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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number: 001-12929

CommScope, Inc.
(Exact name of registrant as specified in its charter)

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 (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 ý No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part Ill of this Form 10-K or any amendment to this Form 10-K.    o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes ý No o

        The aggregate market value of the shares of Common Stock held by non-affiliates of the Registrant was approximately $1.14 billion as of June 30, 2004 (based on the closing price for the Common Stock on the New York Stock Exchange on that date). For purposes of this computation, shares held by affiliates and by directors and officers of the Registrant have been excluded.

        As of March 1, 2005 there were 54,521,696 shares of the Registrant's Common Stock outstanding.

Documents Incorporated by Reference
Portions of the Registrant's Proxy Statement for the 2005 Annual Meeting of Stockholders are
incorporated by reference in Part III hereof.

TABLE OF CONTENTS

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PART I

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

        This Form 10-K includes "Forward-looking Statements." 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," "thinks," "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. Please see Exhibit 99.1 to this Form 10-K for detailed information about the uncertainties and other factors that may cause actual results to differ materially from the views stated in such forward-looking statements. We do not intend, and are not undertaking any duty or obligation, to update any forward-looking statements to reflect developments or information obtained after the date of this Form 10-K.

ITEM 1.    BUSINESS

General

        CommScope, Inc. is a world leader in the design and manufacture of cable and connectivity solutions for communications networks. We focus on the 'last mile' in communications networks, which is the distribution access, or final link to the customer. We believe we are a global leader in structured cabling for business enterprise applications and a global leader in broadband coaxial cables for the cable television industry. We also design, manufacture and market a broad line of high-performance electronic, coaxial and fiber optic cable products for data networking, Internet access, wireless communication, telephony and other broadband applications. In addition, we are a leading provider of environmentally secure enclosures and structured cabling solutions supporting central offices for telecommunication service providers in the United States.

        We are a global manufacturer, employing state-of-the-art manufacturing processes and operate 12 manufacturing facilities on five continents. We sell our products directly to customers and through a global network of distributors, system integrators and value-added resellers. We sell our products in more than 100 countries.

        CommScope, Inc. was incorporated in Delaware on January 28, 1997. Our principal executive offices are located at 1100 CommScope Place SE, Hickory, North Carolina 28602. Our telephone number is (828) 324-2200.

        For the year ended December 31, 2004, our revenues were approximately $1.2 billion and our net income was $75.8 million. During this period, approximately 46% of our revenues were from business enterprise (Local Area Network or "LAN") applications, 41% from broadband and other video applications, and 13% from other telecommunications applications. International sales were approximately 32% of our 2004 revenues. Approximately 79% and 83% of our revenues were from Hybrid Fiber Coaxial ("HFC") cable networks and other video applications and 16% and 14% were from LAN premise wiring applications for the years ended December 31, 2003 and 2002, respectively. Historically, our operating performance is typically weaker during the first and fourth quarters and stronger during the second and third quarters. For further discussion of our current and prior year domestic and international revenues, see Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements included elsewhere in this Form 10-K.

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Our Acquisition of Connectivity Solutions

        On January 31, 2004, we acquired the Connectivity Solutions business ("Connectivity Solutions") from Avaya Inc. ("Avaya"). We acquired Connectivity Solutions primarily to expand our position in the 'last mile' of telecommunications, establish a leadership position in the global enterprise connectivity market and enhance our global growth opportunities. We believe that this complementary combination of our business with the Connectivity Solutions business creates the potential for significant synergies and positions us as a leading provider of cable products and apparatus to both the enterprise and telecommunications markets.

        We acquired substantially all of the assets, subject to specified current liabilities, and also assumed approximately $65 million of other specified liabilities, primarily related to employee benefits, of Connectivity Solutions, for approximately $250 million in cash and approximately 1.8 million shares of our common stock. The cash component of the transaction was funded primarily through our existing cash balances and through $100 million of borrowings under a new $185 million senior secured credit facility. The Connectivity Solutions business, as operated by Avaya, was organized into three product groups as follows:

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SYSTIMAX®, which is a global leader in the design, development, manufacture and marketing of physical layer end-to-end structured cabling solutions for connecting phones, workstations, LANs, storage area networks and other critical communication devices through buildings or across campuses of businesses, enterprises and other organizations.



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ExchangeMAX®, which is a leading provider in the U.S. of physical layer structured cabling solutions supporting central offices of telecommunications service providers.



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Integrated Cabinet Solutions ("ICS"), which provides secure environmental enclosures engineered to protect and optimize the performance of wireless, Digital Subscriber Lines ("DSL") and other electronic equipment, primarily in outdoor locations of telecommunications providers.

        Our historical financial information and other information given as of a date prior to January 31, 2004 reflects the business of CommScope prior to the acquisition of Connectivity Solutions, unless the context specifically requires otherwise. Financial and other information included in this Form 10-K relating to the Connectivity Solutions business as operated by Avaya for the fiscal year ended September 30, 2003 and other periods prior to the acquisition is not necessarily indicative of the future performance of the Connectivity Solutions business as operated by us. For a description of the factors affecting such future performance, see Exhibit 99.1 to this Form 10-K.

Strategy

        Our strategic vision is to be the leading global developer, producer and seller of high-performance communications solutions for deployment by communication service providers and enterprise users. Our acquisition of Connectivity Solutions is an important milestone in achieving this objective. We strive to be recognized for the superior quality and performance of our products, outstanding service to our customers, excellence of our employees and value we provide to our stockholders.

        Our business strategy focuses on enhancing operational efficiency and internal growth for existing CommScope businesses. We intend to enhance revenue growth by developing proprietary products and building upon our worldwide facilities and presence as well as our extensive global network of distributors, system integrators and value-added resellers. Our industry-leading research and development teams continue to spearhead innovative developments in cable and connectivity. We plan to build upon this legacy of innovation and leverage our portfolio of more than 1,100 worldwide patents and pending patent applications to provide leading-edge technology and new, high-performance

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cable and connectivity solutions products to our customers. We intend to use our new market channels to expand sales of existing CommScope products.

        We intend to improve efficiency by increasing operating focus, improving productivity and simplifying processes as we integrate the Connectivity Solutions business. We also intend to maintain our emphasis on superior customer service, which we believe has helped us maintain our market leadership in enterprise and broadband applications.

Operating Segments

        During 2003 and 2002, our operations were conducted within one reportable business segment, based on the similarity of products, production processes, distribution methods and regulatory environment. During 2004, as a result of the acquisition of Connectivity Solutions, we reported results for two business segments:

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Cable segment (approximately 53% of sales), which is the same as CommScope's cable business prior to the acquisition of Connectivity Solutions and includes Broadband/Video products, Enterprise LAN solutions and Wireless/Other Telecommunications products.



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Connectivity Solutions segment (approximately 47% of sales), which is the acquired Connectivity Solutions business and includes SYSTIMAX, ExchangeMAX and the ICS product groups.

        See Note 20 in the Notes to the Consolidated Financial Statements included elsewhere in this Form 10-K for certain segment and geographic financial data relating to our business. We are currently evaluating alternative operational and financial reporting structures that may integrate Cable segment product groups with similar product groups offered by the Connectivity Solutions segment. This may require us to report our results in more or different reportable segments during future periods.

Major Product Groups

Enterprise Products

        CommScope enterprise products include SYSTIMAX Solutions, from the Connectivity Solutions segment and Uniprise Solutions™, previously referred to as the LAN product line, from the Cable segment. Through both of these brands, we provide structured cabling systems for business enterprise applications. A structured cabling system is the transmission network inside a building or campus of buildings that connects voice and data communication devices, video and building automation devices, switching equipment and other information management systems to one another as well as to outside communications networks. It includes all the in-building and outside plant campus cabling and associated distribution components from the point of demarcation where the building cabling connects to outside communications networks. A structured cabling system consists of various components, including transmission media (cable), circuit administration hardware, connectors, jacks, plugs, adapters, transmission electronics, electrical protection devices, wireless access devices and support hardware. Cables are classified by their construction, their data transmission capability and the environment in which they can be installed. Components are used to build elements, each having a specific purpose that allows easy implementation, moves, changes and maintenance as customer requirements change. A well-designed distribution system is independent of the equipment it serves and is capable of interconnecting many different devices, including computer and peripheral equipment, analog and digital telephones, personal computers and servers.

        We believe that business enterprises are faced with a growing need for higher bandwidth connectivity solutions as network traffic and the number of network devices increases. Applications such as storage area networks, streaming audio/video, multi-site collaboration, database downloads, grid computing and large file transfers create an increasing demand for bandwidth and higher-performance

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structured cabling systems. While the rate of technology adoption or application development is difficult to predict, we believe that desktop bandwidth growth should continue to increase.

Broadband/Video Products

        We design, manufacture and market coaxial and fiber optic cable, most of which is used in the cable television industry. We are the world's largest manufacturer of coaxial cable and a leading domestic supplier of fiber optic cable for cable TV and other video applications. Our coaxial and fiber optic cables are primarily used in HFC networks being deployed throughout the world. HFC networks utilize a combination of fiber optic and coaxial cable and are widely recognized as one of the most cost-effective ways to offer multi-channel video, voice and data services. Our broadband coaxial cables and zero water peak optical fiber cables provide bandwidth connectivity for services such as cable television, video on demand, high-speed Internet access, cable telephony and other interactive services.

        Many other specialized markets or applications are served by multiple cable media such as coaxial, twisted pair, fiber optic or combinations of each. We are a leading producer of composite cables made of flexible coaxial and twisted copper pairs for full service communications providers worldwide. We also provide a variety of cable-in-conduit products for telecommunication applications. Our Broadband/Video products are reported in the Cable segment.

Wireless and Carrier Products

        CommScope also sells a variety of other solutions and products, including ExchangeMAX | and ICS in the Connectivity Solutions segment and wireless products in the Cable segment.

        Our ExchangeMAX structured cabling systems are primarily deployed in U.S. central offices of telephone service providers. The ExchangeMAX solution combines our family of central office connectivity products with an overall system architecture to support the copper cable distribution networks of a central office. Our products include Unshielded Twisted Pair ("UTP"), shielded twisted pair and coaxial cable, copper main distributing frames, digital signal cross connect frames, connectors, patch cords and cable management software. We manufacture and market the ExchangeMAX product line primarily to Original Equipment Manufacturers ("OEMs"), telecommunication service providers ("carriers") and third-party vendors in the U.S.

        Our ICS products are sturdy environmental enclosures for electronics devices and equipment deployed in the outside plant and inside buildings. Enclosures are designed to meet the needs of each customer, including thermal characteristics, and are used mostly by carriers to protect wireless equipment, transmission access equipment, switching equipment and broadband electronic equipment. Each cabinet is assembled, completely wired and system-tested at our facilities to ensure high quality and ease of installation. We market ICS products primarily to domestic telecommunications equipment manufacturers and carriers. Our ICS products also compete in the global integrated cabinet solutions and enclosures industry, providing Broadband, DSL and switching equipment for OEMs of telecommunications equipment.

        Our wireless products include innovative, high frequency cables and components that connect wireless antennae to their transmitters. Semi-flexible coaxial cables are used to connect the antennae located at the top of wireless antenna towers to the radios and power sources located adjacent to or near the antenna site. Over the past few years, we developed and patented Cell Reach™, a line of smooth-wall copper or aluminum shielded semi-flexible coaxial cables and related connectors and accessories to address this market. Cell Reach has been installed in thousands of wireless base stations with leading service providers.

        We also manufacture other broadband coaxial cables, fiber optic cables and twisted pair cables that are used for various wireless applications, including Third Generation Wireless (3G), Personal Communications Systems (PCS), Global System for Mobile Communications (GSM), Universal Mobile

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Telecommunications Systems (UMTS), Cellular, Multichannel Multipoint Distribution Service (MMDS), Local Multipoint Distribution System (LMDS), land mobile radio, paging, automotive and in-building wireless applications.

Manufacturing

        Most of our manufacturing facilities have received IS0 9000 certification, the most widely recognized standard for quality management. In addition, several of our facilities have the TL 9000 certification, which is a telecommunications specific standard for quality management. We employ a global manufacturing strategy and operate 12 manufacturing facilities located in Nebraska, North Carolina, Alabama and Nevada; Seneffe, Belgium; Jaguariuna, Brazil; Bray, Ireland; Brisbane, Australia; and Tianjin, China. We are in the process of building a broadband manufacturing facility in Suzhou, China, which is expected to be operational by mid-2005.

Communications Cables

        We employ numerous advanced cable manufacturing processes. Many of these processes, some of which are proprietary and/or include trade secret information, are performed on equipment that has been modified for our purposes or specifically built to our specifications, often internally in our own machine shop facilities. These manufacturing processes include bimetallic wire fabrication, fine wire drawing, thermoplastic extrusion for insulating wires and cables, high-speed welding and swaging of metallic shields or outer conductors, braiding, cabling and stranding, and automated testing. Our manufacturing facilities are generally vertically integrated. We outsource certain fabrication of selected materials when cost-effective.

Apparatus Devices

        Apparatus devices support a complete systems solution. These products include jacks, outlets, panels, cords, connectors, protectors and network management tools. The manufacture of a typical part includes the following steps: molding of the parts, stamping metal parts, forming of sheet metal parts, insertion of printed wiring boards, assembly, wire wrapping, labeling and packaging. These products are composed of various plastics, stamped metal components and purchased assembled components.

Solutions Approach

        We utilize a unique, top-down systems approach to developing structured cabling systems. This approach is supported by modal decomposition and simulation techniques developed by our laboratories. Modal Decomposition Modeling is a sophisticated measurement and modeling tool to analyze the hundreds of interactions present in multi-conductor transmission systems. We believe that this proprietary tool increases measurement accuracy and can effectively cascade individual components mathematically into a link or a channel. After collection of the modal data for a large number of individual components, through a mathematical process we can simulate a link or channel as if all components were physically connected. We believe that this modeling tool allows us a more comprehensive understanding of the properties of a cabling channel than our competitors. In addition, we are able to better identify weak links and refine components for system tuning and optimization. With this optimization, a UTP cabling system can sustain speeds in the multi-gigabit range without radical new design or network footprint. We believe that our unique tools help us create better-structured cabling solutions, deliver best-in-class total system performance and globally maintain a strong competitive position.

Integrated Cabinets

        An integrated cabinet starts with base metal sheets that are stamped or cut and then formed to specification. These parts are then treated and sealed in a dry paint line process. The metal parts are

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then assembled and engineered around specific power and thermodynamic components and designs, some of which are developed internally and others of which are purchased from third party providers. Then a base line cabinet can be assembled using cable or apparatus products and integrated to high-end electronic devices provided by the end user drawings.

Cost Reduction and Organizational Initiatives at Connectivity Solutions Manufacturing, Inc.

        During the fourth quarter of 2004, Connectivity Solutions Manufacturing, Inc. ("CSMI"), our wholly owned manufacturing subsidiary, adopted organizational and cost-reduction initiatives at its Omaha, Nebraska facility. These long-term manufacturing initiatives are designed to improve the competitive position of these operations and are expected to be substantially in place by the middle of 2005. The primary components of this restructuring are: a) a reorganized management structure that creates more focused stand-alone management organizations for cable, apparatus and cabinets, b) re-engineered, simplified business practices and manufacturing processes and c) a reduced number of management, production and support personnel. As a result of these initiatives, we recognized impairment charges during the fourth quarter of 2004 related to manufacturing equipment that was no longer used in operations. CSMI is also developing a plan for under-utilized real estate.

        The 2.4 million square foot Omaha facility is the largest production facility for SYSTIMAX, ExchangeMAX and ICS products. The facility was purchased from Avaya in conjunction with the acquisition of the Connectivity Solutions business on January 31, 2004.

        See Note 6 in the Notes to the Consolidated Financial Statements included elsewhere in this Form 10-K for additional detail about the restructuring costs recognized and expected future costs related to these initiatives.

Restructured Relationship with Furukawa

        From November 2001 through June 2004 we owned a minority equity interest in OFS BrightWave, LLC ("OFS BrightWave"), one of the world's largest manufacturers of optical fiber and fiber optic cable. OFS BrightWave was formed by us and The Furukawa Electric Co., Ltd. ("Furukawa") to operate certain fiber optic cable and transmission fiber assets of the Optical Fiber Solutions Group acquired from Lucent Technologies Inc. ("Lucent") in 2001. The remaining equity interest in OFS BrightWave was owned by an indirect wholly owned subsidiary of Furukawa.

        Primarily as a result of the continuing weakness in the global fiber optic cable market and Furukawa's continuing efforts to restructure its OFS BrightWave operations, we agreed with Furukawa to further amend our existing contractual arrangements in the second quarter of 2004 for the mutual benefit of both companies. In June 2004, we exercised our contractual right to sell and sold our 9.4% equity ownership interest in OFS BrightWave to Furukawa in exchange for the 7,656,900 shares of our common stock owned by Furukawa. We hold these shares as treasury stock. As a result of the transaction, we no longer own any equity interest in OFS BrightWave.

        This transaction does not affect our right to receive full payment from OFS BrightWave under an existing $30 million loan, which is scheduled to mature in 2006. In conjunction with the sale of our ownership interest in OFS BrightWave, we fully impaired the remaining balance of this asset due to market conditions and because we no longer had an equity ownership in OFS BrightWave. The impairment loss was included in the net gain on sale in our consolidated statement of operations during 2004. For the year ended December 31, 2004, OFS BrightWave continued to make interest payments in accordance with the terms and conditions of the original loan agreement.

        We recorded a net pretax gain during the second quarter of 2004 of approximately $121.3 million ($76.4 million net of tax or approximately $1.13 per diluted share), as a result of these transactions. For more information about this transaction, see Note 5 in the Notes to the Consolidated Financial Statements included elsewhere in this Form 10-K.

        In addition, we agreed with Furukawa to continue our existing optical fiber supply relationship by entering into a new four-year supply agreement expiring June 2008. We will continue to have access to a broad array of technologically advanced optical fibers as well as a cross license agreement for key intellectual property.

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Research and Development

        Our research, development and engineering ("R&D") expenditures for the creation and application of new and improved products and processes were $29.3 million, $6.2 million and $6.2 million for the years ended December 31, 2004, 2003 and 2002, respectively. R&D costs increased in 2004 primarily as a result of our acquisition of the Connectivity Solutions business. In connection with this acquisition we gained over 100 research and development professionals who focus on fundamental research, product development and enhancements and manufacturing processes related to our Connectivity Solutions segment products. During 2004, our major R&D activities related to developing new enterprise structured cabling solutions as well as more cost effective designs for cables, apparatus and cabinets.

        Many of our professionals maintain a presence in standards-setting organizations so that the products related to our enterprise and carrier businesses can be formulated to achieve broad market acceptance. These organizations include the Telecommunications Industry Association, the Electronic Industry Association, the Institute of Electrical and Electronic Engineers and the Asynchronous Transfer Mode Forum.

Sales and Distribution

        We market our products directly to telecommunication service providers and through an extensive global network of distributors, system integrators and value-added resellers. We support our sales organization with regional service centers in locations around the world. A key aspect of our North American customer support and distribution system is the use of our private truck fleet, which primarily serves our broadband/video customers. We believe that our ability to offer rapid delivery services, materials management and logistics services to customers in the continental U.S. through our private truck fleet is an important competitive advantage.

        Our broadband/video products are primarily sold directly to cable television system operators. According to the National Cable & Telecommunications Association, the five largest cable television system operators account for approximately 70% of the cable television subscribers in the United States. The major cable television system operators include such companies as Comcast Corporation ("Comcast"), which merged with AT&T Broadband in November 2002, Time Warner Inc., Charter Communications, Inc. ("Charter"), Cox Communications, Inc. and Adelphia Communications Corporation ("Adelphia"). Although we sell to a wide variety of customers dispersed across many different geographic areas, sales to the five largest domestic broadband service providers represented approximately 18% of our net sales during 2004 and 39% during 2003. During 2004, Comcast accounted for less than 10% of our net sales. However, prior to the acquisition of Connectivity Solutions, sales to Comcast accounted for approximately 18% and 20% of our net sales, as if they were combined with AT&T Broadband, for the full years ended December 31, 2003 and 2002, respectively. No other broadband/video customer accounted for 10% or more of our net sales during 2004, 2003 or 2002.

        Our enterprise solutions products are sold to customers primarily through independent distributors, system integrators and value-added resellers. During 2004, sales of enterprise products to the top five distributors, system integrators and value-added resellers represented approximately 50% of our consolidated net sales. In particular, during 2004, Anixter International and its affiliates ("Anixter") accounted for approximately 35% of our net sales. No other enterprise customer accounted for more than 10% of our net sales during 2004. However, net sales by the Connectivity Solutions business, as operated by Avaya, to Anixter and Graybar Electric Company were approximately 53% and 14%, respectively, for Avaya's fiscal year ended September 30, 2003. In addition, selling products through distributors has associated risks, including, without limitation, that sales can be negatively affected on a short-term basis as a result of changes in inventory levels maintained by distributors; these inventory changes may be unrelated to the purchasing trends by the ultimate customer.

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        We believe the enterprise structured cabling market has three segments: premium, mid-tier and basic. Products in the premium segment consist of end-to-end solutions created from cable, connectors and components that are specifically designed for compatibility to provide cutting-edge performance and best-in-class system transmission. Products in the mid-tier segment generally consist of value-oriented solutions based on established technology or cable that is matched with connectors from a variety of manufacturers. Products in the basic segment consist of lower performance cables typically used for phone wiring or lower speed networks.

        We intend to deploy a two-tier strategy to address different market needs with our enterprise brands. Our SYSTIMAX Solutions branded products focus on the premium segment and are sold primarily to large, multinational companies. Our Uniprise branded products focus on the middle-tier market and are sold primarily to large and medium sized enterprises in the U.S.

        We sell our wireless and carrier products both directly and through distribution, primarily to large, domestic telecommunication service providers and OEMs. Our customer service and engineering groups maintain particularly close working relationships with these carrier customers due to the significant amount of design and customization associated with some of these products.

        Our international sales consist primarily of our enterprise and broadband/video products. Our primary channels to international markets are through distributors and direct sales to end users and OEMs. We support our international sales efforts with sales representatives based in Europe, Latin America, Asia/Pacific Rim and other regions throughout the world. Our net sales from international operations were approximately $373.7 million during 2004. Prior to the Connectivity Solutions acquisition, our net sales from international operations were approximately $110.8 million and $111.5 million during 2003 and 2002, respectively.

        Changes in the relative value of currencies take place from time to time and their effects on our results of operations may be favorable or unfavorable. We sometimes engage in foreign currency hedging transactions to mitigate these effects. For more information about our foreign currency exposure management, see Note 13 in the Notes to the Consolidated Financial Statements included elsewhere in this Form 10-K.

Patents and Trademarks

        We pursue an active policy of seeking intellectual property protection, namely patents and registered trademarks, for new products and designs. As of December 31, 2004, on a worldwide basis, we held over 1,100 patents and pending patent applications, including those we acquired as part of the Connectivity Solutions acquisition. As of December 31, 2004, we also had over 700 registered trademarks and pending trademark applications worldwide. We consider our patents and trademarks to be valuable assets, but no single patent or trademark is material to our operations as a whole. We intend to rely on our intellectual property rights including our proprietary knowledge, trade secrets and continuing technological innovation to develop and maintain our competitive position. We have and will continue to protect certain key intellectual property rights.

        We have entered into cross-licensing arrangements with Furukawa, providing us with access to key technology for communications cables, especially fiber optic cables.

Backlog

        At December 31, 2004, 2003 and 2002, we had an order backlog of approximately $91 million, $24 million and $26 million, respectively. Orders typically fluctuate from quarter to quarter based on customer demand and general business conditions. Backlog includes only orders for products scheduled to be shipped within six months. In some cases, unfilled orders may be canceled prior to shipment of goods; but cancellations historically have not been material. However, our current order backlog may not be indicative of future demand.

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        For Connectivity Solutions' fiscal year ended September 30, 2003, Connectivity Solutions as operated by Avaya had an order backlog of approximately $24 million. Under Avaya, Connectivity Solutions measured backlog as actual orders not shipped, regardless of when shipments were to be made.

Competition

        The market for cable products and structured cabling systems is highly competitive and subject to rapid technological change. We encounter competition in substantially all areas of our business and from both international and domestic companies. Our competitors include large, diversified companies, some of which have substantially greater assets and financial resources than we do, as well as medium to small companies. We also face competition from certain smaller companies that have concentrated their efforts in one or more areas of the broadband/video, enterprise or carrier markets. Some of our representative competitors by product group include: Enterprise—ADC Telecommunications, Inc., Belden CDT, Inc., Draka Holding N.V., General Cable Corp., Ortronics, Inc., Nexans SA, Panduit Corp. and Tyco Electronics Corporation; Broadband—Amphenol Corporation, Corning Incorporated, Pirelli & C. SpA and Trilogy Communications, Inc.; Wireless and Carrier—Alcatel, ADC Telecommunications, Inc., Andrew Corporation, Eupen Cable, Inc., Marconi plc, and Emerson Electric Co.

        We compete primarily on the basis of product specifications, quality, price, engineering, customer service and delivery time. We believe that we have a strong competitive position in the broadband cable market due to our position as a low-cost, high-volume cable producer and reputation as a high-quality provider of state-of-the-art cables with a strong orientation toward customer service. We believe that our structured cabling systems business has a strong competitive position in the enterprise market because of its long-standing relationships with distributors, system integrators and value-added resellers, its strong brand recognition and its premium product features and reliability. Competition in the wireless and carrier markets remains particularly intense, primarily due to consolidation among our customers, reduced spending for telephone central office applications and increased pricing pressures from competitors.

Raw Materials

        Our production processes are material intensive and we use significant quantities of various raw materials, including plastics and other polymers, fluoropolymers, fabricated aluminum, bimetals, copper, optical fiber and steel, among others. Fluorinated ethylene propylene is the primary raw material used throughout the industry for producing flame-retarding cables for LAN applications in North America. We use fabricated aluminum, copper and steel in the manufacture of coaxial and twisted pair cables. Most of these fabricated metal components are purchased under supply arrangements with some portion of the unit pricing indexed to commodity market prices for these metals. We have adopted a hedging policy pursuant to which we may, from time to time, purchase physical inventory or attempt to match futures contracts or option contracts for a specific metal with some portion of the anticipated metal purchases for the same periods. Optical fiber is a primary raw material used for making fiber optic cables.

        Our profitability may be affected by changes in the market price of our raw materials, most of which are linked to the commodity markets. Prices for copper, fluoropolymers and certain polymers derived from oil and natural gas have increased substantially over the past twelve months. As a result, we have increased our prices for certain enterprise and broadband/video products and may have to increase prices again in the future. Our inability to recover costs through increased prices has had and could continue to have a material adverse impact on the results of our operations.

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Environment

        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 hazardous substances, the handling and disposal of solid and hazardous waste, and the investigation and remediation of hazardous substance contamination. Because of the nature of our business, we have incurred, and will continue to incur, costs relating to compliance with these environmental 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. However, new laws and regulations, including those regulating the types of substances allowable in certain of our consumer products, stricter enforcement of existing laws and regulations, 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 business.

        Pursuant to the Comprehensive Environmental Response, Compensation and Liability Act and similar state statutes, 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, can be held jointly and severally liable for the costs of investigation and remediation of the contaminated property, regardless of fault. Certain of our owned facilities, including the Omaha facility of CSMI acquired in the Connectivity Solutions acquisition, are the subject of ongoing investigation and/or remediation of hazardous substance contamination in the soil and/or groundwater. Costs relating to these investigations or remediation activities are being indemnified by prior owners and operators of these facilities. Based on currently available information and the availability of indemnification, we do not believe that the costs associated with these contaminated sites will have a material adverse effect on our financial condition or results of operations. However, our present and former facilities have or had been in operation for many years and, over such time, these facilities have used substances or generated and disposed of wastes that are or may be considered hazardous. Therefore, it is possible that environmental liabilities may arise in the future which we cannot now predict.

Employees

        As of December 31, 2004, we employed approximately 4,300 people. The majority of our employees are located in the U.S., but we also have employees in foreign countries, including Australia, Belgium, Brazil, Ireland, Singapore, China and The Netherlands.

        CSMI has collective bargaining agreements with the International Brotherhood of Electrical Workers ("IBEW"), System Council T-3 on behalf of its Locals 1614 and 1974. In connection with our acquisition of Connectivity Solutions, CSMI assumed these agreements, with modifications, effective January 31, 2004. These collective bargaining agreements expire on May 31, 2006. These collective bargaining agreements govern the pay, benefits and working conditions for approximately 750 production, maintenance and clerical employees represented by the two IBEW Locals.

        We believe that our relations with our employees and unions are satisfactory.

Available Information

        Our website can be found at http://www.commscope.com. This website contains frequently updated information about us and our operations. Copies of each of our filings with the Securities and Exchange Commission ("SEC") on Form 10-K, Form 10-Q and Form 8-K and all amendments to those reports can be viewed and downloaded free of charge as soon as reasonably practicable after the reports and amendments are electronically filed with or furnished to the SEC by accessing http://www.commscope.com and clicking on Investor Relations/News and then clicking on SEC Filings.

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New York Stock Exchange Annual CEO Certification

        Our common stock is listed on the New York Stock Exchange. In accordance with New York Stock Exchange rules, on June 1, 2004 we filed the annual certification by our CEO that, as of the date of the certification, he was unaware of any violation by CommScope of the New York Stock Exchange's corporate governance listing standards.

ITEM 2.    PROPERTIES

        As of December 31, 2004, our principal administrative, production, and research and development facilities (including those owned by subsidiaries) were as follows:

(1)

Our interest in each of these properties is encumbered by a lien securing our existing senior secured credit facility (see Note 12 in the Notes to the Consolidated Financial Statements included elsewhere in this Form 10-K).

(2)

This facility is presently under construction and is expected to be operational by mid-2005.

(3)

These facilities are leased by CommScope Solutions Tianjin Cable, Ltd., a joint venture in which we own a 60% equity interest acquired from Avaya in connection with the Connectivity Solutions acquisition.

        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 our facilities, utilization is subject to change based on customer demand. We can give no assurances that we will not continue to have excess manufacturing capacity over the long-term.

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ITEM 3.    LEGAL PROCEEDINGS

        We are either a plaintiff or a defendant in pending legal matters in the normal course of business; however, management believes none of these legal matters will have a materially adverse effect on our business or financial condition upon their final disposition.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matters were submitted to a vote of our security holders during the three months ended December 31, 2004.

EXECUTIVE OFFICERS OF THE REGISTRANT

        Set forth below is certain information with respect to the executive officers of the Company as of March 10, 2005.

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PART II

ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
              MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

        Our common stock is traded on the New York Stock Exchange under the symbol "CTV." The following table sets forth the high and low sale prices as reported by the New York Stock Exchange for the periods indicated.

        As of March 1, 2005, the approximate number of registered stockholders of record of our common stock was 595.

        We have never declared or paid any cash dividends on our common stock. We do not currently intend to pay cash dividends in the foreseeable future, but intend to reinvest earnings in our business. Certain of our debt agreements contain limits on our ability to pay cash dividends on our common stock.

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ITEM 6.    SELECTED FINANCIAL DATA

        The following table presents our historical selected financial data as of the dates and for the periods indicated. The data for each of the years presented are derived from our audited consolidated financial statements. The information set forth below should be read in conjunction with our audited consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-K. This historical financial data does not reflect the historical financial information of the Connectivity Solutions business, or pro forma information relating to our acquisition of Connectivity Solutions on January 31, 2004, and the related financing, and therefore may not be indicative of our financial condition and performance for future periods.

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

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS

        The following discussion of our historical results of operations and financial condition should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this Form 10-K. On January 31, 2004 we acquired the Connectivity Solutions business of Avaya. The historical financial and other information included in this Management's Discussion and Analysis of Financial Condition and Results of Operations for periods prior to January 31, 2004 reflects the business of CommScope prior to our acquisition of the Connectivity Solutions business, unless otherwise noted. Because the acquisition of the Connectivity Solutions business is significant to us, our historical financial information may not be indicative of our financial condition and performance for future periods.

Overview

        CommScope, Inc. is a world leader in the design and manufacture of cable and connectivity solutions for communications networks. We focus on the 'last mile' in communications networks, which is the distribution access, or final link to the customer. Through our acquisition of the Connectivity Solutions business of Avaya on January 31, 2004, we became a global leader in structured cabling for business enterprise applications. We believe we are a global leader in broadband coaxial cables for the cable television industry. We also design, manufacture and market a broad line of high-performance electronic, coaxial and fiber optic cable products for data networking, Internet access, wireless communication, telephony and other broadband applications. In addition, we are a leading provider of environmentally secure enclosures and structured cabling solutions supporting central offices for telecommunication service providers in the United States.

        During 2003 and 2002, our operations were conducted within one reportable business segment, based on the similarity of products, production processes, distribution methods and regulatory environment. During 2004, as a result of the acquisition of Connectivity Solutions, management evaluated the results of operations in two reportable business segments: the Cable segment, which is the same as our cable business prior to the acquisition, and the Connectivity Solutions segment, which is the business acquired in January 2004. As we continue to integrate the Connectivity Solutions segment into our global operations and financial reporting systems, we are evaluating alternative operational and financial reporting structures that may integrate Cable segment product groups with similar product groups offered by the Connectivity Solutions segment. This may require us to report our results in more or different reportable segments during future periods.

        Net sales for 2004 increased by $579.4 million to $1,152.7 million as compared to 2003, primarily due to the inclusion of eleven months of net sales from the Connectivity Solutions segment. Net income for 2004 increased by $146.4 million to $75.8 million as compared to 2003, primarily due to the gain ($76.4 million, after-tax) from the sale of our interest in OFS BrightWave; an increase in gross margin to approximately 22% during 2004 compared with approximately 20% during 2003; and a reduction in equity in losses of OFS BrightWave ($60.3 million, after-tax). This increase in net income was partially offset by various charges directly and indirectly related to the Connectivity Solutions acquisition.

        During the periods presented in this Management's Discussion and Analysis of Financial Condition and Results of Operations, the primary source of revenue from our Cable segment was product sales to cable television system operators, telecommunication service providers, OEMs and distributors. Demand for our cable products depends primarily on capital spending by cable television system operators for maintaining, constructing and rebuilding or upgrading their systems. The primary source of revenue for our Connectivity Solutions segment was product sales to large, multinational companies, which are made primarily through a global network of distributors, system integrators and value-added resellers. Demand for Connectivity Solutions products depends primarily on capital spending by enterprises on communications projects in new buildings or campuses, building expansions or upgrades of network systems within buildings or campuses.

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        Our future financial condition and performance will be dependent, in large part, on our ability to successfully complete the integration of the Connectivity Solutions business and on economic conditions in the industries in which we operate. Our revenues and profitability are affected by increasing consolidation in the telecommunications industry and the capital spending of our major customers, which has declined in recent years. In addition, the financial condition of several of our customers has deteriorated in recent years. These conditions may result in lower sales volumes to our customers, write-offs of our receivables, the impairment of certain of our manufacturing assets and reductions in our workforce. Our profitability is also affected by the mix and volume of sales among our various product groups and between domestic and international customers, competitive pricing pressures and changes in the price of our raw materials, many of which are linked to the commodity markets. We attempt to mitigate the risk of increases in raw material prices through effective requirements planning and by working closely with key suppliers to obtain the best possible pricing and delivery terms. In addition, during 2004 we announced price increases for certain products due to the rising cost of certain raw materials. To the extent that we are unable to pass on cost increases to customers without a significant decrease in sales, cost increases could have a material effect on our operations.

CRITICAL ACCOUNTING POLICIES

        This Management's Discussion and Analysis of Financial Condition and Results of Operations includes a discussion and analysis of our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. 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.

        Significant accounting estimates reflected in our financial statements include the allowance for doubtful accounts; reserves for sales returns, discounts, allowances, and rebates and distributor price protection reserves; inventory excess and obsolescence reserves; product warranty reserves; income tax valuation allowances; impairment reviews for investments, fixed assets, goodwill and other intangibles; pension and postretirement benefit costs; and fair values of assets acquired and liabilities assumed in the acquisition of Connectivity Solutions. 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.

        Allowance for Doubtful Accounts—We maintain allowances for doubtful accounts for estimated losses expected to result from the inability of our customers to make required payments. These estimates are based on management's evaluation of the ability of our customers to make payments, focusing on customer financial difficulties and age of receivable balances. An adverse change in financial condition of a significant customer or group of customers could materially affect management's estimates related to doubtful accounts.

        Reserves for Sales Returns, Discounts, Allowances and Rebates and Distributor Price Protection Reserves—We record estimated reductions to revenue for potential sales returns as well as customer programs and incentive offerings, such as discounts, allowances, rebates and distributor price protection programs. These estimates are based on contract terms, historical experience, inventory levels in the distributor channel and other factors. Management believes it has sufficient historical experience to allow for reasonable and reliable estimation of these reductions to revenue. However, declining market conditions could result in increased estimates of sales returns and allowances and potential distributor price protection incentives, resulting in incremental reductions to revenue.

        Inventory Excess and Obsolescence Reserves—We maintain reserves to reduce the value of inventory based on the lower of the cost or market principle, including allowances for excess and obsolete

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inventory. These reserves are based on management's assumptions about and analysis of relevant factors including current levels of orders and backlog, shipment experience, forecasted demand and market conditions. We do not believe our products are subject to a significant risk of obsolescence in the short term and management believes it has the ability to adjust production levels in response to declining demand. However, if actual market conditions become less favorable than anticipated by management, additional allowances for excess and obsolete inventory could be required.

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

        Income Tax Valuation Allowances—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 determining the valuation allowance, we consider the amounts and timing of future deductions or carryforwards and sources of taxable income that may enable utilization. We maintain an existing valuation allowance until sufficient positive evidence exists to support its reversal. Differences in the timing or amount of future reversals of existing deferred tax liabilities or in future income may have a material impact on the amount of a deferred tax asset ultimately realized. If we determine that we will not be able to realize all or part of a deferred tax asset in the future, an adjustment to the deferred tax asset valuation allowance would be charged to income in the period such determination was made.

        Impairment Reviews—Management reviews intangible assets, investments, and other long-lived assets for impairment when events or changes in circumstances indicate that their carrying values may not be fully recoverable. Goodwill and other intangible assets with indefinite lives are tested for impairment annually as of August 31 and on an interim basis when events or circumstances change. Management assesses potential impairment of the carrying values of these assets based on market prices, if available, or assumptions about and estimates of future cash flows expected to arise from these assets. Operating performance, market conditions, and other factors may adversely impact future cash flows. If an impairment is indicated by this analysis, the impairment charge to be recognized, if any, would be measured as the amount by which the carrying value exceeds fair value, estimated by management based on market prices, if available, or forecasted cash flows, discounted using a discount rate commensurate with the risks involved. Assumptions related to future cash flows and discount rates involve management judgment and are subject to significant uncertainty. If actual future cash flows, discount rates and other assumptions used in the assessment and measurement of impairment differ from management's estimates and forecasts, additional impairment charges could be required.

        Pension and Postretirement Benefit Costs—Our pension and postretirement benefit costs are developed from actuarial valuations. Critical assumptions inherent in these valuations include the discount rate, health care cost trend rate, rate of return on plan assets, and mortality rates. Assumptions are subject to change each year based on changes in market conditions and in management's assumptions about future events. Changes in these assumptions may have a material impact on future pension and postretirement benefit costs.

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        Fair Values of Assets Acquired and Liabilities Assumed in the Acquisition of Connectivity Solutions—The acquisition of Connectivity Solutions as of January 31, 2004 was accounted for using purchase accounting, which required management to make significant estimates. First, management must estimate the cost of the acquired entity based on the fair value of the consideration paid or the fair value of the net assets acquired, whichever is more clearly evident. This cost must then be allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. In addition, management must identify and estimate the fair values of intangible assets that should be recognized as assets apart from goodwill. Management utilized third party appraisals to assist in estimating the fair value of tangible property, plant and equipment and intangible assets acquired.

COMPARISON OF RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004 WITH THE YEAR ENDED DECEMBER 31, 2003

        Effective January 31, 2004, we completed the acquisition of substantially all of the assets and assumed certain liabilities of Connectivity Solutions. The Connectivity Solutions segment's operating results have been included in our consolidated financial statements since the date of acquisition. Accordingly, the consolidated results for the year ended December 31, 2004 include the operating results of the Connectivity Solutions segment for the eleven-month period from February 1, 2004 through December 31, 2004. However, the consolidated results reflected above for the year ended December 31, 2003 do not include any actual or pro forma results for the Connectivity Solutions segment. This information should be considered when comparing the financial results of 2004 and 2003. See Note 3 in the Notes to the Consolidated Financial Statements included elsewhere in this Form 10-K.

Net sales

        Below is a summary that reflects our actual net sales for the year ended December 31, 2004, which includes the Connectivity Solutions segment net sales for the eleven-month period from February 1, 2004 through December 31, 2004. This summary also reflects pro forma net sales for the years ended December 31, 2004 and 2003, as if Connectivity Solutions had been acquired on January 1, 2004 and 2003, respectively. The pro forma net sales of the Connectivity Solutions segment for the one-month

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period ended January 31, 2004, which are included in the pro forma net sales for the year ended December 31, 2004, and the pro forma net sales of the Connectivity Solutions segment for the year ended December 31, 2003 are based on the historical results of the Connectivity Solutions business as operated by Avaya during the periods presented and therefore may not be indicative of the actual results of the Connectivity Solutions segment as operated by us. Actual inter-segment sales eliminations for the eleven-month period ended December 31, 2004 and pro forma inter-segment sales eliminations for the pro forma periods are included below.

        Overall, consolidated net sales, on a pro forma basis, increased during 2004 primarily due to an increase in international sales of Broadband/Video products and domestic sales of LAN products within the Cable segment. In addition, improving business conditions and continuing benefits of deregulation in selected international markets contributed to the overall increase in net sales of our Broadband/Video products. Our Connectivity Solutions segment experienced an increase in domestic sales of the SYSTIMAX products. As the economic environment improved during 2004, companies increased capital spending.

Cable Segment

        The increase in net sales of Broadband/Video products for 2004 primarily resulted from strong international sales volumes and the positive impact of price increases for certain products. Despite lower sales of fiber optic cable and lower sales to our largest domestic Cable segment customer, sales of Broadband/Video products increased moderately during 2004 due to price increases, higher international sales related in part to deregulation in selected markets and reconstruction related to certain storms that occurred in the southeastern U.S.

        The increase in net sales of LAN products was primarily driven by improved project business and the positive impact of price increases for certain products. We announced two price increases for

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certain LAN products during 2004 as a result of significant increases in the cost of certain raw materials. In addition, the launch of our Uniprise brand contributed to the increase in net sales of LAN products. We believe that the overall improvement in the financial condition of our customers has and will continue to contribute to an increase in their information technology budgets.

        The increase in net sales of Wireless and Other Telecom products was mainly due to a higher volume of sales, primarily in wireless products in domestic markets. The improvement in general financial conditions of our customers has led to increased spending by the major wireless carriers. In addition, we have developed relationships with certain new customers, who generally purchase larger diameter products, which have comparatively higher prices. We believe we continue to make steady progress communicating the Cell Reach value proposition to new and existing customers, both domestically and internationally. While we expect sales of wireless products to be somewhat volatile since customer spending is mainly project-driven, we remain optimistic about our long-term global wireless opportunities.

Connectivity Solutions Segment

        The pro forma net sales in the table above for the year ended December 31, 2004 reflect the actual sales of the Connectivity Solutions segment for the eleven-month period ended December 31, 2004 in addition to sales recognized by the Connectivity Solutions business in January 2004 as operated by Avaya prior to our acquisition of this business on January 31, 2004. The pro forma net sales in the table above for the year ended December 31, 2003 reflect sales recognized by the Connectivity Solutions business during that period as operated by Avaya.

        The discussion below compares the pro forma net sales for the years ended December 31, 2004 and 2003, since the actual net sales for the eleven-month period ended December 31, 2004 would not be comparable with the pro forma net sales for the year ended December 31, 2003. However, these pro forma results may not be indicative of the actual results of the Connectivity Solutions segment as operated by us.

        The net sales of SYSTIMAX products were moderately higher during 2004 primarily due to strong domestic sales volumes driven by improved project business and the positive impact of price increases for certain products. During the first quarter of 2004, we announced two price increases for certain products on new projects, primarily due to the rising cost of copper and certain polymers. During the first half of 2004, SYSTIMAX sales volume was negatively impacted by an effort to reduce external inventory balances held by distributors to a more appropriate level. During the second half of 2004, the SYSTIMAX product line reported strong sales which more than offset the impact of the first half weak sales growth. We expect demand for SYSTIMAX products to be driven by the ongoing need for bandwidth and high-performance structured cabling in the enterprise market and by global information technology spending, among other things.

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        The decrease in net sales of ExchangeMAX products for 2004 was primarily related to the continued impact of competitive pricing pressure and weak demand for central office telecommunications equipment.

        The increase in ICS net sales for 2004 was primarily due to increased sales volumes resulting from increasing service provider DSL deployments.

Gross profit (net sales less cost of sales)

        Gross profit increased by $140.2 million to $254.8 million, primarily due to the acquisition of Connectivity Solutions. Gross profit margin increased to 22.1% during 2004 compared to 20.0% during 2003, primarily due to the contribution of the Connectivity Solutions SYSTIMAX product, as these products generated higher margins, on average, than our other products.

        Gross profit margin for 2004 was adversely affected by the impact of purchase accounting adjustments on the Connectivity Solutions segment inventory. These purchase accounting adjustments resulted from the write-up above replacement manufacturing cost of Connectivity Solutions finished goods and work in process inventory to reflect its acquired fair value as of the acquisition date. This write-up to fair value resulted in an increase of approximately $14.6 million in cost of sales and lower margins following the Connectivity Solutions acquisition as the acquired inventory was sold.

        The rising cost of raw materials, such as copper, aluminum, plastics and other polymers, and steel also increased cost of sales. As a result of these higher costs, we announced price increases for certain products during 2004, which somewhat offset the impact of higher raw material prices on gross margin during 2004.

        Although we expect to continue to recover these increased raw material costs by raising prices of certain products, the inability to achieve market acceptance of the price increases could result in lower gross profit and gross profit margin. Gross profit margin should benefit from cost reduction initiatives begun during the fourth quarter of 2004 at CSMI's Omaha facility (see Restructuring Costs below).

Selling, general and administrative expense

        Selling, general and administrative ("SG&A") expenses increased by $107.4 million to $193.1 million during 2004, primarily due to the acquisition of Connectivity Solutions. As a percentage of sales, SG&A increased to 16.8% of net sales during 2004 compared to 14.9% of net sales during 2003. In addition to costs associated with the acquisition, the increase in SG&A as a percentage of sales, was primarily driven by increases in sales and marketing expenses to bring new products to market and to market existing product groups. Additional increases in SG&A were primarily driven by higher employee compensation and benefit costs, insurance costs, professional fees related to new regulatory requirements, and travel costs.

Research and development

        R&D expense increased by $23.1 million to $29.3 million during 2004 primarily due to the acquisition of Connectivity Solutions, which involves more extensive research and development activities than the Cable segment. At the time of the acquisition of Connectivity Solutions, we gained over 100 R&D professionals who focus on fundamental research, product development and enhancements, and manufacturing processes related to our Connectivity Solutions segment products. During 2004, we incurred R&D costs primarily related to developing new enterprise structured cabling solutions as well as cost effective designs for cables, apparatus and cabinets.

Impairment charges for fixed assets

        During the fourth quarter of 2004, $6.8 million of fixed asset impairment charges were recognized as a component of the restructuring costs incurred in connection with the cost reduction initiatives at CSMI's Omaha facility (see Restructuring Costs below).

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        During the second quarter of 2003, as a result of the difficult global business environment in telecommunications and an ongoing decline in demand, both domestically and internationally, and reduced export sales from our Brazilian operation, we determined that certain domestic and Brazilian manufacturing fixed assets were impaired. Accordingly, we obtained third party appraisals of the majority of these specifically-identified assets to determine their fair values and the resulting amount of impairment charges to be recognized. In total, we recognized pretax impairment charges as follows (in millions):

In-process research and development charges

        We recognized a $4.0 million pretax charge in 2004 for the write-off of in-process R&D acquired in our acquisition of Connectivity Solutions. This R&D was valued as an intangible asset by independent appraisal in accordance with purchase accounting guidance. Since R&D activities are required to be expensed as incurred under U.S. generally accepted accounting principles, this acquired intangible asset was written off immediately following the acquisition date, with subsequent adjustments and write-offs resulting from changes in the purchase price allocation.

Acquisition-related transition and startup costs

        We incurred pretax charges of $8.3 million during 2004 as a result of startup, transition and other costs related to the acquisition of Connectivity Solutions. These charges primarily related to information technology, transition activities and other acquisition-related costs.

        We reduced the Connectivity Solutions segment workforce by approximately 45 employees, or 2% of the segment's global workforce, during the first quarter of 2004. The reductions were primarily related to our efforts to improve operational efficiency and reduce cost. We recorded net pretax charges of approximately $1.3 million in acquisition-related transition and startup costs for employee termination benefits related to this workforce reduction.

Restructuring Costs

        We recognized a $14.2 million pretax charge for restructuring costs during the fourth quarter of 2004 related to organizational and cost reduction initiatives at CSMI's Omaha, Nebraska facility. CSMI's Omaha facility is part of the Connectivity Solutions segment and was acquired on January 31, 2004 as part of the acquisition of the Connectivity Solutions business of Avaya.

        The charge consisted of $5.8 million of employee-related costs, including severance pay and related fringe benefits and a net curtailment loss; $6.8 million of impairment charges related to manufacturing equipment that is no longer used in operations; and $1.6 million of process improvement costs related to consulting and other costs associated with modifying the manufacturing operations.

        We anticipate that we will recognize additional pretax restructuring charges of $4 million to $6 million to complete the implementation of the initiatives during the first half of 2005.

        As a result of these initiatives, there is excess real estate and equipment capacity at the Omaha facility. Management is evaluating alternatives for such excess capacity and additional charges, which could be material to our results of operations and financial position, may result from such evaluation.

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Loss on early extinguishment of debt

        We recognized a $5.0 million pretax loss during 2004 on the early extinguishment of our 4% convertible subordinated notes. This loss includes premiums paid and accrued to note holders of $3.1 million and the write-off of the remaining balance of related long-term financing costs of $1.9 million. See further discussion under "Liquidity and Capital Resources."

Net interest expense

        Net interest expense during 2004 was $7.0 million, compared to $5.8 million during 2003. Our weighted average effective interest rate on outstanding borrowings, including amortization of associated loan fees, was 2.70% as of December 31, 2004, compared to 4.85% as of December 31, 2003. Although our average interest rate decreased, net interest expense increased due to higher average outstanding balances of long-term debt, incurred primarily for the acquisition of Connectivity Solutions. The decrease in the effective interest rate was primarily due to the refinancing in March and April 2004 of our then existing $172.5 million aggregate principal amount of 4% convertible subordinated notes with the issuance of $250 million aggregate principal amount of 1% convertible senior subordinated debentures.

Income taxes

        Our effective income tax rate was 32.8% for 2004, compared to 37.0% for 2003. Our effective tax rate reflects the benefits derived from significant operations outside the U.S., which are generally taxed at rates lower than the U.S. statutory rate of 35%. In conjunction with our Connectivity Solutions acquisition, we significantly increased the number of international locations in which we conduct business.

OFS BrightWave, LLC

        Effective April 1, 2004, Furukawa made additional equity investments in OFS BrightWave and we elected not to make further corresponding investments in OFS BrightWave. As a result, our ownership percentage was reduced from 18.4% to 9.4%.

        Primarily as a result of the continuing weakness in the fiber optic cable market and Furukawa's continuing efforts to restructure its OFS operations, we agreed with Furukawa to further amend our existing contractual arrangements in the second quarter of 2004 for the mutual benefit of both companies. On June 14, 2004, we agreed with Furukawa to change the period in which we could exercise our contractual right to sell our ownership interest in OFS BrightWave to Furukawa from 2006 to any time on or after June 14, 2004 and changed the exercise price from $173.4 million in cash to the approximately 7.7 million shares of our common stock owned by Furukawa. On June 14, 2004, we exercised our contractual right to sell our 9.4% ownership interest in OFS BrightWave to Furukawa in exchange for the approximately 7.7 million shares of our common stock owned by Furukawa, which had a fair value of $132.3 million as of the transaction date. We currently hold these shares as treasury stock.

        As a result of this transaction, we no longer own any equity interest in OFS BrightWave. However, we maintained our strategic relationship with Furukawa by entering into a new four-year optical fiber supply agreement with OFS Fitel, LLC ("Fitel"), a wholly-owned subsidiary of Furukawa, replacing the existing supply agreement with Fitel that was scheduled to expire in November 2004. Through this supply agreement, we continue to have access to a broad array of technologically advanced optical fibers. We also have a cross license arrangement with a subsidiary of Furukawa for key intellectual property.

        The OFS BrightWave transaction resulted in a net pretax gain of $121.3 million ($76.4 million net of tax or $1.13 per diluted share) during 2004. This gain represents (1) the fair value of the common stock received by us in exchange for the transfer of our ownership interest in OFS BrightWave to

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Furukawa, plus (2) the realized gain from our cumulative equity method share of OFS BrightWave's unrealized foreign currency translation gains previously recorded in accumulated other comprehensive loss, less (3) an $11 million impairment charge related to fully impairing the $30 million note receivable from OFS BrightWave. This transaction does not affect our right to receive full payment from OFS BrightWave under the $30 million revolving note due in 2006, based on its original terms.

        Our share of the losses of OFS BrightWave for the period from January 1, 2004 through June 14, 2004 was approximately $2.3 million, pretax, compared to approximately $98.2 million during 2003. The 2003 results reflected the impact of impairment charges for certain fixed assets and intangible assets, restructuring and employee separation costs. We realized a tax benefit related to our share of the losses of approximately $0.8 million in 2004 and $36.3 million in 2003.

2005 Outlook

        We currently anticipate an overall improvement in business conditions in both North America and Europe. In addition, the completion of our manufacturing facility in Suzhou, China should increase our presence in the Asia Pacific region. We believe market conditions for both the Cable segment and Connectivity Solutions segment should allow for modest revenue growth during 2005, due to price increases and a slight increase in sales volume. We have increased prices in response to increases in the cost of raw materials such as copper, aluminum and plastics. In order to achieve an increase in sales, we are dependent upon continued spending for maintenance of existing infrastructure and ongoing capital investment by our customers.

        We expect operating income to increase during 2005 as we continue to integrate the Connectivity Solutions segment into our global operations. We also believe the impact of restructuring the Omaha facility operations should result in improved profitability during 2005.

COMPARISON OF RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 WITH THE YEAR ENDED DECEMBER 31, 2002

Net sales

        Net sales decreased due to lower sales of Broadband/Video products to certain domestic broadband service providers and lower sales of fiber optic cable. This decrease was partially offset by increases in net sales of our LAN products and our Wireless and Other Telecom products. The

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following table presents (in millions) our revenues by product group as well as domestic versus international sales for the years ended December 31, 2003 and 2002:

        The decrease in net sales of Broadband/Video products primarily resulted from a lower volume of sales to certain domestic broadband service providers, including Charter, Comcast and Adelphia, in addition to a significant decline in fiber optic cable pricing. Comcast merged with AT&T Broadband in November 2002. During the year ended December 31, 2003, Comcast accounted for approximately 18% of our net sales compared to approximately 20% of our net sales as if they were combined with AT&T Broadband for the full year ended December 31, 2002. Accounts receivable from Comcast comprised approximately 17% of the Company's net accounts receivables as of December 31, 2003, compared to 23%, as of December 31, 2002. International sales, primarily for Broadband/Video products, were relatively stable.

        The increase in net sales of LAN products was primarily driven by a higher volume of sales of fiber optic cable and improved project business.

        The increase in net sales of Wireless and Other Telecom products was mainly due to a higher volume of sales primarily in wireless products. The improvement in general economic conditions led to increased spending by the major wireless carriers. In addition, we developed relationships with new customers, who generally purchase larger diameter products, which have comparatively higher prices. We believe we continue to make steady progress communicating the Cell Reach value proposition to new and existing customers, both domestically and internationally.

Gross profit (net sales less cost of sales)

        Although gross profit declined by approximately 5% primarily due to lower sales, gross profit margin remained stable at 20% of net sales. An increase in the cost of certain raw materials was offset by cost savings due to the reduction in workforce in 2002 and early 2003, detailed below.

        While gross profit margins for Broadband/Video and LAN products were relatively stable, gross profit margins for Wireless and Other Telecom products increased significantly. However, gross profit margins for Wireless and Other Telecom products were below corporate average and were volatile as a result of aggressive competition, mix and ongoing pricing pressures.

        We reduced our workforce by approximately 200 employees, or 8%, during the third quarter of 2002. In December 2002, we announced an additional reduction of our workforce of approximately 150 employees, or 5%, that was effective in January 2003. The reductions were primarily in response to the challenging global telecommunications environment. We recorded total pretax charges related to these workforce reductions of approximately $2.2 million in cost of sales for employee termination benefits during 2002.

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Selling, general and administrative expense

        The higher SG&A expense in 2002 was primarily due to the bad debt expense incurred related to the write-off of Adelphia receivables, which totaled $21.4 million. Excluding the Adelphia write-off, SG&A expense increased $2.4 million, or 3%, during 2003, which was primarily driven by higher insurance premiums and increased incentive compensation and other employee benefit costs. SG&A expenses for 2003 also included approximately $0.6 million related to the then pending acquisition of Connectivity Solutions. We have taken charges for doubtful accounts as a result of the difficult market environment based on our analysis of customer financial difficulties, age of receivable balances and other relevant factors.

Research and development

        R&D expense remained stable at approximately 1% of net sales. During 2003, our major R&D projects consisted of research and engineering activities related to expanding our drop cable and LAN optical fiber product offerings. We also focused on developing more cost effective product designs.

Impairment charges for fixed assets

        During the second quarter of 2003, as a result of the difficult global business environment in telecommunications and an ongoing decline in demand, both domestically and internationally, and reduced export sales from our Brazilian operation, we determined that certain domestic and Brazilian manufacturing fixed assets were likely impaired. Accordingly, we obtained third party appraisals of the majority of these specifically-identified assets to determine their fair values and the resulting amount of impairment charges to be recognized. In total, we recognized pretax impairment charges on fixed assets as follows (in millions):

        Due to the difficult business environment in telecommunications and the continuing decline in demand for our products, we performed a test of recoverability for our long-lived assets during 2002. As a result of this impairment test we recognized pretax impairment charges as follows (in millions):

Net interest expense

        Net interest expense for 2003 was $5.8 million, compared to $6.7 million for 2002. Our weighted average effective interest rate on outstanding borrowings, including amortization of associated loan fees, was 4.85% as of December 31, 2003, compared to 4.29% as of December 31, 2002. Although our average interest rate increased, net interest expense decreased primarily due to lower average outstanding balances of long-term debt.

Income taxes

        Our effective income tax rate was 37% for the years ended December 31, 2003 and 2002.

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Equity in losses of OFS BrightWave, LLC

        For the years ended December 31, 2003 and 2002, our share of the losses of OFS BrightWave was approximately $98.2 million and $85.4 million, pretax, respectively. We realized a tax benefit related to our share of the losses of approximately $36.3 million and $31.5 million for the years ended December 31, 2003 and 2002, respectively.

        OFS BrightWave operates in some of the same markets we do and its financial results were also adversely affected by the difficult global business conditions. As a result, OFS BrightWave incurred pretax losses of $585 million and $464 million during the years ended December 31, 2003 and 2002, respectively. The 2003 losses included charges of $477 million related primarily to the impairment of certain fixed assets and intangible assets, restructuring and employee separation costs. The 2002 losses included charges of $217 million, net of a $32 million tax benefit from losses generated by a domestic corporate subsidiary of OFS BrightWave, for the write-off of goodwill and certain fixed assets, restructuring and employee separation costs and other cost reduction activities.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow Overview

        Our principal sources of liquidity, both on a short-term and long-term basis, are cash, cash equivalents and short-term investments, cash flows provided by operations and availability under credit facilities. Reduced sales and profitability could reduce cash provided by operations and limit availability under credit facilities. In addition, increases in working capital, excluding cash, cash equivalents and short-term investments, related to increasing sales could reduce our operating cash flows in the short term until cash collections of accounts receivable catch up to the higher level of billings.

        The decrease in cash, cash equivalents and short-term investments as of December 31, 2004 was primarily due to the use of $150 million of cash on hand as a portion of the purchase price for Connectivity Solutions. We borrowed $100 million under our new senior secured credit facility for the balance of the acquisition cost. In addition, we used the proceeds from the issuance of $250 million aggregate principal amount of 1% convertible senior subordinated debentures during 2004 to repurchase and redeem all $172.5 million aggregate principal amount of our 4% convertible subordinated notes, to repay $25 million of borrowings under our revolving credit facility and for other general corporate purposes. This net decrease in cash, cash equivalents and short-term investments was partially offset by cash flows from operations, as discussed below.

        The increase in working capital was driven by our acquisition of Connectivity Solutions during the first quarter of 2004. See further discussion of working capital changes below.

        Our long-term debt as a percent of book capital structure increased during 2004 primarily due to the issuance of $250 million aggregate principal amount of 1% convertible senior subordinated debentures and borrowings under the senior secured credit facility, which was partially offset by the extinguishment of $172.5 million aggregate principal amount of 4% convertible subordinated notes. Our book capital structure was also impacted by our issuance of approximately 1.8 million shares of our

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common stock, valued at approximately $32.4 million, as a portion of the purchase price for the Connectivity Solutions business and our receipt of approximately 7.7 million shares of our common stock, valued at approximately $132.3 million, from Furukawa in a nonmonetary exchange for our investment in OFS BrightWave.

Operating Activities

        Net cash provided by operating activities increased year over year primarily due to the additional operating cash inflows provided by the Connectivity Solutions segment for the eleven months ended December 31, 2004 as we worked to reduce inventory balances in our Connectivity Solutions segment to a more appropriate level. Partially offsetting this increase were acquisition-related transition and startup costs paid in 2004 of approximately $8.3 million. In addition, we also paid approximately $11.7 million in income taxes in 2004. We expect to generate net cash from operations during 2005 primarily due to increased margins from sales of certain product groups. In addition, we will continue to focus on enhancing operational efficiency and internal growth from all of our product groups and the further integration of the Connectivity Solutions segment.

Investing Activities

        Our investment in property, plant and equipment was higher during 2004 primarily due to the acquisition of the Connectivity Solutions business. The increase in capital spending during 2004 was primarily related to cost reduction efforts, information technology initiatives and additional production capability in Asia, including the construction of a manufacturing facility in Suzhou, China. We expect total capital expenditures to remain at a level below consolidated depreciation and amortization expense for the next several years.

        As discussed further below, as of January 31, 2004, we completed the acquisition from Avaya of substantially all of the assets, subject to certain current liabilities, and assumed approximately $65 million of other specified liabilities, primarily related to employee benefits, of Connectivity Solutions.

Financing Activities

        On January 31, 2004, in connection with our acquisition of Connectivity Solutions, we replaced our then existing $100 million secured credit facility with a new $185 million senior secured credit facility. The purchase price for Connectivity Solutions consisted of approximately $250 million in cash and approximately 1.8 million shares of our common stock, valued at $32.4 million. The cash portion of the purchase price consisted of $150 million from our existing cash balances and $100 million from borrowings under the new 5-year $185 million senior secured credit facility, which amended and restated our previous secured credit facility. This new senior secured credit facility is comprised of a $75 million term loan and a $110 million revolving credit facility and is secured by substantially all of our assets, is guaranteed by all of our material domestic subsidiaries and contains certain financial and restrictive covenants. The balance outstanding under the term loan facility as of December 31, 2004 was $49.5 million and is required to be repaid by us in consecutive quarterly installments of $3.25 million with a final payment of all outstanding principal and interest on December 31, 2008. We had availability under the new revolving credit facility of approximately $48 million and had no outstanding borrowings under this facility as of December 31, 2004. Our ability to borrow under this revolving credit facility depends on the amount of our borrowing base, which is determined as specified percentages of our eligible receivables and inventory, reduced for certain reserves and the total amount of letters of credit issued under the credit facility. We believe we were in compliance with all of our covenants under this senior secured credit facility as of December 31, 2004. See Note 12 in the Notes to the Consolidated Financial Statements included elsewhere in this Form 10-K for additional discussion of the terms of this senior secured credit facility.

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        In March 2004, we issued $250 million aggregate principal amount of 1% convertible senior subordinated debentures due March 15, 2024. The proceeds from these debentures were used primarily to extinguish our outstanding 4% convertible subordinated notes due December 15, 2006, to repay $25 million of borrowings under our revolving credit facility, and for general corporate purposes. We repurchased or redeemed all of our 4% convertible subordinated notes during March and April 2004. The repurchase and redemption of these notes resulted in a $5.0 million pretax loss on the early extinguishment of debt. See Note 12 in the Notes to the Consolidated Financial Statements included elsewhere in this Form 10-K for additional discussion of the terms of these debentures.

        As of October 9, 2002, we, together with Furukawa, purchased 10.2 million shares of our common stock from Lucent. The total purchase price paid to Lucent by us and Furukawa was approximately $53.0 million, or $5.20 per share. Of the 10.2 million shares of our common stock purchased from Lucent, Furukawa purchased approximately 7.7 million shares and we repurchased the remaining approximately 2.5 million shares, which are currently classified as treasury stock. We funded our $13.2 million repurchase using existing cash balances. As of December 31, 2003 and 2002, Furukawa owned approximately 13% of our outstanding common stock. In June 2004, we exchanged our entire equity interest in OFS BrightWave for the approximately 7.7 million shares of our stock owned by Furukawa and those shares are currently classified as treasury stock.

Future Cash Needs

        We expect that our primary future cash needs will be to fund working capital, capital expenditures, debt service and employee obligations. We believe we have incurred all of the acquisition-related transition and startup costs associated with Connectivity Solutions during 2004. In addition, we assumed approximately $65 million of other specified liabilities in connection with our acquisition of the Connectivity Solutions business, primarily related to employee benefits. We expect to contribute approximately $8.7 million to our defined benefit pension plans during 2005. These noncurrent employee benefit liabilities will be funded with cash flows from future operations. In conjunction with the restructuring initiatives at CSMI's Omaha facility, we have accrued a $4.1 million liability as of December 31, 2004, which is expected to be paid during the first half of 2005.

        We believe that our existing cash, cash equivalents and short-term investments and cash flows from operations, combined with availability under our senior secured revolving credit facility, will be sufficient to meet our presently anticipated future cash needs. We may, from time to time, borrow under our revolving credit facility or issue securities, if market conditions are favorable, to meet our future cash needs or to reduce our borrowing costs.

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CONTRACTUAL OBLIGATIONS

        The following table summarizes our contractual obligations as of December 31, 2004 (in millions):

(a)

Refer to Note 12 to the Notes to the Consolidated Financial Statements included elsewhere in this Form 10-K for information regarding the terms of our long-term debt agreements.

(b)

Interest on variable rate debt is estimated based upon rates in effect as of December 31, 2004.

(c)

Purchase obligations include minimum amounts owed under take-or-pay or requirements contracts. Amounts covered by open purchase orders are excluded as there is no contractual obligation until goods or services are received.

(d)

Amounts reflect voluntary pension contribution expected in 2005 and amounts expected to be paid under the postretirement benefit plans (see Note 14 in the Notes to the Consolidated Financial Statements included elsewhere in this Form 10-K).

(e)

Estimated payments are based on exchange rates in effect as of December 31, 2004.

EFFECTS OF INFLATION AND CHANGING PRICES

        We continually attempt to minimize any effect of inflation on earnings by controlling our operating costs and selling prices. The principal raw materials purchased by us (fabricated aluminum, plastics and other polymers, bimetals, copper and optical fiber) are subject to changes in market price as they are influenced by commodity markets. Prices for copper, fluoropolymers and certain other polymers derived from oil and natural gas have increased substantially over the last twelve months. As a result, we have significantly increased our prices for certain enterprise and broadband products and may have to increase prices again in the future. To the extent that we are unable to pass on cost increases to customers without a significant decrease in sales, these cost increases could have a material impact on the results of our operations.

OTHER

        We are either a plaintiff or a defendant in pending legal matters in the normal course of business; however, we believe none of these legal matters will have a materially adverse effect on our financial condition and results of operations upon final disposition. In addition, we are subject to various federal, state, local and foreign environmental 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 our financial condition or results of operations.

NEWLY ISSUED ACCOUNTING STANDARDS

        In April 2004, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position ("FSP") No. FAS 129-1, "Disclosure Requirements under FASB Statement No. 129, Disclosure of

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Information about Capital Structure, Relating to Contingently Convertible Securities." This FSP interprets how the disclosure provisions of Statement of Financial Accounting Standards ("SFAS") No. 129 apply to contingently convertible securities and to their potentially dilutive effects on net income (loss) per share. The guidance in this FSP was effective immediately and applies to all existing and newly created securities. We believe that our disclosures comply with the requirements of this FSP.

        In June 2004, the FASB issued FSP No. FAS 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003." This FSP provides guidance on the accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act") for employers that sponsor postretirement health care plans that provide prescription drug benefits. The FSP states that if the benefits provided by a plan are actuarially equivalent to Medicare Part D, measures of the accumulated postretirement benefit obligation and net periodic postretirement benefit cost on or after the date of enactment should reflect the effects of the Act. It also requires employers to provide certain disclosures regarding the effect of the federal subsidy provided by the Act. We implemented this FSP on a prospective basis as of July 1, 2004 (see Note 14 in the Notes to the Consolidated Financial Statements included elsewhere in this Form 10-K).

        In October 2004, the FASB ratified the consensus reached by the Emerging Issues Task Force on Issue No. 04-8, "The Effect of Contingently Convertible Debt on Diluted Earnings per Share." Issue No. 04-8 requires that all instruments that have embedded conversion features that are contingent on market conditions indexed to an issuer's share price be included in diluted net income per share (if dilutive) regardless of whether the market conditions have been met. This consensus was effective for the year ended December 31, 2004. Issue No. 04-8 applies retroactively to instruments outstanding at the date of adoption of this consensus and requires prior period diluted net income per share amounts to be restated to conform to this consensus. We believe that our 1% convertible senior subordinated debentures issued in March 2004 are subject to the requirements of Issue No. 04-8 (see Notes 2 and 22 in the Notes to the Consolidated Financial Statements included elsewhere in this Form 10-K for the impact of the application of this consensus on our diluted net income per share).

        In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4." This Statement is the result of efforts to converge U.S. accounting standards for inventories with International Accounting Standards. SFAS No. 151 requires that items such as idle facility expense, excessive spoilage, and rehandling costs be recognized as expenses in the current period. It also requires that allocation of fixed production overheads to the costs of conversion be based on normal capacity of the production facilities. SFAS No. 151 is effective on a prospective basis for inventory costs incurred during fiscal years beginning after June 15, 2005, though earlier adoption is permitted. Application of SFAS No. 151 is not expected to have a material impact on our results of operations or financial position.

        In December 2004, the FASB issued SFAS No. 123 (revised), "Share-Based Payment," which establishes standards related to the accounting for transactions in which an entity exchanges its equity instrument for goods or services. This revised standard also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of these equity instruments. SFAS No. 123 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. This standard requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognize the cost over the period during which an employee is required to provide service in exchange for the award. This standard is effective for periods beginning after June 15, 2005. We believe that this standard will have a material impact on our statement of operations. The pro forma effects on net income (loss) and net income (loss) per share related to the application of this standard, had we applied fair value recognition provisions for the years ended December 31, 2004, 2003 and 2002, are reported in Note 2 of the Notes in the Consolidated Financial Statements included elsewhere in this Form 10-K.

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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        We have established a risk management strategy that includes the reasonable use of derivative and non-derivative financial instruments primarily to manage our exposure to market risks resulting from adverse fluctuations in commodity prices, interest rates and foreign currency exchange rates. Derivative financial instruments which may be used by us, include commodity pricing contracts, foreign currency exchange contracts, and contracts hedging exposure to interest rates. We do not use derivative financial instruments for trading purposes, nor do we engage in speculation.

        Materials, in their finished form, account for a large portion of our cost of sales. These materials, such as fabricated aluminum, plastics and other polymers, bimetals, copper and optical fiber, are subject to changes in market price as they are influenced by commodity markets. 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. However, increases in the prices of certain commodity products have resulted in, and may continue to result in, higher overall production costs.

        In conjunction with our Connectivity Solutions acquisition, we significantly increased the number of international locations in which we conduct business. Approximately 32.4% of our 2004 sales were to customers located outside the U.S., compared to 19.3% in 2003. Although we primarily bill customers in foreign countries in U.S. dollars, a portion of our sales are denominated in currencies other than the U.S. dollar, particularly sales from some of our foreign subsidiaries. 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. The 1999 acquisition of our Belgian subsidiary created a specific market risk that a decline in the value of the euro compared to the U.S. dollar could adversely affect our net investment in that subsidiary. Prior to its termination, our Eurodollar Credit Agreement served as a hedge of a portion of our net investment in our Belgian subsidiary. In December 2002, we terminated this hedging relationship and entered into a cross currency rate and forward foreign exchange swap agreement expiring in 2009, which we designated as a new hedge of a portion of our net investment in our Belgian subsidiary. Our investment in Brazil during 2000 created a new foreign subsidiary and a specific market risk that a decline in the value of the Brazilian real compared to the U.S. dollar could adversely affect our net investment in that subsidiary. We continue to evaluate alternatives to help us reasonably manage the market risk of our net investment in the Brazilian subsidiary.

        As of December 31, 2004, the only derivative financial instrument outstanding was a cross currency rate and forward foreign exchange swap agreement, which serves as a hedge of a portion of our net investment in our Belgian subsidiary. Settlement of the fair value of this net investment hedging instrument as of December 31, 2004 and 2003 would have resulted in a loss of approximately $5.7 million and $4.0 million, respectively, net of tax. These unrealized losses are included in accumulated other comprehensive loss. At December 31, 2004, we were continuing to evaluate hedging alternatives related to additional foreign currency exposures. In addition, we evaluated our commodity pricing exposures and concluded that it was not currently practical to use derivative financial instruments to hedge our current commodity price risks.

        Our non-derivative financial instruments consist primarily of cash and cash equivalents, short-term investments, trade receivables, trade payables, and debt instruments. At December 31, 2004 and 2003, the carrying values of each of the financial instruments recorded on our balance sheet were considered representative of their respective fair values due to their variable interest rates and/or short terms to maturity, with the exception of our 1% convertible debentures, which were recorded in the financial statements at $250 million and had a fair value of approximately $267.2 million at December 31, 2004, and our 4% convertible notes, which were recorded in the financial statements at $172.5 million and had a fair value of approximately $170.8 million at December 31, 2003. Fair value of our debt is

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estimated using discounted cash flow analysis, based on our current incremental borrowing rates for similar types of arrangements, or quoted market prices whenever available.

        The following tables summarize our market risks associated with long-term debt and foreign currency exposure as of December 31, 2004 and 2003. The tables present principal and interest cash outflows and related interest rates by year of maturity. Variable interest rates for each year represent the interest rate effective for the related loan as of December 31, 2004 for the first table and as of December 31, 2003 for the second table. The foreign currency exchange rate used to disclose the net interest payments under the cross currency swap agreement was based on the U.S. dollar/euro exchange rate as of December 31, 2004 for the first table and as of December 31, 2003 for the second table. The tables assume payments will be made in accordance with due dates in the respective agreements and no prepayment of any amounts due.

        The tabular format used below does not reflect (1) our option to redeem all or a portion of our $250 million aggregate principal amount of 1% convertible debentures at any time on or after March 20, 2009 at 100% of the principal amount plus accrued interest; (2) the holders' option to require us to repurchase all or a portion of the debentures on March 20, 2009, March 15, 2014 and March 15, 2019 for 100% of the principal amount plus accrued interest; or (3) the holders' right to convert the debenture into shares of our common stock if certain conditions are met (see Note 12 in the Notes to the Consolidated Financial Statements included elsewhere in this Form 10-K).

Long-term Debt and Foreign Currency Derivative
Principal and Interest Payments by Year
($ in millions)