EXHIBIT 99
COMMSCOPE, INC.
EXHIBIT 99 - FORWARD-LOOKING INFORMATION
The Securities Exchange Act of 1934, the Private Securities Litigation Reform
Act of 1995 and other related laws provide a "safe harbor" for forward-looking
statements. Our Form 10-K for the year ended December 31, 1999, our Annual
Report to Stockholders, any Form 10-Q or Form 8-K of ours, or any other oral or
written statements made by us or on our behalf, may include forward-looking
statements which reflect our current views with respect to future events and
financial performance. These forward-looking statements are identified,
including without limitation, by their use of such terms and phrases as
"intends," "intend," "intended," "goal," "estimate," "estimates," "expects,"
"expect," "expected," "project," "projects," "projected," "projections,"
"plans," "anticipates," "anticipated," "should," "think", "designed to,"
"foreseeable future," "believe," "believes" and "scheduled" and similar
expressions. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date the statement was
made. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
Our actual results may differ significantly from the results discussed in
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, (a) the general political, economic and competitive
conditions in the United States and other markets where we operate; (b) changes
in capital availability or costs, such as changes in interest rates, market
perceptions of the industry in which we operate, or security ratings; (c)
employee workforce factors; (d) authoritative generally accepted accounting
principles or policy changes from such standard-setting bodies as the Financial
Accounting Standards Board and the Securities and Exchange Commission and the
factors set forth below.
Our sales and profitability may be adversely affected by changes in cable
television capital spending.
Most of our revenues come from sales to the cable television industry. Demand
for our products depends primarily on capital spending by cable television
operators for maintaining, constructing, rebuilding or upgrading their systems.
The amount of this capital spending, and, therefore, our sales and
profitability, will be affected by a variety of factors, including, without
limitation:
o general economic conditions;
o acquisitions of cable television operators by non-cable television
operators;
o cable system consolidation within the industry;
o the financial condition of domestic cable television operators and their
access to financing;
o competition from satellite and wireless television providers and
telephone companies;
o technological developments; and
o new legislation and regulation of cable television operators.
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We cannot assure you that cable television capital spending will increase
from historical levels or that existing levels of cable television capital
spending will be maintained.
In recent years, cable television capital spending has been affected by new
legislation and regulation, on the federal, state and local level. Many aspects
of government regulation are currently the subject of judicial proceedings and
administrative or legislative proposals. The Federal Communications Commission
is continuing its implementation of the Telecommunications Act of 1996 (the
"Telecom Act") which, when fully implemented, may significantly impact the
communications industry and alter federal, state and local laws and regulations
regarding the provision of cable, internet and telephony services. The Telecom
Act eliminates substantially all restrictions on the entry of telephone
companies and certain public utilities into the cable television business.
Telephone companies may now enter the cable television business as traditional
cable operators, as common carrier conduits for programming supplied by others,
as operators of wireless distribution systems, or as hybrid common carrier/cable
operator providers of programming on so-called "open video systems." The
economic impact of the Telecom Act, ongoing litigation in this regard, other
federal legislation, and the rules implementing these laws on the cable
television industry and our business is still uncertain.
The loss of some of our principal cable television customers could materially
adversely affect us.
Although the domestic cable television industry is comprised of thousands of
cable systems, a small number of cable television operators own a majority of
cable television systems and account for a majority of the capital expenditures
made by cable television operators. The loss of some or all of our principal
cable television customers could have a material adverse effect on our business
and financial condition.
The inability of our customers to obtain adequate financing to fund their
infrastructure projects could materially adversely affect us.
Demand for our products depends primarily on cable system operators, wireless
service providers, alternate service providers, and other customers and third
parties continuing to construct, maintain, rebuild, and upgrade their wired and
wireless communication infrastructure. The inability of our customers to obtain
adequate financing to fund their infrastructure projects could have a material
adverse effect on our business and financial condition.
Our failure to introduce new products successfully, and changes in technology,
could adversely affect us.
Many of our markets are characterized by advances in information processing
and communications capabilities which require increased transmission speeds and
greater capacity, or "bandwidth," for carrying information. These advances
require ongoing improvements in the capabilities of wire and cable products. We
believe that our future success will depend in part upon our ability to enhance
existing products and to develop and manufacture new products that meet or
anticipate these changes. The failure to introduce successful new or enhanced
products on a timely and cost-competitive basis could adversely affect our
business and financial condition.
Fiber optic technology presents a potential substitute for the products that
comprise most of our sales. Fiber optic cables have penetrated the cable
television and local area network markets we serve in high-bandwidth
point-to-point and trunking applications. Fiber optic cables have not
significantly penetrated the local distribution and residential application
markets we serve because of the high relative cost of electro-optic interfaces
and the high cost of fiber termination and connection. At the same time,
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advances in data transmission equipment and copper cable technologies have
increased the relative performance of copper-based cables which are our
principal products. However, a significant decrease in the cost of fiber optic
systems could make these systems superior on a price/performance basis to copper
systems. While we are a fiber optic cable manufacturer and supplier to a small
portion of the cable television market and certain specialty markets, a
significant decrease in the cost of fiber optic systems would likely have an
adverse effect on us.
Our industry is highly competitive and rapid technological change may lead to
further competition.
Our coaxial, fiber optic and electronic cable products compete with those of
a substantial number of foreign and domestic companies, some of which have
greater resources, financial or otherwise, than we have. The rapid technological
changes occurring in the telecommunications industry could lead to the entry of
new competitors. Existing competitors' actions and new entrants may have an
adverse impact on our sales and profitability. We believe that we enjoy a strong
competitive position in the coaxial cable market because of our position as a
low-cost, high-volume coaxial cable producer and our reputation as a
high-quality provider of state-of-the-art cables, along with our strong
orientation toward customer service. However, we cannot assure you that we will
continue to compete successfully with our existing competitors or that we will
be able to compete successfully with new competitors.
Our dependence on commodities subjects us to price fluctuations which could
adversely affect us.
The principal raw materials we purchase are fabricated aluminum, plastics,
bimetals, copper and optical fiber. Our profitability may be affected by changes
in the market price of these materials, which are linked to the commodity
markets. Although we have generally been able to pass on increases in the price
of these materials to our customers, we cannot assure you that we will be able
to do so in the future. Additionally, significant increases in the price of our
products due to increases in the cost of raw materials could have a negative
effect on demand for our products.
Difficulties with our key suppliers could adversely affect us.
A significant portion of our raw material purchases are bimetallic center
conductors for coaxial cables. Copperweld has indicated its intent to continue
to supply us with those materials at volumes consistent with its recent rate of
supply for the remainder of calendar year 2000. Also, Copperweld has agreed to
supply us a fixed amount of bimetallic center conductors for calendar year 2001
and to work with us towards a longer-term supply arrangement. If we are unable
to continue to purchase the necessary quantities of bimetallic center
conductors, namely copper clad aluminum wire and copper clad steel wire, from
this supplier, we may be unable to obtain these raw materials on commercially
acceptable terms from another source. There are few, and limited, alternative
sources of supply for these raw materials. In February 1999, we purchased the
clad wire fabrication equipment and technology of Texas Instruments Incorporated
for manufacturing bimetallic center conductors, and we have recently begun to
produce a portion of our requirements of those materials. Management believes
that our current supply arrangement with Copperweld, together with our
increasing internal production of bimetallic center conductors, addresses
concerns regarding the continuing availability of these key materials and
enhances our ability to support the growing demand for broadband cable. However,
the loss of Copperweld as a supplier of bimetallic center conductors,
Copperweld's inability to supply, and/or our failure to adequately expand our
internal production of these products, could have a material adverse effect on
our business and financial condition.
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In addition, we purchase fine aluminum wire from a limited number of
suppliers and optical fiber principally from one supplier. Neither of these raw
materials could be readily replaced in sufficient quantities if all supplies
from the respective primary sources were disrupted for an extended period. In
such event, there could be a materially adverse impact on our financial results.
Additionally, fluorinated-ethylene-propylene (FEP) is the primary raw
material used throughout the industry for producing flame-retarding cables for
local area network applications. There are few worldwide producers of FEP and
market supplies have been periodically limited over the past several years.
Availability of adequate supplies of FEP will be critical to future local area
network cable sales growth.
Our business is subject to the economic uncertainties and political risks of
selling our products in foreign countries.
We believe that growth in international markets, including the developing
markets in Asia, the Middle East and Latin America, and the expected
privatization of the telecommunications structure in many European countries,
represents significant future opportunities for us. However, we cannot predict
with certainty the outlook for international sales in the short-term due to
political and economic uncertainties.
Our international operations are subject to the usual risks inherent in sales
abroad, including risks with respect to currency exchange rates, economic and
political destabilization, restrictive actions by foreign governments,
nationalizations, the laws and policies of the U.S. affecting trade, foreign
investment and loans, and foreign tax laws.
Potential environmental liabilities may arise in the future and adversely impact
our financial position.
We are subject to various federal, state, local and foreign laws and
regulations governing the use, discharge and disposal of hazardous materials. We
believe that our manufacturing facilities are in substantial compliance with
current laws and regulations. Compliance with current laws and regulations has
not had and is not expected to have a material adverse effect on our financial
condition.
Our present and past facilities have been in operation for many years, and
over that time in the course of those operations, these facilities have used
substances which are or might be considered hazardous, and we have generated and
disposed of wastes which are or might be considered hazardous. Therefore, it is
possible that environmental issues may arise in the future which we cannot now
predict.
Our indebtedness could restrict our operations, make us more vulnerable to
adverse economic conditions and make it more difficult for us to make payments
on our existing debt.
Our current and future indebtedness could have important consequences to you.
For example, it could:
o impair our ability to obtain additional financing in the future;
o reduce funds available to us for other purposes, including working
capital, capital expenditures, research and development, strategic
acquisitions and other general corporate purposes;
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o restrict our ability to introduce new products or exploit business
opportunities;
o increase our vulnerability to economic downturns and competitive
pressures in the industry we operate in;
o increase our vulnerability to interest rate increases to the extent
variable-rate debt is not effectively hedged;
o limit, along with the financial and other restrictive covenants in our
indebtedness, our ability to dispose of assets or borrow additional
funds;
o make it more difficult for us to satisfy our obligations with respect to
our existing debt; or
o place us at a competitive disadvantage.
The restrictions imposed by our existing debt could negatively affect our
business and our failure to comply with these restrictions could result in a
default under our debt instruments.
Our existing debt agreements contain covenants that restrict our ability and
our subsidiaries' ability to:
o dispose of assets;
o incur additional indebtedness;
o incur liens on property or assets;
o repay other indebtedness;
o pay dividends;
o enter into certain investments or transactions;
o repurchase or redeem capital stock;
o engage in mergers or consolidations; or
o engage in certain transactions with subsidiaries and affiliates and
otherwise restrict corporate activities.
In addition, our existing debt agreements contain financial covenants,
including:
o a total debt to EBITDA ratio;
o a net worth maintenance; and
o an interest expense coverage ratio.
Our compliance with our covenants in the future may be affected by events
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beyond our control. Our breach of or failure to comply with any of the covenants
could result in a default under our debt agreements.
Our failure to effectively implement our new information management system could
adversely affect us.
On January 2, 2000, we began the implementation of a new integrated
information management system. Our goal for this new computer-based system is to
help us improve business practices, allow faster access to information and
ultimately enable us to service our customers better in the future, among other
things.
However, during January 2000 we experienced some delays in certain shipments
in connection with the transition to this new information system. During the
first quarter of 2000, we worked diligently to resolve these transition issues
and to increase shipping efforts to reduce the system-related backlogs. During
the first nine months of 2000, the transition also contributed to an increase in
accounts receivable. We do not believe that these transition issues will have a
material impact on our results of operations, liquidity or financial condition
for the full year 2000. However, we cannot assure you that we will incur no
future issues with this system.
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