Segment Results
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Three Months Ended |
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March 31, |
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2022 |
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2021 |
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Amount |
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% of Net Sales |
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Amount |
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% of Net Sales |
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Change |
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% Change |
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(dollars in millions) |
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Net sales by segment: |
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CCS |
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$ |
838.0 |
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37.6 |
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% |
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$ |
676.9 |
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32.7 |
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% |
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$ |
161.1 |
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23.8 |
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% |
OWN |
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390.1 |
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17.5 |
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324.2 |
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15.6 |
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65.9 |
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20.3 |
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NICS |
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188.0 |
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8.4 |
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191.2 |
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9.2 |
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(3.2 |
) |
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(1.7 |
) |
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ANS |
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316.8 |
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14.2 |
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378.7 |
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18.3 |
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(61.9 |
) |
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(16.3 |
) |
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Core net sales (1) |
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1,732.9 |
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77.8 |
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1,571.0 |
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75.8 |
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161.9 |
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10.3 |
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Home |
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495.7 |
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22.2 |
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501.0 |
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24.2 |
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(5.3 |
) |
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(1.1 |
) |
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Consolidated net sales |
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$ |
2,228.6 |
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|
100.0 |
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% |
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$ |
2,072.0 |
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100.0 |
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% |
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$ |
156.6 |
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7.6 |
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% |
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Operating income (loss) by segment: |
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CCS |
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$ |
37.3 |
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4.5 |
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% |
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$ |
26.1 |
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3.9 |
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% |
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$ |
11.2 |
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42.9 |
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% |
OWN |
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52.9 |
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13.6 |
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50.8 |
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15.7 |
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2.1 |
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4.1 |
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NICS |
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(43.0 |
) |
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(22.9 |
) |
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(60.4 |
) |
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(31.6 |
) |
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17.4 |
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(28.8 |
) |
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ANS |
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(6.6 |
) |
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(2.1 |
) |
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23.9 |
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6.3 |
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(30.5 |
) |
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(127.6 |
) |
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Core operating income (1) |
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40.6 |
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2.3 |
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40.4 |
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2.6 |
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0.2 |
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0.5 |
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Home |
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(13.8 |
) |
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(2.8 |
) |
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(31.5 |
) |
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(6.3 |
) |
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17.7 |
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(56.2 |
) |
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Consolidated operating income |
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$ |
26.8 |
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1.2 |
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% |
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$ |
8.9 |
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0.4 |
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% |
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$ |
17.9 |
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201.1 |
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% |
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Adjusted EBITDA by segment: |
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CCS |
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$ |
98.6 |
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11.8 |
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% |
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$ |
106.0 |
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15.7 |
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% |
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$ |
(7.4 |
) |
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(7.0 |
) |
% |
OWN |
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71.0 |
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18.2 |
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73.7 |
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22.7 |
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(2.7 |
) |
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(3.7 |
) |
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NICS |
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(13.8 |
) |
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(7.3 |
) |
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(17.4 |
) |
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(9.1 |
) |
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3.6 |
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(20.7 |
) |
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ANS |
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74.2 |
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23.4 |
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108.0 |
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28.5 |
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(33.8 |
) |
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(31.3 |
) |
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Core adjusted EBITDA (1) |
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230.0 |
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13.3 |
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270.3 |
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17.2 |
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(40.3 |
) |
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(14.9 |
) |
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Home |
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23.3 |
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4.7 |
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19.4 |
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3.9 |
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3.9 |
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20.1 |
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Non-GAAP consolidated adjusted EBITDA (2) |
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$ |
253.3 |
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11.4 |
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% |
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$ |
289.7 |
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14.0 |
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% |
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$ |
(36.4 |
) |
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(12.6 |
) |
% |
Note: Components may not sum to total due to rounding.
(1)Core financial measures reflect the results of our CCS, OWN, NICS and ANS segments, in the aggregate. Core financial measures exclude the results of our Home segment.
(2)See “Reconciliation of Non-GAAP Measures.”
Connectivity and Cable Solutions Segment
Net sales for the CCS segment increased for the three months ended March 31, 2022 compared to the prior year period due to increased demand for our products and services as service providers continued to enhance their networks to keep pace with increasing broadband demand. CCS segment net sales also benefitted from pricing increases as well as additional production enabled by our capacity expansion. We continue to experience supply shortages with certain of our network cable products, which hindered our ability to meet customer demand for our CCS segment products during the three months ended March 31, 2022, and these shortages could extend into the remainder of 2022. From a regional perspective, for the three months ended March 31, 2022, net sales increased in the U.S. by $139.8 million, the EMEA region by $9.9 million, the CALA region by $7.8 million and Canada by $7.5 million but decreased in the APAC region by $3.9 million. Foreign exchange rate changes impacted CCS segment net sales unfavorably by approximately 1% during the three months ended March 31, 2022 compared to the prior year period.
28
For the three months ended March 31, 2022, CCS segment operating income and adjusted EBITDA both benefitted from pricing increases and higher sales volumes. However, these benefits were more than offset by higher material and freight costs and increases in SG&A and R&D costs. Compared to the prior year period, CCS segment operating income for the three months ended March 31, 2022 was favorably impacted by a $13.8 million reduction in restructuring expense and a $10.8 million reduction in amortization expense but was unfavorably impacted by a $4.9 million charge to establish an allowance against certain accounts receivable determined to be uncollectible as a result of the Russia/Ukraine conflict. Restructuring expense, amortization expense 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” below.
Outdoor Wireless Networks Segment
For the three months ended March 31, 2022, OWN segment net sales increased compared to the prior year period primarily due to an increase in customer demand for both metro and macro cell solutions and favorable pricing impacts. From a regional perspective, for the three months ended March 31, 2022, OWN segment net sales increased in the U.S. by $80.5 million and the EMEA region by $8.0 million but decreased in the APAC region by $13.9 million, Canada by $6.3 million and the CALA region by $2.4 million compared to the prior year period. Foreign exchange rate changes impacted OWN segment net sales unfavorably by approximately 1% during the three months ended March 31, 2022 compared to the same prior year period.
For the three months ended March 31, 2022, OWN segment operating income and adjusted EBITDA both benefitted from increased sales volumes and favorable pricing impacts, but these benefits were more than offset by higher material and freight costs. Compared to the prior year period, OWN segment operating income for the three months ended March 31, 2022 was favorably impacted by a $3.6 million reduction in restructuring expense which is not reflected in adjusted EBITDA. See “Reconciliation of Segment Adjusted EBITDA” below.
Networking, Intelligent Cellular and Security Solutions Segment
For the three months ended March 31, 2022, NICS segment net sales decreased slightly compared to the prior year period. Sales of our Ruckus products were unfavorably impacted by material shortages, but the decrease was partially offset by the favorable impacts of pricing. NICS segment net sales also benefitted from increased demand for our distributed antenna systems and small cell products. We believe the material shortages experienced by our Ruckus business could continue for the remainder of 2022 and into 2023. From a regional perspective, for the three months ended March 31, 2022, net sales decreased in Canada by $4.5 million, the U.S. by $1.1 million and the CALA region by $1.1 million but increased in the EMEA region by $2.8 million and the APAC region by $0.7 million compared to the prior year period. Foreign exchange rate changes impacted NICS segment net sales unfavorably by approximately 1% during the three months ended March 31, 2022 compared to the prior year period.
For the three months ended March 31, 2022, NICS segment operating loss decreased and adjusted EBITDA increased compared to the prior year period primarily due to favorable pricing impacts on certain products, favorable product mix and lower selling expenses, partially offset by lower sales volumes, higher material costs and higher R&D costs. Compared to the prior year period, NICS segment operating loss was favorably impacted by a $7.6 million reduction in restructuring expense and a $2.5 million reduction in amortization expense which are not reflected in adjusted EBITDA. See “Reconciliation of Segment Adjusted EBITDA” below.
Access Network Solutions Segment
For the three months ended March 31, 2022, net sales decreased in the ANS segment due to the negative impact of supply shortages resulting in delays on our ability to meet customer demand. These shortages could continue for the remainder of 2022. From a regional perspective, for the three months ended March 31, 2022, net sales decreased in the U.S. by $57.5 million, the APAC region by $7.4 million and the CALA region by $6.0 million but increased in the EMEA region by $5.4 million and Canada by $3.6 million compared to the prior year period. Foreign exchange rate changes had no significant impact on ANS segment net sales during the three months ended March 31, 2022 compared to the prior year period.
For the three months ended March 31, 2022, ANS segment operating loss increased and adjusted EBITDA decreased compared to the prior year period primarily due to lower sales volumes and unfavorable geographic and product mix, partially offset by lower material and freight costs and lower SG&A and R&D costs. Compared to the prior year period, ANS segment operating loss was unfavorably impacted by a $3.8 million transformation cost related to the termination of a supply agreement as part of CommScope NEXT but was favorably impacted by a $2.2 million reduction in restructuring expense. Neither of these items is reflected in adjusted EBITDA. See “Reconciliation of Segment Adjusted EBITDA” below.
29
Home Networks Segment
Net sales for the Home segment decreased slightly for the three months ended March 31, 2022 compared to the prior year period. While net sales of broadband solution products benefitted from favorable pricing impacts, these increases were more than offset by lower net sales volumes of our other Home products due to continued supply shortages, which delayed our ability to meet customer demand. Although we are working to secure components from key suppliers, we still expect to experience supply chain challenges through 2022 and into 2023. From a regional perspective, for the three months ended March 31, 2022, net sales decreased in the CALA region by $29.8 million, the U.S. by $6.5 million and the EMEA region by $5.4 million but increased in Canada by $32.2 million and the APAC region by $2.5 million compared to the prior year period. Foreign exchange rate changes impacted Home segment net sales unfavorably by less than 1% during the three months ended March 31, 2022 compared to the prior year period.
For the three months ended March 31, 2022, Home segment operating loss decreased and adjusted EBITDA increased compared to the prior year period primarily due to favorable pricing impacts, benefits from cost savings initiatives, lower warranty costs and favorable product mix. These benefits were partially offset by higher component and freight costs and lower sales volumes. Compared to the prior year period, Home segment operating loss for the three months ended March 31, 2022 was favorably impacted by a reduction of $5.1 million in restructuring expense and a $3.4 million reduction in transaction, transformation and integration costs which are not reflected in adjusted EBITDA. See “Reconciliation of Segment Adjusted EBITDA” below.
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes certain key measures of our liquidity and capital resources (in millions, except percentage data).
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March 31, 2022 |
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|
December 31, 2021 |
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Change |
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% Change |
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|
|
(dollars in millions) |
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|
Cash and cash equivalents |
|
$ |
314.7 |
|
|
$ |
360.3 |
|
|
$ |
(45.6 |
) |
|
|
(12.7 |
) |
% |
Working capital (1), excluding cash and cash equivalents and current portion of long-term debt |
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|
1,138.8 |
|
|
|
1,068.9 |
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|
|
69.9 |
|
|
|
6.5 |
|
|
Availability under revolving credit facility |
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|
715.6 |
|
|
|
684.1 |
|
|
|
31.5 |
|
|
|
4.6 |
|
|
Long-term debt, including current portion |
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|
9,508.3 |
|
|
|
9,510.5 |
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|
|
(2.2 |
) |
|
|
— |
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|
Total capitalization (2) |
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|
10,264.8 |
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|
10,410.0 |
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|
|
(145.2 |
) |
|
|
(1.4 |
) |
|
Long-term debt as a percentage of total capitalization |
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|
92.6 |
% |
|
|
91.4 |
% |
|
|
|
|
|
|
|
(1) Working capital consisted of current assets of $3,643.4 million less current liabilities of $2,221.9 million at March 31, 2022. Working capital consisted of current assets of $3,579.7 million less current liabilities of $2,182.5 million at December 31, 2021.
(2) Total capitalization includes long-term debt, including the current portion, Series A convertible preferred stock (the 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.
The primary uses of liquidity include debt service requirements, voluntary debt repayments or redemptions, working capital requirements, capital expenditures, business separation transaction costs, transformation costs, acquisition integration 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 expect the interest payments on our senior secured term loan due in 2026 (2026 Term Loan) and our senior secured asset-based revolving credit facility (Revolving Credit Facility) to increase in 2022 as a result of the Federal Reserve’s increase in interest rates in March 2022 and the expectation that they will continue to raise interest rates further in 2022. See Part II, Item 7A, “Quantitative and Qualitative Disclosure About Market Risk” in our 2021 Annual Report for further discussion of our interest rate risk. 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.
30
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 twelve months ended March 31, 2022, our non-GAAP pro forma adjusted EBITDA, as measured pursuant to the indentures governing our notes, was $1,132.6 million, which included annualized savings expected from cost reduction initiatives ($52.0 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 March 31, 2022.
Cash and cash equivalents decreased during the three months ended March 31, 2022 primarily driven by cash used for operating activities of $14.6 million, capital expenditures of $27.4 million and tax withholding payments for vested equity-based compensation awards of $10.6 million. As of March 31, 2022, approximately 71% of our cash and cash equivalents were held outside the U.S.
Working capital, excluding cash and cash equivalents and the current portion of long-term debt, increased during the three months ended March 31, 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. Offsetting the increase in inventory was an increase in accounts payable mainly driven by higher inventory balances and a shift in payments timing. In the first quarter of 2022, we sold approximately $82 million of accounts receivable under customer-sponsored supplier financing agreements. Approximately $60 million of that amount impacted working capital, excluding cash and cash equivalents and the current portion of long-term debt, as of March 31, 2022. Under these agreements, we are able to sell certain 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 the three months ended March 31, 2022 reflected the net loss for the period.
Cash Flow Overview
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Three Months Ended |
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|
|
|
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|
|
March 31, |
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|
|
|
|
% |
|
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
Change |
|
|
|
(dollars in millions) |
|
Net cash used in operating activities |
|
$ |
(14.6 |
) |
|
$ |
(124.0 |
) |
|
$ |
109.4 |
|
|
|
(88.2 |
)% |
Net cash used in investing activities |
|
|
(16.0 |
) |
|
|
(25.4 |
) |
|
|
9.4 |
|
|
|
(37.0 |
) |
Net cash used in financing activities |
|
|
(17.2 |
) |
|
|
(42.7 |
) |
|
|
25.5 |
|
|
|
(59.7 |
) |
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(in millions) |
|
Net loss |
|
$ |
(139.9 |
) |
|
$ |
(97.6 |
) |
Adjustments to reconcile net loss to net cash generated by operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
|
180.2 |
|
|
|
199.2 |
|
Equity-based compensation |
|
|
16.5 |
|
|
|
23.5 |
|
Deferred income taxes |
|
|
2.3 |
|
|
|
(53.4 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
|
(60.5 |
) |
|
|
(164.2 |
) |
Inventories |
|
|
(73.7 |
) |
|
|
(10.7 |
) |
Prepaid expenses and other assets |
|
|
29.6 |
|
|
|
4.1 |
|
Accounts payable and other liabilities |
|
|
23.5 |
|
|
|
(23.9 |
) |
Other |
|
|
7.4 |
|
|
|
(1.0 |
) |
Net cash used in operating activities |
|
$ |
(14.6 |
) |
|
$ |
(124.0 |
) |
During the three months ended March 31, 2022, cash used for operating activities decreased compared to the prior year period primarily as a result of higher collections of accounts receivable and a shift in the timing of certain variable incentive compensation payments, partially offset by higher inventory costs.
31
Investing Activities
|
|
|
|
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|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(in millions) |
|
Additions to property, plant and equipment |
|
$ |
(27.4 |
) |
|
$ |
(26.4 |
) |
Proceeds from sale of property, plant and equipment |
|
|
— |
|
|
|
1.0 |
|
Other |
|
|
11.4 |
|
|
|
— |
|
Net cash used in investing activities |
|
$ |
(16.0 |
) |
|
$ |
(25.4 |
) |
During the three months ended March 31, 2022, the decrease in cash used in investing activities compared to the prior year period was primarily driven by proceeds of $6.9 million on the sale of an equity method investment and a return of $4.5 million on equity method investments.
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(in millions) |
|
Long-term debt repaid |
|
$ |
(93.0 |
) |
|
$ |
(8.0 |
) |
Long-term debt proceeds |
|
|
85.0 |
|
|
|
— |
|
Dividends paid on Series A convertible preferred stock |
|
|
— |
|
|
|
(14.3 |
) |
Proceeds from the issuance of common shares under equity-based compensation plans |
|
|
0.1 |
|
|
|
3.9 |
|
Tax withholding payments for vested equity-based compensation awards |
|
|
(10.6 |
) |
|
|
(24.3 |
) |
Other |
|
|
1.3 |
|
|
|
— |
|
Net cash used in financing activities |
|
$ |
(17.2 |
) |
|
$ |
(42.7 |
) |
During the three months ended March 31, 2022, we borrowed and repaid $85.0 million under the Revolving Credit Facility. We also paid the quarterly scheduled amortization payment of $8.0 million on the senior secured term loan due in 2026 during the three months ended March 31, 2022.
As of March 31, 2022, we had no outstanding borrowings under the Revolving Credit Facility and the remaining availability was $715.6 million, reflecting a borrowing base of $807.5 million reduced by $91.9 million of letters of credit issued under the Revolving Credit Facility.
During the three months ended March 31, 2022, we received proceeds of $0.1 million related to the exercise of stock options compared to $3.9 million in the prior year period. Also during the three months ended March 31, 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 $10.6 million compared to $24.3 million in the prior year period.
32
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. These financial measures should not be considered as alternatives to operating income (loss), net income (loss) or any other performance measures derived in accordance with U.S. GAAP as measures of operating performance, operating cash flows or liquidity.
We also believe presenting these non-GAAP results for the twelve months ended March 31, 2022 provides an additional tool for assessing our recent performance. Such amounts are unaudited and are derived by subtracting the data for the three months ended March 31, 2021 from the data for the year ended December 31, 2021 and then adding the data for the three months ended March 31, 2022.
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Year |
|
|
Twelve Months |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
March 31, |
|
|
December 31, |
|
|
March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
2021 |
|
|
2022 |
|
|
|
(in millions) |
|
Net loss |
|
$ |
(139.9 |
) |
|
$ |
(97.6 |
) |
|
$ |
(462.6 |
) |
|
$ |
(504.9 |
) |
Income tax expense (benefit) |
|
|
30.9 |
|
|
|
(29.5 |
) |
|
|
(71.9 |
) |
|
|
(11.5 |
) |
Interest income |
|
|
(0.7 |
) |
|
|
(0.5 |
) |
|
|
(1.9 |
) |
|
|
(2.1 |
) |
Interest expense |
|
|
136.5 |
|
|
|
137.5 |
|
|
|
561.2 |
|
|
|
560.2 |
|
Other (income) expense, net |
|
|
— |
|
|
|
(1.0 |
) |
|
|
23.8 |
|
|
|
24.8 |
|
Operating income |
|
$ |
26.8 |
|
|
$ |
8.9 |
|
|
$ |
48.6 |
|
|
$ |
66.5 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of purchased intangible assets |
|
|
140.7 |
|
|
|
154.7 |
|
|
|
613.0 |
|
|
|
599.0 |
|
Restructuring costs, net |
|
|
12.1 |
|
|
|
44.4 |
|
|
|
91.9 |
|
|
|
59.6 |
|
Equity-based compensation |
|
|
16.5 |
|
|
|
23.5 |
|
|
|
79.6 |
|
|
|
72.6 |
|
Asset impairments |
|
|
— |
|
|
|
— |
|
|
|
13.7 |
|
|
|
13.7 |
|
Transaction, transformation and integration costs (1) |
|
|
15.6 |
|
|
|
15.7 |
|
|
|
90.3 |
|
|
|
90.2 |
|
Acquisition accounting adjustments (2) |
|
|
2.0 |
|
|
|
3.3 |
|
|
|
11.5 |
|
|
|
10.2 |
|
Patent claims and litigation settlements |
|
|
1.2 |
|
|
|
1.5 |
|
|
|
31.7 |
|
|
|
31.4 |
|
Reserve for Russian accounts receivable |
|
|
5.4 |
|
|
|
— |
|
|
|
— |
|
|
|
5.4 |
|
Depreciation |
|
|
33.0 |
|
|
|
37.7 |
|
|
|
136.7 |
|
|
|
132.0 |
|
Non-GAAP adjusted EBITDA |
|
$ |
253.3 |
|
|
$ |
289.7 |
|
|
$ |
1,117.0 |
|
|
$ |
1,080.6 |
|
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 costs related to the planned spin-off of the Home Networks business, transformation costs related to CommScope NEXT and integration costs related to the ARRIS acquisition.
(2)In 2022 and 2021, reflects acquisition accounting adjustments related to reducing deferred revenue to its estimated fair value.
33
Reconciliation of Segment Adjusted EBITDA
Segment adjusted EBITDA is provided as a performance measure in Note 7 in the Notes to Unaudited Condensed Consolidated Financial Statements included herein. 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 loss in that footnote.
Connectivity and Cable Solutions Segment
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(in millions) |
|
Operating income |
|
$ |
37.3 |
|
|
$ |
26.1 |
|
Adjustments: |
|
|
|
|
|
|
Amortization of purchased intangible assets |
|
|
29.4 |
|
|
|
40.2 |
|
Restructuring costs, net |
|
|
2.9 |
|
|
|
16.7 |
|
Equity-based compensation |
|
|
4.0 |
|
|
|
5.7 |
|
Transaction, transformation and integration costs |
|
|
4.4 |
|
|
|
4.2 |
|
Patent claims and litigation settlements |
|
|
1.6 |
|
|
|
— |
|
Reserve for Russian accounts receivable |
|
|
4.9 |
|
|
|
— |
|
Depreciation |
|
|
14.0 |
|
|
|
13.0 |
|
Adjusted EBITDA |
|
$ |
98.6 |
|
|
$ |
106.0 |
|
Outdoor Wireless Networks Segment
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(in millions) |
|
Operating income |
|
$ |
52.9 |
|
|
$ |
50.8 |
|
Adjustments: |
|
|
|
|
|
|
Amortization of purchased intangible assets |
|
|
8.1 |
|
|
|
8.8 |
|
Restructuring costs, net |
|
|
2.2 |
|
|
|
5.8 |
|
Equity-based compensation |
|
|
1.9 |
|
|
|
2.5 |
|
Transaction, transformation and integration costs |
|
|
1.8 |
|
|
|
1.9 |
|
Reserve for Russian accounts receivable |
|
|
0.1 |
|
|
|
— |
|
Depreciation |
|
|
3.8 |
|
|
|
3.9 |
|
Adjusted EBITDA |
|
$ |
71.0 |
|
|
$ |
73.7 |
|
Networking Intelligent Cellular and Security Solutions Segment
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(in millions) |
|
Operating loss |
|
$ |
(43.0 |
) |
|
$ |
(60.4 |
) |
Adjustments: |
|
|
|
|
|
|
Amortization of purchased intangible assets |
|
|
15.5 |
|
|
|
18.0 |
|
Restructuring costs, net |
|
|
3.6 |
|
|
|
11.2 |
|
Equity-based compensation |
|
|
3.6 |
|
|
|
5.1 |
|
Transaction, transformation and integration costs |
|
|
1.2 |
|
|
|
1.4 |
|
Acquisition accounting adjustments |
|
|
0.6 |
|
|
|
1.5 |
|
Patent claims and litigation settlements |
|
|
— |
|
|
|
0.3 |
|
Reserve for Russian accounts receivable |
|
|
0.4 |
|
|
|
— |
|
Depreciation |
|
|
4.4 |
|
|
|
5.5 |
|
Adjusted EBITDA |
|
$ |
(13.8 |
) |
|
$ |
(17.4 |
) |
34
Access Network Solutions Segment
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(in millions) |
|
Operating income (loss) |
|
$ |
(6.6 |
) |
|
$ |
23.9 |
|
Adjustments: |
|
|
|
|
|
|
Amortization of purchased intangible assets |
|
|
61.7 |
|
|
|
61.7 |
|
Restructuring costs, net |
|
|
2.6 |
|
|
|
4.8 |
|
Equity-based compensation |
|
|
4.2 |
|
|
|
6.3 |
|
Transaction, transformation and integration costs |
|
|
5.5 |
|
|
|
2.2 |
|
Acquisition accounting adjustments |
|
|
0.8 |
|
|
|
1.2 |
|
Depreciation |
|
|
6.0 |
|
|
|
7.8 |
|
Adjusted EBITDA |
|
$ |
74.2 |
|
|
$ |
108.0 |
|
Home Networks Segment
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(in millions) |
|
Operating loss |
|
$ |
(13.8 |
) |
|
$ |
(31.5 |
) |
Adjustments: |
|
|
|
|
|
|
Amortization of purchased intangible assets |
|
|
26.0 |
|
|
|
26.0 |
|
Restructuring costs, net |
|
|
0.8 |
|
|
|
5.9 |
|
Equity-based compensation |
|
|
2.9 |
|
|
|
3.9 |
|
Transaction, transformation and integration costs |
|
|
2.6 |
|
|
|
6.0 |
|
Acquisition accounting adjustments |
|
|
0.4 |
|
|
|
0.5 |
|
Patent claims and litigation settlements |
|
|
(0.4 |
) |
|
|
1.2 |
|
Depreciation |
|
|
4.8 |
|
|
|
7.5 |
|
Adjusted EBITDA |
|
$ |
23.3 |
|
|
$ |
19.4 |
|
Note: Components may not sum to total due to rounding.
35
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q or any other oral or written statements made by us or on our behalf may include forward-looking statements that reflect our current views with respect to future events and financial performance. These statements may discuss goals, intentions or expectations as to future plans, trends, events, results of operations or financial condition or otherwise, in each case, based on current beliefs and expectations of management, as well as assumptions made by, and information currently available to, management. 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 forward-looking statements are subject to various risks and uncertainties, many of which are outside our control, including, without limitation, risks related to the successful execution of CommScope NEXT; changes in cost and availability of key raw materials, components and commodities and the potential effect on customer pricing and timing of delivery of products to customers; risks associated with our dependence on a limited number of key suppliers for certain raw materials and components; potential difficulties in realigning global manufacturing capacity and capabilities among our global manufacturing facilities or those of our contract manufacturers that may affect our ability to meet customer demands for products; possible future restructuring actions; the risk that our manufacturing operations, including our contract manufacturers that we rely on, encounter capacity, production, quality, financial or other difficulties causing difficulty in meeting customer demands; substantial indebtedness and restrictive debt covenants; our ability to incur additional indebtedness; our ability to generate cash to service our indebtedness; the potential separation of the Home Networks business or any other potential separation, divestiture or discontinuance of a business or product line, including uncertainty regarding the timing of the separation, achieving the expected benefits and the potential disruption to the business; our ability to integrate and fully realize anticipated benefits from prior or future divestitures, acquisitions or equity investments; our dependence on customers’ capital spending on data and communication systems; concentration of sales among a limited number of customers and channel partners; risks associated with our sales through channel partners; changes to the regulatory environment in which we and our customers operate; changes in technology; industry competition and the ability to retain customers through product innovation, introduction, and marketing; possible future impairment charges for fixed or intangible assets, including goodwill; our ability to attract and retain qualified key employees; labor unrest; product quality or performance issues, including those associated with our suppliers or contract manufacturers, and associated warranty claims; our ability to maintain effective management information technology systems and to successfully implement major systems initiatives; cyber-security incidents, including data security breaches, ransomware or computer viruses; the use of open standards; the long-term impact of climate change; significant international operations exposing us to economic risks like variability in foreign exchange rates and inflation as well as political and other risks, including the impact of wars, regional conflicts and terrorism; the potential impact of higher than normal inflation; our ability to comply with governmental anti-corruption laws and regulations and export and import controls and sanctions worldwide; our ability to compete in international markets due to export and import controls to which we may be subject; changes in the laws and policies in the United States affecting trade, including the risk and uncertainty related to tariffs or potential trade wars and potential changes to laws and policies, that may impact our products; cost of protecting or defending intellectual property; costs and challenges of compliance with domestic and foreign environmental laws; the impact of litigation and similar regulatory proceedings that we are involved in or may become involved in, including the costs of such litigation; the scope, duration and impact of disease outbreaks and pandemics, such as COVID-19, on our business including employees, sites, operations, customers, supply chain and the global economy; income tax rate variability and ability to recover amounts recorded as deferred tax assets; and other factors beyond our control. These and other factors are discussed in greater detail in our 2021 Annual Report, and may be updated from time to time in our annual reports, quarterly reports, current reports and other filings we make with the Securities and Exchange Commission. Although the information contained in this Quarterly Report on Form 10-Q 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 this information to reflect developments or information obtained after the date of this report, except as otherwise may be required by law.