2022 Annual Report
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Three-year
selected financial data
(Unaudited—in millions, except per share amounts)
Year Ended December 31
Result of operations
Net sales
Gross profit
Restructuring costs, net
Asset impairments
Operating income (loss)
Net interest expense
Net loss
Series A convertible preferred stock dividends
Net loss attributable to common stockholders
Loss per share information:
Weighted average number of shares outstanding:
Basic
Diluted
Loss per share:
Basic
Diluted
Non-GAAP adjusted results:
Non-GAAP adjusted EBITDA (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
Series A convertible preferred stock
Stockholders’ equity (deficit)
(1) See reconciliation of GAAP measures to Non-GAAP measures (page 8).
2
2022 Annual Report
2020
$8,435.9
2,747.8
88.4
206.7
(51.8)
(573.4)
(573.4)
(56.1)
(629.5)
196.8
196.8
$(3.20)
$(3.20)
2021
$8,586.7
2,684.3
91.9
13.7
48.6
(559.3)
(462.6)
(57.3)
(519.9)
203.6
203.6
$(2.55)
$(2.55)
$1,215.2
$1,117.0
$1.56
$1.39
$436.2
823.3
121.2
$122.3
786.3
131.4
2022
$9,228.1
2,804.1
62.9
1,119.6
(713.8)
(586.1)
(1,286.9)
(59.0)
(1,345.9)
207.4
207.4
$(6.49)
$(6.49)
$1,276.7
$1.66
$190.0
696.1
101.3
As of December 31
$521.9
8,936.9
684.5
$360.3
8,259.0
656.3
$398.1
6,545.9
609.6
13,576.8
13,259.5
11,685.4
1,401.1
9,520.6
1,041.8
355.0
1,397.2
9,510.5
1,056.1
(156.6)
1,618.7
9,501.6
1,100.3
(1,546.0)
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2022 was a very rewarding year for CommScope. Despite significant
inflation and continued supply chain challenges, we were able to achieve
our financial objectives shared at our 2021 Investor Day. We showed
sequential financial improvement through 2022 and are exiting 2022
as a substantially stronger company than when we entered the year.
Chuck Treadway
President and Chief Executive Officer
In spite of the ongoing economic uncertainty, our
In spite of 2022’s dynamic and challenging global
comprehensive CommScope NEXT transformation plan
business climate, characterized by steep inflationary
provided the guidance we needed to adapt and thrive
pressures and ongoing supply chain disruptions,
over the course of the year. We are excited to announce
following the CommScope NEXT playbook enabled
that we finished 2022 stronger than expected on virtually
us to compete, overcome and succeed on every
every front.
level. Much of this success is due to our business
segment realignment and the clearer accountabilities
CommScope NEXT is a carefully mapped series of steps
it provides. These segments include:
our company must take to achieve portfolio optimization,
drive organic growth and improve operational efficiency
- Connectivity and Cable Solutions (CCS)
to enhance the value of the CommScope brand for our
customers worldwide and increase shareholder value at the
- Networking, Intelligent Cellular and Security (NICS)
same time. Our successful reorganization of CommScope’s
- Outdoor Wireless Networks (OWN)
business segments—and the concurrent adoption of the
general manager model in those segments—has paved the
way for some truly exceptional year-end results.
- Access Network Solutions (ANS)
- Home Networks (HOME)
Our headline achievements are consolidated sales
growth of 7%, and adjusted EBITDA* growth of 14%,
underpinned by Core CommScope’s net sales increase of
12% and adjusted EBITDA growth of 15%. CommScope
also successfully reached the high-end 2022 target for
Core adjusted EBITDA of $1.15 – 1.25 billion by delivering
$1.25 billion of adjusted EBITDA for the Core portfolio.
And with our improved profitability, we reduced our year
end net leverage to 6.9x, towards the bottom of our 6.8x
$1,083.9
$1,091.5
$1,250.4
2020
2021
2022
– 7.2x targeted net leverage range.
FY Core Adjusted EBITDA ($ in millions)
19368.indd 3
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Comprising 14 individual business units, these segments are better able to align the business with sales, supply chain,
operations, marketing and engineering resources to empower faster, smarter decision-making. Segments also have
simpler structures, making them more efficient and more easily compared to our industry peers, something that helps
investors to appropriately evaluate our company’s portfolio.
CommScope also remains among the world’s top innovators in networking technology, keenly attuned to being ready
for the next big shift in communications. In 2022, we saw the growing importance of rural broadband connectivity and
the public imperative of closing the digital divide between the connected haves and have nots. While 2023 remains an
uncertain time for the global economy, CommScope is already positioned to be a key player in this great step toward
universal broadband connectivity in the United States and elsewhere.
CommScope NEXT is a long-term roadmap, but as our 2022 performance demonstrates, each step we take on
that journey, to the benefit of our customers and shareholders alike, has been the right one.
2022 Fiinancial and Opeerationaal Performance
2022 provided some limited relief on the supply chain front, but also delivered greater inflationary challenges. Judicious
pricing adjustments helped to insulate CommScope financially from the worst of these effects, and with the slowly
untangling supply chain, CommScope has begun to clear the substantial backlog that was built up over the previous year.
The end result is strong growth in sales and EBITDA across the company, particularly in the Core CommScope business.
These are the top-line company-wide results for 2022:
- 2022 consolidated net sales of
$9.23 billion increased 7% YoY,
led by the Core portfolio delivering
growth in CCS, NICS and OWN
but partially offset by declines in
ANS and non-Core Home.
- Core CommScope delivered net
sales of $7.52 billion, growing
12% from the prior year.
- 2022 consolidated adjusted
EBITDA* was $1.28 billion,
an increase of 14% YoY, with
growth across all segments except
ANS. Core adjusted EBITDA of
$1.25 billion grew 15% YoY and
delivered at the high-end of our
CommScope NEXT full year 2022
target of $1.15 - $1.25 billion.
- Adjusted earnings per share* was
$1.66, an increase of 19% from
the prior year.
- For the full year 2022,
CommScope delivered $190
million of cash flow from
operations, free cash flow of
$89 million and adjusted free
cash flow* of $198 million, all
significant improvements from
the prior year, despite headwinds
faced throughout the year relating
primarily to supply chain.
- CommScope delivered a reduction
in year-end net leverage from
the prior year, ending at 6.9x.
This represents nearly a full turn
reduction in net leverage from the
prior year and within the lower
end of our 2022 targeted range
between 6.8x – 7.2x.
- We expect continued execution of
CommScope NEXT to help drive
further reduction in net leverage
in the range of 5.5x – 6.5x by the
end of 2023, and to substantially
reduce it to less than 4.0x by the
end of 2025.
4
2022 Annual Report
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Highlights
Our five reorganized business segments took great steps forward in 2022, thanks in large part to the
general manager model driving each business with flexibility, transparency and accountability. Here are
some of our most prominent wins in 2022.
Connnectivvity andd Caablee
Solutioons (CCCS)
Netwworkking,, Inteelligeencee
Celluular aand Secuurityy (NICCS)
- CommScope introduced our XGS-PON
solution suite, the next-generation
10G-capable cloud-to-edge platform designed
to support rapidly-growing fiber-to-the-
home (FTTH) networks. The XGS-PON
solution suite’s flexible architecture, exceptional
interoperability and cloud-based operation
enables providers to bridge multiple network
topologies and take advantage of software-
defined network (SDN) efficiencies to
connect homes, businesses, manufacturing and
even smart cities.
- The launch of the Propel™ high-speed fiber
platform put terabit speeds within easy reach
for data centers. CommScope’s innovative
answer to the ever-accelerating demand
on data center infrastructure, the Propel
platform, enables faster, more efficient cloud
computing and AI applications at 400 Gbps
and 800 Gbps, as well as at the emerging
1.6 Tbps standard. The Propel solution was
a Gold Honoree in the Cabling Installation &
Maintenance Awards.
- CommScope’s Prodigy™ fiber connectors
and NOVUX™ FTTX solutions earned 2022
Diamond Technology Awards from Broadband
Technology Report.
- CommScope joined the prestigious Innovative
Optical and Wireless Network Global
Forum, securing our place among more
than 100 leading companies in advancing
communication and infrastructure technologies
for the advancement of all society.
- CommScope collaborated with Microsoft to advance
industrial manufacturing by integrating our citizens
broadband radio service (CBRS) access points, which use
unlicensed spectrum for private wireless networking with
Microsoft Azure private MEC, to streamline manufacturing
processes in our own plant in Shakopee, Minnesota. This
proof-of-concept demonstration in our own plant enabled
new capabilities and efficiencies as we lean into Industry 4.0.
- CommScope was selected by Spurs Sports &
Entertainment (SS&E) to provide next-generation for
the AT&T Center, the home of the San Antonio Spurs
professional basketball organization. CommScope’s ERA® all-
digital DAS solution expanded capacity and availability over
4G, 5G and private wireless networks in the vast arena.
- CommScope’s RUCKUS Networks debuted a new and
expanded RUCKUS BIG DOGS Partner Program, adding a
third middle tier while streamlining management across all
tiers. Together, Elite, Certified and Registered Partners can
now offer more specialized service for customers and grow
their own businesses through improved incentives.
- Front-running India’s fast-growing IT market and its
increasingly connected society, CommScope’s RUCKUS
Networks, opened a new R&D center in collaboration
with IIT Madras Research Park in Chennai. This is the
second R&D innovation center RUCKUS operates in India,
and the first collaboration with IIT Madras, the top-ranked
institute in the country.
- CommScope expanded our partnership with Trackhouse
Racing with the launch of the CommScope Ignition Program,
which leverages the excitement of motorsports to foster
STEM learning. The team’s star driver, Daniel Suárez, and
their CommScope-branded Chevrolet racecars, traveled to six
schools across the United States to deliver classroom sessions
to ignite curiosity in STEM subjects and get them involved in
the technologies and careers of tomorrow.
19368.indd 5
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Outddoorr Wirrelesss Netwoorkss (OWWN)
Homme Nettwoorks (HOOMEE)
- The release of CommScope’s innovate new Mosaic™
modular base station antenna made waves in the
industry as it provided a uniquely flexible, economical and
environmentally responsible platform for network operators’
staged 5G rollouts without compromising existing 4G
passive antenna performance at the same site.
- CommScope collaborated with Meta Connect to accelerate
the adoption of Open RAN (O-RAN) interoperability
standards in the massive MIMO (mMIMO) Evenstar
program. This competitive reference model disaggregates
the radio from antennas and filters, a key advantage for the
growing O-RAN market.
- CommScope’s PowerShift™ intelligent power
management solution has been deployed in more than
20,000 macro cellular sites worldwide. By dynamically
regulating voltage levels to tower-top C-Band and other
high-power remote radio units, PowerShift improves
energy efficiency by as much as 10%, helping mobile
network operators reduce costs and improve their
sustainability profiles.
Acceess NNetwworkk Solutions (AANSS)
- Leading broadband provider Liberty Global selected
CommScope as their DOCSIS 4.0 technology partner,
trusting us to help them achieve 10G network capabilities
in Europe. CommScope developed and deployed a Remote
MACPHY (RMD) node platform for D4.0 to simplify and
enhance the operational efficiency of Liberty Global’s hybrid
fiber-coaxial infrastructure.
- Mediacom, the 5th largest broadband and cable operator
in North America, turned to CommScope to power their
network migration to a distributed access architecture
(DAA) based on Remote MACPHY. CommScope RD2322
RxD devices were deployed to increase network speeds and
reduce latency in Mediacom’s multi-gigabit network.
- ViacomCBS partnered with CommScope to migrate
satellite-delivered channels to a content delivery network
(CDN) powered by the CommScope DigiCiper Streaming
system. This shift provided costs efficiencies and eliminated
geographical dependencies, enabling ViacomCBS to expand
its footprint to connect with larger audiences worldwide.
- CommScope launched the HomeSight™
platform for healthcare and homecare
applications and partnered with Kraydel to
put this easy-to-use and potentially life-saving
remote networking technology into homes of the
medically at-risk in the UK. Branded as Konnect,
this intuitive, TV-based connectivity solution is an
economical way to improve levels of care.
- The new HomeVista™ streaming solution
was launched at SCTE Cable-Tec Expo
2022, demonstrating the new device’s highly
customizable delivery of streamed content
and live TV over its RDK-based technology.
HomeVista successfully blends the best of OTT
and streaming applications seamlessly, with a
highly individualized platform.
- Vodafone Germany selected CommScope’s
TG6442 DOCSIS 3.1 cable gateways to deliver
Wi-Fi 6 performance to millions of subscribers
in Germany. The CommScope solution delivers
multi-gigabit data rates to homes and meets
growing user demand for faster upstream feeds
as well.
- Orange Belgium began delivering 4K UHD
video and seamless streaming to subscribers
on CommScope’s latest-generation set-
top box (STB) solution running the Android
TV™ operating system. The solution provides
multiscreen cloud recording, Chromecast built-
in™ and voice-activated content search. This
deployment comes after the successful rollout
in 2021 for Orange Slovensko. In both cases,
Orange also appreciated the 99 percent post-
consumer recycled plastics used in the STB’s
construction.
- CommScope entered the Wi-Fi 6 retail
market with the launch of two new products
from our ARRIS® business: The SURFBoard
THRUSTER Gaming Acceleration Kit and the
SURFBOARD Wi-Fi 6E Network Upgrade Kit.
By enabling Wi-Fi 6’s massive bandwidth boosts,
these solutions are poised to redefine video
gaming. The Wi-Fi 6E upgrade also enables IoT
applications that are at the cornerstone of today’s
modern smart homes.
6
2022 Annual Report
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NEXT steps in oour ESG transformation
Our CommScope NEXT roadmap focuses on the importance of our global responsibility to people, society at large and
the environment we all share. 2022 was a great year on the ESG front as well.
From a sustainability standpoint, CommScope was once again named to Newsweek’s list of “America’s Most
Responsible Companies.” We were also honored to be recognized in our inclusion on Forbes’ “Mexico’s Best
Employers” list, on Investor’s Business Daily’s “100 Best ESG Companies” list. We were also honored with our 7th
consecutive “Gold” sustainability rating by Ecovadis.
In regard to personal development and social equity, CommScope also made headlines in the achievements of our
employees all over the world, including honors from Innovator in Action Awards, CRN Women of the Channel Awards,
CPI Media Most Innovative Go-To-Market Strategist, WICT Women to Watch, TIA Star Awards and the Broadband Forum
Individual Awards.
Taking tthe NEXXT step innto 20223
While there remains a great deal of uncertainty about what the world economy will look like in 2023, CommScope is
proud to say that the steps we’ve taken in 2021 and 2022 have positioned us well for the coming year. Communications
remain the most precious commodity in the modern world, and networks are the vast exchanges where values and ideas
are traded every second of every day. Connecting more people, in more places, in more ways than ever before, is not just
CommScope’s business. It’s our mission—and it’s a mission we will continue to pursue relentlessly.
CommScope NEXT will continue to guide our decision-making processes with the flexibility, transparency and
accountability that delivered such impressive results in 2022.
Chuck Treadway
President and Chief Executive Officer
Go digital and
learn more.
Find our interactive
annual report at
ir.commscope.com
* See Description of Non-GAAP Financial Measures and Reconciliation of GAAP Measures to Non-GAAP Adjusted Measures contained within this annual report.
19368.indd 7
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Reconciliation oof GAAP measurres to noon-GAAPP adjusteed meassures
(Unaudited—in millions, except per share amounts)
Reconciliattion of adjuusted EBITDA
Net loss, as reported
Income tax benefit, as reported
Interest income, as reported
Interest expense, as reported
Other expense, net, as reported
Operating income (loss), as reported
Adjustments:
Amortization of purchased intangible assets
Restructuring costs, net
Equity-based compensation
Asset impairments
Transaction, transformation and integration costs (1)
Acquisition accounting adjustments (2)
Patent claims and litigation settlements
Executive severance
Reserve for Russian accounts receivable
Depreciation
Non-GAAP adjusted EBITDA
Reconciliation oof adjustedd net iincomme
and aadjustted dilutedd EPS
Net loss, as reported
Adjustments:
Total pretax adjustments to adjusted EBITDA
Pretax amortization of debt issuance costs and OID (3)
Pretax loss on debt transactions (4)
Tax effects of adjustments and other tax items (5)
Non-GAAP adjusted net income
Diluted EPS, as reported (6)
Non-GAAP adjusted diluted EPS (7)
Reconciliattion of adjuusted free ccash flflow
Cash flow generated by operating activities, as reported
Less: Additions to property, plant and equipment
Adjustments:
Cash paid for transaction, transformation and integration costs
Cash paid for restructuring costs, net
Non-GAAP adjusted free cash flow
220020
$(573.4)
Year Ended December 31
2200221
2200222
$(462.6)
$(1,286.9)
(81.1)
(4.4)
577.8
29.3
(51.8)
630.5
88.4
115.0
206.7
24.9
20.6
16.3
6.3
-
(71.9)
(1.9)
561.2
23.8
48.6
613.0
91.9
79.6
13.7
90.3
11.5
31.7
-
-
(13.1)
(2.8)
588.9
0.1
(713.8)
543.0
62.9
61.1
1,119.6
38.2
7.3
28.5
-
2.7
158.3
$1,215.2
136.7
$1,117.0
127.2
$1,276.7
$(573.4)
$(462.6)
$(1,286.9)
1,108.7
34.5
17.9
(216.7)
$371.0
$(3.20)
$1.56
$436.2
(121.2)
21.7
78.7
$415.4
931.7
36.5
34.4
(196.3)
$343.7
$(2.55)
$1.39
$122.3
(131.4)
66.7
42.6
$100.2
1,863.3
25.8
—
(189.4)
$412.8
$(6.49)
$1.66
$190.0
(101.3)
50.7
58.1
$197.5
Note: Components may not sum to total due to rounding.
(1) In 2022, primarily reflects transformation costs related to CommScope NEXT and integration costs
related to the ARRIS acquisition. In 2021, primarily reflects transaction separation costs related to the
planned separation of the Home Networks segment from CommScope, transformation costs related
to CommScope NEXT and integration costs related to the ARRIS acquisition. In 2020, primarily reflects
integration costs related to the ARRIS acquisition.
(2) In 2022, 2021 and 2020, reflects ARRIS acquisition accounting adjustments related to reducing
deferred revenue to its estimated fair value.
(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.
(6) For all periods presented, GAAP EPS was calculated using net loss attributable to
common stockholders in the numerator, which includes the impact of the Series A
convertible preferred stock dividend.
(7) Diluted shares used in the calculation of non-GAAP adjusted diluted EPS for the
years ended December 31, 2022, 2021 and 2020 were 249.4 million, 246.4 million
and 238.3 million, respectively.
CommScope management believes that presenting certain non-GAAP financial
measures noted above enhances an investor's understanding of CommScope's
financial performance when considered together with the GAAP financial measures.
CommScope management further believes that these non-GAAP financial measures
are useful in assessing CommScope's operating performance from period to period
by excluding certain items that it believes are not representative of its core business.
In addition, CommScope management uses certain of these financial measures for
business planning purposes and in measuring CommScope's performance relative to
that of its competitors.
8
2022 Annual Report
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(cid:3)
(cid:4)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2022
OR
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)
Title of each class
Common Stock, par value $.01 per share
Ticker symbol
COMM
Name of each exchange on which registered
Nasdaq
Securities registered pursuant to Section 12(b) of the Act:
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:3) No (cid:4)
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:4) No (cid:3)
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:3) No (cid:4)
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:3) No (cid:4)
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.
Large accelerated filer
(cid:3)
Non-accelerated filer
(cid:4)
Emerging growth company (cid:4)
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:4)
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. (cid:3)
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. (cid:4)
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive o(cid:5)cers during the relevant recovery period pursuant to §240.10D-1(b). (cid:4)
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes (cid:4) No (cid:3)
The aggregate market value of shares of Common Stock held by non-affiliates of the registrant was approximately $1,247.6 million as of
June 30, 2022. For purposes of this computation, shares held by affiliates and by directors and officers of the registrant have been excluded.
As of February 10, 2023 there were 208,455,920 shares of the registrant’s Common Stock outstanding.
Accelerated filer
Smaller reporting company
(cid:4)
(cid:4)
Portions of the registrant’s Proxy Statement for the 2023 Annual Meeting of Stockholders are incorporated by reference in Part III hereof.
Documents Incorporated by Reference
CommScope Holding Company, Inc.
Form 10-K
December 31, 2022
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. Reserved
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
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
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 Schedule
Signatures
3
18
44
45
46
46
47
48
49
68
70
119
119
120
120
120
120
120
121
121
121
127
2
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,” "potential," “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.
These statements are subject to various risks and uncertainties, many of which are outside of 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
CommScope Holding Company, Inc. was incorporated in Delaware on October 22, 2010 and our initial public
offering for our common stock was on October 25, 2013. Since our founding as an independent company in 1976,
we have consistently played a significant role in many of the world’s leading communication networks. Our
evolution has been driven by technological innovation and strategic acquisitions that expanded our product offerings
and complemented our existing solutions. We are a global provider of infrastructure solutions for communication,
data center and entertainment networks. Our solutions for wired and wireless networks enable service providers,
including cable, telephone, data center and digital broadcast satellite operators and media programmers, to deliver
media, voice, Internet Protocol (IP) data services and Wi-Fi to their subscribers and allow enterprises to experience
constant wireless and wired connectivity across complex and varied networking environments. Our solutions are
complemented by services including technical support, systems design and integration. We are a leader in digital
video and IP television (IPTV) distribution systems, broadband access infrastructure platforms and equipment that
delivers data and voice networks to homes. 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.
We have a team of over 30,000 people who serve our customers in over 150 countries through a network of world-
class manufacturing and distribution facilities strategically located around the globe. Our customers include
substantially all the leading global telecommunications operators, data center managers, cable television providers or
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.
3
In 2021, we announced a transformation initiative called CommScope NEXT designed to drive shareholder value
through three pillars: profitable growth, operational efficiency and portfolio optimization. We believe these efforts
are critical to making us more competitive and allowing us to invest in growth, de-leverage and maximize
stockholder and other stakeholder value. We incurred $62.9 million and $91.9 million of restructuring costs and
$38.2 million and $90.3 million of transaction, transformation and integration costs during the years ended
December 31, 2022 and 2021, respectively, which were primarily related to CommScope NEXT. We expect to
continue to incur restructuring costs and transaction, transformation and integration costs related to CommScope
NEXT in 2023 and such costs could be material.
As a step to optimize our portfolio through CommScope NEXT, as of January 1, 2022, we reorganized our internal
management and reporting structure to align our portfolio of products and solutions more closely with the markets
we serve and provide better performance comparability with our competitive peer set across our businesses. The
reorganization changed the information regularly reviewed by our chief operating decision maker for purposes of
allocating resources and assessing performance. As a result, we are now reporting financial performance based on
the following operating segments: Connectivity and Cable Solutions (CCS), Outdoor Wireless Networks (OWN),
Networking, Intelligent Cellular and Security Solutions (NICS), Access Network Solutions (ANS) and Home
Networks (Home). Prior to this change, we operated and reported four operating segments: Broadband Networks,
Outdoor Wireless Networks, Venue and Campus Networks and Home Networks. The Home segment was
unchanged in this realignment.
Also as a step in our CommScope NEXT transformation plan, in 2021, we announced a plan to separate the Home
Networks business. Due to the impact of the uncertain supply chain environment, capital spending patterns of
customers and other macroeconomic factors related to the Home Networks business, we have delayed our separation
plan, but we continue to analyze the financial results of our "Core" business separately from Home. See the
Operating Segments section below for an illustration of the aggregation of our Core financial measures.
For the year ended December 31, 2022, our revenues were $9.23 billion and our net loss was $1,286.9 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.
Operating Segments
As discussed above, as of January 1, 2022, we reorganized our reporting structure and are now reporting financial
performance based on five operating segments: CCS, OWN, NICS, ANS and Home. All prior period amounts have
been recast to reflect these operating segment changes. Our Core segments include our CCS, OWN, NICS and ANS
segments and exclude our Home segment. The distribution of net revenues among our five segments was as follows:
CCS
OWN
NICS
ANS
Core segments
Home
Total
2022
Year Ended December 31,
2021
2020
41.0%
15.9
10.2
14.4
81.5
18.5
100.0%
35.6%
16.5
10.0
16.4
78.5
21.5
100.0%
30.4%
14.8
10.0
16.3
71.5
28.5
100.0%
4
CCS Segment (2022 Net Sales of $3.8 billion)
Our CCS segment provides fiber optic and copper connectivity and cable solutions for use in telecommunications,
cable television, residential broadband networks, data centers and business enterprises. The CCS portfolio includes
network solutions for indoor and outdoor network applications. Indoor network solutions include optical fiber and
twisted pair structured cable solutions, intelligent infrastructure management hardware and software and network
rack and cabinet enclosures. Outdoor network solutions are used in both local-area and wide-area networks and “last
mile” fiber-to-the-home installations, including deployments of fiber-to-the-node, fiber-to-the-premises and fiber-to-
the-distribution point to homes, businesses and cell sites.
OWN Segment (2022 Net Sales of $1.5 billion)
Our OWN segment focuses on the macro and metro cell markets. The segment includes base station antennas, radio
frequency (RF) filters, tower connectivity, microwave antennas, metro cell products, cabinets, steel, accessories and
our wireless spectrum management business, Comsearch.
NICS Segment (2022 Net Sales of $0.9 billion)
Our NICS segment provides wireless networks for enterprises and service providers. Product offerings include
indoor and outdoor Wi-Fi and long-term evolution (LTE) access points, access and aggregation switches; an Internet
of Things (IoT) suite, on-premises and cloud-based control and management systems; and software and software-as-
a-service applications addressing security, location, reporting and analytics.
ANS Segment (2022 Net Sales of $1.3 billion)
Our ANS segment’s product solutions include cable modem termination systems (CMTS), video infrastructure,
distribution and transmission equipment and cloud solutions that enable facility-based service providers to construct
a state-of-the-art residential and metro distribution network.
Home Segment (2022 Net Sales of $1.7 billion)
Our Home segment includes subscriber-based solutions that support broadband and video applications. The
broadband offerings in the Home segment include devices that provide residential connectivity to a service
provider’s network, such as digital subscriber line and cable modems and telephony and data gateways which
incorporate routing and Wi-Fi functionality. Video offerings include set top boxes that support cable, satellite and
IPTV content delivery and include products such as digital video recorders, high definition set top boxes and hybrid
set top devices.
5
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 IoT. In addition, video distribution over the broadband
IP network is transforming how content is managed and consumed. IP facilitates new forms of video such as Over-
the-Top (OTT) and interactive television. During the COVID-19 pandemic, we learned even more about business
and consumer reliance on their network connectivity, as our products and services allowed a dramatic shift from
working in offices to working in the home. As the world is now recovering from the COVID-19 pandemic, we
continue to see a mix of connectivity needs in homes, in offices and while on the move. We are still seeing a shift in
how people are using the network which is continuing to drive higher upstream usage than downstream usage.
Additionally, as the network becomes more bi-directional and interactive, the need for lower and more consistent
latency is growing in importance. Some of these trends have subsided and may continue to subside as people work
less from home, but other recent network usage trends involving increased upstream usage remain the new normal,
still requiring network bandwidth capacities to be more symmetrical than in the past.
There are several major trends that we expect to continue to drive network deployments and investment, including:
Evolving Network Architecture and Technology
The pace of change in networking has increased as consumers and data-driven businesses utilize more bandwidth
and shift toward cloud and mobile applications. Exponential growth in video and mobile data consumption 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.
Our customers are working to transition their networks to become faster, more responsive, more efficient and more
reliable. The work from home trend caused by the COVID-19 pandemic has accelerated many of these network
trends. We believe the following key network trends will continue to impact CommScope and the industry during
2023:
1) Network Convergence: Operators are moving toward converged or multi-use network architectures. Rather
than building upon independent wireline and wireless networks, operators are shifting toward networks that
combine voice, video and data communications into a single converged data network for wired and
wireless services.
2) Continued Disruption by Over-the-Top TV: Although content consumption continues to increase,
subscriptions to pay TV continue declining. As a result, cable operators are compelled to invest in and
upgrade their networks for broadband but have mixed feelings about investments in their video and voice
services. While past data trends have been defined by rapid growth in the downlink, more interactive
experiences and IoT will drive the need for major network change in the uplink.
3) Densification: As wireless operators work to meet consumer demand, cell splitting, in the form of
densification, is expected to be a key driver for fulfilling the promise of 5G networks. Increased
sectorization at macro cell sites and establishing better inbuilding coverage will also play significant roles
in the 5G network. We expect that densification will require significant fiber cable and connectivity
between wireless cell sites.
4) Virtualization, Centralization and Disaggregation: Operators are virtualizing and centralizing their
networks to make them more flexible and efficient. Wireless operators are deploying centralized radio
access networks (CRAN) as a first step in the evolution to a virtualized radio access network. Eventually
this will enable servers and switches to replace some of the hardware specific equipment that exists today
and allow much of the processing to be performed on general purpose processors wherever and whenever it
is needed throughout the network. Cable operators are also seeking to virtualize their networks by moving
from a traditional converged cable access platform (CCAP) architecture to a distributed access architecture
(DAA). This moves some of the processing from the head end to the node and virtualizes the rest on
traditional switches and servers.
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5) Low Latency Services: To support the increased demands of a growing game-playing subscriber base, all
operators are seeking new ways to reduce the latency and jitter of the gaming packet streams. As an
example, Data Over Cable Service Interface Specification (DOCSIS) deployments will likely be adding the
new low latency DOCSIS technologies to their CMTS and customer premises equipment (CPE) gear in the
coming year. Node-splits will also be used to reduce congestion. Over time, we expect these low latency
services to allow support of Web3.0 and the metaverse, as access networks are increasing and used in a
more interactive way. The densification of 5G networks will also reduce congestion and decrease latency as
well.
6) Capacity Expansion: Wired and wireless network providers are both cognizant of the need to stay ahead of
the traffic growth that occurs every year. This traffic growth results from increases in average subscriber
consumption levels and in maximum service level agreement (SLA) levels. For cable providers, the next
years will see many increases in spectrum, including moves to DOCSIS 3.1 upstream mid-splits (85 MHz)
and DOCSIS 3.1 upstream high-splits (204 MHz) and downstream DOCSIS 3.1 transitions to 1.2 GHz.
Capacity will also be increased via the increased use of the spectrally-efficient DOCSIS 3.1 orthogonal
frequency-division multiplexing (OFDM) and orthogonal frequency-division multiple access (OFDMA)
channels within the cable spectrum. Additionally, some operators will begin their upgrade path to DOCSIS
4.0 in certain regions of their networks. New DOCSIS equipment will be needed for this expansion. For
wireless providers, the next years will see continued deployment of 5G that will include ongoing additions
to their wireless spectrum in the CBRS band, the C-band and the millimeter wave (mmWave) bands. New
antenna equipment will be needed for this expansion.
7) Government-sponsored Broadband Improvements: Several government-sponsored programs aimed at
improving the Broadband infrastructure connecting to rural and other under-served areas launched in the
second half of 2022. The funds from these programs and initiatives to build more equitable access—in
particular, in the United States (U.S.), the Rural Digital Opportunity Fund (RDOF), American Rescue Plan
Act (ARPA), and the Broadband Equity, Access, and Deployment (BEAD) Program—are expected to drive
technology and device sales across the board. While we did not see money flowing under the BEAD
Program in 2022, we expect planning activity to pick up dramatically in 2023, and for funds to start being
distributed by 2024.
Transition to 5G
5G wireless is evolving from an industry vision toward a tangible next generation wireless technology. Many
operators have begun a transition to 5G networks with countries in North America, Northeast Asia, Gulf
Cooperation Council and Western Europe leading the way in terms of 5G subscription penetration. To date, there are
over 240 5G commercial networks launched worldwide and over 500 operators investing in 5G technology. The
number of 5G-enabled devices is expected to continue to increase during 2023. The primary benefits of 5G are
expected to include:
•
•
•
Enhanced mobile broadband—to support significant improvement in data rates and user experience in both
the uplink and downlink,
IoT communications to support the expected billions of connections between machines, as well as short
bursts of information to other systems,
Low latency, high-reliability—to support applications that are critical or are needed in real time, like
factory machines, virtual reality and augmentation, and
• Underlying capacity to support fixed broadband services in underserved areas.
As described above, wireless 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 infrastructure to connect wireless access points to each other to improve the
response time of the network. As wireless operators transition toward 5G, they must also manage the fundamental
network deployment issues of site acquisition, power, backhaul and in-building wireless proliferation.
7
In addition to investment required by wireless operators, the transition to 5G could also spark an investment cycle by
cable operators as they upgrade their networks to compete with fixed wireless broadband, which is becoming a
viable alternative to traditional broadband internet access. Many cable operators are already offering or planning to
offer 5G wireless services on top of their wired cable services, and one approach under consideration employs
convergence techniques that utilize wired networks, such as DOCSIS or passive optical networks (PON), to support
Crosshaul (xHaul) to the more heavily-densified wireless access points and radio units of 5G. All of these transitions
are expected to lead to increased investment.
Fiber Deep Deployments
Residential and business bandwidth consumption continues to grow substantially. The proliferation of OTT 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 optical 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 improved 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.
Ethernet passive optical networks (EPON) and XGS PON are both being included in the plans of network operators,
and CommScope is developing optical line terminal (OLT) and optical network terminal (ONT) equipment for both
technologies. CommScope’s broad PON product portfolio will include both node-based platforms and shelf-based
platforms.
Shift in Enterprise Spending
Several trends in the enterprise market are expected to create opportunities and challenges for us. 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, indoor cellular networks (private and
public), and IoT devices 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 and Wi-Fi 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 for in-house corporate data centers. Multi-tenant and hyperscale data center managers are
focused on ultra-low loss, high density, scalable fiber connectivity solutions.
Enterprises are also looking at using LTE and 5G for their own, private uses. It is expected that private networks
will become far more important to an enterprise’s information technology plans and will provide a level of reliable
connection that they have not been able to get from their Wi-Fi networks, further moving the demand of enterprise
communications into the wireless domain.
8
Metro Cell, DAS and Small Cell Investment to Enhance and Expand Wireless Coverage and Capacity
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 traditional macro cell sites.
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.
Small cell and DAS solutions 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.
Transition to Wi-Fi 6E
Wi-Fi 6E (extended) is the next generation standard in Wi-Fi technology that builds on and improves the current
Wi-Fi 6 standard. The Wi-Fi 6E standard will bring a new dimension to Wi-Fi 6 capacity through additional
spectrum allocation in the 6 GHz frequency band. With tri-band enterprise grade access points (2.4/5/6Ghz),
wireless bandwidth capacities will increase to support multiple Gbps services, requiring even higher bandwidth
capacities on the wired networks that feed them. This is expected to drive investment in Wi-Fi networks and in the
DOCSIS, PON and ethernet solutions that can provide the required connectivity.
Strategy
In 2021, we announced a transformation initiative, CommScope NEXT, designed to drive stockholder value through
three pillars: profitable growth, operational efficiency and portfolio optimization. We believe these efforts are
critical to making us more competitive and allowing us to invest in growth, de-leverage and maximize stockholder
and stakeholder value.
Profitable Growth
Organic growth is fundamental to achieving the financial returns that investors expect from us. While acquisitions
and inorganic growth can change the structure of a business and reset financial expectations resulting in short-term
financial returns, the only reliable means for consistently producing long-term positive financial performance is
strong organic growth. Our plan to achieve our growth opportunities are driven by five themes:
•
•
•
•
•
Become more market and customer centric – work to truly understand the needs of our customers and
applications for data and video networking solutions.
Expand to service providers outside of North America – expand market share with service providers in
the rest of the world.
Expand Enterprise sales coverage – enhance sales coverage in historically underpenetrated top
metropolitan statistical areas and verticals within the North American region, as well as targeted
country/vertical combinations around the world.
Introduce new products and scale software solutions – build and scale our differentiated products,
software and technology.
Investment in capacity – expand capacity for products with high backlog, fast-growth and long-term
demand visibility.
The underpinning of our growth opportunities is also optimizing pricing across our products and solutions. We are
revamping our pricing processes, policies, tools and governance structure to simplify and create more ownership and
accountability so that we can better react to changes in the market and maintain acceptable margins.
9
Operational Efficiency
We are pursuing strategic initiatives aimed at optimizing our utilization of resources by improving direct
procurement processes, increasing transparency and control over indirect procurement spend, driving operational
improvements to lower manufacturing costs and streamlining and optimizing our period overhead cost structure. Our
management team has a strong track record of improving operational efficiency and successfully executing on
formalized annual profit improvement plans, cost-savings initiatives and working capital improvements to drive
future profitability and cash flow.
Portfolio Optimization
As discussed above, in addition to optimizing our portfolio with our commitment to separate the Home Networks
business from Core CommScope, we reorganized our internal management and reporting structure as of January 1,
2022 to align our portfolio of products and solutions more closely with the markets we serve and provide better
performance comparability with our competitive peer set. As a result, our new operating segments are CCS, OWN,
NICS, ANS and Home.
We utilize a general management model in our segments. This enables us to manage our portfolio more granularly,
assign responsibilities and build a culture of accountability and ownership. We continuously review our portfolio
and look for ways to better manage and optimize our product offerings.
The Future of CommScope
We are positioned as a leader in most of our Core segments already and will work to defend our leadership in the
more mature parts of these markets, while also shifting resources towards our targeted growth choices within them.
We believe that with CommScope NEXT, we will achieve the following:
•
•
•
•
•
Deliver organic growth
Create a well-positioned comprehensive portfolio of products and services
Stimulate market leading innovation, delivering powerful software and services
Maintain world class operational efficiency and cost structures
Architect a simplified organization, with more accountability, responsibility and visibility
With CommScope NEXT, we are transforming our organization into one that has better operational efficiency,
speed and resilience and one that can better service our existing customers, as well as new ones. We expect
CommScope NEXT to drive adjusted EBITDA expansion over the next several years that will enable us to
significantly increase our cash flow to accelerate our de-leveraging and further invest in our growth.
Customers
Our customers include substantially all the leading global telecommunications operators, data center managers,
cable television providers or MSOs and thousands of enterprise customers, including many Fortune 500 companies.
Major customers and distributors include companies such as Altice USA, Inc.; America Movil, S.A.B. de C.V.;
AT&T Inc.; Charter Communications, Inc.; Comcast Corporation (Comcast); Cox Communications, Inc.; Graybar
Electric Co. Inc.; KGP Co.; Liberty Media Corporation; Power & Telephone Supply Co.; Purchase Power Exchange
LLC; Talley Inc.; T-Mobile U.S. Inc.; Verizon Communications Inc.; Vodafone Group PLC; and Wesco
International, Inc. (including Anixter International Inc.). For the year ended December 31, 2022, we derived
approximately 15% of our consolidated net sales from our top two direct customers, but no single direct customer
accounted for 10% or more of our net sales. No single direct customer accounted for 10% or more of our net sales
for the year ended December 31, 2021, and we derived approximately 11% of our consolidated net sales from
Comcast for the year ended December 31, 2020.
10
Products from our CCS segment are primarily sold directly to cable television system operators, broadband
operators and other service providers that deploy broadband networks. CCS segment products are also sold through
independent distributors or system integrators for large telecommunication operators.
Products from our OWN segment are primarily sold directly to wireless operators, original equipment manufacturers
(OEMs) that sell equipment to wireless operators and other service providers that deploy elements of wireless
networks at the direction of 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. Although we sell to most wireless operators globally, we are dependent on a small number of large
operators.
Products from our NICS segment are primarily sold through independent distributors or system integrators for large
telecommunications operators and to customers in a broad range of enterprise vertical markets, including hospitality,
education, smart cities, government, venues and service providers indirectly through channel partners. We also sell
directly to cable television system operators, broadband operators and service providers that deploy broadband
networks. In certain circumstances, we sell NICS segment products directly to end customers, but it is a relatively
small part of the overall business.
Products from our ANS segment are primarily sold directly to wireline network service providers, such as telephone
companies and cable television network providers, to be deployed into their service delivery networks. In some
cases, we sell through specialized resellers and distributors who primarily provide logistics support and in certain
circumstances post-sale service and support. 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. We sell these products to most of the wireline and satellite operators globally.
Products from our Home segment are primarily sold directly to wireline network service providers, such as
telephone companies and cable television network providers, to be deployed by them into their subscribers’ homes
and businesses. We sell some products to satellite video distributors who also deploy our products into their
subscribers’ premises. In some cases, we sell through specialized resellers and distributors who primarily provide
logistics support and, in certain circumstances, post-sale service and support. 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. We sell these products to most of the wireline and satellite operators
globally. In the U.S., we also sell certain products directly to consumers over the internet and through brick and
mortar retailers.
We generally have no minimum purchase commitments from any of our distributors, system integrators, channel
partners, value-added resellers, wireless operators or OEM customers, and our contracts with these parties generally
do not prohibit them from purchasing from our competitors 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 significant 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 1, Item 1A, “Risk Factors.”
Competition
The markets in which we participate are dynamic and highly competitive, requiring companies to react quickly to
capitalize on opportunity. We retain skilled and experienced personnel and deploy substantial resources to meet the
changing demands of the industry and to capitalize on change. The market for our products is highly competitive
and subject to rapid technological change. We encounter significant domestic and international competition across
all segments of our business.
11
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. Major
competitors by segment include the following: CCS segment – Amphenol Corporation, Belden Inc., Clearfield, Inc.,
Corning Inc. and Sterlite Corporation.; OWN segment – Comba Telecom Systems Holding Ltd., Huawei
Technologies Co., Ltd., Rosenberger NA and Telefonaktiebolaget LM Ericsson; NICS segment – Cisco Systems,
Inc., Comba Telecom Systems Holding Ltd., Corning Inc., Extreme Networks, Inc., Hewlett Packard Enterprise
Development LP, Huawei Technologies Co., Ltd, JMA Wireless, Juniper Networks, Inc., SOLiD, Inc. and Ubiquiti
Inc.; ANS segment – ATX Networks Corp., Casa Systems, Inc., Cisco Systems, Inc., Harmonic Inc., Technetix
Group Ltd., Teleste Corporation and Vecima Networks Inc.; and Home segment – Humax Co., Ltd., Kaonmedia
Co., Ltd., Nokia Oyj, Sagemcom Broadband SAS, Vantiva SA. and ZTE Corporation.
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 and entertainment
networks, and we believe we hold leading market positions in most of our segments. Since our founding in 1976,
CommScope has been a leading brand in connectivity solutions for communications networks. In the cable
television and video network equipment industry, both CommScope and ARRIS are longstanding market leaders,
along with other brands we own such as RUCKUS, PACE, ADC and many smaller brands. 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
Our integrated solutions for building better networks are differentiated in the marketplace and are a significant
global competitive advantage. We invested $657.4 million in research and development (R&D) during 2022 to
advance product innovation and drive total cost of deployment and ownership down. Our ongoing innovation,
supported by proprietary intellectual property and technology know-how, has allowed us to build and sustain a
competitive advantage.
Established Sales Channels and Customer Relationships
We serve customers in over 150 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 and maintain high-performing
communication networks. Our customers include substantially all the leading global telecommunications operators,
data center managers, 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 significant 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. Given our understanding of their existing networks, when it comes to deploying networks at
scale, these customers trust CommScope and hold high regards for our ability to help them achieve their goals.
12
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.
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. Most of our manufacturing employees are in lower-cost geographies such as Mexico, China, India and
the Czech Republic. The combination of our dynamic manufacturing organization, our global network of third-party
manufacturers and our distribution organization allows us to:
•
Flex our capacity to meet market demand and expand our market position;
• Deliver high-quality customer solutions;
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Provide high customer service levels due to proximity to the customer; and
Effectively integrate acquisitions and capitalize on related synergies.
Manufacturing and Distribution
We maintain a balance of internal and external manufacturing providers to continue offering our customers a
competitive combination of quality, cost and flexibility in meeting their needs. 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.
In addition, we utilize contract manufacturers located throughout the world, including in Brazil, China, Malaysia,
Mexico, South Africa, Thailand, Vietnam and the U.S., for many of our product groups, including those in our
Home segment, certain products in our CCS, OWN and ANS segments and all of our Ruckus products. There can be
no guarantee that the Company will be able to extend or renew agreements with contract manufacturers on similar
terms, or at all.
Our global footprint allows us to mitigate macroeconomic headwinds in an everchanging environment. We
continuously evaluate and adjust operations to improve service, lower cost and improve the return on our capital
investments, and we expect to continue modifying our global operations to adapt to changing product demand and
business conditions.
Raw Materials and Components
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, copper, steel, bimetals, optical fiber and plastics and other polymers,
among others. 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 significant price increases and/or availability issues for the
materials we obtain from these suppliers as we have seen in recent years. These supply chain constraints have
limited our ability to manufacture and deliver products to our customers in the past and could have similar impacts
in the future.
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Our profitability has been and may continue to be materially affected by changes in the market price of our raw
materials and components, most of which are linked to the commodity markets. Prices for aluminum, copper,
plastics, silicon 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
third-party suppliers. We depend upon sole suppliers for certain of these components, including capacitors, memory
devices and silicon chips. Our results of operations have been and may continue to be materially affected if these
suppliers cannot provide these components in sufficient quantity and quality on a timely and cost-efficient basis. We
believe that our supply contracts and our supplier contingency plans mitigate some of this risk. Our supply
agreements include technology licensing and component purchase contracts, and several of our competitors have
similar supply agreements for these components. There can be no guarantee that the Company will be able to extend
or renew these supply agreements on similar terms, or at all. In addition, we license software for operating network
and security systems or sub-systems and a variety of routing protocols from different suppliers.
Research and Development
We operate in an industry that is subject to rapid changes in technology, and our success is largely contingent upon
anticipating and reacting to such changes. Accordingly, R&D 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 $657.4
million in R&D during 2022, and we expect to continue with substantial investments in future years. We intend to
focus our major R&D activities on high-growth opportunities such as fiber optic connectivity for fiber-to-the-x
(FTTX) and data centers, Wi-Fi 6E and 6GHz, CCAP, DAA, DOCSIS 4.0, gigabit passive optical network (GPON),
active and passive base-station antennas and metro cell and small cell wireless solutions. We are also developing
solutions that support the convergence of wireline and wireless networks in connection with the rollout of 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.
Backlog and Seasonality
At December 31, 2022 and 2021, we had an order backlog of $3,588.8 million and $3,953.9 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. We expect a majority of our backlog as of December 31, 2022 to be recognized as
revenue during 2023.
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 fluctuations in
quarterly sales and operating income. Our operating performance is typically the weakest during the first quarter,
and this pattern is expected to continue in the future. It may be more meaningful to focus on our annual rather than
interim results.
Patents and Trademarks
We pursue an active policy of seeking intellectual property protection, including patents and registered trademarks,
for new products and designs. For technology that is not owned by us, we have a program for obtaining appropriate
licenses to help ensure that we have the necessary license coverage for our products. In addition, we have formed
strategic relationships with leading technology companies to provide us with early access to technology that we
believe will help keep us at the forefront of our industry.
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On a worldwide basis, as of December 31, 2022, we held over 16,000 patents and patent applications and
approximately 3,000 registered trademarks and trademark applications. Over the next five years, approximately
2,100, or about 19%, of our issued patents will expire, while at the same time CommScope intends to seek patents
protecting new innovations. We consider our patents and trademarks to be valuable assets, and although no single
patent is material to our overall operations, we believe the COMMSCOPE, ARRIS, SURFBOARD, RUCKUS,
SYSTIMAX, NETCONNECT, NOVUX, ERA, ONECELL and HELIAX 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.
From time to time there are disputes with respect to the ownership of the technology used in our industry and
accusations of patent infringements. We will continue to protect our key intellectual property rights.
Government Regulation
We are subject to various domestic and international government regulations. For example, 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 also subject to governmental export and import
regulations and sanctions programs that could subject us to liability or impair our ability to compete in international
markets. In addition, because of the nature of information that may pass through or is stored on our solutions or
networks, we and our end customers may be subject to complex and evolving U.S. and foreign laws and regulations
regarding information privacy, data protection, cybersecurity and other matters. Further, we are subject to various
federal, state, local and foreign environmental laws and regulations governing, among other things, substances used
in our products, discharges to air and water, management of regulated materials, handling and disposal of solid and
hazardous waste, and investigation and remediation of contaminated sites. These descriptions are not exhaustive,
and these laws, regulations and rules frequently change and are increasing in number. See Part I, Item 1A, “Risk
Factors” for additional discussion of our risks related to government laws and regulations.
Corporate Responsibility and Sustainability
We believe that corporate responsibility and sustainability means making decisions that have a positive impact on
our people, planet and bottom line. Our company-wide sustainability mission is to enable faster, smarter and more
sustainable solutions while demonstrating the utmost respect for our human and natural resources. We are
accomplishing this mission by utilizing innovative technology, intelligent engineering and energy efficient design to
build more sustainable networks that make our customers more agile, while at the same time seeking to preserve the
natural ecosystems from which we source our raw materials.
While we may provide technological solutions, it is our people who make the real difference in our communities.
Their commitment to our customers, fellow employees and the communities in which they live and work drives
them to provide creative solutions, services and practices that are safe and sustainable for our environment and
future generations.
We understand how important it is to consider the larger impact of our actions beyond the balance sheet. We are
proud of CommScope’s prominent standing in one of the world’s most vital and dynamic industries. We push
ourselves and our thinking for the purpose of creating a better and sustainable tomorrow. For the sake of our current
and future generations, we will continue to grow as a sustainable, environmentally conscious business that benefits
the whole planet.
For additional information, which is not incorporated by reference in this Annual Report on Form 10-K, see our
Corporate Responsibility & Sustainability pages on the CommScope website: https://www.commscope.com/About-
Us/Corporate-Responsibility-and-Sustainability/.
15
Human Capital Management
Our employees are at the center of everything we do at CommScope and are the driving force for our innovation and
success. CommScope works to ensure it provides a safe, inclusive and positive employee experience and workplace
environment for all its employees. We have a global team of over 30,000 employees with approximately 62%
classified as manufacturing employees. The majority of these manufacturing employees are located in low-cost labor
countries such as Mexico, China, India and the Czech Republic. Our U.S. workforce is a mix of manufacturing and
non-manufacturing employees and makes up almost 20% of our employee base.
Our employees have continued to unite behind our common purpose to “Create Lasting Connections” all over the
world. We collaborate and innovate to create the world’s most advanced networks and succeed by having people
who come to work passionate about delivering on this vision every day. Core pillars underlying our Human Capital
Management strategy focus on engagement; total rewards; training and development; inclusion, equality, and
diversity; and health, safety and well-being.
Employee Engagement
CommScope prides itself on creating a collaborative, engaged and enabled workforce. We believe communication
and feedback are integral to building engaged employees and driving a high-performance culture. In support of this,
we periodically “take the pulse” of our organization through a global engagement survey. Our Pulse Survey is one
way our employees worldwide can voice their opinions and give feedback. The survey seeks to understand how
employees experience company values, asks questions to determine if employees feel a strong sense of inclusion and
belonging, and measures overall engagement. With this rich feedback, we can identify strengths and determine
potential areas for focused improvement. We consistently see strong results in engagement, strategic alignment,
teamwork, trust, collaboration, belonging, psychological safety and pride in working for CommScope. CommScope
continues to further build out the employee experience by leveraging technology, enabling managers, emphasizing
communication, providing flexible work approaches and aiming to become a destination for the best talent.
Total Rewards
We compensate employees equitably, relative to experience and performance, regardless of gender, nationality or
disability. Globally, we sustain our pay-for-performance compensation philosophy, regularly completing pay equity
assessments to calculate the results of our pay practices. CommScope’s compensation plans and programs strive to
attract and retain skilled, high-performing individuals; pay base salaries that are competitive in our industry and the
local markets in each country where we operate; and provide short- and long-term incentives (when appropriate) that
are tied to superior employee and company performance. The proportion of total rewards aligned with variable
(incentive) pay increases with job level and is reflective of the job level’s influence on both short- and long-term
results. Eligibility for the Annual Incentive Plan (AIP) or Sales Incentive Plan (SIP), which are both cash incentive
plans, and the Long-Term Incentive Plan (LTIP), which is our equity-based compensation plan, is based on the job
level and market competitiveness.
We provide comprehensive market-aligned benefits at a country level, reviewing annually to validate against
proprietary market data. Benefits typically include medical plans, life/disability and accident coverage, retirement
benefits, paid time-off policies and other locally applicable benefits.
Employee Education, Training and Development
We are committed to developing the careers and capabilities of our current and future employees. We have an Early
Career Strategy aimed at recruiting great talent for internships, co-ops and graduate rotation programs, ensuring we
are hiring the top early-in-career talent where and when they are needed. Once hired, our career development and
learning philosophy is based on the belief that employees learn best through a combination of work experience,
coaching, feedback, training and education.
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We use an online solution to manage permanent employees’ performance and goals throughout the year, providing
continuous development opportunities through coaching and feedback. We also maintain an online learning platform
consisting of a wealth of work-related development topics, including product knowledge, leadership development,
project management, general business content as well as ethics and diversity training. Growth is not only achieved
through these learning platforms but also through our regular town halls, round tables and everyday interaction with
our front-line managers. We focus heavily on interacting with our employees how, when and where it matters most.
Employee Inclusion, Equity, and Diversity
CommScope strives to create an inclusive environment that draws upon the strength of our diverse workforce to
exceed the expectations of all our partners and stakeholders. CommScope’s global workforce is comprised of
individuals of many races, cultures, backgrounds, geographies and experiences. We focus on ensuring equity in the
workplace and take pride in our diverse workforce and inclusive culture for which we diligently strive to uphold.
The results of our focused efforts on diversity, equity and inclusion make us stronger and pave a path for innovation,
which drives business differentiation, talent engagement and retention. CommScope has also continued to strengthen
the global Diversity & Inclusion Business Network that was established in 2020, providing over 1,600 employees
with targeted opportunities to network, learn and lead, grow their careers and support their communities. In February
2022, our chief executive officer signed the CEO Pledge for the CEO Action for Diversity & Inclusion and
committed to a set of actions. This is the largest CEO-driven business commitment to advance diversity and
inclusion in the workplace—a commitment that recognizes diversity and inclusion is not a competitive issue but a
societal issue.
Employee Health, Safety and Well-being
At CommScope, our employees’ health, safety and well-being are our top priority. This came into focus more than
ever with the COVID-19 pandemic. In response, we implemented rigorous health and safety protocols globally,
which continue. Overall, our vision is to seek opportunities to protect the well-being of our employees, customers,
suppliers, environment and communities.
A commitment to business practices that are innovative, safe and sustainable is key to our company’s success. To
achieve this, we maintain a robust Environment, Health & Safety (EHS) management system, set objectives and
targets, provide necessary resources and create a comprehensive well-being and benefits program. All of this
encourages ongoing improvement as we continue to unlock the greatest potential of our employees. The global EHS
team utilizes a companywide EHS management system designed and implemented based on the requirements of the
International Standards of ISO45001 and ISO14001.
CommScope seeks to inspire a culture of proactive and productive health such that our employees make lifestyle
decisions that lead to rewarding careers and balanced lives. To realize this goal, we support our workforce by
providing tools, services and programs that help our employees achieve and maintain optimal personal health. We
make a commitment in our benefits program to ensure we provide our employees and their family members with a
compelling and competitive benefits package that offers value, choices and resources to help manage their well-
being, including our GuidanceResources program, which provides physical, emotional, legal and financial well-
being resources to employees.
Available Information
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments
to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as
amended, are available free of charge on our web site at www.commscope.com under Company — Investor
Relations as soon as reasonably practicable after we electronically file such material with, or furnish it to, the
Securities and Exchange Commission. The information posted to our website is not incorporated elsewhere in this
Annual Report on Form 10-K.
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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.
Summary Risk Factors
The following is a summary of some of the risks, uncertainties and assumptions that could materially adversely
affect our business, financial position, results of operations and cash flows. You should read this summary together
with the more detailed description of each risk factor contained below.
Competitive Risks
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Our business is dependent upon third-party capital spending for data, communication and entertainment
equipment, and reductions in such capital spending could adversely affect our business.
A substantial portion of our business is derived from a limited number of key customers and channel
partners.
We face competitive pressures with respect to all our major product groups.
Our ability to sell our products is highly dependent on the quality of our support services after the sale,
and our inability to provide adequate support after the sale would have a material adverse effect on
business.
Changes to the regulatory environment in which our customers operate and changes in or uncertainty
about government funded programs may negatively impact our business.
Supply Chain Risks
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We are dependent on a limited number of key suppliers for logistics support and certain raw materials
and components, and supply shortages or delays could limit our ability to manufacture products.
Our dependence on commodities and certain components subjects us to cost volatility and potential
availability constraints.
If our integrated global manufacturing operations, including our contract manufacturers, suffer capacity
constraints or production or shipping delays, we may have difficulty meeting customer demands.
Strategic Risks
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The successful execution of our CommScope NEXT transformation plan is key to the long-term success
of our business.
Difficulties may be encountered in the realignment of manufacturing capacity and capabilities among
our global manufacturing facilities and our contract manufacturers that could adversely affect our ability
to meet customer demand for our products.
The separation, discontinuance or divestiture of a business or product line is subject to various risks and
uncertainties that could disrupt or adversely affect our business.
Our business strategy has historically relied, 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 may need to undertake additional restructuring actions in the future.
The Carlyle Group (Carlyle) owns a substantial portion of our equity and its interests may not be
aligned with yours.
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Financial Risks
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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 financial obligations.
Despite current indebtedness levels and restrictive covenants, we may still incur additional indebtedness
that could further exacerbate the risks associated with our substantial financial leverage.
To service our indebtedness and pay dividends on our preferred stock, we will require a significant
amount of cash, and our ability to generate sufficient cash depends on many factors beyond our control.
We may need to recognize additional impairment charges related to goodwill, identified intangible
assets, fixed assets and right of use assets.
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The IRS may not agree ARRIS International plc (ARRIS) was a foreign corporation for United States
(U.S.) federal income tax purposes.
Business and Operational Risks
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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.
If we do not stay current with product life cycle developments, our business may suffer.
If our products do not effectively interoperate with cellular networks and mobile devices, future sales of
our products could be negatively affected.
If our product or service offerings, including material purchased from our suppliers, have quality or
performance issues, our business may suffer.
We depend on cloud computing infrastructure operated by third parties and any disruption in these
operations could adversely affect our business.
Our business depends on effective management information systems.
Cybersecurity 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.
Climate change may have a long-term impact on our business.
Labor-Related Risks
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We may not be able to attract and retain key employees.
Labor unrest could have a material adverse effect on our business, results of operations and financial
condition.
International Risks
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Our significant international operations expose us to economic, political, foreign exchange rate and
other risks.
Additional or new tariffs or a global trade war could increase the cost of our products, which could
adversely impact the competitiveness of our products.
Our significant 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 subject to governmental export and import controls and sanctions programs that could subject us
to liability or impair our ability to compete in international markets.
Litigation and Regulatory Risks
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We may not be successful in protecting our intellectual property and in defending against claims that we
are infringing on the intellectual property of others, and any such actions may be costly.
Because of the nature of information that may pass through or be stored on certain of our solutions or
networks, we, our vendors and our end customers are subject to complex and evolving U.S. and foreign
laws and regulations regarding information privacy, data protection, cybersecurity, and other related
matters.
Compliance with current and future social and environmental laws, regulations, policies and provisions,
customer and investor pressures, other efforts to mitigate climate change and potential environmental
liabilities may have a material adverse impact on our business, financial condition and results of
operations.
General Risks
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Any future public health crisis, similar to the COVID-19 pandemic, could materially adversely affect
our business, financial condition, results of operations and cash flows.
Our stock price has been volatile and may continue to fluctuate significantly.
We may experience significant variability in our quarterly or annual effective income tax rate.
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.
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.
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Competitive Risks
Our business is dependent upon third-party capital spending for data, communication and entertainment
equipment, and reductions in such capital spending could adversely affect our business.
Our performance is dependent on third parties’ capital spending for constructing, rebuilding, maintaining or
upgrading data, communication and entertainment 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. We have
experienced and may continue to experience significant quarterly fluctuations in sales and operating income due to
the volatility in our industry. A variety of factors affect the timing and amount of capital spending in the
communications industry, including:
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general economic and market conditions, including increased costs due to rising inflation or interest
rates;
customer-specific financial conditions or budget allocation decisions;
competitive pressures, including pricing pressures;
competing technologies;
timing and adoption of the global rollout of new technologies;
customer acceptance of new technologies and services offered;
foreign currency fluctuations;
seasonality of outdoor deployments;
changes in customer preferences or requirements;
availability and cost of capital;
governmental regulation;
demand for network services;
consumer demand for video content and pay TV services;
variability of shipments under large contracts;
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.
The global economy experienced high inflation in 2022, which many central banks are responding to by raising
interest rates. Many perceive these actions as increasing the risk of a downturn in the economy in 2023. A downturn
in the economy that negatively impacts the capital spending of our customers could materially adversely affect our
business, financial condition, results of operations, cash flows and stock price.
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, value-added resellers and sales representatives. For the year ended
December 31, 2022, we derived approximately 15% of our consolidated net sales from our top two direct customers.
The concentration of our net sales with these key customers subjects us to a variety of risks, including:
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lower sales volumes that could result from the loss of one or more of our key customers;
dependency on customers with substantial purchasing power and leverage in negotiating contractual
obligations as well as the operational structure of the relationship, resulting in potential reductions in
profit;
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less efficient operations that could result in higher costs from an inability to accurately forecast and plan
for volatile spending patterns of key customers;
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;
election by our key customers to purchase products from our competitors in order to diversify their
supplier base and dual-source key products, resulting in reduced purchases of our products; 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.
A material portion of our sales is derived through our channel partners, including distributors, systems integrators
and value-added resellers. Our channel partners have experienced financial difficulties in the past that has adversely
affected our collection of accounts receivable. Our exposure to credit risks of our channel partners may increase if
our channel partners and their end customers are adversely affected by global or regional economic conditions. One
or more of these channel partners could delay payments or default on credit extended to them, either of which could
materially adversely affect our business, financial condition, results of operations and cash flows.
We generally have no minimum purchase commitments with any of our distributors, value-added resellers,
operators, OEMs or other customers, and our contracts with these parties generally do not prohibit them from
purchasing or offering products or services that compete with ours. We have historically experienced variability in
the level of purchases by our key customers and expect that similar variability could affect future sales. 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, cash flows and stock price.
We face competitive pressures with respect to all 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; and customer service, including 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 that better meet customer preferences than we are able to provide, which may cause us to lose
sales opportunities and revenue. Competitors’ actions, such as price reductions, acceptance of high-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.
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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, the functionality of our products is at risk of being subsumed by competitors who utilize software to
provide the same functions as our products. A related trend that could affect us is the emerging interest in distributed
access architecture (DAA), which disaggregates some of the functions of the converged cable access platform
(CCAP) and the access and transport platforms to enable deployment of these functions in ways that could reduce
traditional operator capital expenditures in hybrid fiber-coaxial. We have developed and deployed a line of DAA
products, but some operators may not be aligned on the specific implementations of DAA and we could lose market
share to competitors. Service providers also have the goal of virtualizing CCAP management and control functions
as they deploy DAA, and although we are developing a fully virtualized CCAP product, this could potentially enable
new competitors to enter the market and reduce operator dependence on our products. In our mobile wireless
markets, the shift to 5G includes the deployment of new spectrum in higher frequency bands where larger available
bandwidths enable a significant increase in network capacity. In many cases, massive MIMO technology (active
antennas) is the most effective way to deliver coverage in these bands. Consequently, 5G deployments present an
inherent headwind to our traditional passive base station antenna business. We are developing technologies and new
products to address this shift from passive to active antennas, but we may not be able to completely offset this trend.
As there is technology evolution or transformation within the industry, whether it be DOCSIS 4.0, PON, Wi-Fi
technology or the shift to 5G, there is a risk that our market position would be weakened. If any of our competitors’
products or technologies were to become the industry standard, our business would be negatively affected.
The continued industry move toward open standards may result in an increase in competition for our products that
may adversely impact our future revenues and margins. In addition, many of our customers participate in
“technology pools” and increasingly request that we donate a portion of our source code used by customers to these
pools, which may impact our ability to recapture the R&D investment made in developing such code. We believe
that we will be increasingly required to work with third-party technology providers. As a result, we expect the shift
to more open standards may require us to license software and other components indirectly to third parties via
various open-source or royalty-free licenses. In some circumstances, our use of such open-source technology may
include technology or protocols developed by standards settings bodies, other industry forums or third-party
companies. The terms of the open-source licenses granted by such parties, or the granting of royalty-free licenses,
may limit our ability to commercialize products that utilize such technology, which could have a material adverse
effect on our results of operations.
In some instances, our customers themselves may also be our competition in other business areas. Some of our
customers may develop their own software requiring support within our products and/or may design and develop
products of their own that are produced to their own specifications directly by a contract manufacturer. Further, if
we are unable 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. We are also facing significant and increased
competition from original design manufacturers (ODMs) and contract manufacturers who are selling and attempting
to sell their products directly to service providers.
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 business, financial condition, results
of operations and cash flows could be materially and adversely affected.
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Our ability to sell our products is highly dependent on the quality of our support services after the sale, and our
inability to provide adequate support after the sale would have a material adverse effect on our business.
After our products are deployed, our channel partners and end customers depend on our support organization to
resolve any issues relating to our products. A high level of support is important for the successful marketing and sale
of our products. In many cases, our channel partners provide support directly to our end customers. We do not have
complete control over the level or quality of support provided by our channel partners. These channel partners may
also provide support for other third-party products, which may potentially distract resources from support for our
products. If we and our channel partners do not effectively assist our end customers in deploying our products,
quickly resolving post-deployment issues and provide effective ongoing support, it could adversely affect our ability
to sell our products to existing end customers and could harm our reputation with potential end customers. In some
cases, we guarantee a certain level of performance to our end customers, which could prove to be resource-intensive
and expensive for us to fulfill if unforeseen technical problems arise.
Many of our service provider and large enterprise end customers have more complex networks and require higher
levels of support than our smaller end customers. In addition, given the extent of our international operations, our
support organization faces challenges, including those associated with delivering support, training and
documentation in languages other than English. Our failure to maintain high-quality support and services could have
a material adverse effect on our business, financial condition, results of operations and cash flows.
Changes to the regulatory environment in which our customers operate and changes in or uncertainty about
government funded programs 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. Many of our customers are subject to various rules and regulations
as Internet service providers and changes to such rules and regulations could adversely impact our customers’
decisions regarding capital spending. We, as well as some of our customers, also participate in and benefit from
government funded programs that encourage the development of network infrastructures such as the Infrastructure
Investment and Jobs Act (IIJA), Rural Digital Opportunity Fund (RDOF) and American Rescue Plan Act (ARPA).
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 and could
materially and adversely affect our business, financial condition, results of operations, cash flows and stock price.
Supply Chain Risks
We are dependent on a limited number of key suppliers for logistics support and certain raw materials and
components, and supply shortages or delays could limit our ability to manufacture products.
We are dependent on a limited number of key suppliers for logistics support and certain of our raw material and
component purchases, including certain semiconductors, memory and chip capacitors, polymers, copper rod, copper
and aluminum tapes, fine aluminum wire, steel wire, optical fiber, circuit boards and other electronic components,
subassemblies and modules. Certain of our suppliers are sole source suppliers and a number of our agreements with
suppliers are short-term in nature. Our reliance on sole or limited suppliers and our reliance on subcontractors
involves several risks, including a potential inability to obtain an adequate supply of required materials, components
and other products, and reduced control over pricing, quality, terms and conditions of purchase and timely delivery.
Current limited supply of memory devices, capacitors and silicon chips have impacted and could continue to impact
our ability to deliver on a timely basis due to extended lead times and have increased and could continue to increase
overall product costs. Key silicon providers may have significant power and ability to influence prices and supply.
We are currently experiencing extended lead times from certain of our key suppliers which has affected our ability
to deliver on a timely basis and could continue to affect our performance in the future. In some instances, we are
purchasing components as much as fifteen months in advance of our expected need for such components, which has
diverted and may continue to divert our working capital from other needs. The extended lead times also contribute to
increased risk of excess and obsolescence of components which can lead to increased costs.
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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 and pricing inflation 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. We have adjusted our market prices for certain of our products as
component prices have changed, but we may not be able to pass along all further cost increases to our customers,
which could have a material adverse effect on our gross margin and results of operations, especially in a highly
inflationary environment. Our ability to ship products on a timely basis has been and may continue to be
unfavorably impacted, which could damage relationships with current and prospective customers and potentially
have a material adverse effect on our business. We also face the risk of our customers canceling their orders and
moving them to our competitors who can ship more timely, which would not allow us to realize our backlog and
would have a material adverse effect on our business.
We also source many of our components from international markets. Any change in the laws and policies of the U.S.
or other countries affecting trade is 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.
Our dependence on commodities and certain components 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
and components, some of which are linked to the commodity markets. The principal raw materials and components
we purchase are aluminum, copper, steel, bimetals, optical fiber, plastics and other polymers, capacitors, memory
devices and silicon chips. Prices for aluminum, copper, steel, silicon, fluoropolymers and certain other polymers
have experienced significant volatility as a result of changes in the levels of global demand, supply disruptions,
including port, transportation and distribution delays or interruptions, and other factors. As a result, we have seen a
significant increase in costs that has negatively impacted our results of operations. We have adjusted our prices for
most of our products, but we 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. Conversely, 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.
If our integrated global manufacturing operations, including our contract manufacturers, suffer capacity
constraints or production or shipping delays, we may have difficulty meeting customer demands.
Disruption of our ability to produce at or distribute from our manufacturing or contract manufacturing facilities
could adversely affect our ability to manufacture products in a cost-effective and timely manner. We experienced
lost sales opportunities in the past due to lack of capacity to meet the demand for certain of our products. If we
cannot ramp up capacity fast enough to meet customer demand in the future, we may experience lost sales
opportunities, lose market share and experience customer relations problems, which could have a material adverse
effect on our business, financial condition, results of operations and cash flows.
We rely on unaffiliated contract manufacturers, both domestically and internationally, to produce certain products or
key components of products. Our reliance on these contract manufacturers reduces our control over the
manufacturing process and exposes us to risks, including reduced control over quality assurance, product supply and
costs and timing. Any manufacturing disruption by our contract manufacturers could severely impair our ability to
fulfill orders. Our reliance on outsourced manufacturers also increases the potential for infringement or
misappropriation of our intellectual property.
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If our internal manufacturing operations or contract manufacturers suffer delays or disruptions in production or other
operations for any reason, including financial instability of the contract manufacturer, labor disturbances or
shortages, fires, electrical outages, cybersecurity incidents, pandemics/epidemics, severe weather events, natural
disasters, geopolitical instability, acts of violence or terrorism, shipping interruptions including port distribution
delays or interruptions, increased manufacturing lead times, capacity constraints or quality control problems in their
manufacturing operations, failure to meet our future requirements for timely delivery or some other catastrophic
event, our ability to manufacture products at our manufacturing or contract manufacturer facilities and ship products
to our customers in a cost-effective and timely manner could be impaired, which could have a material adverse
effect on our business, financial condition, results of operations and cash flows.
Our contract manufacturers typically fulfill our supply requirements on the basis of individual orders. In most cases,
we do not have long-term contracts with our contract manufacturers that guarantee capacity, the continuation of
particular pricing terms or the extension of credit limits. Accordingly, our contract manufacturers are not always
obligated to continue to fulfill our supply requirements, which could result in supply shortages, and the prices we are
charged for manufacturing services could be increased on short notice. If our manufacturers are unable or unwilling
to continue manufacturing our products in required volumes, we will be required to identify one or more acceptable
alternative manufacturers to satisfy our demand. There is no assurance that we would be able to identify suitable
alternative manufacturing partners on a timely basis, on terms that are acceptable to us, or at all.
Some of our manufacturing and contract manufacturing facilities rely on aging production equipment and
information technology infrastructure, and if we fail or our contract manufacturers fail to properly maintain or
update this equipment, it could affect our ability to manufacture or ship products.
Strategic Risks
The successful execution of our CommScope NEXT transformation plan is key to the long-term success of our
business.
We are currently implementing a business transformation initiative called CommScope NEXT, designed to drive
stakeholder value. CommScope NEXT could result in changes to our business that may result in a number of risks
and uncertainties, including the following: lost customers or reduced sales volumes if customers do not accept
higher pricing, our new product offerings or if we discontinue or divest of product lines; higher one-time costs such
as restructuring costs and transaction, transformation and integration costs; the loss of key management and other
employees if we are not successful in getting employee buy-in for CommScope NEXT; and additional supply chain
disruptions or higher costs of supplies if we do not successfully execute our projects related to direct and indirect
procurement. The implementation of CommScope NEXT may take longer than anticipated, and once implemented,
we may not realize, in full or in part, the anticipated benefits or such benefits may be realized more slowly than
anticipated. The failure to realize benefits, which may be due to our inability to execute plans or delays in the
implementation of CommScope NEXT, could have a material adverse effect on our business, financial condition,
results of operations, cash flows and stock price.
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Difficulties may be encountered in the realignment of manufacturing capacity and capabilities among our global
manufacturing facilities and our contract manufacturers that could adversely affect our ability to meet customer
demand for our products.
We periodically realign manufacturing capacity among our global facilities and contract manufacturers in order to
reduce costs by improving manufacturing efficiency and to strengthen our long-term competitive position. The
implementation of these strategic initiatives may include significant shifts of production capacity among facilities
and contract manufacturers. We have done this in the past related to the integration of certain acquisitions, including
the integration of the ARRIS business. Also, in prior years, with some of the uncertainties in the U.S. trade tariff
environment, we transitioned manufacturing for certain impacted products to non-tariff countries. In addition, in
response to intermittent shutdowns of our facilities during the COVID-19 pandemic, we transitioned certain
manufacturing to less impacted facilities. These changes are time-consuming and costly, and changes in our contract
manufacturers or manufacturing locations may cause significant interruptions in supply if the manufacturers have
difficulty manufacturing products to our specifications. 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; maintaining product quality as a result of
shifting capacity; adequate raw material and other service providers to meet the needs at the new production
locations; ability to successfully remove, transport and re-install equipment; and 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.
The separation, discontinuance or divestiture of a business or product line is subject to various risks and
uncertainties that could disrupt or adversely affect our business.
To better optimize our portfolio of products, we may decide in the future to separate, discontinue or divest of
businesses or product lines that we believe are not core to CommScope's business. A plan to separate, discontinue or
divest a business or product line is complex in nature and can be affected by unanticipated developments or changes,
including changes in the macroeconomic, regulatory or political environment, changes in credit or equity markets or
changes in other market conditions. For example, these and other unanticipated developments have delayed the
planned separation of the Home Networks business that was announced in April 2021.
If we do choose to separate, discontinue or divest of a business or product line and successfully complete the
separation plan, we cannot assure you or any of our stakeholders that we will achieve the expected benefits. Upon
completion, we would also be a smaller, less diversified company and may be more vulnerable to changing market
conditions. In addition, we will continue to incur ongoing costs some of which may exceed our estimates and may
be stranded.
Whether or not a separation plan is completed, our businesses may face risks and uncertainties, including, but not
limited to: the diversion of senior management’s attention from ongoing business concerns; maintaining employee
morale and retaining key management and other employees; retaining existing business and operational
relationships, including with customers, suppliers and employees, and attracting new business and operational
relationships; foreseen and unforeseen costs and expenses; and potential negative reactions from the financial
markets if we fail to complete a separation plan as expected, within the anticipated time frame, or at all. Any of
these factors could have a material adverse effect on our business, financial condition, results of operations, cash
flows and stock price.
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Our business strategy has historically relied, in part, on acquisitions to create growth. We may not fully realize
anticipated benefits from past or future acquisitions or investments in other companies.
Our business strategy has historically relied, in part, on acquisitions to create growth, such as CommScope’s 2019
acquisition of ARRIS, ARRIS’ 2017 acquisition of Ruckus Wireless and the ICX Switch business, ARRIS’ 2016
combination with Pace plc and CommScope’s 2015 acquisition of TE Connectivity’s Broadband Network Solutions
business (the BNS business). We anticipate that a portion of our future growth may be accomplished by acquiring
existing businesses, products or technologies. We cannot guarantee that we will be able to identify suitable
acquisition opportunities or obtain the necessary financing on acceptable terms to provide these future growth
opportunities. We may spend time and money investigating and negotiating with potential acquisition or investment
targets but not complete the transaction which may divert or waste resources.
All acquisitions involve risks, such as the assumption of additional liabilities and expenses, issuance of debt,
incurrence of transaction and integration costs, diversion of management’s attention from other business concerns,
assumption of unknown contingent liabilities, unanticipated litigation costs and falling short of growth expectations.
There are also significant challenges to integrating an acquired operation into our business, including, but not
limited to successfully managing the operations, manufacturing facilities and technology of the combined business;
integrating the sales organizations; maintaining and increasing the customer base; retaining key employees,
suppliers and distributors; integrating management information systems, including enterprise resource planning
(ERP) systems; integrating inventory management and accounting activities; integrating R&D activities; navigating
markets in which we potentially have limited or no prior experience; integrating and implementing effective
disclosure controls and procedures and internal controls over financial reporting; and the impact of goodwill or other
impairment charges, amortization costs for acquired intangible assets and acquisition accounting treatment,
including the loss of deferred revenue and increases in the fair values of inventory and other acquired assets, on our
financial condition and results of operations. Furthermore, such acquisitions may be dilutive to our financial results.
Although we typically expect to realize strategic, operational and financial benefits as a result of our past and future
acquisitions and investments, we cannot predict or guarantee whether and to what extent anticipated cost savings,
synergies and growth prospects will be achieved. For example, we have not fully achieved the expected growth
prospects associated with the ARRIS acquisition and that has had adverse effects on our financial condition, results
of operations, cash flows and stock price.
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, in
conjunction with the implementation of initiatives to reduce costs and improve the efficiency of our operations and
to integrate acquisitions. For example, the CommScope NEXT actions to date have included the planned closure of a
manufacturing facility as well as workforce reductions. In prior years, we have also undertaken a number of
initiatives to support the integration of acquisitions, such as the 2019 acquisition of the ARRIS business and the
2015 acquisition of the BNS business. These initiatives included the closure of manufacturing facilities,
consolidation of distribution centers and other real estate and various other workforce reductions. As a result of the
continued efforts related to CommScope NEXT, changes in business conditions and other developments, we may
need to initiate additional restructuring actions that could result in workforce reductions and restructuring charges,
which could adversely and materially affect our cash flows.
Carlyle owns a substantial portion of our equity and its interests may not be aligned with yours.
Funding for the acquisition of ARRIS included an investment by Carlyle in our Series A Convertible Preferred
Stock. As a result, Carlyle owns approximately 16% of our common stock on an if-converted basis and has the right
to designate up to two directors on our Board of Directors. In addition, certain of our existing directors are senior
advisors to Carlyle. As a result, Carlyle has significant influence on our business. Circumstances may occur in
which the interests of Carlyle could conflict with the interests of our other stockholders.
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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 financial obligations.
As of December 31, 2022, we had approximately $9.6 billion of indebtedness. As of December 31, 2022, we had no
outstanding loans under our asset-based revolving credit facility (Revolving Credit Facility) and the remaining
availability was $908.8 million, reflecting a borrowing base subject to maximum capacity of $1,000.0 million
reduced by $91.2 million of outstanding letters of credit. 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 October 2022, we completed
the refinancing of our Revolving Credit Facility which continues to provide borrowing capacity of up to $1.0 billion,
subject to certain limitations, but includes additional assets under the borrowing base not previously included and
extends the maturity from April 2024 to September 2027.
Our interest cost on our senior secured term loan due 2026 (2026 Term Loan) and our Revolving Credit Facility,
which make up about $3.1 billion of our indebtedness, is variable and subject to the risk of changes in interest rates.
As the Federal Reserve has increased interest rates in 2022, we have seen increased interest cost which has adversely
impacted our results of operations and cash flows. This may continue into 2023 if the Federal Reserve continues to
maintain higher interest rates or chooses to raise interest rates further. We have entered into certain hedging
agreements to reduce our exposure to variable rate debt.
Other consequences our substantial indebtedness has had and could continue to have on our business are as follows:
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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 reduce the
amount of cash flows available for working capital, capital expenditures, investments or acquisitions
and other general corporate purposes;
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 or our ability to refinance existing indebtedness in
the future with reasonable terms and conditions, or at all; 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.
LIBOR has historically been the reference interest rate in our variable rate debt agreements, but LIBOR is being
discontinued and is scheduled to be fully phased out in June 2023. In anticipation of the cessation of LIBOR and in
connection with the refinancing of our Revolving Credit Facility in October 2022, we transitioned to a variable rate
based on Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York (SOFR) for
borrowings under that facility. We also expect to amend our 2026 Term Loan to replace LIBOR with SOFR as the
reference interest rate in the first half of 2023. SOFR is calculated differently than LIBOR and they have inherent
differences, which could give rise to uncertainties, including limited historical data and volatility. While we do not
expect the transition to SOFR to have a material adverse effect on our business, the full effects of the transition to
SOFR remains uncertain.
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.
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Despite current indebtedness levels and restrictive covenants, 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 indebtedness contain restrictions on the incurrence
of additional indebtedness, these restrictions are subject to a number of thresholds, qualifications and exceptions,
and 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 and pay dividends on our preferred stock, we will require a significant amount of
cash, and our ability to generate sufficient 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 and pay cash dividends on our preferred stock will depend on the level of earnings and distributable
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 achieve 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 and dividends on our
preferred stock.
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, fixed
assets and right of use assets.
We have substantial balances of goodwill and identified intangible assets. As of December 31, 2022, goodwill and
identified intangible assets represented approximately 56% of our total 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 have recognized substantial impairment charges related to goodwill, some of them being
significant, including $1,119.6 million in 2022, $13.7 million in 2021 and $206.7 million in 2020. As of the October
2022 annual impairment test, the fair value of a certain reporting unit only modestly exceeded its carrying value and
slight changes in significant assumptions or business factors could result in material impairment. In the future, if we
are unable to improve our results of operations and cash flows, or other indicators of impairment exist, such as a
sustained significant decline in our share price and market capitalization, we may incur material charges against
earnings relating to our remaining goodwill.
We are also required to evaluate identified intangible assets, fixed assets and right of use 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 identified intangible assets
and fixed assets. In the future, we may again determine 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.
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The IRS may not agree ARRIS was a foreign corporation for U.S. federal income tax purposes.
Following the Pace combination, ARRIS was incorporated under the laws of England and Wales and a tax resident
in the United Kingdom (U.K.) for U.K. tax purposes. There is a risk that the Internal Revenue Service does not agree
that ARRIS was a foreign corporation for U.S. federal income tax purposes in periods prior to the acquisition of
ARRIS by CommScope and we could be subject to substantial additional U.S. taxes. For U.K. tax purposes, ARRIS
was expected to be treated as a U.K. tax resident for all periods prior to the acquisition of ARRIS by CommScope
and following the Pace combination, regardless of how ARRIS was treated in the U.S. Therefore, if ARRIS was
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 certain periods prior to the acquisition of ARRIS by CommScope, which could have a material adverse effect on
our financial condition, results of operations and cash flows.
Business and 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 rapid advances in information processing and communications
capabilities that require increased transmission speeds and density and greater bandwidth. These advances require
significant investments in R&D 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 R&D will yield marketable product or service 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
business, financial condition, results of operations 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. Developing our
products is expensive, complex and involves uncertainties. Each phase in the development of our products presents
serious risks of failure, rework or delay, any one of which could impact the timing and cost-effective development
of such product and could jeopardize end customer acceptance of the product. We have experienced in the past, and
may in the future experience, design, manufacturing, marketing and other difficulties that could delay or prevent the
development, introduction or marketing of new products and enhancements. Any such difficulties or delays 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.
To compete successfully, we must continue to innovate in anticipation of both our customers’ needs and developing
industry trends, which require us to quickly design, develop, manufacture and sell new or enhanced products that
provide increasingly higher levels of performance and reliability. If we do not have competitively priced, market-
accepted products available to meet our customers’ planned roll-out of new technologies, we may miss a significant
opportunity and our business, financial condition, results of operations and cash flows could be materially and
adversely affected.
The introduction of new or enhanced products requires that we carefully manage the transition from older products
to minimize disruption in customer ordering practices and ensure that new products can be timely delivered to meet
our customers’ demand. 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.
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Furthermore, there are several major trends that we expect to continue to impact the enterprise market and product
life cycles, including the shift to 5G, enterprises 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 business, financial condition,
results of operations and cash flows.
In order to stay current with product life cycle developments, we have formed strategic relationships with leading
technology companies to provide us with early access to technology that we believe will help keep us at the
forefront of our industry. Our strategic alliances are generally based on business relationships that have not been the
subject of written agreements expressly providing for the alliance to continue for a significant period of time, and
the loss of any such strategic relationship could have a material adverse effect on our business and results of
operations.
If our products do not effectively interoperate with cellular networks and mobile devices, future sales of our
products could be negatively affected.
Many of our products are designed to interoperate with cellular networks and mobile devices using Wi-Fi
technology. These networks and devices have varied and complex specifications. As a result, we must ensure that
our products interoperate effectively with these existing and planned networks and devices. To meet these
requirements, we must continue development and testing efforts that require significant capital and employee
resources. We may not accomplish these development efforts quickly or cost-effectively, or at all. If our products do
not interoperate effectively, orders for our products could be delayed or cancelled, which would harm our revenue,
operating results and reputation, potentially resulting in the loss of existing and potential end customers. The failure
of our products to interoperate effectively with cellular networks or mobile devices may result in significant
warranty, support and repair costs, divert the attention of our engineering personnel from our product development
efforts and cause significant customer relations problems. In addition, our end customers may require our products
to comply with new and rapidly evolving security or other certifications and standards. If our products are late in
achieving or fail to achieve compliance with these certifications and standards, or our competitors first achieve
compliance with these certifications and standards, such end customers may not purchase our products, which would
harm our business, operating results, financial condition and cash flows.
If our product or service offerings, 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. Many of our products include both hardware and software components. It is not
unusual for software, especially in earlier versions, to contain bugs that can unexpectedly interfere with expected
operations. 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; and depending on the number of products
affected, the cost of fixing or replacing such products could have a material impact on our results of operations and
cash flows. Our agreements with our contract manufacturers and component suppliers may not cover all costs
related to defects.
In some cases, we are dependent on a sole supplier for components used in our products. Defects in sole-sourced
components subject us to additional risk of being unable to quickly address any product issues or failures
experienced by our customers as a result of the component defect and could delay our ability to deliver new products
until the defective components are corrected or a new supplier is identified and qualified. This could increase our
costs in resolving the product issue, result in decreased sales of the impacted product or damage our reputation with
customers, any of which could negatively impact our results of operations.
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Hardware or software defects could also permit unauthorized users to gain access to our customers’ networks and/or
a consumer’s home network. In addition to potentially damaging our reputation with customers, such defects may
also subject us to claims for damages under agreements with our customers and fines by regulatory authorities.
We 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 a result of reputational damage.
Our products have been deployed in many different locations and user environments and are capable of providing
services and connectivity to many different types of devices operating a variety of applications. The ability of our
products to operate effectively can be negatively impacted by many different elements unrelated to our products. For
example, a user’s experience may suffer from an incorrect setting in a Wi-Fi device. Although certain technical
problems experienced by users may not be caused by our products, users often may perceive them to be the
underlying cause of poor performance of the wireless network. This perception, even if incorrect, could harm our
business and reputation. Similarly, a high-profile network failure may be caused by improper operation of the
network or failure of a network component that we did not supply, but service providers may perceive that our
products were implicated, which, even if incorrect, could harm our business, financial condition, results of
operations and cash flows.
We depend on cloud computing infrastructure operated by third parties and any disruption in these operations
could adversely affect our business.
For certain of our service offerings, in particular our Wi-Fi-related cloud services, we rely on third parties to provide
cloud computing infrastructure that offers storage capabilities, data processing and other services. We currently
operate our cloud-dependent services using Amazon Web Service (AWS), Google Compute Engine (GCE) or
Microsoft Azure (Azure). We cannot easily switch our AWS, GCE or Azure operations to another cloud provider.
Any disruption of or interference with our use of these cloud services would impact our operations and our business
could be adversely impacted.
Problems faced by our third-party cloud services with the telecommunications network providers with whom we or
they contract or with the systems by which our telecommunications providers allocate capacity among their
customers, including us, could adversely affect the experience of our end customers. If AWS, GCE or Azure are
unable to keep up with our needs for capacity, this could have an adverse effect on our business. Any changes in
third-party cloud services or any errors, defects, disruptions or other performance problems with our cloud-based
applications, could adversely affect our reputation and may damage our end customers’ stored files or result in
lengthy interruptions in our services. Interruptions in our services might adversely affect our reputation and
operating results, cause us to issue refunds or service credits, subject us to potential liabilities or result in contract
terminations.
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 ERP systems to support critical
business operations such as processing sales orders and invoicing, manufacturing, shipping, inventory control,
purchasing and supply chain management, human resources and financial reporting. In 2020, we began the upgrade
and integration of our ERP software to a newer, cloud-based version. The first phase was completed in early 2021
and the next phase is ongoing. We may experience difficulties as we transition to the upgraded systems, including
loss or corruption of data, delayed shipments, decreases in productivity as personnel implement and become familiar
with new systems and processes, unanticipated expenses (including increased costs of implementation or costs of
conducting business) and lost revenue. Difficulties in implementing the upgrade or significant system failure could
disrupt our operations, divert management’s attention and have an adverse effect on our capital resources, financial
condition, results of operations or cash flows.
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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, produce information for business decision-making activities and support digital
customer experience activities, we could experience a material adverse impact on our business or an inability to
timely and accurately report our financial results.
Cybersecurity 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 receive, process, store and transmit confidential data, including “personally identifiable
information,” with respect to employees, vendors, customers and others. As the continued rise in cybersecurity
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 of 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, sensitive or
personal information, the deletion or modification of records or interruptions in our operations. These cybersecurity
risks increase when we transmit information from one location to another, including transmissions over the Internet
or other electronic networks. Any future significant compromise or breach of our data security, whether external or
internal, or misuse of employee, vendor, customer, or Company data, could result in significant costs, lost sales,
fines, lawsuits, lost customers and damage to our reputation. We employ a variety of security breach
countermeasures and security controls designed to mitigate these risks, but we cannot guarantee that all breach
attempts can be successfully thwarted by these measures as the sophistication of attacks increases. As cyber threats
continue to evolve, we may be required to expend additional resources to mitigate new and emerging threats while
continuing to enhance our information security capabilities or to investigate and remediate security vulnerabilities.
In addition, defects in some of the hardware or software we develop and sell, including in our engineering or in their
implementation by our customers, could also result in unauthorized access to our customers’ and/or consumers’
networks. Such unauthorized access could result in third parties gaining access to the private information of our
customers, such as home health information, home cameras or other personal information or technology. Any such
events could result in theft of personal information, trade secrets and intellectual property; give rise to legal
proceedings; cause us to incur increased costs for insurance premiums, security, remediation and regulatory
compliance; 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; expose the confidential information of our clients and others; 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, cash flows and stock price.
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Climate change may have a long-term impact on our business.
There are inherent climate change risks wherever business is conducted. The potential physical impacts of climate
change on our operations are highly uncertain and would be particular to the geographic areas in which we operate.
These may include changes in rainfall and storm patterns and intensities, water shortages, changing sea levels and
changing temperatures. These impacts may adversely impact the cost, production levels and financial performance
of our operations. Climate-related events, including the increasing frequency of extreme weather events and their
impact on critical infrastructure in the regions in which we operate, have the potential to disrupt our business, our
third-party suppliers, and/or the business of our customers and may cause us to experience higher attrition, losses
and additional costs to maintain or resume operations. CommScope aligns with the Sustainability Accounting
Standards Board (SASB) standards, Global Reporting Initiative (GRI) standards and makes use of the Carbon
Disclosure Project (CDP) platform, which is committed to aligning with the Task Force on Climate Related
Financial Disclosures (TCFD) recommendations to accurately assess, take potential proactive action and report as
appropriate. For additional information, which is not incorporated by reference in this Annual Report on Form 10-K,
see our Corporate Responsibility and Sustainability report on the CommScope website:
https://www.commscope.com/corporate-responsibility-and-sustainability/.
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 or are at or near retirement age, including a
disproportionate amount of our workforce in key geographic areas who will reach retirement age in the next decade.
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 and changes in key leadership has created and
could continue to create challenges in retaining employees as well. As the corporate culture evolves, some
employees may not find the new culture appealing. In addition, the pace of integration and transformation may cause
retention issues with our workforce due to change fatigue.
Furthermore, as our workforce ages, we are challenged to find and attract a younger population to replace them.
Younger generations are motivated by progression and opportunity, which may be limited by our current employee
population. In addition, many of our employees are highly experienced, skilled individuals who have extensive
knowledge or relationships in our industry. As these employees leave CommScope, we may not be able to easily
replicate their experience, knowledge and relationships; and with rising labor costs, replacing these employees may
increase costs. Difficulties in attracting or retaining employees with the necessary management, technical and
financial skills needed to achieve our business objectives may limit our growth potential and have had and may
continue to have a material adverse effect on our business, financial condition and results of operations.
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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 works’ councils or similar statutory arrangements. We are required to consult
with, and seek the consent or advice of, various employee groups or works’ councils that represent our employees
for any changes to our activities or employee benefits. We have recently concluded negotiations resulting in an
agreement for the establishment of a European Works Council that would serve as a representative body of our
European workforce. Requirements to consult with such groups could have a significant impact on our flexibility in
managing costs and responding to market changes. 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 could harm our reputation with our customers, reduce demand for our products, increase
costs and have a material adverse effect on us.
International Risks
Our significant international operations expose us to economic, political, foreign exchange rate and other risks.
We have significant international sales, manufacturing, distribution and R&D operations. Our major international
manufacturing, distribution and R&D facilities are located in China, the Czech Republic, Germany, India, Ireland,
Mexico, the Netherlands, Singapore and the United Kingdom. For the year ended December 31, 2022, international
sales represented 38% of our consolidated net sales. In general, our international sales have lower gross profit
percentages than our domestic sales. To the extent international sales increase as a percentage of our net sales, our
overall gross profit percentages may decline.
Our international sales, manufacturing, distribution and R&D operations are subject to the risks inherent in operating
abroad, including, but not limited to, coordinating communications among and managing international operations;
currency exchange rate fluctuations; economic and political destabilization, including the current risk with China-
Taiwan relations, China-U.S. relations and Russia-U.S. relations; restrictive actions by foreign governments; price
inflation; volatile interest rates; wage inflation; nationalization of businesses and expropriation of assets; the laws
and policies of the U.S. and other countries affecting trade and tariffs, 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, including the imposition of new data privacy and climate change
regulations; volatile geopolitical turmoil, including popular uprisings, regional conflicts, terrorism, and war;
shipping interruptions, including shortages of containers or port congestion; major public health or safety concerns,
such as pandemics and infectious diseases; natural or man-made disasters; inflexible labor contracts or labor laws in
the event of business downturns; and economic boycott for doing business in certain countries. Although the
Company maintains insurance coverage for certain types of losses, such insurance coverage may be insufficient to
cover all losses that may arise.
A significant portion of our products sold in the U.S. are manufactured outside the U.S. 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. For a
more complete discussion of our risks related to trade policies, see the risk factor, “Additional tariffs or a global
trade war could increase the cost of our products, which could adversely impact the competitiveness of our
products” under “International Risks” in this Item 1A, Risk Factors section.
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Risks related to fluctuations in foreign currency rates has impacted in the past and could continue to impact our
sales, financial condition, results of operations and cash flows. Our foreign currency risk exposure is mainly
concentrated in Chinese yuan, euro, British pound sterling, Mexican peso, Japanese yen, Canadian dollar, Australian
dollar, Brazilian real, South African rand, Indian rupee and Czech koruna. 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.
There is uncertainty about the future relationship between the U.S. and various other countries, most significantly
China, with respect to trade policies and tariffs. Past U.S. administrations have called for substantial changes to U.S.
foreign trade policy with respect to China and other countries, including the possibility of imposing greater
restrictions on international trade and significant increases in tariffs on goods imported into the U.S. The current
administration could have a different approach to U.S. foreign trade policy with China as well as other countries but
there remains uncertainty.
This uncertainty about the future relationship between the U.S. and certain of its trading partners may reduce trade
between the U.S. and other nations, including countries in which we currently operate, or result in a global economic
slowdown with long-term changes to global trade. Changes in policy or continued uncertainty could depress
economic activity and restrict our access to suppliers or customers. The tariffs implemented on our products (or on
materials, parts or components we use to manufacture our products) by past U.S. administrations increased the cost
of our products manufactured in the U.S. and imported into the U.S. 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. We expect to continue to pass along some of these costs to our
customers, but the increased cost could adversely affect the demand for products. We have been successful in the
past in shifting the manufacturing locations for the impacted products, but this takes time and results in additional
one-time costs and these alternative locations may have higher ongoing manufacturing costs. 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. In addition, a significant percentage of our component parts are
manufactured in China and other southeastern Asian countries. The impact of tariffs or other geopolitical instability
may limit our access and our manufacturing partners’ access to those components which would impact production
and could lead to further increases to product costs. Additionally, further escalation of trade tensions could lead to
the possible decoupling of the U.S. and China economies. Any or all of these factors could negatively affect demand
for our products and our business, financial condition, results of operations and cash flows, and such effects could be
material.
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Our significant 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 anti-corruption laws and regulations of the U.S. government and various other
international jurisdictions, and our failure to comply with these laws 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 and
the U.K. Bribery Act. Violations of these legal requirements are punishable by significant criminal fines and
imprisonment, civil penalties, disgorgement of profits, injunctions, debarment from government contracts and other
remedial measures. We have established policies, procedures and internal controls designed to assist us and our
personnel in complying with applicable U.S. and international anti-corruption laws and regulations. However, 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 and sanctions programs 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 exemption. In addition, we are required
to comply with certain U.S. and foreign import and customs rules, sanctions and embargos such as the U.S. enacted
Uyghur Forced Labor Prevention Act (UFLPA) that became effective in 2022. Although we believe the risk of a
UFLPA enforcement action against the Company to be low at this time, we will continue to monitor the ongoing
potential impact as the Customs and Border Protection guidance will continue to evolve. 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 a 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 and
have systems in place designed to prevent compliance failures, we cannot assure you 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 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 not be successful in protecting our intellectual property and in defending against claims that we are
infringing on the intellectual property of others, and any such actions may be costly.
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.
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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. In addition, the payment of any damages or
any necessary licensing fees or indemnification costs associated with a patent infringement claim could be material
and could also materially adversely affect our cash flows and operating results. 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, harm to our reputation and/or a reduction in
our net sales.
Because of the nature of information that may pass through or be stored on certain of our solutions or networks,
we, our vendors and our end customers are subject to complex and evolving U.S. and foreign laws and
regulations regarding information privacy, data protection, cybersecurity and other related matters.
Globally, there has been an increase in laws and regulatory action concerning privacy-related matters. Generally,
these laws create rights for individuals in their personal data as well as impose obligations on businesses regarding
the handling of personal data, including data of employees, consumers and business contacts. Several U.S. states are
considering or have adopted legislation requiring companies to disclose the collection of personal data, protect the
security of personal information that they hold or respond to rights individuals' rights regarding their personal data.
For example, the California Consumer Privacy Act, which went into effect on January 1, 2020, subjects us to stricter
obligations, greater fines and more private causes of action related to data security. The California Privacy Rights
Act (CPRA), which is effective in 2023, amends and further expands the California Consumer Privacy Act.
Virginia, Connecticut, Utah and Colorado also have similar laws going into effect in 2023. Also, many jurisdictions
have enacted or are enacting laws requiring companies to notify regulators or individuals of data security incidents
involving certain types of personal data, including recently proposed rules by the Securities and Exchange
Commission in the U.S. that are expected to be adopted in 2023 that would, among other things, require public
disclosure of material security incidents. These mandatory disclosures regarding security incidents often lead to
widespread negative publicity. Any security incident, whether actual or perceived, could harm our reputation, erode
customer confidence in the effectiveness of our data security measures, negatively impact our ability to attract or
retain customers, or subject us to third-party lawsuits, regulatory fines or other action or liability, which could
materially and adversely affect our business and operating results.
Foreign data protection, privacy and other laws and regulations can be more restrictive than those in the U.S. For
example, the E.U.’s General Data Protection Regulation (GDPR), which became effective in May 2018, was
designed to harmonize data privacy laws across Europe, to protect all E.U. citizens’ data privacy, empower E.U.
citizens with respect to their personal data and to reshape the way organizations across the region approach data
privacy. Compliance with GDPR has required changes to products and service offerings, internal and external
software systems, including our websites, and changes to many company processes and policies. Failure to comply
with GDPR could cause significant penalties and loss of business. Subsequent judicial rulings in Europe about
GDPR have invalidated the E.U.-U.S. privacy shield framework, which was the mechanism relied upon by some of
our vendors for personal data transfers out of the E.U. Additionally, these rulings require companies like ours to
assess their personal data transfers from the E.U. to determine whether the protections in the U.S. or any country
without an adequacy determination meet E.U. standards in the context of the specific transfer. A European data
protection authority could disagree with our assessment of such transfers, resulting in penalties or required changes
in how we transfer data within our company.
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In addition, some countries are considering or have passed legislation requiring local storage and processing of data.
For example, Brazil and India have each adopted such laws that became effective in January 2020. These new and
proposed laws could increase the cost and complexity of offering our solutions or maintaining our business
operations in those jurisdictions. The introduction of new solutions or expansion of our activities in certain
jurisdictions may subject us to additional laws and regulations. Our channel partners and end customers also may be
subject to such laws and regulations in the use of our products and services.
These U.S. federal and state and foreign laws and regulations, which often can be enforced by private parties or
government entities, are constantly evolving. In addition, the application and interpretation of these laws and
regulations are often uncertain, may be interpreted and applied inconsistently from jurisdiction to jurisdiction and
may be contradictory with each other. For example, a government entity in one jurisdiction may demand the transfer
of information forbidden from transfer by a government entity in another jurisdiction. If our actions were determined
to be in violation of any of these disparate laws and regulations, in addition to the possibility of fines, we could be
ordered to change our data practices, which could have an adverse effect on our business and results of operations
and financial condition. There is also a risk that we, directly or as the result of a third-party service provider we use,
could be found to have failed to comply with the laws or regulations applicable in a jurisdiction regarding the
collection, handling, transfer, disposal or consent to the use of personal data, which could subject us to fines or other
sanctions, as well as adverse reputational impact.
Some states and countries are considering or have introduced laws and regulations requiring minimum or particular
security controls be incorporated into devices that connect to the internet (so called “Internet of Things Security
laws”). Where products we manufacture are considered in scope for some of these laws and regulations, compliance
obligations or customer contracts may necessitate modification of existing product features and specifications or
make inventory obsolete. Inconsistencies in these laws can introduce complexity into our design, manufacturing and
inventory management processes.
Compliance with these existing and proposed laws and regulations can be costly and require significant management
time and attention, and failure to comply can result in negative publicity and subject us to inquiries or investigations,
claims or other remedies, including fines or demands that we modify or cease existing business practices. Customers
may demand or request additional functionality in our products or services that they believe are necessary or
appropriate to comply with such laws and regulations, which can cause us to incur significant additional costs and
can delay or impede the development of new solutions. In addition, there is a risk that failures in systems designed
to protect private, personal or proprietary data held by us or our customers using our solutions will allow such data
to be disclosed to or seen by others, resulting in application of regulatory penalties, enforcement actions,
remediation obligations, private litigation by parties whose data were improperly disclosed or claims from our
customers for costs or damages they incur. There can be no assurance that the limitations of liability in our contracts
would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to
any particular claim. Our existing general liability insurance coverage and coverage for errors and omissions may
not continue to be available on acceptable terms or may not be available in sufficient amounts to cover one or more
large claims, or our insurers may deny coverage as to any future claim. The successful assertion of one or more large
claims against us that exceeds available insurance coverage, or the occurrence of changes in our insurance policies,
including premium increases or the imposition of large deductible or co-insurance requirements, could have a
material adverse effect on our business, financial condition, results of operations and cash flow.
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Compliance with current and future social and environmental laws, regulations, policies and provisions,
customer and investor pressures, other efforts to mitigate climate change 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, energy consumption, handling and
disposal of solid and hazardous waste and investigation and remediation of contaminated sites. We are also 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, there is an increasing focus on corporate social and environmental responsibility in
our industry, in which 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.
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.
Efforts to regulate emissions of greenhouse gases (GHGs), such as carbon dioxide, are continuing to evolve in the
U.S. and other countries where we operate, and this 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.
A number of governments or governmental bodies have also introduced or are contemplating regulatory changes in
response to various climate change interest groups and the potential impact of climate change, such as the proposed
reporting regulations issued by the Securities and Exchange Commission in the U.S. and final regulations issued in
the U.K. Legislation and increased regulation regarding climate change could impose significant costs on us and our
suppliers, including costs related to increased energy requirements, capital equipment, environmental monitoring
and reporting, and other costs to comply with such regulations. Any adopted future climate change regulations could
also negatively impact our ability to compete with companies situated in areas not subject to such limitations.
Additionally, some of our customers have adopted, or may adopt, procurement policies that include social and
environmental responsibility provisions or requirements with which their suppliers should comply. An increasing
number of investors are also pushing companies to disclose corporate social and environmental policies, practices
and metrics. If we are unable to comply with such policies or meet the requirements of our customers and investors,
it may impact the demand for our products, negatively impact our stock price or expose us to potential litigation.
Given the political significance around and uncertainty about how to best mitigate climate change, we cannot predict
how legislation, regulation or customer and investor expectations will affect our financial condition, operating
performance and ability to compete. Furthermore, even without such regulation, increased awareness and any
adverse publicity in the global marketplace about potential impacts on climate change by us or other companies in
our industry could harm our reputation.
40
General Risk Factors
Any future public health crisis, similar to the COVID-19 pandemic, could materially adversely affect our
business, financial condition, results of operations and cash flows.
Pandemics, such as the COVID-19 pandemic, have had and could have in the future, material and adverse effects on
our ability to successfully operate and on our financial condition, results of operations and cash flows due to the
following factors, among others:
•
•
•
•
•
•
health concerns that may lead to a complete or partial closure of, or other operational issues at, our
manufacturing facilities or those of our contract manufacturers like we experienced related to the
COVID-19 pandemic in the first quarter of 2020 with the shutdown of our factories in Suzhou, China;
the reduced economic activity may severely impact our customers’ financial condition and liquidity and
may lead to decreased demand for our products and services like we experienced in 2020 related to the
COVID-19 pandemic or impact the timing of on-going or planned projects;
difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and
instability in the global financial markets or deteriorations in credit and financing conditions may affect
our access to capital necessary to fund business operations or address existing and anticipated liabilities
on a timely basis;
a deterioration in our ability to operate in affected areas or delays in the supply of products or services to
us from vendors that are needed for our efficient operations could adversely affect our operations like
we experienced related to the COVID-19 pandemic in 2021 and 2022;
the potential outbreaks among our personnel, particularly if a significant number of them are impacted,
could result in a deterioration in our ability to ensure business continuity during a disruption; and
remote working arrangements may increase our vulnerability to cybersecurity incidents, including
breaches of information systems security, which could damage our reputation, disrupt operations and
expose us to claims from customers, suppliers, employees and others.
The extent to which any future public health crisis, such as COVID-19, impacts our operations and those of our
customers and suppliers will depend on the scope, severity, duration and spread of the health crisis, the actions taken
to contain it or mitigate its impact, and the direct and indirect economic effects of the crisis and containment
measures, among others, all of which are uncertain and cannot be predicted with confidence. Although the negative
impacts of COVID-19 have receded as we experienced recovery in demand for our products in 2022, the pandemic
continues to present future uncertainty and risks both domestically and internationally related to indirect
consequences such as inflation, rising interest rates, shortages in materials and components and increased logistics
costs. Any continued global supply chain and economic disruption could impact the timing and amount of capital
spending by our customers, affect our ability to deliver products in a timely manner and negatively impact our
business, financial condition, results of operations, cash flows and access to sources of liquidity.
41
Our stock price has been volatile and may continue to fluctuate significantly.
Stock price volatility may make it more difficult for you to resell your common stock when desired. Our common
stock price may fluctuate significantly due to a variety of factors that include the following:
•
•
•
•
•
•
•
•
•
•
actual or expected variations in quarterly results of operations;
recommendations by securities analysts;
operating and stock price performance of comparable companies, as deemed by investors;
news reports relating to trends, concerns and other issues in our industry;
perceptions in the marketplace about our company or competitors;
new technology used, or services offered, by competitors;
significant acquisitions or business combinations, strategic partnerships, joint ventures or capital
commitments by, or involving, our Company or competitors;
failure to integrate acquisitions or realize expected benefits from acquisitions;
changes in government regulations; and
general economic conditions and events, such as economic slowdowns, recessions, interest rate changes
or credit loss trends.
In recent years, the stock market, in general, has experienced significant price and volume fluctuations that have
often been unrelated or disproportionate to the operating performance of those companies. Broad market and
industry factors may affect the market price of our common stock, regardless of our actual operating performance. A
low or declining stock price may make us attractive to hedge funds or other short-term investors which could result
in substantial stock price volatility and cause fluctuations in trading volumes for our stock. As a result of this
volatility, you may not be able to sell your common stock at or above the price paid for the shares.
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 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 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, including the implementation of any global minimum tax for
corporations. A significant increase in our quarterly or annual effective income tax rate could have a material
adverse impact on our results of operations. The enactment of tax reform legislation, including legislation
implementing changes in taxation of international business activities, could adversely impact our financial position
and 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.
42
The full realization of our deferred tax assets may be affected by a number of factors, including future earnings and
the feasibility of on-going planning strategies. We have deferred tax assets including state and foreign net operating
loss carryforwards, accruals not yet deductible for tax purposes, employee benefit items and other items. We have
established valuation allowances to reduce the deferred tax assets to an amount that is more likely than not to be
realized. Our ability to utilize the deferred tax assets depends in part upon our ability to generate future taxable
income within each respective jurisdiction during the periods in which these temporary differences reverse or our
ability to carryback any losses created by the deduction of these temporary differences. We expect to realize the
deferred tax assets over an extended period. If we are unable to generate sufficient future taxable income in the U.S.
and/or certain foreign jurisdictions, or if there is a significant change in the time period within which the underlying
temporary differences become taxable or deductible, we could be required to increase our valuation allowances
against our deferred tax assets. Our effective tax rate would increase if we were required to increase our valuation
allowances against our deferred tax assets which would negatively impact our results of operations.
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 reduce our debt and fund our growth. 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:
•
•
•
•
•
•
•
•
•
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;
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;
until the 2023 annual meeting of stockholders, 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;
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.
43
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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
44
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, 2022, our principal facilities, grouped according to
the facility’s primary use, were as follows:
Approximate
square feet
Principal segments
Owned or leased
Location
Administrative facilities:
Hickory, NC (1)
Horsham, PA
Suwanee, GA
Richardson, TX (1)
Shakopee, MN
Bangalore, India
Lowell, MA
Santa Clara, CA
Manufacturing and distribution facilities:
Catawba, NC (1)
Claremont, NC (1)
Kessel-Lo, Belgium (2)
Suzhou, China (3)
Suzhou, China (3)
Goa, India (3)
Santa Teresa, NM
Juarez, Mexico
Brno, Czech Republic
Reynosa, Mexico
Suzhou, China
Veenendaal, Netherlands
Juarez, Mexico
Cary, NC
Mission, TX
Delicias, Mexico
Bray, Ireland
Tijuana, Mexico
Buchdorf, Germany
Vacant facilities and properties:
Sorocaba, Brazil (4)
Richardson, TX (5)
Orland Park, IL (6)
Corporate headquarters
84,000
Corporate
325,000
Corporate
103,000
Corporate
100,000
CCS
177,000
151,000 Home & CCS
144,000
132,000 ANS
CCS, ANS & NICS
CCS
1,000,000
CCS
589,000
431,000
CCS
400,000 OWN & NICS
CCS
363,000
353,000 OWN & NICS
333,800 Global Logistics
327,000 NICS
CCS
281,000
CCS
279,000
225,000
CCS, NICS & OWN
215,000 OWN & NICS
189,000
CCS
151,000 Global Logistics
150,000 Global Logistics
139,000
CCS
130,000 NICS
128,000 ANS
109,000 NICS
157,000 OWN
100,000 OWN
— Corporate
Owned
Owned
Leased
Owned
Leased
Leased
Leased
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Leased
Owned
Leased
Leased
Leased
Owned
Leased
Owned
Owned
Leased
Owned
Owned
Leased
Owned
(1)
(2)
(3)
(4)
(5)
(6)
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 7 in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K).
The Kessel-Lo, Belgium facility is currently being marketed for sale.
The buildings in these facilities are owned while the land is held under long-term lease agreements.
The Sorocaba, Brazil facility is not currently being marketed for sale.
The Richardson, TX facility is vacant and is currently being marketed for sublease.
The building at the Orland Park, IL facility was demolished and cleared. The 73-acre parcel is vacant and currently being
negotiated for sale.
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.
45
ITEM 3. LEGAL PROCEEDINGS
The Company is party to certain intellectual property claims and also periodically receives notices asserting that its
products infringe on another party’s patents and other intellectual property rights. These claims and assertions,
whether against the Company directly or against its customers, could require the Company to pay damages,
royalties, stop offering the relevant products and/or cease other activities. The Company may also be called upon to
indemnify certain customers for costs related to products sold to such customers. The outcome of these claims and
notices is uncertain and a reasonable estimate of the loss from unfavorable outcomes in certain of these matters
either cannot be determined or is estimated at the minimum amount of a range of estimates. The actual loss, through
settlement or trial, could be material and may vary significantly from our estimates. From time to time, the Company
may also be involved as a plaintiff involving intellectual property claims. Gain contingencies, if any, are recognized
when they are realized.
The Company is also either a plaintiff or a defendant in certain other pending legal matters in the normal course of
business. Management believes none of these pending legal matters will have a material adverse effect on the
Company’s business or financial condition upon final disposition.
In addition, the Company is subject to various federal, state, local and foreign laws and regulations governing the
use, discharge, disposal and remediation of hazardous materials. Compliance with current laws and regulations has
not had, and is not expected to have, a materially adverse effect on the Company’s financial condition or results of
operations.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
46
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information and Holders
Our common stock is traded on the Nasdaq Global Select Market under the symbol COMM. As of February 10,
2023, 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 following table summarizes the stock purchase activity for the three months ended December 31, 2022:
Period
October 1, 2022 - October 31, 2022
November 1, 2022 - November 30, 2022
December 1, 2022 - December 31, 2022
Total
Total Number
of Shares
Purchased (1)
67,086
1,967
12,080
81,133
Average
Price
Paid
Per
Share
$ 9.21
$ 13.07
$ 8.76
$ 9.24
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
— $
— $
— $
—
—
—
—
(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.
47
Stock Performance Graph
The following graph compares cumulative total return on $100 invested on December 31, 2017 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 on its
common stock over this period.
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:85)(cid:76)(cid:86)(cid:82)(cid:81) (cid:82)(cid:73) (cid:38)(cid:88)(cid:80)(cid:88)(cid:79)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72) (cid:41)(cid:76)(cid:89)(cid:72) (cid:60)(cid:72)(cid:68)(cid:85) (cid:55)(cid:82)(cid:87)(cid:68)(cid:79) (cid:53)(cid:72)(cid:87)(cid:88)(cid:85)(cid:81)
(cid:7)(cid:21)(cid:24)(cid:19)
(cid:7)(cid:21)(cid:19)(cid:19)
(cid:7)(cid:20)(cid:24)(cid:19)
(cid:7)(cid:20)(cid:19)(cid:19)
(cid:7)(cid:24)(cid:19)
(cid:7)(cid:19)
(cid:20)(cid:21)(cid:18)(cid:22)(cid:20)(cid:18)(cid:20)(cid:26)
(cid:20)(cid:21)(cid:18)(cid:22)(cid:20)(cid:18)(cid:20)(cid:27)
(cid:20)(cid:21)(cid:18)(cid:22)(cid:20)(cid:18)(cid:20)(cid:28)
(cid:20)(cid:21)(cid:18)(cid:22)(cid:20)(cid:18)(cid:21)(cid:19)
(cid:20)(cid:21)(cid:18)(cid:22)(cid:20)(cid:18)(cid:21)(cid:20)
(cid:20)(cid:21)(cid:18)(cid:22)(cid:20)(cid:18)(cid:21)(cid:21)
(cid:38)(cid:82)(cid:80)(cid:80)(cid:54)(cid:70)(cid:82)(cid:83)(cid:72) (cid:43)(cid:82)(cid:79)(cid:71)(cid:76)(cid:81)(cid:74) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:15) (cid:44)(cid:81)(cid:70)(cid:17)
(cid:54)(cid:9)(cid:51) (cid:24)(cid:19)(cid:19) (cid:44)(cid:81)(cid:71)(cid:72)(cid:91)
(cid:54)(cid:9)(cid:51) (cid:20)(cid:24)(cid:19)(cid:19) (cid:38)(cid:82)(cid:80)(cid:80)(cid:88)(cid:81)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:40)(cid:84)(cid:88)(cid:76)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87) (cid:44)(cid:81)(cid:71)(cid:72)(cid:91)
Company / Index
CommScope Holding Company, Inc.
S&P 500 Index
S&P 1500 Communications Equipment
Index
ITEM 6. RESERVED
Base
Period
12/31/2017
100
100
12/31/2018
43.33
95.62
INDEXED RETURNS
Period Ending
12/31/2020
35.42
148.85
12/31/2019
37.51
125.72
12/31/2021
29.18
191.58
12/31/2022
19.43
156.88
100
112.57
128.50
129.80
193.14
153.61
48
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 is for the year ended
December 31, 2022 compared with the year ended December 31, 2021. This comparison 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. For a discussion and analysis of our financial condition and
results of operations for the year ended December 31, 2021 compared to December 31, 2020, see Part II, Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2021
Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 17, 2022.
OVERVIEW
We are a global provider of infrastructure solutions for communication, data center and entertainment networks. Our
solutions for wired and wireless networks enable service providers, including cable, telephone and digital broadcast
satellite operators and media programmers, to deliver media, voice, Internet Protocol (IP) data services and Wi-Fi to
their subscribers and allow enterprises to experience constant wireless and wired connectivity across complex and
varied networking environments. Our solutions are complemented by services including technical support, systems
design and integration. We are a leader in digital video and IP Television distribution systems, broadband access
infrastructure platforms and equipment that delivers data and voice networks to homes. 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.
In 2021, we announced a transformation initiative referred to as CommScope NEXT designed to drive shareholder
value through three pillars: profitable growth, operational efficiency and portfolio optimization. We believe these
efforts are critical to making us more competitive and allowing us to invest in growth, de-leverage and maximize
stockholder and other stakeholder value. We have incurred $62.9 million and $91.9 million of restructuring costs
and $38.2 million and $90.3 million of transaction, transformation and integration costs during the years ended
December 31, 2022 and 2021, respectively, primarily related to CommScope NEXT. We expect to continue to incur
restructuring costs and transaction, transformation and integration costs related to CommScope NEXT in 2023 and
such costs could be material.
As a step to optimize our portfolio through CommScope NEXT, as of January 1, 2022, we reorganized our internal
management and reporting structure to align our portfolio of products and solutions more closely with the markets
we serve and provide better performance comparability with our competitive peer set across our businesses. The
reorganization changed the information regularly reviewed by our chief operating decision maker for purposes of
allocating resources and assessing performance. As a result, we are now reporting financial performance based on
the following operating segments: Connectivity and Cable Solutions (CCS), Outdoor Wireless Networks (OWN),
Networking, Intelligent Cellular and Security Solutions (NICS), Access Network Solutions (ANS) and Home
Networks (Home). Prior to this change, we operated and reported four operating segments: Broadband Networks,
Outdoor Wireless Networks, Venue and Campus Networks and Home Networks. The Home segment was
unchanged in this realignment. All prior period amounts have been recast to reflect these operating segment
changes.
Also as a step in our CommScope NEXT transformation plan, in 2021, we announced a plan to separate the Home
Networks business. Due to the impact of the uncertain supply chain environment, capital spending patterns of
customers and other macroeconomic factors related to the Home Networks business, we have delayed our separation
plan, but we continue to analyze the financial results of our "Core" business separately from Home. As such, below
we refer to certain supplementary Core financial measures, which reflect the results of our CCS, OWN, NICS and
ANS segments in the aggregate. See the Segment Results section below for the aggregation of our Core financial
measures.
49
Impacts of Supply Chain Constraints and Inflation
As in many industries, we have seen the negative impacts of COVID-19 recede and a recovery in demand for our
products over the past year, but this has created negative indirect consequences such as inflation, shortages in
materials and components and increased logistics costs. Prices for certain commodities and other raw materials that
we use have experienced significant volatility as a result of changes in the levels of global demand, supply
disruptions, including port, transportation and distribution delays or interruptions, and other factors. As a result, we
have seen a significant increase in costs that has negatively impacted our results of operations. We are also
experiencing limited supply of memory devices, capacitors and silicon chips, which has increased our costs and has
impacted our ability to deliver products on a timely basis due to extended lead times. We have mitigated some of our
increased component and logistics costs by implementing higher prices on our products and services. We are also
mitigating certain shortages by purchasing components in advance and maintaining higher levels of inventory,
finding alternate vendors for some components or in certain cases, product redesign.
We believe the global supply chain challenges and their adverse impact on our business and financial results will
continue to improve in 2023 but certain shortages could continue throughout 2023. We also believe certain
macroeconomic pressures in the U.S. and the global economy, such as rising interest rates and energy prices as well
as customer concern about an economic slow-down, could impact the timing and amount of capital spending by our
customers in 2023, which could negatively impact our results of operations.
For more discussion, see Part I, Item 1A, "Risk Factors" elsewhere in this Annual Report on Form 10-K.
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 Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a
description of all our significant accounting policies.
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 exist that indicate the carrying value may no longer be recoverable. We compare the
fair value of our reporting units with the carrying amount, including goodwill. We recognize an impairment charge
for the amount by which the reporting unit’s carrying amount exceeds its fair value.
50
We estimate the fair value of a reporting unit using a discounted cash flow (DCF) method or, as appropriate, a
combination of the DCF method and a market approach known as the guideline public company method. Under the
DCF method, we calculate the fair value of a reporting unit based on the present value of estimated future cash
flows. The significant assumptions in the DCF model primarily include, but are not limited to, forecasts of annual
revenue growth rates, annual operating income margin, the terminal growth rate and the discount rate used to
determine the present value of the cash flow projections. When determining these assumptions and preparing these
estimates, we consider 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 and is commensurate with the risk and uncertainty inherent in each
reporting unit and in internally developed forecasts. Under the guideline public company method, we estimate the
fair value based upon market multiples of revenue and earnings derived from publicly-traded companies with similar
operating and investment characteristics as the reporting unit. The weighting of the fair value derived from the
market approach may vary depending on the level of comparability of these publicly-traded companies to the
reporting unit. When comparable public companies are not meaningful or not available, we may estimate the fair
value of a reporting unit using only the DCF method.
Estimating the fair value of a reporting unit involves uncertainties because it requires management to develop
numerous assumptions, including assumptions about the future growth and potential volatility in revenues and costs,
capital expenditures, industry economic factors and future business strategy. 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 our strategy, changes in technology or other factors could negatively affect the
fair value in one or more of our reporting units and result in a material impairment charge in the future.
To assess the reasonableness of the calculated fair values of our reporting units, we also compare the sum of the
reporting units’ fair values to our market capitalization and calculate an implied control premium (the excess of the
sum of the reporting units’ fair values over the market capitalization). If the implied control premium is not
reasonable, we will reevaluate the fair value estimates of the reporting units by adjusting the discount rates and/or
other assumptions.
2022 Interim and Annual Goodwill Analysis
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. We assessed goodwill for impairment due
to a change in the composition of certain reporting units resulting from the new segment structure as of January 1,
2022. We performed impairment testing immediately before and after the change and determined that no goodwill
impairment existed.
The annual test of goodwill impairment was performed for each of the reporting units with goodwill balances as of
October 1, 2022. For the 2022 annual goodwill test, we determined the fair value of each reporting unit using a DCF
model and a guideline public company approach, with 75% of the value determined using the DCF model and 25%
of the value determined using the market approach. The range of discount rates used in our annual tests were 10.0%
to 12.0% for 2022. During the annual impairment test performed in the fourth quarter of 2022 and in conjunction
with the development of our 2023 and long-range plans, we identified changes in our ANS reporting unit's expected
future cash flows due to various market trends expected to affect the business, including technology shifts affecting
hardware sales, trends affecting bandwidth growth and other operational challenges, as well as an increase in the
cost of capital. As a result, we determined the goodwill balance in the ANS reporting unit was partially impaired and
recorded a $1,119.6 million impairment charge. The ANS reporting unit has remaining goodwill allocated of $734.0
million as of October 1, 2022. The ANS reporting unit is the same as our ANS reportable segment.
51
As discussed, our ANS reporting unit failed the annual goodwill impairment test and a partial impairment was
recorded as of October 1, 2022. Also, the amount by which our Building and Data Center Connectivity (BDCC)
reporting unit's fair value exceeded its carrying value was lower year over year. The BDCC reporting unit is in our
CCS reportable segment. Considering the headroom going forward for each of the ANS and BDCC reporting units,
there is a risk for future impairment in the event of declines in general economic, market or business conditions or
any significant unfavorable change in the forecasted cash flows, weighted average cost of capital or growth rates. If
current and long-term projections for our ANS and BDCC reporting units are not realized or decrease materially, we
may be required to recognize additional goodwill impairment charges and these charges could be material to our
results of operations.
The following table provides summary information regarding our reporting units with goodwill balances as of
December 31, 2022 that have the lowest level of headroom. The table presents key assumptions used in our annual
goodwill analysis, along with sensitivity analysis showing the effect of a change in certain key assumptions,
assuming all other assumptions remain constant, to the resulting fair value using an income approach.
Key Assumptions
Goodwill
Excess (Deficit) of Fair Value to Carrying Value
Reporting
Unit
Discount
Rate
Terminal
Growth
Rate
Balance at
December 31,
2022
% of
Total
Assets
Result of Annual
Goodwill Test as
of October 1,
2022
Decrease of
10% in Cash
Flows
ANS
BDCC
10.0%
11.5%
1.0% $
1.5%
734.0
975.9
6.3% $
8.4%
(1,119.6)
290.4
$
(1,265.5)
161.5
Decrease of
0.5% in
Long-term
Growth Rate
(1,165.8)
$
258.5
Increase of
0.5% in
Discount
Rate
(1,196.6)
231.3
$
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. We performed a recoverability test for our ANS reporting unit because of
the goodwill impairment recognized in the fourth quarter of 2022. Our Home Networks reporting unit also had an
indicator of impairment as its carrying amount exceeded its estimated fair value. We did not identify any
impairments of definite-lived intangible assets as a result of these tests. Changes in the estimates of forecasted net
cash flows or changes in classification from held for use may result in future asset impairments that could be
material to our results of operations. We impaired certain other long-lived assets as a result of restructuring actions
in 2022.
Revenue Recognition
We recognize revenue based on the satisfaction of distinct obligations to transfer goods and services to customers.
Our revenue is generated primarily from product or equipment sales. We also generate revenue from custom design
and installation services as well as bundled sales arrangements that include product, software and services. We apply
a five-step approach as defined in ASC 606, Revenue from Contracts with Customers, in determining the amount
and timing of revenue to be recognized: (1) identify the contract with a customer; (2) identify the performance
obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance
obligations in the contract; and (5) recognize revenue when a corresponding performance obligation is satisfied.
Most contracts with customers are to provide distinct products or services within a single contract. However, if a
contract is separated into more than one performance obligation, the total transaction price is allocated to each
performance obligation in an amount based on the estimated relative standalone selling price.
Product sales, to end-customers or distributors, represent over 90% of our revenue and are recognized at a point-in-
time, which is generally at the point in time when products have been shipped, right to payment has been obtained
and risk of loss has been transferred. Certain of our product performance obligations include proprietary operating
system software, which typically is not considered separately identifiable. Therefore, sales of these products and the
related software are considered one performance obligation.
52
License contracts include revenue recognized for the licensing of intellectual property, including software, sold
separately without products. Functional intellectual property licenses do not meet the criteria for revenue to be
recognized over time and revenue is most commonly recognized upon delivery of the license/software to the
customer.
The Company has service arrangements where net sales are recognized over time. These arrangements include a
variety of post-contract support service offerings, which are generally recognized over time as the services are
provided, including the following: maintenance and support services provided under annual service-level
agreements; “Day 2” professional services to help customers maximize their utilization of deployed systems; and
installation services related to the routine installation of equipment ordered by the customer at the customer’s site.
Revenue is measured based on the consideration to which we expect to be entitled based on customer contracts.
Sales are adjusted for variable consideration amounts, including but not limited to estimated discounts, rebates,
distributor price protection programs and returns. 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. Variable
consideration is primarily related to sales to our distributors, system integrators and value-added resellers.
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.
Unbilled receivables are recorded when revenues are recognized in advance of invoice issuance. These assets are
presented on a combined basis with accounts receivable and are converted to accounts receivable once our right to
the consideration becomes unconditional, which varies by contract but is generally based on achieving certain
acceptance milestones. We recognize 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.
We include shipping and handling costs billed to customers in net sales and include the costs incurred to transport
product to customers as well as certain internal handling costs, which relate to activities to prepare goods for
shipment, 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.
Contingencies and Litigation
We are a party to lawsuits, claims and proceedings incident to the operation of our business, including intellectual
property infringement matters, those pertaining to labor and employment contracts and other matters, some of which
allege substantial monetary damages. We assess these matters in order to determine if a contingent liability should
be recorded. In making this determination, management may, depending on the nature of the matter, consult with
internal and external legal counsel and technical experts. We expense legal fees associated with consultations and
defense of lawsuits as incurred. We accrue for loss contingencies when losses become probable and are reasonably
estimable. If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, the
minimum amount of the range is recorded as a liability. Gain contingencies are recognized when they are realized.
Litigation outcomes are difficult to predict and are often resolved over long periods of time, making our estimates
highly judgmental. Estimating probable losses requires the analysis of multiple possible outcomes that often depend
on judgments about potential actions by third parties, such as future changes in facts and circumstances, differing
interpretations of the law, assessments of the amount of damages and other factors beyond our control. There is the
potential for a material adverse effect on our results of operation and cash flows if one or more matters are resolved
in a particular period in an amount materially in excess of what we anticipated. Alternatively, if the judgments and
estimates made by management are incorrect and a particular contingent loss does not occur, the contingent loss
recorded would be reversed, thereby favorably impacting our results of operations.
53
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 our results of operations.
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 various periods, depending upon the product subject to the warranty and the terms of the individual
agreements. 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, and may be material to our results of
operations.
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 our net loss.
54
Comparison of results of operations for the year ended December 31, 2022 with the year ended December 31,
2021
RESULTS OF OPERATIONS
Year Ended December 31,
2022
2021
Amount
% of Net
Sales
Amount
% of Net
Sales
$
Change
%
Change
(dollars in millions, except per share amounts)
Net sales
Core net sales (1)
Gross profit
Operating income (loss)
Core operating income (loss) (1)
Non-GAAP adjusted EBITDA (2)
Core adjusted EBITDA (1)
Net loss
Diluted loss per share
$ 9,228.1
7,524.7
2,804.1
(713.8)
(573.6)
1,276.7
1,250.4
(1,286.9)
(6.49)
$
100.0% $ 8,586.7
6,737.4
81.5
2,684.3
30.4
(7.7)
48.6
263.5
(7.6)
1,117.0
13.8
1,091.5
16.6
(462.6)
(13.9)
(2.55)
$
100.0% $ 641.4
787.3
78.5
119.8
31.3
(762.4)
0.6
(837.1)
3.9
159.7
13.0
158.9
16.2
(824.3)
(5.4)
(3.94)
$
7.5%
11.7
4.5
(1,568.7)
(317.7)
14.3
14.6
178.2
154.1
(1) Core financial measures reflect the results of our CCS, OWN, NICS and ANS segments, in the aggregate, and
exclude the results of our Home segment. See the Segment Results section below for illustration of the
aggregation of our Core financial measures.
(2)
See "Reconciliation of Non-GAAP Measures" in this Management’s Discussion and Analysis of Financial
Condition and Results of Operations, below.
Net sales
Net sales
Domestic
International
Year Ended December 31,
2022
2021
$
Change
%
Change
$
$
9,228.1
5,750.5
3,477.6
(dollars in millions)
8,586.7
4,960.5
3,626.2
$
641.4
790.0
(148.6)
7.5%
15.9
(4.1)
Net sales in 2022 increased $641.4 million, or 7.5%, compared to the prior year driven by higher pricing. Core net
sales in 2022 increased $787.3 million, or 11.7%, compared to the prior year with increases in the CCS segment of
$735.8 million, the NICS segment of $77.8 million and the OWN segment of $50.8 million, partially offset by a
decrease of $77.1 million in the ANS segment. Net sales in 2022 in the Home segment decreased $145.9 million
compared to the prior year. During 2022, we continued to experience supply shortages and extended lead times for
certain materials that negatively affected our ability to meet customer demand for certain of our products. We expect
these shortages and delays to improve for some components, but we expect to continue to experience shortages and
delays for others into 2023. For further details by segment, see the discussion of Segment Results below.
From a regional perspective in 2022, net sales increased in the U.S. by $790.0 million and Canada by $94.4 million,
but these increases were partially offset by decreases in the Asia Pacific (APAC) region of $114.1 million, the
Caribbean and Latin American (CALA) region of $103.3 million and the Europe, Middle East and Africa (EMEA)
region of $25.6 million. Net sales to customers located outside of the U.S. comprised 38% of total net sales for 2022
compared to 42% for 2021. Foreign exchange rate changes impacted net sales unfavorably by approximately 2% for
2022 compared to the prior year. For additional information on regional sales by segment, see discussion of Segment
Results below and Note 16 in the Notes to Consolidated Financial Statements included elsewhere in this Annual
Report on Form 10-K.
55
Gross profit, SG&A expense and R&D expense
Gross profit
As a percent of sales
SG&A expense
As a percent of sales
R&D expense
As a percent of sales
Year Ended December 31,
2021
2022
$
Change
%
Change
$
2,804.1
$
(dollars in millions)
2,684.3
$
30.4%
1,135.0
12.3%
657.4
7.1%
31.3%
1,233.9
14.4%
683.2
8.0%
119.8
(98.9)
(25.8)
4.5%
(8.0)
(3.8)
Gross profit (net sales less cost of sales)
Gross profit increased in 2022 compared to the prior year primarily due to higher net sales, partially offset by higher
material and freight costs and unfavorable product mix.
Selling, general and administrative expense
For 2022, selling, general and administrative (SG&A) expense decreased by $98.9 million compared to 2021,
primarily due to a decrease in transaction, transformation, and integration costs of $52.1 million and cost savings
initiatives. We expect to continue to incur transaction, transformation and integration costs related to CommScope
NEXT in 2023 and such costs could be material. Also included in 2022 SG&A expense is $20.9 million of bad debt
expense related to deterioration in the credit profile of a certain distributor in the OWN segment; and similarly, in
2021, we recorded bad debt expense of $30.3 million related to the credit deterioration of a specific Home segment
value added reseller.
Research and development expense
Research and development (R&D) expense for 2022 decreased primarily due to lower spending on ANS segment
products of $27.3 million. Spending on OWN and Home segment products also declined but was offset by higher
spending on CCS and NICS segment products. 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, net and Asset impairments
Year Ended December 31,
2022
2021
$
Change
%
Change
Amortization of purchased intangible assets
Restructuring costs, net
Asset impairments
$
$
543.0
62.9
1,119.6
Amortization of purchased intangible assets
$
(dollars in millions)
613.0
91.9
13.7
(70.0)
(29.0)
1,105.9
(11.4)%
(31.6)
8,072.3
The amortization of purchased intangible assets was lower in 2022 compared to the prior year because certain of our
intangible assets became fully amortized.
Restructuring costs, net
The net restructuring costs recorded in 2022 included $59.3 million related to CommScope NEXT. From a cash
perspective, we paid $49.4 million to settle CommScope NEXT restructuring liabilities during 2022 and expect to
pay an additional $58.2 million in 2023 and $0.5 million in 2024 related to restructuring actions that have been
initiated. The net restructuring costs recorded in 2021 included $90.7 million related to CommScope NEXT.
Additional restructuring actions related to CommScope NEXT are expected to be identified and the resulting
charges and cash requirements could be material.
56
Asset impairments
We recorded goodwill impairment charges of $1,119.6 million in 2022 related to our ANS reporting unit which is
the same as our ANS segment. See the discussion above under “Critical Accounting Policies” for more information
regarding the annual goodwill impairment test performed during 2022. We recorded goodwill impairment charges of
$13.7 million during 2021 related to our Home Networks reporting unit within our Home segment.
Other expense, net
Foreign currency loss
Other income (expense), net
NM - Not meaningful
Foreign currency loss
Year Ended December 31,
2022
2021
$
Change
%
Change
(dollars in millions)
$
$
(4.1)
4.0
(4.4)
(19.4)
$
0.3
23.4
(6.8)%
NM
Foreign currency loss includes the net foreign currency gains and losses resulting from the settlement of receivables
and payables, foreign currency contracts and short-term intercompany advances in a currency other than the
subsidiary’s functional currency. The change in foreign currency loss in 2022 compared to 2021 was not significant.
Other income (expense), net
The change in other income (expense), net in 2022 compared to 2021 was primarily due to a redemption fee paid in
2021 of $34.4 million related to the refinancing of our 5.50% senior secured notes due March 2024 (2024 Secured
Notes). The remaining change is due to changes in income derived from equity method investments and other
miscellaneous investments.
Interest expense, Interest income and Income taxes
Interest expense
Interest income
Income tax benefit
Interest expense and Interest income
Year Ended December 31,
2021
2022
$
Change
%
Change
$
(588.9) $
2.8
13.1
(dollars in millions)
(561.2) $
1.9
71.9
(27.7)
0.9
(58.8)
4.9%
47.4
(81.8)
Interest expense increased in 2022 compared to 2021. The increase was driven by higher interest expense related to
our senior secured term loan due 2026 (2026 Term Loan) due to the increased variable interest rate compared to
2021. This increase was partially offset by lower interest on our fixed rate debt due to the refinancing of our 2024
Secured Notes in 2021. We expect our interest expense will increase in 2023 as a result of the Federal Reserve's
increase in interest rates in 2022 and the expectation that they will continue to raise interest rates into 2023. Our
weighted average effective interest rate on outstanding borrowings, including the impact of the interest rate swap
and the amortization of debt issuance costs and original issue discount, was 6.91% at December 31, 2022 and 5.74%
at December 31, 2021.
Income tax benefit
For 2022, we recognized an income tax benefit of $13.1 million on a pretax loss of $1,300.0 million. Our tax benefit
was less than the statutory rate of 21.0% in 2022 primarily due to a goodwill impairment charge of $1,119.6 million,
for which minimal tax benefits were recorded. Our tax benefit was also impacted by the unfavorable impacts of U.S.
anti-deferral provisions and non-creditable withholding taxes, partially offset by tax benefit related to federal tax
credits. See Note 12 in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on
Form 10-K for more discussion of our income tax benefit.
57
For 2021, our effective tax rate was 13.5% and we recognized an income tax benefit of $71.9 million on a pretax
loss of $534.5 million. Our tax benefit was less than the statutory rate primarily due to the impact of $37.4 million of
tax expense related to a foreign tax rate change.
Segment Results
Net sales by segment:
CCS
OWN
NICS
ANS
Core net sales (1)
Home
Consolidated net sales
Operating income (loss)
by segment:
CCS
OWN
NICS
ANS
Core operating income
(loss) (1)
Home
Consolidated operating
income (loss)
Adjusted EBITDA by
segment:
CCS
OWN
NICS
ANS
Core adjusted EBITDA (1)
Home
Non-GAAP consolidated
adjusted EBITDA (2)
NM - Not meaningful
$
$
$
Year Ended December 31,
2022
Amount
% of Net
Sales
2021
Amount
% of Net
Sales
(dollars in millions)
$
Change
%
Change
3,789.6
1,467.9
939.7
1,327.5
7,524.7
1,703.4
9,228.1
41.1 % $ 3,053.8
1,417.1
15.9
861.9
10.2
1,404.6
14.4
6,737.4
81.5
18.5
1,849.3
100.0 % $ 8,586.7
35.6 % $
16.5
10.0
16.4
78.5
21.5
100.0 % $
735.8
50.8
77.8
(77.1)
787.3
(145.9)
641.4
24.1 %
3.6
9.0
(5.5)
11.7
(7.9)
7.5 %
438.2
189.0
(51.2)
(1,149.6)
11.6 % $
12.9
(5.4)
(86.6)
138.5
197.3
(143.5)
71.2
4.5 % $
13.9
(16.6)
5.1
299.7
(8.3)
92.3
(1,220.8)
216.4 %
(4.2)
(64.3)
(1,714.6)
(573.6)
(140.2)
(7.6)
(8.2)
263.5
(214.9)
3.9
(11.6)
(837.1)
74.7
(317.7)
(34.8)
$
(713.8)
(7.7) % $
48.6
0.6 % $
(762.4)
(1,568.7) %
$
643.6
269.7
51.9
285.2
1,250.4
26.3
17.0 % $
18.4
5.5
21.5
16.6
1.5
448.9
266.8
(15.3)
391.1
1,091.5
25.5
14.7 % $
18.8
(1.8)
27.8
16.2
1.4
194.7
2.9
67.2
(105.9)
158.9
0.8
43.4 %
1.1
NM
(27.1)
14.6
3.1
$
1,276.7
13.8 % $ 1,117.0
13.0 % $
159.7
14.3 %
(1) Core financial measures reflect the results of our CCS, OWN, NICS and ANS segments, in the aggregate, and
exclude the results of our Home segment.
(2)
See “Reconciliation of Non-GAAP Measures” within this Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
58
Connectivity and Cable Solutions Segment
Net sales for the CCS segment increased in 2022 compared to the prior year primarily due to increased demand for
our products and services as service providers continued to enhance their networks to keep pace with increasing
broadband demand. We were able to meet this increased demand with the additional production enabled by our
capacity expansion. CCS segment net sales also significantly benefitted from pricing increases. The supply
shortages with certain of our network cable products experienced during the first half of the year eased in the second
half and are expected to continue to improve into 2023. From a regional perspective in 2022, net sales increased in
the U.S. by $690.0 million, the EMEA region by $23.9 million, Canada by $20.1 million and the CALA region by
$10.2 million but decreased in the APAC region by $8.4 million compared to the prior year. Foreign exchange rate
changes impacted CCS segment net sales unfavorably by approximately 2% during 2022.
For 2022, CCS segment operating income and adjusted EBITDA both benefitted from pricing increases, higher sales
volumes and operational efficiencies compared to the prior year. These benefits were partially offset by higher
material costs, unfavorable product mix, increases in SG&A costs, higher freight costs and increases in R&D costs.
In 2022, CCS segment operating income was favorably impacted by reductions of $57.2 million in amortization
expense, $44.9 million in restructuring expense and $7.9 million in transaction, transformation and integration costs
but was unfavorably impacted by a $2.7 million net charge to establish an allowance against certain accounts
receivable determined to be uncollectible as a result of the Russia/Ukraine conflict. Amortization expense,
restructuring expense, transaction, transformation and integration costs and the charge related to certain
uncollectible accounts receivable resulting from the Russia/Ukraine conflict are not reflected in adjusted EBITDA.
See “Reconciliation of Segment Adjusted EBITDA” within this Management’s Discussion and Analysis of
Financial Condition and Results of Operations, below.
Outdoor Wireless Networks Segment
For 2022, OWN segment net sales increased compared to the prior year primarily due to favorable pricing impacts.
From a regional perspective in 2022, OWN segment net sales increased in the U.S. by $168.3 million but decreased
in the EMEA region by $54.4 million, the APAC region by $29.9 million, Canada by $21.4 million and the CALA
region by $11.8 million. Foreign exchange rate changes impacted OWN segment net sales unfavorably by
approximately 2% during 2022.
For 2022, OWN segment operating income decreased and adjusted EBITDA increased compared to the prior year.
Both operating income and adjusted EBITDA benefitted from favorable pricing impacts, favorable product mix and
benefits from decreases in selling and marketing and R&D costs, but these were partially offset by higher material
and freight costs and higher bad debt expense, driven by a $20.9 million reserve related to a distribution customer.
In addition, OWN segment operating income for 2022 was unfavorably impacted by an increase of $18.8 million in
restructuring expense which is not reflected in adjusted EBITDA. See “Reconciliation of Segment Adjusted
EBITDA” within this Management’s Discussion and Analysis of Financial Condition and Results of Operations,
below.
Networking, Intelligent Cellular and Security Solutions Segment
Net sales increased in 2022 compared to the prior year primarily due to the impacts of favorable pricing and to a
lesser extent increases in sales volumes particularly in the second half of the year. We experienced material
shortages related to our Ruckus products during the first half of 2022 which negatively impacted our sales volumes
for the year. We saw some improvement in material shortages in the second half of 2022, but we expect certain
shortages to continue into 2023. From a regional perspective in 2022, net sales increased in the U.S. by $49.1
million, the EMEA region by $12.5 million, the APAC region by $11.6 million, Canada by $2.6 million and the
CALA region by $2.0 million compared to the prior year. Foreign exchange rate changes impacted NICS segment
net sales unfavorably by approximately 2% during 2022.
59
For 2022, NICS segment operating loss decreased and adjusted EBITDA increased compared to the prior year and
both benefitted from favorable pricing impacts on certain products, higher sales volumes, lower SG&A costs and
lower freight costs. These favorable impacts were partially offset by higher material costs and higher R&D costs.
For 2022, NICS segment operating loss was favorably impacted by reductions of $12.3 million in amortization
expense which is not reflected in adjusted EBITDA. See “Reconciliation of Segment Adjusted EBITDA” within this
Management’s Discussion and Analysis of Financial Condition and Results of Operations, below.
Access Network Solutions Segment
Net sales decreased in 2022 compared to the prior year primarily due to lower volumes related to the negative
impact of supply constraints and also due to projects in the first half of 2021 that did not recur in 2022. These
unfavorable impacts to net sales were partially offset by pricing increases on ANS segment products. From a
regional perspective in 2022, net sales decreased in the CALA region by $82.5 million, the APAC region by $52.2
million and the EMEA region by $22.5 million but increased in the U.S. by $77.9 million and Canada by $2.2
million compared to the prior year. Foreign exchange rate changes impacted ANS segment net sales unfavorably by
approximately 1% during 2022.
In 2022, ANS segment operating loss increased and adjusted EBITDA decreased compared to the prior year period.
Both ANS segment operating loss and adjusted EBITDA were unfavorably impacted by product mix and decreased
sales volumes, but these negative impacts were partially offset by favorable pricing impacts and lower R&D and
SG&A costs. For 2022, ANS segment operating loss was unfavorably impacted by a goodwill impairment charge of
$1,119.6 million, an increase of $4.6 million of transaction, transformation and integration costs mostly related to
the termination of a supply agreement as part of CommScope NEXT and an increase of $3.0 million in restructuring
expense but was favorably impacted by a reduction of $2.9 million in intellectual property litigation settlement
charges. Goodwill impairment charges, transaction, transformation and integration costs, restructuring expense and
intellectual property litigation settlement charges are not reflected in adjusted EBITDA. See the discussion above
under "Critical Accounting Policies" for more information regarding the annual goodwill impairment test performed
during 2022. Also see “Reconciliation of Segment Adjusted EBITDA” within this Management’s Discussion and
Analysis of Financial Condition and Results of Operations, below.
Home Networks Segment
Net sales for the Home segment decreased in 2022 compared to the prior year. While net sales of broadband and
video products benefitted from favorable pricing impacts, these increases were more than offset by lower net sales
volumes across all our Home segment products primarily due to continued supply shortages. Although we are
working to secure components from key suppliers, we still expect to experience some supply chain challenges into
2023 for our Home segment products. From a regional perspective in 2022, net sales decreased in the U.S. by
$195.3 million, the APAC region by $35.2 million and the CALA region by $21.2 million but increased in Canada
by $90.9 million and the EMEA region by $14.9 million compared to the prior year. Foreign exchange rate changes
impacted Home segment net sales unfavorably by approximately 2% during 2022.
Home segment operating loss decreased and adjusted EBITDA increased in 2022 compared to the prior year. Both
benefitted from favorable pricing impacts, lower bad debt expense and lower warranty costs, but these were partially
offset by increased material costs and lower sales volumes. In 2021, Home segment bad debt expense was driven by
a $30.3 million charge related to a value-added reseller customer. Home segment operating loss was favorably
impacted in 2022 by reductions of $41.6 million in transaction, transformation and integration costs and $7.3 million
in restructuring expense. Home segment operating loss in 2021 also included a goodwill impairment charge of $13.7
million. Transaction, transformation and integration costs, restructuring expense and goodwill impairment charges
are not reflected in adjusted EBITDA. See “Reconciliation of Segment Adjusted EBITDA” within this
Management’s Discussion and Analysis of Financial Condition and Results of Operations, below.
60
Liquidity and Capital Resources
The following table summarizes certain key measures of our liquidity and capital resources:
December 31,
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 as a percentage of total capitalization
2022
$
398.1
$
2021
(dollars in millions)
360.3
$
$
Change
%
Change
37.8
10.5 %
1,252.6
908.8
9,501.6
9,055.9
1,068.9
684.1
9,510.5
10,410.0
183.7
224.7
(8.9)
(1,354.1)
17.2
32.8
(0.1)
(13.0)
104.9%
91.4%
(1) Working capital consists of current assets of $3,726.2 million less current liabilities of $2,107.5 million as of
December 31, 2022 and current assets of $3,579.7 million less current liabilities of $2,182.5 million as of
December 31, 2021.
(2)
Total capitalization includes long-term debt, including the current portion, Series A convertible preferred
stock (Convertible Preferred Stock) and stockholders’ equity (deficit).
Our principal sources of liquidity on a short-term basis are cash and cash equivalents, cash flows provided by
operations and availability under our credit facilities. On a long-term basis, our potential sources of liquidity also
include raising capital through the issuance of additional equity and/or debt.
On October 19, 2022, we completed the refinancing of our senior secured asset-based revolving credit facility
(Revolving Credit Facility), the main result of which was to extend the maturity to September 30, 2027. We
continue to have borrowing capacity up to $1.0 billion, subject to certain limitations, but we have added additional
assets under the borrowing base which increases our availability. The interest rate in the amended Revolving Credit
Agreement is an adjusted Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New
York (SOFR) with a spread of 1.25% to 1.50%. In the first half of 2023, we expect to amend our 2026 Term Loan to
replace LIBOR with SOFR as the reference interest rate in anticipation of the cessation of LIBOR in 2023. We do
not anticipate a material impact on our results of operations or cash flows with the transition to SOFR in our variable
rate debt, but the impact is still uncertain.
The primary uses of liquidity include debt service requirements, voluntary debt repayments, redemptions or
purchases on the open market, working capital requirements, capital expenditures, business separation transaction
costs, transformation costs, restructuring costs, dividends related to the Convertible Preferred Stock if we elect to
pay such dividends in cash, litigation settlements, income tax payments and other contractual obligations. We
believe that our existing cash, cash equivalents and cash flows from operations, combined with availability under
our Revolving Credit Facility, 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 additional amounts under our Revolving Credit
Facility or issue debt or equity securities, if market conditions are favorable, to meet future cash needs or to reduce
our borrowing costs.
Our interest payments on long-term debt are expected to total $2,466.4 million over the duration of the debt, with
$635.8 million due in 2023 (assuming interest rates in effect as of December 31, 2022 on our variable rate debt). In
2022, the interest payments on our 2026 Term Loan and our Revolving Credit Facility increased as a result of the
Federal Reserve's increase in interest rates in 2022, and we expect that they will continue to raise interest rates into
2023. For additional information regarding our long-term debt obligations, see Note 7 in the Notes to Consolidated
Financial Statements and our discussion of our interest rate risk in Item 7A. Quantitative and Qualitative Disclosures
About Market Risk included elsewhere in this Annual Report on Form 10-K. For information on our obligations
related to our Convertible Preferred Stock, see Note 13 in the Notes to Consolidated Financial Statements included
elsewhere in this Annual Report on Form 10-K.
61
We periodically enter into sell / buy transactions with our contract manufacturers, where we sell certain component
inventory to them for use in our finished goods. We are obligated to subsequently repurchase this inventory either as
a finished good or the original component inventory if not used after a specific period of time. We record an
accounts receivable and a contract manufacturer inventory repurchase liability related to these transactions. We do
not record a sale upon shipment of the inventory to the contract manufacturer and the original value of the inventory
remains in our inventory balance. Our current accrued liability related to these transactions is $79.1 million as of
December 31, 2022, and we expect to repurchase a portion of this inventory either as a finished good or the original
component inventory in 2023.
During the normal course of business, to manage manufacturing lead times and help ensure adequate component
supply, we enter into agreements with our contract manufacturers and suppliers that allow them to produce and
procure inventory based upon our forecasted requirements. We estimate our obligations under these agreements to
be $340.0 million as of December 31, 2022. While we believe we have adequate liabilities recorded related to our
excess inventory under these purchase commitments, unexpected changes to projected demand may result in us
being committed to purchase additional excess inventory to satisfy these commitments and the related charges could
be material.
We have $124.0 million in unrecognized tax benefits; however, the timing of the related tax payments is highly
uncertain. We anticipate a reduction of up to $7.0 million of unrecognized tax benefits during the next twelve
months. See Note 12 in the Notes to Consolidated Financial Statements included elsewhere in the Annual Report on
Form 10-K for further discussion.
We are contingently liable under open standby letters of credit issued by our banks to support performance
obligations of a third-party contractor that totaled $44.0 million as of December 31, 2022. These amounts represent
our estimate of the maximum amounts we would expect to incur upon the contractual non-performance of the
contractor, but we also have cross-indemnities in place that may enable us to recover some or all of our losses in the
event of the contractor's non-performance. We believe the likelihood of having to perform under these guarantees is
remote. There were no material amounts recorded in our consolidated financial statements related to third-party
guarantee agreements as of December 31, 2022 or 2021.
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 non-GAAP adjusted EBITDA as presented in the
“Reconciliation of Non-GAAP Measures” section below, but also give pro forma effect to certain events, including
acquisitions, synergies and savings from cost reduction initiatives such as facility closures and headcount reductions.
For the year ended December 31, 2022, our non-GAAP pro forma adjusted EBITDA, as measured pursuant to the
indentures governing our notes, was $1,327.3 million, which included annualized savings expected from cost
reduction initiatives of $50.6 million so that the impact of 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 based on similar financial measures. We believe we
are in compliance with the covenants under our indentures and senior secured credit facilities at December 31, 2022.
Cash and cash equivalents increased during 2022 primarily driven by cash generated by operating activities of
$190.0 million and proceeds from other investing activities of $19.1 million, partially offset by capital expenditures
of $101.3 million, our required amortization payments on our 2026 Term Loan totaling $32.0 million, cash
dividends paid for the Convertible Preferred Stock of $14.9 million and tax withholding payments for vested equity-
based compensation awards of $14.8 million. As of December 31, 2022, approximately 49% of our cash and cash
equivalents were held outside the U.S.
62
Working capital, excluding cash and cash equivalents and the current portion of long-term debt, increased during
2022 primarily due to higher inventory balances as a result of rising material costs and increases in stock as we build
inventory waiting for certain materials or components to complete our products for sale and lower accounts payable
due to the timing of payments. During 2022, we sold accounts receivable under customer-sponsored supplier
financing agreements. This had an impact of approximately $78 million on working capital, excluding cash and cash
equivalents and the current portion of long-term debt, as of December 31, 2022. Under these agreements, we are
able to sell accounts receivable to a bank, and we retain no interest in and have no servicing responsibilities for the
accounts receivable sold. The net reduction in total capitalization during 2022 reflected the net loss for the year.
Cash Flow Overview
Year Ended
December 31,
2022
$
Change
2021
(dollars in millions)
%
Change
Net cash generated by operating activities
Net cash used in investing activities
Net cash used in financing activities
$ 190.0 $ 122.3
(136.8)
(139.5)
(82.1)
(65.0)
$
67.7
54.7
74.5
55.4%
(40.0)
(53.4)
Operating Activities
Net loss
Adjustments to reconcile net loss 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 assets
Other noncurrent liabilities
Other
Net cash generated by operating activities
Year Ended December 31,
2022
2021
(in millions)
$ (1,286.9) $
(462.6)
696.1
61.1
(118.4)
1,119.6
(16.0)
(178.8)
30.9
(43.2)
8.2
(88.8)
6.2
190.0
$
786.3
79.6
(147.5)
13.7
(59.6)
(359.8)
3.2
256.0
(45.5)
8.4
50.1
122.3
$
During 2022, cash generated by operating activities increased compared to the prior year primarily as a result of
better operating performance and lower payments of litigation settlements of $35.1 million, partially offset by higher
interest paid of $37.3 million and higher taxes paid of $51.3 million.
Investing Activities
Additions to property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments upon settlement of net investment hedge
Other
Net cash used in investing activities
Year Ended December 31,
2022
2021
(in millions)
(101.3) $
0.1
—
19.1
(82.1) $
(131.4)
13.1
(18.0)
(0.5)
(136.8)
$
$
63
During 2022, the decrease in cash used in investing activities compared to the prior year was primarily driven by
lower capital expenditures in the current year and a payment of $18.0 million to settle a net investment hedge in the
prior year that did not recur. The increased capital expenditures in 2021 related to the capacity expansion in our CCS
segment. Our investments in property, plant and equipment generally relate to supporting improvements and
expanding production capacity in manufacturing operations and investing in information technology. Cash used in
investing activities was also favorably impacted in the current year by proceeds of $8.2 million on the sale of certain
nonfinancial assets, $6.9 million related to the sale of an equity method investment and a return of $4.5 million on
equity method investments.
Financing Activities
Long-term debt repaid
Long-term debt proceeds
Debt issuance costs
Debt extinguishment costs
Dividends paid on Series A convertible preferred stock
Proceeds from the issuance of common shares under equity-based
compensation plans
Tax withholding payments for vested equity-based compensation awards
Other
Net cash used in financing activities
Year Ended December 31,
2022
2021
(in millions)
(365.0) $ (1,282.0)
1,250.0
333.0
(12.0)
(7.2)
(34.4)
—
(43.0)
(14.9)
0.1
(14.8)
3.8
(65.0) $
5.6
(26.4)
2.7
(139.5)
$
$
In 2022, we borrowed $333.0 million and repaid $333.0 million under the Revolving Credit Facility. We also paid
four quarterly scheduled amortization payments totaling $32.0 million on our 2026 Term Loan during 2022.
As of December 31, 2022, we had no outstanding borrowings under the Revolving Credit Facility and the remaining
availability was $908.8 million, reflecting a borrowing base subject to maximum capacity of $1,000.0 million
reduced by $91.2 million of letters of credit issued under the Revolving Credit Facility. In connection with the
refinancing of our Revolving Credit Facility in October 2022, we paid $7.2 million of debt issuance costs. We may
continue to look for favorable opportunities to refinance portions of our existing debt to lower borrowing costs,
extend the term or adjust the total amount of fixed-rate or floating-rate debt.
In 2021, we issued $1,250.0 million of 4.75% senior secured notes due 2029 (the 2029 Secured Notes) and used the
net proceeds from the offering, together with cash on hand, to redeem and retire $1,250.0 million outstanding under
the 2024 Secured Notes. In connection with the issuance of the 2029 Secured Notes, we paid $9.6 million of debt
issuance costs. We paid a redemption premium of $34.4 million to retire the 2024 Secured Notes. We also paid four
quarterly scheduled amortization payments totaling $32.0 million on our 2026 Term Loan.
Also impacting cash used in financing activities for 2022 was a decrease of $28.1 million in cash dividends paid for
the Convertible Preferred Stock. In 2022, we paid cash dividends of $14.9 million and paid $44.1 million of
dividends in additional shares of the Convertible Preferred Stock. In 2021, we paid cash dividends of $43.0 million
and paid $14.3 million of dividends in additional shares of the Convertible Preferred Stock. During 2022, employees
surrendered 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 $14.8 million compared to $26.4 million in the prior
year. During 2022, we received proceeds of $0.1 million related to the exercise of stock options compared to $5.6
million in the prior year.
64
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 that of our
competitors. However, our use of the term non-GAAP adjusted EBITDA may vary from that of others in our
industry. This financial measure should not be considered as an alternative 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.
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 non-GAAP adjusted EBITDA as presented in this
section, but also give pro forma effect to certain events, including acquisitions and savings from cost reduction
initiatives such as facility closures and headcount reductions.
Consolidated
Net loss
Income tax benefit
Interest income
Interest expense
Other expense, net
Operating income (loss)
Adjustments:
Amortization of purchased intangible assets
Restructuring costs, net
Equity-based compensation
Asset impairments
Transaction, transformation and integration costs (1)
Acquisition accounting adjustments (2)
Patent claims and litigation settlements
Executive severance
Reserve of Russian accounts receivable
Depreciation
Non-GAAP adjusted EBITDA
Year Ended December 31,
2022
(1,286.9)
(13.1)
(2.8)
588.9
0.1
(713.8)
543.0
62.9
61.1
1,119.6
38.2
7.3
28.5
—
2.7
127.2
1,276.7
$
$
$
$
$
$
2021
(in millions)
2020
(462.6)
(71.9)
(1.9)
561.2
23.8
48.6
613.0
91.9
79.6
13.7
90.3
11.5
31.7
—
—
136.7
1,117.0
$
$
$
(573.4)
(81.1)
(4.4)
577.8
29.3
(51.8)
630.5
88.4
115.0
206.7
24.9
20.6
16.3
6.3
—
158.3
1,215.2
(1)
In 2022, primarily reflects transformation costs related to CommScope NEXT and integration costs related to
the ARRIS acquisition. In 2021, primarily reflects transaction separation costs related to the planned
separation of the Home segment from CommScope, transformation costs related to CommScope NEXT and
integration costs related to the ARRIS acquisition. In 2020, primarily reflects integration costs related to the
ARRIS acquisition.
(2)
In 2022, 2021 and 2020, reflects ARRIS acquisition accounting adjustments related to reducing deferred
revenue to its estimated fair value.
65
Reconciliation of Segment Adjusted EBITDA
Segment adjusted EBITDA is provided as a performance measure in Note 16 in the Notes to Consolidated Financial
Statements included elsewhere in this Annual Report on Form 10-K. Below we reconcile segment adjusted EBITDA
for each segment individually to operating income (loss) for that segment to supplement the reconciliation of the
total segment adjusted EBITDA to consolidated operating income (loss) in that footnote.
Connectivity and Cable Solutions Segment
Operating income
Adjustments:
Amortization of purchased intangible assets
Restructuring costs, net
Equity-based compensation
Transaction, transformation and integration costs
Patent claims and litigation settlements
Executive severance
Reserve of Russian accounts receivable
Depreciation
Adjusted EBITDA
Outdoor Wireless Networks Segment
Operating income
Adjustments:
Amortization of purchased intangible assets
Restructuring costs, net
Equity-based compensation
Transaction, transformation and integration costs
Executive severance
Depreciation
Adjusted EBITDA
$
$
$
$
2022
Year Ended December 31,
2021
(in millions)
138.5
$
$
438.2
99.5
17.1
14.9
10.6
1.7
—
2.7
58.8
643.6
$
156.7
62.0
19.5
18.5
—
—
—
53.6
448.9
$
2022
Year Ended December 31,
2021
(in millions)
197.3
$
$
189.0
32.4
22.4
7.1
4.5
—
14.3
269.7
$
33.5
3.6
8.4
8.5
—
15.4
266.8
$
2020
169.3
161.6
25.9
28.6
7.9
(1.3)
1.7
—
53.9
447.5
2020
179.3
45.8
15.7
13.8
4.2
1.2
17.2
277.3
Networking, Intelligent Cellular and Security Solutions Segment
Operating loss
Adjustments:
Amortization of purchased intangible assets
Restructuring costs, net
Equity-based compensation
Transaction, transformation and integration costs
Acquisition accounting adjustments
Patent claims and litigation settlements
Executive severance
Depreciation
Adjusted EBITDA
2022
Year Ended December 31,
2021
(in millions)
2020
$
(51.2) $
(143.5) $
(136.7)
59.7
9.9
13.5
3.0
2.0
—
—
15.0
51.9
$
72.0
8.5
17.4
6.2
4.6
0.3
—
19.2
(15.3) $
72.2
8.0
22.6
2.5
7.3
15.0
0.8
21.0
12.8
$
66
Access Network Solutions Segment
Operating income (loss)
Adjustments:
Amortization of purchased intangible assets
Restructuring costs, net
Equity-based compensation
Asset impairments
Transaction, transformation and integration costs
Acquisition accounting adjustments
Patent claims and litigation settlements
Executive severance
Depreciation
Adjusted EBITDA
Home Networks Segment
Operating loss
Adjustments:
Amortization of purchased intangible assets
Restructuring costs, net
Equity-based compensation
Asset impairments
Transaction, transformation and integration costs
Acquisition accounting adjustments
Patent claims and litigation settlements
Executive severance
Depreciation
Adjusted EBITDA
Note: Components may not sum to total due to rounding
Recent Accounting Pronouncements
2022
Year Ended December 31,
2021
(in millions)
71.2
$
$ (1,149.6) $
247.2
12.2
15.8
1,119.6
14.0
3.3
—
—
22.5
285.2
$
$
247.0
9.2
20.9
—
9.4
4.8
2.9
—
25.8
391.1
$
2020
11.6
247.0
8.8
27.8
—
4.1
11.4
3.0
1.5
31.1
346.3
2022
Year Ended December 31,
2021
(in millions)
2020
$
(140.2) $
(214.9) $
(275.4)
104.1
1.3
9.9
—
6.2
1.7
26.9
—
16.6
26.3
$
103.9
8.6
13.4
13.7
47.8
1.9
28.5
—
22.7
25.5
$
103.9
30.0
22.1
206.7
6.2
1.9
(0.3)
1.2
35.1
131.3
$
See Note 2 in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-
K for a discussion of recent accounting pronouncements.
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 and components purchased by us (aluminum, copper, steel,
bimetals, optical fiber, plastics and other polymers, capacitors, memory devices and silicon chips) are subject to
changes in market price as they are influenced by commodity markets and other factors. Prices for these items 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 quickly and 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.
67
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
outstanding at December 31, 2022 (mainly the $3.1 billion variable rate senior secured term loan due 2026 (2026
Term Loan) and our asset-based revolving credit facility). The principal payments presented below are based on
scheduled maturities and assume no borrowings under our asset-based revolving credit facility. The interest
payments presented below assume the interest rates in effect as of December 31, 2022 (see Note 7 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.
2023
2024
2025
2026
2027
Thereafter
Principal and interest payments on
variable rate debt
Average cash interest rate
Impact of 1% increase in interest
rate index
$
$
270.5
7.74%
30.8
$
$
265.8
7.67%
30.5
$
$
262.2
7.63%
$
3,028.7
7.63%
30.2
$
3.7
$
$
— $
—
— $
—
—
—
We also have $6.5 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, 2022.
Principal and interest payments on
fixed rate debt
Average cash interest rate
$
397.3
$
6.11%
397.3
6.11%
$ 1,658.2
$ 1,774.2
$ 1,919.3
$
2,088.9
6.12%
6.16%
5.99%
5.01%
2023
2024
2025
2026
2027
Thereafter
As part of our hedging strategy to mitigate a portion of the exposure to changes in cash flows resulting from the
variable interest rate on our 2026 Term Loan, in March 2019, we entered into and designated pay-fixed, receive-
variable interest rate swap derivatives as cash flow hedges of interest rate risk. The total notional amount of the
interest rate swap derivatives as of December 31, 2022 was $300 million with outstanding maturities of up to fifteen
months. As of December 31, 2022, the combined fair value of the interest rate swaps was an $8.6 million gain. The
table above excludes the impact of these interest rate swap derivatives. See Note 8 in the Notes to Consolidated
Financial Statements included elsewhere in this Annual Report on Form 10-K for further discussion of these
contracts.
Foreign Currency Risk
Approximately 38% and 42% of net sales for 2022 and 2021, 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, British pound sterling, Mexican peso, Japanese yen,
Canadian dollar, Australian dollar, Brazilian real, South African rand, Indian rupee and Czech koruna. 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.
68
We use derivative instruments such as forward exchange contracts to manage the risk of fluctuations in the value of
certain foreign currencies. As of December 31, 2022, we had foreign exchange contracts with a net unrealized gain
of $3.4 million, with maturities of up to eight months and aggregate notional value of $522.2 million (based on
exchange rates as of December 31, 2022). 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, 2022 or 2021. Our derivative instruments are not leveraged and are not held for trading or
speculation. See Note 8 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 aluminum, copper, steel, bimetals,
optical fiber, plastics and other polymers, capacitors, memory devices and silicon chips, 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, 2022, we had forward purchase
commitments outstanding under take-or-pay contracts for certain metals of approximately $4.9 million that we
expect to consume in the normal course of operations through the second quarter of 2023. We continuously evaluate
the amount and type of derivative instruments utilized to manage commodity price risk.
69
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders’ Equity (Deficit)
Notes to Consolidated Financial Statements
71
75
76
77
78
79
80
70
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, 2022 and 2021, the related consolidated statements of operations, comprehensive loss,
stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2022, 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,
2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2022, 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, 2022, 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 22, 2023 expressed an unqualified opinion
thereon.
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.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters
below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Description of the
Matter
Valuation of Goodwill for the ANS Reporting Unit
As more fully described in Note 3 to the consolidated financial statements, at December 31,
2022, the Company’s goodwill was $4,072.4 million, of which $734.0 million relates to the
Access Network Solutions (ANS) reporting unit. The Company’s goodwill is initially assigned
to its reporting units as of the acquisition date. Goodwill is tested for impairment at least
annually at the reporting unit level. The Company performed its annual goodwill impairment
test in the fourth quarter of 2022 using both a discounted cash flow model and a guideline
public company approach. As a result of the annual goodwill impairment test, the Company
recorded a $1,119.6 million impairment charge in the ANS reporting unit, which reflects a
partial impairment of the goodwill of that reporting unit, as its estimated fair value was less
than the carrying value.
71
Auditing management’s goodwill impairment test was complex and highly judgmental due to
the significant estimation required in determining the fair value of the ANS reporting unit. In
particular, the fair value estimate was sensitive to changes in significant assumptions, such as
the estimated discount rates, projected revenue growth rates and projected operating income
margins, which are affected by expectations about future market or economic conditions.
How We Addressed
the Matter in Our
Audit
We evaluated the Company’s assessment of the impairment of goodwill for the ANS reporting
unit. We obtained an understanding, evaluated the design and tested the operating
effectiveness of controls that address the risks of material misstatement relating to the annual
goodwill impairment test for this reporting unit, including controls over management’s
development and review of the significant assumptions discussed above.
that
To test the estimated fair value of the ANS reporting unit, we performed audit procedures with
the assistance of our valuation specialists
included, among others, assessing
methodologies and testing the significant assumptions discussed above and the underlying data
used by the Company in its analysis. We evaluated the Company’s estimated discount rate
methodology and developed independent ranges of reasonable discount rates. We compared
the significant assumptions of projected revenue growth rates and projected operating income
margins used by management to current industry and economic trends, changes to the
Company’s business model, customer base or product mix and other relevant factors. We also
evaluated the reasonableness of the guideline public companies used to develop the fair value
estimate of the ANS reporting unit. We assessed the historical accuracy of management’s
estimates and performed sensitivity analyses of significant assumptions to evaluate the
changes in the fair value of this reporting unit that would result from changes in the
assumptions. We also evaluated the related goodwill disclosures included in Note 3 to the
consolidated financial statements.
Incomes Taxes - Valuation Allowance
As more fully described in Note 12 to the consolidated financial statements, at December 31,
2022, the Company recognized deferred tax assets related to deductible temporary differences
and carryforwards of $924.9 million, net of valuation allowances of $643.1 million. Deferred
tax assets are reduced by a valuation allowance if, based on the weight of all available
evidence, in management’s judgment, it is more likely than not that some portion, or all, of the
deferred tax assets will not be realized.
Auditing management’s assessment of the realizability of deferred tax assets involved
especially challenging and subjective auditor judgment in determining whether the reversal of
existing taxable temporary differences and the generation of sufficient future taxable income
support the realization of the Company’s existing deferred tax assets before expiration.
Description of the
Matter
How We Addressed
the Matter in Our
Audit
We evaluated the Company’s assessment of the realizability of deferred tax assets, with the
assistance of our income tax professionals. We obtained an understanding, evaluated the
design and tested the operating effectiveness of controls that address the risks of material
misstatement relating to the realizability of deferred tax assets, including controls over
management’s development and review of the estimated future taxable income discussed
above.
72
To test the realizability of deferred tax assets, we performed audit procedures that included,
among others, evaluating whether the sources of management’s estimated future taxable
income were of the appropriate character and would be sufficient to utilize the deferred tax
assets under the relevant tax laws. We tested the forecasted timing of the reversal of existing
taxable temporary differences by evaluating the projected sources of future taxable income
and considering the nature of the temporary differences. We also evaluated the significant
assumptions used by the Company to develop estimates of future taxable income and tested
For example, we compared
the completeness and accuracy of the underlying data.
management’s estimates of future income with current industry and economic trends, the
actual results of prior periods and other forecasted financial information prepared by the
Company. We also evaluated the related income tax disclosures included in Note 12 to the
consolidated financial statements.
We have served as the Company’s auditor since 2008.
Charlotte, North Carolina
February 22, 2023
73
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,
2022, 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, 2022, 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, 2022 and 2021, the related
consolidated statements of operations, comprehensive loss, stockholders’ equity (deficit) and cash flows for each of
the three years in the period ended December 31, 2022, and the related notes and our report dated February 22, 2023
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 22, 2023
74
CommScope Holding Company, Inc.
Consolidated Statements of Operations
(In millions, except per share amounts)
Net sales
Cost of sales
Gross profit
Operating expenses:
Selling, general and administrative
Research and development
Amortization of purchased intangible assets
Restructuring costs, net
Asset impairments
Total operating expenses
Operating income (loss)
Other expense, net
Interest expense
Interest income
Loss before income taxes
Income tax benefit
Net loss
Series A convertible preferred stock dividends
Net loss attributable to common stockholders
Loss per share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
$
$
$
$
Year Ended December 31,
2021
8,586.7
5,902.4
2,684.3
$
$
2022
9,228.1
6,424.0
2,804.1
1,135.0
657.4
543.0
62.9
1,119.6
3,517.9
(713.8)
(0.1)
(588.9)
2.8
(1,300.0)
13.1
(1,286.9)
(59.0)
(1,345.9)
(6.49)
(6.49)
207.4
207.4
$
$
$
1,233.9
683.2
613.0
91.9
13.7
2,635.7
48.6
(23.8)
(561.2)
1.9
(534.5)
71.9
(462.6)
(57.3)
(519.9)
(2.55)
(2.55)
203.6
203.6
$
$
$
2020
8,435.9
5,688.1
2,747.8
1,170.7
703.3
630.5
88.4
206.7
2,799.6
(51.8)
(29.3)
(577.8)
4.4
(654.5)
81.1
(573.4)
(56.1)
(629.5)
(3.20)
(3.20)
196.8
196.8
See notes to consolidated financial statements.
75
CommScope Holding Company, Inc.
Consolidated Statements of Comprehensive Loss
(In millions)
Comprehensive loss:
Net loss
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss)
Defined benefit plans:
Change in unrecognized actuarial gain (loss)
Change in unrecognized net prior service credit
Gain (loss) on hedging instruments
Total other comprehensive income (loss), net of tax
Total comprehensive loss
Year Ended December 31,
2021
2020
2022
$
(1,286.9)
$
(462.6)
$
(573.4)
(104.5)
(85.3)
82.2
(1.5)
0.1
16.0
(89.9)
(1,376.8)
$
$
22.8
0.2
11.8
(50.5)
(513.1)
$
(10.8)
(0.2)
(30.1)
41.1
(532.3)
See notes to consolidated financial statements.
76
CommScope Holding Company, Inc.
Consolidated Balance Sheets
(In millions, except share amounts)
Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts
Assets
of $82.8 and $63.7, respectively
Inventories, net
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net of accumulated depreciation
of $873.5 and $787.4, respectively
Goodwill
Other intangible assets, net
Other noncurrent assets
Total assets
Liabilities and Stockholders' Deficit
Accounts payable
Accrued and other liabilities
Current portion of long-term debt
Total current liabilities
Long-term debt
Deferred income taxes
Other noncurrent liabilities
Total liabilities
Commitments and contingencies
Series A convertible preferred stock, $0.01 par value
Stockholders' deficit:
Preferred stock, $0.01 par value: Authorized shares: 200,000,000;
Issued and outstanding shares: 1,100,310 and 1,056,144, respectively,
Series A convertible preferred stock
Common stock, $0.01 par value: Authorized shares: 1,300,000,000;
Issued and outstanding shares: 208,371,426 and 204,567,294,
respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Treasury stock, at cost: 12,726,695 shares and
10,970,585 shares, respectively
Total stockholders' deficit
Total liabilities and stockholders' deficit
December 31,
2022
2021
$
398.1 $
360.3
1,523.6
1,588.1
216.4
3,726.2
609.6
4,072.4
2,473.5
803.7
11,685.4 $
1,025.5 $
1,050.0
32.0
2,107.5
9,469.6
173.4
380.6
12,131.1
1,532.6
1,435.8
251.0
3,579.7
656.3
5,231.7
3,027.3
764.5
13,259.5
1,160.7
989.8
32.0
2,182.5
9,478.5
208.2
490.8
12,360.0
$
$
1,100.3
1,056.1
—
—
2.2
2,542.9
(3,502.2)
(296.3)
(292.6)
(1,546.0)
11,685.4 $
$
2.2
2,540.7
(2,215.3)
(206.4)
(277.8)
(156.6)
13,259.5
See notes to consolidated financial statements.
77
CommScope Holding Company, Inc.
Consolidated Statements of Cash Flows
(In millions)
2022
Year Ended December 31,
2021
2020
$
(1,286.9) $
(462.6) $
(573.4)
Operating Activities:
Net loss
Adjustments to reconcile net loss 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 assets
Other noncurrent liabilities
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 Cable Exchange acquisition
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 costs
Debt extinguishment costs
Dividends paid on Series A convertible preferred stock
Proceeds from the issuance of common shares under
equity-based compensation plans
Tax withholding payments for vested equity-based
compensation awards
Other
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
$
696.1
61.1
(118.4)
1,119.6
(16.0)
(178.8)
30.9
(43.2)
8.2
(88.8)
6.2
190.0
(101.3)
0.1
—
—
19.1
(82.1)
(365.0)
333.0
(7.2)
—
(14.9)
0.1
(14.8)
3.8
(65.0)
(5.1)
37.8
360.3
398.1 $
786.3
79.6
(147.5)
13.7
(59.6)
(359.8)
3.2
256.0
(45.5)
8.4
50.1
122.3
(131.4)
13.1
—
(18.0)
(0.5)
(136.8)
(1,282.0)
1,250.0
(12.0)
(34.4)
(43.0)
5.6
(26.4)
2.7
(139.5)
(7.6)
(161.6)
521.9
360.3 $
823.3
115.0
(154.7)
206.7
228.4
(100.5)
(17.2)
(175.2)
28.8
(4.0)
59.0
436.2
(121.2)
5.0
(3.5)
—
(0.5)
(120.2)
(1,282.0)
950.0
(11.7)
(17.9)
(14.3)
9.0
(16.9)
—
(383.8)
(8.5)
(76.3)
598.2
521.9
See notes to consolidated financial statements.
78
CommScope Holding Company, Inc.
Consolidated Statements of Stockholders' Equity (Deficit)
(In millions, except share amounts)
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
Balance at end of period
Common stock:
Balance at beginning of period
Issuance of shares under equity-based compensation plans
Balance at end of period
Additional paid-in capital:
Balance at beginning of period
Issuance of shares under equity-based compensation plans
Equity-based compensation
Dividends on Series A convertible preferred stock
Balance at end of period
Accumulated deficit:
Balance at beginning of period
Net loss
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
Balance at end of period
Total stockholders' equity (deficit)
2022
Year Ended December 31,
2021
2020
204,567,294
5,560,242
(1,756,110)
208,371,426
200,095,232
6,219,566
(1,747,504)
204,567,294
194,563,530
7,343,401
(1,811,699)
200,095,232
$
$
$
$
$
$
$
$
$
$
$
2.2
—
2.2
2,540.7
0.1
61.1
(59.0)
2,542.9
$
$
$
$
2.1
0.1
2.2
2,512.9
5.5
79.6
(57.3)
2,540.7
$
$
$
$
2.0
0.1
2.1
2,445.1
8.9
115.0
(56.1)
2,512.9
(2,215.3) $
(1,286.9)
(3,502.2) $
(1,752.7) $
(462.6)
(2,215.3) $
(1,179.3)
(573.4)
(1,752.7)
(206.4) $
(89.9)
(296.3) $
(277.8) $
(14.8)
(292.6) $
(1,546.0) $
(155.9) $
(50.5)
(206.4) $
(251.4) $
(26.4)
(277.8) $
(156.6) $
(197.0)
41.1
(155.9)
(234.5)
(16.9)
(251.4)
355.0
See notes to consolidated financial statements.
79
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements
(In millions, 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, data center and entertainment networks. The
Company’s solutions for wired and wireless networks enable service providers including cable, telephone and digital
broadcast satellite operators and media programmers to deliver media, voice, Internet Protocol (IP) data services and
Wi-Fi to their subscribers and allow enterprises to experience constant wireless and wired connectivity across
complex and varied networking environments. The Company’s solutions are complemented by services including
technical support, systems design and integration. CommScope is a leader in digital video and IP television (IPTV)
distribution systems, broadband access infrastructure platforms and equipment that delivers data and voice networks
to homes. 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.
As of January 1, 2022, the Company reorganized its internal management and reporting structure to align its
portfolio of products and solutions more closely with the markets it serves and provides better performance
comparability with its competitive peer set. The reorganization changed the information regularly reviewed by the
Company's chief operating decision maker for purposes of allocating resources and assessing performance. As a
result, the Company is now reporting financial performance based on the following operating segments:
Connectivity and Cable Solutions (CCS), Outdoor Wireless Networks (OWN), Networking, Intelligent Cellular and
Security Solutions (NICS), Access Network Solutions (ANS) and Home Networks (Home). These five segments
represent non-aggregated reportable operating segments. Prior to this change, the Company operated and reported
four operating segments: Broadband Networks, Outdoor Wireless Networks, Venue and Campus Networks and
Home Networks. All prior period amounts in these consolidated financial statements have been recast to reflect
these operating segment changes.
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.
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; impairment reviews for investments, property, plant and equipment, goodwill and other
intangible assets; 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.
80
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
Cash and Cash Equivalents
Cash and cash equivalents represent deposits in banks and cash invested temporarily in various instruments that are
highly liquid and have a maturity of three months or less at the time of purchase.
Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable and contract assets for unbilled receivables are stated at the amount owed by the
customer, net of allowances for estimated doubtful accounts, discounts, returns and rebates. The Company measures
the allowance for doubtful accounts using an expected credit loss model, which uses a lifetime expected loss
allowance for all trade accounts receivable and contract assets. To measure the expected credit losses, trade accounts
receivable and contract assets are grouped based on shared credit risk characteristics and the days past due based on
the contractual terms of the receivable. Contract assets relate to unbilled work in progress and have substantially the
same risk characteristics as trade accounts receivable for the same types of contracts. Therefore, the Company has
concluded that the expected loss rates for trade accounts receivables are a reasonable approximation of the loss rates
for the contract assets.
In calculating an allowance for doubtful accounts, the Company uses its historical experience, external indicators
and forward-looking information to calculate expected credit losses using an aging method. The Company assesses
impairment of trade accounts receivable on a collective basis as they possess shared credit risk characteristics which
have been grouped based on the days past due.
The expected loss rates are based on the payment profiles of sales over the preceding thirty-six months and the
corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect
current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle
their trade accounts receivable. Accounts are written off against the allowance account when they are determined to
be no longer collectible.
The Company sells certain of its accounts receivable under a customer-sponsored supplier financing agreement.
Under this agreement, the Company is able to sell certain accounts receivable to a bank at a discount. The Company
sold approximately $339 million and $45 million of trade accounts receivable under this program during the years
ended December 31, 2022 and 2021, respectively, and the cost of factoring such receivables was not material. The
Company derecognizes the accounts receivable on the Consolidated Balance Sheet once sold to the bank, as it
retains no interest in and has no servicing responsibilities for them once they have been sold. The cash received from
the bank is classified within the operating activities section in the Consolidated Statements of Cash Flows.
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.
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.
The Company periodically uses forward contracts to hedge a portion of its balance sheet foreign exchange re-
measurement risk and to hedge certain planned foreign currency expenditures. 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 designated as hedges for hedge
accounting purposes and are marked to market each period through earnings.
81
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
The Company also has a hedging strategy to mitigate a portion of the exposure to changes in cash flows resulting
from variable interest rates on the senior secured term loan due 2026 (2026 Term Loan), which are based on the one-
month LIBOR benchmark rate. Hedge effectiveness is assessed each quarter, and for hedges that meet the
effectiveness requirements, changes in fair value are recorded as a component of other comprehensive income (loss),
net of tax, and are reclassified to interest expense as interest payments are made on the Company’s variable rate
debt.
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. See Note 8 for further disclosure
related to the derivative instruments and hedging activities.
Leases
The Company determines if a contract is a lease or contains a lease at inception. Right of use assets related to
operating type leases are reported in other noncurrent assets and the present value of remaining lease obligations is
reported in accrued and other liabilities and other noncurrent liabilities on the Consolidated Balance Sheets. For the
periods presented, CommScope does not have any financing type leases.
Operating lease liabilities are recognized based on the present value of the future minimum lease payments over the
lease term at commencement date. The majority of the Company’s leases do not provide an implicit rate; therefore,
the Company uses the incremental borrowing rates applicable to the economic environment and the duration of the
lease, based on the information available at commencement date, in determining the present value of future
payments. The right of use asset for operating leases is measured using the lease liability adjusted for the impact of
lease payments made prior to commencement, lease incentives received, initial direct costs incurred and any asset
impairments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the
option will be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the
lease term.
The Company remeasures and reallocates the consideration in a lease when there is a modification of the lease that
is not accounted for as a separate contract. The lease liability is remeasured when there is a change in the lease term
or a change in the assessment of whether the Company will exercise a lease option. The Company assesses right of
use assets for impairment in accordance with its long-lived asset impairment policy.
The Company accounts for lease agreements with contractually required lease and non-lease components on a
combined basis. Lease payments made for cancellable leases, variable amounts that are not based on an observable
index and lease agreements with an original duration of less than twelve months are recorded directly to lease
expense.
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.
82
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
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, which approximates the pattern that the economic benefits are
realized by the Company.
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, intangible
assets with finite lives and right of use assets 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
adjusted to estimated fair value. Equity investments without readily determinable fair values are evaluated each
reporting period for impairment based on a qualitative assessment and are then measured at fair value if an
impairment is determined to exist. See Notes 3 and 9 for discussion of asset impairment charges.
Inventory Repurchase Obligations
The Company periodically enters into sell / buy transactions with its contract manufacturers, where it sells certain
component inventory to its contract manufacturers for use in its finished goods. The Company is obligated to
subsequently repurchase this inventory either as a finished food or the original component inventory if it is not
consumed after a specific period of time. The Company records an accounts receivable and a corresponding contract
manufacturer inventory repurchase obligation in accrued and other liabilities related to these transactions. The
Company does not record a sale upon shipment of the inventory to the contract manufacturer and the original value
of the inventory remains in its inventory balance.
Revenue Recognition
The Company recognizes revenue based on the satisfaction of distinct obligations to transfer goods and services to
customers. The Company’s revenue is generated primarily from product or equipment sales. The Company also
generates revenue from custom design and installation services as well as bundled sales arrangements that include
product, software and services. The Company applies a five-step approach as defined in ASC 606, Revenue from
Contracts with Customers, in determining the amount and timing of revenue to be recognized: (1) identify the
contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction
price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue
when a corresponding performance obligation is satisfied. Most contracts with customers are to provide distinct
products or services within a single contract. However, if a contract is separated into more than one performance
obligation, the total transaction price is allocated to each performance obligation in an amount based on the
estimated relative standalone selling price.
Product sales to end-customers or distributors represent over 90% of the Company’s revenue and are recognized at a
point-in-time, which is generally at the point in time when products have been shipped, right to payment has been
obtained and risk of loss has been transferred. Certain of the Company’s product performance obligations include
proprietary operating system software, which typically is not considered separately identifiable. Therefore, sales of
these products and the related software are considered one performance obligation.
License contracts include revenue recognized for the licensing of intellectual property, including software, sold
separately without products. Functional intellectual property licenses do not meet the criteria for revenue to be
recognized over time and revenue is most commonly recognized upon delivery of the license/software to the
customer.
83
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
The Company has service arrangements where net sales are recognized over time. These arrangements include a
variety of post-contract support service offerings, which are generally recognized over time as the services are
provided, including the following: maintenance and support services provided under annual service-level
agreements; “Day 2” professional services to help customers maximize their utilization of deployed systems; and
installation services related to the routine installation of equipment ordered by the customer at the customer’s site.
Revenue is measured based on the consideration the Company expects to be entitled based on customer contracts.
Sales are adjusted for variable consideration amounts, including but not limited to estimated discounts, rebates,
distributor price protection programs and returns. 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. Variable
consideration is primarily related to the Company's sales to distributors, system integrators and value-added
resellers.
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 services arrangements.
Unbilled receivables are recorded when revenues are recognized in advance of invoice issuance. These assets are
presented on a combined basis with accounts receivable and are converted to accounts receivable once 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.
Shipping and Handling Costs
The Company includes shipping and handling costs billed to customers in net sales and includes the costs incurred
to transport product to customers as well as certain internal handling costs, which relate to activities to prepare
goods for shipment, 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.
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 net sales.
Advertising Costs
Advertising costs are expensed in the period in which they are incurred and are reflected in selling, general and
administrative expense on the Consolidated Statements of Operations. Advertising expense was $39.4 million, $35.8
million and $45.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.
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 various periods, depending on the product subject to the warranty and the terms of
the individual agreements. 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.
84
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
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.
Restructuring
The Company records restructuring charges associated with management-approved restructuring plans, which could
include the elimination of job functions, closure or relocation of facilities, reorganization of operations, changes in
management structure, workforce reductions or other actions. Restructuring charges may include ongoing and
enhanced termination benefits related to employee separations, contract termination costs, impairment of certain
assets and other related costs associated with exit or disposal activities. Severance benefits are provided to
employees primarily under the Company’s ongoing benefit arrangements. These severance costs are accrued once
management commits to a plan of termination and it becomes probable that employees will be separated and entitled
to benefits at amounts that can be reasonably estimated. In some instances, the Company enhances its ongoing
termination benefits with one-time termination benefits, which are recognized when employees are notified of their
enhanced termination benefits.
Foreign Currency Translation
For the years ended December 31, 2022, 2021 and 2020, approximately 38%, 42% and 39%, respectively, of the
Company’s net sales were to customers located outside the U.S. A portion of these sales was 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.
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 $4.1
million, $4.4 million and $19.2 million during the years ended December 31, 2022, 2021 and 2020, 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 are recorded in accumulated other comprehensive loss.
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
within income tax expense benefit.
85
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
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.
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.
The Company records the income tax effects related to the activity of its defined benefit plans and hedging
instruments in accumulated other comprehensive loss at the currently enacted tax rate and reclassifies it to net
income (loss) in the same period that the related pre-tax accumulated comprehensive income (loss) reclassifications
are recognized.
Earnings (Loss) Per Share
Basic earnings (loss) per share (EPS) is computed by dividing net income (loss), less any dividends related to the
Series A convertible preferred stock (Convertible Preferred Stock), by the weighted average number of common
shares outstanding during the period. The numerator in diluted EPS is based on the basic EPS numerator adjusted to
add back any dividends related to the Convertible Preferred Stock, subject to antidilution requirements. The
denominator used in diluted EPS is based on the basic EPS computation plus the effect of potentially dilutive
common shares related to the Convertible Preferred Stock and equity-based compensation plans, subject to
antidilution requirements.
For the years ended December 31, 2022, 2021 and 2020, 11.3 million, 12.2 million and 17.4 million shares,
respectively, of outstanding equity-based compensation awards were not included in the computation of diluted EPS
because either the effect was antidilutive or the performance conditions were not met. Of those amounts, for the
years ended December 31, 2022, 2021 and 2020, 2.9 million, 4.9 million and 4.4 million shares, respectively, would
have been considered dilutive if the Company had not been in a net loss position.
For the years ended December 31, 2022, 2021 and 2020, 39.1 million, 37.9 million and 37.1 million, respectively, of
as-if converted shares related to the Convertible Preferred Stock were excluded from the diluted share count because
they were anti-dilutive; however, they may have been considered dilutive if the Company had not been in a net loss
position.
86
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
Year ended December 31,
2021
2022
2020
Numerator:
Net loss
Dividends on Series A convertible preferred stock
Net loss attributable to common stockholders
Denominator:
$ (1,286.9) $ (462.6) $ (573.4)
(56.1)
$ (1,345.9) $ (519.9) $ (629.5)
(59.0)
(57.3)
Weighted average common shares outstanding – basic
Dilutive effect of as-if converted Series A convertible preferred stock
Dilutive effect of equity-based awards
Weighted average common shares outstanding – diluted
207.4
—
—
207.4
203.6
—
—
203.6
196.8
—
—
196.8
Loss per share:
Basic
Diluted
Concentrations of Risk
$
$
(6.49) $
(6.49) $
(2.55) $
(2.55) $
(3.20)
(3.20)
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
Consolidated Balance Sheets. See Note 16 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, 2022, 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 and components purchased by CommScope (aluminum, copper, steel, bimetals, optical
fiber, plastics and other polymers, capacitors, memory devices and silicon chips) 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.
The Company relies on sole suppliers or a limited group of suppliers for certain key components (memory devices,
capacitors and silicon chips), subassemblies and modules and a limited group of contract manufacturers to
manufacture a significant portion of its products. Any disruption or termination of these arrangements could have a
material adverse impact on the Company’s results of operations.
87
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
Recent Accounting Pronouncements
Adopted in 2022
On January 1, 2022, the Company adopted Accounting Standards Update (ASU) No. 2020-06, Debt—Debt with
Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity
(Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The new
guidance simplifies the accounting for convertible instruments by reducing the number of accounting models
available for convertible debt instruments and convertible preferred stock and amends the guidance for the
derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting
conclusions and requires the application of the if-converted method for calculating diluted earnings per share, along
with expanded disclosures. The impact of adopting this new guidance was not material to the consolidated financial
statements.
On January 1, 2022, the Company early adopted ASU No. 2021-08, Business Combinations (Topic 805):
Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The new guidance
improves the accounting for acquired revenue contracts with customers in a business combination by addressing
diversity in practice and inconsistency related to recognition of an acquired contract liability, as well as payment
terms which affect subsequent revenue recognized by the acquirer. According to the guidance, at the acquisition
date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if the acquirer
had originated the contracts. The adoption of this new guidance had no impact to the consolidated financial
statements but will be applied prospectively to future business combinations.
Issued but Not Adopted
In September 2022, the Financial Accounting Standards Board (FASB) issued ASU No. 2022-04, Liabilities–
Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. The new
guidance is expected to improve the transparency of supplier finance programs by requiring that a buyer in a
supplier finance program disclose sufficient qualitative and quantitative information about the program to allow a
user of its financial statements to understand the program's nature, activity during the period, changes from period to
period and potential magnitude. ASU No. 2022-04 is effective for the Company as of January 1, 2023 on a
retrospective basis including interim periods within those fiscal years, except for the requirement to disclose
rollforward information which is effective for the Company as of January 1, 2024. Early adoption is permitted. The
Company had no material supplier finance programs in 2022. The Company does not expect this guidance to have a
material impact on the consolidated financial statements.
In March 2020, January 2021 and December 2022, the FASB issued ASU No. 2020-04, Reference Rate Reform
(Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, ASU No. 2021-01,
Reference Rate Reform (Topic 848): Scope and ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of
the Sunset Date of Topic 848, respectively. Together, the ASUs provide temporary optional guidance to ease the
potential burden in accounting for reference rate reform. The new guidance provides optional expedients and
exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if
certain criteria are met. These transactions include contract modifications, hedging relationships, and sale or transfer
of debt securities classified as held-to-maturity. The most recent amendment defers the sunset date of Topic 848
from December 31, 2022 to December 31, 2024.
88
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
3. GOODWILL AND OTHER INTANGIBLE ASSETS
The following table presents details of the Company’s intangible assets other than goodwill as of December 31,
2022 and 2021:
Gross
Carrying
Amount
2022
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
2021
Accumulated
Amortization
Net
Carrying
Amount
Customer base
Trade names and trademarks
Patents and technologies
Other
Total intangible assets
$
$
3,486.5 $
1,020.6
2,014.4
58.3
6,579.8 $
1,941.5 $
502.9
1,603.6
58.3
4,106.3 $
1,545.0 $
517.7
410.8
—
2,473.5 $
3,508.4 $
1,022.3
2,025.7
58.3
6,614.7 $
439.8
1,310.0
58.3
1,779.3 $ 1,729.1
582.5
715.7
—
3,587.4 $ 3,027.3
There were no impairments of finite-lived intangible assets identified during the years ended December 31, 2022,
2021 or 2020.
Amortization expense for intangible assets was $543.0 million, $613.0 million and $630.5 million for the years
ended December 31, 2022, 2021 and 2020, respectively. Future amortization expense as of December 31, 2022 is as
follows:
2023
2024
2025
2026
2027
Thereafter
$
Estimated
Amortization
Expense
429.8
342.7
277.8
229.1
199.1
995.0
The following table presents the activity in goodwill by reportable segment.
December 31, 2021
Accumulated
Impairment
Losses
$
$
(51.5) $
(159.5)
(41.2)
(142.1)
(413.2)
(807.5) $
Total
2,255.8
507.1
611.8
1,857.0
—
5,231.7
CCS
OWN
NICS
ANS
Home
Total
Goodwill
$
$
2,307.3
666.6
653.0
1,999.1
413.2
6,039.2
December 31, 2020
Accumulated
Impairment
Losses
$
$
(51.5)
(159.5)
(41.2)
(142.1)
(399.5)
(793.8)
Total
$ 2,272.3
511.1
616.6
1,886.5
—
$ 5,286.5
CCS
OWN
NICS
ANS
Home
Total
Goodwill
$ 2,323.8
670.6
657.8
2,028.6
399.5
$ 6,080.3
Activity
Impairment
Foreign
Exchange
and Other
December 31, 2022
Accumulated
Impairment
Losses
Goodwill
— $
— $
—
—
—
—
—
(1,119.6)
—
—
— $ (1,119.6)
$
(26.4)
(6.3)
(3.6)
(3.4)
—
(39.7)
$
$
2,280.9
660.3
649.4
1,995.7
413.2
5,999.5
$
$
(51.5) $
(159.5)
(41.2)
(1,261.7)
(413.2)
(1,927.1) $
Total
2,229.4
500.8
608.2
734.0
—
4,072.4
Additions
(Deductions)
$
$
December 31, 2021
Accumulated
Impairment
Losses
$
$
(51.5)
(159.5)
(41.2)
(142.1)
(413.2)
(807.5)
Total
$ 2,255.8
507.1
611.8
1,857.0
—
$ 5,231.7
Goodwill
$ 2,307.3
666.6
653.0
1,999.1
413.2
$ 6,039.2
Activity
Impairment
Foreign
Exchange
and Other
— $
—
—
—
(13.7)
(13.7)
$
(16.5)
(4.0)
(4.8)
(15.8)
—
(41.1)
Additions
(Deductions)
$
— $
—
—
(13.7)
13.7
$
— $
89
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
During the annual impairment test performed in the fourth quarter of 2022 and in conjunction with the development
of its 2023 and long-range plans, the Company identified changes in the ANS reporting unit's expected future cash
flows due to various market trends expected to affect the business, including technology shifts affecting hardware
sales, trends affecting bandwidth growth and other operational challenges, as well as an increase in the cost of
capital. As a result, the Company determined the goodwill balance in the ANS reporting unit was impaired and
recorded a $1,119.6 million impairment charge. The ANS reporting unit is the same as the ANS segment.
In the second quarter of 2021, management shifted certain product lines from the Company’s ANS segment to its
Home segment to better align the Home segment with how the business is being managed. The realignment of
product lines changed the composition of the Company’s reporting units which resulted in the reallocation of $13.7
million of goodwill from the ANS reporting unit, within the ANS segment, to the Home Networks reporting unit,
within the Home segment, which is reflected as additions (deductions) in the table above. During the annual
impairment test performed in the fourth quarter of 2021 and in conjunction with the development of the Company's
2022 and long-range plans, the Company identified further weakness in the projected results of its Home Networks
reporting unit that stemmed from the continued decline in customer demand for video products. As a result, the
Company determined the goodwill balance in the Home Networks reporting unit was impaired and recorded a $13.7
million impairment charge.
The goodwill balance for the year ended December 31, 2020 reflects the final measurement period adjustments from
the ARRIS acquisition. During the second quarter of 2020, the Company recorded a $206.7 million goodwill
impairment charge relating to the Home Networks reporting unit which resulted in a full impairment of the
remaining goodwill in the Home segment, and as such, the Home segment had no remaining goodwill balance as of
December 31, 2020.
Estimating the fair value of a reporting unit involves uncertainties because it requires management to develop
numerous assumptions, including assumptions about the future growth and potential volatility in revenues and costs,
capital expenditures, industry economic factors and future business strategy. 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 the Company’s strategy, changes in technology or other factors could negatively
affect the fair value in one or more of the Company’s reporting units and result in a material impairment charge in
the future.
4. REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregated Net Sales
See Note 16 for the presentation of net sales by segment and geographic region.
Allowance for Doubtful Accounts
Allowance for doubtful accounts, beginning of period
Provision
Write-offs
Foreign exchange and other
Allowance for doubtful accounts, end of period
Year Ended December 31,
2021
2020
2022
$
$
63.7
22.6
(2.1)
(1.4)
82.8
$
$
40.3
25.8
(0.9)
(1.5)
63.7
$
$
35.4
5.0
(3.2)
3.1
40.3
During the year ended December 31, 2022, the Company recorded an allowance for $20.9 million to reserve the
balance due from a distributor in the OWN segment based on deterioration in the customer’s risk profile. During the
year ended December 31, 2021, the Company recorded an allowance for $30.3 million to reserve the balance due
from a value-added reseller in the Home segment due to deterioration in the customer’s risk profile. These charges
are included in the provision line in the table above and in selling, general and administrative expense on the
Consolidated Statements of Operations.
90
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
Customer Contract Balances
The following table provides the balance sheet location and amounts of contract assets, or unbilled accounts
receivable, and contract liabilities, or deferred revenue, from contracts with customers as of December 31, 2022 and
December 31, 2021.
Contract Balance Type
Unbilled accounts receivable
Balance Sheet Location
Accounts receivable, net of allowance for doubtful accounts
2022
2021
$
35.3 $
35.0
December 31,
Deferred revenue - current
Deferred revenue - noncurrent Other noncurrent liabilities
Accrued and other liabilities
Total contract liabilities
$
97.9 $
63.4
94.6
61.1
$ 161.3 $ 155.7
There were no material changes to contract asset balances for the year ended December 31, 2022 as a result of
changes in estimates or impairments. The change in the contract liability balance from December 31, 2021 to
December 31, 2022 was primarily due to upfront support billings to be recognized over the support term. During the
year ended December 31, 2022, the Company recognized $88.3 million of revenue related to contract liabilities
recorded as of December 31, 2021.
5. LEASES
The Company has operating type leases for real estate, equipment and vehicles both in the U.S. and internationally.
As of December 31, 2022 and 2021, the Company had no finance type leases. Operating lease expense was $97.6
million, $102.1 million and $105.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Operating lease expense included period cost for short-term, cancellable and variable leases that were not included
in lease liabilities, of $36.2 million, $33.2 million and $31.3 million for the years ended December 31, 2022, 2021
and 2020, respectively.
The Company occasionally subleases all or a portion of certain unutilized real estate facilities. As of December 31,
2022, the Company’s sublease arrangements were classified as operating type leases and the income amounts were
not material for the years ended December 31, 2022, 2021 and 2020, respectively.
Supplemental cash flow information related to operating leases:
Operating cash paid to settle lease liabilities
Right of use asset additions in exchange for lease liabilities
Year Ended December 31,
2021
2020
2022
$
$
59.4
43.5
$
71.5
25.3
74.6
21.9
Supplemental balance sheet information related to operating leases:
Balance Sheet Location
2022
2021
December 31,
Right of use assets
Other noncurrent assets
Lease liabilities - current
Lease liabilities - noncurrent
Total lease liabilities
Accrued and other liabilities
Other noncurrent liabilities
$
$
$
149.0
47.7
123.5
171.2
$
$
$
162.5
46.7
140.8
187.5
91
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
Weighted average remaining lease term (in years)
Weighted average discount rate
Future minimum lease payments under non-cancellable leases as of December 31, 2022 are as follows:
Operating Leases
2023
2024
2025
2026
2027
Thereafter
Total minimum lease payments
Less: imputed interest
Total
$
$
5.3
8.8%
57.2
45.0
31.8
24.4
15.0
47.9
221.3
(50.1)
171.2
6. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
Accounts Receivable
Accounts receivable - trade
Accounts receivable - other
Allowance for doubtful accounts
Total accounts receivable, net
Inventories
Raw materials
Work in process
Finished goods
Total inventories, net
Property, Plant and Equipment
Land and land improvements
Buildings and improvements
Machinery and equipment
Construction in progress
Accumulated depreciation
Total property, plant and equipment, net
December 31,
2022
2021
1,545.3
61.1
(82.8)
1,523.6
$
$
1,499.9
96.4
(63.7)
1,532.6
$
$
December 31,
2022
2021
535.8
212.7
839.6
1,588.1
$
$
436.0
178.3
821.5
1,435.8
December 31,
2022
2021
52.2
340.9
1,038.1
51.9
1,483.1
(873.5)
609.6
$
$
54.1
334.4
968.0
87.2
1,443.7
(787.4)
656.3
$
$
$
$
92
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
Depreciation expense was $127.2 million, $136.7 million and $158.3 million during the years ended December 31,
2022, 2021 and 2020, respectively. No interest was capitalized during the years ended December 31, 2022, 2021 or
2020.
Accrued and Other Liabilities
Compensation and employee benefit liabilities
Accrued interest
Deferred revenue
Contract manufacturer inventory repurchase obligation
Restructuring liabilities
Operating lease liabilities
Product warranty accrual
Other
Total accrued and other liabilities
December 31,
2022
2021
301.3
118.1
97.9
79.1
58.9
47.7
44.8
302.2
1,050.0
$
$
304.7
118.3
94.6
14.5
41.0
46.7
54.0
316.0
989.8
$
$
Accumulated Other Comprehensive Loss
The following table presents changes in accumulated other comprehensive loss (AOCL), net of tax:
Foreign currency translation
Balance at beginning of period
Other comprehensive loss
Amounts reclassified from AOCL
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
Hedging instruments
Balance at beginning of period
Other comprehensive income
Balance at end of period
Net AOCL at end of period
Year Ended December 31,
2022
2021
$
$
$
$
$
$
$
(165.8)
(104.3)
(0.2)
(270.3)
(13.4)
(1.4)
—
(14.8)
(27.2)
16.0
(11.2)
(296.3)
$
$
$
$
$
$
$
(80.5)
(86.4)
1.1
(165.8)
(36.4)
24.1
(1.1)
(13.4)
(39.0)
11.8
(27.2)
(206.4)
Amounts reclassified from net AOCL related to foreign currency translation and defined benefit plans are recorded
in other expense, net in the Consolidated Statements of Operations.
Cash Flow Information
Cash paid during the period for:
Income taxes, net of refunds
Interest
Year Ended December 31,
2022
2021
$
130.7
563.2
$
79.4
525.9
93
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
7.
FINANCING
7.125% senior notes due July 2028
5.00% senior notes due March 2027
8.25% senior notes due March 2027
6.00% senior notes due June 2025
4.75% senior secured notes due September 2029
6.00% senior secured notes due March 2026
Senior secured term loan due April 2026
Senior secured revolving credit facility
Total principal amount of debt
Less: Original issue discount, net of amortization
Less: Debt issuance costs, net of amortization
Less: Current portion
Total long-term debt
Senior Notes
December 31,
2022
2021
$
$
700.0
750.0
1,000.0
1,300.0
1,250.0
1,500.0
3,096.0
—
9,596.0
(15.9)
(78.5)
(32.0)
9,469.6
$
$
700.0
750.0
1,000.0
1,300.0
1,250.0
1,500.0
3,128.0
—
9,628.0
(20.3)
(97.2)
(32.0)
9,478.5
As of December 31, 2022, the Company had outstanding two series of senior secured notes: (1) $1,250.0 million of
4.75% senior secured notes due September 1, 2029 (the 2029 Secured Notes) issued by CommScope, Inc. in August
2021; and (2) $1.5 billion of 6.00% senior secured notes due March 1, 2026 issued by CommScope, Inc. in February
2019 (the 2026 Secured Notes and, together with the 2029 Secured Notes, the Secured Notes). As of December 31,
2022, the Company had outstanding four series of senior unsecured notes: (1) $700.0 million initial aggregate
principal amount of 7.125% senior notes due July 1, 2028 (the 2028 Notes) issued by CommScope, Inc. in July
2020; (2) $ 750.0 million initial aggregate principal amount of 5.00% senior notes due March 15, 2027 issued by
CommScope Technologies LLC (CommScope Technologies), a wholly owned subsidiary of the Company, in March
2017 (the 5.00% 2027 Notes); (3) $1.3 billion aggregate principal amount of 6.00% senior notes due June 15, 2025
issued by CommScope Technologies in June 2015 (the 2025 Notes, and together with the 5.00% 2027 Notes, the
CommScope Technologies Notes); (4) $1.0 billion initial aggregate principal amount of 8.25% senior notes due
March 1, 2027 issued by CommScope, Inc. in February 2019 (the 8.25% 2027 Notes and, together with the 2028
Notes, the CommScope, Inc. Notes; the Secured Notes, the CommScope Technologies Notes and the CommScope,
Inc. Notes, collectively, the Senior Notes).
The indentures governing the Senior Notes contain covenants that restrict the ability of CommScope, Inc. and its
restricted subsidiaries to, among other things, incur additional debt, make certain payments, including payment of
dividends (except, in the case of the CommScope, Inc. Notes and the Secured Notes, with respect to the Convertible
Preferred Stock) or repurchases of equity interests of CommScope, Inc. or the applicable issuer, make loans or
acquisitions or capital contributions and certain investments, incur certain liens, sell assets, merge or consolidate or
liquidate other entities and enter into certain transactions with affiliates.
There are no financial maintenance covenants in the indentures governing the Senior Notes. Events of default under
the indentures governing the Senior Notes include, among others, non-payment of principal or interest when due,
covenant defaults, bankruptcy and insolvency events and cross acceleration to material debt.
94
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
4.75% Senior Secured Notes due 2029 and 6.00% Senior Secured Notes due 2026 (the Secured Notes)
The 2029 Secured Notes mature on September 1, 2029 and the 2026 Secured Notes mature on March 1, 2026.
Interest is payable on the Secured Notes semi-annually in arrears on March 1 and September 1 of each year. The
Secured Notes are guaranteed on a senior secured basis by the Company and each of CommScope, Inc.’s existing
and future wholly owned domestic restricted subsidiaries that is an obligor under the senior secured credit facilities
or certain other debt, subject to certain exceptions. The Secured Notes and the related guarantees are secured on a
first-priority basis by security interests in all of the assets that secure indebtedness under the 2026 Term Loan on a
first-priority basis, and on a second-priority basis in all assets that secure the Revolving Credit Facility (as defined
below) on a first-priority basis and the 2026 Term Loan on a second-priority basis. The Secured Notes and the
related guarantees rank senior in right of payment to all of CommScope, Inc.’s and the guarantors’ subordinated
indebtedness and equally in right of payment with all of CommScope, Inc.’s and the guarantors’ senior indebtedness
(without giving effect to collateral arrangements), including the senior secured credit facilities and the other Senior
Notes. The Secured Notes and the related guarantees are effectively senior to all of CommScope, Inc.’s and the
guarantors’ unsecured indebtedness and debt secured by a lien junior to the liens securing the Secured Notes, in each
case to the extent of the value of the collateral, and effectively equal to all of CommScope, Inc.’s and the guarantors’
senior indebtedness secured on the same priority basis as the Secured Notes, including the 2026 Term Loan. The
Secured Notes and the related guarantees are effectively subordinated to any of CommScope, Inc.’s or the
guarantors’ indebtedness that is secured by assets that do not constitute collateral for the Secured Notes and
effectively subordinated to any of CommScope, Inc.’s or the guarantors’ indebtedness that is secured by a senior-
priority lien, including under the Revolving Credit Facility, in each case to the extent of the value of the assets
securing such indebtedness. In addition, the Secured Notes and related guarantees are structurally subordinated to all
existing and future liabilities (including trade payables) of CommScope, Inc.’s subsidiaries that do not guarantee the
Secured Notes.
The Secured Notes may be redeemed prior to maturity under certain circumstances. Upon certain change of control
events, the Secured Notes may be redeemed at the option of the holders at 101% of their face amount, plus accrued
and unpaid interest. The 2029 Secured Notes may be redeemed on or after September 1, 2024 by CommScope, Inc.
at the redemption prices specified in the indenture governing the 2029 Secured Notes. Prior to September 1, 2024,
the 2024 Secured Notes may be redeemed by CommScope, Inc. at a redemption price equal to 100% of their
principal amount, plus a make-whole premium (as specified in the indenture governing the 2029 Secured Notes),
plus accrued and unpaid interest. Prior to September 1, 2024, under certain circumstances, CommScope, Inc. may
also redeem up to 40% of the aggregate principal amount of the 2029 Secured Notes at a redemption price of
104.750%, plus accrued and unpaid interest, using the proceeds of certain equity offerings. At any time prior to
September 1, 2024, CommScope, Inc. may redeem during each calendar year up to 10.0% of the aggregate principal
amount of the 2029 Secured Notes at a redemption price equal to 103.0% of the aggregate principal amount of the
2029 Secured Notes to be redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of
redemption. The 2026 Secured Notes may be redeemed by CommScope, Inc. at the redemption prices specified in
the indenture governing the 2026 Secured Notes.
95
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
7.125% Senior Notes due 2028 and 8.25% Senior Notes due 2027 (the CommScope, Inc. Notes)
The 2028 Notes mature on July 1, 2028 and the 8.25% 2027 Notes mature on March 1, 2027. Interest is payable
semi-annually in arrears on the 2028 Notes on July 1 and January 1 of each year and on the 8.25% 2027 Notes on
March 1 and September 1 of each year. The CommScope, Inc. Notes are guaranteed on a senior unsecured basis by
each of CommScope, Inc.’s existing and future wholly owned domestic restricted subsidiaries that is an obligor
under the senior secured credit facilities or certain other capital markets debt, subject to certain exceptions. The
CommScope, Inc. Notes and the related guarantees rank senior in right of payment to all of CommScope, Inc.’s and
the guarantors’ subordinated indebtedness and equally in right of payment with all of CommScope, Inc.’s and the
guarantors’ senior indebtedness (without giving effect to collateral arrangements), including the senior secured
credit facilities and the other Senior Notes. The CommScope, Inc. Notes and the related guarantees are effectively
junior to all of CommScope, Inc.’s and the guarantors’ existing and future secured indebtedness, including the
Secured Notes and the senior secured credit facilities, to the extent of the value of the assets securing such secured
indebtedness. In addition, the CommScope, Inc. Notes and related guarantees are structurally subordinated to all
existing and future liabilities (including trade payables) of CommScope, Inc.’s subsidiaries that do not guarantee the
CommScope, Inc. Notes.
The CommScope, Inc. Notes may be redeemed prior to maturity under certain circumstances. Upon certain change
of control events, the CommScope, Inc. Notes may be redeemed at the option of the holders at 101% of their
principal amount, plus accrued and unpaid interest. The 2028 Notes may be redeemed by CommScope, Inc. on or
after July 1, 2023 at the redemption prices specified in the indenture governing the 2028 Notes. Prior to July 1,
2023, the 2028 Notes may be redeemed by CommScope, Inc. at a redemption price equal to 100% of their principal
amount, plus a make-whole premium (as specified in the indenture governing the 2028 Notes), plus accrued and
unpaid interest. Prior to July 1, 2023, under certain circumstances, CommScope, Inc. may also redeem up to 40% of
the aggregate principal amount of the 2028 Notes at a redemption price of 107.125%, plus accrued and unpaid
interest, using the proceeds of certain equity offerings. The 8.25% 2027 Notes may be redeemed by CommScope,
Inc. at the redemption prices specified in the indenture governing the 8.25% 2027 Notes.
5.00% Senior Notes due 2027 and 6.00% Senior Notes due 2025 (the CommScope Technologies Notes)
The 5.00% 2027 Notes mature on March 15, 2027 and the 2025 Notes mature on June 15, 2025. Interest is payable
on the 5.00% 2027 Notes semi-annually in arrears on March 15 and September 15 of each year and on the 2025
Notes on June 15 and December 15 of each year.
The CommScope Technologies Notes are guaranteed on a senior unsecured basis by CommScope, Inc. and each of
CommScope, Inc.’s existing and future wholly owned domestic restricted subsidiaries (other than CommScope
Technologies) that is an obligor under the senior secured credit facilities or certain other capital markets debt,
subject to certain exceptions. The CommScope Technologies Notes and the related guarantees rank senior in right of
payment to all of CommScope Technologies’ and the guarantors’ subordinated indebtedness and equally in right of
payment with all of CommScope Technologies’ and the guarantors’ senior indebtedness (without giving effect to
collateral arrangements), including the senior secured credit facilities and the other Senior Notes. The CommScope
Technologies Notes and the related guarantees are effectively junior to all of CommScope Technologies’ and the
guarantors’ existing and future secured indebtedness, including the Secured Notes and the senior secured credit
facilities, to the extent of the value of the assets securing such secured indebtedness. In addition, the CommScope
Technologies Notes and related guarantees are structurally subordinated to all existing and future liabilities
(including trade payables) of CommScope, Inc.’s subsidiaries that do not guarantee the CommScope Technologies
Notes.
The CommScope Technologies Notes may be redeemed prior to maturity under certain circumstances. Upon certain
change of control events, the CommScope Technologies Notes may be redeemed at the option of the holders at
101% of their principal amount, plus accrued and unpaid interest. The 5.00% 2027 Notes may be redeemed by
CommScope Technologies at the redemption prices specified in the indenture governing the 5.00% 2027 Notes. The
2025 Notes may be redeemed by CommScope Technologies at the redemption prices specified in the indenture
governing the 2025 Notes.
96
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
Senior Secured Credit Facilities
Senior Secured Term Loan due 2026
The 2026 Term Loan has scheduled amortization payments of $32.0 million per year due in equal quarterly
installments, which began with the quarter ended December 31, 2019, with the balance due at maturity (April 2026).
For the year ended December 31, 2022, the interest rate was, at the Company’s option, either (1) the base rate
(which is the highest of (w) the greater of the then-current federal funds rate set by the Federal Reserve Bank of
New York and the overnight federal funds rate, in each case, plus 0.5%, (x) the prime rate on such day, (y) the one-
month Eurodollar rate published on such date plus 1.00% and (z) 1.00% per annum) plus an applicable margin of
2.25% or (2) one-, two-, three- or six-month LIBOR or, if available from all lenders, 12-month LIBOR or any
shorter period (selected at the option of CommScope, Inc.) plus an applicable margin of 3.25%. For the year ended
December 31, 2022, the 2026 Term Loan was subject to a LIBOR floor of 0.00%.
Subject to certain conditions, the 2026 Term Loan may be increased or a new incremental term loan facility may be
added to increase the capacity by up to the sum of the greater of $950.0 million and 50% of Consolidated EBITDA,
as defined in the credit agreement governing the 2026 Term Loan (the Credit Agreement), plus an unlimited amount
as long as on a pro forma basis the Company meets certain net leverage ratios or fixed charge ratios as defined in the
Credit Agreement.
CommScope, Inc. may voluntarily prepay loans under the 2026 Term Loan, subject to minimum amounts, with prior
notice but without premium or penalty. CommScope, Inc. must prepay the 2026 Term Loan with the net cash
proceeds of certain asset sales, the incurrence or issuance of specified refinancing indebtedness and, commencing
with the fiscal year ending in December 2020, 50% of excess cash flow (such percentage subject to reduction based
on the achievement of specified Consolidated First Lien Net Leverage Ratios), in each case, subject to certain
reinvestment rights and other exceptions.
CommScope, Inc.’s obligations under the 2026 Term Loan are guaranteed by the Company and each of
CommScope, Inc.’s direct and indirect wholly owned U.S. subsidiaries (subject to certain permitted exceptions
based on immateriality thresholds of aggregate assets and revenues of excluded U.S. subsidiaries). The 2026 Term
Loan is secured by a lien on substantially all of CommScope, Inc.’s and the guarantors’ current and fixed assets
(subject to certain exceptions), and the 2026 Term Loan will have a first-priority lien on all fixed assets and a
second-priority lien on all current assets (second in priority to the liens securing the Revolving Credit Facility), in
each case, subject to other permitted liens.
The 2026 Term Loan contains customary negative covenants consistent with those applicable to the 2026 Secured
Notes, including, but not limited to, restrictions on the ability of CommScope, Inc. and its subsidiaries to merge and
consolidate with other companies, incur indebtedness, grant liens or security interests on assets, pay dividends
(except with respect to the Convertible Preferred Stock) or make other restricted payments, sell or otherwise transfer
assets or enter into certain transactions with affiliates.
The 2026 Term Loan provides that, upon the occurrence of certain events of default, the obligations thereunder may
be accelerated. Such events of default will include payment defaults, material inaccuracies of representations and
warranties, covenant defaults, cross-defaults to other material indebtedness, voluntary and involuntary bankruptcy
proceedings, material money judgments, material pension-plan events, change of control and other customary events
of default.
During the year ended December 31, 2022, the Company made scheduled amortization payments totaling $32.0
million due in equal quarterly installments on the 2026 Term Loan. The current portion of long-term debt reflects
$32.0 million of repayments due under the 2026 Term Loan.
No portion of the 2026 Term Loan was reflected as a current portion of long-term debt as of December 31, 2022
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 2022 related to 2021.
97
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
Senior Secured Revolving Credit Facility
On October 19, 2022, the Company completed the refinancing (the Refinancing) of the Company’s asset-based
revolving credit facility (Revolving Credit Facility) which continues to provide borrowing capacity of up to $1.0
billion, subject to certain limitations, available to CommScope, Inc. and its U.S. subsidiaries designated as co-
borrowers (the U.S. Revolving Borrowers). The Refinancing, among other things, (i) refinanced in full all existing
loans outstanding under the Revolving Credit Facility immediately prior to the Refinancing, (ii) extended the
maturity of the Revolving Credit Facility from April 2024 to the earliest of (x) September 30, 2027, (y) the date the
commitments of the lenders under the Revolving Credit Agreement are reduced to zero and (z) 91 days prior to the
maturity date of any other indebtedness of a "Credit Party" (as defined in the credit agreement governing the
Revolving Credit Facility) that has a scheduled maturity or weighted average life to maturity that is prior to
September 30, 2027 (subject to certain exceptions) and (iii) replaced the existing revolving loan commitments
outstanding under the Revolving Credit Facility immediately prior to the Refinancing with a new tranche of
commitments (the Tranche A Revolving Commitments) for borrowings denominated in U.S. dollars, euros and
pounds sterling made to the U.S. Revolving Borrowers and a separate tranche of commitments (the Tranche B
Revolving Commitments) for borrowings denominated in euros, pounds sterling and Swiss francs made to the U.S.
Revolving Borrowers and certain of the Company's wholly owned Irish, English and Swiss subsidiaries that are
joined as borrowers under the Revolving Credit Facility (such subsidiaries, the European Revolving Borrowers and,
together with the U.S. Revolving Borrowers, the Revolving Borrowers). Prior to the joinder of any European
Revolving Borrower, Tranche A Loans are available to the U.S. Revolving Borrowers in an aggregate amount equal
to (i) the lesser of (x) $1.0 billion and (y) the borrowing base of the U.S. Revolving Borrowers minus (ii) the
aggregate amount of all "Tranche A Revolving Credit Outstandings" (as defined in the credit agreement governing
the Revolving Credit Facility). From and after the joinder of any European Revolving Borrower, the Revolving
Borrowers may reallocate an amount of the Tranche A Revolving Commitments to Tranche B Revolving
Commitments, and Tranche B Loans will then be available to the Revolving Borrowers in an amount equal to (i) the
lesser of (x) the Tranche B Revolving Commitments and (y) the sum of the borrowing base of the European
Revolving Borrowers minus (ii) the aggregate amount of all "Tranche B Revolving Credit Outstandings" (as defined
in the credit agreement governing the Revolving Credit Facility). At no time will the aggregate commitments of the
lenders under the Revolving Credit Facility exceed $1.0 billion. Borrowing base calculations are based on the sum
of specific percentages of eligible accounts receivable and eligible inventory, minus the amount of any applicable
reserves. The ability to draw under the Revolving Credit Facility or issue letters of credit is conditioned upon,
among other things, delivery of prior written notice of a borrowing or issuance, as applicable, the ability of the
Revolving Borrowers to reaffirm the representations and warranties contained in the credit agreement governing the
Revolving Credit Facility and the absence of any default or event of default. As of December 31, 2022, the
Company had no outstanding borrowings under the Revolving Credit Facility and had availability of $908.8 million,
after giving effect to borrowing base limitations and outstanding letters of credit.
Letters of credit under the Revolving Credit Facility are limited to the lesser of (x) $250.0 million and (y) the
aggregate unused amount of commitments under the Revolving Credit Facility then in effect. Subject to certain
conditions, the Revolving Credit Facility may be expanded by up to $400.0 million in additional commitments.
Loans under the Revolving Credit Facility may be denominated, at the option of the Revolving Borrowers, (i) with
respect to Tranche A Loans, in U.S. dollars, euros or pounds sterling, and (ii) with respect to Tranche B Loans, U.S.
dollars, euros, pounds sterling or Swiss francs.
Borrowings under the Revolving Credit Facility will bear interest at a floating rate, which can be either (1) an
adjusted Term SOFR rate (for borrowings denominated in U.S. dollars), (2) the EURIBOR rate (for borrowings
denominated in euros), (3) the Sterling Overnight Index Average (SONIA) (for borrowings denominated in pounds
sterling) or (4) the Swiss Average Rate Overnight (SARON) (for borrowings denominated in Swiss francs), in each
case, subject to certain adjustments plus an applicable margin of 1.25% to 1.50% or, at the option of the Revolving
Borrowers, a base rate plus an applicable margin of 0.25% to 0.50%.
98
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
The obligations of the U.S. Revolving Borrowers under the Revolving Credit Facility are guaranteed by the
Company, CommScope, Inc. and each of CommScope, Inc.’s direct and indirect wholly owned U.S. subsidiaries
(subject to certain permitted exceptions based on immateriality thresholds of aggregate assets and revenues of
excluded U.S. subsidiaries). The Revolving Credit Facility is secured by a lien on substantially all of the U.S.
Revolving Borrowers’ and the guarantors’ current and fixed assets (subject to certain exceptions). The Revolving
Credit Facility has a first-priority lien on all current assets and a second-priority lien on all fixed assets (second in
priority to the liens securing the 2029 Secured Notes, the 2026 Secured Notes and the 2026 Term Loan), in each
case, subject to other permitted liens.
The following fees are applicable under the Revolving Credit Facility: (i) an unused line fee of (x) 0.25% per annum
of the unused portion of the Revolving Credit Facility when the average unused portion of the facility is less than
50% of the aggregate commitments under the Revolving Credit Facility or (y) 0.375% per annum of the unused
portion of the Revolving Credit Facility when the average unused portion of the facility is equal to or greater than
50% of the aggregate commitments under the Revolving Credit Facility; (ii) a letter of credit participation fee on the
aggregate stated amount of each letter of credit equal to the applicable margin for adjusted Term SOFR, EURIBOR,
SONIA and SARON loans, as applicable; (iii) a letter of credit fronting fee of 0.125% per annum, multiplied by the
average aggregate daily maximum amount available to be drawn under all applicable letters of credit issued by such
letter of credit issuer; and (iv) certain other customary fees and expenses of the lenders and agents thereunder.
The Revolving Borrowers will be required to make prepayments under the Revolving Credit Facility at any time
when, and to the extent that, the aggregate amount of the outstanding loans and letters of credit under the Revolving
Credit Facility exceeds the lesser of the aggregate amount of commitments in respect of the Revolving Credit
Facility and the borrowing base.
The Revolving Credit Facility contains customary covenants, including, but not limited to, restrictions on the ability
of CommScope, Inc. and its subsidiaries to merge and consolidate with other companies, incur indebtedness, grant
liens or security interests on assets, make acquisitions, loans, advances or investments, pay dividends (except with
respect to the Convertible Preferred Stock), sell or otherwise transfer assets, optionally prepay or modify terms of
any junior indebtedness, enter into certain transactions with affiliates or change lines of business. The Revolving
Credit Facility contains a Covenant Fixed Charge Coverage Ratio (as defined in the credit agreement governing the
Revolving Credit Facility) of 1.00 to 1.00. The credit agreement governing the Revolving Credit Facility provides
that the Covenant Fixed Charge Coverage Ratio must be tested and must exceed the level set forth above only in the
event that excess availability under the Revolving Credit Facility is less than the greater of $80 million and 10% of
the maximum credit as of the end of the most recent fiscal quarter. As of December 31, 2022, the Company’s excess
availability and Covenant Fixed Charge Coverage Ratio were in excess of the Revolving Credit Facility’s
requirements.
The Revolving Credit Facility provides that, upon the occurrence of certain events of default, the obligations
thereunder may be accelerated and the lending commitments terminated. Such events of default include payment
defaults, material inaccuracies of representations and warranties, covenant defaults, cross-defaults to other material
indebtedness, voluntary and involuntary bankruptcy proceedings, material money judgments, material pension-plan
events, certain change of control events and other customary events of default.
Other Matters
The following table summarizes scheduled maturities of long-term debt as of December 31, 2022:
Scheduled maturities of long-term debt
$
32.0
$
32.0
2023
2024
2025
$1,332.0
2026
$ 4,500.0
2027
$ 1,750.0
Thereafter
$ 1,950.0
The Company’s non-guarantor subsidiaries held $3,664 million, or 31%, of total assets and $1,029 million, or 8%,
of total liabilities as of December 31, 2022 and accounted for $2,708 million, or 29%, of net sales for the year ended
December 31, 2022. All amounts presented exclude intercompany balances.
99
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
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 impact of the interest rate
swap, and the amortization of debt issuance costs and original issue discount, was 6.91% at December 31, 2022 and
5.74% at December 31, 2021.
8. 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, 2022, the Company had foreign
exchange contracts outstanding with maturities of up to eight months and aggregate notional values of $522.2
million (based on exchange rates as of December 31, 2022). 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.
The following table presents the balance sheet location and fair value of the Company’s derivatives not designated
as hedging instruments:
Contract Type
Foreign currency contracts
Foreign currency contracts
Location of Asset (Liability)
Prepaid expenses and other current assets
Accrued and other liabilities
Total derivatives not designated as
hedging instruments
December 31,
2022
2021
$
$
9.9
(6.5)
3.4
$
$
5.7
(0.8)
4.9
The pretax impact of the foreign currency forward contracts, both matured and outstanding, on the Consolidated
Statements of Operations is as follows:
Other expense, net
Location of Gain (Loss)
2022
Year Ended December 31,
2021
2020
$
(19.0)
$
(2.6)
$
24.9
Derivative Instruments Designated As Cash Flow Hedges of Interest Rate Risk
The Company has a hedging strategy to mitigate a portion of the exposure to changes in cash flows resulting from
variable interest rates on the 2026 Term Loan. The total notional amount of the interest rate swap derivatives as of
December 31, 2022 was $300 million with outstanding maturities up to fifteen months. There was no ineffectiveness
on the instruments designated as cash flow hedges for the years ended December 31, 2022, 2021 or 2020.
The following table presents the balance sheet location and fair value of the derivative instruments designated as
cash flow hedges of interest rate risk:
Contract Type
Interest rate swap contracts
Interest rate swap contracts
Interest rate swap contracts
Total derivatives designated as cash
flow hedging instruments
Location of Asset (Liability)
Other noncurrent assets
Accrued and other liabilities
Other noncurrent liabilities
December 31,
2022
2021
$
$
$
8.6
—
—
8.6
$
—
(1.5)
(10.3)
(11.8)
100
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
The impact of the effective portion of the interest rate swap contracts designated as cash flow hedging instruments
on the Consolidated Statements of Comprehensive Loss is as follows:
Location of Gain (Loss)
2022
Year Ended December 31,
2021
2020
Other comprehensive income (loss), net of tax
$
16.0
$
14.4
$
(10.2)
9. FAIR VALUE MEASUREMENTS
The Company’s financial instruments consist primarily of cash and cash equivalents, trade receivables, trade
payables, debt instruments, interest rate swap contracts 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, 2022 and December 31, 2021 were considered representative of their fair values due to their short
terms to maturity. The fair values of the Company’s debt instruments, interest rate swap contracts 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 debt instruments, interest
rate derivatives and foreign currency contracts as of December 31, 2022 and 2021, are as follows:
Assets:
Foreign currency contracts
Interest rate swap contracts
Liabilities:
7.125% senior notes due 2028
5.00% senior notes due 2027
8.25% senior notes due 2027
6.00% senior notes due 2025
4.75% senior secured notes due 2029
6.00% senior secured notes due 2026
Senior secured term loan due 2026
Foreign currency contracts
Interest rate swap contracts
December 31, 2022
December 31, 2021
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Valuation
Inputs
$
$
9.9
8.6
700.0
750.0
1,000.0
1,300.0
1,250.0
1,500.0
3,096.0
6.5
—
$
$
9.9
8.6
502.6
513.4
780.8
1,183.4
1,000.0
1,383.3
2,925.7
6.5
—
$
$
5.7
—
700.0
750.0
1,000.0
1,300.0
1,250.0
1,500.0
3,128.0
0.8
11.8
$
$
5.7
—
690.4
705.0
1,023.8
1,300.0
1,240.3
1,554.4
3,092.8
0.8
11.8
Level 2
Level 2
Level 2
Level 2
Level 2
Level 2
Level 2
Level 2
Level 2
Level 2
Level 2
Non-Recurring Fair Value Measurements
During the annual impairment test in the fourth quarter of 2022, a goodwill impairment charge of $1,119.6 million
was recorded related to the ANS reporting unit in the ANS segment. The fair value of each reporting unit was
determined using a discounted cash flow (DCF) model and a guideline public company approach, with 75% of the
value determined using the DCF model and 25% of the value determined using the guideline public company
approach. Under the DCF method, the fair value of a reporting unit is based on the present value of estimated future
cash flows. Under the guideline public company method, the fair value is based upon market multiples of revenue
and earnings derived from publicly-traded companies with similar operating and investment characteristics as the
reporting unit. The inputs to both the DCF model and the guideline public company analysis are Level 3 valuation
inputs. Changes in any of these inputs, among other factors, could negatively affect the fair value of one or more of
the Company’s reporting units and result in a material impairment charge in the future.
101
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
During the annual impairment test in the fourth quarter of 2021, the Company recorded a pretax goodwill
impairment charge of $13.7 million in the Home segment related to the goodwill reallocated from the ANS reporting
unit to the Home Networks reporting unit in the second quarter of 2021 as a result of a segment realignment. The
fair value of each reporting unit was determined consistent with the approach used in the annual test in 2022 and
used Level 3 valuation inputs.
During the second quarter of 2020, the Company recorded a pretax goodwill impairment charge of $206.7 million
related to the Home Networks reporting unit in the Home segment. The fair value of the reporting unit was
determined as of May 31, 2020 based on the present value of estimated future cash flows using a DCF model. The
inputs to the DCF model were 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.
10. 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 cash-based and primarily
consist of employee-related costs, which include severance and other one-time termination benefits.
In addition to the employee-related costs, the Company records other costs associated with restructuring actions
such as the gain or loss on the sale of facilities and impairment costs arising from unutilized real estate or
equipment. The Company attempts to sell or lease this unutilized space but additional impairment charges may be
incurred related to these or other excess assets.
The Company’s net pretax restructuring activity included in restructuring costs, net on the Consolidated Statements
of Operations, by segment, was as follows:
2022
2021
2020
Year Ended December 31,
CCS
OWN
NICS
ANS
Home
Total
$
$
17.1
22.4
9.9
12.2
1.3
62.9
$
$
62.0
3.6
8.5
9.2
8.6
91.9
$
$
Restructuring liabilities were included in the Company’s Consolidated Balance Sheets as follows:
Accrued and other liabilities
Other noncurrent liabilities
Total restructuring liabilities
December 31,
2022
2021
$
$
58.9
0.5
59.4
$
$
25.9
15.7
8.0
8.8
30.0
88.4
41.0
28.2
69.2
102
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
CommScope NEXT Restructuring Actions
In the first quarter of 2021, the Company announced and began implementing a business transformation initiative
called CommScope NEXT. This initiative is designed to drive shareholder value through three pillars: profitable
growth, operational efficiency and portfolio optimization. The activity within the liability established for
CommScope NEXT restructuring actions was as follows:
Balance at December 31, 2020
Additional expense, net
Cash paid
Foreign exchange and other non-cash items
Balance at December 31, 2021
Additional expense, net
Cash paid
Foreign exchange and other non-cash items
Balance at December 31, 2022
Employee-
Related
Costs
— $
86.7
(26.6)
0.5
60.6
50.7
(48.9)
(3.7)
58.7
$
$
$
Other
Total
— $
4.0
—
(4.0)
—
8.6
(0.5)
(8.1)
— $
—
90.7
(26.6)
(3.5)
60.6
59.3
(49.4)
(11.8)
58.7
CommScope NEXT actions to date have included employee costs related to the closure of an international
manufacturing facility as well as headcount reductions in manufacturing, engineering, marketing, sales and
administrative functions. Asset impairment charges related to real estate and property, plant and equipment that are
affected by restructuring activities are included in the other category in the table above and in restructuring costs, net
on the Consolidated Statements of Operations for the years ended December 31, 2022 and 2021.
The Company has recognized restructuring charges of $150.0 million to date related to CommScope NEXT actions.
The Company expects to make cash payments of $58.2 million in 2023 and $0.5 million in 2024 to settle
CommScope NEXT restructuring actions. Additional restructuring actions related to CommScope NEXT are
expected to be identified and the resulting charges and cash requirements could be material.
11. 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, 2022, 2021 and 2020, the Company made
contributions to defined contribution retirement savings plans of $51.2 million, $50.4 million and $56.6 million,
respectively.
The Company also maintains noncontributory and contributory deferred compensation plans. During the years
ended December 31, 2022, 2021 and 2020, the Company recognized pretax costs of $2.7 million, $1.3 million and
$2.6 million, respectively, related to these plans. The liability related to these plans was $22.5 million and $31.3
million as of December 31, 2022 and 2021, respectively.
103
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
Pension Plans
The Company sponsors defined benefit pension plans covering certain active and former domestic and foreign
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:
Change in benefit obligation:
Benefit obligation, beginning
Service cost
Interest cost
Actuarial gain
Benefits paid
Settlements
Curtailment
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 (asset)
December 31,
U.S. Plans
Non-U.S. Plans
2022
2021
2022
2021
$
$
$
$
$
12.5
—
0.3
(2.6)
(0.8)
—
—
—
9.4
$
$
— $
0.8
—
(0.8)
—
—
— $
$
9.4
13.5
—
0.3
(0.5)
(0.8)
—
—
—
12.5
$
$
— $
0.8
—
(0.8)
—
—
— $
$
12.5
275.5
5.7
3.7
(68.7)
(4.5)
(6.2)
—
(22.2)
183.3
279.4
6.4
(69.9)
(4.5)
(6.2)
(24.0)
181.2
2.1
$
$
$
$
$
310.5
6.8
3.1
(20.6)
(5.5)
(3.9)
(4.0)
(10.9)
275.5
279.1
7.5
11.8
(5.5)
(3.9)
(9.6)
279.4
(3.9)
The following table presents the balance sheet location of the Company's pension liabilities and assets:
Accrued and other liabilities
Other noncurrent liabilities
Other noncurrent assets
December 31,
U.S. Plans
Non-U.S. Plans
2022
2021
2022
2021
$
(0.9) $
(8.5)
—
(0.7) $
(11.8)
—
(0.7) $
(15.3)
13.9
(0.4)
(22.0)
26.3
The accumulated benefit obligation for the Company’s U.S. defined benefit pension plans was $9.4 million and
$12.5 million as of December 31, 2022 and 2021, respectively, and the accumulated benefit obligation for the
Company’s non-U.S. defined benefit pension plans was $159.9 million and $233.2 million as of December 31, 2022
and 2021, respectively.
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
2022
2021
2022
2021
$
$
9.4
9.4
—
$
12.5
12.5
—
$
44.1
41.3
28.4
48.8
45.9
27.4
104
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
The following table summarizes pretax amounts included in accumulated other comprehensive loss:
Unrecognized net actuarial gain (loss)
Unrecognized prior service cost
Total
December 31,
U.S. Plans
2022
2021
Non-U.S. Plans
2022
2021
$
$
1.0
—
1.0
$
$
(1.7) $
—
(1.7) $
(16.5) $
—
(16.5) $
(13.6)
(0.1)
(13.7)
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,
2022
U.S. Plans
2021
2020
2022
2021
2020
Non-U.S. Plans
Service cost
Interest cost
Recognized actuarial loss
Expected return on plan assets
Settlement loss
Curtailment gain
Net periodic benefit cost
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
Curtailment and settlements
Total included in other comprehensive
income (loss)
Total recognized in net periodic benefit cost and
included in other comprehensive income (loss)
$ — $ — $ — $
0.3
0.1
—
—
—
0.4
0.3
0.1
—
—
—
0.4
0.3
0.1
—
—
—
0.4
$
$
$
$
$
$
(2.7)
—
—
$
(0.6)
—
—
1.0
—
—
$
(2.7)
$
(0.6)
$
1.0
$ (2.3) $ (0.2) $
1.4
$
$
$
$
$
$
5.7
3.7
0.1
(4.9)
1.6
—
6.2
2.9
(0.1)
—
$
$
$
6.8
3.1
1.6
(6.4)
0.3
(2.5)
2.9
(28.0)
(0.4)
(1.8)
4.3
4.0
1.3
(7.0)
1.5
—
4.1
13.4
(0.2)
(1.5)
2.8
$
(30.2)
$
11.7
9.0
$ (27.3) $
15.8
The Company reports the service cost component of net periodic benefit cost in the same line item as other
compensation costs arising from the services rendered by the employee and records the other components of net
periodic benefit cost in other expense, net.
Assumptions
Significant weighted average assumptions used in determining benefit obligations and net periodic benefit cost are
as follows:
Benefit obligations:
Discount rate
Rate of compensation increase
Net periodic benefit cost:
Discount rate
Rate of return on plan assets
Rate of compensation increase
2022
U.S. Plans
2021
2020
2022
Non-U.S. Plans
2021
2020
4.99 %
— %
2.55 %
— %
— %
2.55 %
— %
2.07 %
— %
— %
2.07 %
— %
2.95 %
— %
— %
4.37 %
3.36 %
1.47 %
4.03 %
3.79 %
1.47 %
3.79 %
1.02 %
1.96 %
3.59 %
1.02 %
3.59 %
1.65 %
2.33 %
3.74 %
105
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
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. The
majority of the non-U.S. pension assets are managed by independent investment advisors. In general, the investment
strategy is designed to accumulate a diversified portfolio among markets, asset classes or individual securities in
order to reduce market risk and assure that the pension assets are available to pay benefits as they come due.
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, 2022 or 2021. 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
Mutual funds:
International equity
International debt
Absolute return
Other
Total
Expected Cash Flows
December 31, 2022
Non-U.S. Plans
Level 1
Fair Value
Level 2
Fair Value
19.7
36.8
—
7.7
64.2
$
$
December 31, 2021
Non-U.S. Plans
Level 1
Fair Value
Level 2
Fair Value
25.6
47.4
—
9.6
82.6
$
$
7.7
76.0
3.8
29.5
117.0
32.2
126.5
9.5
28.6
196.8
$
$
$
$
The Company expects to contribute $0.9 million to U.S. defined benefit pension plans and $4.2 million to non-U.S.
defined benefit pension plans during 2023.
106
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
The following table summarizes projected benefit payments from pension plans through 2032, including benefits
attributable to estimated future service (in millions):
U.S. Plans
Non-U.S. Plans
2023
2024
2025
2026
2027
2028-2032
$
$
0.9
0.9
0.9
0.9
0.8
3.7
12.
INCOME TAXES
Loss before income taxes includes the results from domestic and international operations as follows:
14.8
10.0
10.3
13.8
11.6
57.5
2020
(689.7)
35.2
(654.5)
Year Ended December 31,
2021
2022
(1,359.2) $
59.2
(1,300.0) $
(541.0) $
6.5
(534.5) $
Year Ended December 31,
2021
2020
2022
42.0
45.5
17.8
105.3
$
$
(90.7) $
(17.1)
(10.6)
(118.4)
$
(13.1) $
(19.1) $
86.7
8.0
75.6
$
(123.9) $
(14.0)
(9.6)
(147.5)
$
(71.9) $
(0.1)
67.3
6.4
73.6
(131.0)
(7.1)
(16.6)
(154.7)
(81.1)
U.S. companies
Non-U.S. companies
Loss before income taxes
The components of income tax benefit were as follows:
Current:
Federal
Foreign
State
Current income tax expense
Deferred:
Federal
Foreign
State
Deferred income tax benefit
Total income tax benefit
$
$
$
$
$
$
$
107
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
The reconciliation of income taxes calculated at the statutory U.S. federal income tax rate to the Company’s benefit
for income taxes was as follows:
Benefit for income taxes at federal statutory rate
State income taxes, net of federal tax effect
Other permanent items
Equity-based compensation
Other changes in tax laws and tax rulings
Goodwill related items
Base erosion and anti-abuse tax
Foreign-derived intangible income deduction
Federal tax credits
Change in unrecognized tax benefits
Withholding taxes and Subpart F income, net of foreign tax credits
Foreign earnings taxed at other than federal rate
Tax provision adjustments and revisions to prior years' returns
Change in valuation allowances
Total benefit for income taxes
Year Ended December 31,
2021
2020
2022
$
$
(273.0) $
(8.4)
12.5
(5.6)
4.7
232.0
—
(7.4)
(26.4)
(7.1)
48.8
6.6
(3.2)
13.4
(13.1) $
(112.2) $
(20.9)
7.0
7.0
37.9
2.8
10.2
(7.5)
(23.2)
(13.2)
19.7
5.6
(5.8)
20.7
(71.9) $
(137.4)
(21.6)
11.0
16.1
(38.2)
42.8
—
(3.8)
(23.4)
(2.6)
23.6
20.9
7.1
24.4
(81.1)
The components of deferred income tax assets and liabilities and the classification of deferred tax balances on the
balance sheet were as follows:
Deferred tax assets:
Accounts receivable, inventory and warranty reserves
Employee benefits
Foreign net operating loss and tax credit carryforwards
Federal net operating loss and tax credit carryforwards
State net operating loss and tax credit carryforwards
Unrecognized tax benefits
Interest limitation
Capitalized research and development costs
Other
Total deferred tax assets
Valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Intangible assets
Property, plant and equipment
Undistributed foreign earnings
Other
Total deferred tax liabilities
Net deferred tax asset
Deferred taxes recognized on the balance sheet:
Noncurrent deferred tax asset (included with other noncurrent assets)
Noncurrent deferred tax liability
Net deferred tax asset
108
December 31,
2022
2021
$
$
$
$
$
$
$
138.3
60.4
573.3
22.0
103.6
30.8
75.4
471.6
92.6
1,568.0
(643.1)
924.9
(542.7)
(15.3)
(20.6)
(13.0)
(591.6)
333.3
506.7
(173.4)
333.3
$
$
$
$
$
$
$
109.4
50.9
649.0
115.2
108.9
43.0
51.7
391.6
85.9
1,605.6
(706.7)
898.9
(629.7)
(19.1)
(17.6)
(13.6)
(680.0)
218.9
427.1
(208.2)
218.9
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
The deferred tax asset for foreign net operating loss and tax credit carryforwards as of December 31, 2022 includes
foreign net operating loss carryforwards (net of federal tax effects) of $560.3 million, which begin to expire in 2023,
and foreign tax credit carryforwards (net of federal tax effects) of $13.0 million, which begin to expire in 2023.
Certain of these foreign net operating loss carryforwards are subject to local restrictions limiting their utilization.
Valuation allowances of $542.8 million have been established related to these foreign deferred tax assets.
The deferred tax asset for federal net operating loss and tax credit carryforwards as of December 31, 2022 relates to
$4.9 million of net operating loss carryforwards, which begin to expire in 2030 and $17.1 million of U.S. foreign tax
credit carryforwards, which begin to expire in 2028. A valuation allowance of $17.1 million has been established
against these deferred tax assets.
The deferred tax asset for state net operating loss and tax credit carryforwards as of December 31, 2022 includes
state net operating loss carryforwards (net of federal tax impact) of $37.3 million, which begin to expire in 2023,
and state tax credit carryforwards (net of federal tax impact) of $66.3 million, which begin to expire in 2023. A
valuation allowance of $79.8 million has been established against these and other state income tax related deferred
tax assets.
In addition to the valuation allowances detailed above, the Company has also established a valuation allowance of
$3.4 million against other deferred tax assets.
Under current U.S. tax regulations, in general, repatriation of foreign earnings to the U.S. can be completed with no
incremental U.S. tax. However, repatriation of foreign earnings could subject the Company to U.S. state and non-
U.S. jurisdictional taxes (including withholding taxes) on distributions. As of December 31, 2022, the Company has
a deferred tax liability of $20.6 million for the estimated foreign and state tax costs associated with the expected
repatriation of the Company’s undistributed foreign earnings. The unrecorded deferred tax liability for foreign and
state tax costs associated with earnings considered permanently reinvested is not material as of December 31, 2022.
The following table reflects a reconciliation of the beginning and end of period amounts of gross unrecognized tax
benefits, excluding interest and penalties:
Balance at beginning of period
Increase related to prior periods
Decrease related to prior periods
Increase related to current periods
Decrease related to settlements with taxing authorities
Decrease related to lapse in statutes of limitations
Decrease related to the ARRIS acquisition
Balance at end of period
Year Ended December 31,
2021
2020
2022
$
$
176.6
1.1
(23.3)
5.1
(13.4)
(0.6)
—
145.5
$
$
190.5
0.7
(0.3)
5.9
(7.5)
(12.7)
—
176.6
$
$
191.9
2.5
(4.5)
5.0
(0.9)
(2.6)
(0.9)
190.5
The Company’s liability for unrecognized tax benefits that, if recognized, would favorably affect the effective tax
rate in future periods was $115.6 million as of December 31, 2022. The Company operates in numerous jurisdictions
worldwide and is subject to routine tax audits on a regular basis. The determination of the Company’s unrecognized
tax benefits involves significant management judgment regarding interpretation of relevant facts and tax laws in
each of these jurisdictions.
Unrecognized tax benefits are reviewed and evaluated on an ongoing basis and may be adjusted for changing facts
and circumstances including the lapse of applicable statutes of limitation and closure of tax examinations. Although
the timing and outcome of such events are difficult to predict, the Company estimates that the balance of
unrecognized tax benefits, excluding the impact of accrued interest and penalties, may be reduced by up to $7.0
million within the next twelve months.
109
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
The Company provides for interest and penalties related to unrecognized tax benefits as income tax expense. The
Company accrued $9.4 million for interest and penalties as of both December 31, 2022 and 2021. During the years
ended December 31, 2022, 2021 and 2020 the net expense (benefit) for interest and penalties recognized through
income tax benefit was $0.1 million, $(0.1) million and $(1.3) million, respectively.
The Company files federal, state and local tax returns with statutes of limitation generally ranging from 3 to 4 years.
The Company is currently undergoing a U.S. federal income tax audit for the 2019 tax year and is generally no
longer subject to state and local tax examinations for years prior to 2019. Tax returns filed by the Company’s
significant foreign subsidiaries are generally subject to statutes of limitation of 3 to 7 years and are generally no
longer subject to examination for years prior to 2017. In many jurisdictions, tax authorities retain the ability to
review prior years’ tax returns and to adjust any net operating loss or tax credit carryforwards from these years that
are available to be utilized in subsequent periods. During 2022, the Company recognized $9.7 million (net of
payments) related to the lapse of applicable statutes of limitations and the conclusion of various domestic and
foreign examinations.
The following table presents income tax expense (benefit) related to amounts presented in other comprehensive
income (loss):
Foreign currency translation
Defined benefit plans
Total
Year Ended December 31,
2021
2020
2022
$
$
1.2
0.8
2.0
$
$
1.2
6.6
7.8
$
$
(5.0)
(3.5)
(8.5)
13.
SERIES A CONVERTIBLE PREFERRED STOCK
On April 4, 2019, the Company issued and sold 1,000,000 shares of the Convertible Preferred Stock for $1.0 billion,
or $1,000 per share, pursuant to an Investment Agreement between the Company and The Carlyle Group (Carlyle),
dated November 8, 2018 (the Investment Agreement). As of December 31, 2022, the Company had authorized
1,200,000 shares of Series A Convertible Preferred Stock.
Dividend Rights
The Convertible Preferred Stock ranks senior to the shares of the Company’s common stock, with respect to
dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company. The Convertible Preferred Stock has a liquidation preference of $1,000
per share. Holders of the Convertible Preferred Stock are entitled to a cumulative dividend at the rate of 5.5% per
year, payable quarterly in arrears. If CommScope does not declare and pay a dividend, the dividend rate will
increase by 2.5% to 8.0% per year (and that rate will increase by an additional 0.50% every three months until such
unpaid dividend is declared and paid, subject to a cap of 11.0% per year) until all accrued but unpaid dividends have
been paid in full. Dividends can be paid in cash, in-kind through the issuance of additional shares of Convertible
Preferred Stock or any combination of the two, at the Company’s option.
During the years ended December 31, 2022, 2021 and 2020, the Company paid cash dividends of $14.9 million,
$43.0 million and $14.3 million, respectively, and dividends in-kind of $44.1 million, $14.3 million and $41.8
million, respectively, which were recorded as additional Convertible Preferred Stock on the Consolidated Balance
Sheets.
110
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
Conversion Features
The Convertible Preferred Stock is convertible at the option of the holders at any time into shares of CommScope
common stock at an initial conversion rate of 36.3636 shares of common stock per share of the Convertible
Preferred Stock (equivalent to $27.50 per common share). The conversion rate is subject to customary anti-dilution
and other adjustments. At any time after the third anniversary of the issuance of the Convertible Preferred Stock, if
the volume weighted average price of CommScope’s common stock exceeds the conversion price of $49.50, as may
be adjusted pursuant to the Certificate of Designations, for at least thirty trading days in any period of forty-five
consecutive trading days (including the final five trading days of any such forty-five-trading day period) all of the
Convertible Preferred Stock may be converted at the election of CommScope into the relevant number of shares of
CommScope common stock.
Redemption Rights
On any date during the three months following the eight year and six-month anniversary of the Investment
Agreement closing date and the three months following each anniversary thereafter, holders of the Convertible
Preferred Stock will have the right to require CommScope to redeem all or any portion of the Convertible Preferred
Stock at 100% of the liquidation preference thereof plus all accrued and unpaid dividends. The redemption price is
payable, at the Company’s option, in cash or a combination of cash and common stock, subject to certain
restrictions.
Upon certain change of control events involving CommScope, CommScope has the right, subject to the holder’s
right to convert prior to such redemption, to redeem all of the Convertible Preferred Stock for the greater of (i) an
amount in cash equal to the sum of the liquidation preference of the Convertible Preferred Stock, all accrued but
unpaid dividends and, if the applicable redemption date is prior to the fifth anniversary of the first dividend payment
date, the present value, discounted at a rate of 10%, of any remaining scheduled dividends through the five year
anniversary of the first dividend payment date, assuming CommScope chose to pay such dividends in cash and (ii)
the consideration the holders would have received if they had converted their shares of the Convertible Preferred
Stock into CommScope common stock immediately prior to the change of control event.
To the extent that CommScope does not exercise the redemption right described above, following the effective date
of any such change of control event, the holders of the Convertible Preferred Stock can require CommScope to
repurchase the Convertible Preferred Stock at the greater of (i) an amount in cash equal to 100% of the liquidation
preference thereof plus all accrued but unpaid dividends and (ii) the consideration the holders would have received if
they had converted their shares of the Convertible Preferred Stock into CommScope common stock immediately
prior to the change of control event.
Voting Rights
Holders of the Convertible Preferred Stock are entitled to vote with the holders of the Company’s common stock on
an as-converted basis. Holders of the Convertible Preferred Stock are entitled to a separate class vote with respect to,
among other things, amendments to CommScope’s organizational documents that have an adverse effect on the
Convertible Preferred Stock, issuances by CommScope of securities that are senior to, or equal in priority with, the
Convertible Preferred Stock and issuances of shares of the Convertible Preferred Stock after the closing date of the
Acquisition, other than shares issued as dividends with respect to shares of the Convertible Preferred Stock.
111
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
14. STOCKHOLDERS’ EQUITY
Equity-Based Compensation Plans
In 2019, the Company’s stockholders approved the 2019 Long-Term Incentive Plan authorizing 8.0 million shares
for issuance, plus additional shares underlying awards outstanding under the predecessor plans. Subsequently, in
each of the years 2020, 2021 and 2022, the Company’s stockholders approved the Amended and Restated 2019
Long-Term Incentive Plan (the 2019 Plan) and authorized an additional aggregate 15.8 million shares for issuance.
All future equity awards will be made from the 2019 Plan. Awards under the 2019 Plan may include stock options,
stock appreciation rights, restricted stock, stock units (including restricted stock units (RSUs) and deferred stock
units), performance awards (represents any of the awards already listed with a performance-vesting component),
other stock-based awards and cash-based awards. As of December 31, 2022, there were 3.9 million shares available
for future grants under the 2019 Plan.
As of December 31, 2022, $89.0 million of total unrecognized compensation expense related to unvested stock
options, RSUs and performance share units (PSUs) is expected to be recognized over a remaining weighted average
period of 1.9 years. There were no significant capitalized equity-based compensation costs at December 31, 2022.
The following table shows a summary of the equity-based compensation expense included in the Consolidated
Statements of Operations:
Selling, general and administrative
Research and development
Cost of sales
Total equity-based compensation expense
2022
Year Ended December 31,
2021
2020
$
$
34.6
18.3
8.2
61.1
$
$
40.7
25.8
13.1
79.6
$
$
63.0
33.5
18.5
115.0
The Company believes the valuation techniques and the approaches utilized to develop the underlying assumptions
are appropriate in estimating the fair values of its equity-based compensation. Estimates of fair value are not
intended to predict actual future events or the value ultimately realized by employees who receive equity awards.
Subsequent events are not indicative of the reasonableness of the original estimates of fair value made by the
Company.
Stock Options
Stock options are awards that allow the recipient to purchase shares of the Company’s common stock at a fixed
price. Stock options are granted at an exercise price equal to the Company’s stock price at the date of grant. The
Company uses the Black-Scholes model to estimate the fair value of stock options at the date of grant. These awards
generally vest over five years following the grant date and have a contractual term of ten years. There were 2.3
million options outstanding as of December 31, 2022 with no intrinsic value and the majority were vested. There
were no stock options granted during the years ended December 31, 2022, 2021 or 2020. The intrinsic value of
options exercised during the years ended December 31, 2022, 2021 and 2020 was $0.1 million, $5.4 million and
$7.1 million, respectively.
Restricted Stock Units
RSUs entitle the holder to shares of common stock after a vesting period of generally three years. The fair value of
the awards is determined on the grant date based on the Company’s stock price.
112
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
The following table summarizes the RSU activity (in millions, except per share data):
Non-vested share units at December 31, 2021
Granted
Vested and shares issued
Forfeited
Non-vested share units at December 31, 2022
Restricted
Stock
Units
Weighted
Average Grant
Date Fair Value
Per Share
10.4
7.3
(5.1)
(1.4)
11.2
$
$
$
$
$
15.04
8.05
14.99
14.02
10.66
The weighted average grant date fair value per unit of these awards granted during the years ended December 31,
2022, 2021 and 2020 was $8.05, $20.19 and $10.49, respectively. The total fair value of RSUs that vested during the
years ended December 31, 2022, 2021 and 2020 was $76.5 million, $82.4 million and $76.0 million, respectively.
Performance Share Units
PSUs are stock awards in which the number of shares ultimately received by the employee depends on achievement
towards a performance measure. Certain of CommScope’s PSUs have an internal performance measure and the
awards vest at the end of three years. The number of shares issued under these awards can vary between 0% and
300% of the number of PSUs granted. The fair value of these awards is determined on the date of grant based on the
Company's stock price.
CommScope also has PSUs with a market condition performance measure based on stock price milestones over a
three-year period. The number of shares issued under these awards can vary between 0% to 100% of the number of
PSUs granted. In addition, the Company has PSUs with a market condition based on the Company's total
stockholder return (TSR) ranking relative to the S&P 500 TSR for a three-year period. The number of shares issued
under these awards can vary between 0% to 200% of the number of PSUs granted. The Company uses a Monte
Carlo simulation model to estimate the fair value of PSUs with a market condition performance measure at the date
of grant. Key assumptions used in the model include the risk-free interest rate, which reflects the yield on zero-
coupon U.S. treasury securities, and stock price volatility, which is derived based on the historical volatility of the
Company's stock.
The following table presents the weighted average assumptions used to estimate the fair value of these awards
granted:
Risk-free interest rate
Expected volatility
Weighted average fair value at grant date
2022
Year Ended December 31,
2021
2020
1.7%
61.2%
11.21
$
0.4%
56.0%
11.21
$
$
0.2%
51.7%
4.03
The following table summarizes the PSU activity (in millions, except per share data):
Non-vested share units at December 31, 2021
Granted
Vested and shares issued
Forfeited
Non-vested share units at December 31, 2022
Performance
Share Units
Weighted
Average Grant
Date Fair Value
Per Share
2.1
1.4
(0.4)
(0.2)
2.9
$
$
$
$
$
7.69
9.51
8.13
15.91
8.14
113
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
The weighted average grant date fair value per unit of these awards granted during the years ended December 31,
2022, 2021 and 2020 was $9.51, $14.47 and $4.63, respectively. The total fair value of PSUs that vested during the
years ended December 31, 2022, 2021 and 2020 was $3.5 million, $1.0 million, and $18.4 million, respectively.
15. COMMITMENTS AND CONTINGENCIES
The following table summarizes the activity in the product warranty accrual, included in accrued and other liabilities
and other noncurrent liabilities:
Product warranty accrual, beginning of period
Provision for warranty claims
Warranty claims paid
Foreign exchange
Product warranty accrual, end of period
Third-Party Guarantees
2022
Year Ended December 31,
2021
2020
$
$
66.8
24.7
(36.1)
(0.4)
55.0
$
$
59.5
38.5
(30.8)
(0.4)
66.8
$
$
61.0
30.9
(32.4)
—
59.5
The Company was contingently liable under open standby letters of credit issued by its banks to support
performance obligations of a third-party contractor that totaled $44.0 million as of December 31, 2022. These
amounts represent an estimate of the maximum amounts the Company would expect to incur upon the contractual
non-performance of the third-party contractor, but the Company also has cross-indemnities in place that may enable
it to recover amounts in the event of non-performance by the third-party contractor. The Company believes the
likelihood of having to perform under these guarantees is remote. There were no material amounts recorded in the
consolidated financial statements related to third-party guarantee agreements as of and for the years ended
December 31, 2022 or 2021. As of December 31, 2022, these instruments reduced the available borrowings under
the Revolving Credit Facility.
Legal Proceedings
The Company is a party to certain intellectual property claims and also periodically receives notices asserting that its
products infringe on another party’s patents and other intellectual property rights. These claims and assertions,
whether against the Company directly or against its customers, could require the Company to pay damages,
royalties, stop offering the relevant products and/or cease other activities. The Company may also be called upon to
indemnify certain customers for costs related to products sold to such customers. The outcome of these claims and
notices is uncertain and a reasonable estimate of the loss from unfavorable outcomes in certain of these matters
either cannot be determined or is estimated at the minimum amount of a range of estimates. The actual loss, through
settlement or trial, could be material and may vary significantly from the Company's estimates. From time to time,
the Company may also be involved as a plaintiff involving intellectual property claims. Gain contingencies, if any,
are recognized when they are realized.
As of December 31, 2022 and 2021, the Company had liabilities of $37.1 million and $24.6 million, respectively,
recorded in accrued and other liabilities and noncurrent liabilities on the Consolidated Balance Sheets related to
certain intellectual property assertions that have been settled or are in the process of settlement. For the years ended
December 31, 2022, 2021 and 2020, the Company recorded charges to cost of sales in the Consolidated Statements
of Operations of $31.0 million, $48.6 million and $7.8 million, respectively, related to these intellectual property
assertions. The current year charges are reflected in the results of the Home, NICS and CCS segments. The
Company paid $21.0 million, $56.1 million and $109.0 million during the years ended December 31, 2022, 2021
and 2020, respectively, to settle intellectual property assertions.
During the year ended December 31, 2021, the Company received $17.1 million in the settlement of a warranty
indemnification matter that was assumed in the acquisition of ARRIS in 2019. The recovery was recorded as a
reduction of cost of sales in the Consolidated Statements of Operations and is reflected in the results of the ANS
segment.
114
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
The Company is either a plaintiff or a defendant in certain other pending legal matters in the normal course of
business. Management believes none of these other pending legal matters will have a material adverse effect on the
Company’s business or financial condition upon final disposition.
The Company is subject to various federal, state, local and foreign laws and regulations governing the use,
discharge, disposal and remediation of hazardous materials. Compliance with current laws and regulations has not
had, and is not expected to have, a materially adverse effect on the Company’s financial condition or results of
operations.
INDUSTRY SEGMENTS, MAJOR CUSTOMERS, RELATED PARTY TRANSACTIONS AND
16.
GEOGRAPHIC INFORMATION
Segment Information
As of January 1, 2022, the Company reorganized its internal management and reporting structure to align its
portfolio of products and solutions more closely with the markets it serves and provides better performance
comparability with its competitive peer set. The reorganization changed the information regularly reviewed by the
Company's chief operating decision maker for purposes of allocating resources and assessing performance. As a
result, the Company is now reporting financial performance based on the following operating segments: CCS,
OWN, NICS, ANS and Home. All prior period amounts below have been recast to reflect these operating segment
changes.
The Connectivity and Cable Solutions (CCS) segment provides fiber optic and copper connectivity and cable
solutions for use in telecommunications, cable television, residential broadband networks, data centers and business
enterprises. The CCS portfolio includes network solutions for indoor and outdoor network applications. Indoor
network solutions include optical fiber and twisted pair structured cable solutions, intelligent infrastructure
management hardware and software and network rack and cabinet enclosures. Outdoor network solutions are used in
both local-area and wide-area networks and “last mile” fiber-to-the-home installations, including deployments of
fiber-to-the-node, fiber-to-the-premises and fiber-to-the-distribution point to homes, businesses and cell sites.
The Outdoor Wireless Networks (OWN) segment focuses on the macro and metro cell markets. The segment
includes base station antennas, radio frequency (RF) filters, tower connectivity, microwave antennas, metro cell
products, cabinets, steel, accessories and the wireless spectrum management business, Comsearch.
The Networking, Intelligent Cellular and Security Solutions (NICS) segment provides wireless networks for
enterprises and service providers. Product offerings include indoor and outdoor Wi-Fi and long-term evolution
(LTE) access points, access and aggregation switches; an Internet of Things suite, on-premises and cloud-based
control and management systems; and software and software-as-a-service applications addressing security, location,
reporting and analytics.
The Access Network Solutions (ANS) 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 a state-of-the-art residential and metro distribution network.
The Home Networks (Home) segment includes subscriber-based solutions that support broadband and video
applications. The broadband offerings in the Home segment include devices that provide residential connectivity to
a service provider’s network, such as digital subscriber line and cable modems and telephony and data gateways
which incorporate routing and Wi-Fi functionality. Video offerings include set top boxes that support cable, satellite
and IP television content delivery and include products such as digital video recorders, high definition set top boxes
and hybrid set top devices.
115
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
The following table provides summary financial information by reportable segment:
Identifiable segment-related assets:
CCS
OWN
NICS
ANS
Home
Total identifiable segment-related assets
Reconciliation to total assets:
Cash and cash equivalents
Deferred income tax assets
Total assets
December 31,
2022
2021
$
$
4,263.8
1,166.8
1,338.1
2,632.6
1,379.3
10,780.6
398.1
506.7
11,685.4
$
$
4,377.2
1,386.5
1,397.0
3,831.9
1,479.5
12,472.1
360.3
427.1
13,259.5
The Company’s measurement of segment performance is adjusted EBITDA (earnings before interest, income taxes,
depreciation and amortization). The Company defines adjusted EBITDA as operating income (loss), adjusted to
exclude depreciation, amortization of intangible assets, restructuring costs, asset impairments, equity-based
compensation, transaction, transformation and integration costs and other items that the Company believes are
useful to exclude in the evaluation of operating performance from period to period because these items are not
representative of the Company’s core business.
116
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
The following table provides net sales, adjusted EBITDA, depreciation expense and additions to property, plant and
equipment by reportable segment:
Net sales:
CCS
OWN
NICS
ANS
Home
Consolidated net sales
Segment adjusted EBITDA:
CCS
OWN
NICS
ANS
Home
Total segment adjusted EBITDA
Amortization of intangible assets
Restructuring costs, net
Equity-based compensation
Asset impairments
Transaction, transformation and integration costs
Acquisition accounting adjustments
Patent claims and litigation settlements
Executive severance
Reserve of Russian accounts receivable
Depreciation
Consolidated operating income (loss)
Depreciation expense:
CCS
OWN
NICS
ANS
Home
Consolidated depreciation expense
Additions to property, plant and equipment:
CCS
OWN
NICS
ANS
Home
Consolidated additions to property, plant and equipment
2022
Year Ended December 31,
2021
2020
$
$
$
$
$
$
$
$
3,789.6
1,467.9
939.7
1,327.5
1,703.4
9,228.1
643.6
269.7
51.9
285.2
26.3
1,276.7
(543.0)
(62.9)
(61.1)
(1,119.6)
(38.2)
(7.3)
(28.5)
—
(2.7)
(127.2)
(713.8)
58.8
14.3
15.0
22.5
16.6
127.2
64.6
9.9
7.0
11.1
8.7
101.3
$
$
$
$
$
$
$
$
3,053.8
1,417.1
861.9
1,404.6
1,849.3
8,586.7
448.9
266.8
(15.3)
391.1
25.5
1,117.0
(613.0)
(91.9)
(79.6)
(13.7)
(90.3)
(11.5)
(31.7)
—
—
(136.7)
48.6
53.6
15.4
19.2
25.8
22.7
136.7
81.5
11.0
13.4
14.6
10.9
131.4
$
$
$
$
$
$
$
$
2,551.8
1,250.4
847.1
1,379.1
2,407.5
8,435.9
447.5
277.3
12.8
346.3
131.3
1,215.2
(630.5)
(88.4)
(115.0)
(206.7)
(24.9)
(20.6)
(16.3)
(6.3)
—
(158.3)
(51.8)
53.9
17.2
21.0
31.1
35.1
158.3
61.8
12.8
10.1
10.3
26.2
121.2
117
CommScope Holding Company, Inc.
Notes to Consolidated Financial Statements-(Continued)
(In millions, unless otherwise noted)
Customer and Supplier Information
No direct customer accounted for 10% or more of the Company's total net sales during the years ended December
31, 2022 or 2021. Net sales to Comcast Corporation and affiliates (Comcast) accounted for 11% of the Company’s
net sales during the year ended December 31, 2020. Net sales to Comcast are mostly derived from the Home, ANS
and CCS segments. Other than Comcast, no direct customer accounted for 10% or more of the Company’s total net
sales during the year ended December 31, 2020. Accounts receivable from Charter Communications, Inc. (Charter)
represented approximately 12% of accounts receivable as of December 31, 2022. Other than Charter, no direct
customer accounted for 10% or more of the Company's accounts receivable as of December 31, 2022. No direct
customers accounted for 10% or more of the Company’s accounts receivable as of December 31, 2021.
The Company relies on sole suppliers or a limited group of suppliers for certain key components, subassemblies and
modules and a limited group of contract manufacturers to manufacture a significant portion of its products. Any
disruption or termination of these arrangements could have a material adverse impact on the Company’s results of
operations.
Related Party Transactions
See Note 13 for a discussion of the Convertible Preferred Stock issued to Carlyle to finance the ARRIS acquisition.
Other than transactions related to the Convertible Preferred Stock, there were no material related party transactions
for the years ended December 31, 2022, 2021 or 2020.
Geographic Information
Sales to customers located outside of the U.S. comprised 38%, 42% and 39% of total net sales during the years
ended December 31, 2022, 2021 and 2020, respectively. Sales by geographic region, based on the destination of
product shipments or service provided, were as follows:
Year Ended December 31, 2022
CCS
OWN
NICS
ANS
Home
Total
Geographic Region:
United States (U.S.)
Europe, Middle East and Africa (EMEA)
Asia Pacific (APAC)
Caribbean and Latin America (CALA)
Canada
Consolidated net sales
$ 2,513.6 $ 1,062.6 $
571.9
431.4
179.3
93.4
218.0
120.8
32.8
33.7
$ 3,789.6 $ 1,467.9 $
732.4 $ 5,750.5
539.5 $
1,595.0
430.2
250.7
824.5
79.0
114.1
595.7
199.0
20.3
15.1
462.4
262.8
939.7 $ 1,327.5 $ 1,703.4 $ 9,228.1
902.4 $
124.2
79.2
164.3
57.4
Geographic Region:
United States
Europe, Middle East and Africa
Asia Pacific
Caribbean and Latin America
Canada
Consolidated net sales
Year Ended December 31, 2021
CCS
OWN
NICS
ANS
Home
Total
$ 1,823.6 $
548.0
439.8
169.1
73.3
894.3 $
272.4
150.7
44.6
55.1
$ 3,053.8 $ 1,417.1 $
927.7 $ 4,960.5
490.4 $
1,620.6
415.3
238.2
938.6
114.2
102.5
699.0
220.2
18.3
368.0
171.9
12.5
861.9 $ 1,404.6 $ 1,849.3 $ 8,586.7
824.5 $
146.7
131.4
246.8
55.2
Long-lived assets, excluding intangible assets, consist substantially of property, plant and equipment and right of use
assets. The Company’s long-lived assets, excluding intangible assets, located in the U.S., EMEA, APAC and CALA
regions represented the following percentages of such long-lived assets: 60%, 14%, 18% and 8%, respectively, as of
December 31, 2022 and 63%, 13%, 18% and 6%, respectively, as of December 31, 2021.
118
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of the Chief Executive Officer (CEO) and Chief Financial Officer (CFO),
evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by
this report.
Based on this evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this report,
these disclosure controls and procedures were effective and operating to provide reasonable assurance that
information that we are required to disclose in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the rules and forms of the Securities and
Exchange Commission, and that such information is accumulated and communicated to our management, including
our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
The management of CommScope is responsible for establishing and maintaining adequate internal control over
financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the
Exchange Act, as a process designed by, or under the supervision of, the company’s principal executive and
principal financial officers and effected by the company’s board of directors, management and other personnel, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated
financial statements for external purposes in accordance with generally accepted accounting principles and includes
those policies and procedures that:
•
•
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of
consolidated 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
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 consolidated financial
statements.
CommScope’s management assessed the effectiveness of CommScope’s internal control over financial reporting as
of December 31, 2022. In making this assessment, CommScope’s management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated
Framework (2013). Based on this assessment, management concluded that, as of December 31, 2022, CommScope’s
internal control over financial reporting is effective based on the COSO internal control criteria.
CommScope’s independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report
on the effectiveness of CommScope’s internal control over financial reporting, which is included in Item 8 of this
Annual Report on Form 10-K.
119
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal controls over financial reporting during the quarter ended
December 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s
internal control over financial reporting.
Inherent Limitations of Disclosure Controls and Internal Control over Financial Reporting
Because of their inherent limitations, our disclosure controls and procedures and our internal control over financial
reporting may not prevent all material errors or fraud. A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The
effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to
risks, including that the controls may become inadequate because of changes in conditions or that the degree of
compliance with our policies or procedures may deteriorate.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information responsive to this item is incorporated herein by reference to our Proxy Statement for our 2023
annual meeting of stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
Code of Ethics for Principal Executive and Senior Financial and Accounting Officers
We have adopted the CommScope Holding Company, Inc. Code of Ethics for Principal Executive and Senior
Financial and Accounting Officers (the Senior Officer Code of Ethics), a code of ethics that applies to our Chief
Executive Officer, Chief Financial Officer and Chief Accounting Officer. The Senior Officer Code of Ethics is
publicly available on our web site at www.commscope.com. If we make an amendment to, or grant a waiver from, a
provision of the Senior Officer Code of Ethics, we will disclose the nature of such waiver or amendment on our web
site.
ITEM 11. EXECUTIVE COMPENSATION
The information responsive to this item is incorporated herein by reference to our Proxy Statement for our 2023
annual meeting of stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information responsive to this item is incorporated herein by reference to our Proxy Statement for our 2023
annual meeting of stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
120
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information responsive to this item is incorporated herein by reference to our Proxy Statement for our 2023
annual meeting of stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information responsive to this item is incorporated herein by reference to our Proxy Statement for our 2023
annual meeting of stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents Filed as Part of this Report:
1. Audited Consolidated Financial Statements
The following consolidated financial statements of CommScope Holding Company, Inc. are included
under Part II, Item 8:
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the Years Ended December 31, 2022, 2021 and 2020
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2022, 2021 and
2020
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2022,
2021 and 2020
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
All schedules are omitted because they are not applicable or the required information is shown in the
financial statements or notes thereto.
3. List of Exhibits. See Index of Exhibits included herein.
121
Exhibit No.
* 2.2
* 2.3
* 3.1
* 3.2
* 3.3
* 3.4
* 4.1
* 4.2
* 4.3
* 4.4
* 4.5
Index of Exhibits
Description
Bid Conduct Agreement, dated November 8, 2018, among CommScope Holding Company, Inc.
and ARRIS International plc (the Bid Conduct Agreement) (Incorporated by reference to Exhibit
2.1 of the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed with the SEC on
November 8, 2018).
First Amendment to Bid Conduct Agreement, dated January 2, 2019, between CommScope
Holding Company, Inc. and ARRIS International plc (Incorporated by reference to Exhibit 2.1 of
the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed with the SEC on January
3, 2019).
Amended and Restated Certificate of Incorporation of CommScope Holding Company, Inc.
(Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 10-Q (File No. 001-36146),
filed with the SEC on November 7, 2013).
Certificate of Designations Designating Series A Preferred Stock (Incorporated by reference to
Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 4, 2019).
Certificate of Amendment of Amended and Restated Certificate of Incorporation of CommScope
Holding Company, Inc. (Incorporated by reference to Exhibit 3.2 of the Registrant’s Registration
Statement on Form S-8 (File No. 333-256539), filed with the SEC on May 27, 2021).
Fifth Amended and Restated By-Laws of CommScope Holding Company, Inc. (as adopted May 7,
2021) (Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 10-Q (File No. 001-
36146), filed with the SEC on November 4, 2021).
Indenture governing the 6.000% Senior Notes due 2025 by and between the CommScope
Technologies Finance LLC and Wilmington Trust, National Association, as trustee, dated as of
June 11, 2015 (including form of 6.000% Senior Note due 2025) (Incorporated by reference to
Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed with the
SEC on June 12, 2015).
First Supplemental Indenture, dated August 28, 2015, by and among CommScope Technologies
LLC, the Guarantors party thereto and Wilmington Trust, National Association, as trustee
(Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No.
001-36146), filed with the SEC on August 28, 2015).
Indenture governing the 5.000% Senior Notes due 2027, by and among CommScope Technologies
LLC, the guarantors named therein and Wilmington Trust, National Association, as trustee and as
collateral agent, dated as of March 13, 2017, (including form of 5.000% Senior Note due 2027)
(Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No.
001-36146), filed with the SEC on March 13, 2017).
Indenture, dated as of February 19, 2019, by and between the Escrow Issuer and Wilmington
Trust, National Association, as trustee, including the form of 8.25% Senior Note due 2027
(Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K (File No.
001-36146), filed with the SEC on February 19, 2019).
First Supplemental Indenture, dated as of April 4, 2019, by and among CommScope, Inc., the
guarantors party thereto and Wilmington Trust, National Association, as trustee (Incorporated by
reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on
April 4, 2019).
122
* 4.6
* 4.7
* 4.8
* 4.9
* 4.10
* 10.1
** 10.2
* 10.3
** 10.4
* 10.5
** 10.6
** 10.7
** 10.8
* 10.9
Indenture, dated as of February 19, 2019, by and between the Escrow Issuer and Wilmington
Trust, National Association, as trustee and collateral agent, including the form of 5.50% Senior
Secured Note due 2024 and form of 6.00% Senior Secured Note due 2026 (Incorporated by
reference to Exhibit 4.3 of the Registrant’s Current Report on Form 8-K (File No. 001-36146),
filed with the SEC on February 19, 2019).
First Supplemental Indenture, dated as of April 4, 2019, by and among CommScope, Inc.,
CommScope Holding Company, Inc., the other guarantors party thereto, Wilmington Trust,
National Association, as trustee, and Wilmington Trust, National Association, as collateral agent
(Incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K filed
with the SEC on April 4, 2019).
Indenture, dated as of July 1, 2020, by and between Wilmington Trust, National Association, as
trustee, including the form of 7.125% Senior Note due 2028 (Incorporated by reference to Exhibit
4.1 of the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed with the SEC on
July 2, 2020).
Indenture, dated as of August 23, 2021, by and among CommScope, Inc., the guarantors party
thereto and Wilmington Trust, National Association, as trustee and collateral agent, including the
form of 4.750% Senior Secured Note due 2029 (Incorporated by reference to Exhibit 4.1 of the
Registrant’s Current Report on Form 8-K (File No. 001-36146), filed with the SEC on August 23,
2021).
Description of Securities Registered Pursuant to Section 12 of the Exchange Act (Incorporated by
reference to Exhibit 4.10 to the Registrant’s Annual Report on Form 10-K filed with the SEC on
February 20, 2020).
Employment Agreement between Charles L. Treadway and CommScope, Inc., dated October 1,
2020 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
(File No. 001-36146), filed with the SEC on October 1, 2020).***
Amendment to Employment Agreement between Charles L. Treadway and CommScope, Inc.,
dated October 4, 2022.***
Employment Agreement between Claudius E. Watts IV and CommScope, Inc., dated October 1,
2020 (Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K
(File No. 001-36146), filed with the SEC on October 1, 2020).***
Amendment to Employment Agreement between Claudius E. Watts, IV and CommScope, Inc.,
dated October 4, 2022.***
Form of Amended and Restated Severance Protection Agreement between CommScope, Inc. and
certain executive officers entered into after 2015 (Incorporated by reference to Exhibit 10.23 of the
Registrant's Annual Report on Form 10-K (File No. 001-36146), filed with the SEC on February
20, 2019).***
Form of Severance Protection Agreement between CommScope, Inc. and Kyle D. Lorentzen,
Justin C. Choi and Robyn T. Mingle.***
Severance Protection Agreement between Charles L. Treadway and CommScope, Inc., dated
October 4, 2022.***
Severance Protection Agreement between Claudius E. Watts and CommScope, Inc., dated October
4, 2022.***
Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.22 of Amendment
No. 2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-190354), filed with the
SEC on September 12, 2013).***
* 10.10
Amended and Restated CommScope Holding Company, Inc. 2011 Incentive Plan (as amended and
restated effective February 19, 2013) (Incorporated by reference to Exhibit 10.26 of Amendment
No. 2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-190354), filed with the
SEC on September 12, 2013).***
123
* 10.11
* 10.12
* 10.13
* 10.14
* 10.15
* 10.16
* 10.17
* 10.18
** 10.19
** 10.20
* 10.21
* 10.22
* 10.23
Forms of Nonqualified Stock Option Certificate under the Amended and Restated CommScope
Holding Company, Inc. 2011 Incentive Plan (Incorporated by reference to Exhibit 10.31 of
Amendment No. 2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-190354),
filed with the SEC on September 12, 2013).***
CommScope Holding Company, Inc. Amended and Restated 2013 Long-Term Incentive Plan (as
amended and restated effective February 21, 2017) (Incorporated by reference to Exhibit 10.28 of
the Registrant’s Annual Report on Form 10-K (File No. 001-36146), filed with the SEC on
February 23, 2017).***
Form of Non-Qualified Stock Option Certificate under the CommScope Holding Company, Inc.
2013 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.4 of the Registrant’s
Quarterly Report on Form 10-Q (File No. 001-36146), filed with the SEC on April 30, 2015).***
CommScope Holding Company, Inc. Amendment to Outstanding Options, effective March 7,
2016 (Incorporated by reference to Exhibit 10.5 of the Registrant’s Quarterly Report on Form 10-
Q (File No. 001-36146), filed with the SEC on April 28, 2016).***
Form of Restricted Stock Unit Award Certificate under the CommScope Holding Company, Inc.
2013 Long-Term Incentive Plan (for grants in 2016 and later) (Incorporated by reference to
Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36146), filed with
the SEC on April 28, 2016).***
Form of Performance Share Unit Award Certificate under the CommScope Holding Company,
Inc. 2013 Long-Term Incentive Plan (for grants in 2016 and later) (Incorporated by reference to
Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36146), filed with
the SEC on April 28, 2016).***
Form of Non-Qualified Stock Option Certificate under the CommScope Holding Company, Inc.
2013 Long-Term Incentive Plan (for grants in 2016 and later) (Incorporated by reference to
Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36146), filed with
the SEC on April 28, 2016).***
CommScope Holding Company, Inc. Annual Incentive Plan, as amended February 17, 2016
(Incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q
(File No. 001-36146), filed with the SEC on April 28, 2016).***
CommScope Holding Company, Inc. Non-Employee Director Compensation Plan, as amended on
February 19, 2019.
Form of Restricted Stock Unit Award Certificate under the CommScope Holding Company, Inc.
Non-Employee Director Compensation Plan, which is operated as a subplan of the CommScope
Holding Company, Inc. 2019 Long-Term Incentive Plan.
Form of Non-Qualified Stock Option Certificate under the CommScope Holding Company, Inc.
Amended and Restated 2013 Long-Term Incentive Plan (for grants to senior executive officers in
2019) (Incorporated by reference to Exhibit 10.5 of the Registrant’s Quarterly Report on Form 10-
Q (File No. 001-36146), filed with the SEC on August 8, 2019).***
Form of Restricted Stock Unit Award Certificate under the CommScope Holding Company, Inc.
Amended and Restated 2019 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.2
of the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed with the SEC on
October 1, 2020).***
Form of Performance Share Unit Award Certificate under the CommScope Holding Company,
Inc. Amended and Restated 2019 Long-Term Incentive Plan (service and average stock price
vesting) (Incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form
10-Q (File No. 001-36146), filed with the SEC on October 1, 2020). ***
124
* 10.24
* 10.25
* 10.26
* 10.27
* 10.28
* 10.29
* 10.30
* 10.31
* 18.1
** 21.1
** 23.1
** 31.1
** 31.2
± 32.1
Form of Performance Share Unit Award Certificate under the CommScope Holding Company,
Inc. Amended and Restated 2019 Long-Term Incentive Plan (Incorporated by reference to Exhibit
10.1 of the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36146), filed with the SEC
on May 5, 2022).***
CommScope Holding Company, Inc. Deferred Compensation Plan (as amended and restated
effective January 1, 2017) ((Incorporated by reference to Exhibit 10.41 of the Registrant’s Annual
Report on Form 10-K (File No. 001-36146), filed with the SEC on February 23, 2017).***
CommScope Holding Company, Inc. Amended and Restated 2019 Long-Term Incentive Plan
(Incorporated by reference to Exhibit 99.1 to the Registrant’s Registration Statement on Form S-8
(File No. 333-265198), filed with the Commission on May 25, 2022).***
Investment Agreement, dated November 8, 2018, by and between CommScope Holding
Company, Inc. and Carlyle Partners VII S1 Holdings, L.P. (Incorporated by reference to Exhibit
10.1 of the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed with the SEC on
November 8, 2018).
Registration Rights Agreement, dated as of April 4, 2019, by and between CommScope Holding
Company, Inc. and Carlyle Partners VII S1 Holdings, L.P. (Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 4, 2019).
Revolving Credit Agreement, dated as of April 4, 2019, and as amended by that certain
Amendment Agreement, dated August 11, 2021, among CommScope Holding Company, Inc.,
CommScope, Inc., the co-borrowers named therein, JPMorgan Chase Bank, N.A., as
administrative agent and collateral agent, and the other agents and lenders party thereto
(Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed
with the SEC on April 4, 2019).
Amendment No. 2, dated October 19, 2022, to the Revolving Credit Agreement, dated as of April
4, 2019, among CommScope Holding Company, Inc., CommScope, Inc., the co-borrowers named
therein, J.P. Morgan Chase Bank, N.A., as administrative agent and collateral agent, and the other
agents and lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K filed with the SEC on October 20, 2022).
Term Loan Credit Agreement, dated as of April 4, 2019, and as amended by that certain
Amendment Agreement, dated August 11, 2021, among CommScope, Inc., as the borrower,
CommScope Holding Company, Inc., as holdings, JPMorgan Chase Bank, N.A., as administrative
agent and collateral agent, and the other agents and lenders party thereto (Incorporated by
reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on
April 4, 2019).
Preferability Letter from Ernst & Young LLP, Independent Registered Public Accounting Firm
(Incorporated by Reference to Exhibit 18.1 of the Registrant’s Quarterly Report on Form 10-Q
(File No. 001-36146), filed with the SEC on August 8, 2019).
List of Subsidiaries
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
Certification of Principal Executive Officer pursuant to Rule 13a-14(a).
Certification of Principal Financial Officer pursuant to Rule 13a-14(a).
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished
pursuant to Item 601(b)(32)(ii) of Regulation S-K).
† 101.INS
Inline XBRL Instance Document – The instance document does not appear in the interactive data
file because its XBRL tags are embedded within the inline XBRL document.
† 101.SCH Inline XBRL Schema Document, furnished herewith.
125
† 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
† 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.
† 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document,
† 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document).
* Previously filed
** Filed as an exhibit to the Company's Form 10-K, filed with the Securities and Exchange Commission on
February 23, 2023.
*** Management contract or compensatory plan or arrangement.
† In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not
filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933,
is deemed not filed for purposes of Section 18 of the Exchange Act of 1934, and otherwise is not subject to liability
under these sections.
± In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 33-8238 and 34-47986, Final
Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in
Exchange Act Periodic Reports, the certification furnished in Exhibit 32.1 hereto is deemed to accompany this Form
10-K and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certification will not be
deemed to be incorporated by reference into any filings under the Securities Act or the Exchange Act, except to the
extent that the registrant specifically incorporates it by reference.
126
Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
DATE: February 22, 2023
COMMSCOPE HOLDING COMPANY, INC
BY: /s/ Charles L. Treadway
Charles L. Treadway
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K
has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates
indicated.
Signature
Title
Date
/s/ CHARLES L. TREADWAY
Charles L. Treadway
President, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ KYLE D. LORENTZEN
Kyle D. Lorentzen
Executive Vice President and Chief Financial
Officer (Principal Financial Officer)
/s/ LAURIE S. ORACION
Laurie S. Oracion
Senior Vice President and Chief Accounting
Officer (Principal Accounting Officer)
February 22, 2023
February 22, 2023
February 22, 2023
/s/ CLAUDIUS E. WATTS IV
Claudius E. Watts IV
Director and Chairman of the Board
February 22, 2023
/s/ MARY S. CHAN
Mary S. Chan
Director
February 22, 2023
/s/ FRANK M. DRENDEL
Frank M. Drendel
/s/ STEPHEN C. GRAY
Stephen C. Gray
/s/ L. WILLIAM KRAUSE
L. William Krause
/s/ MINDY MACKENZIE
Mindy Mackenzie
/s/ JOANNE M. MAGUIRE
Joanne M. Maguire
/s/ THOMAS J. MANNING
Thomas J. Manning
/s/ PATRICK R. MCCARTER
Patrick R. McCarter
/s/ DERRICK A. ROMAN
Derrick A. Roman
/s/ TIMOTHY T. YATES
Timothy T. Yates
Director and Chairman Emeritus
February 22, 2023
February 22, 2023
February 22, 2023
February 22, 2023
February 22, 2023
February 22, 2023
February 22, 2023
February 22, 2023
February 22, 2023
Director
Director
Director
Director
Director
Director
Director
Director
127
Subsidiaries of the Registrant
CommScope, Inc.
CommScope, Inc. of North Carolina
CommScope Technologies LLC
CommScope Connectivity LLC
CommScope EMEA Ltd
ARRIS US Holdings, Inc.
Ruckus Wireless, Inc.
ARRIS Solutions, Inc.
ARRIS Technology, Inc.
ARRIS Enterprises LLC
ARRIS Global Services, Inc.
CommScope UK Holdings Ltd
ARRIS International Ltd
ARRIS Global Ltd
ARRIS International IP Ltd
Exhibit 21.1
Delaware (USA)
North Carolina (USA)
Delaware (USA)
Minnesota (USA)
Ireland
Delaware (USA)
Delaware (USA)
Delaware (USA)
Delaware (USA)
Delaware (USA)
Delaware (USA)
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-3 No. 333-202490) and related Prospectus of CommScope Holding
Company, Inc.;
(2) Registration Statement (Form S-3 No. 333-230826) and related Prospectus of CommScope Holding
Company, Inc.;
(3) Registration Statement (Form S-8 No. 333-191959) pertaining to the CommScope Holding Company, Inc.
2013 Long-Term Incentive Plan, the Amended and Restated CommScope Holding Company, Inc. 2011
Incentive Plan, the Amended and Restated CommScope, Inc. 2006 Long-Term Incentive Plan, the Amended
and Restated CommScope, Inc. 1997 Long-Term Incentive Plan, the Andrew Corporation Management
Incentive Program, and the Options Granted to Non-Employee Directors Outside of a Plan;
(4) Registration Statement (Form S-8 No. 333-230720) pertaining to the ARRIS International plc 2016 Stock
Incentive Plan;
(5) Registration Statement (Form S-8 No. 333-232354) pertaining to the CommScope Holding Company, Inc.
2019 Long-Term Incentive Plan;
(6) Registration Statement (Form S-8 No. 333-238716) pertaining to the CommScope Holding Company, Inc.
Amended and Restated 2019 Long-Term Incentive Plan;
(7) Registration Statement (Form S-8 No. 333-249204) pertaining to the Restricted Stock Units and Performance
Share Units Granted as Employment Inducement Awards Outside of a Plan;
(8) Registration Statement (Form S-8 No. 333-256539) pertaining to the CommScope Holding Company, Inc.
Amended and Restated 2019 Long-Term Incentive Plan; and
(9) Registration Statement (Form S-8 No. 333-265198) pertaining to the CommScope Holding Company, Inc.
Amended and Restated 2019 Long-Term Incentive Plan
of our reports dated February 22, 2023, with respect to the consolidated financial statements of CommScope Holding
Company, Inc. and the effectiveness of internal control over financial reporting of CommScope Holding Company,
Inc. included in this Annual Report (Form 10-K) of CommScope Holding Company, Inc. for the year ended December
31, 2022.
Charlotte, North Carolina
February 22, 2023
Exhibit 31.1
MANAGEMENT CERTIFICATION
I, Charles L. Treadway, certify that:
1. I have reviewed this annual report on Form 10-K of CommScope Holding Company, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, 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;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Dated: February 22, 2023
/s/ Charles L. Treadway
Name: Charles L. Treadway
Title:
President, Chief Executive Officer
and Director (Principal Executive
Officer)
Exhibit 31.2
I, Kyle D. Lorentzen, certify that:
MANAGEMENT CERTIFICATION
1. I have reviewed this annual report on Form 10-K of CommScope Holding Company, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, 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;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Dated: February 22, 2023
/s/ Kyle D. Lorentzen
Name: Kyle D. Lorentzen
Title:
Executive Vice President and Chief
Financial Officer (Principal Financial
Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of CommScope Holding Company, Inc. (the “Company”) on Form 10-K for
the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), we, Charles L. Treadway, President, Chief Executive Officer and Director of the Company, and Kyle D.
Lorentzen, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §
1350 as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Dated: February 22, 2023
/s/ Charles L. Treadway
Charles L. Treadway
President, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Kyle D. Lorentzen
Kyle D. Lorentzen
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Board of directors
Management team
Investor information
Claudius (Bud) E. Watts IV
Chairman, CommScope
Private Investor and Founding Partner
Meeting Street Capital, LLC
Charles L. Treadway ¹ ²
President and Chief Executive Officer,
CommScope
Mary S. Chan
Chair of Compensation Committee
Managing Partner, VectoIQ, LLC
Frank M. Drendel
Founder & Chairman Emeritus, CommScope
Stephen (Steve) C. Gray
Compensation Committee Member
Founder and Chairman of Gray Venture
Partners, LLC
L. William (Bill) Krause
Compensation Committee Member
Charles L. Treadway ¹ ²
President and Chief Executive Officer
Kyle D. Lorentzen ¹ ²
Executive Vice President and
Chief Financial Officer
John R. Carlson ¹
Senior Vice President and
Chief Commercial Officer
Justin C. Choi ¹ ²
Senior Vice President,
Chief Legal Officer and Secretary
Robyn T. Mingle ¹ ²
Senior Vice President and
Chief Human Resources Officer
Laurie S. Oracion ¹
Senior Vice President and
Chief Accounting Officer
and Nominating and Corporate Governance
Committee Member, Former Chairman &
Charles A. Gilstrap
Senior Vice President, Tax & Treasury
CEO of 3Com Corporation
Mindy Mackenzie
Compensation Committee Member
Managing Director, Chief Performance
Officer, The Carlyle Group
Joanne M. Maguire
Chair of Nominating and Corporate
Governance Committee, Former EVP,
Lockheed Martin Corporation
Thomas J. Manning
Audit Committee Member
Executive Chairman, Cresco Labs, Inc.
Patrick R. McCarter
Nominating and Corporate Governance
Committee Member, Managing Director
and Head of the Global Technology,
Joe Chow ¹ ²
Senior Vice President and
President, Home Networks
Farid Firouzbakht ¹ ²
Senior Vice President and President,
Outdoor Wireless Networks
Bart Giordiano ¹ ²
Senior Vice President and President,
Networking, Intelligent Cellular and
Security Solutions
John (Ric) R. Johnsen ¹ ²
Senior Vice President and President,
Connectivity & Cable Solutions
Guy Sucharczuk ¹ ²
Senior Vice President and President,
Media and Telecommunications Group,
Access Network Solutions
The Carlyle Group
Derrick A. Roman
Audit Committee Member
Former Partner,
PricewaterhouseCoopers LLP
Timothy T. Yates
Lead Independent Director
and Chair of Audit Committee
Praveen Jonnala
Senior Vice President and
Chief Information Officer
Boris Kokotovic ²
Senior Vice President, Corporate Quality
Former President and Chief Executive
1 Section 16 Officers
Annual meeting
Thursday, May 11, 2023, 1:00 p.m. ET
Virtual at ir.commscope.com
Corporate headquarters
CommScope Holding Company, Inc.
1100 CommScope Place, SE
Hickory, NC 28602
www.commscope.com
+1 828.324.2200
800.982.1708 (U.S. only)
Transfer agent and registrar
American Stock Transfer
& Trust Company, LLC
Shareholder Services Department
6201 15th Avenue
Brooklyn, NY 11219
help@astfinancial.com
+1 718.921.8124
800.937.5449 (U.S. only)
www.astfinancial.com
Investor relations
Michael (Mick) McCloskey
Vice President, Head of Investor Relations
+1 828.431.9874
Common stock
Trades on NASDAQ under
the symbol “COMM”
A copy of the Company’s 2022
Annual Report on Form 10-K for the
fiscal year ended December 31, 2022,
may be obtained, free of charge,
by any shareholder by writing to
CommScope Holding Company, Inc.,
1100 CommScope Place, SE, Hickory,
NC 28602, Attention: Investor
Relations. Our Annual Report on
Form 10-K is also available and may
be accessed free of charge through
the Investor Relations section
Officer, Monster Worldwide, Inc.
2 Ethics, Compliance & Sustainability
of our Internet website at
Executive Council Members
ir.commscope.com.
19368.indd 11
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1100 CommScope Place, SE
Hickory, NC 28602
+1 828.324.2200
IR-117437-EN © 2023 CommScope, Inc.
All Rights Reserved. All trademarks identified by
® or ™ are registered trademarks or trademarks,
respectively, of CommScope, Inc.
19368.indd 12
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