such integration will not be more costly or take longer than presently contemplated. If we cannot successfully
complete the integration within a reasonable time frame, we may not be able to realize the anticipated benefits of the
Pending Acquisition, which could have a material adverse effect on our share price, business, financial position,
results of operations and cash flows.

Our ability to realize the expected synergies and benefits of the Pending Acquisition is subject to a number of risks
and uncertainties, many of which are outside of our control. These risks and uncertainties include, among other
things:

(cid:120)

the completion of an effective integration of operations, controls, policies and procedures, and
technologies, as well as the harmonization of differences in the business cultures of CommScope and
ARRIS;

the diversion of management attention from ongoing operation of our business as well as ARRIS’ business
during the integration;

our ability to retain the service of senior management and other key personnel of both CommScope and
ARRIS;

our ability to preserve customer, supplier and other important relationships of CommScope and ARRIS and
resolve potential conflicts that may arise;

the risk that certain of CommScope’s or ARRIS’ customers and suppliers will opt to discontinue business
with CommScope or ARRIS or exercise their right to terminate agreements as a result of the Acquisition
pursuant to change of control provisions in these agreements or otherwise;

the risk that ARRIS may have liabilities we failed to or were unable to discover in the course of performing
due diligence;

integrating CommScope’s and ARRIS’ various information systems, including different enterprise resource
planning systems, will be complex and challenging and may result in production disruptions or be more
costly than anticipated;

the risk that integrating ARRIS’ workforce into the CommScope workforce may result in production or
other disruptions or be more costly than anticipated;

(cid:120)

greater than expected difficulties in achieving anticipated cost savings, synergies, business opportunities
and growth prospects from the combination; and

greater than expected difficulties in managing the expanded operations of a significantly larger and more
complex combined business.

As a result of the Pending Acquisition, The Carlyle Group (Carlyle) will own a substantial portion of our equity
and its interests may not be aligned with yours.

Funding for the Pending Acquisition will include a convertible preferred stock investment by Carlyle. As a result,
Carlyle will own approximately 16% of our common stock on an as-converted basis and we will increase the size of
our board of directors to eleven, giving Carlyle the right to designate up to two directors. In addition, certain of our
existing directors are senior advisors to Carlyle. Circumstances may occur in which the interests of Carlyle could
conflict with the interests of our other stockholders. For example, the existence of Carlyle as a significant
stockholder and Carlyle’s board appointment rights may have the effect of deterring hostile takeovers, delaying or
preventing changes in control or changes in management or limiting the ability of our other stockholders to approve
transactions that they may deem to be in the best interests of our company.

Competitive Risks

Our business is dependent on capital spending for data and communication networks, and reductions in such
capital spending could adversely affect our business.

Our performance is dependent on capital spending for constructing, rebuilding, maintaining or upgrading data and
communication networks, which can be volatile and difficult to forecast. Capital spending in the communications
industry is cyclical and can be curtailed or deferred on short notice. A variety of factors affect the timing and amount
of capital spending in the communications industry including: competing technologies; general economic
conditions; seasonality of outside deployments; timing and adoption of the global rollout of new technologies;
customer specific financial or general market conditions; changes in customer preferences or requirements;
availability and cost of capital; governmental regulation; demands for network services; competitive pressures,
including pricing pressures; acceptance of new services offered by our customers; industry consolidation; and real or
perceived trends or uncertainties in these factors. As a result of these factors, we may not be able to maintain or
increase our sales in the future, and our business, financial condition, results of operations and cash flows could be
materially and adversely affected.

A substantial portion of our business is derived from a limited number of key customers and channel partners.

Our customer base includes direct customers, original equipment manufacturers (OEMs) and channel partners,
which include distributors, system integrators and value-added resellers. We derived 18% of our 2018 consolidated
net sales from our top two direct customers. Our largest customer, Anixter International Inc. (Anixter), accounted
for 11% of our 2018 consolidated net sales. As a result of the Pending Acquisition, our customer concentration
composition will likely change and our largest customer is expected to be Comcast Corporation with 10% or more
of our total net sales.

The concentration of our net sales among key customers subjects us to a variety of risks including:

(cid:120)

lower sales that could result from the loss of one or more of our key customers;

less efficient operations that could result in higher costs from an inability to accurately forecast and plan for
volatile spending patterns of key customers;

renegotiations of agreements with key customers (or consolidation of agreements with common customers
in connection with the Pending Acquisition) that could result in materially less favorable terms;

financial difficulties experienced by one or more of our key customers that could result in reduced
purchases of our products and/or delays or difficulties in collecting accounts receivable balances; and

reductions in inventory levels held by channel partners and OEMs, which may be unrelated to purchasing
trends by end customers.

We are also exposed to similar risks to the extent that we have significant indirect sales to one or more end-users of
our products who may also be a direct customer.

We generally have no minimum purchase commitments with any of our distributors, system integrators, value-added
resellers, operators or OEMs or other customers, and our contracts with these parties do not prohibit them from
purchasing or offering products or services that compete with ours. Although we maintain long-term relationships
with these parties and have not historically lost key customers, we have experienced variability in the level of
purchases by our key customers. Any significant reduction in sales to these customers, including as a result of the
inability or unwillingness of these customers to continue purchasing our products, could materially and adversely
affect our business, financial condition, results of operations and cash flows.

We face competitive pressures with respect to all of our major product groups.

Competition in our industry depends on a number of factors, including innovative product and service solution
offerings, the ability to adapt to changing markets and customer preferences, product and service quality, timing of
the introduction of new products and services, speed of delivery, pricing, customer service and the total customer
experience. In each of our major product groups, we compete with a substantial number of foreign and domestic
companies, some of which have greater financial, technical, marketing and other resources or lower operating costs.
They may also have broader product offerings and market focus. This gives many of these enterprises a competitive
advantage to withstand any significant reduction in capital spending by customers in our markets over the long term.
Further, our industry continues to consolidate, and the combination of any of our competitors could further increase
these advantages and result in competitors with broader market presence.

Some competitors may be able to bundle their products and services together and may be capable of delivering more
complete solutions than we are able to provide to better meet customer preferences, which may cause us to lose sales
opportunities and revenue. Competitors’ actions, such as price reductions, acceptance of higher-risk contractual
terms, or the introduction of new innovative products and services, and the use of exclusively price driven auctions
by customers have caused lost sales opportunities in the past and may cause us to lose sales opportunities in the
future. The rapid technological changes occurring in the communications industry could also lead to the entry of
new competitors against whom we may not be able to compete successfully. For example, as networks become more
virtualized, our products may be at risk of being subsumed by competitors who provide software solutions that
perform the same functionality as our products. In addition, if any of our competitors’ products or technologies were
to become the industry standard, our business would be negatively affected. Further, if we are unable to continue to
transform our business processes to support changing customer expectations and deliver a superior total customer
experience, we may lose sales opportunities in the future. Changes in trade policies could also decrease the price
competitiveness of our products and/or increase our operating costs. 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.

We cannot assure you that we will continue to compete successfully with our existing competitors or with new
competitors. If we are unable to compete in any of our markets at the same level as we have in the past or are forced
to reduce the prices of our products in order to continue to be competitive, our operating results, financial condition
and cash flows could be materially and adversely affected.

Changes to the regulatory environment in which our customers operate may negatively impact our business.

The telecommunications and cable television industries are subject to significant and changing federal and state
regulation, both in the U.S. and other countries. We have benefited from government programs that encourage
spending on initiatives that utilize our products. Changes to the way in which internet service providers are
regulated, changes in government programs in our industry or uncertainty regarding future changes could adversely
impact our customers’ decisions regarding capital spending, which could decrease demand for our products.
Decreased demand for our products could materially and adversely affect our operating results, financial condition
and cash flows.

Operational Risks

Our future success depends on our ability to anticipate and adapt to changes in technology and customer
preferences and develop, implement and market innovative solutions.

Many of our markets are characterized by advances in information processing and communications capabilities that
require increased transmission speeds and greater bandwidth. These advances require significant investments in
research and development in order to improve the capabilities of our products and services and develop new
offerings or solutions that will meet the needs and preferences of our customers. There can be no assurance that our
investments in research and development will yield marketable product innovations.

We may not be successful in our ongoing innovation efforts if, among other things, our products and services are not
cost effective; brought to market in a timely manner; compliant with evolving industry standards; accepted in the
market; or recognized as meeting customer requirements. We could experience a material adverse effect on our
results of operations, financial condition and cash flows if we are not successful in our ongoing innovation efforts.

As our products become more complex and customer preferences continue to change, we may encounter difficulties
in meeting customer preferences including performance, service and delivery expectations, which could have a
material adverse effect on our results of operations, financial condition and cash flows.

If we do not stay current with product life cycle developments, our business may suffer.

A significant portion of our revenues is dependent on the commercial deployment of technologies based on 3G and
4G wireless communications equipment and products. If we are not able to support our customers in an effective and
cost-efficient manner as they advance from older generation networks or as they expand the capacity of their
networks, our business will suffer. If we do not have competitively priced, market-accepted products available to
meet our customers’ planned roll-out of 5G wireless communications systems, we may miss a significant
opportunity and our business, financial condition, results of operations and cash flows could be materially and
adversely affected.

In addition, there are several major trends that we expect to continue to impact the enterprise market and product life
cycles. Enterprises are shifting toward mobility indoors and adjusting in-building cabling designs to support Wi-Fi,
more access points and in-building cellular applications. Due to significant increases in data traffic and migrations of
applications to the cloud, enterprises are also shifting spending toward multi-tenant data centers and hyperscale
cloud service providers, which offer cloud data centers services as a replacement to in-house corporate data centers.
As a result, there is growing demand for fiber solutions and decelerating demand for copper solutions. If we are
unable to continue to support customers in these transitions, or if sales of copper products decline faster than
expected, we could experience a material adverse effect on our results of operations, financial condition and cash
flows.

If our service offerings or products, including material purchased from our suppliers, have quality or
performance issues, our business may suffer.

Our business depends on delivering products and services of consistently high quality. Many of our solutions are
highly complex and testing procedures used by us and our customers are limited to evaluating them under likely and
foreseeable failure scenarios. For various reasons, once deployed, our products may fail to perform as expected.
Performance issues could result from faulty design, defective raw materials or components purchased from
suppliers, problems in manufacturing or installation errors. We have experienced such performance issues in the past
and remain exposed to such performance issues in the future. In some cases, recall of some or all affected products,
product redesigns or additional capital expenditures may be required to correct a defect. In addition, we generally
offer warranties on most products, the terms and conditions of which depend upon the product subject to the
warranty. In many cases, we also indemnify our customers against damages or losses that might arise from certain
claims relating to our products and services. Future claims may have a material adverse effect on our business,
financial condition, results of operations and cash flows. Any significant or systemic product or service failure could
also result in lost future sales as well as reputational damage.

Our business depends on effective management information systems.

We rely on effective management information systems for critical business operations, to support strategic business
decisions and to maintain a competitive edge in the marketplace. We rely on our enterprise resource planning
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.
We also rely on management information systems to produce information for business decision-making and
planning and to support e-commerce activities. 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.

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

Cyber-security incidents, including data security breaches, ransomware or computer viruses, could harm our
business by exposing us to various liabilities, disrupting our delivery of products and services and damaging our
reputation.

We rely extensively on our management information technology systems and those of third parties to operate our
business and store proprietary information about our products and intellectual property. Additionally, we and others
acting on our behalf store “personally identifiable information” with respect to employees, vendors, customers and
others. As the recent rise in cyber-security incidents around the world indicates, all management information
technology systems are vulnerable. Despite the security controls we have in place, our facilities, systems and
procedures, and those of our third-party service providers, are at risk to security breaches, acts of vandalism,
ransomware, software viruses, misplaced or lost data, programming and/or human errors or other similar events. In
particular, unauthorized access to our computer systems or stored data could result in the theft or improper
disclosure of proprietary, confidential or sensitive information, the deletion or modification of records or
interruptions in our operations. Any such events could subject us to civil and criminal penalties; expose us to
liabilities to our customers, employees, vendors, governmental authorities or other third parties; allow others to
unfairly compete with us; disrupt our delivery of products and services; and have a negative impact on our
reputation, all of which could have a material adverse effect on our business, financial condition, results of
operations and cash flows.

There has been an increase in the adoption of laws and regulations in the U.S., Europe and elsewhere imposing
requirements for the handling of personal data, as well as requirements for remediation actions and financial
penalties for noncompliance. For example, we are subject to the European Union’s General Data Protection
Regulation (GDPR), which took effect in May 2018. We employ a variety of security breach countermeasures and
security controls that we believe are compliant, but we cannot guarantee that all breach attempts can be successfully
thwarted by these measures as the sophistication of attacks increases. In addition, as the regulatory environment
related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and
constantly changing requirements applicable to our business, compliance with those requirements could also result
in additional costs. Noncompliance with laws and regulations related to cyber-security breaches could have negative
consequences, including government investigations, penalties, files, civil and criminal sanctions and reputational
harm, and have an adverse effect on our business, financial condition, results of operations and cash flows.

If our integrated global manufacturing operations suffer production or shipping delays, we may have difficulty
meeting customer demands.

Disruption of our ability to produce at or distribute from our facilities could adversely affect our ability to
manufacture products at our other manufacturing facilities in a cost-effective and timely manner. In particular, some
of our manufacturing facilities rely on aging production equipment and information technology infrastructure, and if
we fail to properly maintain or update this equipment, it could affect our ability to manufacture or ship products.
Other disruptions, including those due to failure of our manufacturing infrastructure, information technology outage,
labor disturbances, fire, electrical outage, natural disaster, acts of violence or terrorism, shipping interruptions or
some other catastrophic event could adversely affect our ability to manufacture products at our other manufacturing
facilities in a cost-effective and timely manner, which could have a material adverse effect on our business, financial
condition, results of operations and cash flows.

Supply Chain Risks

Our dependence on commodities subjects us to cost volatility and potential availability constraints.

Our profitability may be materially affected by changes in the market price and availability of certain raw materials,
most of which are linked to the commodity markets. The principal raw materials and components we purchase are
made of metals such as copper, steel, aluminum or brass; plastics and other polymers; and optical fiber. Fabricated
copper, steel and aluminum are used in the production of coaxial and twisted pair cables and polymers are used to
insulate and protect cables. Prices for copper, steel, aluminum, fluoropolymers and certain other polymers derived
from oil and natural gas have experienced significant volatility as a result of changes in the levels of global demand,
supply disruptions and other factors. As a result, we have adjusted our prices for certain products and may have to
adjust prices again in the future. Delays in implementing price increases or a failure to achieve market acceptance of
price increases has in the past and could in the future have a material adverse impact on our results of operations. In
an environment of falling commodities prices, we may be unable to sell higher-cost inventory before implementing
price decreases, which could have a material adverse impact on our business, financial condition and results of
operations.

We are dependent on a limited number of key suppliers for certain raw materials and components.

We are dependent on a limited number of key suppliers for certain of our raw material and component purchases,
including certain polymers, copper rod, copper and aluminum tapes, fine aluminum wire, steel wire, optical fiber,
circuit boards and other electronic components.

Our key suppliers have experienced in the past, and could experience in the future, production, operational or
financial difficulties, or there may be global shortages of certain raw materials or components we use. Our inability
to find sufficient sources of supply on reasonable terms could impact our ability to manufacture products in a cost-
effective manner, which could have a material adverse effect on our gross margin and results of operations.

We also source many of our components from international markets. Any changes in the laws and policies of the
U.S. or other countries affecting trade may be a risk to us. To the extent there are unfavorable changes imposed by
the U.S. or other countries and/or retaliatory actions taken by trading partners, such as the addition of new tariffs or
trade restrictions, we may experience material adverse impacts on earnings. For a more complete discussion of our
risks related to tariffs and trade restrictions, 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 our
“International Risk Factors” in this Item 1A. Risk Factors section.

Capacity constraints with respect to our internal facilities and/or existing or new contract manufacturers could
have an adverse impact on our business.

We internally produce, both domestically and internationally, a portion of the components used in our finished
products. We also rely on unaffiliated contract manufacturers, both domestically and internationally, to produce
certain products or key components of products. If we do not have sufficient production capacity, either through our
internal facilities or independent contract manufacturers, or if we cannot ramp up capacity for complex products fast
enough to meet customer demand, we may experience lost sales opportunities, lost market share and customer
relations problems, which could have a material adverse effect on our business, financial condition, results of
operations and cash flows.

If our contract manufacturers encounter production, quality, financial or other difficulties, we may experience
difficulty in meeting customer demands.

We rely on unaffiliated contract manufacturers, both domestically and internationally, to produce certain products or
key components of products. If these contract manufacturers encounter production, quality, financial or other
difficulties, including labor disturbances or geopolitical instability, and if acceptable alternative suppliers cannot be
identified, we may encounter difficulty in meeting customer demands. Any such difficulties could have a material
adverse effect on our business, financial results, results of operations and cash flows.

Strategic Risks

Our business strategy relies in part on acquisitions to create growth. We may not fully realize anticipated benefits
from past or future acquisitions or investments in other companies.

We have completed a number of acquisitions and invested in other companies over recent years, most significantly
the acquisition of the BNS business from TE Connectivity in 2015. There are significant challenges to integrating an
acquired operation into our business, including, but not limited to: successfully managing the operations,
manufacturing facilities and technology; integrating the sales organizations; maintaining and increasing the
customer base; retaining key employees, suppliers and distributors; integrating management information systems,
including enterprise resource planning systems; integrating inventory management and accounting activities;
integrating research and development activities; and addressing operating losses that may exist related to individual
markets, facilities or product lines. Although we expect to realize strategic, operational and financial benefits as a
result of past or future acquisitions and investments, we cannot predict or guarantee whether and to what extent
anticipated cost savings, synergies and growth prospects will be achieved.

We anticipate that a portion of any future growth of our business may be accomplished by acquiring existing
businesses, products or technologies. However, we may not be able to identify suitable acquisition opportunities or
obtain any necessary financing on acceptable terms. We may spend time and money investigating and negotiating
with potential acquisition or investment targets but not complete the transaction.

Any future acquisition could involve other risks, including the assumption of additional liabilities and expenses,
issuances of debt, incurrence of transaction and integration costs, litigation and diversion of management’s attention
from other business concerns, and such acquisition may be dilutive to our financial results.

Last November we announced the pending acquisition of ARRIS to be completed in the first half of 2019. For a
discussion of the risks associated with the Pending Acquisition, see the “ARRIS Acquisition Risks” noted above
under this Item 1A. Risk Factors section.

We may sell or discontinue one or more of our product lines, as a result of our evaluation of our products and
markets.

We periodically evaluate our various product lines and may consider the divestiture or discontinuance of one or
more of those product lines. Any such divestiture or discontinuance could adversely affect our results of operations,
cash flows and financial position.

Divestitures of product lines have inherent risks, including the expense of selling the product line; the possibility
that any anticipated sale will not occur; possible delays in closing any sale; the risk of lower-than-expected proceeds
from the sale of the divested business; unexpected costs associated with the separation of the business to be sold
from our management information and other operating systems; potential post-closing claims for indemnification;
and potential loss of customers. Expected cost savings may also be difficult to achieve or maximize due to a fixed
cost structure, and we may experience varying success in the timely reduction of fixed costs or transferring of
liabilities previously associated with the divested or discontinued business.

Difficulties may be encountered in the realignment of manufacturing capacity and capabilities among our global
manufacturing facilities that could adversely affect our ability to meet customer demand for our products.

We periodically realign manufacturing capacity among our global facilities in order to reduce costs by improving
manufacturing efficiency and to strengthen our long-term competitive position. The implementation of these
initiatives may include significant shifts of production capacity among facilities.

There are significant risks inherent in the implementation of these initiatives, including our failure to ensure the
following: adequate inventory on hand or production capacity to meet customer demand while capacity is being
shifted among facilities; maintenance of product quality as a result of shifting capacity; adequate raw material and
other service providers to meet the needs at the new production locations; our ability to successfully remove,
transport and re-install equipment; and the availability of adequate supervisory, production and support personnel to
accommodate the shifted production.

In the event manufacturing realignment initiatives are not successfully implemented, we could experience lost future
sales and increased operating costs as well as customer relations problems, any of which could have a material
adverse effect on our business, financial condition, results of operations and cash flows.

We may need to undertake additional restructuring actions in the future.

We have previously recognized restructuring charges in response to slowdowns in demand for our products and in
conjunction with implementation of initiatives to reduce costs and improve efficiency of our operations. In addition,
over the past several years, we have undertaken a number of initiatives to support the BNS integration which
included the closure of certain domestic and international manufacturing facilities and various other workforce
reductions. As a result of changes in business conditions, the Pending Acquisition and other developments, we may
need to initiate additional restructuring actions that could result in workforce reductions and restructuring charges,
which could be material.

Financial Risks

Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations,
limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of
our variable rate debt and prevent us from meeting our obligations with respect to our indebtedness.

As of December 31, 2018, we had approximately $4.0 billion of indebtedness on a consolidated basis. See Note 6 in
the Notes to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for
additional details of our indebtedness. We had no outstanding loans under our revolving credit facility and
approximately $463.1 million in borrowing capacity. 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.

In addition, we intend to finance the Pending Acquisition largely with the proceeds of additional indebtedness. On
February 19, 2019 we issued $1.25 billion of 5.50% senior secured notes due 2024, $1.5 billion of 6.00% senior
secured notes due 2026 and $1.0 billion of 8.25% senior unsecured notes due 2027 and priced the borrowing of $3.2
billion under a new senior secured term loan due 2026 with an interest rate of LIBOR plus 3.25%. The proceeds of
the notes were placed into escrow and will be released upon consummation of the Pending Acquisition, and it is
expected that the new senior secured term loan will be borrowed at closing of the Pending Acquisition. We expect to
use a portion of the new senior secured term loan to pay off our existing senior secured term loan due December
2022. We also expect to enter into a new asset-based revolving credit facility in an amount of up to $1.0 billion,
subject to borrowing base capacity. As such, as of December 31, 2018, on a pro forma basis after giving effect to the
Pending Acquisition, we would have had approximately $10.5 billion of indebtedness on a consolidated basis. We
expect to enter into certain hedging agreements to reduce our exposure to variable rate debt among other risks.

Our substantial indebtedness could have important consequences. For example, it could:

(cid:120)

limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions,
investments and other general corporate purposes;

require a substantial portion of our cash flows to be dedicated to debt service payments and reducing the
amount of cash flows available for working capital, capital expenditures, investments or acquisitions and
other general corporate purposes;

expose us to the risk of increased interest rates as the interest cost on a significant portion of our
indebtedness is subject to changes in interest rates (especially if our efforts to mitigate this risk through
hedging agreements are unsuccessful);

place us at a competitive disadvantage compared to certain of our competitors who have less debt;

hinder our ability to adjust rapidly to changing market conditions;

limit our ability to secure adequate bank financing in the future with reasonable terms and conditions; and

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.

Our variable rate indebtedness may use LIBOR as a benchmark for establishing the rate. On July 27, 2017, the
authority that regulates LIBOR announced that it intends to stop compelling banks to submit rates for the calculation
of LIBOR after 2021. It is unclear whether new methods of calculating LIBOR will be established such that it
continues to exist after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates
Committee, is considering replacing U.S. dollar LIBOR with a newly created index, calculated with a broad set of
short-term repurchase agreements backed by treasury securities. It is not possible to predict the effect of these
changes, other reforms or the establishment of alternative reference rates in the United Kingdom (U.K.), the U.S. or
elsewhere.

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

Despite current indebtedness levels and restrictive covenants and future anticipated indebtedness and covenants
as a result of the Pending Acquisition, we may still incur additional indebtedness that could further exacerbate
the risks associated with our substantial financial leverage.

We may incur significant additional indebtedness in the future under the agreements governing our indebtedness.
Although the indentures and the credit agreements governing our current indebtedness and our future indebtedness
as a result of the Pending Acquisition contain restrictions on the incurrence of additional indebtedness, these
restrictions are subject to a number of thresholds, qualifications and exceptions, and the additional indebtedness
incurred in compliance with these restrictions could be substantial. Additionally, these restrictions permit us to incur
obligations that, although preferential to our common stock in terms of payment, do not constitute indebtedness.

To service our indebtedness, we will require a significant amount of cash and our ability to generate cash
depends on many factors beyond our control.

Our operations are conducted through our global subsidiaries and our ability to make cash payments on our
indebtedness will depend on the earnings and the distribution of funds from our subsidiaries. Certain of our
subsidiaries may have limitations or restrictions on paying dividends and otherwise transferring funds to us. Our
ability to make cash payments on and to refinance our indebtedness will depend upon our financial condition and
operating performance, which are subject to prevailing economic and competitive conditions and to financial,
business, legislative, regulatory and other factors beyond our control. We might not be able to maintain a level of
cash flows from operating activities or transfer sufficient funds from our subsidiaries to permit us to pay the
principal, premium, if any, and interest on our indebtedness.

If we are unable to generate sufficient cash flow or are otherwise unable to obtain funds necessary to meet required
payments of principal, premium, if any, and interest on our indebtedness or if we fail to comply with the various
covenants in the instruments governing our indebtedness and we are unable to obtain waivers from the required
lenders, we could be in default under the terms of the agreements governing such indebtedness. In the event of such
default, the holders of our indebtedness could elect to declare all the funds borrowed to be due and payable, together
with accrued and unpaid interest. The lenders under our revolving credit facility could elect to terminate their
commitments, cease making further loans and institute foreclosure proceedings against our assets. As a result, we
could be forced into bankruptcy or liquidation.

We may need to recognize additional impairment charges related to goodwill, identified intangible assets and
fixed assets.

We have substantial balances of goodwill, identified intangible assets and fixed assets. We are required to test
goodwill for possible impairment on the same date each year and on an interim basis if there are indicators of a
possible impairment. We are also required to evaluate identified intangible assets and fixed assets for impairment if
there are indicators of a possible impairment.

In the past, due to revisions in financial performance outlooks or deterioration in certain markets, we have
recognized significant impairment charges on our goodwill, identified intangible assets and fixed assets. In the
future, we may determine, again, that one or more of our long-lived assets is impaired and additional impairment
charges may be recognized that could have a material adverse effect on our financial condition and results of
operations.

As a result of the Pending Acquisition, we expect our goodwill, identified intangible assets and fixed asset balances
to increase significantly, which will compound our risk of impairments and any resulting adverse effects on our
financial condition and results of operations.

We may experience significant variability in our quarterly or annual effective income tax rate.

We have a large and complex international tax profile and a significant level of foreign tax credit carryforwards in
the U.S. and other carryforwards in various jurisdictions. Variability in the mix and profitability of domestic and
international activities, identification and resolution of various tax uncertainties and the inability to realize foreign
tax credits and other carryforwards included in deferred tax assets, among other matters, have impacted our effective
income tax rate in the past and may impact our effective income tax rate in the future. Tax law changes in the U.S.
and certain other countries have also impacted our effective income tax rate in the past and may impact our effective
tax rate in the future. A significant increase in our quarterly or annual effective income tax rate could have a material
adverse impact on our results of operations.

We are commonly audited by various tax authorities, and some jurisdictions, both in the U.S. and abroad, have
become more aggressive in their approach to audits and their enforcement of their applicable tax laws. In the
ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is
uncertain. Significant judgment is required in determining our worldwide provision for income taxes. Although we
believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be
materially different from our historical income tax provisions and accruals. The results of an audit or litigation could
have a material effect on our financial statements in the period or periods for which that determination is made and
on our overall effective income tax rate.

There is a risk related to the Pending Acquisition that the Internal Revenue Service does not agree that ARRIS was a
foreign corporation for U.S. federal income tax purposes in pre-acquisition periods and we could be subject to
substantial additional U.S. taxes. For U.K. tax purposes, ARRIS is expected to be treated as a U.K. tax resident,
regardless of how they are treated in the U.S. Therefore, if ARRIS were treated as a U.S. corporation for U.S.
federal income tax purposes, we could be liable for both U.S. and U.K. taxes in pre-acquisition periods, which could
have a material adverse effect on our financial condition, results of operations and cash flows.

Labor Related Risks

We may not be able to attract and retain key employees.

Our business depends upon our continued ability to hire and retain key employees. Effective succession planning is
important to our long-term success. We depend on our senior management team and other key employees for
strategic success. Some of our key employees have retired, announced their decision to retire or are at or near
retirement age. Failure to ensure effective transfer of knowledge and smooth transitions involving key employees
could hinder our strategic planning and execution.

Key employees include individuals in our sales force, operations management, engineers and skilled production
workers at our operations around the world. Competition for skilled personnel and highly qualified managers in the
industries in which we operate is intense. Our growth by acquisitions creates challenges in retaining employees as
well. As the corporate culture evolves to incorporate new workforces, some employees may not find the new culture
appealing. In addition, the pace of integration may cause retention issues with our workforce due to integration
fatigue.

As our workforce ages and leaves the company, we are challenged to find and attract workers to replace them. As a
practical matter, we will be required to draw from different generations in order to fill these positions. Workers from
these different generations may be motivated by factors that are different from our current workforce, and we may
have difficulty meeting the expectations of these workers. Difficulties in obtaining or retaining employees with the
necessary management, technical and financial skills needed to achieve our business objectives may have a material
adverse effect on our business, financial condition and results of operations.

Labor unrest could have a material adverse effect on our business, results of operations and financial condition.

Although none of our U.S. employees are represented by unions, a significant portion of our international employees
are members of unions or subject to workers’ councils or similar statutory arrangements. In addition, many of our
direct and indirect customers and vendors have unionized workforces. Strikes, work stoppages or slowdowns
experienced by us at our international locations or experienced by our customers or vendors could have a negative
impact on us. Organizations responsible for manufacturing or shipping our products may also be impacted by labor
disruptions. Any interruption in the delivery of our products and services could harm our reputation with our
customers, reduce demand for our products and services, increase costs and have a material adverse effect on us.

We have obligations under our defined benefit employee benefit plans and may be required to make plan
contributions in excess of current estimates.

At December 31, 2018, our net liability for pension and other postretirement benefits was $11.8 million (benefit
obligations of $215.2 million and plan assets of $203.4 million). See Note 10 in the Notes to the Consolidated
Financial Statements included elsewhere in this Annual Report on Form 10-K. Significant declines in the valuation
of the assets and/or increases in the liabilities related to these obligations as a result of changes in actuarial
estimates, asset performance, interest rates or benefit changes, among other assumptions, could have a material
adverse impact on our financial position and/or results of operations.

The amounts and timing of the contributions we expect to make to our defined benefit plans reflect a number of
actuarial estimates and other assumptions. The actual amounts and timing of these contributions may differ
materially from those presented in this Annual Report on Form 10-K. If we elect to terminate one or more of these
plans and settle the obligation through the purchase of annuities or otherwise, we could incur a charge and/or be
required to make additional contributions and such amounts could be material.

International Risks

Our significant international operations expose us to economic, political and other risks.

We have significant international sales, manufacturing and distribution operations. Our major international
manufacturing and/or distribution facilities are located in Australia, Belgium, China, the Czech Republic, Germany,
India, Ireland, Mexico, Singapore and the U.K. For the years ended December 31, 2018, 2017 and 2016,
international sales represented approximately 44%, 46% and 46%, respectively, of our consolidated net sales. In
general, our international sales have lower gross margin percentages than our domestic sales. To the extent
international sales represent a greater percentage of our revenue, our overall gross margin percentages may decline.

Our international sales, manufacturing and distribution operations are subject to the risks inherent in operating
abroad, including, but not limited to, risks with respect to currency exchange rate fluctuations; economic and
political destabilization; restrictive actions by foreign governments; wage inflation; nationalizations; the laws and
policies of the U.S affecting trade, anti-bribery, foreign investment and loans; foreign tax laws, including the ability
to recover amounts paid as value-added and similar taxes; potential restrictions on the repatriation of cash; reduced
protection of intellectual property; longer customer payment cycles; compliance with local laws and regulations;
armed conflict; regional violence; terrorism; shipping interruptions; and major health concerns (such as infectious
diseases). A significant portion of our products sold in the U.S. are manufactured outside the U.S. We utilize lower-
cost geographies for high labor content products while investing in largely automated plants in higher-cost regions
close to customers. Most of our manufacturing employees are located in lower-cost geographies such as Mexico,
China, India and the Czech Republic. 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.

In June 2016, the U.K. held a referendum in which voters approved an exit from the European Union (E.U.),
commonly referred to as Brexit. As a result of the referendum, the British government began negotiating the terms
of the U.K.’s future relationship with the E.U. in March 2017 with a deadline of March 29, 2019 to complete the
negotiations. Although it is still unclear what those terms will be or even if a deal will be reached, it is possible that
there will be greater restrictions on imports and exports between the U.K. and E.U. countries and increased
regulatory complexities. These changes could cause disruptions to and create uncertainty surrounding our business
and the business of existing and future customers and suppliers as well as have an impact on our employees based in
Europe, which could adversely impact our business, financial condition, results of operations and cash flows.

Risks related to fluctuations in foreign currency rates can impact our sales, results of operations, cash flows and
financial position. Our foreign currency risk exposure is mainly concentrated in Chinese yuan, euro, Czech koruna,
Australian dollar, Indian rupee, Mexican peso and Brazilian real. We manage our foreign currency rate risks through
regular operating and financing activities and use derivative financial instruments such as foreign exchange forward
contracts. There can be no assurance that our risk management strategies will be effective or that the counterparties
to our derivative contracts will be able to perform. In addition, foreign currency rates in many of the countries in
which we operate have at times been extremely volatile and unpredictable. We may choose not to hedge or
determine we are unable to effectively hedge the risks associated with this volatility. In such cases, we may
experience declines in sales and adverse impacts on earnings and such changes could be material.

Additional tariffs or a global trade war could increase the cost of our products, which could adversely impact the
competitiveness of our products.

During 2018, the U.S. administration announced tariffs on certain products imported into the U.S., which has
resulted in reciprocal tariffs from other countries, including countries where we operate. The U.S. has renegotiated
the North American Free Trade Agreement with Mexico and Canada. The renegotiated agreement remains subject to
ratification by the U.S. Congress and by the governments of Mexico and Canada, and the prospects for and timing of
approval are uncertain.

These developments have created uncertainty about the future relationship between the U.S. and certain of its
trading partners and may reduce global trade and trade between the U.S. and other nations, including countries in
which we currently operate. Changes in policy or continued uncertainty could depress economic activity and restrict
our access to suppliers or customers. We have significant international manufacturing operations, particularly in
China and Mexico. The tariffs implemented on our products (or on materials, parts or components we use to
manufacture our products) by the U.S. will increase the cost of our products manufactured and imported into the
U.S. Tariffs and other trade restrictions announced by other countries on products manufactured in the U.S. could
likewise increase the costs of those products when imported into other countries. If additional tariffs or trade
restrictions are implemented on our products (or on materials, parts or components we use to manufacture our
products) by the U.S. or other countries, the cost of our products manufactured in China, Mexico or other countries
and imported into the U.S. or other countries could increase further. 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.

Our international operations expose us to increased challenges in complying with anti-corruption laws and
regulations of the U.S. government and various other international jurisdictions.

We are required to comply with the laws and regulations of the U.S. government and various other international
jurisdictions, and our failure to comply with these rules and regulations may expose us to significant liabilities.
These laws and regulations may apply to companies, individual directors, officers, employees and agents, and may
restrict our operations, trade practices, investment decisions and partnering activities. In particular, we are subject to
U.S. and foreign anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act (FCPA) and
the U.K. Anti-Bribery Act. Violations of these legal requirements are punishable by criminal fines and
imprisonment, civil penalties, disgorgement of profits, injunctions, debarment from government contracts as well as
other remedial measures. While we have established policies and procedures designed to assist us and our personnel
in complying with applicable U.S. and international laws and regulations, our employees, subcontractors or channel
partners could take actions that violate these requirements. In addition, some of the international jurisdictions in
which we operate have elevated levels of corruption. As a result, we are exposed to an increased risk of violating
anti-corruption laws. Violation of anti-corruption laws could adversely affect our reputation, business, financial
condition, results of operations and cash flows and such effects could be material.

We are subject to governmental export and import controls that could subject us to liability or impair our ability
to compete in international markets.

Certain of our products, including purchased components of such products, are subject to export controls and may be
exported only with the required export license or through an export license exception. In addition, we are required to
comply with certain U.S. and foreign import and customs rules, sanctions and embargos. If we were to fail to
comply with applicable export licensing, customs regulations, economic sanctions and other laws, we could be
subject to substantial civil and criminal penalties, including fines, the incarceration of responsible employees and
managers, and the possible loss of export or import privileges. In addition, if our distributors fail to obtain
appropriate import, export or re-export licenses or permits, we may also be adversely affected through reputational
harm and penalties. Obtaining the necessary export license for a particular sale may be time-consuming and may
result in the delay or loss of sales opportunities. Furthermore, export control laws and economic sanctions prohibit
the shipment of certain products to embargoed or sanctioned countries, governments and persons. While we train
our employees to comply with these regulations, we cannot assure that a violation will not occur, whether knowingly
or inadvertently. Any such shipment could have negative consequences including government investigations,
penalties, fines, civil and criminal sanctions, and reputational harm. Any change in export or import regulations,
economic sanctions or related legislation, shift in the enforcement or scope of existing regulations, or change in the
countries, governments, persons or technologies targeted by such regulations, could result in our decreased ability to
export, import or sell our products to existing or potential customers, particularly those with international operations.
Any decreased use of our products or limitation on our ability to export, import or sell our products could adversely
affect our business, financial condition, results of operations and cash flows and such effects could be material.

Litigation and Regulatory Risks

We may incur costs and may not be successful in protecting our intellectual property and in defending claims
that we are infringing on the intellectual property of others.

We may encounter difficulties and significant costs in protecting our intellectual property rights or obtaining rights
to additional intellectual property to permit us to continue or expand our business. Other companies, including some
of our largest competitors, hold intellectual property rights in our industry and the intellectual property rights of
others could inhibit our ability to introduce new products unless we secure necessary licenses on commercially
reasonable terms.

In the past, we have initiated litigation in order to enforce patents issued or licensed to us or to determine the scope
and/or validity of a third party’s patent or other proprietary rights and we may initiate similar litigation in the future.
We also have been and may in the future be subject to lawsuits by third parties seeking to enforce their own
intellectual property rights, including against certain of the products or intellectual property that we have acquired
through acquisitions. Any such litigation, regardless of outcome, could be costly and could subject us to significant
liabilities or require us to cease using proprietary third party technology and, consequently, could have a material
adverse effect on our results of operations, financial condition and cash flows. Such litigation can also be a
significant distraction to management.

In certain markets, we may be required to address counterfeit versions of our products. We may incur significant
costs in pursuing the originators of such counterfeit products and, if we are unsuccessful in eliminating them from
the market, we may experience a reduction in the value of our products and/or a reduction in our net sales.

Compliance with current and future environmental laws and potential environmental liabilities may have a
material adverse impact on our business, financial condition and results of operations.

We are subject to various federal, state, local and foreign environmental laws and regulations governing, among
other things, discharges to air and water, management of regulated materials, handling and disposal of solid and
hazardous waste, and investigation and remediation of contaminated sites. In addition, we are subject to laws and
regulations regarding the types of substances allowable in certain of our products and the handling of our products at
the end of their useful life. Because of the nature of our business, we have incurred and will continue to incur costs
relating to compliance with or liability under these environmental laws and regulations and these costs could be
material. In addition, new laws and regulations, new or different interpretations of existing laws and regulations,
expansion of existing legal requirements related to our products, the discovery of previously unknown
contamination or the imposition of new remediation or discharge requirements, could require us to incur costs or
become the basis for new or increased liabilities that could have a material adverse effect on our financial condition.

Efforts to regulate emissions of greenhouse gases (GHGs), such as carbon dioxide, are underway in the U.S. and
other countries which could increase the cost of raw materials, production processes and transportation of our
products. If we are unable to comply with such regulations or sufficiently increase prices or otherwise reduce costs
to offset the increased costs of compliance, GHG regulation could have a material adverse effect on our business,
financial condition, results of operations and cash flow.

Certain environmental laws impose strict and, in some circumstances, joint and several liability on current or former
owners or operators of a contaminated property, as well as companies that generated, disposed of or arranged for the
disposal of hazardous substances at a contaminated property, for the costs of investigation and remediation of the
contaminated property. Our present and past facilities have been in operation for many years and over that time, in
the course of those operations, hazardous substances and wastes have been used, generated and occasionally
disposed of at such facilities, and we have disposed of waste products either directly or through third parties at
numerous disposal sites. Consequently, it has been necessary to undertake investigation and remediation projects at
certain sites and we have been and may in the future be held responsible for a portion of the investigation and clean-
up costs at these sites and our share of those costs may be material.

Common Stock Ownership Risks

We do not intend to pay dividends on our common stock and, consequently, the ability of investors to achieve a
return on their investment will depend on appreciation in the price of our common stock.

We do not intend to declare and pay dividends on our common stock for the foreseeable future. The payment of
future dividends will be at the discretion of our Board of Directors; however, the indentures and the credit
agreements governing our indebtedness place limitations on our ability to pay dividends. We currently intend to
invest our future earnings, if any, to fund our growth and reduce our debt and our Board of Directors may choose to
provide returns to our stockholders through share repurchases. The success of an investment in our common stock
will largely depend upon future appreciation in value, and there can be no guarantee that our common stock will
appreciate in value.

Provisions of our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a
change of control of our company or changes in our management and, as a result, depress the trading price of
our common stock.

Our certificate of incorporation and bylaws contain provisions that could discourage, delay or prevent a change in
control of our company or changes in our management that the stockholders of our company may deem
advantageous. These provisions:

(cid:120)

authorize 1,300,000,000 shares of common stock, which, to the extent unissued, could be issued by the
Board of Directors, without stockholder approval, to increase the number of outstanding shares and to
discourage a takeover attempt;

authorize the issuance, without stockholder approval, of blank check preferred stock that our Board of
Directors could issue to increase the number of outstanding shares and to discourage a takeover attempt;

(cid:120)

grant to the Board of Directors the sole power to set the number of directors and to fill any vacancy on the
Board of Directors;

limit the ability of stockholders to remove directors only “for cause” and require any such removal to be
approved by holders of at least three-quarters of the outstanding shares of common stock;

prohibit our stockholders from calling a special meeting of stockholders;

prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a
meeting of our stockholders;

provide that the Board of Directors is expressly authorized to adopt, or to alter or repeal our bylaws;

establish advance notice and certain information requirements for nominations for election to our Board of
Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings;

establish a classified Board of Directors, with three staggered terms; and

require the approval of holders of at least three-quarters of the outstanding shares of common stock to
amend the bylaws and certain provisions of the certificate of incorporation.

These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our
company and may prevent our stockholders from receiving the benefit from any premium to the market price of our
common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of
these provisions may adversely affect the prevailing market price of our common stock if the provisions are viewed
as discouraging takeover attempts in the future. These provisions could also discourage proxy contests and make it
more difficult for our stockholders to elect directors of their choosing and cause us to take corporate actions other
than those our stockholders may desire.

Our business could be negatively impacted as a result of actions by activist stockholders or others.

Stockholder activism has been increasing in publicly traded companies in recent years and we are subject to the risks
associated with such activism, particularly due to the recent decline in our stock price. Our business could be
negatively affected as a result of stockholder activism, which could cause us to incur significant legal fees and other
costs, hinder execution of our business strategy and impact the trading value of our securities. Additionally,
stockholder activism could give rise to perceived uncertainties as to our future direction, adversely affect our
relationships with key executives and business partners and make it more difficult to attract and retain qualified
employees. Any of these impacts could materially and adversely affect our business and operating results.

ITEM 1B.
None.

UNRESOLVED STAFF COMMENTS

ITEM 2.

PROPERTIES

Our facilities are used primarily for manufacturing, distribution and administration. Facilities primarily used for
manufacturing may also be used for distribution, engineering, research and development, storage, administration,
sales and customer service. Facilities primarily used for administration may also be used for research and
development, sales and customer service. As of December 31, 2018, our principal facilities, grouped according to
the facility’s primary use, were as follows:

Location
Administrative facilities:

Hickory, NC (1)
Joliet, IL (2)
Shakopee, MN
Richardson, TX (1)

Manufacturing and distribution facilities:

Catawba, NC (1)
Claremont, NC (1)
Kessel-Lo, Belgium
Suzhou, China (3)
Suzhou, China (3)
Santa Teresa, NM
Juarez, Mexico
Juarez, Mexico
Goa, India (4)
Brno, Czech Republic
Reynosa, Mexico
Greensboro, NC (1)
Mission, TX
Delicias, Mexico
Campbellfield, Australia
Bray, Ireland
Brno, Czech Republic
Buchdorf, Germany

Vacant facilities and properties:

Orland Park, IL (1)(4)
Sorocaba, Brazil (5)

Approximate
square feet

Principal segments

Owned or leased

84,000 Corporate headquarters

690,000 Corporate
177,000
100,000

CCS
CMS

1,000,000

CCS
589,000 CCS
431,000 CCS
414,000 CMS
363,000 CCS
334,000 CCS
327,000 CCS
304,000 CCS
298,000 CMS
281,000 CCS
279,000 CMS
196,000 CCS
150,000 CMS
139,000 CCS
133,000 CMS
130,000 CCS
120,000 CMS
109,000 CMS

— CMS
152,000 CMS

Owned
Leased
Leased
Owned

Owned
Owned
Owned
Owned
Owned
Leased
Owned
Leased
Owned
Leased
Owned
Owned
Leased
Owned
Leased
Owned
Leased
Owned

Owned
Owned

(1) Our interest in each of these properties is encumbered by a mortgage or deed of trust lien securing our senior secured

credit facilities (see Note 6 in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on
Form 10-K).
The former manufacturing portion of the Joliet facility is vacant and is currently being marketed for sublease.
The buildings in these facilities are owned while the land is held under long-term lease agreements.
The building at the Orland Park facility was demolished and cleared and the 73 acre parcel is vacant.
The Sorocaba, Brazil facility is currently being marketed for sale.

(2)
(3)
(4)
(5)

We believe that our facilities and equipment generally are well maintained, in good condition and suitable for our
purposes and adequate for our present operations. While we currently have excess manufacturing capacity in certain
of our facilities, utilization is subject to change based on customer demand. We can give no assurances that we will
not have excess manufacturing capacity or encounter capacity constraints over the long term.

ITEM 3.

LEGAL PROCEEDINGS

The material set forth under “Commitments and Contingencies” in Note 13 to the Consolidated Financial Statements
in Part II, Item 8 of this Annual Report on Form 10-K is incorporated herein by reference. Management believes
none of these legal matters will be material to our business or financial condition upon their final disposition.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.

MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Stock Price and Dividends

Our common stock is traded on the Nasdaq Global Select Market under the symbol COMM.

As of February 7, 2019, all of our outstanding shares of common stock are held by one stockholder of record, Cede
& Co., as nominee for the Depository Trust Company. Many brokers, banks and other institutions hold shares of
common stock as nominees for beneficial owners that deposit these shares of common stock in participant accounts
at the Depository Trust Company.

Issuer Purchases of Equity Securities

The authorization granted by the Company’s Board of Directors in August 2017 to repurchase up to $100.0 million
of the Company’s outstanding common stock expired on July 31, 2018.

The following table summarizes the stock purchase activity for the three months ended December 31, 2018:

Period

October 1, 2018 - October 31, 2018
November 1, 2018 - November 30, 2018
December 1, 2018 - December 31, 2018
Total

Total
Number of
Shares
Purchased (1)

Average
Price
Paid Per
Share

Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs

Maximum Value of
Shares that May Yet be
Purchased Under the
Plans or Programs

156 $ 29.79
5,272 $ 19.39
518 $ 16.05
5,946 $ 19.37

— $
— $
— $
—

—
—
—

(1) The shares purchased were withheld to satisfy the withholding tax obligations related to restricted stock units

and performance share units that vested during the period.

Stock Performance Graph

The following graph compares cumulative total return on $100 invested on December 31, 2013 in each of
CommScope’s Common Stock, the Standard & Poor’s 500 Stock Index (S&P 500 Index) and the Standard & Poor’s
1500 Communications Equipment Index (S&P 1500 Communications Equipment). The return of the Standard &
Poor’s indices is calculated assuming reinvestment of dividends. CommScope has not paid any dividends over this
period.

Comparison of Cumulative Five Year Total Return

$250

$200

$150

$100

$50

$0
12/31/13

12/31/14

12/31/15

12/31/16

12/31/17

12/31/18

CommScope Holding Company, Inc.

S&P 500 Index

S&P 1500 Communications Equipment Index

Company / Index
CommScope Holding Company, Inc.
S&P 500 Index
S&P 1500 Communications Equipment

Base

INDEXED RETURNS

Period

12/31/2013
100
100
100

Period Ending
12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018
120.60 136.77 196.51 199.84
86.58
113.69 115.26 129.05 157.22 150.33
112.89 100.26 120.03 146.99 165.46

ITEM 6.

SELECTED FINANCIAL DATA

The following table presents our historical selected financial data as of the dates and for the periods indicated. The
data for each of the years presented are derived from our audited consolidated financial statements. The information
set forth below should be read in conjunction with our audited consolidated financial statements and notes thereto
and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of
this Annual Report.

Five-Year Summary of Selected Financial Data
(In thousands, except per share amounts)

2018

Year Ended December 31,
2016

2015

2017

2014

Results of Operations:
Net sales
Gross profit (1)
Restructuring costs, net
Asset impairments
Operating income (1)
Net interest expense
Net income (loss)
Earnings (Loss) Per Share Information:
Weighted average number of shares
outstanding:

Basic
Diluted

Earnings (loss) per share:

Basic
Diluted

Other Information:
Net cash generated by operating activities
Depreciation and amortization
Additions to property, plant and equipment

44,025
15,000

$ 4,568,507 $ 4,560,582 $ 4,923,621 $ 3,807,828 $ 3,829,614
1,688,284 1,767,803 2,029,250 1,338,658 1,390,907
19,267
12,096
449,968 472,039 567,639 169,615 566,403
(235,000 ) (252,838 ) (272,010 ) (230,533 ) (173,981 )
(70,875 ) 236,772
140,217 193,764 222,838

42,875
38,552

29,488
90,784

43,782
—

192,022 192,430 192,470 189,876 186,905
195,332 196,811 196,459 189,876 191,450

$
$

0.73 $
0.72 $

1.01 $
0.98 $

1.16 $
1.13 $

(0.37 ) $
(0.37 ) $

1.27
1.24

$ 494,144 $ 586,286 $ 640,221 $ 327,115 $ 394,733
357,458 378,012 399,050 303,500 259,504
36,935

68,314

56,501

68,721

82,347

2018

2017

As of December 31,
2016

2015

2014

Balance Sheet Data:
Cash and cash equivalents
Goodwill and intangible assets
Property, plant and equipment, net
Total assets
Working capital
Long-term debt, including current maturities
Stockholders' equity

$ 458,195 $ 453,977 $ 428,228 $ 562,884 $ 729,321
4,204,299 4,522,714 4,567,369 4,838,119 2,712,814
450,861 467,289 474,990 528,706 289,371
6,630,540 7,041,666 7,141,986 7,502,631 4,917,058
1,187,203 1,220,142 1,135,946 1,319,548 1,351,805
3,985,904 4,369,401 4,562,010 5,243,651 2,668,898
1,756,768 1,647,826 1,394,084 1,222,720 1,307,619

(1) As of January 1, 2018, the Company adopted new accounting guidance requiring that the service cost component of net
periodic benefit cost be reported in the same line item as other compensation costs arising from services rendered by the
employee and requiring that the other components of net periodic benefit cost be reported outside the subtotal of operating
income. The guidance has been applied retrospectively to the prior periods presented.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in
conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report
on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve
risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth under "Risk Factors" included in Part I, Item 1A
or in other parts of this Annual Report on Form 10-K.

OVERVIEW

We are a global provider of infrastructure solutions for communication networks. Our solutions and services for
wired and wireless networks enable high-bandwidth data, video and voice applications. Our portfolio includes
innovative wireless and fiber optic solutions for today’s evolving digital lifestyle. Our global leadership position is
built upon innovative technology, broad solution offerings, high-quality and cost-effective customer solutions and
global manufacturing and distribution scale. Our talented and experienced global team helps customers increase
bandwidth; maximize existing capacity; improve network response time and performance; and simplify technology
migration. Our solutions are found in some of the largest venues and outdoor spaces; in buildings and data centers of
all sizes and complexities; at wireless cell sites; in telecom central offices and cable headends; in fiber-to-the-X
(FTTX) deployments; and in airports, trains, and tunnels. Vital networks around the world run on CommScope
solutions.

On November 8, 2018, we announced that we have entered into an agreement to acquire ARRIS International plc
(ARRIS) (the Pending Acquisition) in an all cash transaction with a total purchase price of approximately $7.4
billion, or $31.75 per outstanding ARRIS share. We expect the transaction to close during the first half of 2019. See
Part I, Item 1, “Business—Strategy—ARRIS Acquisition Rationale” for a discussion of strategy behind the
acquisition of ARRIS and see Part I, Item 1A., “Risk Factors—ARRIS Acquisition Risks” for a discussion of risks
related to the pending acquisition of ARRIS.

To fund the Pending Acquisition, on February 19, 2019 we issued $1.25 billion of 5.50% senior secured notes due
2024, $1.5 billion of 6.00% senior secured notes due 2026 and $1.0 billion of 8.25% senior unsecured notes due
2027 and priced the borrowing of $3.2 billion under a new senior secured term loan due 2026 with an interest rate of
LIBOR plus 3.25%. The proceeds of the notes were placed into escrow and will be released upon consummation of
the Pending Acquisition, and it is expected that the new senior secured term loan will be borrowed at closing of the
Pending Acquisition. We expect to use a portion of the new senior secured term loan to pay off our existing senior
secured term loan due December 2022. We also expect to enter into a new asset-based revolving credit facility in an
amount of up to $1.0 billion, subject to borrowing base capacity. In addition to the new debt, we expect to fund the
Pending Acquisition by issuing 1.0 million shares of series A convertible preferred stock to the Carlyle Group for
$1,000 per share, or an aggregate investment of $1.0 billion.

The following is a summary of our results for the year ended December 31, 2018 compared to the prior year:

(cid:120) Net sales were essentially flat with an increase of less than 1%;
(cid:120) Operating income decreased 4.7%;
(cid:120) Non-GAAP adjusted operating income decreased 4.4%;
(cid:120) Non-GAAP adjusted EBITDA decreased 4.7%;
(cid:120) Net income decreased 27.7%; and
(cid:120) Diluted earnings per share decreased 26.5%.

We report financial performance based on two operating segments: CommScope Connectivity Solutions (CCS) and
CommScope Mobility Solutions (CMS). For an overview of our operating segments, see Part I, Item I “Business –
Operating Segments.”

Our future financial condition and performance will be largely dependent upon: global spending by wireless
operators; global spending by business enterprises on information technology; investment by cable operators and
communications companies in video and communications infrastructure; overall global business conditions; and our
ability to manage costs successfully across our global operations. Our profitability is also affected by the mix and
volume of sales among our various product groups and between domestic and international customers and
competitive pricing pressures.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our consolidated financial statements have been prepared in conformity with generally accepted accounting
principles (GAAP) in the United States (U.S.). The preparation of these financial statements requires management to
make estimates and assumptions that affect the amounts reported in the financial statements and accompanying
notes. These estimates and their underlying assumptions form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other objective sources. Management bases its
estimates on historical experience and on assumptions that are believed to be reasonable under the circumstances
and revises its estimates, as appropriate, when changes in events or circumstances indicate that revisions may be
necessary.

The following critical accounting policies and estimates reflected in our financial statements are based on
management’s knowledge of and experience with past and current events and on management’s assumptions about
future events. While we have generally not experienced significant deviations from our critical estimates in the past,
it is reasonably possible that these estimates may ultimately differ materially from actual results. See Note 2 in the
Notes to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a
description of all of our significant accounting policies.

Business Combinations

We use the acquisition method of accounting for business combinations which requires assets acquired and
liabilities assumed be recorded at their fair values on the acquisition date. Goodwill represents the excess of the
purchase price over the fair value of the net assets acquired. The fair values of the assets acquired and liabilities
assumed are determined based upon management’s valuation and involves making significant estimates and
assumptions based on facts and circumstances that existed as of the acquisition date. We use a measurement period
following the acquisition date to gather information that existed as of the acquisition date that is needed to determine
the fair value of the assets acquired and liabilities assumed. The measurement period ends once all information is
obtained, but no later than one year from the acquisition date.

Revenue Recognition

We recognize revenue based on the satisfaction of distinct obligations to transfer goods and services to customers.
The majority of our revenue is from product sales. Revenue from product sales is recognized when control is
transferred to the customer, typically upon either shipment or delivery. A minor portion of our revenue is derived
from project contracts containing a combination of product and service obligations. Revenue from project contracts
is recognized either at a point in time or over time using cost input methods, based on the specific terms of each
contract.

For project contracts containing multiple distinct performance obligations, the transaction price is allocated based on
the relative standalone estimated selling price of each performance obligation. The relative standalone selling price
is determined using current price lists and observable pricing in separate contracts with similar customers. For
performance obligations recognized over-time, judgment is required to evaluate assumptions, including the total
estimated costs to determine progress towards completion of the performance obligation and to calculate the
corresponding amount of revenue to recognize. If estimated total costs on any contract are greater than the net
contract revenues, the entire estimated loss is recognized in the period the loss becomes known. The cumulative
effects on revenue from revisions to total estimated costs are recorded in the period in which the revisions to
estimates are identified and the amounts can be reasonably estimated.

We also recognize revenue from other customer contract types, including licensing of intellectual property, software
licensing and post-contract support (PCS) which may be sold as part of a bundled product offering or as a separate
contract. For bundled product arrangements, the transaction price is allocated based on the relative standalone
estimated selling price of each performance obligation. Distinct intellectual property obligations, including software,
are considered functional in nature and are recognized as revenue at the point in time the customer receives the
rights to use and benefit from the intellectual property or are determined using a usage-based royalty. PCS
obligations are typically recognized over the term of the contract.

Revenue is measured based on the consideration to which we expect to be entitled, based on customer contracts. For
sales to distributors, system integrators and value-added resellers (primarily for CCS segment), revenue is adjusted
for variable consideration amounts, including estimated discounts, returns, rebates and distributor price protection
programs. These estimates are determined based upon historical experience, contract terms, inventory levels in the
distributor channel and other related factors. Adjustments to variable consideration estimates are recorded when
circumstances indicate revisions may be necessary.

We record a contract asset for unbilled accounts receivable related to revenue that has been recognized in advance of
consideration being unconditionally due from the customer, which is common for certain project contract
performance obligations. Contract asset amounts are transferred to accounts receivable when our right to the
consideration becomes unconditional, which varies by contract, but is generally based on achieving certain
acceptance milestones.

A contract liability for deferred revenue is recorded when consideration is received or is unconditionally due from a
customer prior to transferring control of goods or services to the customer under the terms of a contract. Deferred
revenue balances typically result from advance payments received from customers for product contracts or from
billings in excess of revenue recognized on project or services arrangements.

We include shipping and handling costs billed to customers in net sales and include the costs incurred to transport
product to customers as cost of sales. Shipping and handling costs incurred after control is transferred to the
customer are accounted for as fulfillment costs and are not accounted for as separate revenue obligations.

Inventory Reserves

We maintain reserves to reduce the value of inventory based on the lower of cost or net realizable value, including
allowances for excess and obsolete inventory. These reserves are based on management’s assumptions about and
analysis of relevant factors including current levels of orders and backlog, forecasted demand, market conditions and
new products or innovations that diminish the value of existing inventories. If actual market conditions deteriorate
from those anticipated by management, additional allowances for excess and obsolete inventory could be required
and may be material to earnings.

Product Warranty Reserves

We recognize a liability for the estimated claims that may be paid under our customer assurance-type warranty
agreements to remedy potential deficiencies of quality or performance of our products. The product warranties
extend over periods ranging from one to twenty-five years from the date of sale, depending upon the product subject
to the warranty. We record a provision for estimated future warranty claims based upon the historical relationship of
warranty claims to sales and specifically identified warranty issues. We base our estimates on historical experience
and on assumptions that are believed to be reasonable under the circumstances and revise our estimates, as
appropriate, when events or changes in circumstances indicate that revisions may be necessary. Although these
estimates are based on management’s knowledge of and experience with past and current events and on
management’s assumptions about future events, it is reasonably possible that they may ultimately differ materially
from actual results, including in the case of a significant product failure.

Tax Valuation Allowances and Liabilities for Unrecognized Tax Benefits

We establish an income tax valuation allowance when available evidence indicates that it is more likely than not that
all or a portion of a deferred tax asset will not be realized. In assessing the need for a valuation allowance, we
consider the amounts, character, source and timing of expected future deductions or carryforwards as well as sources
of taxable income and tax planning strategies that may enable utilization. We maintain an existing valuation
allowance until sufficient positive evidence exists to support its reversal. Changes in the amount or timing of
expected future deductions or taxable income may have a material impact on the level of income tax valuation
allowances. If we determine that we will not be able to realize all or part of a deferred tax asset in the future, an
increase to an income tax valuation allowance would be charged to earnings in the period such determination was
made.

We recognize income tax benefits related to particular tax positions only when it is considered more likely than not
that the tax position will be sustained if examined on its technical merits by tax authorities. The amount of benefit
recognized is the largest amount of tax benefit that is evaluated to be greater than 50% likely to be realized.
Considerable judgment is required to evaluate the technical merits of various positions and to evaluate the likely
amount of benefit to be realized. Lapses in statutes of limitations, developments in tax laws, regulations and
interpretations, and changes in assessments of the likely outcome of uncertain tax positions could have a material
impact on the overall tax provision.

We establish deferred tax liabilities for the estimated tax cost associated with foreign earnings that we do not
consider permanently reinvested (primarily foreign withholding and state income taxes). These liabilities are subject
to adjustment if there is a change in the assertion of whether the foreign earnings are considered to be permanently
reinvested.

We also establish allowances related to value-added and similar recoverable taxes when it is considered probable
that those assets are not recoverable. Changes in the probability of recovery or in the estimates of the amount
recoverable are recognized in the period such determination is made and may be material to earnings.

Asset Impairment Reviews

Impairment Reviews of Goodwill

We test goodwill at the reporting unit level for impairment annually as of October 1 and on an interim basis when
events occur or circumstances indicate the carrying value may no longer be recoverable. The goodwill impairment
test starts with a comparison of the carrying value of a reporting unit to its estimated fair value. We estimate the fair
value of a reporting unit through the use of a discounted cash flow (DCF) valuation model. The significant
assumptions in the DCF model are the annual revenue growth rate, the annual operating income margin and the
discount rate used to determine the present value of the cash flow projections. Among other inputs, the annual
revenue growth rate and operating income margin are determined by management using historical performance
trends, industry data, insight derived from customers, relevant changes in the reporting unit’s underlying business
and other market trends that may affect the reporting unit. The discount rate is based on the estimated weighted
average cost of capital as of the test date of market participants in the industry in which the reporting unit operates.
The assumptions used in the DCF model are subject to significant judgment and uncertainty. Changes in projected
revenue growth rates, projected operating income margins or estimated discount rates due to uncertain market
conditions, loss of one or more key customers, changes in technology, or other factors, could result in one or more
of our reporting units with a significant amount of goodwill failing the goodwill impairment test in the future. It is
possible that future impairment reviews may indicate additional impairments of goodwill, which could be material
to our results of operations and financial position. Our historical or projected revenues or cash flows may not be
indicative of actual future results.

2018 Annual Goodwill Analysis

The annual test of goodwill was performed for each of the reporting units with goodwill balances as of October 1,
2018. The weighted average discount rates used in the 2018 annual test were 9.5% for the CCS reporting units and
10.0% for the CMS reporting units. These discount rates were unchanged from those used in the 2017 annual
goodwill impairment tests. Based on the estimated fair values generated by our DCF models, the reporting units
passed the annual goodwill impairment test. The Company considered the sensitivity to changes in key assumptions
for the reporting unit with the lowest level of headroom and determined that a fifty basis point change in the
discount rate or long-term growth rate would result in a potential impairment. Accordingly, if performance is worse
than anticipated, future impairment tests could result in impairment charges that could be material to our results of
operations.

Definite-Lived Intangible Assets and Other Long-Lived Assets

Management reviews definite-lived intangible assets and other long-lived assets for impairment when events or
changes in circumstances indicate that their carrying values may not be fully recoverable. This analysis differs from
our goodwill impairment analysis in that an intangible or other long-lived asset impairment is only deemed to have
occurred if the sum of the forecasted undiscounted future net cash flows related to the assets being evaluated is less
than the carrying value of the assets. If the forecasted net cash flows are less than the carrying value, then the asset is
written down to its estimated fair value. During 2018, we recorded an impairment charge of $15.0 million allocated
equally to the CCS and CMS segments related to our equity investment in a privately-held company. Other than this
equity investment impairment and other certain assets abandoned or disposed of as part of restructuring actions, we
did not identify any other impairments of definite-lived intangible assets or other long-lived assets in 2018. Changes
in the estimates of forecasted net cash flows may result in future asset impairments that could be material to our
results of operations.

Comparison of results of operations for the year ended December 31, 2018 with the year ended December 31,
2017

RESULTS OF OPERATIONS

Year Ended December 31,

2018

2017

Amount

% of Net
Sales
(dollars in millions, except per share amounts)

% of Net
Sales

Amount

Change

%
Change

Net sales
Gross profit
Operating income
Non-GAAP adjusted operating income (1)
Net income
Diluted earnings per share

$ 4,568.5 100.0 % $ 4,560.6 100.0 % $
1,688.3
450.0
838.0
140.2
0.72

37.0 1,767.8
472.0
876.7
193.8
0.98

9.9
18.3
3.1
$

38.8
10.3
19.2
4.2

7.9
(79.5 )
(22.0 )
(38.7 )
(53.6 )
(0.26 )

0.2 %
(4.5 )
(4.7 )
(4.4 )
(27.7 )
(26.5 )

(1)

See "Reconciliation of Non-GAAP Measures" in this Management’s Discussion and Analysis of Financial
Condition and Results of Operations, below.

Net sales

Domestic net sales
International net sales

Year Ended December 31,

2018

2017

$
Change

Change

4,568.5 $
2,539.2
2,029.3

(dollars in millions)
4,560.6 $
2,449.4
2,111.2

7.9
89.8
(81.9 )

0.2 %
3.7
(3.9 )

Net sales. Net sales for 2018 were essentially flat compared to 2017. Net sales in the U.S. and the Europe, Middle
East and Africa (EMEA) region increased in 2018 compared to 2017. The increase in the U.S. was driven by higher
sales volumes primarily as a result of government initiatives to promote the expansion of wireless networks but was
partially offset by reductions in certain selling prices. Net sales in the U.S. also benefitted from incremental net sales
in 2018 related to the acquisition of Cable Exchange on August 1, 2017. The increase in net sales in the EMEA
region for 2018 was driven mostly by favorable foreign exchange rate changes. These increases in net sales were
largely offset by decreases in the Asia Pacific (APAC) region as a result of projects in 2017 that did not recur in
2018. Net sales in the Caribbean and Latin America (CALA) region also decreased in 2018 with higher sales
volumes being more than offset by unfavorable foreign exchange rate changes. Net sales to customers located
outside of the U.S. comprised 44% for 2018 compared to 46% for 2017.

From a segment perspective, net sales from the CCS segment and the CMS segment in 2018 were both relatively
unchanged compared to 2017. CCS segment net sales in the EMEA region and in the U.S. both increased but these
were mostly offset by decreases in the APAC region. Net sales from the CMS segment increased in the U.S. but that
increase was mostly offset by decreases in the APAC region. For further details by segment, see the section titled
“Segment Results” below.

Gross profit, SG&A expense and R&D expense

Year Ended December 31,

Gross profit

As a percent of sales

SG&A expense

As a percent of sales

R&D expense

As a percent of sales

2018

$ 1,688.3 $
37.0 %
729.0
16.0 %
185.7
4.1 %

Change

2017
(dollars in millions)
1,767.8

(79.5 )

(4.5 )%

(66.4 )

(8.3 )

0.1

38.8 %

795.4

17.4 %

185.6

4.1 %

Gross profit (net sales less cost of sales). Despite higher sales volumes and favorable product and geographic mix,
gross profit and gross profit as a percentage of sales decreased for 2018, primarily due to reductions in certain
selling prices, higher material costs and unfavorable foreign exchange rate changes.

Selling, general and administrative expense. Selling, general and administrative (SG&A) expense for 2018 was
lower than 2017 due primarily to benefits from cost reduction initiatives and lower costs related to the integration of
the Broadband Network Solutions (BNS) business acquired from TE Connectivity in 2015. These decreases in costs
were partially offset by higher transaction costs related to the pending acquisition of ARRIS, higher incentive
compensation expense and higher bad debt expense in 2018. SG&A expense as a percentage of sales decreased from
the prior year as a result of these overall net reductions in expense.

Research and development. Research and development (R&D) expense and R&D expense as a percentage of sales
were virtually unchanged for 2018 compared to the prior year. R&D activities generally relate to ensuring that our
products are capable of meeting the evolving technological needs of our customers, bringing new products to market
and modifying existing products to better serve our customers.

Amortization of purchased intangible assets, Restructuring costs and Asset impairments

Amortization of purchased intangible assets
Restructuring costs, net
Asset impairments

NM – Not meaningful

Year Ended December 31,

2018

2017
(dollars in millions)

Change

264.6 $
44.0
15.0

271.0 $
43.8
—

(6.4 )
0.2

15.0

(2.4 )%
0.5
NM

Amortization of purchased intangible assets. The amortization of purchased intangible assets decreased for 2018
compared to the prior year because certain of our intangible assets became fully amortized. This decrease was
partially offset during 2018 by the amortization of intangible assets related to the Cable Exchange acquisition that
occurred in August 2017.

Restructuring costs, net. Restructuring costs, net for 2018 were related to the continuing integration of the BNS
business and a voluntary retirement program in the U.S. that was initiated in the fourth quarter of 2018.
Restructuring costs, net for 2017 were primarily related to the continuing integration of the BNS business. No
significant additional restructuring charges are expected to be incurred to complete the previously announced BNS
integration initiatives. From a cash perspective, we paid $42.1 million to settle restructuring liabilities during 2018.
We expect to pay $29.9 million in 2019 and $5.2 million between 2020 and 2022 related to restructuring actions that
have been initiated. Additional restructuring actions may be identified and the resulting charges and cash
requirements may be material.

Asset impairments. During 2018, we recorded an impairment charge of $15.0 million allocated equally to the CCS
and CMS segments to fully impair an equity investment in a privately-held company. We did not record any asset
impairment charges during 2017.

Net interest expense, Other expense, net and Income taxes

Net interest expense
Other expense, net
Income tax expense

Year Ended December 31,

2018

2017

Change

(235.0 ) $
(44.3 )
(30.5 )

(dollars in millions)
(252.8 ) $
(9.5 )
(16.0 )

17.8
(34.8 )
(14.5 )

(7.0 )%

366.3
90.6

Net interest expense. Net interest expense for 2018 decreased due to lower long-term debt balances as a result of the
voluntary repayments in the fourth quarter of 2017 and in July 2018 on the senior secured term loan due 2022 (the
2022 Term Loan) as well as the May 2017 amendment to reduce the interest rate margin on the 2022 Term Loan.
These decreases were partially offset by an increase in LIBOR. In connection with the repayment of the 2022 Term
Loan in July 2018, we wrote off $7.4 million of debt issuance costs and original issue discount. Similarly, in 2017,
we wrote off $14.1 million of debt issuance costs and original issue discount in connection with the redemption of
$500.0 million of 4.375% senior secured notes due 2020 (the 2020 Notes) and the repayment of $460.0 million of
senior secured term loans. The redemption of the 2020 Notes and the repayment of the senior secured term loans
were substantially funded by the issuance in March 2017 of $750.0 million of 5.00% senior notes due 2027 (the
2027 Notes).

Our weighted average effective interest rate on outstanding borrowings, including the amortization of debt issuance
costs and original issue discount, was 5.73% at December 31, 2018 and 5.45% at December 31, 2017.

Other expense, net. In 2018, we terminated a significant U.S. defined benefit pension plan which was settled
through the purchase of annuities. As a result of the settlement, we recognized a pretax charge in other expense, net
primarily related to unrecognized net actuarial losses previously recorded in accumulated other comprehensive loss
of $34.5 million. We also amended certain of our U.S. postretirement medical plans to terminate benefits as of
December 31, 2018. We recognized a pretax gain in other expense, net in 2018 of $9.7 million related to
unrecognized prior service credits and unrecognized net actuarial gains previously recorded in accumulated other
comprehensive loss.

Net periodic benefit income of $9.1 million, excluding the amounts discussed above, was included in other expense,
net for 2018 as a result of the adoption of ASU No. 2017-07, Improving the Presentation of Net Periodic Pension
Cost and Net Periodic Postretirement Benefit Cost. Other expense, net for 2017 was recast to include $5.6 million of
net periodic benefit income as a result of the new guidance. See the discussion under Recent Accounting
Pronouncements in Note 2 to the Consolidated Financial Statements included elsewhere in this Annual Report on
Form 10-K for further information regarding the adoption of this new accounting guidance.

Foreign exchange losses of $29.9 million were included in other expense, net for 2018 compared to foreign
exchange losses of $8.7 million for 2017. The 2018 amount included a $14.0 million pretax loss related to foreign
currency translation adjustments previously reported in accumulated other comprehensive loss that were recognized
in other expense, net due to the liquidation of a foreign subsidiary.

The change in other expense, net for 2018 compared to the prior year was also impacted by a redemption premium
of $14.8 million incurred during the first quarter of 2017 in connection with the redemption of the 2020 Notes,
partially offset by $9.0 million in gains recognized during 2017 related to the sale of our investment in Hydrogenics
Corporation.

Income tax expense. On December 22, 2017, the U.S. government enacted tax reform legislation (U.S. tax reform)
that reduced the corporate income tax rate from 35% to 21% and included a broad range of complex provisions
affecting the taxation of businesses. Generally, financial statement recognition of the new legislation would be
required to be completed in the period of enactment; however, in response to the complexities of this new
legislation, the SEC staff issued Staff Accounting Bulletin No. 118 to provide companies with transitional relief.
Specifically, while the initial accounting for items under the new legislation was incomplete, the guidance allowed
the recognition of provisional amounts when reasonable estimates could be made or the continued application of the
prior tax law if a reasonable estimate of the effect could not be made. The SEC staff provided up to one year for
companies to finalize the accounting for the effects of this new legislation. During 2018, we recognized $7.8 million
of tax benefit related to changes made to the provisional amounts, primarily related to our transition tax and from
revaluing our U.S. deferred tax assets and liabilities.

The effective income tax rate of 17.9% for 2018 was lower than the statutory rate of 21.0% primarily due to a
reduction in tax expense of $23.3 million related to the expiration of statutes of limitations on various uncertain tax
positions, the $7.8 million benefit recorded for changes to the provisional amounts as indicated above and the
favorable impact of $4.6 million of excess tax benefits related to equity-based compensation awards for 2018.
These decreases to the effective tax rate were partially offset by an increase in tax expense due to the effect of the
provision for state income taxes, the impact of earnings in foreign jurisdictions that are taxed at rates higher than the
U.S., the impact of the new U.S. anti-deferral provisions and the impact of repatriation taxes.

Our effective income tax rate of 7.6% for 2017 reflected the impact of U.S. tax reform enacted in December 2017.
Our effective income tax rate was also favorably affected by changes in tax legislation in certain other jurisdictions
and a reduction in tax expense related to the expiration of statutes of limitations on various uncertain tax positions.
In addition, the effective tax rate was favorably affected by $14.4 million of excess tax benefits related to equity-
based compensation awards for 2017.

Segment Results

Net sales by segment:

CCS
CMS

Consolidated net sales

Operating income by segment:

CCS
CMS

Consolidated operating income

Year Ended December 31,

2018

2017

Amount

% of Net
Sales

Amount

% of Net
Sales

Change

(dollars in millions)

$ 2,812.7
1,755.8

61.6 % $
38.4
$ 4,568.5 100.0 % $ 4,560.6 100.0 % $

61.6 % $ 2,809.8
38.4 1,750.8

2.9
5.0
7.9

0.1 %
0.3
0.2 %

$ 271.9
178.1
$ 450.0

9.7 % $ 239.0
10.1 233.0
9.9 % $ 472.0

8.5 % $ 32.9
(54.9 )
13.3
10.3 % $ (22.0 )

13.8 %
(23.6 )

(4.7 ) %

Non-GAAP adjusted operating income by
segment:
CCS
CMS

$ 521.8
316.2

18.6 % $ 523.3
18.0 353.4

18.6 % $
20.2

(1.5 )
(37.2 )

(0.3 ) %

(10.5 )

Non-GAAP consolidated adjusted
operating income (1)

$ 838.0

18.3 % $ 876.7

19.2 % $ (38.7 )

(4.4 ) %

(1) See “Reconciliation of Non-GAAP Measures” within this Management’s Discussion and Analysis of

Financial Condition and Results of Operations, below.

CommScope Connectivity Solutions Segment

CCS segment net sales were relatively unchanged in 2018 compared to 2017. Net sales increased in the EMEA
region primarily due to favorable foreign exchange rate changes for 2018. Net sales also increased in the U.S. for
2018, driven by incremental net sales due to the acquisition of Cable Exchange on August 1, 2017. These increases
were mostly offset by reductions in certain selling prices in the U.S. as well as decreases in net sales in the APAC
region and in Canada. Despite higher sales volumes, net sales in the CALA region were unchanged in 2018 due to
unfavorable foreign exchange rate changes.

CCS segment operating income increased during 2018 compared to the prior year while non-GAAP adjusted
operating income decreased slightly. CCS segment operating income benefitted from lower integration costs and
restructuring costs offset by the impairment of our equity investment in a privately-owned entity in 2018, all of
which are excluded from non-GAAP adjusted operating income. Both operating income and non-GAAP adjusted
operating income benefitted from higher sales volumes, favorable product and geographic mix and cost savings
initiatives that were partially offset by selling price reductions, higher material costs and unfavorable foreign
exchange rate changes impacting costs. See “Reconciliation of Non-GAAP Measures” within this Management’s
Discussion and Analysis of Financial Condition and Results of Operations, below.

We expect demand for our indoor network CCS products to be driven by global information technology spending,
particularly for hyperscale and cloud data center networks, as the ongoing need for bandwidth and intelligence in the
network continues to create demand for high-performance connectivity solutions. We expect demand for our
outdoor network CCS products to be driven by global deployment of fiber-optic solutions for fiber-to-the-X
applications, new services, densification, competitive dynamics in the access market, ongoing maintenance
requirements of cable networks and residential construction market activity in North America. Spending patterns by
service providers and data center customers can be volatile. Uncertain global economic conditions, variability in the
levels of commercial and residential construction activity, consolidation among service providers, uncertain levels of
information technology spending and reductions in the levels of distributor inventories may negatively affect
demand for our products. The increasing demand for fiber solutions is expected to be somewhat offset by
decelerating demand for copper solutions in networks. We expect modest near-term net sales growth in the CCS
segment as a result of these business dynamics as well as ongoing pricing pressure.

CommScope Mobility Solutions Segment

CMS segment net sales were relatively unchanged during 2018 compared to 2017. The CMS segment saw higher
sales volumes in the U.S. primarily as a result of government initiatives to promote the expansion of wireless
networks. The increase in U.S. sales volumes was offset partially by reductions in certain selling prices. The
increase in CMS segment net sales in the U.S. was largely offset by decreases in the APAC region. Foreign
exchange rate changes were not significant to CMS segment net sales for 2018.

CMS segment operating income and non-GAAP adjusted operating income decreased in 2018 primarily due to
selling price reductions and unfavorable foreign exchange rate changes impacting costs, partially offset by favorable
product and geographic mix and higher sales volumes. CMS segment operating income was also impacted by higher
restructuring costs and the impairment of our equity investment in a privately-owned entity in 2018, which are both
excluded from non-GAAP adjusted operating income. See “Reconciliation of Non-GAAP Measures” within this
Management’s Discussion and Analysis of Financial Condition and Results of Operations, below.

Our sales to wireless operators are volatile. We expect longer-term demand for our CMS products to be positively
affected by wireless coverage and capacity expansion in emerging markets and growth in mobile data services and
network capacity requirements in developed markets. In addition, we expect demand for our CMS products to
continue to be favorably affected by government initiatives to promote the expansion of wireless networks (e.g.,
FirstNet), new spectrum deployments (e.g., Citizen’s Broadband Radio Service or CBRS) and a venue refresh cycle
over the next couple of years. We also expect longer-term demand for our CMS products to be positively affected by
the introduction of 5G technology. In preparation for 5G networks, we continue to invest heavily in R&D, support
customer trials and participate in industry forums to help shape 5G standards. Uncertainty in the global economy or
a particular region or consolidation among or other investments by wireless operators may slow the growth or cause
a decline in capital spending by wireless operators and negatively impact our net sales. We expect modest near-term
net sales growth in the CMS segment as a result of these business dynamics as well as ongoing pricing pressure.

Comparison of results of operations for the year ended December 31, 2017 with the year ended December 31,
2016

Year Ended December 31,

2017

2016

Amount

% of Net
Sales
(dollars in millions, except per share amounts)

% of Net
Sales

Amount

Change

%
Change

Net sales
Gross profit
Operating income
Non-GAAP adjusted operating income (1)
Net income
Diluted earnings per share

$ 4,560.6 100.0 % $ 4,923.6 100.0 % $ (363.0 )
(261.5 )
1,767.8
(95.6 )
472.0
(167.5 )
876.7
(29.0 )
193.8
(0.15 )
0.98

38.8 2,029.3
567.6
10.3
19.2 1,044.2
222.8
1.13

41.2
11.5
21.2
4.5

4.2
$

(7.4 )%

(12.9 )
(16.8 )
(16.0 )
(13.0 )
(13.3 )

(1)

See "Reconciliation of Non-GAAP Measures" within this Management’s Discussion and Analysis of
Financial Condition and Results of Operations, below.

Net sales

Domestic net sales
International net sales

Year Ended December 31,

2017

2016

Change

4,560.6 $
2,449.4
2,111.2

(dollars in millions)
4,923.6 $
2,634.9
2,288.7

(363.0 )
(185.5 )
(177.5 )

(7.4 )%
(7.0 )
(7.8 )

Net sales. Net sales for 2017 were lower across all regions compared to the prior year except the EMEA region, with
the U.S. and APAC region having the largest declines. Net sales to customers located outside of the U.S. comprised
46% of total net sales for both 2017 and 2016. Foreign exchange rate changes did not significantly impact net sales
for 2017 compared to 2016.

From a segment perspective, CCS segment net sales decreased by 5.3% and CMS segment net sales decreased by
10.6% for 2017 compared to the prior year due to lower sales in both domestic and international markets. For further
details by segment, see the section titled “Segment Results” below.

Gross profit, SG&A expense and R&D expense

Year Ended December 31,

Gross profit

As a percent of sales

SG&A expense

As a percent of sales

R&D expense

As a percent of sales

2017

$ 1,767.8 $
38.8 %
795.4
17.4 %
185.6
4.1 %

Change

2016
(dollars in millions)
2,029.3

(261.5 )

(12.9 )%

41.2 %

881.7

17.9 %

201.3

4.1 %

(86.3 )

(9.8 )

(15.7 )

(7.8 )

Gross profit (net sales less cost of sales). The decrease in gross profit for 2017 compared to 2016 was mainly driven
by decreases in sales volume, reductions in price, unfavorable geographic and product mix and higher material costs.
This decrease was partially offset by the favorable impact of cost reduction initiatives.

Selling, general and administrative expense. SG&A expense for 2017 was lower than 2016 due primarily to lower
incentive compensation expense and benefits from cost reduction initiatives. Despite lower net sales, SG&A
expense as a percentage of sales decreased from 2016 as a result of these lower costs.

Research and development. R&D expense decreased for 2017 compared to 2016 primarily as a result of lower
incentive compensation expense. R&D expense as a percentage of sales remained unchanged from 2016.

Amortization of purchased intangible assets, Restructuring costs and Asset impairments

Amortization of purchased intangible assets
Restructuring costs, net
Asset impairments

Year Ended December 31,

2017

2016
(dollars in millions)

Change

271.0 $
43.8
—

297.2 $
42.9
38.6

(26.2 )
0.9
(38.6 )

(8.8 )%
2.1
(100.0 )

Amortization of purchased intangible assets. The amortization of purchased intangible assets was lower for 2017
compared to 2016 primarily because certain of our intangible assets became fully amortized. This was partially
offset by the amortization of intangible assets related to the Cable Exchange acquisition.

Restructuring costs, net. The restructuring costs for 2017 and 2016 were primarily related to the continuing
integration of the BNS acquisition.

Asset impairments. We did not record any asset impairment charges during 2017. During 2016, we recorded
impairment charges of $15.0 million within the CCS segment due to the revised business plan for a product line that
indicated its intangible assets would not be recoverable. Also during 2016, we recorded impairment charges of $8.3
million related to certain long-lived assets acquired with the BNS business that were no longer expected to be
utilized in operations within the CCS segment. In addition to these intangible asset and long-lived asset impairment
charges, 2016 included a $15.3 million goodwill impairment charge in the CCS segment as a result of the
impairment analysis required by the change in reportable segments.

Net interest expense, Other expense, net and Income taxes

Net interest expense
Other expense, net
Income tax expense

Year Ended December 31,

2017

2016

Change

(252.8 ) $
(9.5 )
(16.0 )

(dollars in millions)
(272.0 ) $
(23.1 )
(49.7 )

19.2
13.6
33.7

(7.1 )%

(58.9 )
(67.8 )

Net interest expense. The decrease in net interest expense for 2017 as compared to 2016 resulted primarily from
decreases in our long-term debt due to our debt redemptions and repayments in 2017 and 2016. Our average long-
term debt outstanding decreased by more than $400.0 million for 2017 as compared to 2016. During 2017, the
reduction in interest expense was offset partially by the write-off of $14.1 million of debt issuance costs and original
issue discount in connection with the redemption of $500.0 million of the 2020 Notes and the prepayment of $460.0
million of senior secured term loans. The redemption of the 2020 Notes and the prepayment of the senior secured
term loans were substantially funded by the issuance of the 2027 Notes in March 2017.

During 2016, we repaid $150.0 million of our senior secured term loan due in 2018 and voluntarily redeemed $536.6
million of the 6.625%/7.375% senior payment-in-kind toggle notes (the senior PIK toggle notes). In connection with
the repayment and redemption, we wrote off $7.1 million of debt issuance costs and original issue discount to
interest expense during 2016.

Our weighted average effective interest rate on outstanding borrowings, including the amortization of debt issuance
costs and original issue discount, was 5.45% at December 31, 2017 and 5.24% at December 31, 2016.

Other expense, net. In connection with the redemption of the 2020 Notes during 2017, we paid a redemption
premium of $14.8 million which was included in other expense, net. In May 2017, we amended the 2022 Term Loan
to reduce the interest rate margin, and in connection with the amendment, we incurred debt modification costs of
$1.1 million which were included in other expense, net for 2017. In connection with the debt redeemed or repaid
during 2016, we incurred redemption premiums of $17.7 million and other fees of $1.2 million which were included
in other expense, net.

Foreign exchange losses of $8.7 million were included in other expense, net for 2017 compared to losses of $9.5
million for 2016.

During 2017, we sold the remainder of our investment in Hydrogenics resulting in pretax gains of $9.0 million
which were recorded in other expense, net. During 2016, sales of Hydrogenics shares resulted in pretax gains of $1.2
million.

Income tax expense. Our effective income tax rate of 7.6% for 2017 reflected the impact of U.S. tax reform enacted
in December 2017. Our effective income tax rate was also favorably affected by changes in tax legislation in certain
other jurisdictions and a reduction in tax expense related to the expiration of statutes of limitations on various
uncertain tax positions. The effective tax rate was also favorably affected by $14.4 million of excess tax benefits
related to equity-based compensation awards for 2017.

Our effective income tax rate of 18.2% for 2016 was lower than the statutory rate of 35% primarily due to a
reduction in tax expense related to the release of valuation allowances related to certain federal tax credit
carryforwards and certain other deferred tax assets. The effective income tax rate was also favorably affected by the
reduction of reserves for uncertain tax positions and earnings in foreign jurisdictions that we did not plan to
repatriate. These foreign earnings were generally taxed at rates lower than the U.S. Offsetting these decreases in
2016 was the effect of the provision for state income taxes as well as the goodwill impairment charge for which only
partial tax benefits were recorded.

Segment Results

Net sales by segment:

CCS
CMS

Consolidated net sales

Operating income by segment:

CCS
CMS

Consolidated operating income

Year Ended December 31,

2017

2016

Amount

% of Net
Sales

Amount

% of Net
Sales

Change

(dollars in millions)

$ 2,809.8
1,750.8

60.2 % $ (155.7 )
39.8 (207.3 )
$ 4,560.6 100.0 % $ 4,923.6 100.0 % $ (363.0 )

61.6 % $ 2,965.5
38.4 1,958.1

(5.3 ) %

(10.6 )

(7.4 ) %

$ 239.0
233.0
$ 472.0

8.5 % $ 287.4
13.3 280.2
10.3 % $ 567.6

9.7 % $ (48.4 )
14.3
(47.2 )
11.5 % $ (95.6 )

(16.8 ) %
(16.8 )
(16.8 ) %

Non-GAAP adjusted operating income by
segment:
CCS
CMS

$ 523.3
353.4

18.6 % $ 628.5
20.2 415.7

21.2 % $ (105.2 )
(62.3 )
21.2

(16.7 ) %
(15.0 )

Non-GAAP consolidated adjusted
operating income (1)

$ 876.7

19.2 % $ 1,044.2

21.2 % $ (167.5 )

(16.0 ) %

(1) See “Reconciliation of Non-GAAP Measures” within this Management’s Discussion and Analysis of

Financial Condition and Results of Operations, below.

CommScope Connectivity Solutions Segment

CCS segment net sales were lower in 2017 compared to 2016 in all regions except the EMEA region. The decrease
was driven by the U.S. and the APAC region as a result of a slowdown in the rollout of new projects by certain
North American service providers, continued weakness in demand for our indoor network products, and certain
large projects in the APAC region in 2016 that did not recur in 2017. In addition, we experienced BNS integration
issues early in 2017 that negatively affected customer service levels and order rates. Incremental sales related to the
Cable Exchange acquisition completed in August 2017 were not material to the CCS segment for 2017. Foreign
exchange rate changes did not significantly impact segment sales for 2017 compared to 2016.

CCS segment operating income and non-GAAP adjusted operating income decreased for 2017 compared to 2016
primarily due to lower sales volumes, price reductions, unfavorable geographic and product mix and higher material
costs. These decreases were partially offset by the favorable impact of cost reduction initiatives and lower incentive
compensation. The decrease in CCS segment operating income was also partially offset by lower intangible asset
amortization, lower impairment charges and lower integration and transaction costs during 2017 compared to 2016.
The impacts of intangible asset amortization, impairment charges and integration and transaction costs are excluded
from the calculation of non-GAAP adjusted operating income.

CommScope Mobility Solutions Segment

The CMS segment experienced a decrease in net sales for 2017 compared to 2016 in all major regions, with the
decrease being most pronounced in the U.S. and the APAC region. While CMS segment net sales benefited from
increased spending by certain domestic operators in the first quarter of 2017, we saw a slowdown in their spending
during the remainder of 2017. The decline in sales of our CMS products in the APAC region was primarily due to
certain large projects in 2016 that did not recur during 2017. Foreign exchange rate changes did not significantly
impact segment sales for 2017 compared to 2016.

CMS segment operating income and non-GAAP adjusted operating income decreased for 2017 compared to 2016
primarily due to lower sales volumes, price reductions and unfavorable geographic mix, partially offset by lower
incentive compensation. The decrease in CMS segment operating income for 2017 compared to 2016 was partially
offset by lower intangible amortization and restructuring costs. Non-GAAP adjusted operating income excludes the
impacts of intangible amortization and restructuring costs.

Liquidity and Capital Resources

The following table summarizes certain key measures of our liquidity and capital resources:

Cash and cash equivalents
Working capital (1), excluding cash and cash
equivalents and current portion of long-term debt
Availability under revolving credit facility
Long-term debt, including current portion
Total capitalization (2)
Long-term debt, including current portion, as a
percentage of total capitalization

December 31,

2018

2017

Change

458.2 $

(dollars in millions)
454.0 $

4.2

0.9 %

729.0
463.1
3,985.9
5,742.7

766.2
425.4
4,369.4
6,017.2

(37.2 )
37.7
(383.5 )
(274.5 )

(4.9 )
8.9
(8.8 )
(4.6 )

69.4 %

72.6 %

(1) Working capital consists of current assets of $1,877.8 million less current liabilities of $690.6 million as of

December 31, 2018 and current assets of $1,943.9 million less current liabilities of $723.7 million as of
December 31, 2017.

(2) Total capitalization includes long-term debt, including the current portion, and stockholders’ equity.

Our principal sources of liquidity on a short-term basis are cash and cash equivalents, cash flows provided by
operations and availability under credit facilities. Refer to Note 6 in the Notes to Consolidated Financial Statements
included elsewhere in this Annual Report on Form 10-K for information regarding the terms of our credit
agreements as of December 31, 2018. To fund the Pending Acquisition, on February 19, 2019 we issued $1.25
billion of 5.50% senior secured notes due 2024, $1.5 billion of 6.00% senior secured notes due 2026 and $1.0 billion
of 8.25% senior unsecured notes due 2027 and priced the borrowing of $3.2 billion under a new senior secured term
loan due 2026 with an interest rate of LIBOR plus 3.25%. The proceeds of the notes were placed into escrow and
will be released upon consummation of the Pending Acquisition, and it is expected that the new senior secured term
loan will be borrowed at closing of the Pending Acquisition. We expect to use a portion of the new senior secured
term loan to pay off our existing senior secured term loan due December 2022. We also expect to enter into a new
asset-based revolving credit facility in an amount of up to $1.0 billion, subject to borrowing base capacity. In
addition to the new debt, we expect to fund the Pending Acquisition by issuing 1.0 million shares of series A
convertible preferred stock to the Carlyle Group for $1,000 per share, or an aggregate investment of $1.0 billion. On
a long-term basis, our potential sources of liquidity include raising capital through additional issuances of debt
and/or equity.

In addition to funding the pending ARRIS acquisition, the primary uses of liquidity include debt service
requirements, funding working capital requirements, capital expenditures, paying restructuring and integration costs,
income tax payments and funding pension benefits. We believe that our existing cash, cash equivalents and cash
flows from operations, combined with the long-term borrowings incurred for the pending ARRIS acquisition,
availability under our current and future revolving credit facility and access to capital markets, will be sufficient to
meet our presently anticipated future cash needs. We may experience volatility in cash flows between periods due
to, among other reasons, variability in the timing of vendor payments and customer receipts. We may, from time to
time, borrow under our revolving credit facility or issue securities, if market conditions are favorable, to meet future
cash needs or to reduce our borrowing costs.

Although there are no financial maintenance covenants under the terms of our senior notes, there is a limitation,
among other limitations, on certain future borrowings based on an adjusted leverage ratio or a fixed charge coverage
ratio. These ratios are based on financial measures similar to adjusted EBITDA as presented in the “Reconciliation
of Non-GAAP Measures” section below, but also give pro forma effect to certain events, including acquisitions and
savings from cost reduction initiatives such as facility closures and headcount reductions. For the year ended
December 31, 2018, our pro forma adjusted EBITDA, as measured pursuant to the indentures governing our notes,
was $951.5 million, which included $37.9 million of savings from announced cost reduction initiatives so that the
impact of the cost reduction initiatives is fully reflected in the twelve-month period used in the calculation of the
ratios. In addition to limitations under these indentures, our senior secured credit facilities contain customary
negative covenants. We believe we are in compliance with the covenants under our indentures and senior secured
credit facilities at December 31, 2018.

Cash and cash equivalents increased slightly during 2018. We generated less cash from operations and had higher
capital expenditures in 2018 compared to 2017. However, in 2017 we used cash on hand to fund our purchase of
Cable Exchange for $105.2 million. In 2018, we made net voluntary repayments of $400.0 million on the 2022 Term
Loan while in 2017 we made $210.0 million in voluntary repayments of debt and repurchased $175.0 million of our
common stock. As of December 31, 2018, approximately 70% of our cash and cash equivalents were held outside
the U.S.

Working capital, excluding cash and cash equivalents, decreased during 2018. The decrease was mainly due to
lower accounts receivable balances due to the timing of net sales. This decrease was partially offset by lower
accounts payable balances and higher inventory balances as of December 31, 2018 compared to December 31, 2017.
The net reduction in total capitalization during 2018 reflected the repayment of $400.0 million on the 2022 Term
Loan and foreign currency translation losses partially offset by current year earnings.

Cash Flow Overview

Comparison for the year ended December 31, 2018 with the year ended December 31, 2017

Year Ended December 31,

2018

2017
(dollars in millions)

Change

494.1 $
(64.3 )
(409.6 )

586.3 $
(166.2 )
(413.6 )

(92.2 )
101.9
4.0

(15.7 ) %
NM
NM

Net cash generated by operating activities
Net cash used in investing activities
Net cash used in financing activities

NM - Not meaningful

Operating Activities

During 2018, we generated $494.1 million of cash through operating activities compared to $586.3 million during
2017. The lower level of cash generation was primarily due to lower earnings, increases in cash used to build
inventory and higher cash payments for interest and taxes. The decreases were offset partially by lower payments of
incentive compensation compared with the prior year.

Investing Activities

Investment in property, plant and equipment during 2018 was $82.3 million compared with $68.7 million for the
prior year. The investment in property, plant and equipment was primarily related to supporting improvements in
manufacturing operations, including expanding production capacity and investing in information technology,
including software developed for internal use.

During 2018 and 2017, we sold property and equipment no longer being utilized for $12.9 million and $5.4 million,
respectively.

During 2018 and 2017, we received $5.1 million and paid $7.6 million, respectively, to settle net investment hedges
that we entered into for the purpose of mitigating a portion of the foreign currency risk on the euro net investment in
a foreign subsidiary.

During 2017, we acquired Cable Exchange and paid $105.2 million, net of cash acquired, using cash on hand. Also
during 2017, we received proceeds of $9.9 million related to the sale of the remainder of our investment in
Hydrogenics.

Financing Activities

In July 2018, we repaid $400.0 million of the 2022 Term Loan. The payment was made using $250.0 million of cash
on hand and $150.0 million borrowed under our asset-based revolving credit facility (the revolving credit facility)
which was repaid during the third quarter of 2018. As of December 31, 2018, we had no outstanding borrowings
under the revolving credit facility and the remaining availability was $463.1 million, reflecting a borrowing base of
$492.6 million reduced by $29.5 million of letters of credit issued under the revolving credit facility. During 2018,
we received proceeds of $6.1 million related to the exercise of stock options. Also during 2018, employees
surrendered 407,938 shares of our common stock to satisfy their tax withholding requirements on vested restricted
stock units and performance share units, which reduced cash flows by $15.7 million.

During 2017, we issued the 2027 Notes for $750.0 million and the proceeds, together with cash on hand, were used
to (i) redeem all $500.0 million of the outstanding 2020 Notes, (ii) repay a portion of the outstanding borrowings
under our senior secured term loans, including $111.9 million of outstanding principal on our senior secured term
loan due 2018 and $138.1 million of outstanding principal on the 2022 Term Loan, and (iii) pay related fees and
expenses. We paid a $14.8 million premium to redeem the 2020 Notes and paid $7.2 million in debt issuance costs
related to the 2027 Notes. In addition, during 2017, we amended the 2022 Term Loan to reduce the interest rate
margin by 50 basis points which resulted in the repayment of $30.4 million to certain lenders under the senior
secured credit facilities and the receipt of $30.4 million in proceeds from the new lenders and existing lenders who
increased their positions. We also paid $1.1 million in debt modification costs related to this amendment. Also
during 2017, we voluntarily repaid $210.0 million of the 2022 Term Loan. During 2017, we paid cash of $175.0
million to repurchase stock under stock repurchase programs authorized by our Board of Directors in 2017. The
repurchase authorization expired on July 31, 2018. In addition, we received proceeds of $9.9 million related to the
exercise of stock options and employees surrendered 411,932 shares of our common stock to satisfy their tax
withholding requirements on vested restricted stock units, which reduced cash flows by $15.4 million.

Comparison for the year ended December 31, 2017 with the year ended December 31, 2016

Year Ended December 31,

2017

2016
(dollars in millions)

Change

586.3 $
(166.2 )
(413.6 )

640.2 $
(54.6 )
(708.4 )

(53.9 )
(111.6 )
294.8

(8.4 ) %
NM
NM

Net cash generated by operating activities
Net cash used in investing activities
Net cash used in financing activities

NM - Not meaningful

Operating Activities

During 2017, we generated $586.3 million of cash through operating activities compared to $640.2 million during
2016. The lower level of cash generation was primarily due to the prior year benefit generated from the extension of
vendor payment terms as well as higher 2016 incentive compensation which was paid in 2017 and lower operating
performance in 2017 compared to 2016. These declines were partially offset by higher cash flow from accounts
receivable due to changes in the timing of sales and collections as well as approximately $59.2 million of customer
payments received in late 2017 that were not due until 2018. In addition, we paid lower cash taxes and cash interest
during 2017 than in 2016.

Investing Activities

During 2017, we acquired Cable Exchange and paid $105.2 million, net of cash acquired, using cash on hand. We
recorded a noncurrent liability for the remaining $14.5 million of payments due to the sellers. During 2016, we
received adjustments to the BNS acquisition purchase price of $7.1 million and paid $1.0 million as a final payment
on a previous acquisition.

Investment in property, plant and equipment during 2017 was $68.7 million compared with $68.3 million for the
prior year. The investment in property, plant and equipment was primarily related to supporting improvements in
manufacturing operations, including expanding production capacity and investing in information technology,
including software developed for internal use.

During 2017, we received proceeds of $9.9 million related to the sale of the remainder of our investment in
Hydrogenics. During 2016, we received $1.3 million in proceeds related to the sale of a portion of that investment.

During 2017, we paid $7.6 million to settle a net investment hedge that we entered into in 2017 for the purpose of
mitigating a portion of the foreign currency risk on the euro net investment in a foreign subsidiary. As of December
31, 2017, we had entered into another net investment hedge intended to mitigate the same risk with an outstanding
maturity of twelve months.

During 2017 and 2016, we sold properties no longer being utilized for $4.5 million and $3.7 million, respectively.

Financing Activities

In March 2017, we issued the 2027 Notes for $750.0 million and the proceeds, together with cash on hand, were
used to (i) redeem all $500.0 million of the outstanding 2020 Notes, (ii) repay a portion of the outstanding
borrowings under our senior secured term loans, including the $111.9 million of outstanding principal on our senior
secured term loan due 2018 and $138.1 million of outstanding principal on the 2022 Term Loan, and (iii) pay related
fees and expenses. We paid a $14.8 million premium to redeem the 2020 Notes and paid $7.2 million in debt
issuance costs related to the 2027 Notes.

During 2017, we amended the 2022 Term Loan to reduce the interest rate margin by 50 basis points which resulted
in the repayment of $30.4 million to certain lenders under the senior secured credit facilities and the receipt of $30.4
million in proceeds from the new lenders and existing lenders who increased their positions. We also paid $1.1
million in debt modification costs related to this amendment. In addition, we voluntarily repaid $210.0 million of the
2022 Term Loan during 2017.

As of December 31, 2017, we had no outstanding borrowings under our revolving credit facility and the remaining
availability was $425.4 million, reflecting a borrowing base of $452.4 million reduced by $27.0 million of letters of
credit issued under the revolving credit facility.

During the first half of 2017, we paid cash of $100.0 million to repurchase stock under the stock repurchase program
authorized by our Board of Directors in February 2017. We had no remaining authorization under this stock
repurchase program as of December 31, 2017. In August 2017, our Board of Directors approved a new stock
repurchase plan of up to $100.0 million. We paid cash of $75.0 million to repurchase stock under this plan during
2017. We had $25.0 million of remaining authorization under this stock repurchase program as of December 31,
2017. The repurchase authorization under this plan expired on July 31, 2018.

During 2017, we received proceeds of $9.9 million related to the exercise of stock options. Also during 2017,
employees surrendered 411,932 shares of our common stock to satisfy their tax withholding requirements on vested
restricted stock units and performance share units, which reduced cash flows by $15.4 million.

During 2016, we voluntarily redeemed the remaining $536.6 million of our senior PIK toggle notes and made
mandatory debt repayments of $12.5 million on the 2022 Term Loan. In connection with the debt redeemed or
repaid in 2016, we paid redemption premiums of $17.7 million and other fees of $1.2 million. Also during 2016, we
received proceeds of $16.8 million related to the exercise of stock options and employees surrendered 143,000
shares of our common stock to satisfy their tax withholding requirements on vested restricted stock units, which
reduced cash flows by $3.9 million.

Reconciliation of Non-GAAP Measures

We believe that presenting certain non-GAAP financial measures enhances an investor’s understanding of our
financial performance. We further believe that these financial measures are useful in assessing our operating
performance from period to period by excluding certain items that we believe are not representative of our core
business. We also use certain of these financial measures for business planning purposes and in measuring our
performance relative to that of our competitors. We believe these financial measures are commonly used by
investors to evaluate our performance and the performance of our competitors. However, our use of the terms non-
GAAP adjusted operating income and non-GAAP adjusted EBITDA may vary from that of others in our industry.
These financial measures should not be considered as alternatives to operating income (loss), net income (loss) or
any other performance measures derived in accordance with U.S. GAAP as measures of operating performance,
operating cash flows or liquidity.

Consolidated

Operating income
Adjustments:

Amortization of purchased intangible
assets
Restructuring costs, net
Equity-based compensation
Asset impairments
Integration and transaction costs (a)
Purchase accounting adjustments (b)
Non-GAAP adjusted operating income

Depreciation

Non-GAAP adjusted EBITDA

2018

Year Ended December 31,
2017
(in millions)

2016

450.0 $

472.0 $

567.6

264.6
44.0
44.9
15.0
19.5
—
838.0 $
75.6
913.6 $

271.0
43.8
41.9
—
48.0
—
876.7 $
81.7
958.4 $

297.2
42.9
35.0
38.6
62.3
0.6
1,044.2
80.5
1,124.6

(a) Reflects integration costs related to the acquisition of the BNS business, transaction costs related to potential

and consummated acquisitions and costs related to secondary stock offerings.

(b) Reflects non-cash charges resulting from the application of acquisition accounting.

CCS Segment

Operating income
Adjustments:

Amortization of purchased intangible assets
Restructuring costs, net
Equity-based compensation
Asset impairments
Integration and transaction costs
Purchase accounting adjustments
Non-GAAP adjusted operating income

CMS Segment

Operating income
Adjustments:

Amortization of purchased intangible assets
Restructuring costs, net
Equity-based compensation
Asset impairments
Integration and transaction costs
Non-GAAP adjusted operating income

Note: Components may not sum to total due to rounding

2018

Year Ended December 31,
2017
(in millions)

2016

271.9 $

239.0 $

287.4

178.6
24.2
27.3
7.5
12.3
—
521.8 $

175.5
36.6
24.4
—
47.9
—
523.3 $

195.9
27.1
19.8
38.6
59.1
0.6
628.5

2018

Year Ended December 31,
2017
(in millions)

2016

178.1 $

233.0 $

280.2

86.0
19.8
17.6
7.5
7.3
316.2 $

95.5
7.2
17.5
—
0.2
353.4 $

101.3
15.8
15.2
—
3.3
415.7

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2018:

Contractual Obligations

Long-term debt, including current
maturities (a)
Interest on long-term debt (a)(b)
Operating leases
Purchase obligations and other supplier
agreements (c)
Pension and other postretirement
benefit liabilities (d)
Restructuring costs, net (e)
Unrecognized tax benefits (f)
Total contractual obligations

Total
Payments
Due

Amount of Payments Due per Period

2019

2020-2021 2022-2023 Thereafter

(in millions)

$ 4,036.3 $
1,258.9
119.7

— $
219.1
35.7

650.0 $
419.9
53.4

486.3 $ 2,900.0
271.4
348.5
11.3
19.3

36.4

32.8

3.6

—

8.7
29.2
—
$ 5,489.2 $

5.6
27.7
—

1.0
1.5
—
320.9 $ 1,129.4 $

0.8
—
—

1.3
—
—
854.9 $ 3,184.0

(a) No prepayment or redemption of any of our long-term debt balances has been assumed. Refer to Note 6 in the
Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for
information regarding the terms of our long-term debt agreements.

(b)

Interest on long-term debt excludes the amortization of debt issuance costs and original issue discount. Interest
on variable rate debt is estimated based upon rates in effect as of December 31, 2018.

minimum amounts owed under take-or-pay or requirements contracts. Amounts covered by open purchase
orders are excluded as there is no contractual obligation until goods or services are received. This item also
includes $11.1 million and $3.6 million of purchase price payments due in 2019 and 2020, respectively,
related to the acquisition of Cable Exchange.

(d) Amounts reflect expected contributions related to payments under the postretirement benefit plans through
2028 and expected pension contributions of $5.0 million in 2019 (see Note 10 in the Notes to Consolidated
Financial Statements included elsewhere in this Annual Report on Form 10-K).

(e) Future restructuring payments exclude payments due under lease arrangements which are included in

operating leases above.

(f) Due to the uncertainty in predicting the timing of tax payments related to our unrecognized tax benefits,

$17.3 million has been excluded from the presentation. We anticipate a reduction of up to $5.0 million of
unrecognized tax benefits during the next twelve months (see Note 11 in the Notes to Consolidated Financial
Statements included elsewhere in this Annual Report on Form 10-K).

Recent Accounting Pronouncements

Adopted in 2018

In the fourth quarter of 2018, we early adopted ASU No. 2018-14, Disclosure Framework: Changes to the
Disclosure Requirements for Defined Benefit Plans, which adds disclosure requirements identified as relevant for
employers that sponsor defined benefit pension or other postretirement plans, removes disclosures that are no longer
considered cost beneficial, and clarifies existing guidance for certain disclosure requirements. The impact on our
disclosures was to remove the disclosure of the amounts in accumulated other comprehensive loss expected to be
recognized as net periodic benefit cost in the next year and to provide explanations of significant gains and losses
related to the changes in the benefit obligation for the period. The impacts were applied retrospectively to the
disclosures for all periods presented. The adoption of this ASU only affected the disclosures on our defined benefit
pension plans and did not affect our consolidated financial statements. See Note 10 in the Notes to the Consolidated
Financial Statements included elsewhere in this Annual Report on Form 10- K for further discussion of our defined
benefit pension plans.

In the fourth quarter of 2018, we early adopted ASU No. 2018-02, Reclassification of Certain Tax Effects from
Accumulated Other Comprehensive Income, which allows companies to elect reclassification from accumulated
other comprehensive income to retained earnings for certain tax effects resulting from the U.S. tax legislation
enacted in 2017. Our policy is to generally recognize the tax effects in accumulated other comprehensive income at
the currently enacted tax rate and reclassify it to net income in the same period that the related pre-tax accumulated
comprehensive income reclassifications are recognized. We did not elect the permitted reclassification and therefore
adoption did not have an impact on our consolidated financial statements.

We adopted ASU No. 2014-09, Revenue from Contracts with Customers, including all subsequently issued
clarifying guidance, on January 1, 2018. The core principle of the new guidance is to recognize revenue when
promised goods or services are transferred to customers in an amount that reflects the consideration that is expected
to be received for those goods or services. We adopted the standard using the modified retrospective approach with
the cumulative effect of applying the standard on the date of adoption recognized in retained earnings (accumulated
deficit).

Revenue recognition for our product sales remained generally consistent with historical practice. However, the
adoption of ASU No. 2014-09 resulted in acceleration of revenue recognition for certain project contracts containing
integrated product and service obligations, primarily within the CMS segment. These multi-element contracts
represented less than 2.0% of total net sales for the years ended December 31, 2018 and 2017. For these contracts,
certain performance obligations are recognized over time using cost-based input methods, which recognize revenue
and cost of sales based on the relationship between actual costs incurred compared to the total estimated cost for the
performance obligation. Based on contracts in effect at January 1, 2018, we recorded a cumulative effect adjustment,
net of tax, of $3.4 million, which reduced the accumulated deficit on the Consolidated Balance Sheets. This
adjustment reflects an acceleration of $8.0 million of net sales.

The impact of adoption of the new revenue recognition standard on the consolidated financial statements was as
follows:

Year Ended December 31, 2018

Amounts Without
Adoption of
ASU No. 2014-09

Effect of Change
Increase / (Decrease)
(4,127 )
(1,697 )
(2,430 )
(622 )
(1,808 )

4,572,634 $
2,881,920
452,398
31,117
142,025

Net sales
Cost of sales
Operating income
Income tax expense
Net income

As Reported

4,568,507 $
2,880,223
449,968
30,495
140,217

Assets:

Accounts receivable, less allowance
for doubtful accounts
Inventories, net

Liabilities:

Other accrued liabilities

Stockholders' equity:

As of December 31, 2018

Amounts Without
Adoption of
ASU No. 2014-09

Effect of Change
Increase / (Decrease)

As Reported

810,359 $

473,327

808,381

475,008

291,385

292,693

1,978

(1,681 )

(1,308 )

Retained earnings (accumulated deficit)

(249,777 )

(251,382 )

1,605

We adopted ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, on
January 1, 2018. This new guidance modifies how entities measure equity investments (except those accounted for
under the equity method of accounting) and present changes in the fair value of financial liabilities; simplifies the
impairment assessment of equity investments without readily determinable fair values by requiring a qualitative
assessment to identify impairment; changes presentation and disclosure requirements; and clarifies that an entity
should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in
combination with the entity’s other deferred tax assets. Adoption of this new guidance did not have a material
impact on the consolidated financial statements.

We adopted ASU No. 2016-16, Accounting for Income Taxes, Intra-Entity Asset Transfers of Assets Other than
Inventory, on January 1, 2018. Under previous guidance, the tax effects of intra-entity asset transfers were deferred
until the transferred asset was sold to a third party or otherwise recovered through use. The new guidance eliminates
the exception for all intra-entity sales of assets other than inventory. As a result, the tax effect of an intra-entity asset
sale would be recognized when the transfer occurs. We recorded a cumulative effect adjustment of $2.6 million as of
January 1, 2018 that decreased the accumulated deficit on the Consolidated Balance Sheets as a result of this new
guidance.

We adopted ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost, on January 1, 2018. The new standard requires an employer to report the service cost
component of net periodic benefit cost in the same line item as other compensation costs arising from services
rendered by the employee and requires the other components of net periodic benefit cost to be reported outside the
subtotal of operating income. Of the total $19.8 million of net periodic benefit cost for year ended December 31,
2018, $15.7 million of net periodic benefit cost was recorded in other expense, net, and $4.1 million of net periodic
benefit cost was recorded within operating income. We utilized the practical expedient and used the amounts
disclosed in our employee benefit plans note for the years ended December 31, 2017 and 2016 as the basis for
applying the retrospective presentation requirements. We reclassified $5.6 million and $7.1 million of net periodic
benefit income from operating income to other expense, net for the years ended December 31, 2017 and 2016,
respectively. The adoption of this guidance had no impact on the previously reported income before income taxes or
net income for the years ended December 31, 2017 and 2016.

We adopted ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, on January 1, 2018.
The new guidance provides targeted improvements to the hedge accounting model intended to allow financial
reporting to more closely reflect an entity’s risk management activities and to simplify the application of hedge
accounting. Beginning January 1, 2018, we elected to assess the effectiveness of our net investment hedges using the
spot rate method. As a result, differences between the spot rate and the forward rate will be amortized to earnings on
a straight-line basis over the life of the contract. See Note 7 in the Notes to the Consolidated Financial Statements
included elsewhere in this Annual Report on Form 10- K for further details on our derivative and hedging activities
and the related impacts to the financial statements.

Issued but Not Adopted

In August 2018, the Financial Accounting Standards Board (FASB) issued ASU No. 2018-15, Customer’s
Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement (CCA) that is a Service
Contract, which aligns the accounting for costs incurred to implement a CCA that is a service arrangement with the
guidance on capitalizing costs associated with developing or obtaining internal-use software. ASU No. 2018-15 is
effective for us as of January 1, 2020 and early adoption is permitted. We are evaluating the impact of the new
guidance on the consolidated financial statements and when it will be adopted.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test of Goodwill Impairment, which
eliminates Step 2 from the goodwill impairment test. Under the new guidance, an entity will perform its annual or
interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity
will recognize a goodwill impairment charge for the excess of the reporting unit’s carrying amount over its fair
value, up to the amount of goodwill allocated to that reporting unit. ASU No. 2017-04 is effective for us as of
January 1, 2020 and early adoption is permitted. We plan to adopt this new guidance as of January 1, 2019 and do
not anticipate that adoption will materially affect the consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. The
new guidance replaces the current incurred loss method used for determining credit losses on financial assets,
including trade receivables, with an expected credit loss method. ASU No. 2016-13 is effective for us as of January
1, 2020 and early adoption is permitted. We are evaluating the impact of the new guidance on the consolidated
financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which supersedes the current leasing guidance in
Topic 840, Leases. Under the new guidance, lessees are required to recognize assets and lease liabilities for the
rights and obligations created by leased assets previously classified as operating leases. ASU No. 2016-02 is
effective for us as of January 1, 2019. In July 2018, the FASB issued ASU No. 2018-11, which allows entities a
transition election to recognize the effects of applying the new leasing standard as a cumulative-effect adjustment to
retained earnings (accumulated deficit) as opposed to restating comparative periods for the effects of applying the
new standard. We expect to elect this transition approach. We are finalizing the necessary changes to our accounting
policies, processes, internal controls and information systems that will be required to meet the new standard’s
reporting and disclosure requirements. The majority of our leased asset value relates to real estate with the
remainder primarily related to vehicles and equipment. We estimate that adoption of the new standard will increase
total assets and total liabilities in the Consolidated Balance Sheets by $95 million to $100 million due to the addition
of right-of-use assets and lease obligations for operating type leases, net of the elimination of existing prepaid rent,
deferred rent and lease termination cost amounts. We do not expect the adoption of the new standard to significantly
affect the Consolidated Statements of Operations and Comprehensive Income or the Consolidated Statements of
Cash Flows.

Off-Balance Sheet Arrangements

We are not a party to any significant off-balance sheet arrangements, except for operating leases. There have not
been any material changes to our off-balance sheet arrangements during the year ended December 31, 2018.

Effects of Inflation and Changing Prices

We continually attempt to minimize the effect of inflation on earnings by controlling our operating costs and
adjusting our selling prices. The principal raw materials purchased by us (copper, aluminum, steel, plastics and other
polymers, bimetals and optical fiber) are subject to changes in market price as they are influenced by commodity
markets and other factors. Prices for copper, fluoropolymers and certain other polymers derived from oil and natural
gas have, at times, been volatile. As a result, we have adjusted our prices for certain products and may have to adjust
prices again in the future. To the extent that we are unable to pass on cost increases to customers without a
significant decrease in sales volume or must implement price reductions in response to a rapid decline in raw
material costs, these cost changes could have a material adverse impact on the results of our operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Interest Rate Risk

The table below summarizes the expected interest and principal payments associated with our variable rate debt (the
$486.3 million senior secured term loan and revolving credit facility) as of December 31, 2018. The principal
payments presented below are based on scheduled maturities and assume no borrowings under the revolving credit
facility. The interest payments presented below assume the interest rates in effect as of December 31, 2018 (see
Note 6 in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K).
The impact of a 1% increase in the interest rate index on projected future interest payments on the variable rate debt
is also included in the table below.

2019

2020

2021
2022
(dollars in millions)

2023

There-
after

Principal and interest payments
on variable rate debt
Average cash interest rate
Impact of 1% increase in interest rate index $

23.4 $
4.81 %
4.9 $

22.7 $
4.66 %
4.9 $

22.0 $ 508.2 $
4.52 %
4.52 %
4.9 $
4.9 $

— $
—
— $

—
—
—

We also have $3.55 billion aggregate principal amount of fixed rate senior notes. The table below summarizes our
expected interest and principal payments related to our fixed rate debt at December 31, 2018.

Principal and interest payments
on fixed rate debt
Average cash interest rate

Foreign Currency Risk

2019

2020

2021
2022
(dollars in millions)

2023

There-
after

$ 195.7 $ 195.7 $ 829.5 $ 163.3 $ 163.3 $ 3,171.4

5.51 %

5.57 %

5.63 %

5.38 %

Approximately 44% and 46% of net sales for 2018 and 2017, respectively, were to customers located outside the
U.S. Significant changes in foreign currency exchange rates could adversely affect our international sales levels and
the related collection of amounts due. In addition, a significant decline in the value of currencies used in certain
regions of the world as compared to the U.S. dollar could adversely affect product sales in those regions because our
products may become more expensive for those customers to pay for in their local currency. Conversely, significant
increases in the value of foreign currencies as compared to the U.S. dollar could adversely affect profitability as
certain product costs increase relative to a U.S. dollar-denominated sales price. The foreign currencies to which we
have the greatest exposure include the Chinese yuan, euro, Czech koruna, Australian dollar, Indian rupee, Mexican
peso and Brazilian real. Local manufacturing provides a partial natural hedge and we continue to evaluate additional
alternatives to help us reasonably manage the market risk related to foreign currency exposures.

We use derivative instruments such as forward exchange contracts to manage the risk of fluctuations in the value of
certain foreign currencies. At December 31, 2018, we had foreign exchange contracts with a net unrealized loss of
$1.3 million, with maturities of up to nine months and aggregate notional value of $363 million (based on exchange
rates as of December 31, 2018). These contracts are not designated as hedges for accounting purposes and are
marked to market each period through earnings and, as such, there were no unrecognized gains or losses as of
December 31, 2018 or 2017. In addition, we hold certain foreign exchange forward contracts designated as net
investment hedges to mitigate a portion of the foreign currency risk on our euro net investment in a foreign
subsidiary. At December 31, 2018, we held designated forward contracts with an aggregate notional value of $40
million and a maturity of twelve months. Our derivative instruments are not leveraged and are not held for trading or
speculation. See Note 7 in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report
on Form 10-K for further discussion of these contracts. We continuously evaluate the amount and type of derivative
instruments utilized to manage the market risk related to foreign currency exposures.

Commodity Price Risk

Materials account for a large portion of our cost of sales. These materials, such as copper, aluminum, steel, plastics
and other polymers, bimetals and optical fiber, are subject to changes in market price as they are influenced by
commodity markets and supply and demand levels, among other factors. Management attempts to mitigate these
risks through effective requirements planning and by working closely with key suppliers to obtain the best possible
pricing and delivery terms. We may also enter into agreements with certain suppliers to guarantee our access to
certain key components. As of December 31, 2018, we had forward purchase commitments outstanding under take-
or-pay contracts for certain metals of approximately $21.7 million that we expect to consume in the normal course
of operations through the second quarter of 2019. We continuously evaluate the amount and type of derivative
instruments utilized to manage commodity price risk.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

Reports of Independent Registered Public Accounting Firm

Consolidated Statements of Operations and Comprehensive Income

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Consolidated Statements of Stockholders’ Equity

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of CommScope Holding Company, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of CommScope Holding Company, Inc. (the
Company) as of December 31, 2018 and 2017, and the related consolidated statements of operations and
comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December
31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company at
December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) and our report dated February 20, 2019 expressed an unqualified opinion
thereon.

Adoption of New Accounting Standards

As discussed in Note 2 to the consolidated financial statements, the Company changed its classification of net periodic
benefit cost for pension and other postretirement benefit plans.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2008.

Charlotte, North Carolina
February 20, 2019

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of CommScope Holding Company, Inc.

Opinion on Internal Control over Financial Reporting

We have audited CommScope Holding Company, Inc.’s internal control over financial reporting as of December 31,
2018, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, CommScope
Holding Company, Inc. (the Company) maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2018, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the related
consolidated statements of operations and comprehensive income, stockholders’ equity and cash flows for each of the
three years in the period ended December 31, 2018, and the related notes, of the Company and our report dated
February 20, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

Charlotte, North Carolina
February 20, 2019

CommScope Holding Company, Inc.
Consolidated Statements of Operations and Comprehensive Income
(In thousands, except per share amounts)

Net sales
Operating costs and expenses:

Cost of sales
Selling, general and administrative
Research and development
Amortization of purchased intangible assets
Restructuring costs, net
Asset impairments

Total operating costs and expenses

Operating income
Other expense, net
Interest expense
Interest income
Income before income taxes
Income tax expense
Net income

Earnings per share:
Basic
Diluted

Weighted average shares outstanding:
Basic
Diluted

Comprehensive income:

Net income
Other comprehensive income (loss), net of tax:

Foreign currency translation gain (loss)
Defined benefit plans:

2018
4,568,507 $

Year Ended December 31,
2017
4,560,582 $

2,880,223
729,032
185,696
264,563
44,025
15,000
4,118,539
449,968
(44,256 )
(242,017 )
7,017
170,712
(30,495 )
140,217 $

2,792,779
795,381
185,612
270,989
43,782
—
4,088,543
472,039
(9,469 )
(257,059 )
4,221
209,732
(15,968 )
193,764 $

2016
4,923,621

2,894,371
881,661
201,321
297,202
42,875
38,552
4,355,982
567,639
(23,060 )
(277,534 )
5,524
272,569
(49,731 )
222,838

0.73 $
0.72 $

1.01 $
0.98 $

1.16
1.13

192,022
195,332

192,430
196,811

192,470
196,459

140,217 $

193,764 $

222,838

(87,771 )

201,378

(93,528 )

$
$

Change in unrecognized actuarial gain (loss)
Change in unrecognized net prior service cost (credit)

Gain (loss) on net investment hedge
Available-for-sale securities

Total other comprehensive income (loss), net of tax

Total comprehensive income

23,301
(11,676 )
3,544
—
(72,602 )
67,615 $

6,876
(2,255 )
(4,981 )
(2,508 )
198,510
392,274 $

(16,002 )
96
—
(4,001 )
(113,435 )
109,403

See notes to consolidated financial statements.

CommScope Holding Company, Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)

Assets

Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts of
$17,398 and $13,976, respectively
Inventories, net
Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net of accumulated depreciation
of $437,713 and $390,389, respectively
Goodwill
Other intangible assets, net
Other noncurrent assets
Total assets

Liabilities and Stockholders' Equity

Accounts payable
Other accrued liabilities

Total current liabilities

Long-term debt
Deferred income taxes
Pension and other postretirement benefit liabilities
Other noncurrent liabilities
Total liabilities

Commitments and contingencies
Stockholders' equity:

Preferred stock, $0.01 par value: Authorized shares: 200,000,000;

Issued and outstanding shares: None

Common stock, $0.01 par value: Authorized shares: 1,300,000,000;

Issued and outstanding shares: 192,376,255 and 190,906,110,
respectively

Additional paid-in capital
Retained earnings (accumulated deficit)
Accumulated other comprehensive loss
Treasury stock, at cost: 6,744,082 shares and 6,336,144 shares,

respectively

Total stockholders' equity
Total liabilities and stockholders' equity

December 31,

2018

2017

458,195 $

453,977

810,359
473,327
135,944
1,877,825

450,861
2,852,309
1,351,990
97,555
6,630,540 $

399,237 $
291,385
690,622
3,985,904
83,341
16,843
97,062
4,873,772

898,829
444,941
146,112
1,943,859

467,289
2,886,630
1,636,084
107,804
7,041,666

436,737
286,980
723,717
4,369,401
134,241
25,140
141,341
5,393,840

—

1,991
2,385,082
(249,777 )
(159,205 )

1,972
2,334,071
(395,998 )
(86,603 )

(221,323 )
1,756,768
6,630,540 $

(205,616 )
1,647,826
7,041,666

See notes to consolidated financial statements.

CommScope Holding Company, Inc.
Consolidated Statements of Cash Flows
(In thousands)

Operating Activities:

Net income
Adjustments to reconcile net income to net cash generated
by operating activities:

Depreciation and amortization
Equity-based compensation
Deferred income taxes
Asset impairments
Changes in assets and liabilities:

Accounts receivable
Inventories
Prepaid expenses and other current assets
Accounts payable and other accrued liabilities
Other noncurrent liabilities
Other noncurrent assets

Other

Net cash generated by operating activities
Investing Activities:

Additions to property, plant and equipment
Proceeds from sale of property, plant and equipment
Cash paid for acquisitions, including purchase price adjustments,
net of cash acquired
Proceeds from sale of businesses and long-term investments
Proceeds (payments) upon settlement of net investment
hedge
Other

Net cash used in investing activities
Financing Activities:

Long-term debt repaid
Long-term debt proceeds
Debt issuance and modification costs
Debt extinguishment costs
Cash paid for repurchase of common stock
Proceeds from the issuance of common shares under equity-based
compensation plans
Tax withholding payments for vested equity-based compensation
awards

Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

Year Ended December 31,
2017

2016

2018

$ 140,217 $ 193,764 $ 222,838

357,458 378,012 399,053
35,006
41,850
(71,475 ) (100,878 )
38,552

44,899
(49,247 )
15,000

—

96,745 (100,867 )
65,070
(31,996 )
53,658
(48,456 )
14,273
(1,273 )
998
(790 ) (154,691 ) 191,405
(35,950 )
14,644
(1,834 )
(8,418 )
10,619
43,470
494,144 586,286 640,221

(54,615 )
(8,004 )
31,614

(82,347 )
12,908

(68,721 )
5,424

(68,314 )
4,084

— (105,249 )
9,898
—

6,098
1,292

5,134
—

(7,558 )
—
(64,305 ) (166,206 )

—
2,253
(54,587 )

(550,000 ) (990,379 ) (718,914 )
19,764
150,000 780,379
(4,318 )
(8,363 )
—
(17,779 )
—
(14,800 )
—
— (175,000 )

6,130

9,949

16,756

(15,707 )

(15,405 )

(3,878 )
(409,577 ) (413,619 ) (708,369 )
19,288
(11,921 )
25,749 (134,656 )
453,977 428,228 562,884
$ 458,195 $ 453,977 $ 428,228

(16,044 )
4,218

See notes to consolidated financial statements.

CommScope Holding Company, Inc.
Consolidated Statements of Stockholders' Equity
(In thousands, except share amounts)

Year Ended December 31,
2017

2018

2016

Number of common shares outstanding:
Balance at beginning of period
Issuance of shares under equity-based compensation plans
Shares surrendered under equity-based compensation plans
Repurchase of common stock
Balance at end of period

Common stock:

190,906,110 193,837,437 191,368,727
2,611,710
(143,000 )
—
192,376,255 190,906,110 193,837,437

2,275,595
(411,932 )
(4,794,990 )

1,878,083
(407,938 )
—

Balance at beginning of period
Issuance of shares under equity-based compensation plans
Balance at end of period

1,972 $
19
1,991 $

1,950 $
22
1,972 $

1,923
27
1,950

Additional paid-in capital:

Balance at beginning of period
Issuance of shares under equity-based compensation plans
Equity-based compensation
Cumulative effect of change in accounting principle
Tax benefit from shares issued under equity-based compensation
plans
Balance at end of period

Retained earnings (accumulated deficit):

Balance at beginning of period
Net income
Cumulative effect of change in accounting principles
Balance at end of period

Accumulated other comprehensive loss:
Balance at beginning of period
Other comprehensive income (loss), net of tax
Balance at end of period

Treasury stock, at cost:

Balance at beginning of period
Net shares surrendered under equity-based compensation plans
Repurchase of common stock
Balance at end of period

Total stockholders' equity

$ 2,334,071 $ 2,282,014 $ 2,216,202
16,729
34,756
—

6,111
44,900
—

9,927
41,835
295

14,327
$ 2,385,082 $ 2,334,071 $ 2,282,014

—

(395,998 ) $
140,217
6,004
(249,777 ) $

(589,556 ) $
193,764
(206 )
(395,998 ) $

(812,394 )
222,838
—
(589,556 )

(86,603 ) $
(72,602 )
(159,205 ) $

(285,113 ) $
198,510
(86,603 ) $

(171,678 )
(113,435 )
(285,113 )

(205,616 ) $
(15,707 )
—
(221,323 ) $

(11,333 )
(3,878 )
—
(15,211 )
$
$ 1,756,768 $ 1,647,826 $ 1,394,084

(15,211 ) $
(15,405 )
(175,000 )
(205,616 ) $

See notes to consolidated financial statements.

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements
(In thousands, unless otherwise noted)

1. BACKGROUND AND DESCRIPTION OF THE BUSINESS

CommScope Holding Company, Inc., along with its direct and indirect subsidiaries (CommScope or the Company),
is a global provider of infrastructure solutions for communication networks. The Company’s solutions and services
for wired and wireless networks enable high-bandwidth data, video and voice applications. CommScope’s global
leadership position is built upon innovative technology, broad solution offerings, high-quality and cost-effective
customer solutions, and global manufacturing and distribution scale.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation

The accompanying consolidated financial statements include CommScope Holding Company, Inc., along with its
direct and indirect subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.

Prior to January 1, 2017, the Company consolidated the operating results of the Broadband Network Solutions
(BNS) business acquired from TE Connectivity based on the BNS fiscal reporting calendar that resulted in a
reporting lag of one day for the year ended December 31, 2016. The BNS business results included 52 weeks for the
year ended December 31, 2017 compared to 53 weeks for the year ended December 31, 2016. Effective January 1,
2017, the reporting lag was eliminated as a result of system conversions that were part of the BNS integration. The
elimination of the reporting lag represents a change in accounting principle which the Company believes to be
preferable because it provides more current information to the users of its financial statements. The Company
determined that it was impracticable to apply the effects of the lag elimination to financial reporting periods prior to
January 1, 2017, and therefore, reported the cumulative effect of the change in accounting principle in net income
for the year ended December 31, 2017.

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

Use of Estimates in the Preparation of the Financial Statements

The preparation of the accompanying consolidated financial statements in conformity with accounting principles
generally accepted in the United States (U.S.) requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes. These estimates and their underlying
assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not
readily apparent from other objective sources. The Company bases its estimates on historical experience and on
assumptions that are believed to be reasonable under the circumstances and revises its estimates, as appropriate,
when events or changes in circumstances indicate that revisions may be necessary. Significant accounting estimates
reflected in the Company’s financial statements include the allowance for doubtful accounts; reserves for sales
returns, discounts, allowances, rebates and distributor price protection programs; inventory excess and obsolescence
reserves; product warranty reserves and other contingent liabilities; tax valuation allowances; liabilities for
unrecognized tax benefits; purchase price allocations; impairment reviews for investments, fixed assets, goodwill
and other intangibles; and pension and other postretirement benefit costs and liabilities. Although these estimates are
based on management’s knowledge of and experience with past and current events and on management’s
assumptions about future events, it is at least reasonably possible that they may ultimately differ materially from
actual results.

Cash and Cash Equivalents

Cash and cash equivalents represent deposits in banks and cash invested temporarily in various instruments with a
maturity of three months or less at the time of purchase.

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated at the amount owed by the customer, net of allowances for estimated doubtful
accounts, discounts, returns and rebates. The Company maintains allowances for doubtful accounts for estimated
losses expected to result from the inability of its customers to make required payments. These estimates are based
on management’s evaluation of the ability of customers to make payments, focusing on historical experience,
known customer financial difficulties and the age of receivable balances. Accounts receivable are charged to the
allowance when determined to be no longer collectible. The Company does not offer extended payment terms to
customers and as a result amounts owed are not adjusted for the effects of any significant financing component.

Inventories

Inventories are stated at the lower of cost or net realizable value. Inventory cost is determined on a first-in, first-out
(FIFO) basis. Costs such as idle facility expense, excessive scrap and re-handling costs are expensed as incurred.
The Company maintains reserves to reduce the value of inventory to the lower of cost or net realizable value,
including reserves for excess and obsolete inventory.

Long-Lived Assets
Property, Plant and Equipment

Property, plant and equipment are stated at cost. Upon application of acquisition accounting, property, plant and
equipment are measured at estimated fair value as of the acquisition date to establish a new historical cost basis.
Provisions for depreciation are based on estimated useful lives of the assets using the straight-line method. Useful
lives generally range from 10 to 35 years for buildings and improvements and 3 to 10 years for machinery and
equipment. Expenditures for repairs and maintenance are expensed as incurred. Assets that management intends to
dispose of and that meet held for sale criteria are carried at the lower of the carrying value or fair value less costs to
sell.

Goodwill and Other Intangible Assets

Goodwill is assigned to reporting units based on the difference between the purchase price as allocated to the
reporting units and the estimated fair value of the identified net assets acquired as allocated to the reporting units.
Purchased intangible assets with finite lives are carried at their estimated fair values at the time of acquisition less
accumulated amortization and any impairment charges. Amortization is recognized on a straight-line basis over the
estimated useful lives of the respective assets (see Note 4).

Asset Impairments

Goodwill is tested for impairment annually or at other times if events have occurred or circumstances exist that
indicate the carrying value of the reporting unit may exceed its fair value. Property, plant and equipment and
intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying value of the assets may not be recoverable, based on the undiscounted cash flows expected to be
derived from the use and ultimate disposition of the assets. Assets identified as impaired are carried at estimated fair
value. See Notes 4 and 8 for discussion of impairment charges. Due to uncertain market conditions, it is possible
that future impairment reviews may indicate additional impairments of goodwill, other intangible assets and/or
property, plant and equipment, which could result in charges that are material to the Company’s results of
operations.

Income Taxes

Deferred income taxes reflect the future tax consequences of differences between the financial reporting and tax
basis of assets and liabilities. The Company records a valuation allowance, when appropriate, to reduce deferred tax
assets to an amount that is more likely than not to be realized.

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

Tax benefits that result from uncertain tax positions may be recognized only if they are considered more likely than
not to be sustainable, based on their technical merits. The amount of benefit to be recognized is the largest amount
of tax benefit that is at least 50% likely to be realized.

In addition, the Company does not provide for U.S. taxes related to the foreign currency remeasurement gains and
losses on its long-term intercompany loans with foreign subsidiaries. These loans are not expected to be repaid in the
foreseeable future, and the foreign currency gains and losses are therefore recorded to accumulated other
comprehensive loss.

Revenue Recognition

The Company recognizes revenue based on the satisfaction of distinct obligations to transfer goods and services to
customers. The majority of the Company’s revenue is from product sales. Revenue from product sales is recognized
when control is transferred to the customer, typically upon either shipment or delivery. A minor portion of the
Company’s revenue is derived from project contracts containing a combination of product and service obligations.
Revenue from project contracts is recognized either at a point in time or over time using cost input methods, based
on the specific terms of each contract.

The Company also recognizes revenue from other customer contract types, including licensing of intellectual
property, software licensing and post-contract support (PCS) which may be sold as part of a bundled product
offering or as a separate contract. For bundled product arrangements, the transaction price is allocated based on the
relative standalone estimated selling price of each performance obligation. Distinct intellectual property obligations,
including software, are considered functional in nature and are recognized as revenue at the point in time the
customer receives the rights to use and benefit from the intellectual property or are determined using a usage-based
royalty. PCS obligations are typically recognized over the term of the contract.

Revenue is measured based on the consideration to which the Company expects to be entitled, based on customer
contracts. For sales to distributors, system integrators and value-added resellers (primarily for the CommScope
Connectivity Solutions (CCS) segment), revenue is adjusted for variable consideration amounts, including estimated
discounts, returns, rebates and distributor price protection programs. These estimates are determined based upon
historical experience, contract terms, inventory levels in the distributor channel and other related factors.
Adjustments to variable consideration estimates are recorded when circumstances indicate revisions may be
necessary.

The Company records a contract asset for unbilled accounts receivable related to revenue that has been recognized
in advance of consideration being unconditionally due from the customer, which is common for certain project
contract performance obligations. Contract asset amounts are transferred to accounts receivable when the
Company’s right to the consideration becomes unconditional, which varies by contract, but is generally based on
achieving certain acceptance milestones. The Company recognizes the incremental costs of obtaining a contract as
an expense when incurred if the amortization period of the asset would be one year or less.

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

The Company includes shipping and handling costs billed to customers in net sales and includes the costs incurred
to transport product to customers as cost of sales. Shipping and handling costs incurred after control is transferred to
the customer are accounted for as fulfillment costs and are not accounted for as separate revenue obligations. Certain
internal handling costs, which relate to activities to prepare goods for shipment, are recorded in selling, general and
administrative expense and were $55.0 million, $62.1 million and $56.2 million for the years ended December 31,
2018, 2017 and 2016, respectively.

Tax Collected from Customers

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-
producing transaction, which are collected by the Company from customers, are excluded from revenue.

Product Warranties

The Company recognizes a liability for the estimated claims that may be paid under its customer assurance-type
warranty agreements to remedy potential deficiencies of quality or performance of the Company’s products. These
product warranties extend over periods ranging from one to twenty-five years from the date of sale, depending upon
the product subject to the warranty. The Company records a provision for estimated future warranty claims as cost
of sales based upon the historical relationship of warranty claims to sales and specifically identified warranty issues.
The Company bases its estimates on assumptions that are believed to be reasonable under the circumstances and
revises its estimates, as appropriate, when events or changes in circumstances indicate that revisions may be
necessary. Such revisions may be material.

Advertising Costs

Advertising costs are expensed in the period in which they are incurred. Advertising expense was $17.3 million,
$21.2 million and $20.0 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Research and Development

Research and development (R&D) costs are expensed in the period in which they are incurred. R&D costs include
materials and equipment that have no alternative future use, depreciation on equipment and facilities currently used
for R&D purposes, personnel costs, contract services and reasonable allocations of indirect costs, if clearly related to
an R&D activity. Expenditures in the pre-production phase of an R&D project are recorded as R&D expense.
However, costs incurred in the pre-production phase that are associated with output actually used in production are
recorded in cost of sales. A project is considered finished with pre-production efforts when management determines
that it has achieved acceptable levels of scrap and yield, which vary by project. Expenditures related to ongoing
production are recorded in cost of sales.

Derivative Instruments and Hedging Activities

CommScope is exposed to risks resulting from adverse fluctuations in commodity prices, interest rates and foreign
currency exchange rates. CommScope’s risk management strategy includes the use of derivative financial
instruments whenever management determines their use to be reasonable and practical. This strategy does not permit
the use of derivative financial instruments for trading or speculation. Derivative contracts not designated as hedging
instruments are measured at fair value and are marked to market each period through earnings.

During 2017, the Company began a hedging strategy to designate certain foreign exchange forward contracts as net
investment hedges to mitigate a portion of the foreign currency risk on the euro net investment in a foreign
subsidiary. Hedge effectiveness is assessed each quarter based on the net investment in the foreign subsidiary
designated as the hedged item and the overall changes in the fair value of the designated forward contracts. For
hedges that meet the effectiveness requirements, changes in fair value are recorded as a component of other
comprehensive income (loss), net of tax. The Company did not designate any transactions as hedges in the year
ended December 31, 2016.

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

In the first quarter of 2018, the Company changed the method used to assess the effectiveness of its net investment
hedges from the forward rate method to the spot rate method. The Company believes the spot rate method better
aligns with the underlying foreign currency exposure of the hedged net investment. Effective January 1, 2018, the
spot-forward differences of the designated forward contracts are excluded from hedge effectiveness at inception and
are recognized on a straight-line basis to interest expense over the life of each contract. See Note 7 for further
disclosure related to the derivative instruments and hedging activities.

The Company has elected and documented the use of the normal purchases and sales exception for normal purchase
and sales contracts that meet the definition of a derivative financial instrument.

Foreign Currency Translation

For the years ended December 31, 2018, 2017 and 2016, approximately 44%, 46% and 46%, respectively, of the
Company’s net sales were to customers located outside the U.S. A portion of these sales were denominated in
currencies other than the U.S. dollar, particularly sales from the Company’s foreign subsidiaries. The financial
position and results of operations of certain of the Company’s foreign subsidiaries are measured using the local
currency as the functional currency. Revenues and expenses of these subsidiaries have been translated into U.S.
dollars at average exchange rates prevailing during the period. Assets and liabilities of these subsidiaries have been
translated at the exchange rates as of the balance sheet date. Translation gains and losses are recorded in
accumulated other comprehensive loss. Upon sale or liquidation of an investment in a foreign subsidiary, the amount
of net translation gains or losses that have been accumulated in other comprehensive loss attributable to that
investment are reported as a gain or loss in earnings in the period in which the sale or liquidation occurs. During the
year ended December 31, 2018, the Company liquidated a foreign subsidiary and recognized $14.0 million in
translation losses in other expense, net that had been in accumulated other comprehensive loss.

Aggregate foreign currency gains and losses, such as those resulting from the settlement of receivables or payables,
foreign currency contracts and short-term intercompany advances in a currency other than the subsidiary’s
functional currency, are recorded currently in earnings (included in other expense, net) and resulted in losses of
$15.9 million, $8.7 million and $9.5 million during the years ended December 31, 2018, 2017 and 2016,
respectively. Foreign currency remeasurement gains and losses related to certain long-term intercompany loans that
are not expected to be settled in the foreseeable future and the effective portion of foreign currency contracts
designated as net investment hedges are recorded in accumulated other comprehensive loss. See Note 7 for
disclosure of foreign currency gains and losses specifically related to foreign currency contracts.

Equity-Based Compensation

The estimated fair value of stock awards is recognized as expense over the requisite service periods. Forfeitures of
stock awards are recognized as they occur. The Company records deferred tax assets related to compensation
expense for awards that are expected to result in future tax deductions for the Company, based on the amount of
compensation cost recognized and the Company’s statutory tax rate in the jurisdiction in which it expects to receive
a deduction. Differences between the deferred tax assets recognized for financial reporting purposes and actual tax
deductions reported on the Company’s income tax return are recorded in the Consolidated Statements of Operations
and Comprehensive Income within income tax expense.

Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares
outstanding during the period. Diluted earnings per share is based on net income divided by the weighted average
number of common shares outstanding plus the dilutive effect of potential common shares outstanding during the
period using the treasury stock method. Dilutive potential common shares include outstanding equity-based awards
(stock options, restricted stock units and performance share units). Certain outstanding equity-based awards were
not included in the computation of diluted earnings per share because the effect was either antidilutive or the
performance condition was not met (2.1 million, 1.5 million and 1.0 million shares for the years ended
December 31, 2018, 2017 and 2016, respectively).

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

The following table presents the basis for the earnings per share computations:

Numerator:

Net income for basic and diluted earnings
per share

Denominator:

Year Ended December 31,
2017

2016

2018

140,217 $

193,764 $

222,838

Weighted average common shares outstanding - basic

Dilutive effect of equity-based awards

Weighted average common shares outstanding - diluted

192,022
3,310
195,332

192,430
4,381
196,811

192,470
3,989
196,459

Earnings per share:

Basic
Diluted

Business Combinations

$
$

0.73 $
0.72 $

1.01 $
0.98 $

1.16
1.13

The Company uses the acquisition method of accounting for business combinations which requires the allocation of
the acquisition date fair value to the underlying tangible and intangible assets acquired and liabilities assumed based
on their respective fair market value. Goodwill represents the excess of the consideration transferred over the fair
value of the net assets acquired. The fair values of the assets acquired and liabilities assumed are determined based
upon the Company’s valuation and involves making significant estimates and assumptions based on facts and
circumstances that existed as of the acquisition date. The Company uses a measurement period following the
acquisition date to gather information that existed as of the acquisition date that is needed to determine the fair value
of the assets acquired and liabilities assumed. The measurement period ends once all information is obtained, but no
later than one year from the acquisition date.

Concentrations of Risk

Non-derivative financial instruments used by the Company in the normal course of business include letters of credit
and commitments to extend credit, primarily accounts receivable. The Company generally does not require collateral
on its accounts receivable. These financial instruments involve risk, including the credit risk of nonperformance by
the counterparties to those instruments, and the actual loss may exceed the reserves provided in the Company’s
balance sheet. See Note 14 for further discussion of customer-related concentrations of risk.

The Company manages its exposures to credit risk associated with accounts receivable using such tools as credit
approvals, credit limits and monitoring procedures. CommScope estimates the allowance for doubtful accounts
based on the actual payment history and individual circumstances of significant customers as well as the age of
receivables. In management’s opinion, as of December 31, 2018, the Company did not have significant unreserved
risk of credit loss due to the non-performance of customers or other counterparties related to amounts receivable.
However, an adverse change in financial condition of a significant customer or group of customers or in the
telecommunications industry could materially affect the Company’s estimates related to doubtful accounts.

The principal raw materials purchased by CommScope (aluminum, bimetals, copper, optical fiber, plastics and other
polymers and steel) are subject to changes in market price as these materials are linked to various commodity
markets. The Company attempts to mitigate these risks through effective requirements planning and by working
closely with its key suppliers to obtain the best possible pricing and delivery terms.

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

Recent Accounting Pronouncements

Adopted in 2018

In the fourth quarter of 2018, the Company early adopted ASU No. 2018-14, Disclosure Framework: Changes to
the Disclosure Requirements for Defined Benefit Plans, which adds disclosure requirements identified as relevant
for employers that sponsor defined benefit pension or other postretirement plans, removes disclosures that are no
longer considered cost beneficial, and clarifies existing guidance for certain disclosure requirements. The impact on
the Company’s disclosures was to remove the disclosure of the amounts in accumulated other comprehensive loss
expected to be recognized as net periodic benefit cost in the next year and to provide explanations of significant
gains and losses related to the changes in the benefit obligation for the period. The impacts were applied
retrospectively to the disclosures for all periods presented. The adoption of this ASU only affected the disclosures
on the Company’s defined benefit pension plans and did not affect the Company’s consolidated financial statements.
See Note 10 for further discussion of the Company’s defined benefit pension plans.

In the fourth quarter of 2018, the Company early adopted ASU No. 2018-02, Reclassification of Certain Tax Effects
from Accumulated Other Comprehensive Income, which allows companies to elect reclassification from
accumulated other comprehensive income to retained earnings for certain tax effects resulting from the U.S. tax
legislation enacted in 2017. The Company’s policy is to generally recognize the tax effects in accumulated other
comprehensive income at the currently enacted tax rate and reclassify it to net income in the same period that the
related pre-tax accumulated comprehensive income reclassifications are recognized. The Company did not elect the
permitted reclassification and therefore adoption did not have an impact on the consolidated financial statements.

The Company adopted ASU No. 2014-09, Revenue from Contracts with Customers, including all subsequently
issued clarifying guidance, on January 1, 2018. The core principle of the new guidance is to recognize revenue when
promised goods or services are transferred to customers in an amount that reflects the consideration that is expected
to be received for those goods or services. The Company adopted the standard using the modified retrospective
approach with the cumulative effect of applying the standard on the date of adoption recognized in retained earnings
(accumulated deficit).

Revenue recognition for the Company’s product sales remained generally consistent with historical practice.
However, the adoption of ASU No. 2014-09 resulted in acceleration of revenue recognition for certain project
contracts containing integrated product and service obligations, primarily within the CommScope Mobility Solutions
(CMS) segment. These multi-element contracts represented less than 2.0% of total net sales for the years ended
December 31, 2018 and 2017. For these contracts, certain performance obligations are recognized over time using
cost-based input methods, which recognize revenue and cost of sales based on the relationship between actual costs
incurred compared to the total estimated cost for the performance obligation. Based on contracts in effect at January
1, 2018, the Company recorded a cumulative effect adjustment, net of tax, of $3.4 million, which reduced the
accumulated deficit on the Consolidated Balance Sheets. This adjustment reflects an acceleration of $8.0 million of
net sales.

The impact of adoption of the new revenue recognition standard on the consolidated financial statements was as
follows:

Year Ended December 31, 2018

Net sales
Cost of sales
Operating income
Income tax expense
Net income

As Reported

4,568,507 $
2,880,223
449,968
30,495
140,217

Amounts Without
Adoption of
ASU No. 2014-09

Effect of Change
Increase / (Decrease)
(4,127 )
(1,697 )
(2,430 )
(622 )
(1,808 )

4,572,634 $
2,881,920
452,398
31,117
142,025

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

Assets:

Accounts receivable, less allowance
for doubtful accounts
Inventories, net

Liabilities:

Other accrued liabilities

Stockholders' equity:

As of December 31, 2018

Amounts Without
Adoption of
ASU No. 2014-09

Effect of Change
Increase / (Decrease)

As Reported

810,359 $

473,327

808,381

475,008

291,385

292,693

1,978

(1,681 )

(1,308 )

Retained earnings (accumulated deficit)

(249,777 )

(251,382 )

1,605

The Company adopted ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial
Liabilities, on January 1, 2018. This new guidance modifies how entities measure equity investments (except those
accounted for under the equity method of accounting) and present changes in the fair value of financial liabilities;
simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a
qualitative assessment to identify impairment; changes presentation and disclosure requirements; and clarifies that
an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale
securities in combination with the entity’s other deferred tax assets. Adoption of this new guidance did not have a
material impact on the consolidated financial statements.

The Company adopted ASU No. 2016-16, Accounting for Income Taxes, Intra-Entity Asset Transfers of Assets
Other than Inventory, on January 1, 2018. Under previous guidance, the tax effects of intra-entity asset transfers
were deferred until the transferred asset was sold to a third party or otherwise recovered through use. The new
guidance eliminates the exception for all intra-entity sales of assets other than inventory. As a result, the tax effect of
an intra-entity asset sale would be recognized when the transfer occurs. The Company recorded a cumulative effect
adjustment of $2.6 million as of January 1, 2018 that decreased the accumulated deficit on the Consolidated Balance
Sheets as a result of this new guidance.

The Company adopted ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost, on January 1, 2018. The new standard requires an employer to report the
service cost component of net periodic benefit cost in the same line item as other compensation costs arising from
services rendered by the employee and requires the other components of net periodic benefit cost to be reported
outside the subtotal of operating income. Of the total $19.8 million of net periodic benefit cost for year ended
December 31, 2018, $15.7 million of net periodic benefit cost was recorded in other expense, net, and $4.1 million
of net periodic benefit cost was recorded within operating income. The Company utilized the practical expedient and
used the amounts disclosed in its employee benefit plans note for the years ended December 31, 2017 and 2016 as
the basis for applying the retrospective presentation requirements. The Company reclassified $5.6 million and $7.1
million of net periodic benefit income from operating income to other expense, net for the years ended December
31, 2017 and 2016, respectively. The adoption of this guidance had no impact on the previously reported income
before income taxes or net income for the years ended December 31, 2017 and 2016.

The Company adopted ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, on January
1, 2018. The new guidance provides targeted improvements to the hedge accounting model intended to allow
financial reporting to more closely reflect an entity’s risk management activities and to simplify the application of
hedge accounting. Beginning January 1, 2018, the Company has elected to assess the effectiveness of its net
investment hedges using the spot rate method. As a result, differences between the spot rate and the forward rate will
be amortized to earnings on a straight-line basis to interest expense over the life of the contract. See Note 7 for
details on the Company’s derivative and hedging activities and related impacts on the financial statements.

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

Issued but Not Adopted

In August 2018, the Financial Accounting Standards Board (FASB) issued ASU No. 2018-15, Customer’s
Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement (CCA) that is a Service
Contract, which aligns the accounting for costs incurred to implement a CCA that is a service arrangement with the
guidance on capitalizing costs associated with developing or obtaining internal-use software. ASU No. 2018-15 is
effective for the Company as of January 1, 2020 and early adoption is permitted. The Company is evaluating the
impact of the new guidance on the consolidated financial statements and when it will be adopted.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test of Goodwill Impairment, which
eliminates Step 2 from the goodwill impairment test. Under the new guidance, an entity will perform its annual or
interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity
will recognize a goodwill impairment charge for the excess of the reporting unit’s carrying amount over its fair
value, up to the amount of goodwill allocated to that reporting unit. ASU No. 2017-04 is effective for the Company
as of January 1, 2020 and early adoption is permitted. The Company plans to adopt this new guidance as of January
1, 2019 and does not anticipate that adoption will materially affect the consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. The
new guidance replaces the current incurred loss method used for determining credit losses on financial assets,
including trade receivables, with an expected credit loss method. ASU No. 2016-13 is effective for the Company as
of January 1, 2020 and early adoption is permitted. The Company is evaluating the impact of the new guidance on
the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which supersedes the current leasing guidance in
Topic 840, Leases. Under the new guidance, lessees are required to recognize assets and lease liabilities for the
rights and obligations created by leased assets previously classified as operating leases. The Company is required to
adopt the new standard, including subsequently issued clarifying guidance, as of January 1, 2019. In July 2018, the
FASB issued ASU No. 2018-11, which allows entities a transition election to recognize the effects of applying the
new leasing standard as a cumulative-effect adjustment to retained earnings (accumulated deficit) as opposed to
restating comparative periods for the effects of applying the new standard. The Company plans to elect this
transition approach. The Company is finalizing the necessary changes to its accounting policies, processes, internal
controls and information systems that will be required to meet the new standard’s reporting and disclosure
requirements. The majority of the Company’s leased asset value relates to real estate with the remainder primarily
related to vehicles and equipment. The Company estimates that adoption of the new standard will increase total
assets and total liabilities in the Consolidated Balance Sheets by $95 million to $100 million due to the addition of
right-of-use assets and lease obligations for operating type leases, net of the elimination of existing prepaid rent,
deferred rent and lease termination cost amounts. The Company does not expect the adoption of the new standard to
significantly affect the Consolidated Statements of Operations and Comprehensive Income or the Consolidated
Statements of Cash Flows.

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

3. ACQUISITIONS

Cable Exchange

On August 1, 2017, the Company acquired Cable Exchange in an all-cash transaction. The Company paid $108.7
million ($105.2 million net of cash acquired) and recorded a $14.5 million liability for the remaining payments due
in 2019 and 2020. Cable Exchange is a quick-turn supplier of fiber optic and copper assemblies for data, voice and
video communications. Net sales of Cable Exchange products are included in the CCS segment for the years ended
December 31, 2018 and 2017 and were not material.

The allocation of the purchase price, based on estimates of the fair values of the assets acquired and liabilities
assumed, is as follows (in millions):

Cash and cash equivalents
Accounts receivable
Inventory
Property, plant and equipment
Goodwill
Identifiable intangible assets
Less: Liabilities assumed
Net acquisition cost

Estimated Fair
Value

3.5
6.4
4.4
0.9
49.6
61.1
(2.7 )
123.2

The goodwill arising from the purchase price allocation of the Cable Exchange acquisition is believed to result from
the Company’s reputation in the marketplace and assembled workforce and is expected to be deductible for income
tax purposes.

4. GOODWILL AND OTHER INTANGIBLE ASSETS

The following table presents details of the Company’s intangible assets other than goodwill as of December 31,
2018 and 2017 (in millions):

2018

2017

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Customer base
Trade names and trademarks
Patents and technologies
Non-compete agreements
Total intangible assets

$ 1,911.2 $ 1,103.5 $
249.3
397.7
0.3

995.1
807.7 $ 1,930.3 $
394.4
609.7
359.1
246.6
592.0
185.2
—
0.3
—
$ 3,102.8 $ 1,750.8 $ 1,352.0 $ 3,132.3 $ 1,496.2 $ 1,636.1

935.2 $
215.3
345.4
0.3

608.4
582.9
0.3

There were no intangible asset impairments identified during the years ended December 31, 2018 and 2017. During
the year ended December 31, 2016, the Company determined that certain patent and technology intangible assets in
the CCS segment were no longer recoverable and recorded pretax charges of $15.0 million in asset impairments on
the Consolidated Statements of Operations and Comprehensive Income.

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

The Company’s finite-lived intangible assets are being amortized on a straight-line basis over the weighted-average
amortization periods in the following table. The aggregate weighted-average amortization period is 11.8 years.

Customer base
Trade names and trademarks
Patents and technologies

Weighted-
Average
Amortization
Period
(in years)
11.0
18.8
6.8

Amortization expense for intangible assets was $264.6 million, $271.0 million and $297.2 million for the years
ended December 31, 2018, 2017 and 2016, respectively. Estimated amortization expense for the next five years is as
follows (in millions):

2019
2020
2021
2022
2023

The following table presents goodwill by reportable segments (in millions):

Goodwill, gross, as of December 31, 2015
Adjustments to purchase price allocations
Foreign exchange
Goodwill, gross, as of December 31, 2016
Acquisitions
Foreign exchange
Goodwill, gross, as of December 31, 2017
Foreign exchange
Goodwill, gross, as of December 31, 2018

Accumulated impairment charges as of December 31, 2015
Impairment charges for year ended December 31, 2016
Accumulated impairment charges as of December 31, 2016, 2017 and
2018
Goodwill, net, as of December 31, 2018

Estimated
Amortization
Expense

233.6
227.3
207.5
141.1
101.7

CCS
1,986.6 $
107.7
(16.8 )
2,077.5
49.6
66.1
2,193.2
(31.6 )
2,161.6 $

CMS

Total

4.4
(2.3 )

899.7 2,886.3
112.1
(19.1 )
901.8 2,979.3
49.6
68.7
904.4 3,097.6
(34.3 )
901.7 $ 3,063.3

—
2.6

(2.7 )

(36.2 ) $
(15.3 )

(159.5 ) $
—

(195.7 )
(15.3 )

(51.5 )
2,110.1 $

(159.5 )
(211.0 )
742.2 $ 2,852.3

There were no goodwill impairments identified during the years ended December 31, 2018 and 2017. The goodwill
impairment charge of $15.3 million recorded in the CCS segment during the year ended December 31, 2016 was the
result of the change in reportable segments.

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

5. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION

Disaggregated Net Sales

The following table presents net sales by reportable segment, disaggregated based on contract type (in millions):

Contract type:

Product contracts
Project contracts
Other contracts

Consolidated net sales

Year Ended
December 31, 2018

CCS

CMS

Total

2,803.5 $
0.8
8.4
2,812.7 $

1,662.3 $
49.5
44.0
1,755.8 $

4,465.8
50.3
52.4
4,568.5

Further information on net sales by reportable segment and geographic region is included in Note 14.

Allowance for Doubtful Accounts

Allowance for doubtful accounts, beginning of period
Charged to costs and expenses (1)
Account write-offs and other
Allowance for doubtful accounts, end of period

2018

Year ended December 31,
2017

2016

13,976 $
5,963
(2,541 )
17,398 $

17,211 $
1,277
(4,512 )
13,976 $

19,392
(5,986 )
3,805
17,211

(1) Net of recoveries of previously written off customer accounts.

Customer Contract Balances

The following table provides the balance sheet location and amounts of contract assets and liabilities from contracts
with customers as of December 31, 2018 and 2017.

Unbilled accounts receivable Accounts receivable, less allowance for doubtful

Deferred revenue

accounts
Other accrued liabilities

Balance Sheet Location

December 31,
2018

December 31,
2017

3,082 $
7,554

—
12,611

There were no material changes to contract asset balances for the year ended December 31, 2018 as a result of
changes in estimates or impairments. The full amount of the deferred revenue balance as of December 31, 2018 was
classified as a current liability as the Company expects to recognize these amounts over the next twelve months.

Inventories

Raw materials
Work in process
Finished goods

December 31,

2018

2017

146,846 $
98,830
227,651
473,327 $

126,558
98,526
219,857
444,941

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

Property, Plant and Equipment

Land and land improvements
Buildings and improvements
Machinery and equipment
Construction in progress

Accumulated depreciation

December 31,

2018

2017

49,343 $
212,245
597,023
29,963
888,574
(437,713 )
450,861 $

54,002
217,396
556,809
29,471
857,678
(390,389 )
467,289

Depreciation expense was $75.6 million, $81.7 million and $80.5 million during the years ended December 31,
2018, 2017 and 2016, respectively. No interest was capitalized during the years ended December 31, 2018, 2017 or
2016.

Other Accrued Liabilities

Compensation and employee benefit liabilities
Accrued interest
Deferred revenue
Product warranty accrual
Restructuring reserve
Income taxes payable
Purchase price payable
Value-added taxes payable
Accrued professional fees
Other

December 31,

2018

2017

94,313 $
18,469
7,554
15,630
29,876
7,683
12,171
12,435
19,331
73,923
291,385 $

97,522
23,485
12,611
16,928
24,961
16,949
2,098
11,838
10,224
70,364
286,980

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

Accumulated Other Comprehensive Loss

The following table presents changes in accumulated other comprehensive income (AOCI), net of tax, and
accumulated other comprehensive loss (AOCL), net of tax:

Foreign currency translation

Balance at beginning of period
Other comprehensive income (loss)
Amounts reclassified from AOCL
Balance at end of period

Net investment hedge

Balance at beginning of period
Other comprehensive income (loss)
Balance at end of period

Defined benefit plan activity

Balance at beginning of period
Other comprehensive income (loss)
Amounts reclassified from AOCL
Balance at end of period

Available-for-sale securities

Balance at beginning of period
Other comprehensive income
Amounts reclassified from AOCI
Balance at end of period
Net AOCL at end of period

Year Ended December 31,
2017
2018

(52,770 ) $
(102,501 )
14,730
(140,541 ) $

(254,148 )
201,133
245
(52,770 )

(4,981 ) $
3,544
(1,437 ) $

—
(4,981 )
(4,981 )

(28,852 ) $
(1,609 )
13,234
(17,227 ) $

— $
—
—
— $
(159,205 ) $

(33,473 )
6,047
(1,426 )
(28,852 )

2,508
3,159
(5,667 )
—
(86,603 )

$
$

Amounts reclassified from net AOCL are recorded in other expense, net in the Consolidated Statements of
Operations and Comprehensive Income.

Cash Flow Information

Cash paid during the period for:
Income taxes, net of refunds
Interest

Year Ended December 31,
2017

2018

2016

112,127 $
231,283

100,929 $
216,739

148,984
260,773

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

6. FINANCING

5.00% senior notes due March 2027
6.00% senior notes due June 2025
5.50% senior notes due June 2024
5.00% senior notes due June 2021
Senior secured term loan due December 2022
Senior secured revolving credit facility expires May 2020
Total face value of debt
Less: Original issue discount, net of amortization
Less: Debt issuance costs, net of amortization
Less: Current portion
Total long-term debt

5.00% Senior Notes Due 2027

December 31,

2018

2017

750,000 $
1,500,000
650,000
650,000
486,250
—
4,036,250 $
(1,526 )
(48,820 )
—
3,985,904 $

750,000
1,500,000
650,000
650,000
886,250
—
4,436,250
(3,389 )
(63,460 )
—
4,369,401

In March 2017, CommScope Technologies LLC (CommScope Technologies), a wholly owned subsidiary of the
Company, issued $750.0 million of 5.00% senior notes due March 15, 2027 (the 2027 Notes). Interest is payable on
the 2027 Notes semi-annually in arrears on March 15 and September 15 of each year.

CommScope, Inc., a wholly owned subsidiary of the Company, and each of CommScope, Inc.’s existing and future
domestic subsidiaries (other than CommScope Technologies) that guarantees the senior secured credit facilities also
guarantees the 2027 Notes on a senior unsecured basis, subject to certain exceptions. The 2027 Notes rank senior in
right of payment with all of CommScope Technologies’ and the guarantors’ future subordinated indebtedness and
equally in right of payment with all of CommScope Technologies’ and the guarantors’ existing and future senior
indebtedness, including the senior secured credit facilities, the 6.00% senior notes due June 15, 2025 (the 2025
Notes), the 5.50% senior notes due June 15, 2024 (the 2024 Notes) and the 5.00% senior notes due June 15, 2021
(the 2021 Notes). The 2027 Notes and guarantees are effectively junior to all of CommScope Technologies’ and the
guarantors’ existing and future secured indebtedness, including the senior secured credit facilities, to the extent of
the value of the assets securing such secured indebtedness. In addition, the 2027 Notes are structurally subordinated
to all existing and future liabilities (including trade payables) of CommScope, Inc.’s subsidiaries that do not
guarantee the 2027 Notes, including indebtedness incurred by certain of CommScope, Inc.’s non-U.S. subsidiaries
under the revolving credit facility.

The 2027 Notes may be redeemed prior to maturity under certain circumstances. Upon certain change of control
events, the 2027 Notes may be redeemed at the option of the holders at 101% of their principal amount, plus accrued
and unpaid interest. The 2027 Notes may be redeemed on or after March 15, 2022 at the redemption prices specified
in the indenture governing the 2027 Notes. Prior to March 15, 2022, the 2027 Notes may be redeemed at a
redemption price equal to 100% of the aggregate principal amount of the 2027 Notes to be redeemed, plus a make-
whole premium (as specified in the indenture governing the 2027 Notes), plus accrued and unpaid interest. At any
time prior to March 15, 2020, CommScope Technologies may also redeem up to 40% of the aggregate principal
amount of the 2027 Notes at a redemption price of 105%, plus accrued and unpaid interest, using the proceeds of
certain equity offerings.

In connection with issuing the 2027 Notes, the Company paid $7.2 million of debt issuance costs during the year
ended December 31, 2017, which was recorded as a reduction of the carrying amount of the debt and is being
amortized over the term of the notes.

6.00% Senior Notes Due 2025

In June 2015, CommScope Technologies issued $1.5 billion of the 2025 Notes. Interest is payable on the 2025 Notes
semi-annually in arrears on June 15 and December 15 of each year.

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

The 2025 Notes are guaranteed on a senior unsecured basis by CommScope, Inc. and each of CommScope, Inc.’s
existing and future domestic subsidiaries (other than CommScope Technologies) that guarantees the senior secured
credit facilities, subject to certain exceptions, and rank as described above for the 2027 notes.

The 2025 Notes may be redeemed prior to maturity under certain circumstances. Upon certain change of control
events, the 2025 Notes may be redeemed at the option of the holders at 101% of their principal amount, plus accrued
and unpaid interest. The 2025 Notes may be redeemed on or after June 15, 2020 at the redemption prices specified
in the indenture governing the 2025 Notes. Prior to June 15, 2020, the 2025 Notes may be redeemed at a redemption
price equal to 100% of the aggregate principal amount to be redeemed, plus a make-whole premium (as specified in
the indenture governing the 2025 Notes), plus accrued and unpaid interest.

5.00% Senior Notes Due 2021 and 5.50% Senior Notes Due 2024

In May 2014, CommScope, Inc., a wholly owned subsidiary of the Company, issued $650.0 million of the 2021
Notes and $650.0 million of the 2024 Notes. Interest is payable on the 2021 Notes and the 2024 Notes semi-annually
in arrears on June 15 and December 15 of each year.

The 2021 Notes and the 2024 Notes are guaranteed on a senior unsecured basis by each of CommScope, Inc.’s
existing and future domestic subsidiaries that guarantees the senior secure credit facilities, subject to certain
exceptions, and rank as described above for the 2027 Notes.

The 2021 Notes and the 2024 Notes may be redeemed prior to maturity under certain circumstances. Upon certain
change of control events, the 2021 Notes and the 2024 Notes may be redeemed at the option of the holders at 101%
of their principal amount, plus accrued and unpaid interest to the date of purchase. The 2021 Notes and the 2024
Notes may be redeemed on or after June 15, 2017 or June 15, 2019, respectively, at the redemption prices specified
in the respective indentures governing the 2021 Notes and the 2024 Notes. Prior to June 15, 2019, the 2024 Notes
may be redeemed at a redemption price equal to 100% of the aggregate principal amount, plus a make-whole
premium (as specified in the indentures governing the 2024 Notes), plus accrued and unpaid interest to the
redemption date.

Senior Secured Credit Facilities

The Company’s asset-based revolving credit facility provides borrowing capacity of up to $550.0 million, subject to
certain limitations. The asset-based revolving credit facility expires in May 2020, subject to acceleration under
certain circumstances. As of December 31, 2018, the Company had no outstanding borrowings under its asset-based
revolving credit facility and had availability of $463.1 million after giving effect to borrowing base limitations and
outstanding letters of credit.

As of December 31, 2018, the Company had one term loan outstanding under its senior secured credit facilities, the
senior secured term loan due 2022 (the 2022 Term Loan). In July 2018, the Company repaid $400.0 million of the
2022 Term Loan. The payment was made using $250.0 million of cash on hand and $150.0 million borrowed under
the Company’s asset-based revolving credit facility. In connection with this voluntary repayment, $7.4 million of
original issue discount and debt issuance costs were written off and included in interest expense. The Company
subsequently repaid the $150.0 million borrowed under the asset-based revolving credit facility in September 2018.

In May 2017, the Company amended the 2022 Term Loan to reduce the interest rate margin. The interest rate is, at
the Company’s option, either (1) the base rate (as described in the credit agreement, as amended) plus a margin of
1.00% or (2) one-, two-, three- or six-month LIBOR or, if available from all lenders, twelve-month LIBOR (selected
at the Company’s option) plus a margin of 2.00%. Before the amendment, the margin on the interest rate with
respect to base rate loans was 1.50% and with respect to LIBOR loans was 2.50%. The amendment also reduced the
1.75% base rate floor to 1.00% and eliminated the 0.75% LIBOR floor. The amendment resulted in the repayment of
$30.4 million to certain lenders under the senior secured credit facilities and the receipt of $30.4 million in proceeds
from new lenders and existing lenders who increased their positions. In conjunction with the amendment, the
Company recorded $1.1 million of debt modification costs in other expense, net.

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

During the year ended December 31, 2017, the Company repaid $348.1 million of the 2022 Term Loan and $111.9
million of the senior secured term loan due 2018. In connection with these repayments, $8.3 million of original issue
discount and debt issuance costs were written off and included in interest expense.

During the year ended December 31, 2016, the Company amended the 2022 Term Loan to reduce the margin on the
interest rate and recorded an additional $3.1 million of original issue discount related to this amendment.

During the year ended December 31, 2016, the Company voluntarily repaid $150.0 million, of its senior secured
term loans. In connection with the repayment, combined original issue discount and debt issuance costs of $1.0
million were written off and included in interest expense during the year ended December 31, 2016.

The 2022 Term Loan is secured by a first priority lien on certain of the Company’s non-current assets in the U.S.
and a second priority lien on current assets in the U.S. The asset-based revolving credit facility is secured by a first
priority lien on certain of the Company’s current assets in the U.S. and several European countries and a second
priority lien on the Company’s non-current assets in the U.S.

No portion of the 2022 Term Loan was reflected as a current portion of long-term debt as of December 31, 2018
related to the potentially required excess cash flow payment because no such payment is expected to be required.
There was no excess cash flow payment required in 2018 related to 2017.

Other Matters
The following table summarizes scheduled maturities of long-term debt as of December 31, 2018 (in millions):

Scheduled maturities of long-term debt

2019
$ —

2020
$ —

2021

2023
$ 650.0 $ 486.3 $ —

2022

Thereafter
$ 2,900.0

The Company’s non-guarantor subsidiaries held $2,354 million, or 36%, of total assets and $454 million, or 9%, of
total liabilities as of December 31, 2018 and accounted for $1,835 million, or 40%, of net sales for the year ended
December 31, 2018. As of December 31, 2017, the non-guarantor subsidiaries held $2,587 million, or 37%, of total
assets and $569 million, or 11%, of total liabilities. For the year ended December 31, 2017, the non-guarantor
subsidiaries accounted for $1,915 million, or 42%, of net sales. All amounts presented exclude intercompany
balances.

The Company is dependent upon the earnings and cash flow of its subsidiaries to make certain payments, including
debt and interest payments. Certain subsidiaries may have limitations or restrictions on transferring funds to other
subsidiaries that may be necessary to meet those requirements.

The weighted average effective interest rate on outstanding borrowings, including the amortization of debt issuance
costs and original issue discount, was 5.73% at December 31, 2018 and 5.45% at December 31, 2017.

7. DERIVATIVES AND HEDGING ACTIVITIES

Derivatives Not Designated As Hedging Instruments

The Company uses forward contracts to hedge a portion of its balance sheet foreign exchange re-measurement risk
and to hedge certain planned foreign currency expenditures. As of December 31, 2018, the Company had foreign
exchange contracts outstanding with maturities of up to nine months and aggregate notional values of $363 million
(based on exchange rates as of December 31, 2018). Unrealized gains and losses resulting from these contracts are
recognized in other expense, net and partially offset corresponding foreign exchange gains and losses on the
balances and expenditures being hedged. These instruments are not held for speculative or trading purposes and are
not designated as hedges for hedge accounting and are marked to market each period through earnings.

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

The following table presents the balance sheet location and fair value of the Company’s derivatives not designated
as hedging instruments:

Balance Sheet Location

Fair Value of Asset (Liability)

December 31,

2018

2017

Foreign currency contracts
Foreign currency contracts

Prepaid expenses and other current assets
Other accrued liabilities

1,703 $
(3,044 )

9,050
(574 )

Total derivatives not designated as
hedging instruments

(1,341 ) $

8,476

The pretax impact of the foreign currency forward contracts, both matured and outstanding, on the Consolidated
Statements of Operations and Comprehensive Income is as follows:

Foreign Currency Forward Contracts
Year ended December 31, 2018
Year ended December 31, 2017
Year ended December 31, 2016

Location of Gain (Loss)

Other expense, net
Other expense, net
Other expense, net

Gain (Loss)
Recognized

$
$
$

(17,833 )
28,633
(21,470 )

Derivative Instruments Designated As Net Investment Hedge

During 2017, the Company began a hedging strategy to designate certain foreign exchange contracts as net
investment hedges to mitigate a portion of the foreign currency risk on the euro net investment in a foreign
subsidiary. As of December 31, 2018, the Company held designated forward contracts with an outstanding maturity
of up to twelve months and an aggregate notional value of $40 million. The amortization of the spot-forward
differences recorded to earnings was not material for the year ended December 31, 2018.

Hedge effectiveness is assessed each quarter based on the net investment in the foreign subsidiary designated as the
hedged item and the changes in the fair value of designated forward contracts based on spot rates. For hedges that
meet the effectiveness requirements, changes in fair value are recorded as a component of other comprehensive
income (loss), net of tax. As of December 31, 2018, there was no ineffectiveness on the instruments designated as
net investment hedges.

The following table presents the balance sheet location and fair value of the derivative instruments designated as net
investment hedges:

Balance Sheet Location

Fair Value of Asset (Liability)

December 31,

2018

2017

Foreign currency contracts
Foreign currency contracts

Prepaid expenses and other current assets
Other accrued liabilities

788 $
—

—
(403 )

Total derivatives designated as
hedging instruments

788 $

(403 )

The after tax impact of the forward contracts designated as net investment hedging instruments, both matured and
outstanding, on the Consolidated Statements of Operations and Comprehensive Income is as follows:

Foreign Currency Forward Contracts
Year ended December 31, 2018
Year ended December 31, 2017
Year ended December 31, 2016

Location of Gain (Loss)

Effective Portion
of Gain (Loss)
Recognized

Other comprehensive income (loss), net of tax
Other comprehensive income (loss), net of tax
Other comprehensive income (loss), net of tax

$
$
$

3,537
(4,981 )
—

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

8. FAIR VALUE MEASUREMENTS

The Company’s financial instruments consist primarily of cash and cash equivalents, trade receivables, trade
payables, debt instruments and foreign currency contracts. For cash and cash equivalents, trade receivables and trade
payables, the carrying amounts of these financial instruments as of December 31, 2018 and December 31, 2017 were
considered representative of their fair values due to their short terms to maturity. The fair values of the Company’s
debt instruments and foreign currency contracts were based on indicative quotes.

Fair value measurements using quoted prices in active markets for identical assets and liabilities fall within Level 1
of the fair value hierarchy, measurements using significant other observable inputs fall within Level 2, and
measurements using significant unobservable inputs fall within Level 3.

The carrying amounts, estimated fair values and valuation input levels of the Company’s foreign currency contracts
and debt instruments as of December 31, 2018 and December 31, 2017, are as follows:

Assets:

Foreign currency contracts

2,491 $

9,050 $

9,050 Level 2

December 31, 2018

December 31, 2017

Carrying
Amount

Fair Value

Carrying
Amount

Fair Value

Valuation
Inputs

Liabilities:

5.00% senior notes due 2027
6.00% senior notes due 2025
5.50% senior notes due 2024
5.00% senior notes due 2021
Senior secured term loan due 2022, at par
Foreign currency contracts

Non-Recurring Fair Value Measurements

750,000 608,025 750,000 753,750 Level 2
1,500,000 1,355,550 1,500,000 1,591,800 Level 2
650,000 591,825 650,000 676,780 Level 2
650,000 641,875 650,000 661,375 Level 2
486,250 461,938 886,250 892,343 Level 2
977 Level 2

3,044

977

During the fourth quarter of 2018, the Company recorded a pretax charge of $15.0 million that was allocated equally
to the CCS and CMS segments to fully impair our equity investment in a privately-held company. The determination
of the impairment charge was based on Level 3 valuation inputs.

These fair value estimates are based on pertinent information available to management as of the valuation date.
Although management is not aware of any factors that would significantly affect these fair value estimates, such
amounts have not been comprehensively revalued for purposes of these financial statements since those dates, and
current estimates of fair value may differ significantly from the amounts presented.

9. RESTRUCTURING COSTS

The Company incurs costs associated with restructuring initiatives intended to improve overall operating
performance and profitability. The costs related to restructuring actions are generally composed of employee-related
costs, lease termination costs and fixed asset related costs. Employee-related costs include the expected severance
costs and related benefits as well as one-time severance benefits that are accrued over the remaining period
employees are required to work in order to receive such benefits. Lease termination costs include the discounted cost
of unused leased facilities, net of anticipated sub-rental income. Fixed asset related costs include non-cash
impairments or fixed asset disposals associated with restructuring actions in addition to the cash costs to uninstall,
pack, ship and reinstall manufacturing equipment and the costs to prepare the receiving facility to accommodate
relocated equipment. Fixed asset related costs are expensed as incurred. Cash paid is net of proceeds received from
the sale of related assets.

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

As a result of restructuring and consolidation actions, the Company owns unutilized real estate at various facilities
both inside and outside the U.S. The Company is attempting to sell or lease this unutilized space. Additional
impairment charges may be incurred related to these or other excess assets.

The Company’s net pretax restructuring charges, by segment, were as follows:

CCS
CMS
Total

2018

Year Ended December 31,
2017
$ 24,201 $ 36,551 $ 27,098
15,777
$ 44,025 $ 43,782 $ 42,875

19,824

7,231

2016

Restructuring reserves were included in the Company’s Consolidated Balance Sheets as follows:

Other accrued liabilities
Other noncurrent liabilities
Total liability

Cost Alignment Restructuring Actions

December 31,

2018

2017

29,876 $
5,179
35,055 $

24,961
7,036
31,997

Prior to the acquisition of TE Connectivity’s Broadband Network Solutions (BNS) business in August 2015, the
Company initiated restructuring actions to realign and lower its cost structure, primarily through workforce
reductions and other cost reduction initiatives, including the cessation of manufacturing operations at various
facilities. As of December 31, 2018, these actions were substantially complete except for a $5.6 million liability for
lease termination costs, for which the Company expects to make cash payments, net of sublease income, of $1.9
million during 2019 and make the remaining payments of $3.7 million between 2020 and 2022.

BNS Integration Restructuring Actions

Following the acquisition of BNS, the Company initiated a series of restructuring actions, which are currently
ongoing, to integrate and streamline operations and achieve cost synergies. The activity within the liability
established for the BNS integration restructuring actions was as follows:

Balance at December 31, 2015
Additional charge recorded
Cash paid
Foreign exchange and other non-cash items
Balance at December 31, 2016
Additional charge recorded
Cash paid
Consideration received
Foreign exchange and other non-cash items
Balance at December 31, 2017
Additional charge recorded
Cash paid
Consideration received
Foreign exchange and other non-cash items
Balance at December 31, 2018

Employee-
Related
Costs

Lease
Termination
Costs

Fixed Asset
Related
Costs

28,714 $
35,848
(31,569 )
(253 )
32,740
33,565
(41,084 )
—
367
25,588
41,040
(37,073 )
—
(376 )
29,179 $

— $
378
(256 )
249
371
1,352
(648 )
—
5
1,080
1,570
(2,343 )
—
(23 )
284 $

— $
6,483
(3,079 )
(3,404 )
—
8,202
(582 )
2,699
(10,319 )
—
(821 )
(803 )
11,123
(9,499 )
— $

Total

28,714
42,709
(34,904 )
(3,408 )
33,111
43,119
(42,314 )
2,699
(9,947 )
26,668
41,789
(40,219 )
11,123
(9,898 )
29,463

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

The BNS integration actions include the announced closures or reduction in activities at various U.S. and
international facilities as well as headcount reductions in sales, marketing and administrative functions. The
Company has recognized restructuring charges of $151.4 million since the BNS acquisition for integration actions.
No significant additional restructuring charges are expected to be incurred to complete the previously announced
BNS integration initiatives. The Company expects to make cash payments of $28.0 million during 2019 and
additional cash payments of $1.5 million between 2020 and 2021. Future restructuring actions may be identified and
the resulting charges and cash requirements may be material.

10. EMPLOYEE BENEFIT PLANS
Defined Contribution Plans

The Company and certain of its subsidiaries have defined contribution retirement savings plans, the most significant
of which is a 401(k) plan in the U.S. These plans allow employees meeting certain requirements to contribute a
portion of their compensation on a pretax and/or after-tax basis in accordance with guidelines established by the
plans and the Internal Revenue Service or other tax authorities. The Company matches a percentage of the employee
contributions up to certain limits. During the years ended December 31, 2018, 2017 and 2016, the Company made
contributions to defined contribution retirement savings plans of $24.0 million, $25.9 million and $24.5 million,
respectively.

The Company maintains noncontributory and contributory deferred compensation plans. During the years ended
December 31, 2018, 2017 and 2016, the Company recognized pretax costs of $0.7 million, $2.9 million and $2.6
million, respectively, related to these plans. The liability related to these plans was $32.6 million and $38.7 million
as of December 31, 2018 and 2017, respectively.

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

Pension Plans

The Company sponsors defined benefit pension plans covering certain domestic former employees and certain
foreign current and former employees. Included in the defined benefit pension plans are both funded and unfunded
plans. The following table summarizes information for the defined benefit pension plans:

December 31,

U.S. Plans

Non-U.S. Plans

2018

2017

2018

2017

Change in benefit obligation:

Benefit obligation, beginning
Service cost
Interest cost
Plan participants' contributions
Actuarial loss (gain)
Plan amendments
Benefits paid
Settlements
Foreign exchange and other
Benefit obligation, ending

Change in plan assets:

Fair value of plan assets, beginning
Employer and plan participant contributions
Return on plan assets
Benefits paid
Settlements
Foreign exchange and other
Fair value of plan assets, ending

Funded status, net liability or (net asset)

—
4,205
—
(4,585 )
—

$ 156,729 $ 156,522 $ 240,749 $ 216,634
4,097
4,876
—
5,157
5,300
5,929
129
116
—
5,100 (17,983 )
(2,670 )
—
372
432
(10,730 ) (10,822 )
(9,428 )
(6,583 )
—
(784 )
—
(143,389 )
— (13,491 ) 22,644
—
2,230 $ 156,729 $ 208,818 $ 240,749

$ 160,988 $ 155,638 $ 226,512 $ 196,818
4,990
5,648
1,697
260
9,955
(6,720 )
(8,565 ) 15,912
(6,583 )
(9,428 )
(10,730 ) (10,822 )
—
(143,390 )
—
(784 )
—
— (11,848 ) 21,332
— $ 160,988 $ 203,380 $ 226,512
2,230 $ (4,259 ) $ 5,438 $ 14,237

$
$

The following table presents the balance sheet location of the Company's pension liabilities and assets:

December 31,

U.S. Plans

Non-U.S. Plans

Other accrued liabilities
Pension and other postretirement benefit liabilities
Other noncurrent assets

2018

(260 ) $
(1,970 )
—

2017

2018

(260 ) $

2017
(1,235 )
(2,152 ) (11,329 ) (18,176 )
5,174
6,671

6,172

(281 ) $

The Company terminated a significant U.S. defined benefit pension plan in the fourth quarter of 2018 through the
purchase of annuities. The Company contributed $1.4 million to the plan during the year ended December 31, 2018,
which was needed to fund the termination of the plan. Upon termination, the Company recognized a pretax charge in
other expense, net, of $34.5 million primarily related to unrecognized net actuarial losses previously recorded in
accumulated other comprehensive loss.

The accumulated benefit obligation for the Company’s U.S. defined benefit pension plans was $2,230 and $156,729
as of December 31, 2018 and 2017, respectively and the accumulated benefit obligation for the Company’s non-U.S.
defined benefit pension plans was $174,588 and $195,922 as of December 31, 2018 and 2017, respectively.

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

The following table summarizes information for the Company’s pension plans with an accumulated benefit
obligation in excess of plan assets:

Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets

December 31,

U.S. Plans

Non-U.S. Plans

2018

2017

2018

2017

2,230 $
2,230
—

2,412 $ 13,053 $ 16,755
2,412 11,546 14,683
4,034
3,760

—

The following table summarizes pretax amounts included in accumulated other comprehensive loss:

December 31,

U.S. Plans

Non-U.S. Plans

2018

2017

2018

2017

Unrecognized net actuarial loss
Unrecognized prior service cost
Total

(415 ) $ (26,261 ) $ (22,784 ) $ (28,410 )
(437 )
(415 ) $ (26,261 ) $ (23,532 ) $ (28,847 )

(748 )

—

Actuarial gains and losses are amortized using a corridor approach. The corridor is equal to 10% of the greater of the
benefit obligation and the fair value of the assets. Gains and losses in excess of the corridor are generally amortized
over the average remaining life of the plan participants. Pretax amounts for net periodic benefit cost and other
amounts included in other comprehensive income (loss) for the defined benefit pension plans consisted of the
following components:

Year Ended December 31,

U.S. Plans
2017

2016

2018

Non-U.S. Plans
2017

2016

Service cost
Interest cost
Recognized actuarial loss
Expected return on plan assets
Settlement loss
Net periodic benefit cost (income)
Changes in plan assets and benefit obligations
included in other comprehensive income (loss):
Change in unrecognized net actuarial loss (gain)
Change in unrecognized prior service cost
Settlement

Total included in other comprehensive income (loss)
Total recognized in net periodic benefit cost and
included in other comprehensive income (loss)

388

$ — $ — $ — $ 4,097 $ 4,876 $ 5,352
4,205 5,929 6,452 5,157 5,300 6,096
116
(5,058 ) (6,769 ) (7,002 ) (7,686 ) (7,598 ) (8,632 )
34,495 — —
15 — —
373 2,881 4,101 2,932
34,030

923 1,298 1,523

(176 )

664

— — —

8,649 (4,707 ) (6,540 ) (5,626 ) (4,001 ) 23,750
437 —
(34,495 ) — — — — —
(25,846 ) (4,707 ) (6,540 ) (5,315 ) (3,564 ) 23,750

311

$ 8,184 $ (4,883 ) $ (6,167 ) $ (2,434 ) $

537 $ 26,682

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

Assumptions

Significant weighted average assumptions used in determining benefit obligations and net periodic benefit cost are
as follows:

2018

U.S. Plans
2017

2016

2018

Non-U.S. Plans
2017

2016

Benefit obligations:

Discount rate
Rate of compensation increase

Net periodic benefit cost:

Discount rate
Rate of return on plan assets
Rate of compensation increase

3.70 % 3.50 % 3.94 % 2.50 % 2.23 % 2.38 %
— % — % — % 3.92 % 3.92 % 4.04 %

3.50 % 3.94 % 4.19 % 2.23 % 2.38 % 3.52 %
— % 4.10 % 4.50 % 3.41 % 3.49 % 3.71 %
— % — % — % 3.92 % 4.04 % 4.18 %

The Company considered the available yields on high-quality fixed-income investments with maturities
corresponding to the Company’s expected benefit obligations to determine the discount rates at each measurement
date.

Plan Assets

In developing the expected rate of return on plan assets, the Company considered the expected long-term rate of
return on individual asset classes. Expected return on plan assets is based on the market value of the assets. A
portion of the non-U.S. pension assets are managed by independent investment advisors with an objective of
transitioning to a portfolio of fixed income and absolute return investments that matches the durations of the
obligations as the funded status of each plan improves. The absolute return investment fund is a diversified portfolio
designed to achieve long-term total returns. The remainder of the non-U.S. pension assets is invested with the
objective of maximizing return.

Mutual funds classified as Level 1 are valued at net asset value, which is based on the fair value of the funds’
underlying securities. Certain mutual funds are classified as Level 2 because a portion of the funds’ underlying
assets are valued using significant other observable inputs. Other assets are primarily composed of fixed income
investments (including insurance and real estate products) and are valued based on the investment’s stated rate of
return, which approximates market interest rates.

The Company had no U.S. defined benefit pension plan assets as of December 31, 2018. The estimated fair values
and the valuation input levels of the Company’s non-U.S. defined benefit pension plan assets are as follows:

Mutual funds:

International equity
International debt
Absolute return

Other
Total

December 31, 2018
Non-U.S. Plans

Level 1
Fair Value

Level 2
Fair Value

22,607 $
36,142
—
2,858
61,607 $

25,503
82,429
26,168
7,673
141,773

CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In thousands, unless otherwise noted)

The estimated fair values and the valuation input levels of the Company’s plan assets are as follows:

December 31, 2017

U.S. Plans

Non-U.S. Plans

Level 1
Fair Value

Level 2
Fair Value

Level 1
Fair Value

Level 2
Fair Value

257 $
1,934
145,967
10,252
—
2,578
160,988 $

— $
—
—
—
—
—
— $

— $
34,704
—
31,192
—
6,645
72,541 $

—
26,781
—
98,789
21,994
6,407
153,971

Mutual funds:
U.S. equity
International equity
U.S. debt
International debt
Absolute return

Other
Total

Expected Cash Flows

The Company expects to contribute $0.3 million to U.S defined benefit pension plans and $4.7 million to non-U.S.
defined benefit pension plans during 2019.

The following table summarizes projected benefit payments from pension plans through 2028, including benefits
attributable to estimated future service (in millions):

2019
2020
2021
2022
2023
2024-2028

U.S. Plans

Non-U.S. Plans
9.4
8.1
8.9
9.1
9.3
65.2

0.3 $
0.3
0.3
0.3
0.3
1.3