EXHIBIT 99
COMMSCOPE, INC.
EXHIBIT 99 - FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. The Company's Form 10-K for the
year ended December 31, 1998, the Company's Annual Report to Stockholders,
any Form 10-Q or Form 8-K of the Company, or any other oral or written
statements made by or on behalf of the Company, may include forward-looking
statements which reflect the Company's current views with respect to future
events and financial performance. These forward-looking statements are
identified 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. The Company undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information,
future events or otherwise.
The actual results of the Company 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 the Company operates; (b) changes in capital
availability or costs, such as changes in interest rates, market
perceptions of the industry in which the Company operates, 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; (e) potential disruption from the "Year 2000" problem,
and the factors set forth below.
LEVERAGE; CERTAIN RESTRICTIONS UNDER CREDIT FACILITIES
The Company is substantially leveraged. The degree to which the Company
is leveraged could have important consequences, including the following:
(i) the Company's ability to obtain additional financing in the future for
working capital, capital expenditures, product development, acquisitions,
general corporate purposes or other purposes may be impaired; (ii) a
portion of the Company's and its subsidiaries' cash flow from operations
must be dedicated to the payment of the principal of and interest on its
indebtedness; (iii) the Credit Agreement, dated as of July 23, 1997, among
CommScope, Inc. of North Carolina, a wholly owned subsidiary of the
Company, certain banks, and The Chase Manhattan Bank, as Administrative
Agent, contains certain restrictive financial and operating covenants,
including, among others, requirements that the Company satisfy certain
financial ratios; (iv) a significant portion of the Company's borrowings
are at floating rates of interest, causing the Company to be vulnerable to
increases in interest rates; (v) the Company's degree of leverage may make
it more vulnerable to a downturn in general economic conditions; and (vi)
the Company's degree of leverage may limit its flexibility in responding to
changing business and economic conditions.
DEPENDENCE OF THE COMPANY ON THE CABLE TELEVISION INDUSTRY AND CABLE
TELEVISION CAPITAL SPENDING
The majority of the Company's revenues come from sales to the cable
television industry. Demand for the Company's products depends primarily on
capital spending by cable television operators for constructing, rebuilding
or upgrading their systems. The amount of this capital spending, and,
therefore, the Company's sales and profitability will be affected by a
variety of factors, including general economic conditions, acquisitions of
cable television operators by non-cable television operators, cable system
consolidation within the industry, the financial condition of domestic
cable television operators and their access to financing, competition from
satellite and wireless television providers and telephone companies,
technological developments and new legislation and regulation of cable
television operators. There can be no assurance 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 also been
affected by new legislation and regulation, on the federal, state and local
level, and many aspects of such regulation are currently the subject of
judicial proceedings and administrative or legislative proposals. During
1993 and 1994, the Federal Communications Commission (the "FCC") adopted
rules under the Cable Television Consumer Protection and Competition Act of
1992 (the "1992 Cable Act"), regulating rates that cable television
operators may charge for lower tiers of service and generally not
regulating the rates for higher tiers of service. In 1996, the
Telecommunications Act of 1996 (the "Telecom Act") was enacted to eliminate
certain governmental barriers to competition among local and long distance
telephone, cable television, broadcasting and wireless services. The FCC is
continuing its implementation of 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 and telephony services. Among other things, 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 1992 Cable Act, the
Telecom Act and the rules thereunder on the cable television industry and
the Company is still uncertain.
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 the Company's principal cable television customers could
have a material adverse effect on the business of the Company.
TELECOMMUNICATIONS INDUSTRY COMPETITION AND TECHNOLOGICAL CHANGES AFFECTING
THE COMPANY
Many of the markets that the Company serves are characterized by
advances in information processing and communications capabilities which
require increased transmission speeds and greater capacity ("bandwidth")
for carrying information. These advances require ongoing improvements in
the capabilities of wire and cable products. The Company believes that its
future success will depend in part upon its ability to enhance existing
products and to develop and manufacture new products that meet or
anticipate such changes. The failure to introduce successful new or
enhanced products on a timely and cost-competitive basis could have an
adverse impact on the Company's operations and financial condition.
Fiber optic technology presents a potential substitute for the products
that comprise the majority of the Company's sales. To date, fiber optic
cables have penetrated the cable television and local area network ("LAN")
markets served by the Company in high-bandwidth point-to-point and trunking
applications. Fiber optic cables have not, to date, significantly
penetrated the local distribution and residential application markets
served by the Company because of the high relative cost of electro-optic
interfaces and the high cost of fiber termination and connection. At the
same time, advances in data transmission equipment and copper cable
technologies have increased the relative performance of copper-based cables
which are the Company's principal product offerings. However, a significant
decrease in the cost of fiber optic systems could make such systems
superior on a price/performance basis to copper systems. While the Company
is a fiber optic cable manufacturer and supplier to a small portion of the
cable television market and certain specialty markets, such a significant
decrease in the cost of fiber optic systems would likely have an adverse
effect on the Company.
COMPETITION
The Company's coaxial, fiber optic and electronic cable products compete
with those of a substantial number of foreign and domestic companies, some
with greater resources, financial or otherwise, than the Company, and 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 the Company's sales and
profitability. The Company believes that it enjoys a strong competitive
position in the coaxial cable market because of its position as a low-cost,
high-volume coaxial cable producer and its reputation as a high-quality
provider of state-of-the-art cables, along with its strong orientation
toward customer service. However, there can be no assurance that the
Company will continue to compete successfully with its existing competitors
or that it will be able to compete successfully with new competitors.
IMPACT OF PRICE FLUCTUATIONS OF RAW MATERIALS ON THE COMPANY; SOURCES OF RAW
MATERIALS
Fabricated aluminum, plastics, bi-metals, copper and optical fiber are
the principal raw materials purchased by the Company, and the Company's
profitability may be affected by changes in the market price of these
materials (which are linked to the commodity markets). Although the Company
has generally been able to pass on increases in the price of these
materials to its customers, there can be no assurance that the Company will
be able to do so in the future. Additionally, significant increases in the
price of the Company's products due to increases in the cost of raw
materials could have a negative effect on demand for the Company's
products.
A significant portion of the Company's raw material purchases are
bi-metallic center conductors for coaxial cables, nearly all of which are
purchased from Copperweld Corporation under a long-term supply arrangement
expiring in March 2000. If the Company becomes unable to continue to
purchase bi-metallic center conductors from this supplier, either before or
after expiration of this arrangement, the Company may be unable to obtain
these raw materials on commercially acceptable terms from another source.
The Company recently acquired the clad wire fabrication equipment and
technology of Texas Instruments Incorporated for manufacturing copper-clad
aluminum wire and copper-clad steel wire. The Company anticipates beginning
production in late 1999. At full capacity, this acquisition will give the
Company the ability to produce a significant portion of the bi-metal center
conductors used by the Company. In addition to bi-metallic wires, fine
aluminum wire, which is a smaller raw material purchase than bi-metallic
wire, is purchased primarily from a single source. However, the Company
also intends to pursue fine wire drawing to produce braid wires for
flexible coaxial cables. Neither of these major raw materials could be
readily replaced in sufficient quantities if all supplies from the
respective primary sources were disrupted for an extended period and the
Company was unable to vertically integrate the production of these
products. In such event, there could be a materially adverse impact on the
Company's financial results. Additionally, fluorinated-ethylene-propylene
(FEP) is the primary raw material used throughout the industry for
producing flame-retarding cables for LAN 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 LAN cable sales growth.
INTERNATIONAL OPERATIONS
Management remains guarded about the near-term outlook for international
sales. During 1998, international sales decreased by approximately 30%, or
$60.6 million, compared to 1997, due to monetary crises in key overseas
markets, including the Pacific Rim and South America. Excluding the Seneffe
acquisition, management expects 1999 international sales to be relatively
unchanged compared to 1998. The Seneffe operation is expected to provide
approximately 5% growth in total Company sales in 1999, compared to 1998.
In the long run, the Company's management believes that continued 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, represent
significant future opportunities. However, the Company cannot predict with
certainty the outlook for international sales in 1999 and beyond due to
unpredictable political and economic uncertainties.
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 United States
affecting trade, foreign investment and loans, and foreign tax laws.
ENVIRONMENT
The Company is subject to various federal, state, local and foreign laws
and regulations governing the use, discharge and disposal of hazardous
materials. The Company's manufacturing facilities are believed to be 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 the Company's financial condition.
The Company's present and past facilities have been in operation for
many years, and over that time in the course of those operations, such
facilities have used substances which are or might be considered hazardous,
and the Company has generated and disposed of wastes which are or might be
considered hazardous. Therefore, it is possible that additional
environmental issues may arise in the future which the Company cannot now
predict.